Categorized | happenings

Yet Another Definition of Grownups and Hacks

Greg Mankiw gets in a little snit over Paul Krugman’s NY Times blog The Grownups Are Coming. Here’s the money quote from (Nobel-prize winner) Krugman:

Seriously, isn’t it amazing just how impressive the people being named to key positions in the Obama administration seem? Bye-bye hacks and cronies, hello people who actually know what they’re doing.

Since Mankiw actually served in the Bush administration, so you can’t blame him for getting a tad touchy on the subject:

Of course, if one defines “grownup” as a person who agrees with Paul Krugman, and “hack” as a person who does not, then one might dome to a different conclusion.

I think the world of Dr. Mankiw, but he totally misses Krugman’s point.

It’s not that the Bush administration didn’t include economic luminaries (like Dr. Mankiw, Eddie Lazear, and Ben Bernanke), it’s that they weren’t effective. The first six years of the Bush administration (which included Mankiw’s tenure as Chairman of the Council of Economic Advisors was characterized by, well, the total emasculation of its economic leaders, all of which were immensely powerful brains: Paul O’Neill, Bill Snow, and, sadly, Greg Mankiw. None of these individuals can point to any effective “policy” that they shepherded and led through the administration unless it was in accordance with the policy of, well, the hacks: Dick Cheney and Karl Rove, who had outsized roles in policy making. Asked to defend the Bush budget deficits (which Mankiw knew were indefensible), Mankiw said that it was his job to support the policies of the president.

Now compare that to the team that Obama is bringing in: Summers, Volcker, Goolsbee, Geithner. These are not only excellent economists and bankers, they are effective. They come with a history of pushing policy even against significant resistance or against all odds. Both Summers and Volcker have found themselves literally at the center of the maelstrom, effectively shepherding significant policy changes against loud and powerful resistance. Volcker arguably is the most important economist of our time, not for what he has written, but for what he has accomplished.

And, ultimately, that is how Greg Mankiw’s tenure in the Bush administration (2003-2005) will be judged. Ask yourself a question. Without doing a whole lot of detailed research, what effect did Dr. Mankiw have? What, in his years as Chairman, did he change in the Bush administration? In the disastrous run-up of the federal budget, what did he do? In what is quite possibly the most fiscally irresponsible years in federal spending (2003-2005), what effect did he have? Was he cheering it on? What about the unprecedented run-up of the trade deficit with the rest of the world (in the last year of Mankiw’s tenure, the trade deficit hit a record of a staggering $725B)? (Read the CRS’s report to Congress on China’s trade with the United States to see just how asleep at the wheel the Bush administration was during Mankiw’s tenure – notice how the deficit really balloons in 2005) In the stagnation of American income? In the impossible leveraging of America, not only the government, but business, finance, and consumer leveraging? Didn’t anybody discuss deleveraging the American economy? Where was he as the Bush administration, before and after his tenure, rushed headlong into financial deregulation? He was there, after all, when financial institutions really began jumping all over complex financial instruments – he was there at the steepest part of the exponential curve of the financial bubble.

Ultimately, what did Greg Mankiw do? And all those other cool people he lists (besides Ben Bernanke)?

Ultimately, the only accomplishment I can find that Mankiw achieved is to, well, support the President’s economic policies, as he himself said. Did he agree with them? Who knows, he just supported them no matter how wrong they have turned out to be (and there were plenty of voices worried about all the issues that are crashing around us now). Remember that Walter Heller noisily exited the Johnson administration when they pursued disastrous tax policies in the build-up of the Vietnam War. Heller never “supported” the President’s policies when they were wrong.

Think of Robert Rubin at the start of the Clinton administration. Against all forces – not some, all – he steered Clinton into a budget hawk policy. Arrayed against him were the Vice President, the First Lady (who was very powerful in Clinton’s first year), the Secretary of Labor, George Stephanopoulos and the entire communications team, and just about every Democrat in the Senate and Congress (see Nigel Hamilton’s excellent book on Clinton’s first term in office). Yet he, and later Summers, prevailed and the result was a balanced budget and later a surplus.

Okay, Rubin and Summers were cabinet-level appointments. But even a cursory survey of economic advisors yields some pretty effective economists. Walter Heller, chairman of the CEA under Kennedy and Johnson, convinced Kennedy to cut the marginal rates on federal income taxes (probably the only long-term economically effective tax cut in U.S. history), voluntary wage-price freezes, and the use of deductions and tax preferences to steer policy and economic growth.

Arthur Burns, Alan Greenspan, Murray Weidenbaum, Laura D’Andrea Tyson, Joseph Stiglitz – the list goes on of highly effective chairmen with measurable results in administrations both Republican and Democratic. Good results.

The problem is not how respected Bush’s and Obama’s appointments are as academics, it’s how effective they are as managers, at driving policy. I’ll be quite honest with you. Despite the fact that I follow this stuff in great detail, I cannot point to a single accomplishment that Mankiw made as chairman of the CEA, other than “supporting” the President’s policies, and, even there, he was a tepid apologist. From the outside, to all appearances, policy was being driven by the outsized roles of the Vice President’s office and the office of the domestic policy advisor, Karl Rove. Mankiw and everyone he names (with the possible exception of Ben Bernanke) were window-dressing – and I’m afraid this is going to be history’s verdict as well.

Henry Paulson broke this emasculation of economic leaders in the Bush administration by unflinchingly negotiating autonomy and power. Whatever criticism you may have of Paulson, he does actually “do” something, including providing leadership and direction against massive forces arrayed against him. And, unlike the Bush administration, he is willing to a.) be results-oriented, b.) be flexible, and c.) be accountable.

So, as an alternate definition of “grownup” and “hack,” if you define a grownup as someone who gets things done, speaks their mind, defends their autonomy, and has a powerful effect on economic policy even when powerful forces are arrayed against them (Volcker, Rubin, Heller, Summers) on the one hand and a “hack” as someone who, well, sees his job as supporting the President’s policies (as formulated by ideologues and non-economists) and has no demonstrable accomplishment in a headlong rush into economic disaster, then Krugman’s definition holds up a little better.

In this definition, Obama has hired folks who have faced down the beast and conquered it. Mankiw did little more than add a line – an impressive line, to be sure – to his CV. If that’s not the difference between grown-ups and hacks, what is?

I am, of course, open to Dr. Mankiw actually telling us what he achieved as chairman of the CEA and, given my immense respect for him, very, very open to changing my mind.

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