Damaged Snow
If you were John Snow, would you stay knowing that you were at best the President’s second choice?
Do DC’s conservative activists really value tax cuts more than financial stability? And does their opinion matter so much that the White House would let them blackball credible Wall Street names?
Does the Bush White House want a strong, independent, credible Treasury? At least we know the answer to that question: No.
A Treasury truly is a terrible thing to waste. This Administration needs a Robert Rubin. Real economic and financial risks loom on the horizon. But it keeps demonstrating that it does not really want a Robert Rubin.
Allen Sinai gets it exactly right: “My perception is this administration doesn’t really want a highly creative, independent Treasury secretary who will lead policy … so it seems to me Secretary Snow is effective at doing his job.”
Mike Allen and Jonathan Weisman of the Washington Post delivered on this story.
so have cowen and delong
http://online.wsj.com/public/article/0,,SB110253756310294703,00.html
cheers!
We can and should complain about economic policy, but this Administration and Congressional leadership know precisely what they intend in policy. They have known what they intend since 2000. There is no reason for us to be surprised, simply take seriously the plans set out through the campaigns. So, we must complain and offer far better policy alternatives.
When the President asks you to remain in office as Treasury Secretary, you are most certainly effective from the President’s vantage.
Anne – quite reasonable. It is not an issue of first choice, second choice etc (that seems more about ego). It is an issue of who is effective at achieving the objectives of the administration. Those objectives should be the centre of the debate, not the personalities involved.
Why try to do as if there was something to do about it now ? No matter how, the crash needs to come. It needs to come BEFORE the right people comes to the rescue.
Those that helped this thing to happen, can’t be expected to solve the problem.
It must first explode in their face. Then others will come to the rescue. But nowadays if superman was available, nobody would give him a glance. After all, according to mainstream : THERE IS NO PROBLEM. We are going to live the BEST 10 YEARS economicly speaking. (OECD said that 6 months ago if I remember right)
let it snow! looks like it’s going to be a white christmas
Shouldn’t your headline read instead “Yellow Snow” as in “pissed on”?
Paulo — I was thinking of “dirty snow” but passed … you are right.
anne, marcel — objectives are what counts, and no, there is no real surprise about bush’s objectives. Any Treasury secretary is signing on to promote W’s second term agenda, not to formulate W’s second term agenda.
Still, I think the fact that Snow went through this, and it was clear that the White House/ Cheney sounded out replacements matters. Read Rubin’s memoirs: the threat to walk out and resign is a threat that every Treasury Secretary should have in his pocket, though it is a threat that should be deployed very, very rarely, and only on truly important issues. Rubin was the president’s first choice for the job (post bentsen), and his departure would have signalled a change in economic course and the markets would have noticed, so the threat to walk away mattered. Snow cannot really make that kind of threat, but then again, he never signed on to debate policy objectives.
More importantly, if i were another G-7 finance minister right now and if (an enormous if, one that goes to objectives) the G-7 decided to get serious about global economic governance/policy coordination to manage the orderly unwinding of the US external deficit, I don’t think I would want to negotiate with Snow. He is not going to be around for long, and is clearly not calling the shots, so his promises of future say fiscal deficit reduction don’t carry much weight. Compare and contrast with Rubin. Other governments will want to deal directly with the White House — which probably is what the White House wants.
Of course, what the White House wants is silly: continued rampant borrowing without any negative consequences, or at least the ability to spin it all away and deflect blame.
As long as a Treasury Secretaries have the ability to give the White House a black eye for its fiscal irresponsibility, there is a threat. So, instead of remedying the underlying fiscal mess, the White House just wants to make sure that when things get bad it won’t have to worry about getting called out by Treasury.
Intergovernmental coordination of economic policies has been so lacking in the last twenty years that one wonders if the ability to do so even exists anymore. And why would Bush choose to manage a decline in the CA deficit (in the current environment, that means reducing consumption) when the East Asians insist on funding it? Moreover, Bush is going to need billions from abroad to finance his Social Security privatization scheme. Shrinking the CA deficit runs directly against his interests.
Sure the balance of financial terror is scary, but nursing it along is a lot easier than actually addressing the problem.
http://www.nytimes.com/2004/12/09/business/worldbusiness/09yen.html
Japan’s Once-Booming Recovery Near a Standstill
By TODD ZAUN
TOKYO – Japan’s once-robust recovery slowed to a near standstill in the third quarter as consumer spending weakened more than expected, according to revised figures released Wednesday.
Brad,
Agreed completely, and no I am not happy, but I listen to these folks and am not surprised. There is to be no Robert Rubin for Treasury, alas.
Anne
glut — suspect you are right; usa will go on borrowing so long as the rest of the world is willing to keep on lending, and not stop a moment before it is forced to. That is the pattern that leads to all severe crises.
not with you on “no intergovermental policy coordination” over the past 20 yrs or so tho. It is true that coordination of macro policies among the g-7, and now the g-7 plus china, has been minimal. But the G-7, through institutions like the IMF, have coordinated their response to emerging market crisis. An IMF loan is a form of coordination: all major members agree in advance what share of the loan to put up and then agree at the time of the crisis on the amount and the conditions attached to the loan. The IMF staff play a big role in this process, but at its heart, it is an institutionalized form of G-7 (or G-10, or more) coordination. Like the IMF and its policies or hate it, it is a form of coordination. Same could be said of institutions for coordinating the forgiveness the debt of very poor countries — all generally agree to forgive the same amount.
whoa, 9.8% indirect bidders at the 10-year auction
http://wwws.publicdebt.treas.gov/AI/pdf/ofstats1209200401.pdf
cheers!
Japan is faltering yet again, and it is only a question of when the Bank of Japan will choose to intervene in the currency markets. The dollar will be defended for Japan has little choice but to keep the Yen from rising from here. We will do little complaining, for Japan is supporting us in other areas. So, the Japanese will keep buying dollars and buying American debt and who can tell that there is a limit?
Kstreetfriend:- Tough but was has this to do with the topic?
I agree with ying-yang.
I appreciate a lively comments section.
But one rule of thumb: comments generally should be shorter than my initial posts.
Bush Rejects Rise in Payroll Tax to Underpin Social Security
By DAVID STOUT – New York Times
The House Democratic leader said talks on changing Social Security should take place with “no preconditions.”
Brad,
I think that you are missing the larger issue within the currency markets … the problem is a two way problem not just a US problem … Export-driven economies lke China, Jpana, Korea and Germany are just as much to blame as Americans in this mess … If they spend they will impact the currencies appropriately … your insistence that taxes are a solution just does not sit well with facts … Governments tax to spend …. further government spending will only make the problem worse … please remember that it was economic growth not taxes that drove the 90s … Rubin has made himself rich playing the money game … Enron was a a great win for him … Rubin is applying old economic to the currency problem … His thoughts are NOT fact-based … tax and we will close the gap is absurd … why not spend and shricnk the gap …
I’m not following P. The federal deficit exists. It must be funded. Either (a) Americans stop consuming import goods and start saving (e.g. directly or indirectly buying treasuries), or (b) the Govt must reduce spending or (c) the Govt must raise taxes. It’s go to be one of these three.
Blaming China, Japan, etc is pointless. We have no control over their consumption behaviors. What do we do? Invade their countries and force them to import American goods?
p — i don’t think I have ever said that export driven economies don’t share some of the blame. It takes to tango, or, as Secretary Rubin has often said, for every bad borrower there is a bad lender. We could not consume so much/ save so little if someone was not financing us … my concerns center on the risk that we may overestimate our creditors willingness to finance us, and overindulge.
as for the 90s, sure, economic growth made a huge difference. but so did the combination of tax hikes (in 93 — the increase in the tax rate or higher incomes, which generated more revenue than expected through the .dom era, in part b/c the proceeds from excercising stock options were taxed as normal income, not as capital gains) and spending restraint. Facts are facts — Rubin/ Summers left the Treaury in far better shape than they found it. They saved the windfall from higher than expected economic growth. That was the right thing to do. It gave W room to manuever during the 01-02 recession. The question is whether he will leave the Treasury in better shape when he leaves … so far, the evidence suggests the answer is no. We will go into the next recession with deficits, nor surpluses, and a rising, not falling, debt to GDP ratio.
Right now, interest rates are unusually low(interest costs on federal debt as a share of GDP is way down v. 00 even though debt to GDP is up — thank you Alan Greenspan) and relatively strong growth, but we still have significant deficits. Why? b/c over the past four years, non-interest spending has increased as a share of GDP and taxes have fallen as a share of GDP. low interest rates have in a sense masked our underlying fiscal problems — along with our underlying BOP problems. The solution is some combination of higher taxes and less spending. And yes, i do think realistically that higher taxes are part of the solution — we are at war. that does limit our ability to cut spending.
Getting back to Snow –the WH’s failure to quell the rumours about a change in the position of Secretary Treasurer in the last few weeks, speaks volumes about this Administration. And I suppose about Mr Snow as well. The fate of Mr. Rumsfeld appears to be ending differently.
http://www.nytimes.com/2004/12/10/opinion/10fri1.html
Secretary Snow
Treasury Secretary John Snow, like so many others around President Bush, is nothing more than a messenger.
http://www.nytimes.com/2004/12/10/opinion/10krugman.html
Borrow, Speculate and Hope
By PAUL KRUGMAN
The National Association of Securities Dealers,” The Wall Street Journal reports, “is investigating whether some brokerage houses are inappropriately pushing individuals to borrow large sums on their houses to invest in the stock market.” Can we persuade the association to investigate would-be privatizers of Social Security?
Brad: re your comments about the G7.
The UK set up a website today for their chairmanship of the G7/8 in 2005 (www.g8.gov.uk). The priorities are said to be Africa, climate change, countering terrorism, non-proliferation and supporting reform in the Middle East.
You wrote: “if (an enormous if, one that goes to objectives) the G-7 decided to get serious about global economic governance/policy coordination to manage the orderly unwinding of the US external deficit. . .” But the absence of global economic governance from the list suggests it is of little concern. And this is the cause of so much pain to Europe, especially.
Re: Spam letter post. I recommend editing the thing down to a line or two. No reason to allow spam to clutter up interetsing dialog.
So, the Administration is going to create private accounts for Social Security but not raise payroll taxes. Democrats are complaining, but what are they complaining about? Are Democrats going to be trapped by pushing for tax increases for Social Security? The point is there is no Social Security crisis, and nothing need to be done to reform or save Social Security at a cost of hundreds of billions of dollars in borrowed money. Tax increases are not needed. But, the Democrats are complaining and sounding as though higher taxes are the answer for Social Security reform.
IJ — Global macroeconomic coordination typically would not be discussed by the “8″ (which includes Russia) or at the heads of state level, but among the “7″ at the level of Finance Ministers and Central Banks. The big headline grabbing summit process actually does not include the central banks, so the G7 finmins and central bank meetings (winter, spring, fall) would be the best place to hammer something like this out — but that requires some desire to do so.
Anne — one interesting option: raise the cap on payroll subject to social security taxes (currently about 75K I think, after that, no payroll, but I would need to look up the number) and lower the rate on everyone else …
Brad,
Of course, the cap on the payroll tax should in time be raised. I think the cap at present is about $87,000. But, this Administration and Congress have been adament about not shifting taxes towards higher middle and upper income households. There is a terrific precedent in California. Gray Davis and the Legislature thought there was a serious enough debt problem to raise taxes on vehicle registrations. Arnold Schwarzenegger, as a result, becomes Governor and the would be tax increase is set aside, and despite more debt being issued California suddenly does not have a debt crisis.
Anne
Brad – The trouble is that nobody has legitimacy at present to address the flaws in the global economy. For example, the G20 met three weeks ago. The Economist reported:
“the G20, brings together finance ministers and central bankers from the big rich nations, several big oil exporters and some big emerging markets. . . At the G20 meeting in Berlin, the group called on Asian economies to take “steps towards greater exchange-rate flexibility”, repeating a call made several times before. They hope that China will eventually allow the yuan to crawl upwards, either against the dollar or a basket of currencies.”
“Europe’s finance ministers can do little about this [the pain of having an uncompetitive currency]. They have surrendered control of the currency to an independent central bank that targets inflation, not the exchange rate. The European Central Bank has not intervened directly on behalf of the euro for four years. It is unlikely to do so again without American backing. Japan’s monetary authorities have no such compunction. . . printing yen to buy dollars is one way to inject liquidity into Japan’s moribund financial system.” http://www.economist.com/agenda/displayStory.cfm?story_id=3397847
It looks as though governance of the global economy should be top of the priorities for the G7/8.
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