SYNOPSIS: The head of the Federal Reserve has a duty to stay out of politics

Onstage, the song and dance went perfectly. Offstage, however, George W. Bush's top economic adviser flubbed his lines. On Wednesday The Financial Times ran an interview with Lawrence Lindsey in which the former Fed official made much of his relationship with Alan Greenspan, and appeared to claim that Mr. Greenspan endorses Mr. Bush's economic plan. By the next day Mr. Lindsey was furiously back-pedaling, conceding that he had in fact never discussed the plan with the Fed chairman, and further opining that "It's not for Chairman Greenspan to endorse one tax plan or another tax plan, or to endorse one candidate or another."

Presumably Mr. Lindsey -- perhaps a bit rattled by analysts at Goldman Sachs and elsewhere who have warned that Mr. Bush's proposed tax cuts will drive up interest rates -- was just being sloppy. One hopes that from now on the Republican team will defend its plans on the merits -- starting, in the case of Social Security, by explaining what the plan actually is -- instead of trying to reassure us that everything is O.K. because Uncle Alan approves. And yet there is something more to this story than Mr. Lindsey's blooper. If you ask me, we're hearing too much these days about Mr. Greenspan's opinions.

Mr. Greenspan, after all, holds a position that must be filled with great discretion, because he has a degree of autonomy that is peculiar in a democratic polity. Neither Congress nor the president can tell Mr. Greenspan what to do: he is a power unto himself.

There are good reasons for that special status. Monetary policy presents politicians with dangerous temptations -- for example, to pump up the economy just before an election. To protect themselves from those temptations, even countries where the central bank used to take orders from the finance ministry, like Britain and Japan, have chosen (after hard-learned lessons) to have independent monetary policy boards.

And no central bank has justified its independence as thoroughly as the Fed. Mr. Greenspan has been lucky to preside over an era when everything has gone right with the U.S. economy, but he has made the most of that luck, letting growth rip without reviving inflation. And twice -- in 1987 and 1998 -- he calmed markets at a time when a financial meltdown seemed imminent. It's no surprise that his opinions are sought on many issues.

But here's the problem: if the Fed is to be exempt from normal political control, it must itself be scrupulously nonpolitical, if only for its own sake. Stuff happens: it's a safe bet that one of these years the Fed -- perhaps under Mr. Greenspan, perhaps under his successor -- will make a big mistake. If it is perceived as an institution that carefully respects its limits, that mistake will be forgiven. But if the Fed chairman has come to be perceived as just another political player, trying to influence policy in areas that have nothing to do with his brief, the cries of "Who elected him?" will be hard to answer.

So I get uneasy when I see Mr. Greenspan weighing in on issues that seem remote from his job description. For example, what was he doing testifying in favor of normal trade relations with China? I happen to agree with him on the issue -- but trade policy is a long way from monetary policy, and he should have stayed out of it.

Even the response to Mr. Lindsey's faux pas was inappropriate. According to Mr. Greenspan's spokesman, his "preference is for high or rising surpluses," but "if growing surpluses become politically infeasible to defend, he would prefer that they be allocated to tax cuts rather than to spending initiatives." I guess the first part of that is O.K. -- since monetary policy and fiscal policy are interdependent, it's legitimate for the Fed chief to recommend fiscal restraint. But decisions about whether surpluses should be used to cut taxes or provide benefits -- should we eliminate the estate tax or provide the elderly with drug coverage? -- are surely matters for the electorate, not for unelected monetary technocrats.

If and when Mr. Greenspan becomes a private citizen, his views on such issues will and should be heard. But as the chairman of the Fed, he has to be careful: he must avoid any hint that he is overstepping the boundaries of his position.

Originally published in The New York Times, 8.6.00