Republicans and Bush condemned by Greenspan

The revered former Federal Reserve chairman, Alan Greenspan, lashed out against the Bush administration over the weekend, accusing the White House and the Republicans in a new book of swapping "principle for power" and allowing fiscal policy to run out of control.

In a series of advance releases and interviews ahead of today's publication of a new memoir, Mr Greenspan – a lifelong Republican himself – expressed his deep disappointment with the direction of US economic policy over the past six-and-a-half years, saying he had initially looked forward to working with "old friends" he had known since the Ford administration in the 1970s, only to see them "veer off in unexpected directions".

He was referring, in particular, to Vice President Dick Cheney and former Defence Secretary Donald Rumsfeld, who were key aides to President Ford when Greenspan served on the president's Council of Economic Advisers. His book, The Age of Turbulence: Adventures in a New World, further embarrassed them by insisting on what he called a "politically inconvenient truth": that the Iraq war "is largely about oil".

The core criticisms, though, were of the Republican-controlled Congress, which allowed a budget in surplus at the end of the Clinton administration to give way to runaway deficit spending, and of a White House that did not veto a single spending bill in six years.

"The Republicans in Congress lost their way," he wrote. "They swapped principle for power. They ended up with neither." Of last November's congressional elections, in which the Republicans lost control of both the House and Senate, Greenspan added: "They deserved to lose."

Greenspan said the Bush administration's hands-off approach to Congress was a mistake. Issuing the occasional veto, he argued, "would send a message to Congress that it did not have carte blanche on spending".

He said he had raised the issue with the White House. "But," he said, "the answer I received from a senior White House official was that the president didn't want to challenge former House Speaker Dennis Hastert. "He thinks he can control him better by not antagonising him,' the official said."

Greenspan added: "To my mind, Bush's collaborate-don't-control approach was a major mistake – it cost the nation a check-and-balance mechanism essential to fiscal discipline." He also accused the White House of controlling economic policy by itself and essentially cutting successive Treasury Secretaries – Paul O'Neill and John Snow – out of the equation.

Greenspan, who presided over America's equivalent of a central bank with a rare authority for more than 18 years before his retirement last year, is just the latest in a growing chorus of former senior officials who have lambasted the Bush administration with a vehemence unseen even in the wake of the Watergate scandal that unseated Richard Nixon. Greenspan, in fact, praised Nixon as one of the two smartest presidents he worked with. The other was Bill Clinton.

He and Clinton developed "an easy, impromptu relationship". He wrote: "I didn't share his baby-boom upbringing or his love of rock'*'roll. Probably he found me dry – not the kind of buddy he liked to smoke cigars and watch football with. But we both read books and were curious and thoughtful about the world, and we got along."

Such cosiness was glaringly missing from the administration that followed. Of the advent of the Bush administration in 2001, he wrote: "I looked forward to at least four years of working collegially with many of the government's best and brightest men, with whom I had shared many memorable experiences. And on a personal basis, that is how it worked out.

"But on policy matters, I was soon to see my old friends veer off in unexpected directions."

Greenspan himself has not been immune from criticism since he left the Fed. For years, he has fended off accusations that he helped fuel the dot-com investment bubble at the end of the 1990s, and that he did something very similar with the housing market that is now experience a major crunch, particularly in the sub-prime sector.

Like other memorialists of the Bush administration – for instance, former CIA director George Tenet – Greenspan is also being accused of speaking out too late against policies that, at the time, he gave every public appearance of endorsing.

He memorably endorsed George Bush's advocacy of deep tax cuts, focused on the richest Americans, and said little at the time about their implications for deficit spending.

On the US presidents ...

* George Bush Snr:

"Great things happened on George Bush's watch: the fall of the Berlin Wall, the end of the cold war, a clear victory in the Persian Gulf, and the negotiation of the Nafta agreement to free North American trade. But the economy was his Achilles' heel, and as a result we ended up with a terrible relationship."

* On Clinton:

"Clinton was often criticised for inconsistency and for a tendency to take all sides in a debate, but that was never true about his economic policy. A consistent, disciplined focus on long-term economic growth became a hallmark of his presidency."

* On the current Bush administration:

"I was a different person than I had been when first exposed to the glitter of the White House a quarter-of-a-century before. So were my old friends: not in personality or character, but in opinions about how the world works and ...what is important."