August 30, 2002
Paul Krugman on the Fiscal Outlook

Back in the early 1990s there were a bunch of us who believed that reducing the deficit--returning American fiscal policy to sanity--would lead to a jump in confidence in America's long-run future, to an increase in investment in America, to a high productivity-growth recovery, and to rapid increases in Americans' incomes. We turned out to be right: economic historians will long argue to what degree the 1990s boom was the result of changes in fiscal policy and to what degree it was the result of other factors, for the magnitude of the productivity boom was far greater than we had hoped for, even in our wildest dreams. Thus it is very disappointing to see how quickly what I regard as our flagship accomplishment is being reversed by the Bush administration and the current congress. Here Paul Krugman sums up the story so far: Just Paul Krugman: Trust Us: The story so far: Summer 2000: Candidate George W. Bush assures voters that his tax cut is affordable. He illustrates his point with four $1 bills. One bill, he says, represents the tax cut; one represents new programs, such as prescription drug coverage; the other two are funds set aside to pay...

Posted by DeLong at 12:51 PM

July 20, 2002
Joshua Micah Marshall Says Go Read Chris Caldwell

Joshua Micah Marshall says go read Chris Caldwell's New York Press column, and then go read it again... Talking Points Memo: by Joshua Micah Marshall I didn't want to do any posts this weekend. But this article by Chris Caldwell in the New York Press merits an exception. It's simply devastating and the most apt statement of the White House's predicament I've yet read. Every word of it practically is worth reading and reading again. There's always an element of unmerited, guilty pleasure you feel when you hear someone on the other side making your side's case for you. But it's equally true that sometimes a political point can only be made clearly by someone who has to say it with an element of regret, whose words are free of the dross of wishful-thinking and mindless overstatement......

Posted by DeLong at 10:04 PM

July 07, 2002
Before Paul Krugman Leaves for His Vacation...

Before Paul Krugman leaves for his vacation, he takes one more shot at George W. Bush. Between the two options Krugman gives us--Bush knew about and benefited from Harken's accounting frauds, and Bush was just a very negligent and disconnected director--I think the second is by far the most probable. Succeeding in Business ...the ploy works as follows: corporate insiders create a front organization that seems independent but is really under their control. This front buys some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock. That's exactly what happened at Harken. A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989. White House aides have played down the significance of this maneuver, saying $10 million isn't much, compared with recent scandals. Indeed, it's a small fraction of the apparent profits Halliburton created through a sudden change in accounting procedures during Dick Cheney's tenure as chief executive. But for Harken's stock price -- and hence for Mr. Bush's...

Posted by DeLong at 03:36 PM

July 03, 2002
Bush as a Corporate Director

Byron York, writing in National Review, claims that George W. Bush has no legal vulnerabilities arising from his dumping Harken stock while he was a director and while there was bad undisclosed financial news about Harken hanging. I think he's right about legal liability: Bush's claim that he did not know the bad news is sufficiently plausible to shield any court from deciding beyond a reasonable doubt that he engaged in criminal insider training. But I think he's wrong on the political side: for Bush to be so unaware of Harken's current status to think that he was, as Karen Hughes claimed, "selling into good news" when he was not only a director but also a member of Harken's audit committee demonstrates an astonishing degree of disconnection and disinterest in the company, and in his fiduciary responsibilities to its shareholders. Byron York on Bush & Democrats on National Review Online All the evidence available at the time -- and all that is available now -- suggested that Bush did not, as Krugman implies, engage in insider trading or other wrongdoing. This is what I wrote about the transaction in the June 1999 issue of The American Spectator: [Bush's] largest single...

Posted by DeLong at 10:01 AM