The Economist makes some excellent points about Bush’s economic team this week. 1) It is very weak, as everyone knows. 2) This may not be a major problem under normal circumstances. 3) This will almost certainly be a very major problem if something goes wrong.
George Bush’s economic team still looks weak
There are two growing suspicions about Mr Bush’s approach to economic policy. The first is that he sees it mainly as a question of salesmanship. Showing an admirable faith in markets, the president seems to think that economic policy will basically run itself; what you need is a bit of pizzazz to sell the president’s reforms. Hence, the White House’s enthusiasm for Carlos Gutierrez, the new commerce secretary, who made his fortune selling breakfast cereal at Kellogg.
The second suspicion is that loyalty is more important than knowledge. That was Mr O’Neill’s problem: he said that more tax cuts were a bad idea. Larry Lindsey, Mr Bush’s bumptious first chairman of the National Economic Council, was pushed out soon after he made the impolitic (but pretty accurate) point that the Iraq war could cost $200 billion.
Unfortunately, markets never work quite that sweetly. What would Mr Bush’s team do if there was some sort of international economic crisis, such as a dollar crash? The main international person at the Treasury, John Taylor, has failed to make much of a mark. His replacement is likely to be Tim Adams, head of policy for the Bush-Cheney campaign and before that Mr Snow’s chief-of-staff. In the White House, there are even fewer people who understand international economics.
If and when an international financial crisis happens, the Bush administration will have no one to provide effective leadership, no authority that financial markets will trust and respect, and no one with experience to provide good policy advice.
In 2004 Paul Volker asserted that he thought there was a 75 percent chance of such a crisis happening within five years. Maybe it’s time that someone started thinking about what to do in such an eventuality, because chances are good that the Bush administration’s response will be confused, inept, or altogether non-existent.