February 07, 2004

Leaving a Sinking Ship III

Remember the text of last year's "economists' letter" supporting George W. Bush's then budget proposals? All who signed the letter announced that they supported Bush's economic policy--the immediate predecessor to today's clown show. All announced that they:

  • Were enthusiastic about the economic program.
  • Were confident that the proposals:
    • Were fiscally responsible.
    • Would create more employment.
    • Would create more economic growth.
    • Would create more opportunities for all Americans.
  • In addition, the proposals would:
    • Improve corporate accountability.
    • Strengthen the nation's international competitiveness.

I called for any of the signers of last year's letter to write to me if they still believed, and were willing to sign a similar letter today. (It should be straightforward: this year's policies are almost entirely last year's policies moved ahead one year in time, after all.) I once again make this appeal: is there anybody out there who is enthusiastic about Bush administration economic policy, and this year's budget proposals that are its instantiation? Anybody at all? Please email me.

I have tracked a few letter signers. The almost always complaisant letter signer Kevin Hassett has bailed--he thinks the budget is not fiscally responsible (which raises the big question of why he thought last year's was fiscally responsible). (This surprises me: I thought he would stay to the end.) There is nothing in google news from the letter-signing ex-Republican CEA Chairs Marty Feldstein, Michael Boskin, or Beryl Sprinkel on the budget: they are silent. There is nothing from letter-signer Burton Malkiel. Letter-signer and current CEA Chair Greg Mankiw told Congress this week that he supports "pro-growth tax policy and spending restraint"; given his (and my!) belief that deficits are anti-growth (one dollar of deficit removing seven cents' worth of economic growth), I could read that phrase as a call for a policy of deficit-fighting tax increases--and if I were cruel I would do so. Ben Stein--"actor, writer, economist"--(last seen blaming the Great Depression of 1929-1939 on Franklin Roosevelt, even though Roosevelt didn't take office until 1933) denounces Bush's tax cuts as unfairly generous to the rich. In desperation I went to Donald Luskin's website, but could find no defense of the Bush budget proposals there. In real desperation I went to National Review's website, but could find nothing there willing to say a good word about the Bush economic program. No. wait. Here it is. Larry Kudlow:

Democrats may carp about short-run budget deficits, and the vast majority of media commentators are obsessed with these deficits, but the economy is healthy, the stock market is strong, trade flows are positive, and interest rates and inflation are at rock bottom. Let them carp and obsess.... In electoral terms, it's the economy, not the budget deficit, that will decide November's presidential election. Bush's economy, and his reelection prospects, are in fine shape.

That counts. So far I have still had 1 taker from the signers of last year's letter: Larry Kudlow.

Letter Text and Signature List: We enthusiastically endorse your economic growth and jobs proposal. It is fiscally responsible and it will create more employment, economic growth, and opportunities for all Americans. Moreover, it will improve corporate accountability and strengthen the nation's international competitiveness.

Posted by DeLong at February 7, 2004 12:33 AM | TrackBack | | Other weblogs commenting on this post
Comments

There's always one. And wouldn't you know it would be that old party line flack Kudlow who would snap up the bait. I do hope he gets his due reward.

Posted by: Martin Weil on February 6, 2004 09:41 PM

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Kudlow is considered an idiot within the investment community. He's ignored except for when an example is needed on what is wrong with our financial media.

The academic economists that sign such letters should have their Ph.Ds revoked. They are in the service of our aristocratics to manipulate reports about our well being, to lie on the government's behalf. Income growth, unemployment, CPI, productivity, energy reserves, etc., are manipulated. Consider these economists as collaborators.

Posted by: Phil on February 6, 2004 11:30 PM

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Technically, the Kudlow passage cited just says the economy is healthy; it does not say the Bush policies have done anything to make it healthy or keep it healthy.

Posted by: Jeffrey Kramer on February 7, 2004 04:13 AM

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Isn't Kudlow really implying that deficits only matter when Republicans complain about them? If Republicans choose to set aside 75 years of yammering about over spending, big government and deficits, it is their God given right as the true morally ascendant aristocrats who in fact know what is good for everyone that they are?

Posted by: Cal on February 7, 2004 04:24 AM

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Rather than pick through public positions, why not just Email the petition to the past signers and invite them to sign on again for this year? If you didn't want to do the work of tracking down their Emails yourself, I would guess that you could hire someone to do so for a small amount of money or call on commenters here to divide the list up on a volunteer basis.

Posted by: Rich Puchalsky on February 7, 2004 05:07 AM

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Professor DeLong,

As you are probably aware by now, there was an op-ed piece in Thursday's Wall Street Journal by Richard W. Rahn. It appears that he is still on board the ship ("The Bush team has put forth a realistic program...").
(Has anyone--i.e., you or some other knowledgeable individual--developed a rebuttal/correction to Mr. Rahn's piece?)

Posted by: geaurilla on February 7, 2004 05:40 AM

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Professor DeLong,

As you are probably aware by now, there was an op-ed piece in Thursday's Wall Street Journal by Richard W. Rahn. It appears that he is still on board the ship ("The Bush team has put forth a realistic program...").
(Has anyone--i.e., you or some other knowledgeable individual--developed a rebuttal/correction to Mr. Rahn's piece?)

Posted by: geaurilla on February 7, 2004 05:41 AM

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"trade flows are positive"??

Posted by: A.M.B. on February 7, 2004 06:06 AM

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Perhaps Bush should appoint yet "another commission" to try to figure out where the "jobs" in the Jobs and Growth thing went. Kudlow is pretty sure the household survey tells him that over 2 million of the unemployed are now working from home.

Doing what? Mowing lawns and scooping poop in the neighborhood?

Posted by: bcinaz on February 7, 2004 07:03 AM

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My Republican dad calls Kudlow "Larry One-Note".

Suuuuuppppppllllllyyyyy Siiiiidddddeeeee.

Even the tone deaf get tired of monotony.

Posted by: dennisS on February 7, 2004 07:22 AM

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Ask Kudlow what an umemployed professional calls him/her self

Consultant.

Posted by: ____league on February 7, 2004 07:32 AM

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This is like watching the pod people, isn't it?

Posted by: Alan on February 7, 2004 07:41 AM

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"Trade flows are positive": The dollar-value of international trade is greater than zero. If the dollar-value of international trade goes below zero, you have an economic problem that cannot be described without the use of 23-dimension string theory.

Posted by: zizka / John Emerson on February 7, 2004 08:22 AM

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The letter signers are an example of what happens when economists let their ideology rule rather than their analytic skills.

Posted by: ____league on February 7, 2004 09:08 AM

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Since the previous "economists letter" and all it's nebulous assertions was a frantic response to the letter the "400" sent to the Bush Admin, maybe another letter will have to be sent to Bush before the "conservative" economists will say much of anything. Cheney/Rove and their supporters are not interested in academic discourse. They will, however, respond to what they perceive as a politically motivated plot, even when it's clearly not. Anyway, I am more interested in an update from the "400". The previous letter seems to have had no effect on Bush Admin.

Posted by: cj on February 7, 2004 09:49 AM

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There are many economists who are daily that the economy and stock market and housing market are strong, and there is little reason to fret. Taxes are low, interests rates are low, productivity is growing strongly as are corporate profits. The labor market will turn around and growth will help settle the deficit problem. Such comments are a nightly fixture on PBS News and PBS Business.

I think we have a serious labor market problem, a serious budget problem, and a serious divergence of income and wealth problem. But, it is not easy to convince some that these are problems or others that we can use fiscal or monetary policy to deal effectively with these problems.

Should the Federal Reserve, for instance, quickly begin raising interest rates to stem asset bubbles? I think not, but others would have it so. Should federal taxes be raised? Try to convince voters or Congress of that. Remember that to allow a child tax credit to end is to raise taxes. Not going to happen.

We are in a difficult economic bind.

Posted by: anne on February 7, 2004 10:13 AM

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There are many economists who daily "comment" ...
- Oops -

Posted by: anne on February 7, 2004 10:16 AM

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how many economists does it take to change a deficit?

Posted by: big al on February 7, 2004 10:20 AM

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Also, more voices are linking our domestic economic problems to our trade partners. How are we to convince others that sound domestic economic policy can counter foreign competition that is held not to be fair? Last night, PBS focused on NAFTA as a continuing labor market threat for Americans.

Posted by: anne on February 7, 2004 10:24 AM

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California recalled a Governor largely on a tax issue. Deficit, oh well.... Alabama voters broadly turned down a tax increase for wealthy residents and opted for budget cuts. Oregon voters turned down a tax increase. New York City's Mayor is finally climbing in approval because of a property tax rebate.

The Alternative Minimum Tax is going to be a rapidly increasing middle class problem unless it is set aside year after year. Try ignoring that, and running for re-election?

We have policy problems even when we can agree there are problems.

Posted by: anne on February 7, 2004 10:46 AM

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Isn't Kudlow just saying that the deficit won't hurt Bush's re-election chances? He's saying the economy's OK, and the voters aren't worried about the deficit.

Posted by: Bernard Yomtov on February 7, 2004 10:56 AM

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Remember, many economists wish to have social benefit programs such as Social Security and Medicare sliced away. Why should they worry about deficits? Also, why worry when the deficit is not causing evident immediate problems? Then there is the issue of whose side are we on. The Wall Street Journal this week noted the swinging times are back, for some. Weddings in the palace fit for Louis XIV or XV or XXV or such.

Posted by: anne on February 7, 2004 11:14 AM

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We do have severe policy problems.

Cheap labor somewhere else was not a problem as long as there was not too much of it located together with adequate infrastructure. India and China will continue to be low cost providers of goods and services until the large peasant population is absorbed into the modern economy and wages rise.

Within this country, the income and wealth distribution is becoming more extreme. Bloomberg TV had a guy on this morning who has written a book arguing that the tax burden is being shifted from the very wealthy (>500,000 yearly income) to the middle and upper middle classes. He appeared to be saying that by 1999 or so all income levels paid about the same percentage in taxes, compared to earlier years where the wealthy did pay more. This is of course before the recent tax cuts.

Posted by: ____league on February 7, 2004 11:43 AM

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I suggested earlier (to a different thread) that the good Prof. and his colleagues get George Soros to pay for a letter from the loyal opposition attacking the budget and Bush policies to be published in the major newspapers across the country. The letter should include a challenge to those people who signed the letter last year supporting Bush to sign another letter supporting this year's budget. The public taunt will be better. I'm always told by my professor friends that faculty politics is bloodsport, but it looks genteel from here.

Posted by: Cal on February 7, 2004 11:52 AM

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David Cay Johnston of the New York Times has written a book about the changing and increasingly middle class effecting federal tax system. The book is much recommended, but I have not yet found a compelling review.

Posted by: anne on February 7, 2004 11:55 AM

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It was Johnston on Bloomberg this AM. I couldn't remember the name.

Posted by: ____league on February 7, 2004 11:59 AM

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zizka - it's 26-dimensional string theory. But who's counting?

Posted by: Ben Vollmayr-Lee on February 7, 2004 12:35 PM

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Kudlow WOULD endorse long-term fiscal stimulus as never heard of the crowding-out effect, he never learned the law of scarcity, and he routinely confuses the Keynesian multiplier and supply-side economics. But I wonder if Victor Canto is also endorsing this. After all, he claims Ricardian Equivalence (RE) proves fiscal stimulus does not raise interest rates. Then again RE says fiscal stimulus does not affect aggregate demand. Does Canto really believe this? If so - how could he write "Theorize This" - NRO: 11/15/2002.

Posted by: Harold McClure on February 7, 2004 12:47 PM

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http://www.nytimes.com/2004/02/01/books/review/01GALBRAT.html

'Perfectly Legal': Nothing Is Certain but Death
By JAMES K. GALBRAITH

First we have the repeal of the estate tax, which shifts the tax burden downscale and from the dead to the living.

Next there is the Alternative Minimum Tax, the ''stealth tax,'' designed for the very rich but now set to overrun Middle America. In 2000 this tax hit just 1.3 million households; Treasury estimates held that it would affect 17.9 million by 2010. But the Bush tax cuts doubled this number to 35.6 million by design: ''Between 2003 and 2012 the Bush tax cuts will force an increase of $560 billion in taxes to be paid under the alternative minimum tax. . . . It is a subsidy of the super rich paid for by the middle class and the upper middle class.''

Then there is the payroll tax, a travesty ever since 1983, when Alan Greenspan sold the public on the myth of paying for Social Security in advance. And the difference between the amount brought in through the payroll tax and the amount needed to pay benefits underwrote Reagan's tax cuts for the rich, while the government stuffed a ''Trust Fund'' with I.O.U.'s.

Posted by: anne on February 7, 2004 02:21 PM

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PERFECTLY LEGAL
The Covert Campaign to Rig Our Tax System to Benefit the Super Rich -- and Cheat Everybody Else.
By David Cay Johnston.

- James K. Galbraith -

As Johnston knows, the real scandal of our federal tax system isn't so much what the rich didn't pay. It's what the rest of us now have to -- particularly the middle and upper middle classes, with incomes from $50,000 to $500,000. This is the group Bush is squeezing, to benefit what Johnston aptly calls the ''political donor class.''

Posted by: anne on February 7, 2004 02:34 PM

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Fine post. Linkmeister sent me, and of course I'm happy to read any/everyone's thoughtful musings in advance of the interview. All I know is that I'll have to be well-rested and have my blankie, for when he (President Mr. George W. Bush, Sir) just makes me want to cry and cry, as usual.

Posted by: peggy on February 7, 2004 06:07 PM

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It's interesting that Kudlow doesn't actually come out and say that this budget is responsible and that it's good for America. What he says, quite explicitly, is that the objections to Bush's budget are irrelevant because the budget is good for Republican electoral politics. First he makes the cynical argument that deficits don't matter because they won't "decide November's presidential election," and then he concludes by saying that Bush's election campaign is "in fine shape."

This quote is a classic example of of right-wing postmodernism, of the attitude that facts are malleable. Kudlow does not present a reasoned argument that Bush has proposed a responsible budget; instead, he just says that the people who object to it are losers and that nobody will pay attention to what they say. This is not a response.

Posted by: Matt Austern on February 7, 2004 06:36 PM

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Ben -- for macroeconomics I just toss out the dimensions that don't seem to be doing anything important.

Posted by: zizka / John Emerson on February 7, 2004 08:04 PM

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What's with all the lying and misrepresentation going on here? Oh, yeah - you're strung-out junkies on Bush-hating drugs.

Posted by: Steve Irons on February 17, 2004 07:40 AM

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What's with all the lying and misrepresentation going on here? Oh, yeah - you're strung-out junkies on Bush-hating drugs.

Posted by: Steve Irons on February 17, 2004 07:40 AM

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Apparently most of the posters on this site want to go back to Jimmy Carter's economy, with it's 17% interest rates and high taxes. I prefer not overtaxing production, so we have more of it. Why do we have to teach the same lessons to every generation? Wasn't it enough to see that lowering taxes creates more economic activity, ala Reagan, Thatcher, and GW, while raising taxes slows economic activity like clinton did when he led the U.S. into the last recession?

Posted by: Lance on February 17, 2004 09:37 AM

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Word's out, moron. You're a fraud.

http://www.nationalreview.com/nrof_luskin/truthsquad200402170846.asp

Posted by: Bruce Fullwood on February 17, 2004 02:22 PM

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Eww.

Not only are you a moron, but you're a moron who uses CGI. Your Web guy's job should be shipped overseas.

Posted by: Bruce Fullwood on February 17, 2004 02:24 PM

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