CEOs Speak Out Against Greenspan.

Had Federal Reserve Chairman Alan Greenspan retired after his last term, he might already have an airport named after him. In January 2000, the U.S. economy was still thriving, hot on the heels of 1999's 4.6 percent GDP increase. Despite the ongoing gift of Ronald Reagan's tax cuts, Bill Clinton's embrace of NAFTA and GATT, and Silicon Valley's treasure chest of productivity-enhancing technological innovations, Greenspan was seen as the Prime Mover behind America's prosperity. He found himself lifted virtually above criticism, god-like, as if onto an altar. L.A. Times cartoonist Darrin Bell satirized this situation last year by showing a little girl saying grace before dinner as her parents stared in astonishment. "Greenspan bless Mommy," she says. "Greenspan bless Daddy, and Greenspan bless Playstation."

Just a year later, worship has turned to worry as the U.S. economy sputtered in late 2000 and early 2001. At this writing, industrial production had fallen monthly since August. Consumer confidence sagged each month in the fourth quarter, as did auto sales. Manufacturing payrolls shrank from August right through year's end, falling by 62,000 positions in December alone. The Philadelphia Fed's general activity index plunged from -4.2 to -36.8 in January, its weakest showing since December 1990.

While federal red tape, OPEC'S mischief, and the post-election Florida Fiasco each played a part, the Fed's six rate hikes between June 1999 and May 2000--increasing the federal funds rate by 1.75 percent--also contributed generously to the deceleration. The Fed's two January rate cuts, totalling 1 percent, reversed this tightening strategy.

Business leaders have begun pointing out how the Fed has squeezed the economy in general and their companies in particular. "I think they tightened up too much last year," Enron CEO Ken Lay told me at a Washington, D.C., meeting of the Club for Growth, a market-oriented PAC. "None of the rest of us could see the signs of inflation that they said they were trying to protect us from. Indeed with the kind of international competition we have now and domestic competition and productivity gains, it's really tough to see where the inflationary threat was. So I think they overtightened somewhat, and I think we're now paying a price for that."

Microsoft COO Bob Herbold also was a panelist at the Club's January 19 conference. He spoke glowingly of the promise of high-speed Internet connectivity but later added that "from the standpoint of the buildout of broadband," the lingering impact of the Fed's previous tightening policy "is a serious issue." The wounded founders of hundreds of dead dot-com companies would agree.

James Haustein, CEO of Miami-based Sunglass Hut, wrote the Atlanta Fed a complaint letter after enduring two slow quarters in the first half of 2000. "We are very close to the consumer," Hauslein said by phone. "We started seeing trends that I hadn't seen since the 1989-1991 time frame. I expressed my concern that they had increased interest rates too high, too fast."

Two of Greenspan's earliest critics remain puzzled about his management of the central bank. "Many in the Fed and in the economic profession still share the crazy idea that the American economy is incapable of long term growth in excess of 2.5 percent," says Steve Forbes, CEO of Forbes, Inc. "Our experience since Reagan took office should have disabused them of that theory."

"You have a picture of this guy sitting in his office trying to twist all the dials," says Lawrence Kudlow, chief economist of ING Barings. "It's like the last vestiges of the Politburo." Kudlow believes that Greenspan's 13 years of service are enough. "He has overstayed his welcome. The bloom is off the Greenspan rose, and I frankly think it is time for a change at the Fed."

Since Greenspan's term ends on June 20, 2004, that change likely will be one of attitude rather than tenure. Should the Fed further ease interest rates while Congress and the White House enact tax cuts and regulatory relief, America should snap out of its funk. The real mystery is whether Greenspan will greet a revived economy with renewed anti-inflationary hand-wringing and fresh interest-rate hikes, jeopardizing growth yet again. Frequent, free-market advice from increasingly vocal corporate executives could persuade Alan Greenspan and the Fed to avoid such toxic policies.

New York commentator Deroy Murdock is a senior fellow with the Atlas Economic Research Foundation, and a Hoover institution media fellow.