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.

Saturday, September 09, 2006

The Education of William Greider (Why Oh Why Can't We Have a Better Press Corps?)

In the Nation, William Greider defends David Stockman against the civil securities fraud charges that the Securities and Exchange Commission is thinking he might be guilty of:

Greider starts:

Hold the Schadenfreude: People ask me how I feel about Stockman's new troubles because we were friends in those olden days and I collaborated with him in a truth-telling exercise that deeply shocked official Washington at the time.... Stockman in Washington days was a true believer, brainy and tenacious, in the mysterious arts of federal budget making, and he did indeed assert his faith in public long after the adverse realities were persuading him that Reagan's agenda of tax cutting and doubling defense spending wasn't going to balance the federal budget. His greatest sin, however, was telling the truth, albeit belatedly...

But there was no truth-telling exercise to collaborate in. Republican Vice President George H.W. Bush knew that Reagan's fiscal policies didn't add up: he and his people coined the phrase "voodoo economics." Republican Senate Majority Leader Howard Baker knew that Reagan's plan made no sense: he called it a "riverboat gamble," meaning an imprudent and unwise throw of the dice. Those working for Reagan in 1981 fell into four groups:

  1. The innumerate and gullible--most of them willfully so--who did not look into assurances that the Reagan administration's plan would balance the budget.
  2. True believers in broadening the base, lowering the rates, and balancing the budget who looked on in horror and who hoped to fix things later.
  3. Those who didn't care that the Reagan administration's budget policies were bad for the country in the long-run if they were advantageous in the short run.
  4. Those who knew that the tax cuts and defense spending increases would unbalance the budget, and thought that the deficits created would put irresistible pressure on congress to do what it would never do otherwise--shrink a social insurance state. This was Stockman's group.

Only the first group within the Reagan administration, bamboozled led by the other three--and only those outside the Reagan administration who were bamboozled by it and its "he said-she said" enablers in the press--actually believed in cutting taxes and balancing the budget.

Greider continues:

The Reagan cabinet officer (practically a kid in those days) shared his true opinions privately with me--an assistant managing editor at the much-loathed Washington Post--and I disclosed the bracing realities in the Atlantic Monthly...

But there were no "bracing realities" to be disclosed.

All this--that things didn't add up, and that there were these four feuding groups within the Reagan administration--was common knowledge to budget experts, economists, and journalists.

What Greider got from his breakfasts with Stockman was some juicy quotes that he used in his Atlantic Monthly article and in a very good little book he wrote--The Education of David Stockman and Other Americans. What Stockman and company got out of Stockman's breakfasts was Greider's promotion within the Post of the "he said-she said" coverage that pretended to take the Reaganites' claims to be able to cut taxes and balance the budget seriously.

In short, Greider didn't do his job at the Post: he approved a great many stories about the Reagan budget that he knew, from his contemporaneous conversations with Stockman, were false. Greider then used what he had learned to make a personal splash in the Atlantic that told me, at least, little other than that Stockman personally was in Reagan group 4. And Greider sells this shabby story as a "truth-telling exercise."

Why is Greider misrepresenting his role of 25 years ago? Because he wants to defend David Stockman:

I don't know the facts of Stockman's present travail, but I have a hunch he is guilty mainly of excessive optimism, not fraud. When asked, I express sincere sympathy for his plight. Indeed, his dilemma reminds me of playwright Clare Booth Luce's wicked aphorism: "No good deed goes unpunished."... Whether he misjudged the situation or misrepresented it to investors, I do not know. I do feel sure he was a victim too, perhaps of own Midwestern optimism and self-confidence. Let's not hang the man for trying to do the right thing.

Greider has a lot of cheek. Greider committed a fraud on his employer--the Washington Post--in 1981. Stockman committed a fraud on his boss, Ronald Reagan, in 1981--for Reagan was in group 1, and accepted Stockman's assurances that the numbers would add up. And Stockman committed a fraud on the non-budget expert public--a fraud that Greider tiptoes around, saying only that Stockman did "indeed assert his faith in public long after the adverse realities were persuading him that Reagan's agenda of tax cutting and doubling defense spending wasn't going to balance the federal budget."

But there is a difference between Washington and Wall Street. When Stockman in Washington lies to everybody except his Washington Post managing editor confidant, and that confidant lies to his reporters about the budget--that is "an exercise in truth-telling." When Stockman on Wall Street lies to investors about the finances of Collins & Aikman--that is a potential fraud, and the SEC investigates whether civil fraud charges are warranted.

Background:

First Draft - I Love The Eighties: I think I'm having a flashback.

To old hands in Washington, David A. Stockman will always be the long-haired numbers cruncher who led the cheers for Reaganomics but nearly lost his job for privately denigrating the administration's budget at the same time he sold it to the public.

Stockman's trip "to the woodshed" with President Ronald Reagan and his denouncement of the "rosy scenario" of White House fiscal policy helped coin political phrases that linger in the capital's lexicon more than two decades after he left government.

Now the man who put one over on Congress could face far more severe consequences for possibly misleading Wall Street.

Lawyers at the Securities and Exchange Commission recently notified Stockman that he could face civil charges related to upbeat statements he made to investors two months before an auto parts company he ran sought bankruptcy protection last year, according to sources familiar with the issues who spoke on condition of anonymity because the investigation continues.

Securities regulators are examining the role Stockman and other former executives played in alleged financial irregularities at Collins & Aikman Corp., with an eye on whether Stockman may have lied to investors by telling them the company's finances were being "managed quite effectively" when he was aware of mounting problems. Federal prosecutors have also subpoenaed financial records from the company...

0 Comments:

Post a Comment

Links to this post:

Create a Link

<< Home