Posted on 06/01/2004 12:29:22 AM PDT by neverdem
A few weeks ago, The National Journal, the highly respected and highly expensive Washington policy magazine, asked a dozen distinguished and politically independent economists to grade the Bush administration's economic performance. The magazine surveyed people like Charles Schultze of the Brookings Institution, the longtime Federal Reserve economist Lyle Gramley, David Wyss of Standard & Poor's, among others — a pretty good sampling of mainstream economic thinking.
As a group, the panel gave the Bush team a B-plus for short-term fiscal policy, a C-minus for long-term fiscal policy, a B for regulatory policy and a B-minus for trade and international economics. These aren't the grades that win you a Rhodes scholarship, but they're not too bad.
I thought it might be interesting to see what the Bush people themselves thought of their marks, so I brought The National Journal into the White House and asked a few senior officials to respond.
Their first answer, not surprisingly, is that you have to understand the reality that confronted them when they took office in 2001. Business leaders were calling in to say that economic activity was falling off a cliff. The dot-com bubble was over, manufacturing was getting hit, business confidence was plummeting. Before it became a general concern in the papers, administration folks were worrying that the U.S. might go through a Japanese-style stagnation. Deflation was an unlikely but scary possibility.
They decided to do what was necessary to head off any immediate catastrophe. As Stephen Friedman, director of the National Economic Council, sums it up, "We didn't want to err on the light side when it comes to stimulus." Hence, the large tax cuts.
They wouldn't admit it to me, but I think the administration folks knew they were kicking several large problems down the road. Still, they did a reasonably good job of responding to the immediate crisis. Republicans do not believe that government is supple enough to time a fiscal stimulus effectively, but this is the one (and possibly only) instance when officials recognized a problem early and timed the response well.
There are four big objections to the tax cuts. The first is that you don't cut taxes in a time of war. This is the least persuasive. Some outside economists say the cuts created or preserved 1.5 million jobs. It's hard to see how the war effort would have been enhanced with those people out of work. If we had wanted to create a sense of shared sacrifice, which we should have, it would have been far better to institute an ambitious national service program.
The second objection is that the cuts were poorly designed. They were drawn up in the midst of prosperity and then wheeled out in response to recession. Even Decision Economics' Allen Sinai, a big supporter of the cuts, says the stimulus could have been stronger if more of the cuts had been distributed down the income scale. The White House lacks a compelling response to this.
The third argument is that the cuts should have been temporary. White House folks argue persuasively that given the rolling series of blows — the bubble, the corporate scandals, the war jitters — a short-term stimulus would not have worked. "You were not going to get a sustained recovery from something temporary," Friedman says.
The final and most serious argument is that whatever the short-term benefits, the tax cuts have left us with a long-term fiscal mess. When you ask administration folks about the deficit problem, they argue that it isn't caused primarily by the cuts, but by rising health care costs and the aging baby boomers. That's true, but it evades the fact that the tax cuts made the situation worse.
I realize it's now practically illegal to have modulated views about anything related to the Bush administration, but I'd say it deserves the grades the National Journal economists gave it. What I don't understand is why the administration doesn't now pivot and say: O.K., we had a potential crisis. We prevented it. Now the recovery is in full swing. Let's address the long-term problems. Let's talk about the consequences of the aging baby boomers. Let's talk about reforming the tax code to encourage domestic savings.
After all, this election will probably hinge on Iraq anyway. The Bush folks might as well roll the dice with some attention-grabbing domestic ideas. That way if Bush is re-elected, he'll have a mandate to do something big.
All things considered, I believe this should go in the "plus" column.
Now let's take a peek at the Dems.
Remember their whining and obstruction of darn near everything Bush wanted to do?
Remember - they want to raise taxes and spend more money.
Well if no one will say it, I will. Today's economy is "smoking" klintoon's economy. Things are BOOMING. If there were a dim in office, this propaganda periodical would be assigning an A+ as an economic measure.
LLS
I disagree here. If Bush has a legitimate plan to overhaul social security, he should keep his mouth shut. The Democrats will spin any reform plan as an attack on senior citizens. Better to win the election and then spend four years dismantling the largest fiscal albatross in the history of the Republic.
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