Good Economics Is Good Politics

June 12, 1994

Robert E. Rubin, chairman of the National Economic Council, was much too quick in denying that Federal Reserve Board chairman Alan Greenspan has been "a senior adviser, almost a teacher to [President] Clinton" -- a description appearing in a new book by journalist Bob Woodward of Watergate fame. In asserting that the president "relates to Alan Greenspan the way he relates to" other economic policy advisers, Mr. Rubin turned the usual White House spin into quite a stretch.

The fact is that no president relates to the Fed chairman of the moment as though he were just another adviser. Congress in 1913 created a central banking system with control over monetary policy and a certain independence from elected officials who are in charge of fiscal affairs -- taxes and spending. As a result, presidents have to be circumspect in their dealings with Fed chairmen -- and vice versa.

Nonetheless, it is true -- and reassuring -- that Mr. Greenspan has exerted real influence in this administration. He sat next to First Lady Hillary Rodham Clinton during the president's first economic address to a joint session of Congress. And from this tableau emerged a pattern in which Mr. Greenspan murmured approval as the president opted for deficit-cutting strategies rather than the free-spending "investments" he advocated as a candidate for the White House.

Mr. Woodward, an editor at the Washington Post, recounts in his new book, "The Agenda: Inside the Clinton White House," that Mr. Clinton's conservative approach enraged four outside political advisers -- James Carville, Paul Begala, Mandy Grunwald and Stan Greenberg, who argued that the president was not only throwing away his principles but endangering his re-election.

Fortunately for the nation, the president did not listen to this advice. He evidently adhered to the old doctrine that good economics is good politics. In this, he had the support of Treasury Secretary Lloyd Bentsen, budget director Leon Panetta, economic policy adviser Laura Tyson and Mr. Rubin. Like the president, they have avoided criticism of the Fed's controversial boosts in short-term interest rates, saying the economy is in good shape.

Rather than opt for early and unneeded stimulus soon after inauguration, (note the red-hot 7 percent growth rate in 1993's fourth quarter), Mr. Clinton has pursued a moderate, steady growth pattern which, if successful, could bring him big rewards when he seeks re-election in 1996.

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