Behind The Blandness

Last week, the White House released the Economic Report of the President, an annual publication produced by the Council of Economic Advisers that surveys economic conditions and discusses key economic policy issues.In years past, the economic report has been an important document. Because members of the CEA are well-respected economists in their fields, their thinking is always worth hearing. However, this year, the CEA seems to have gone out of its way to avoid saying anything remotely interesting. There is so little in the report that the New York Times and Washington Post didn’t even bother covering its release.Because CEA members are normally academics on leave from universities, they need to maintain the report’s quality, lest their academic reputations suffer. N. Gregory Mankiw of Harvard, Kristin Forbes of the Massachusetts Institute of Technology, and Harvey Rosen of Princeton authored the current report.Historically, this has given the CEA a certain independence and latitude to be provocative and address hot-button issues that politicians are often wary of touching. In the early 1980s, for example, CEA Chairman Martin Feldstein of Harvard caused much consternation within the White House by warning about the negative effects of budget deficits. Treasury Secretary Donald Regan even suggested abolishing the CEA, which President Reagan rejected.In the 1990s, Republicans in Congress tried to abolish the CEA. I’m not really sure why. But I argued at the time that the CEA was even more important in Democratic than Republican administrations, because Democrats generally have a weaker understanding of economics than Republicans (which is why they are Democrats). Therefore, they needed some professional economists around to explain why their pie-in-the-sky proposals won’t work.Now, it appears that the same needs to be said of Republicans as well. Today, they are the ones with grandiose plans to reform education, health care, Social Security, and the tax system, without always having a clear understanding of economic fundamentals. Consequently, Republican efforts to “reform” education and Medicare have consisted of little more than massively increasing spending on these programs. What little genuine reform was contained in the legislation appears not to have been much more than an afterthought.I have no inside knowledge about this, but I strongly suspect that the CEA was at best lukewarm to both the Medicare and education initiatives. I say this because all economists know that the linkage between money spent on education and educational outcomes is dubious at best. More money doesn’t necessarily translate into improved learning, mainly because the teachers unions absorb all the new money in higher pay.I am also sure that the CEA warned against the Medicare bill because it knows that health-care spending is already out of control. Adding a new program for prescription drugs is like throwing gasoline on a fire. The CEA would also have known that spending for health care programs always greatly exceeds estimates – the 25-year estimate for Medicare in 1965 was off by a factor of 10, for example. Yet recently, members of Congress were shocked to learn that projected spending for the drug benefit has jumped significantly from what they expected.Finally, I know with 100% certainty that the CEA warned against the agriculture subsidy bill that President Bush signed into law three years ago, because it was bad policy in and of itself and would also torpedo the world trade talks. Belatedly, Mr. Bush has realized his error and has asked to cut farm subsidies in his new budget.In a similar vein, the CEA must have opposed the imposition of steel tariffs, which, again, the president reversed himself on eventually. In short, we would all be much better off if the CEA had been listened to more carefully in the first place.That said, I am disappointed by this year’s report. It is bland almost to the level of pointlessness. It’s as though a giant vacuum sucked all the life out of it. Although what it says about the economy, tax reform, trade, immigration, and other issues is fine as far as it goes, there is just nothing remotely interesting about the report.One suspects that there is something missing. This is confirmed by the brevity of the report at just 188 pages for the main text. The shortest report in the last 15 years came in at 248 pages (1994) and the average over that period is 273 pages. This suggests that there are 60 to 85 pages missing somewhere. It also seems odd that there is no chapter devoted to Social Security reform – Mr. Bush’s key second-term issue.Rumors abound that three chapters were excised at the last minute, delaying the report’s release by a week. Maybe nothing is remiss. But CEA Chairman Mankiw’s sudden retirement and departure from Washington makes one suspicious.Mr. Bartlett is a senior fellow at the National Center for Policy Analysis.

Behind The Blandness

Behind The Blandness

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