John Snow, appointed as Treasury secretary by President Bush on Monday, appears extremely qualified for the job.
He has a Ph.D. in economics, a degree in law and previous executive branch service. He was relatively successful in business and has experience as an industry spokesman. Indeed, it is hard to think of any other Treasury secretary in the past century who, on first examination, was more qualified.
But all the press reports on Snow ignore one crucial question: Does the man have good, hard calluses on both the upper and lower surfaces of his tongue?
This is crucial, because anyone with a graduate degree in economics who accepts a job working for President Rove — excuse me, I mean Bush — is going to spend a lot of time biting his tongue. Paul O’Neill and Larry Lindsey just got the boot for failing to master this essential skill in 21st century Washington.
The fact that the new Treasury chief soon will be munching his tongue says a lot about Bush administration economic policy. It is hard for trained economists of either party or any particular school of thought to look at the president’s policy proposals and not express significant reservations.
Of course, one can find supporters for individual components.
A few economists favor repeal of federal estate taxes. Most think that double taxation of corporate earnings is a mistake. Many favor special treatment for capital gains income. Lots of economists would like to see fundamental changes in our approach to environmental protection. Quite a few think that some sort of fiscal stimulus would be good right now.
Very few, however, can support the White House position that cutting whatever taxes are most vexing to the rich is the appropriate response to any economic question, particularly if such tax cuts result in larger long-term budget deficits and growing national debt.
O’Neill, a very bright man whose chief fault was saying what he thought, clearly did not believe that the benefits of positive incentives from lowering taxes for the wealthy outweighed the benefits of long-term balanced budgets.
Judging by speeches Snow made when he led the Business Roundtable in the 1990s, he also doesn’t think tax cuts should trump deficit reduction. But he’ll have to bite his tongue and deny that if he expects to get confirmed by a Senate in which economic wackos in the Republican Party wield increasing influence.
Lindsey, who probably is the most academically respected of all supply-side economists, clearly believes that lowering marginal tax rates on high-income people is important.
But he advocates these as a long-term measure and not as a means of giving some short-term adrenaline shot to the economy.
Indeed, the whole thrust of the supply-side movement was a rejection of the short-term demand manipulation that Keynesian economists advocated.
Lindsey and O’Neill spoke for many economists when they essentially said that the U.S. economy will get out of its current soft patch by itself and that short term “pump priming” is counterproductive.
That position is consistent with the arguments of respected, coherent economists at the Cato Institute and Heritage Foundations and in many conservative university econ departments.
But it’s not an acceptable position to a White House increasingly driven by fear that a stagnant economy will do to George W. in 2004 what it did to his father in 1992.
So whoever serves on the Bush economics team has to publicly defend the intellectually bankrupt position of advocating long-term tax cuts as good way to achieve short-term stimulus.
They also have to pretend that deficits don’t matter or that if we cut taxes enough, the deficit will somehow, miraculously, heal itself.
They also have to accept the fact that George W., like his father, is unwilling to expend any political capital to introduce market-based safety, health and environmental policies to replace the command and control approach pioneered under presidents Johnson and Nixon.
Conservative think tanks, such as Cato and Heritage, have championed such an approach for two decades only to see successive Republican administrations spurn their ideas in favor of simple weakening of the old system in response to industry pressures.
The Environmental Protection Agency’s recent decision to loosen air pollution rules at power plants and the White House’s recent signal that it favors just a tiny increase in fuel-economy standards for automakers is additional evidence that political pragmatism is again trumping coherent conservative principles.
Thus, on both macro and micro issues, anyone such as John Snow, who has a Ph.D. in economics and agrees to serve in the Bush administration, will have to do a lot of hard swallowing and tongue biting.
Maybe Botox injections would numb things a bit.
© 2002 Edward Lotterman
Chanarambie Consulting, Inc.