Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Sunday, December 18, 2005

Ex-Bush CEA Chair Greg Mankiw attacks reporter Daniel Altman. Lord knows that I typically find media coverage of economic policy issues to be abysmal. But this one I score for Altman.

Mankiw's principal beef with Altman is that Altman wrote:

Back in 2003, the choice of N. Gregory Mankiw, a Harvard professor, to head the council initially provoked some wonderment from economists. He had condemned supporters of some Reagan-era tax cuts as "charlatans and cranks" in the first edition of his basic economics textbook.... But it's possible that the administration had few other options....

[T]he role of the council's chair can take on a decidedly political tilt.... Professor Mankiw, who has returned to Harvard, sounded more like Scott McClellan, the White House press secretary, than an economic adviser. "The president is very focused on putting people back to work, at creating jobs," he said. "The president has said that he wants to make the tax cuts permanent. He believes that is important for economic growth."...

But I can't see what Mankiw's objection is. Mankiw writes:

On the issue of my previous views, Altman makes a common error. In the past, I have been critical of supply siders who say that tax cuts generate so much growth as to increase tax revenue. That is different than being critical of tax cuts. I believe that tax cuts increase growth and, therefore, are partly self-financing. I think it is overoptimistic to say they are fully self-financing. That is why spending restraint must go hand in hand with tax cuts. For some reason, some Times reporters think that being critical of one argument for tax cuts is to be critical of tax cuts themselves...

I had always assumed that Greg Mankiw was critical of the Bush tax cut for these reasons:

  1. Major Premise: All serious economists are critical of tax cuts that are not accompanied by spending restraint because they are likely to produce large long-run deficits which may well cause big trouble.
  2. Minor Premise: The Bush tax cut are not accompanied by spending restraint and so are likely to produce large long-run deficits.
  3. Conclusion: All serious economists are critical of the Bush tax cut.

And:

  1. Major Premise: All serious economists are critical of the Bush tax cut.
  2. Minor Premise: Greg Mankiw is a serious economist.
  3. Conclusion: Greg Mankiw is critical of the Bush tax cut.

That Mankiw is in fact critical of tax cuts unaccompanied by spending restraint--like those of the deficits-don't-matter tax-cuts-raise-revenue big-government conservative administration of George W. Bush--is made manifest in his statement in the paragraph I quoted that "spending restraint must go hand in hand with tax cuts" for tax cuts to be a good thing.

So what is Mankiw's beef with Altman?

Mankiw also appears to have a beef with Bill Niskanen. Altman quotes:

"Bush has centralized policy decision-making much more than any president in years," [Niskanen] said. "The Council of Economic Advisers has been somewhat bypassed." Mr. Niskanen said that there were now fewer meetings between members of the council and members of the president's cabinet than there were during his term. The council's offices have even been moved to a building farther from the White House.

All of these tensions may have resulted in a sort of Catch-22. The president's inability to move forward with much of his second-term economic agenda - dealing with Social Security, the tax system, immigration and tort rules - may have dulled economists' eagerness to work with him. Yet he may need them in order to start the wheels moving. "John Snow has talked about turning the tax commission report into legislation," Mr. Niskanen said of the Treasury secretary, "but he does not have the skills on board to do that."

In response, Mankiw writes:

Sadly, this is the kind of "reporting" that I have come to expect from the Times, substituting rumor and innuendo for fact.... Bill Niskanen... assert[s]... the CEA has less access now than when Bill was at the CEA twenty years earlier. There is no way that Bill can possibly know whether this is true (has he had access to Hubbard's, my, Rosen's, or Bernanke's meeting schedule?).

Altman should know that this assertion of fact is baseless and self-serving (it makes the person making the assertion seem more important). But Altman is happy to quote the claim because it is consistent with his preconceived notions of how this administration works...

First, I don't think Bill Niskanen is saying things for I-want-to-look-important reasons. I think Bill Niskanen is saying things for I-have-good-information-sources-and-from-my-perch-in-Washington-they-seem-to-be-true reasons.

Second, the highlights of Bush administration economic policy during Mankiw's tenure were:

  1. A Medicare drug bill that Mankiw's predecessor, Glenn Hubbard, terms "unwise."
  2. Further worsening of the long-run budget deficit as the administration continued to push for tax cuts and spending increases--a worsening that has led Alan Greenspan to publicly call for a restoration of the procedural restrictions on deficits provided by the 1990 Budget Enforcement Act.
  3. No progress at all on the Doha Round of world trade expansions.
  4. A poorly-thought out attempt at Social Security reform that fell far short of the mark on both economic and political dimensions.

Now most of us don't assign Mankiw any of the responsibility for these policy mistakes. We see him as having been, largely, on the side of the angels. We had some hope when Mankiw joined the administration that he could be part of a faction that would shift Bush economic policy away from the big-government conservatism idiocy. But it didn't work. We see Mankiw as having been dealt a weak hand--with his staff exiled from the OEOB to space outside the Executive Office of the President proper, and with little access to High Politicians who have less concern than usual with the substance of economic policy--and yet as having played that hand relatively well.

Mankiw is, I think, unique today in seeking to claim that he had much rather than little influence on White House decision making in 2003 and 2004. Even Donald Rumsfeld is whispering these days that he had less--that he was out of the White House loop: had little to do with Bush's decision to attack Iraq, and in fact never advised Bush to do so.

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