Bush's war on honest economics.
Numbers Game
The New Republic Online
by Noam Scheiber
Post date: 04.29.02
Issue date: 05.06.02
tnr.com
In mid-February the White House Council of Economic Advisers (CEA) put out one of the several documents it generates each year. Under the headline "PRESIDENT BUSH'S 2001 TAX RELIEF SOFTENS THE RECESSION," the two-page report argued that without last year's tax cut, the economy would have shrunk much faster than it actually did. The study went on to make a few pro forma comments about "[increasing] the incentives for saving," and "reducing an important impediment to ... the overall accumulation of wealth," before noting that the tax cut would continue to work its magic in the coming months. "[B]y the end of 2002," the report concluded, "the President's tax relief will have helped the private sector to create 800,000 more jobs."
On its face, this was nothing out of the ordinary. Economists--particularly those employed in Washington--run these estimates as a matter of routine. But there was something curious about the CEA report: Nowhere did it contain so much as a hint as to the study's methodology--no statistical appendix, no footnotes about assumptions, not even a phone number you might call to request that information. In fact, the closer you looked, the less "economic" the report appeared. Logical contradictions stuck out like a sixth finger, among them the suggestion that the tax cut, which by definition dramatically decreased national saving (i.e., the surplus), was at the same time increasing saving. And some of the language sounded oddly political, like the suggestion, right out of a George W. Bush stump speech, that the tax cut had "strengthened families." As William Gale, a senior fellow at the Brookings Institution who served on CEA in the first Bush administration, recalls, "[T]he report ... was basically an assertion, not an analysis. If there was an analysis, it was nowhere to be seen."
A cynic might ask why anyone should be surprised. After all, CEA serves the president and as such its priorities and research agenda are set by the White House. "Life in the political world is different from academia," concedes Harvard economist Jeffrey Frankel, who was a member of the Clinton CEA and worked on the staff of the Reagan CEA. And yet, for most of its 56-year history, CEA has been notable for the lack of politics in its work. The Council is composed almost entirely of academic economists, on one- or two-year leave from universities, whose sole mission is to provide the president with objective economic advice. While bureaucracies like the Treasury, Commerce, and Labor Departments employ highly competent economists of their own, CEA is "the only group of economists in the government that doesn't have some agency ax to grind," as Nixon CEA Chairman Herb Stein famously quipped.
As a result, CEA economists are widely viewed in economic policy circles as scrupulously nonpartisan. In a 1992 article excerpted on the CEA website, former Reagan CEA Chairman Martin Feldstein wrote that "[t]he tradition of professionalis[m] is so strong that even in a presidential election year the CEA chairman appoints members of the staff for the coming academic year with the clear understanding that they will continue to serve even if the party in power loses the presidential election." And over the years CEA officials have been fiercely protective of their independence. Though a pro-business conservative himself, Feldstein quickly found himself out of favor with the Reagan White House for advocating deficit reduction and publicly supporting the Fed's tight monetary policy. Feldstein reportedly so infuriated Reagan Treasury Secretary Don Regan that Regan instructed members of Congress to "throw away" CEA's annual economic report.
All of which is to say that if the Bush administration were using its CEA to put an academic imprimatur on political decisions of questionable economic merit, it would be very big news indeed. Former Jimmy Carter CEA Chairman Charles Schultze once succinctly described CEA's mission as pushing decisions "as far as possible in the direction of sanity." If CEA is no longer pushing, there may be few limits on how far in the direction of insanity this administration will go.
For years CEA was pretty much the only game in town for serious economic analysis. But starting in the 1970s economists began cropping up in all corners of government. In response, recent presidents have tended to rely on a single entity to collect all the economic advice being offered. In the first Bush administration, this entity was called the Economic Policy Council (EPC), and was essentially managed from the Treasury Department. But having run on campaign themes like, "It's the economy, stupid," Bill Clinton needed a higherprofile body, and so he moved the EPC into the White House and renamed it the National Economic Council (NEC). All of a sudden CEA had a rival--and an intensely political one--in its own backyard. For much of the Clinton administration that rivalry never materialized. According to White House lore, Clinton CEA Chair Laura Tyson recognized the potential for conflict early on and worked out an informal arrangement with Robert Rubin, the first NEC head, to defuse it. "There was agreement about the relative size and relative makeup, and the difference in mission," Tyson says. As former Eisenhower aide Bradley Patterson explained it in his book The White House Staff, Tyson sought "to maintain CEA's long-standing reputation as the purveyor of hard, factual economic data-- gathered, analyzed, and distributed without any bending to political considerations or the need for `spin.'"
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