In a recent column, I suggested that Federal Reserve Chairman Alan Greenspan should be appointed Secretary of the Treasury. Today, I would like to explain why President Bush should take this action.
First, I believe that there is a "stature gap" on Bush's economic team relative to the defense and foreign policy team. I think this is principally due to the failure of Treasury Secretary Paul O'Neill to take command of economic policy. For reasons I cannot fathom, he seems to have little interest in or aptitude for the principal issues under his purview.
The result, in my opinion, is that the whole economic team suffers. Without a strong leader at Treasury, Bush's other economic advisers are like a football team without a quarterback. No matter how good they may be at their positions, the team is not going anywhere.
Appointing Greenspan as treasury secretary would immediately solve this problem. There is no economist in the United States who commands more respect and attention than he does. Therefore, having Greenspan at Treasury would instantly elevate the influence of that department and raise the stature of the whole economic team. In my opinion, having a treasury secretary as knowledgeable and interested in economic policy as Greenspan would be of enormous benefit to Council of Economic Advisers Chairman Glenn Hubbard, National Economic Council Director Larry Lindsey and the rest.
Second, I think that Greenspan has a great deal to offer Bush on issues such as fundamental tax reform, corporate governance and Social Security privatization. In his present position, Greenspan has little opportunity to influence them and cannot offer the president political advice. As treasury secretary, he would be in a position to advise the president in many ways that he cannot now do.
Third, after more than 15 years at the Federal Reserve, I think Greenspan would welcome the opportunity. He has done as much as he can do there and may well be suffering from burnout. At Treasury, I think he would be rejuvenated. Moreover, as treasury secretary, he would still be in a position to oversee monetary policy. Historically, the treasury secretary is the administration's principal liaison with the Fed. He and the Fed chairman normally meet on a weekly basis.
Some question whether Greenspan would take the job, but I am certain that he would. Although the Fed chairmanship may actually have more power, being treasury secretary is far more prestigious. They build statues to treasury secretaries and put their pictures on the currency. No one does that for Fed chairmen, most of whom are obscure even to professional economists. That is why G. William Miller was happy to give up the Fed chairmanship in 1979 to become treasury secretary.
There is something special about sitting in Alexander Hamilton's chair and having your signature on the nation's money. That is why, in the pecking order among departments, Treasury ranks second only to State. There is not the slightest chance that Greenspan would refuse an offer to serve the nation as treasury secretary if President Bush asked him.
Even some conservatives have questioned my judgment in urging Bush to appoint Greenspan to the Treasury. However, their concerns consist entirely of complaints about monetary policy. But if they really believe monetary policy is misguided, then they should welcome the opportunity to get Greenspan out of the Fed.
Furthermore, I have yet to hear a serious suggestion about who would be better to replace O'Neill, even from those who have been calling for his ouster for more than a year. The lack of a viable alternative may be why he is still at Treasury. Therefore, getting behind Greenspan -- who clearly is viable and confirmable by the Senate -- may be the best way for O'Neill's critics to get what they want.
Although Greenspan's name seldom appears on lists of potential treasury secretaries in news articles speculating about O'Neill's departure, I think he belongs at the top. Others are also coming around to this view. Hoover Institution economist Martin Anderson, former domestic policy adviser to President Reagan, is enthusiastic about Greenspan as treasury secretary and thinks markets would rejoice. Kevin Hassett of the American Enterprise Institute says, "The country needs him," in an article at TechCentralStation.com.
The longer Bush waits to get the economy back on track, the worse it will be for him in 2004. Making Alan Greenspan his treasury secretary is, I believe, the best first step he could possibly make.