Alan Greenspan

Alan Greenspan, born in 1926, American economist and former chair of the Federal Reserve Board. Greenspan was born in New York City and educated at New York University. Greenspan also studied at Columbia University under noted economist Arthur F. Burns. Greenspan taught economics at New York University from 1953 to 1955 and also formed a consulting firm. He was deeply influenced by his friendship with novelist Ayn Rand and her philosophy of objectivism, which exalts laissez-faire capitalism and promotes “rational selfishness,” the belief that people should live for their own rational self-interests.

At Rand’s urging, Greenspan became an adviser to Richard Nixon during the 1968 presidential campaign. Greenspan then advised President Nixon informally until he was made chairman of the Council of Economic Advisers in 1974. Greenspan remained at the council during the presidency of Gerald Ford (1974-1977), during which time his policies were credited with reducing inflation but leading to recession. His policies may have contributed to Ford’s defeat for reelection.

Returning to private life, Greenspan served on the boards of numerous national companies, and from 1981 to 1983 he was chairman of the National Commission on Social Security Reform. In 1987 President Ronald Reagan appointed him chairman of the Federal Reserve Board (FRB), which governs the Federal Reserve System, also known as the Fed. A moderate Republican, Greenspan believed in deregulation of the banking industry and opposed government intervention in the economy, especially during the recession crisis of the early 1990s.

In January 1992 Greenspan was appointed to a second term as head of the FRB. He opposed tax cuts, believing that they would contribute to the growing federal deficit. He supported President Bill Clinton’s 1993 deficit-reduction programs with the reservation that spending cuts were far better than tax increases. Greenspan was reappointed as chairman of the FRB in 1996 and 2000. During the Clinton administration, the United States experienced the longest economic expansion in the nation’s history and reported a budget surplus.

Greenspan continued to serve as FRB chair under President George W. Bush. Greenspan’s support for Bush’s tax cuts during his first term drew criticism from liberal economists, who blamed the cuts for a mushrooming budget deficit. Critics said the tax cuts would lead to greater inflation and slower economic growth. Greenspan defended the tax cuts. To extricate the United States from a recession in 2001, he led the Fed to lower interest rates to some of the lowest levels in history. Greenspan stepped down from the Federal Reserve in January 2006 and started his own consulting firm. In 2007 he accepted a position as a senior adviser to Deutsche Bank. Greenspan also acts as an adviser to British prime minister Gordon Brown.

Greenspan’s memoir, The Age of Turbulence: Adventures in a New World, drew controversy when it was published in September 2007. In it Greenspan criticized the Bush tax cuts and denied that he favored the specific tax cut proposals put forward by the Bush administration. Describing himself as a lifelong libertarian Republican, Greenspan wrote that the cuts betrayed Republican Party principles and deservedly led to the party’s defeat in the 2006 midterm elections.

Greenspan’s memoir also sparked a rejoinder from Defense Secretary Robert M. Gates for stating that the U.S.-Iraq War was “largely about oil.” Greenspan wrote: “Whatever their publicized angst over Saddam Hussein’s ‘weapons of mass destruction,’ American and British authorities were also concerned about violence in an area that harbors a resource indispensable for the functioning of the world economy. I’m saddened that it is politically inconvenient to acknowledge what everyone knows: The Iraq war is largely about oil.” Gates denied that the continuing U.S. occupation of Iraq concerned oil. In response Greenspan told the Washington Post that he did not mean to imply that he had knowledge that oil was the motivating factor for President Bush, only that he believed it should have been the motivation.