The Man Who Knew: The Life and Times of Alan Greenspan — Twelve: “DO WE REALLY NEED THE FED?”

1. 1. Reagan's economic team, including David Stockman, adopted a contradictory forecast combining high growth and low interest rates to balance the budget on paper, ignoring internal inconsistencies.
2. 2. Greenspan urged Murray Weidenbaum not to challenge the supply-siders' rosy growth assumptions, preferring to avoid conflict and preserve his own capital.
3. 3. The budget deficit ballooned to $128 billion in 1982 and $208 billion in 1983, the worst postwar performance, because the low-inflation, negative-growth reality depressed tax receipts.
4. 4. Reagan asked Volcker directly, 'Do we really need the Federal Reserve?' during a lunch meeting, reflecting the influence of gold-standard advocates.
5. 5. Greenspan argued that after Volcker's Saturday Night Special, deficits no longer caused inflation but instead raised interest rates by increasing government borrowing, threatening thrift institutions.
6. 6. Supply-siders pushed for a return to the gold standard as a way to instantly lower interest rates without spending cuts, but Greenspan viewed this as a cover for budgetary recklessness.
7. 7. Greenspan's gold-bond proposal in the Wall Street Journal was a deliberate stalling tactic to prevent the gold commission from recommending a full return to the gold standard.
8. 8. Volcker testified before the Senate Budget Committee that high interest rates were due to the budget deficit, not Fed policy, and warned against 'shooting the messenger.'
9. 9. Greenspan chaired the National Commission on Social Security Reform, tasked with patching the system to reduce Republican electoral vulnerability, not enacting radical reform.
10. 10. Ayn Rand scolded Greenspan at dinner for betraying libertarian principles by not pursuing root-and-branch Social Security reform, one of their last encounters before her death.
11. 11. The Greenspan commission failed to produce a deal before the 1982 elections, and Democrats exploited Social Security to gain 26 House seats.
12. 12. A bipartisan deal was reached in January 1983, delaying cost-of-living increases, accelerating payroll tax hikes, and taxing benefits of affluent retirees, with Claude Pepper's crucial support.