Politics Mondays: Alan Greenspan, "Political Hack" – A Black Interpretation

There were two statements made last week that should have garnered the attention of a self-enlightened Black electorate, its media, its diverse leadership and intellectual community. First was the controversial statement made by Senator Harry Reid of Nevada about Federal Reserve Chairman Alan Greenspan and the other was made by Congressional Black Caucus Chairman Melvin Watt regarding the release of unemployment statistics from the Department of Labor.

First, Senator Reid created major headlines (with the help of Matt Drudge) when he was quoted as saying, and later stood by a statement he made on the March 3rd edition of CNN’s Inside Politics regarding Federal Reserve Chairman Alan. Mr Reid said, "I'm not a big Greenspan fan -- Alan Greenspan fan, I voted against him the last two times. I think he's one of the biggest political hacks we have in Washington." That is the portion of Senator Reid’s comments that received national attention.

Next, came the words of Congressional Black Caucus Chairman, Congressman Mel Watt, who released a statement regarding the February unemployment figures announced Friday by the U.S. Department of Labor. The first portion of that release reads, "The unemployment numbers released today show that African American unemployment has increased to a staggering 10.9 percent, once again widening the already dramatic gap that existed between White Americans and African Americans in jobs, economic opportunity and ability to survive."

Now, back to Senator Reid. The media focused on the ‘political hack’ portion of what he told Inside Politics host Judy Woodruff. But it is the rest of his statement along with the rest of what came from Congressman Watt last Friday which gets to the heart of an important and apparently growing misconception about the motivation and power of Chairman Greenspan and the institution and interests he represents; as well as the continued public ommission of his relevance to the Black economy . Senator Reid’s complete statement on Chairman Greenspan was the following (bold emphasis is ours):

Judy, you understand, I hope, that I'm not a big Greenspan fan -- Alan Greenspan fan. I voted against him the last two times. I think he's one of the biggest political hacks we have in Washington. The fact of the matter is, he told us when we were in power and Clinton was president the biggest problem facing the American people was the deficit. And we did something about it. We, during the Clinton years, paid down the debt by about a half a trillion dollars.

Why doesn't he respond to the Republicans and tell them the big problem here is the debt that this administration is created? We had a $7 trillion surplus when Bush took office, now we have a $3 or $4 trillion deficit. That's, in fact, what Greenspan should be telling people.

And here is the complete statement of Congressman Watt:

"The unemployment numbers released today show that African American unemployment has increased to a staggering 10.9 percent, once again widening the already dramatic gap that existed between White Americans and African Americans in jobs, economic opportunity and ability to survive.

"The rate of unemployment for African Americans is consistently more than double the rate for White Americans. This is simply unacceptable and must be dealt with. It can only be dealt with by an aggressive commitment to the Agenda outlined to the President by the Congressional Black Caucus in our meeting with him in January - a commitment to closing disparities that continue in every aspect of our lives. We call on the President, once again, to show his personal commitment to closing these disparities and call on him to rally the country behind the persistent and unfinished business of closing these disparities. Only then can our country realize its full potential and honor its commitment to provide equal opportunity for all."

The comments of both men, juxtaposed to the American economy are very revealing.

The portion of the statement from Senator Reid, that we have highlighted and placed in bold, represents the increasing perception, intensified by recent discussions regarding Social Security and the federal budget, that Alan Greenspan and the Federal Reserve are increasingly partisan. The most vocal proponents of this theory of late are Democrats. But we heard the same from some Republicans who felt Chairman Greenspan was carrying water for Democrats in opposing tax cuts in the 1990s.

The portion of the statement from Congressman Watt that we have placed in bold reveals the consistent omission, made by Black political leaders when critiquing the American economic condition. There is no mention of the impact that the Federal Reserve has in determining the fortunes of Black laborers, entrepreneurs and capital providers. Black political leaders – Republican or Democrat - would rather blame the opposition party and its leaders for economic conditions, than they would bring attention to the role that the Federal Reserve plays in determining employment rates, interest rates, access to capital and the cost of capital. So, while we know Congressman Watt's insight regarding Alan Greenspan's errors, and we were certainly impressed with his account of the CBC presentation to President Bush regarding Black disparities, we are confident that interpreting Black unemployment numbers primarily in terms of the office of the President, omitting the Chairmanship of the Federal Reserve, is not a course that will solve the problem of structural unemployment in America. This is especially the case, at present, when it is the Federal Reserve and not the White House, that is directly raising the cost, and dampening the overall demand for capital by raising interest rates, even though it states inflation is under control. Any Black-centered criticism of the President of the United States of America regarding national economic conditions should be married with a stiff critique of the Chairman of the Federal Reserve.

Any discussion regarding economic disparities between White and Black Americans is wanting if it does not acknowledge the role that monetary policy plays in affecting employment rates, risk-taking and true price stability. In 2001 I wrote an open letter to Alan Greenspan that earned me an appearance on Bloomberg Radio explaining how his mismanagement of monetary policy was disproportionately hurting the Black economy. In 2003, I wrote an open letter to members of the Black Caucus that sit on the House Committee on Financial Services that explained a "capital pyramid" and how ineffective and counterproductive it is for Black political leaders to mute race-oriented crtiques of the wealth distribution in America in favor of class-oriented arguments. And in 2005, just a couple of weeks ago, I wrote an open letter to Congressman Mel Watt in advance of Chairman Greenspan's appearance before the Financial Services Committee explaining in detail how the Federal Reserve still subscribes to an unproven theory that causes the Federal Reserve to manipulate the economy in a way that hurts Blacks worse than any other group in the United States of America.

For nearly five years we have made the case that monetary policy is part of the third rail of American politics, especially so for Black leaders, who are consistently absent when the time arrives to make the case against what we liken as the Banking Congress - the Federal Reserve System. Even Black leaders that find the courage to openly attack the President of the United States, military industrial complex, intelligence agencies, powerful interest groups and lobbies seem unable to articulate an argument and direct it at the masses regarding the Money Trust's exclusive control of key levers of this nation’s economy. As we have written, over the last 40 years the closest the Black community has had to the leadership that is necessary on this issue was provided by former Congressman Andrew Young, who made critical insights regarding U.S. monetary policy in the 1970s. Insights that no Black political leader can be found making today.

To be fair, this is not a problem created in the Black community. Perhaps its origins and essence can be found in the decision by Congress in 1913 to cede its constitutionally-granted control over monetary policy to the privately-owned Federal Reserve; and in the attitude witnessed in 2000, that allowed the Humphrey-Hawkins legislation that required the Federal Reserve Federal Open Market Committee to report to Congress on the economy and monetary policy twice a year, to expire. Chairman Greenspan kindly continues the practice, with his verbose and obfuscatory reports before Congress in February and July, but he is no longer legally bound to do so. To say that the entire American political establishment has been lax in confronting the Federal Reserve might be an understatement.

Essentially what is required is an open recognition that Chairman Greenspan and the Federal Reserve do make political decisions in an economic context more than they make partisan decisions in a political context. Jared Bernstein and Dean Baker of the Economic Policy Institute put it best when they wrote in The Benefits Of Full Employment "...when policy makers, such as members of the Federal Reserve Board, deliberately allow the unemployment rate to rise, or prevent it from falling to full-employment levels, they are making a decision about which specific groups of workers will hold jobs and how much they will earn. In effect this is a political decision about the distribution of the pie, not purely a technical decision aimed at maximizing economic efficiency."

The more that American political leaders, especially those representing the Black electorate, accept that this is the real implication of Federal Reserve policy and the effect it has on the condition of the U.S. economy, the better.

So, Alan Greenspan is a political hack, not the kind Senator Reid described, but rather the one Congressman Watt failed to mention.

Cedric Muhammad

Monday, March 7, 2005