Why Larry Lindsey was Let Go: In the Bush Administration, Loyalty Is a One-Way Street Only" (Brad DeLong)

There is a story I have now heard three times about Larry Lindsey's first day in the White House in January 2001. At one point he met with the now-headless Council of Economic Advisers staff--no CEA council members had yet been named. "Well," he began. "You should all be happy: the people who understand economics are now back in charge."

Today such a claim sounds totally ridiculous--mendacious, or simply mad.

But Larry was not mendacious (biased, maybe), and not mad. Remember: he was speaking before the 2001 tax bill that did nothing to increase national savings and investment, something to further complicate our tax code, next to nothing to reduce marginal tax rates, and a good deal to transfer wealth from the middle class to the more-than-$300,000-a-year rich. He was speaking before the farm bill, the steel tariff, and Bush's summary rejection of Pakistan's request for an increase in its textile export quota marked the Bush administration's turn to protectionism. He was speaking before it became clear just how clueless the Bush White House was with respect to the government's important mission of making sure that corporations in financial trouble did not hide their true situation for months or years by telling large lies. And he was speaking before the Bush White House fumbled the stabilization-policy ball as it proved incapable of recognizing that the post-1994 acceleration in productivity growth meant that unemployment would rise even in an economic recovery that was moderately strong by pre-1995 yardsticks.

Today we know that it never crosses the minds of the powers-that-be in the Bush White House that good economic policies might be worth pursuing because good economic policies lead to a stronger economy. To the powers-that-be in the Bush White House, economic policies are way to reward favored groups of constituents. And their effect on the economy? They don't need to think about no stinking effect of policy on the economy.

So Larry lost in his attempt to get the 2001 tax cut to reduce marginal tax rates where they are highest--among the two-children-$25,000-annual-household-income class: in the mind of the Bush White House, the point of tax cuts is not to improve incentives but to reward contributors, and although the two-children-$25,000-annual-household-income class vote in large numbers for Republican presidential candidates, they don't buy tables at $1000-a-plate campaign fundraisers. He lost his fight to keep the White House from imposing steel tariffs. He lost his fight to maintain the progress toward freeing trade in farm products and reducing welfare-for-agribusiness made in the 1990s, when Bill Clinton cooperated with the Gingrich-era Republicans--who for all their faults really did believe in their free-market ideology.

    

It's the Bush economy, stupid! More On Snow (Lance Knobel)

"The Wall Street Journal reports that Treasury secretary-designate John Snow's company, rail freight giant CSX, is no great shakes.

'"For all its progress, CSX still has the worst operating ratio, a common measure of railroad efficiency, among big North American railroads."' That sounds like a recommendation.

"And in 2001, Snow earned "$2.2 million in cash, plus $7.1 million in restricted stock awards. In addition he received $753,057 in additional compensation, including $117,900 in life-insurance premiums and $323,266 in 'above market' interest on deferred earnings". When he retires he qualifies for Welch-like perks, including "use of private aircraft for the remainder of his life".

"Just the man to tackle concerns about corporate governance."