Impeach Treasury Secretary John Snow

Yes. I know that blatant mendacious stupidity is not an impeachable offense. But in this case I'm willing to make an exception. Kevin Drum writes:

The Washington Monthly : BLACK IS WHITE, UP IS DOWN....Via the Carpetbagger, Treasury Secretary John Snow explains why a president who has vastly increased the federal deficit is more fiscally responsible than a president who vastly reduced it:

Sipping a latte at a Starbucks coffee shop with reporters in Washington two days ago, he said that "the president's legacy will be one of having significantly reduced the deficit in his time," and said Clinton's budget was a "mirage" and "wasn't a real surplus."

Snow said the Clinton surplus was inflated by a stock-price bubble and that Bush will be remembered for cutting the gap from a record $412 billion in the 2004 fiscal year.

You can't make this stuff up. Consensus reality just doesn't exist for these guys anymore.

OK now: Bob Kimmitt, Mark Warshawsky, anybody else in the Bush Treasury who wants to retain ties to the reality-based community, or to avoid losing their own reputations to the Clown Show--now is time to start thinking about whether you want to bail out.

Comments

[save_the_rustbelt]

Give Snow some small bit of credit, much of Clinton's second term economy was the largest fraud bubble in history.

As for Snow, he is to be despised, he was sent to Ohio a couple of times during the 2004 campaign to lie about the economy and the economic future of the rustbelt. "Lots of jobs" were his exact words as I remember.

Snow's greatest career accomplishment was looting CSX Corp for $60m on his way out the door.

Bush can't spell economics, so why would we expect him to do anything right?

[pgl]

Snow tossed in the possibility that extrapolating from 2000 tax revenues as far as long-run budget projections might be a dangerous thing to do. In a small way - he has a point. However, this is exactly what the Administration is doing now. Taking a one-time favorable bump in tax revenues and extrapolating. What a hypocrit!

[Craig Tindale]

Bernanke has commented before in many of his papers that tax cuts combined with money printing is either neutral or positive to government revenues. Is this possibly what hes talking about ?

[bakho]

Did any reporters burst out laughing?
When did credibility cease being a job requirement?
Bush is more likely to be remembered as the $10 Trillion deficit president.

[lise]

The contrast between the Clinton presidency and the Bush presidency has become ever more stark for 5 years. I knew this would be a regrettable presidency, but I never imagined it could be so saddening. When all fails then and even before, blame Clinton.

[kharris]

Oh, Rust, please don't put yourself in such awkward positions. Dislike for Clinton's accomplishments, his personal conduct, whatever it may be, is no reason to give any credit to Snow. What Snow said was just simple, dishonest nonsense. The fact that Clinton had some luck is no reason to make up silliness about what happened while he was in office. There has been way to much of that from way to many sources over the past decade and more.

Lise's point is more cogent. Clinton's surplus, by itself, was a bit of a surprise. Bush's deficit is shocking. The change, though, the squandering what was obviously a very good starting point for dealing with SS and Medicare liabilities, was just beyond comprehension. We had a chance to take on a problem and lick it. Instead, we made absolutely sure the problem would lead to hardship for some age group or other, if not for all income groups.

Snow doesn't need to do this. Why does he keep it up?

[Howard]

to pick up on kharris' remark: luck, as branch rickey told us, is the residue of design.

Clinton (or Rubin) (and with the concurrence of the republican house) designed an effective fiscal policy: increase tax revenues in a targeted way; control spending through paygo; reap the rewards in the bond market and through an investment-led boom.

Yes, that investment-led boom did end up with bubbles, but the idea that the late '90s were some spectacular "fraud" bubble is nonsense: in fact, we are still benefitting from that bubble, since the tremendous overbuilding of backbone in the telcom sector set the stage for the great move to wireless that is now taking place.

and anyone who looks up the numbers (as i've done in the past but don't have the time to do now), will discover how modest a part enhanced cap gains revenues played in our overall fiscal position during the late '90s....

[im1dc]

I think everyone is taking away the wrong perspective from Snow's prevarication.

You should shutter because:

#1) He really meant it because he really believed it.

#2) His boss, President Bush43, really believes it too.

#3) Most Republicans really believe they can give tax cuts, raise spending and increase the Deficit bryond historically dangerous levels and this will result in increased tax revenue flowing to the US Govt. (the opposite of bankrupting it).

#1, 2 and 3 leads you to understand:

#4) The Electorate (at least the majority that voted in the last election) also believes you can get something for nothing at least from the Federal Government.

With 1-4 under your belt you then come to the unavoidable conclusion that the magical thinking and acting in regard to Federal Finance will continue until reality can't be ignored and that day comes closer everyday Bush43 and the Republicans are in the majority.

People will get hurt when the gravy train runs out of gravy.

PS Let's note here that Dems in the past contributed equally to Federal spending excesses.

[david]

As the year ends, I will make a prediction: no sensible republican economist will take steps to regain their credibility; no republican economist will suffer for making or enduring false statements. Not Bob Kimmit, not Mark Washsawsky, not anyone. The academy will embrace them with choice appointments and inflated salaries if they so choose; or, there will be even more inflated salaries at think tanks where they get to keep spouting the same bs.

It's a gift I have

[rea]

"Let's note here that Dems in the past contributed equally to Federal spending excesses."

Precious little since about 1968, as far as I can see. At worst, you can criticize them as being insufficently effective in stopping the fiscal fecklessness of Republican presidents

[Redshift]

Actually, impeachable offenses are whatever Congress decides they are. If a few high officials were impeached for simple incompetence, I think it would do wonders for the quality of our governance.

[MTC]

If "blatant mendacious stupidity" is not grounds for impeachment, how about plain-vanilla, garden-variety "stupidity" instead?

[Brian]

Correct me if I am wrong, but the surpluses that were the results of policies by the Clinton administration didn't fully accumulate by the time Bush entered office, and even if tax rates had stayed the same, with a slowing economy, they wouldn't have been as high. Is that right?

Even if it is, Snow still appears to be full of shit. As far as I understand it, the only way that they could claim the administration is still in the process of reducing the deficit is to engage in lots of accounting gimmicks.

[liberal]

Howard wrote, "Clinton (or Rubin) (and with the concurrence of the republican house) designed an effective fiscal policy: increase tax revenues in a targeted way; control spending through paygo..."

The real reason the deficit were brought under control was the 1990 Budget Enforcement Act. There were subsequent extensions that made it even more effective, but the real credit goes to Bush 41 and the Democrats in Congress at the time.

Of course, Clinton gets credit for maintaining relative fiscal discipline.

[Howard]

actually, liberal, on generous days, i even go back to saying that reagan raised taxes six times, then bush 41 and democrats passed the 1990 act, and then get on to clinton (and rubin) (and republicans in congress). success, of course, has thousands of parents, and you're right to remind us of that.

i didn't write generously today only because i was specifically following up on kharris retort to save the rustbelt, and therefore focussing in on clinton in particular....

[Movie Guy]

Kevin Drum is correct. You can't make this stuff up.

"Sipping a latte at a Starbucks coffee shop..." must be CODE for "We were at a bar, and after knocking back twelve stiff drinks, Snow popped off with this one..."

[Movie Guy]

Geez.

[anne]

David is a scream :)

As the year ends, I will make a prediction: no sensible republican economist will take steps to regain their credibility; no republican economist will suffer for making or enduring false statements. Not Bob Kimmit, not Mark Washsawsky, not anyone. The academy will embrace them with choice appointments and inflated salaries if they so choose; or, there will be even more inflated salaries at think tanks where they get to keep spouting the same bs.

It's a gift I have

[Craig Tindale]

Bernanke's quote on tax cuts and fed money production in his 1999 BOJ paper on deflation to me at least create an echo between Snow and Co and Fed Policy. What I am suggesting is that we see many of the so called crazy/stupid statements by Snow and others as an echo of policy rather than stupidity.

Quotes from Bernanke

The newly circulated cash bears no interest and thus has no budgetary
implications for the government if prices remain unchanged. If instead
prices rise, as we anticipate, the government will face higher nominal
spending requirements but will also enjoy higher nominal tax receipts
and a reduction in the real value of outstanding nominal government
debt.

snip

All this means is that some intragovernmental cooperation would be required. Indeed, the
case for a tax cut now has already been made, independent of monetary
considerations (Posen, 1998); the willingness of the BOJ to purchase
government securities equal to the cost of the tax cut would serve to
reduce the net interest cost of the tax cut to the government, possibly
increasing the tax cut¡¦s chance of passage.

snip

Franklin D. Roosevelt was elected President of the United States in
1932 with the mandate to get the country out of the Depression. In the end,
the most effective actions he took were the same that Japan needs to take¡X-
namely, rehabilitation of the banking system and devaluation of the currency
to promote monetary easing.

So by some formula can tax cuts together with large increases in the money supply , and therefore increase government spending all the while increasing government revenues providing a net deficit reduction?

[anne]

Precisely what Japan needed and precisely what Paul Krugman suggested, and I completely agree though Japan has adjusted remarkably using fiscal policy to sustain employment while structural adjustment proceeded.

[anne]

http://www.pkarchive.org/

Notice the Japan file. Though Japan did not follow the Bernanke-Krugman advice, fiscal policy protected the Japanese middle class through the protracted adjustment process which should strike us as remarkable. I am heartened and impressed by Japan's labor sensitive adjustment, though agreeing more with Bernanke-Krugman.

There is much to be learned and applaud from the Japanese adjustment process :)

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5952&u=4|3|...

Redhead in Flight
Patchogue Lake, Long Island, New York.

Hmmm :)

[anne]

http://www.calvorn.com/gallery/photo.php?photo=5347&u=17|4|...

Yellow Warbler Taking Flight
New York City--Central Park, Harlem Meer.

[christo]

Latte, is that French? I guess the war on French Fries is over or the Republican army is over extended in a two front cultural war against "Holidays" and French food. Seriously now, I took the mention of Starbucks as republican positioning to show Snow is just one of those striving upwardly mobile regular middleclass guys just like W's summertime news of what's on his ipod. W's ipod, that was just about the last positive news story about Bush then reality intruded. Is 2007 gonna be the year reality really raises its ugly head for Bush? When are we going to get the story of Cheney standing around the garage talking about Camaros? Or the story about Rumsfield kicking the tires of a hybrid for the wife in the dealership? Finally in an oblique China bashing way, Bush complaining about copied clubs in the pro shop?

[christo]

Yellow Warbler Taking Flight

that was a College Rupublican, right?

[KevinNYC]

Didn't Clinton sign a deficit reduction act in 1993 that the Republicans fought tooth and nail against?

[KevinNYC]

Didn't Clinton sign a deficit reduction act in 1993 that the Republicans fought tooth and nail against?

[Scott Martens]

Christo, "latte" is Italian for "milk", not French. They're your allies in Iraq, sort of, for as long as Berlusconi - a man after Bush's own heart - is in charge.

[bakho]

Before Reagan, Personal income tax was over 9% of GDP. Corporate income tax was over 2.5% of GDP. After Reagan tax cuts, Personal income tax was closer to 8% of GDP and Corporate Income tax was well below 2% of GDP. Under Reagan, we went from collecting over 19% of GDP as revenue to a low of 17.3% before the Democrats retook the Senate and started getting serious about the deficit, driving revnue back over 18% of GDP. By the time Clinton entered office after the Bush recession, Revenue was only 17.5% of GDP.

Yes the Clinton changes in the tax code immediately raised revenues above 18%. During the strong economy revenue collection was over 19% of GDP and averaged over 20% of GDP for Clinton's last four years. Clinton proved that the government can collect over 20% of GDP as revenue and still have a thriving economy. Under Clinton, Personal income tax was 9-10% of GDP and Corporate income tax was over 2% of GDP.

The Bush tax cuts and recession immediately dropped corporate income tax below 2%, as low as 1.2%. Corporate Income taxes have rebounded somewhat because the tax incentives have expired, not because of tax cuts per se. Individual Income tax is now about 7.5% of GDP. CBO projects that Bush will continue to spend around 20% of GDP but collect less than 18% of GDP.

Bush finally collected more revenue in 2005 than Clinton did in 2000. That only goes to show that if one waits long enough, eventually economic expansion will return revenues to previous levels. This in no way implies cause and effect. The economic expansion under Bush tax rates is less impressive than economic expansion under Clinton tax rates. Again, it is not possible to attribute cause and effect. Republican supply siders are stuck on Baconian inductive reasoning and have not advanced to the more modern idea of Descarte's standard of disproof. Thus they remain convinced and continue to believe that their tax cuts are responsible for 2005 revenues being above 2000 absolute levels.

I propose a new standard for evaluating supply side tax cuts. If economic expansion after the tax cuts is not greater than the increase in GDP from the combination of inflation and increasing population and if the gap between revenue and outlays fails to close, the tax cuts are not having the effect claimed by supply siders.

It does not take a genius to note that deficits occur if outlays are greater than revenues.

John Snow is no genius- not even close.

[João Carlos]

So, how many people here belive at a soft landing?

I don't believe it, nevermore.

Boy, the hard landing will be ugly...

[Barry]

"Didn't Clinton sign a deficit reduction act in 1993 that the Republicans fought tooth and nail against?"

Posted by: KevinNYC

Yes, the one which was 'a one-way ticket to a recession' according to Phil 'Looter' Grahm, the GOP's most famous Econ Ph.D. congresscritter. The one which was condemned by the Wall Street Journal Editorial page, and every other GOP/right-wing media outlet which I encounted at that time.

[bakho]

Barry Ritholtz asks:

"Lately, the White House and Treasury Secretary John Snow have been trumpeting the fact that the economy has created 4.4 million new jobs since May 2003.

Inquiring minds want to know: How legit is that number?

First question: How did the White House come up with that 4.4 million new-jobs number? Is it accurate?

The answer is simple math: Measured trough to peak, there were actually almost 4.5 million new jobs created. So the "over 4.4 million jobs created" statement is numerically accurate.

So if that number is mathematically accurate, what's the problem? "... you typically don't get to pick your time periods when measuring performance. You especially don't get to base it on trough-to-peak numbers.

As opposed to cherry-picking the most favorable-looking time periods, job creation historically has been measured from the end of the recession, which the National Bureau of Economic Research puts at March 2001. Another commonly used period is from the start of the president's term (Jan. 20, 2001).

When we plug those time frames into the BLS data, we derive a significantly less rosy picture: Those calendar periods generate job-creation numbers of about 1,835,000. Also, the 4.4 million-job number conveniently ignores the 2.6 million jobs lost from 2001 to 2003.

Over the course of four years, those numbers fail to keep up with population growth. The U.S., with about 275 million people, needs more than 1 million new jobs per year -- between 125,000-150,000 per month -- just to maintain the same percentage of employed relative to the labor force.

So the answer to our second question is that the 4.4 million number significantly overstates the true jobs picture since the end of the recession. Indeed, if this were a mutual fund, the Securities and Exchange Commission would not allow such an advantageously selective timeline to be used in the advertising.

Third question: We know the BLS model is a bit quirky and has some warts on it. How "real" are these numbers, and how much is theoretical conjecture?

Of the 4.4 million new jobs from the March 2003 low until present, the birth/death estimate accounts for 1,639,000. That is an extremely significant 36.7% of new jobs.

By any measure, that's a hefty estimated adjustment to an actual data-based number. It is not particularly credible to me to have a statistical projection be more than a third of a measured data series. To be blunt, it is a game-changing "adjustment."

After all this data-crunching, one query remains: How does this jobs-recovery era compare to prior ones?

The answer, it turns out, is not particularly well. In fact, this is the eighth-worst jobs recovery of the prior 10 recessions, according to The New York Times.

Most economists have been looking at the post-recession period incorrectly. Instead of viewing this as a post-bubble economy, with the 2000 crash a rare event, they are looking at it as if it's just another postwar recession-recovery cycle. That misses the bigger issues.

By nearly any honest measure, this has been a lackluster jobs recovery."

http://www.thestreet.com/_tscana/markets/economics/10258387.html

[me]

christo - chimpy has an IPOD?

So let me see if I have this, paying for levees for New Orleans is a waste of federal dollars but paying a secret service agent to run chimpy's IPOD is not? Ah yes, King Bush.

To Barry's point, does the WSJ editorial page every get anything right, I mean correct?

[Ari]

Kevin

"Didn't Clinton sign a deficit reduction act in 1993 that the Republicans fought tooth and nail against?"

Precisely, and the act helped bring about a remarkable period of economic growth, but Republicans have increasingly gained influence since then and successfully done all they can to distort the effectiveness of Clinton's fiscal policy and they have completely turned the policy about.

[bncthor]

..."Snow said the Clinton surplus was inflated by a stock-price bubble..."

I guess as part of his snow job, Secretary Snow forgot to mention that the Bush deficit has been restrained by the housing bubble. Bubbles of more or less importance are always operative in the economy.

[anne]

Democratic fiscal policy has been responsible enough to bring us not just a socially responsible budget but a balanced budget and even a cushioning surplus that Republicans have squandered.

[save_the_rustbelt]

Kharris:

If you reread my post I essentially called Snow a crook and a liar.

Clinton is still overrated and lucky, but I do give him some credit, and the level of intellect in his administration was certainly higher than the current Rovian mongrels.

[save_the_rustbelt]

"Inquiring minds want to know: How legit is that number?"

I think this number is probably legit, however......

I think the workforce number (the demoninator) is being fudged to present an artifically low unemployment number.

In unemployment terms , a $9 an hour job is the same as a $20 an hour job, we need to look much harder at real wages and income and the distribution of the same.

We need some research on "underemployment," if any econ profs are reading here.

I'm a Republican, but if George Bush told me the sky is blue I would run outside and check.

[Robert]

Anne

re: There is much to be learned and applaud from the Japanese adjustment process :)

I too believe that there is much to be learned from the Japanese adjustment process. But I think that few of the things that matter most involve applause for the Japanese authorities, and even where so, only half-heartedly.

[jon livesey]

"They're your allies in Iraq, sort of, for as long as Berlusconi - a man after Bush's own heart - is in charge."

Oh, that's right. Churchill used to say that it would be our turn to have the Italians as allies next time.

[Craig Tindale]

It’s a damn shame the state of intellectual debate in America.

A bunch of Staussian Necons take office and everyone becomes shocked that they lie when its central to their philosophy. Doh Wake Up! The are lying to you on purpose.

A guy called Bernanke develops a lab hypothesis about how to fix deflation. He suggests you depreciate the dollar, cut taxes and increase money supply to make the tax cuts neutral and transmit the money via the Real Estate asset channel to create consumption via the wealth effect, then everyone goes on and argues about what created the housing bubble doh (he did) (with Greenspans help to counter the deflationary risk 2-3 years ago)

Worse the so called academics don’t even question or critic his work. Doh Where is the risk analysis of implementing such a plan? What happens when you take it from the lab to the real world?

While these ideas are wonderful in theory they don’t account for real world risks .

In his work all foreign governments are neutral or supportive. There is not one mention of the counter moves other foreign governments might make when for instance you try to depreciate the currency (they do as well and your efforts to depreciate are countered by foreign central banks with their own helicopters)

There is no thoughtful criticism of attempting such actions when twin deficits occur. Owing lots of US dollars to your enemies isn’t smart it’s a MAJOR security risk, that is yet to play out. Where in Bernanke’s work do we find issues like oil, Iran, Iraq, China, Russia, Petro Dollars. Where are the considerations of the social impact on the nation. What happens in the long run when you drop cash via asset money channels to the wealthy and leave the others to fend for themselves.?

Is it really ok to provide tax cuts that are intentionally offset via a printing press or is this a shell and pea trick that is designed to trick people into thinking they are wealthier and so therefore able to consume through debt.

These economic monetary memes have infected the entire academic world. It has become accepted that should we face deflation we should pump trillions of greenbacks into the system to counter the business cycle. OK the liquidationists lost the debate but can we have just a little bit of balance between both concepts.? doh

The whole nation has become so self obsessed with the myth of American exceptionalism that Repbulicans and Democrats alike subscribe to monetary policies that has not been fully considered as to their risks to the US on the world stage.

If you gave a term paper to some 4th years entitled. What are the real world risks of enacting Bernanke’s deflation plan in 2005 ? I am sure you would get some interesting answers but we seem unable to bring these risks to the debating table. Why?

Does capitalism really remain capitalism if you have central bank open market policies that entertains the purchase of real assets and services ?

Do we really have floating exchange rates if they are in fact managed by other monetary means?

Is it really all that credible to try and counteract the business cycle via central bank monetary policies ? The current policies assume you can do it forever.! Doh

[Ari]

Ah, there is an Austrian theorist. No monetary policy for Austrians. But, monetary policy really does seem to work and work and work.

[save_the_rustbelt]

Doesn't Snow have a Ph. D. in economics?

Maybe that explains this.

CPA definition of an economist: someone who can be wrong his entire career and never get sued for malpractice