"It has long been apparent to observers like myself that this is the most centralized administration since Nixon's. Cabinet secretaries and cabinet departments seem to have less influence on policy than at any time in recent memory. All key decisions appear to have been made in the White House and the only job of cabinet secretaries is to sell the policy, get votes in Congress, and raise money for the president's reelection.

"This observation was recently confirmed by Sam Bodman, currently deputy secretary of Commerce and nominated to be deputy secretary of the Treasury. In an off-the-record speech recently, Bodman had this to say:

'I will tell you it is very hard for this government to have a vision on anything. We are totally stovepiped and we live within these compartments. This is not by way of a complaint. This is not by way of an excuse. It is by way of a fact.'"

"There is a lot to be said for getting the best deal, economists say."

That blinding glimpse of the obvious came from reporter Steve Lohr, in a story Sunday about Wal-Mart: Surely we can expect more profound insights from the newspaper of record's economics superstar, Paul Krugman -- now a Princeton professor and once the winner of the prestigious John Bates Clark Medal as most important American economist under 40. But sadly, no. In Krugman's most recent Times column, we find this appraisal of the nation's fiscal situation:

"Nothing in our national experience prepared us for the spectacle of a government launching a war, increasing farm subsidies and establishing an expensive new Medicare entitlement — and not only failing to come up with a plan to pay for all this spending in the face of budget deficits, but cutting taxes at the same time."

What would make Krugman, that diligent student of economic history, forget that "our national experience" includes the Lyndon Johnson administration, during which every one of these things occurred? That's easy: Krugman is no longer an economist. He's a liberal pundit -- America's most dangerous. Krugman ignores the fact that Democrat Johnson did these things -- and damns the Bush administration for both doing the very same things and for trying to dismantle Johnson's "Great Society."

It's tragic, in a way, because there is actually a big economic story here -- and it's one that Krugman is uniquely qualified to tell. But his partisan politics are getting in the way.

The big story here is that the Bush administration has to an important extent adopted two key economic policy positions normally associated with Democrats and their core constituencies -- health care entitlements, and protectionism. This is intensely frustrating for economic conservatives who think that Bush is too liberal. But it's just as frustrating for Democrats like Krugman, who find that Bush has co-opted their signature economic issues to the point where, in order to oppose Bush, they find that they must oppose their own principles -- and their own voters.

Let's look at protectionism. The Bush administration's protectionist moves -- the steel tariffs, quotas on Chinese textiles, and meddling with the currency affairs of China and Japan -- have been strongly criticized by conservative free-trade stalwarts. For example, the editorial page of the Wall Street Journal -- certainly a friend of the administration -- called the recently rescinded steel tariffs "one big blooper." National Review Online contributor Bruce Bartlett called the Chinese textile quotas "utterly unjustified and disgraceful." National Review's editor-at-large William F. Buckley, Jr. wrote "the case against protectionism speaks for itself."

As a libertarian, I hate protectionism. So I urged Krugman to let Bush have it right between the eyes -- and I said I'd back him up on it if he did. This one is a natural for Krugman. After all, Krugman excoriates Bush for everything and anything anyway. And on this issue, he should excoriate Bush hardest of all, and from the position of greatest moral and intellectual authority -- because trade is the specialty within the field of economics that made Paul Krugman a famous economist, for which he won the John Bates Clark Medal.

Krugman -- who, as a die-hard liberal, never hesitates to find ways to get Big Government involved in private economic affairs -- has always opposed protectionism, even though free-trade posed a threat to the Democrats' old-line labor constituency, and was disdained by the Democrats' newer anti-globalization and environmental constituency.  In fact, before Krugman became America's most dangerous liberal pundit -- when he was still a serious economist -- liberals used to excoriate him for his free-trade convictions. It seems astonishing today, but in a 1996 article in The American Prospect, leftist economic commentator Robert Kuttner gave Krugman the ultimate snub when he wrote, "Krugman is the conservative's ideal liberal."

So just what did Krugman say to demolish Bush on this issue so central to Krugman's economic principles? Well... not much. In his November 28 Times column, he wrote about the potential for global free trade to improve the lot of the world's poor, and toward the end slipped in this critique of the Bush administration -- mild compared to Krugman's fire-breathing norm:

"Growing tensions over world trade worry me. The steady trickle of U.S. protectionist moves, against everything from steel to Chinese bras, hasn't yet become a torrent. But there's a definite sense that the grown-ups have left the building. What's particularly striking is the contempt this administration has for the rules... just about every protectionist step taken by the Bush administration has been clearly in violation."

Then he made much the same point in his most recent Times column:

"Here's how the steel story looks from Europe: the administration imposed an illegal tariff for domestic political reasons, then changed its mind when threatened with retaliatory tariffs focused on likely swing states."

Why, on this subject does Krugman have only "worry" -- why is there only a "definite sense" -- when on other matters, in the same columns, Krugman keens about "whether this republic can be saved" and how we "have lost the ability to govern ourselves"? And why, Robert Musil asks on his "Man Without Qualities" blog does the winner of the John Bates Clark Medal for his work in trade theory not argue "from economic principles for free trade -- he prefers to cite international law"?

It's simple -- Krugman has sold his economist's soul to the Democratic party. Supporting free trade is simply too adverse to the interests of the Democratic base. Just look at the liberal backlash Krugman got from his mild defenses of free trade, embodied in a letter to the Times from an environmentalist:

"The problem with Paul Krugman's worldview... is that global consumption is unsustainable, especially as the population increases. ...Even if it could be perpetuated, Earth is already being fried. ...Aside from oil, he might have mentioned that corporate globalization is through the barrel of the gun, as has been demonstrated from Chiapas to Miami when people are trying to protect what is 'decent.'"

What's more, pillorying Bush for his protectionism would be rather embarrassing to the Democratic field of presidential contenders whom Krugman endorses (yes, in violation of the Times' Code of Conduct) -- all of whom are pillorying Bush for not being more protectionist. Robert Musil took a poll, and found:

"Gephardt, Dean and Kerry are squarely for extending the tariffs...Clark and Edwards offer incoherent waffles, while arguing that jobs in the steel industry should be 'protected' without any suggestion of how that might be done absent protectionism. And while Lieberman at first seems to advocate ending the tariffs, he makes the weird, unsupported suggestion that the American steel industry has been the victim of 'unfair trade practices'..."

For Krugman, it's nothing less than checkmate.

The situation's pretty much the same for the recently enacted Republican-sponsored Medicare prescription drug bill. Many traditional conservatives are angry because it creates a new welfare-state entitlement. But Democrats realize that, once again, the Republicans have stolen a key liberal issue right out from under them. The Democrats were left with nothing to do but to oppose it on what amount to "not invented here" grounds. All Krugman could come up with were two alarmingly paranoid columns (here and here), criticizing this vast expansion of Medicare as a secret conspiracy to destroy Medicare and make obscene profits for the non-profit AARP.

David Brooks -- Krugman's new rival on the op-ed page of the Times -- summed up the situation after the passage of the Medicare bill:

"Thus week the G.O.P. behaved as a majority party in full. The Republicans used the powers of government to entrench their own dominance."

And where does that leave the Democrats? Brooks says,

"Democrats indulge in the joys of opposition. They get to sputter about fiscal irresponsibility... They get to make wild charges. They get to propose solutions that ignore inconvenient realities. ...they savor their own righteousness."

That's Krugman he's writing about, you know. Yes, Krugman's still America's most dangerous liberal pundit. But now he's dangerous the way a cornered rat is dangerous. I don't much like rats -- but if I have to have them around, I very much prefer them to be cornered.

>>Update... Be sure to read Robert Musil's 3-part series on the sorrows of Krugman, the "aging enfant terrible," whose revolutionary "new trade theory" hasn't stood the test of time all that well. Here, here and here.

>>Correction [12/11/2003, 11:17pm] Reader John Landshof points out that the Lohr story ran on Sunday, not Monday as originally posted. The text above has been revised.

Posted by Donald L. Luskin at 2:40 AM | link    

Wednesday, December 10, 2003

Posted by Donald L. Luskin at 7:37 PM | link    

Posted by Donald L. Luskin at 12:06 AM | link