GREENSPAN CONFIRMATION STALLED IN DEBATE OVER FED'S WAR ON INFLATION.

Byline: Richard W. Stevenson The New York Times

Few were surprised in February when Alan Greenspan won renomination as chairman of the Federal Reserve Board, given the success of his nine-year war on inflation. But three months later Greenspan's confirmation remains stalled in the Senate over questions of whether he has carried that war too far.

Even Sen. Tom Harkin, the Iowa Democrat who has single-handedly blocked a vote, concedes that Greenspan will eventually be confirmed for a third term, in a vote that could come as early as next week.

If nothing else, though, Harkin's stubborn opposition to Greenspan has focused attention on a contrarian movement that contends the time is right for Greenspan to change his focus.

Liberal politicians like Harkin, joined by a growing number of prominent business executives and a handful of economists, argue that instead of maintaining a single-minded concentration on price stability, Greenspan and his colleagues at the nation's central bank should recognize that inflation is no longer as great a threat.

With prices restrained and the economy growing at rates that are sluggish by historical standards, they say, the Federal Reserve should move to reduce interest rates in hopes of stimulating job creation and faster growth.

``I believe very strongly that the Fed should be leaning more forward toward growth, and not be so concerned with the threat of inflation,'' said Dana Mead, the chief executive of Tenneco Inc. and the chairman of the National Association of Manufacturers, an influential lobbying group.

``A change in monetary policy is not the only thing we need, but it's a necessary condition to get started.''

Harkin, who is using the generous rights of delay the Senate grants individual members to block the nomination, wants Republicans to agree to a three-day Senate debate on monetary policy as the price for allowing a vote on Greenspan and two other Federal Reserve nominees, Alice Rivlin and Laurence Meyer.

He has not budged yet despite a personal visit from Greenspan, a phone call from President Clinton and repeated pleas from other administration officials. (Senate leaders are expected to push for a vote on the nominations in a way that allows a limited debate.)

``The Fed today is not concerned about the threat of inflation, nor even about the shadow of a threat, but about the reflection of the shadow of the threat,'' Harkin said. ``To keep our economy in a harness when there is all this potential for growth does all of us a disservice.''

There has always been pressure on the Federal Reserve for ``easy money,'' and the case that the inflation risk should be downgraded in favor of more monetary stimulus remains very much a minority view, at least among economists.

Moreover, mainstream economists warn that when the Federal Reserve tried to ``fine-tune'' the economy in an effort to stimulate growth during the 1970s it helped set off an inflationary spiral that was brought under control only after a long and painful recession in the early 1980s.

``If printing money could create real output and wealth, then all the world's problems would be solved,'' said Paul Kasriel, the chief domestic economist at the Northern Trust Company in Chicago.

Greenspan and his colleagues on the Federal Reserve Board are equally dismissive of the pro-growth advocates, saying that those who are calling for lower rates misunderstand the economy's problems and the role of monetary policy, and overstate the Federal Reserve's ability to influence long-term growth.

``It's a very confused set of arguments,'' said Janet Yellen, a Federal Reserve governor.

Yet the increasingly vocal debate over Federal Reserve policy is coming at a time when the broader question of how to get the economy growing faster is becoming a big issue in this year's presidential campaign.

``Slow economic growth is America's No. 1 economic problem,'' states a draft report prepared for Sen. Bob Dole's Republican presidential campaign several weeks ago by his economic advisers. ``America desperately needs new pro-growth policies to raise wages and secure the incomes of workers, now and in the new century.''

Some of Dole's advisers strongly support Greenspan's anti-inflation focus, arguing that deep tax cuts are what's needed to spur growth.

Clinton has been more ambivalent about the Fed's role, calling early this year for further study on whether the economy is capable of higher rates of noninflationary growth. But Clinton stopped short of advocating a looser Federal Reserve policy, and he later renominated Greenspan to his post.

Despite some ups and downs, the economy in recent years has been growing on average between 2 percent and 2.5 percent, compared with 4 percent during the 1960s and better than 3 percent in the 1970s.

Most economists believe that the nation's underlying problem is a low rate of increase in productivity, or output by each worker, which the Federal Reserve can do practically nothing about. Unless that is overcome, these economists say, the economy will not be able to grow over the long run any faster than about 2.5 percent a year without sparking a rise in inflation.

There is no argument about the benefits of higher noninflationary growth. Adding even half of a percentage point of growth a year, economists said, would allow the economy to create jobs at a faster pace. Wages and living standards would rise. Additional tax revenues would make it easier to balance the federal budget and to finance troubled programs like Social Security and Medicare.