michael_desade

I have dealt with his ilk many times before on Usenet. When a person resorts to line-by-line debate then they have pretty much done in and quickly lose sight of the end point while trying to win little points. I was planning on string him along for a couple more days then nail him with a summery post. You beat me to the summery post.


I dont know if I am conservative enough. My underlying premise and theme that runs through out most of my posts is freedom of choice. I am actually fairly liberal thinking but having owned and operated several businesses gives one a good dose of real world reality.

OK.

Still two propositions, right? Reagan shouldn't take the blame for the deficit, and Clinton shouldn't take credit for reducing it.

But this: "On the one hand, you want to argue that an economist was responsible for a President's economic success, and on the other you want to argue that one was responsible for his failure." ... is just weird. That's a bizarre reading of what I've been saying. I have no idea where you got that idea, but it's just one more thing for me to refute.

As for this ... "Clinton was promoting larger government programs, more entitlement spending, and NAFTA throughout '93. Brad deLong is attempting to revise history, but the CWA campaign in '94 was a direct result of Clinton's policies in '93-'94. I know this to be true because I was here, watching events unfold."

I think the bit you're missing is that people like deLong weren't just watching, they were there. In the thick of it. (Just FYI, I cite deLong a lot not only because (a) he was there helping to frame policy, (b) he's at the upper echelon of professional economists who work in both academia and policy, and (c) he makes most of his stuff, and he's very prolific, available on the net. I'd cite more of Larry Summers and Joe Stiglitz and other top notch professionals too if they had as much stuff online as BDL does. But hey, see below.)

You keep trying to tell me that, whatever deLong was trying to make happen, Clinton was only interested in raising taxes to spend more on his chosen programs. That any emphasis on deficit reduction at that stage was only in deLong's imagination.

Well, you'd better have a chat to Larry Summers, now Harvard president and then top Harvard economics professor on leave to work for Clinton. (Written in 1998.

"In 1993, President Clinton fought for, and Congress approved, a powerful deficit reduction plan that was based on conservative economic assumptions and which brought the deficit down by $500 billion over five years. The deficit reduction increased confidence, helped bring interest rates down, and that, in turn, helped generate and sustain the economic recovery, which, in turn, reduced the deficit further. The result was a healthy, mutually reinforcing interaction of deficit reduction policy and consequent economic growth, that brought the deficit down to $22.3 billion in 1997, and sets the stage for going to balance."

You'd also have to talk to Joe Stiglitz, Nobel Laureate and Columbia professor, and former CEA head.

"Deficit reduction under Bill Clinton worked, both because of the peculiar circumstances of the time and because of the way it was carefully crafted. For a variety of reasons -- including regulatory mistakes that contributed to the economic recession in the first place -- banks had larger than normal portfolios of long-term government bonds. So the lowering of long-term interest rates -- which increases the price of long-term bonds -- effectively recapitalized the banking system, leading to new lending. Normally deficit reduction dampens the economy. But Clinton's carefully designed deficit reduction program was heavily backloaded (to bite after a strong recovery was well under way). Moreover, the 1993 tax increase was targeted at the rich. On both counts, aggregate demand in the short run was not reduced much." (From The American Prospect, but I can't find a live link.)

Three of the world's top-flight economists, all talking in conistent terms about deliberate deficit reduction policy framed from the time of the 1993 budget. You might think they should have done more, done it faster, spent less, or a whole bunch of possibilities, but you've tried to argue the incoming Administration had no real intention of battling the deficit. They're saying they did, to a well-credentialed man, and the results show they did it.

The point you make that Bush Sr had taken deficit reduction action is one I'd already made. I've not claimed such action only started when Clinton arrived, but I've pointed out that deLong also says Bush started on the course of deficit reduction. This isn't a point of disagreement, although the argument exists that Bush succumbed to political pressure at key times to do populist things, and was not taking a systematic and consistent approach to getting the deficit down.

This political science piece and this summary of Wall Street Journal pieces all give credit to the Administration on deficit reduction.

None of this is to mean I think Clinton's record is spotless. You said deLong lied, and I did and do disagree. That's really it.

The Joint Economic Committee piece was quite interesting. I don't think I've ever argued the business cycle upswing didn't play a role in reducing the deficit -- the issue is how you arrange your spending and taxing so as not to squash the recovery and lose the advantage of growing revenues. I accept you think they got their priorities wrong, but that's not what this argument has been about. The JECS analysis is that their main spending cut was in defence, and that the business cycle helped them on the revenue side. I, uh, think Messrs deLong, Summers and Stiglitz and their minions would have been factoring such business cycle movements into their forecasts they used to underpin the budget policy they were designing (with, uh, deficit reduction in mind).

In fact, as you note, deLong WAS factoring such things in -- you quote his statements from his memo about the likely monetary policy response from the Fed that would enable them to take restrictive budgetary action without causing a slowdown.

Before I go, the claim that I thought an economist was to take credit for Clinton and take the blame for Reagan -- uh, where did that come from? I give credit to Clinton for hiring a competent economic team and paying attention to them. I blame Reagan for paying too much attention to Laffer. I don't blame Laffer, he was just being the opportunist he's been described as elsewhere.

If you haven't done so, try reading the chapter on supply siders in Krugman's book, Peddling Prosperity. While a liberal, Krugman worked under Martin Feldstein for Reagans CEA, and developed a loathing for "policy entrepeneurs aka economic cranks" in both sets of administrations (Republican and Democrat). He points out the main movers and shakers on supply side ideas were people like Robert Bartley and Jude Wanniski, with Laffer providing a "legitimising" influence.

I agree with your statement "Finding an economist to support his desire [to cut taxes] seems far more likely a scenario than Laffer convincing him that this was the only way to kick-start the economy." I think that's exactly how it goes. Reagan found an academic who said, with apparent plausibility, that cutting taxes would have its own beneficial revenue consequences. I'm completely underwhelmed by the claim that Reagan's rhetoric had been consistently tax-and-spending-cut -- I mean seriously, the world is full of conservative politicians who talk the talk of small government. That's what they do. I don't know what Reagan really had in mind at any stage, I can't know, but there was an environment where these ideas were being promoted (including in the WSJ, and Fortune), and Reagan openly embraced them.

This anecdote is illustrative.

"Feldstein was a pioneer of the supply side policies then in favor among Reaganites, who believed taxes were the most important determinant of economic growth. But unlike policy entrepreneurs such as Jude Wannisky and The Wall Street Journal's Robert Bartley, Feldstein refused to pretend that Reagan's massive tax cut could pay for itself. When Feldstein insisted on issuing accurate budget projections anticipating government deficits, and even called for a small tax increase to offset them, the administration's supply side purists attacked. (Treasury Secretary Donald Regan even urged reporters to "throw out" the council's annual report.) "

If you read a couple of my newswire stories, you'll see that this hobbling of professional advisers is happening again in the Dubya Administration. Glenn Hubbard and Greg Mankiw had (or are having) a hard time knowing which way to turn, and keep their jobs, and reputations.

I have to bow out of the debate now. I don't have time to keep it up. I learned a bit though. But go for the last word if you wish...

[Edited on Apr 05, 2004 6:15AM]