by Mike Kimel
Deficit numbers for CEA chair signatories on the deficit letter Cross-posted at Presimetrics Title updated
I’m kind of late to this, but apparently ten ex-chairs of the President’s Council of Economic Advisors decided to share their opinion about the national debt with the rest of us. There’s been commentary here and there about how hypocritical some of the names on the list are – the CEA chair is the President’s chief economic advisor, and many of these people served under Presidents (and provided economic advice) that drove up the debt. I thought it would be an interesting exercise to put some numbers on the hypocrisy.
To do that, I pulled the dates for which each CEA chair served and quarterly figures for the total public debt. The debt series I obtained (from the Federal Reserve Economic database) goes back to 1966. The terms of each CEA chair served did not completely coincide with a yearly quarter, but I split them up as best I could. (Note – because sometimes it took a while for a CEA chair to be confirmed, but that person could well be offering the President advice before confirmation, I assumed that each CEA chair “took office” immediately after his/her predecessor left.)
The debt was adjusted by quarterly CPI, and population, resulting in the real national debt per capita. The following figure shows the change in the national debt per person on a quarterly basis, over the length of each CEA chair’s term. The gray bars represent those who signed the letter.
A few comments.
1. Most of the signatories to the letter increased the national debt per person.
2. A number of the CEA chairs are or have been with the Fed – none of them (Greenspan, Yellen, Bernanke) have signed the letter.
3. Harvey Rosen may look responsible… but that’s a function of the timing of the brief term (about a quarter) he served, encompassing the period when individual tax returns were due. He served under GW Bush, after all, and nothing GW, and despite what many supposed conservatives were saying through 2004, at no point did GW ever do anything that resembled being fiscally responsible.
4. About the only signatories who on the face of it have a leg to stand on signing this letter are Schultze (Carter’s CEA) and Bailey (Clinton’s last CEA chair).
5. I think its fair to stretch the leg to stand on thing to include Laura Tyson, Clinton’s first CEA chair. Yes, the debt increased while she was in office, but at a rapidly decreasing rate, and her advice provided some of the ground for the surpluses that came at the end of the Clinton term.
6. I’m sympathetic to Keynes’ view that a responsible government runs up the debt when times are bad, and pays off the debt at other times. By that standard, a lot of these signatories have no excuse whatsoever. I believe it speaks very poorly of economics as a profession that anyone takes Martin Feldstein, Glenn Hubbard, Greg Mankiw, or Edward Lazear seriously, and I believe it is a sign that they have no honor that they would have the temerity to put their names on a letter like this. These are not, after all, low level drones whose livelihood depends on not making waves, but rather financially secure architects of the policies that cratered this country’s finances. As I see it, they were in the position to do good, and instead they enabled bad.
7. That Obama inherited an economic mess does not excuse his economic policies, or those who provided him with advice (Romer & Goolsbee). Nationalizing debt incurred by companies (and there is no other way to describe the process by which nonperforming financial assets were taken off the ledgers of many companies) without also nationalizing the assets of those companies is a surefire way to ensure something like the Great Recession will happen again. And even a mediocre economist should have had the skills to convince even the densest of White House residents what happens when you don’t even try to incarcerate any of the bad actors.
8. I hesitate to disagree with Brad DeLong who is usually right, but I think there is yet another reason to avoid excusing his colleague Christina Romer. When a person’s most famous paper reaches a conclusion that gives ammunition to those who are wrong about economic policy, and that paper is itself a textbook application of Maier’s Law, that person’s advice can only produce poor results.
9. If I had to award a “Supreme Chutzpah” award to any of the signers, I guess it would be Glenn Hubbard. Not only did he turn a surplus into a deficit and lay the groundwork for bigger and better deficits to come, his defense of that deficit he created was fairly unique, involving an implicit assumption of double digit GDP growth!!!. (Yes, this man is now Dean of the Business School at Columbia.) I believe Hubbard was last seen co-authoring a paper explaining the desirability of “a 4.5 percent mortgage for homebuyers for a period of time. This bold idea, akin to our proposal on this page on October 2, would help arrest the decline in house prices and absorb excess inventory of housing.” I’m not sure what “a period of time” is to Hubbard, but we had rates in that neighborhood for about six months last year. The rates got there shortly after the Case Schiller Home Price Index had bottomed out and started rising, and right about the time the index started tanking again. The index is now rising to new post-crash depths.
10. On the other hand, I suspect Brad DeLong might nominate Greg Mankiw for some sort of award among the signatories of the letter and its hard to disagree with him. FYI – my views on debt haven’t changed since this.
And one more thing… as Michael Kanell and I wrote in Presimetrics, sooner or later “Democrats who make it to the Oval Office [will] realize that they are going to be tarred as fiscally irresponsible no matter what, so why make the tough decisions that Republican presidents have refused to make in recent decades?” I guess after Ford, Reagan and the two Bushes, an Obama has come home to roost.