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A fiscal resemblance

October 25, 2005

TALK ABOUT A TOUGH ACT to follow: Acclaimed Federal Reserve Chairman Alan Greenspan is retiring in January after nearly two decades of keeping inflation at bay without derailing the country's growing economy.

That's why the bond market, which fears inflation the way homeowners fear termites, reacted coolly to the news Monday that President Bush had nominated Ben S. Bernanke to succeed Greenspan. Bernanke, a former economics professor at Princeton and Stanford, is viewed in some circles as being less zealously anti-inflation than Greenspan.

But those worries seem ill-founded, and Bernanke should be easily confirmed by the Senate. Widely admired among economists, Bernanke is a good bet to continue the Fed's successful efforts to keep prices stable -- a critical ingredient in a healthy U.S. economy.

Bush has made a wise choice in one of the most important appointments he will ever make. Bernanke's confirmation hearings might not mobilize political activists the way a Supreme Court nomination does, but the Federal Reserve chairman -- the steward of the American dollar -- is arguably the most important economic official on the planet. He is certainly perceived that way in nations, such as China, that are betting their future on our currency.

Bernanke has already had an insider's view of the central bank: Before becoming the chairman of Bush's Council of Economic Advisors in June, he was a member of the Fed's Board of Governors for three years. As an academic, he studied the history of U.S. monetary and banking policy. He has been an influential voice on the relationship between monetary policy and the Depression, which is precisely the sort of expertise you'd want a Fed chairman to have.

One of Bernanke's causes has been opening more of the Fed's inner workings to the public. In particular, he wants the Fed to publicly declare its target for inflation.

Some conservatives have grumbled that Bernanke isn't sufficiently pro-growth because he is not an adherent of supply-side economics -- in particular, the notion that cutting tax rates can increase tax revenue by spurring job creation and expanding production. But one of Bernanke's most appealing attributes is the fact that he's no ideologue. Instead, he's known for questioning accepted wisdom and taking a fresh look at data, an approach he has used to address such vexing issues as how U.S. interest rates have managed to stay low despite the huge federal budget and trade deficits.

Although he has spoken in favor of tax cuts and has spent recent months at the White House, Bernanke was not an architect of the Bush administration's agenda. That kind of independence helped Greenspan win the support of three Republican presidents and one Democrat, enabling him to chart an anti-inflationary course amid a variety of White House economic policies.

Bernanke probably won't duplicate that kind of longevity at the Fed, but at least he won't have to defend himself against accusations of cronyism.

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