WASHINGTON – Former Federal Reserve Chairman Alan Greenspan, in his new book, bashes President Bush for not responsibly handling the nation's spending and racking up big budget deficits.
A self-described "libertarian Republican," Greenspan takes his own party to task for forsaking conservative principles that favor small government.
"My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending," Greenspan wrote.
Of the conflict in the Middle East, Greenspan said: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
Bush took office in 2001, the last time the government produced a budget surplus. Every year after that, the government has been in the red. In 2004, the deficit swelled to a record $413 billion.
"The Republicans in Congress lost their way," Greenspan wrote. "They swapped principle for power. They ended up with neither. They deserved to lose."
In 2006, voters put Democrats in charge of Congress for the first time in a dozen years.
Greenspan's memoir, "The Age of Turbulence: Adventures in a New World," is scheduled for release Monday. The Associated Press purchased a copy Saturday at a retailer in the Washington area.
The book is a recollection of his life and his time as Fed chief.
Greenspan, 81, ran the Fed for 18 1/2 years and was the second-longest serving chief. He served under four presidents, starting with his initial nomination by Ronald Reagan.
He says he began to write the book on Feb. 1, 2006, the day his successor — Ben Bernanke — took over.
The ex-Fed chief writes that he laments the loss of fiscal discipline.
"`Deficits don't matter,' to my chagrin, became part of Republicans' rhetoric."
Greenspan long has argued that persistent budget deficits pose a danger to the economy over the long run.
At the Fed, he repeatedly urged Congress to put back in place a budget mechanism that requires any new spending increases or tax cuts to be offset by spending reductions or tax increases.
Large projected surpluses were the basis for Bush's $1.35 trillion, 10-year tax cut approved in the summer of 2001.
Budget experts projected the government would run a whopping $5.6 trillion worth of surpluses over the subsequent decade after the cuts. Those surpluses, the basis for Bush's campaign promises of a tax cut, never materialized.
"In the revised world of growing deficits, the goals were no longer entirely appropriate," Greenspan noted. Bush, he said, stuck with his campaign promises anyway. "Most troubling to me was the readiness of both Congress and the administration to abandon fiscal discipline."
Greenspan, in testimony before Congress in 2001, gave a major boost to Bush's tax-cut plan, irking Democrats.
At that time, Greenspan argued a tax cut could help the economy deal with sagging growth. The economy slipped into a recession in March 2001. The downturn ended in November of that year.
Surpluses quickly turned to deficits after the bursting of the stock market bubble and the 2001 recession cut into government revenues.
Government spending increased to pay for the fight against terrorism and receipts declined because of a string of tax cuts.
The Bush White House defended its fiscal policies in light of the Greenspan book.
"Clearly those tax cuts proved to be the right medicine for an ailing economy," White House spokesman Tony Fratto said. The 2001 recession was a mild one.
"Tax cuts contributed a portion to early deficits, but those tax cuts accelerated growth over time," Fratto said. He added: "We're not going to apologize for increased spending to protect our national security."
Greenspan said he was surprised by the political grip that Bush exerted over his administration.
The Bush administration turned out to be different from "the reincarnation" of the Ford administration that Greenspan said he had imagined. "Now the political operation was far more dominant." Greenspan was chairman of the Council of Economic Advisers under President Ford.
Greenspan enjoyed a good relationship with Bush's predecessor, Bill Clinton, "a fellow information hound."
They also were on the same economic page. During the Clinton administration, budget deficits turned to surpluses. But Greenspan was "disappointed and sad" when news surfaced that Clinton had an affair with Monica Lewinsky, a White House intern.
Greenspan recalled a conflict with the White House when Bush's father was president. The elder Bush wanted lower interest rates and challenged Greenspan's inclination to raise them because of inflation risks.
For Bush's father, the economy was his "Achilles' heel, and as a result we ended up with a terrible relationship." The economy went into a recession in the summer of 1990 and emerged from it in the spring of 1991.
Many supporters of the elder Bush blamed Greenspan's tight-money policies for the recession that contributed to Bush's loss to Clinton.
Greenspan says in the book he does not lament the loss of America's manufacturing base.
"The shift of manufacturing jobs in steel, autos and textiles, for example, to their more modern equivalents in computers, telecommunications and information technology is a plus, not a minus, to the American standard of living," Greenspan wrote.
Greenspan's memoir includes his early years growing up in a New York City neighborhood of low-rise brick apartment buildings filled with families of Jewish immigrants, his stint as a jazz musician and his decades as a Washington policymaker.
On other topics, Greenspan:
— Says he believes looser mortgage terms for "subprime" borrowers — those with spotty credit histories or low incomes — raised financial risks. However, he says the benefit of expanded home ownership in the United States was worth the risk.
— Questions whether global powerhouse China can continue its economic successes over the long run if it doesn't incorporate democratic processes. However, he predicts that if Beijing continues to move ahead on free-market principles "it will surely propel the world to new levels of prosperity."
— Predicts the most important economic decision U.S. lawmakers and courts will confront in the next quarter century will be to clarify rules involving intellectual property — patents, copyright and trademarks.
— Proposes lowering barriers to skilled immigrants and improving education to narrow income inequality.