Is Paul Krugman Missing Something?

Much as I admire Paul Krugman the economist, and much as I share many of his preoccupations over the growing deflation danger, the balooning deficit and the general lack of economic vision shown by the current US administration, I can't help feeling he's falling into a self made trap, and letting himself become obsessed with the Bush tax cut obsessions. I find his comments on Mankiw uncharitable, not to say bordering on contempt. To suggest that "when the political apparatchiks who make all decisions in this administration want Mr. Mankiw's opinion, they'll tell Mr. Mankiw what it is", is to kinda forget that there is a person called Mr Mankiw, and he may, or may not, be agreeable. I think Glenn Hubbard left the White House, not because he had a knife in his back, but because he was too much of a yes man, even for this administration. I mean, rewriting your own text book, that sounds like something from the old Russia, doesn't it. And his FT article on deflation and the coming American prosperity read more like the dribblings of one of those Merrill Lynch analysts now facing charges for misleading investors, than the considered reflection of an economist with sufficient capacity to be the adviser to the US president, even if that president is George W Bush. And as for the "I almost feel sorry for Mr. Mankiw, who I suspect has no idea what he's getting into; I'm sure he will soon feel frustrated over his inability to have any real influence on this disastrous policy", well I'm sorry, only time will tell whether Mr Mankiw, Mr Bernanke, Mr Taylor, Mr Rogoff and others are able to influence policy to the good. All I can say is that on the face of it they're a damn sight better than the crowd that just left. And that if you don't trust this administration then you shouldn't be so naieve as to believe what they actually say about themselves.

After all it is Paul Krugman himself who has drawn attention to the nudge,nudge wink,wink theatricals which characterise policy execution. Politics is the art of knowing that you can fool some of the people all of the time, and all of the people some of the time, but that you can't fool all of the people all of the time. The art comes in drawing the limits. Who is playing with whom? John Snow says that he supports the strong dollar policy, yet the dollar is down, and it looks like there is more to come, with even the Japanese playing ball and allowing the yen to strengthen. Over at the Fed Greenspan has been critcising the dangers of increasing the deficit, is this anti-Bush, or a let-off for Bush himself? After all, when you're backed into a corner, there are many ways to help dig you out. Again at the Fed it seems that Bernanke's star is rising, while Rogoff has his hand on the tiller over at the IMF. When you look at this horizon, and the intractability of some of the looming problems, getting hold of someone like Greg Mankiw, someone who knows a thing or two about economics, and who may not be afraid to speak his mind, may well be entirely consistent with Bush's real ambition: winning the next election. I think his main obsession may be to avoid his father's fate, and to avoid spending his old age being reminded, 'it was the economy, stupid'. Power, as they say corrupts, and even the most closely held principle, even the most enormous tax cutting programme in history, may find itself betrayed when needs must. Who here is Ahab, and who Moby Dick? Remember, watch not what they say, but what they do.

So Glenn Hubbard has resigned as chairman of the Council of Economic Advisers — to spend more time with his family, of course. (Pay no attention to the knife handles protruding from his back.) Gregory Mankiw, his successor, is a very good economist, but never mind: When the political apparatchiks who make all decisions in this administration want Mr. Mankiw's opinion, they'll tell Mr. Mankiw what it is.

Why is the administration so uninterested in helping the economy? Here's my theory: The depressed state of the economy provides a convenient if bogus rationale for the huge, extremely irresponsible long-run tax cuts that, after Iraq, constitute this administration's principal obsession. To do anything else to help the economy would suggest that it's possible to create jobs now without putting the country's future solvency at risk — and that's not a message this administration wants to convey. I almost feel sorry for Mr. Mankiw, who I suspect has no idea what he's getting into; I'm sure he will soon feel frustrated over his inability to have any real influence on this disastrous policy. But on second thought I'll save my sympathy for the two million people who have lost their jobs over the past two years, and are not likely to find new ones any time soon.
Source: New York Times
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