(first in a two part series)

Maybe Humpty Dumpty would have had a great fall even without Federal Reserve Chairman Alan Greenspan’s escalating interest rates in the spring of 2000. But the plain fact is that Alan Greenspan was disastrously wrong and gave Humpty the first push, though, in truth, the wall was already crumbling.

This year, Greenspan has been slashing interest rates like Freddie Krueger, but Humpty is still tumbling, Low interest rates alone cannot reverse economic gravity.

The danger of America’s “irrational exuberance,” so worrisome to Greenspan, lay not so much in the fact that stock prices were outpacing corporate earnings, but in the much less arcane fact that individual spending was beginning to outpace individual earning.

Almost two million Americans will go bankrupt this year. Their family incomes average $20,000. Their credit card debt averages $18,000. These Americans and millions more who may join them next year, need more than low interest rates to make them part of our economic rebound.

Maybe Humpty Dumpty would have had a great fall even if President Bill Clinton had been a more vigilant steward of our economy during his last year in office. But the plain fact is that President Clinton took no decisive action when Alan Greenspan double-crossed him.

During Bill Clinton’s very first year as president, Greenspan agreed to keep interest rates low if Clinton kept Federal spending within Federal revenues. Clinton kept his part of the bargain by raising taxes high enough so that neither Democratic nor Republican congresses could outspend the revenues.

It wasn’t an unmixed blessing, but then, nothing in economics is. Nevertheless, the Clinton-Greenspan arrangement, bolstered by tremendous consumer confidence, set Humpty Dumpty on an economic perch of such dizzying height, that all of us watched in amazement.

When Greenspan changed the rules, President Clinton’s silence was deafening, his inaction inexcusable. And so, ironically, what would have been the most heralded Clinton legacy, a sustained, booming economy, turned into a falling Humpty Dumpty economy in his last year.

Maybe Humpty Dumpty would have had a great fall even if President George Bush had fought for a more decisive tax cut in his first few months. But the plain fact is that President Bush failed to adjust his tax plan, when even he admitted the economic situation had changed dramatically since he proposed the plan as a candidate.

As a candidate, George Bush either didn’t notice or didn’t believe how fast Humpty Dumpty was falling. To be fair, neither did Vice President Gore or President Clinton or any other major party incumbent, reluctant to bear ill tidings in an election year.

In any case, candidate Bush’s back-loaded tax plan was so timid that even if one objected to its targeting, the cuts would have had no major impact for almost 10 years. Worse yet, as president, George Bush put up no fight when Congress scaled his plan back 25 percent. And by that time, Bush clearly realized there had been drastic changes in our economic outlook. There should have been comparable changes in his tax plan.

Bush showed no reluctance to warn of possible recession if Alan Greenspan did not make changes to his own strategy by lowering interest rates. Later, Bush used the same warning to jawbone Democrats into rapid action on his tax plan, even at the risk of catching flack from the media and from Democrats for his doom-saying. Why did Bush believe his own tax plan, crafted in economic sunshine, would work in an economic storm?

Maybe Humpty Dumpty would have had a great fall even if Senator Tom Daschle (D-SD) had not caved in to a tax plan he didn’t believe in. But the plain fact is that neither Senator Daschle, nor most Senate Democrats, could resist the siren song of power, when Vermont Republican, Jim Jeffords, offered to flip the Senate to Democrat control, if the Democrats agreed to the Bush tax plan.

Tom Daschle wanted a larger tax cut and a different targeting formula. And he had the Senate votes to hold out for it, even as the minority party. The irony is that Daschle and company might well have forced an economic stimulus compromise, very much like what needs to be crafted before the year is out; except we’d have had it last spring and it might have saved Humpty some nasty cracks.

Unfortunately, before any new stimulus can happen, we must endure the mating displays of politicians and their special interest paramours: corporate and union; environmental and religious; farmers and homeless and seniors and women and immigrants; registered special interest groups that number in the thousands.

Every politician who has received or hopes to receive sizable contributions from such groups and back door assistance from their soft money, must prove their loyalty by proposing measures which give special benefits to special interests. Before they’re finished, Humpty Dumpty will look like an Easter egg and smell like a rotten one.

Meanwhile, we can but hope for an economic stimulus program that grows from the center, rather than one dragged there from partisan extremes and special interest indebtedness. Such a program might have six straightforward elements and appear in this column before the month is out. Any guesses on the six elements?

Discuss this column with Paul on KWDB, 1110AM, Mondays 1-3PM, or contact Paul at newmanagos@yahoo.com