Speculating on the Economic Cavalry

Economist and Dean of Columbia Business School Glenn Hubbard writes from time to time on the Op-ed pages of the WSJ, as he did just the other day. It's a good column that merits attention based on the substance, but it merits attention for another reason as well. It could very well represent the thoughts of a man who might turn out to be the most powerful economist of the next decade and constitute the basis of America's economic revival.

Follow me here. Obamanomics has put the economy into a stall and a ditch. As I have said, there is nothing that can revitalize this economy save unabashedly pro-growth policies and this President will not deliver them. It is up to the next President. Who will that be? Well, I believe that the essence of American voters' desires come campaign time will hue more or less to this: "doesn't have to be a rock star, we just need somebody that knows what the f**k they are doing." The overwhelming concern will remain the economy and jobs. Who, out of the current prospective field will have the greatest claim to credibility on the economy? I've told you who and there is some evidence that things are looking up. Who served as a Romney advisor during the last campaign? Hubbard. Obamacare is also a sore spot with Americans and intelligent reform of this beast will be both an attractive campaign focus as well as a high legislative priority. Who wrote a book outlining a comprehensive vision for healthcare reform based on free-market principles? Hubbard. Who is ambitious and was palpably miffed when Ben Bernanke got the job he wanted? Hubbard. Conclusion: in a Romney White House it is virtually a lock that Hubbard would be offered either CEA Chairman or Treasury Secretary. If this happens and a Romney administration can implement a "shock and awe" economic revitalization successfully, he'll get a second term in 2016 and Hubbard can stay as long as he likes, do what he wants and have eight years to place his stamp on US economic policy. That is alot of influence.

Another economist to watch is John Taylor. Paul Ryan's star is on the rise and his fiscal roadmap stands a good chance of becoming the congressional Republicans' defining policy stance. Who has jumped in to defend it in the face of the inevitable attacks from the left? Taylor. Who knows a thing or two about monetary policy? Um, yeah. Who has served in the government before and is civic-minded enough to do it again? Talyor. Look for Taylor to take over for Bernanke in a Romney administration.

Romney's Economic Team

I said to keep a close eye on anything Glenn Hubbard writes/says as he stood a chance of becoming one of the most influential economists in the country. That was if Mitt Romney could pull off a win. That is still a big if, but Hubbard is officially in the on-deck circle. Of course, the media will engage in reductio ad leftydum merely dubbing Hubbard a "former Bush officials" when obviously the reality is much more sophisticated than that. Hubbard is, of course, a highly respected economist, but more importantly he is arguably more of a true free marketer than anyone associated with the Bush administration. He wrote a decidely free-market policy approach book to healthcare and I've heard him say, "I'm a Republican econmist, I wouldn't tell governors what to do." Romney needs to be bold on economic policy to separate himself from pretty much everybody - Obama, Perry and (media reductio as evidence) Bush. Hubbard is as good a choice in that regard as anybody. As for Mankiw, he's fine as far as it goes, but I'm worried that Romney will be susceptible to his misguided "Pigou Club" obsession.

P.S. While have I no hard evidence to cite, I am 100% certain that Hubbard believes demand curves slope downward, which is, ya' know, a good thing to have in an economist. Is it not President Obama?

Wherefore Romney's Fingernails-on-Chalkboard Capital Gains Tax Policy?

Not that I read or care about David Brooks's musings at all, but it is hard to be a political junkie and not cross paths with a smattering of Brooksitry. Recently the NY Crimesian had this to say about Mitt Romney's economic advisors:

"He seems to know how to pick staff. His economic advisers include R. Glenn Hubbard of Columbia, Greg Mankiw of Harvard... This is the gold standard of adviser teams."

Mankiw, of course, is fine although in desperate need of a Pigouectomy; and, of course, I have highlighted Hubbard here on this blog numerous times. I think Hubbard can be a top notch economic policy advisor and, more importantly, a formidable influence on the US economy. So I don't doubt that Mitt Romney is getting great economic policy advice. Or is he? Frankly, I can't disagree with Landsburg's takedown of Romney's capital gains tax incoherence one iota (gotta click thru, no copying/pasting allowed apparently).

So what is going on here? Can such economic gibberish really be emanating from the Hubbard and Mankiw braintrust? Were they overruled? Fine, but who overruled them? Political strategists? Mitt himself? Answers are needed. (Actually answers aren't truly needed, I'm in the ABBO camp and I'm gonna pull the lever for Romney if he's the nominee, but it would be nice for the fingernails-on-the-chalkboard effect of this policy stance to go away.)

My hope is that this is just a pander, so that the campaign doesn't have to directly confront the anti-rich sentiment loose in the land, and that more rational tax policy would prevail in a Romney administration with a Treasury Secretary Hubbard. Sure it's dishonest, but it's a dishonest game and this pales in comparison liberal omelette-makers.

UPDATE: More here in re Romney and economic policy from the fantastic Scott Grannis.

Great Minds Think Alike: Brian Wesbury Edition

In this video, Brian Wesbury makes the prediction that Glenn Hubbard or John Taylor will be the next Fed Chairman under a Romney administration.  (Watch the whole video, it's good.)

Where have I heard that before?  Oh yeah.

Who served as a Romney advisor during the last campaign? Hubbard. Obamacare is also a sore spot with Americans and intelligent reform of this beast will be both an attractive campaign focus as well as a high legislative priority. Who wrote a book outlining a comprehensive vision for healthcare reform based on free-market principles? Hubbard. Who is ambitious and was palpably miffed when Ben Bernanke got the job he wanted? Hubbard. Conclusion: in a Romney White House it is virtually a lock that Hubbard would be offered either CEA Chairman or Treasury Secretary.

and

Another economist to watch is John Taylor. Paul Ryan's star is on the rise and his fiscal roadmap stands a good chance of becoming the congressional Republicans' defining policy stance. Who has jumped in to defend it in the face of the inevitable attacks from the left? Taylor. Who knows a thing or two about monetary policy? Um, yeah. Who has served in the government before and is civic-minded enough to do it again? Talyor. Look for Taylor to take over for Bernanke in a Romney administration. 

That would be an August 2010 prediction mind you.  You heard it hear first...

UPDATE:  Bingo. +1 for DB.

Prediction: Glenn Hubbard Will Briefly Be MSM Darling

Former CEA Chairman, R. Glenn Hubbard (currently dean of the best business school in the country, nay, WORLD) made a very sensible, very specific criticism of the expansion of Medicare that his former boss, George W. Bush, pushed for and signed into law. Bet the ranch that the MSM will pounce on this and put forth the meme that not even former key Bush aides support the President's economic policies. They will expand this narrow criticism to encompass Bush's entire economic program, especially tax cuts, completely ignoring both Hubbard's and Mankiw's unqualified support for the 2003 tax cuts. Hubbard will briefly go from right-wing hack to 'principled' or some such laudatory label, until of course the MSM realizes that the substance of Hubbard's comments were critical of entitlement expansion and contrary to the notion of nationalized healthcare. Then he'll be a right-wing hack again. The roundtrip should take 1-2 months.

Columbia Economists Embody National Debate

I have talked about Glenn Hubbard here and how, in the event of a Romney win in November, he could become the most important economist in America, and perhaps set an economic policy course that leads America out of the Obama wilderness.  Two maybes.  Today, Bloomberg has a nice little "clash of visions" type story contrasting Hubbard and his role in the Romney campaign with Columbia colleague and catch-all-liberal-go-to-Nobelist-who-is-not-Paul Krugman, Joe Stiglitz.

The article isn't earth-shattering, just more campaign fodder with a different twist, but it gives me the opportunity to mention once again that blame for the failed $800 billion stimulus of 2009 ought to be, but isn't, placed on the head of one Joe Stiglitz.  Christy Romer, Larry Summers and others take the heat (when any heat is apply, which it rarely is) for the disastrous at best/ineffective at worst stimulus, but more than anybody the stimulus was a reflection of Stiglitz's thinking.  He was Mr. Aid to States.  He went around during 2008 and 2009 talking about how we desperately needed to give massive federal aid to states to spur the economy.  And we did.  And it did nothing.  States pocketed the money and kept doing what they were doing.  Essentially, we federalized states' profligacy.  Has that enabled California to pull out of its fiscal nose dive, allowed Illinois to get a handle on its fiscal nightmare or obviated the need for the pain reforms that states are now making?  No.  None of it.  And it did nothing for economic growth.  The states that were booming are still booming and the states that were languishing are still languishing. 

So what the article should say, if it were to be really informative, is that we've had Stiglitzian economic policy for years now under Obama.  Despite that Nobel prize, it's yielded pretty miserable results.  Maybe we ought to give an alternate approach, Hubbard's approach, a chance.  We just may.

Big Coup for a 2008 Presidential Hopeful

Mitt Romney has scored a big coup in receruiting Greg Mankiw and Glenn Hubbard as his principal economic advisors to his presidential campaign. Of course, Prof. Mankiw's excellent blog (although declining in quality of late, I guess he's busy) is often referenced here and I have touted Dean Hubbard's healthcare policy book here as well. These economists are great additions to any campaign as they will surely add creativity and broad thinking to policy formulation. With that said, I am quite excited about the prospect of Hubbard's ideas on healthcare reform gaining influence on a major candidate for the Oval Office, yet not too excited at the prospect of Mankiw recruiting a potential denizen of the White House into the Pigou Club.

Steinhardt Insults...Who Exactly?

Legendary hedge fund manager Michael Steinhardt, as reported by Bloomberg, thinks the stock market is going up despite all the dummies in the Bush administration.

"The intellectual quality of the people in the present administration is remarkably low in relation to how well we are doing, " he said.

Well, you would think that Steinhardt was smart enough to know that politicians have generally very little influence on the economy, and when they do exert undue influence it tends to be negative. Enough with generalities though, let's get to specifics. Given that he is talking about the state of the economy, he is most likely talking about any or all of the following people: Larry Lindsay, Paul O'Neil, Glenn Hubbard, Greg Mankiw, Ben Bernanke, John Snow. OK, maybe Lindsay wasn't great but he was fired. O'Neil was fired too, but was his intellectual quality low? Doubtful but let's concede that one. Let's move on to who has actually set our current policy. In the here and now we are basically running on policy recommendations of Hubbard, Mankiw and Bernanke. So is Steinhardt calling these guys low in intellect? Can that statement be taken seriously? OK, not all ivy league professors who write textbooks are good economists, but hardly anybody impugns Mankiw's intellectual firepower. Ditto for Glenn Hubbard and Bernanke. Is there a principled argument that these guys are doofuses? Or is this just another lame assertion of the hackneyed popular belief that GWB is an idiot. You'd think Steinhardt was more sophisticated than that.

Nonetheless, Steinhardt is a legend so let's listen to him. Let's bring back those of sufficient intellectual quality. Get me Janet Yellen, Laura D'Andrea Tyson, and Martin Baily on the horn. At least then we'll know that the good times are for real.

Good: The Walkback from RomneyCare is Complete

I pointed out a while back that you could have predicted what Mitt Romney's healthcare policy proposals would look like, because they were contained in a book written by two of his economic advisors. While I was enjoying vacation, the Romney campaign came out with their health care policy vision, and, yup, it looks just like what Hubbard, Cogan, and Kessler laid out in the book, and Hubbard was on cable news outlining the plan. It is a strong, free market plan and the right vision to combat the creeping to galloping socialism that candidates on the other side are touting. You can even check out a not-so snazzy PowerPoint presentation here.

Who Will Get Paulson's Nod?

Endorsements are rolling in (former Solicitor General Ted Olson goes with Rudy) and economic policy teams are being assembled. The Big Kahuna, however, is Treasury Secretary Hank Paulson. The candidate that can offer the nation the continuing services of Paulson as Treasury Secretary will be the best positioned in terms of economic policy. The policy credibility and the fundraising advantage of a Paulson endorsement is simply enormous. The only other endorsement that could come even close to having that type of advantage is if Robert Rubin signs on to be Hillary's TreasSec. That said, it is highly unlikely that a sitting cabinet member would make an outright endorsement during the primaries. Perhaps it will be left to winks and nods or talented tea leaf reading to determine who could score Paulson for their team, that is if Paulson even wants to serve beyond the Bush administration (I think he does). Assuming I am right then, who could it be? It is obvious that Paulson knows all the candidates well. As CEO of Goldman Sachs, one of NYC's largest employers, clearly he must have had a good working relationship with Rudy while he was mayor. Consider also that Paulson must have worked closely with this group which is led by Glenn Hubbard. Hubbard is with Romney. This is a tough one to call. I'll be watching for clues.

Strassel On the RomneyCare Millstone

Kim Strassel explores Mitt Romney's role in the Scott Brown earthquake. She rightly gives Romney credit for his deft assistance to the upstart Brown, and she doesn't shy away from potential "millstone" around Romney's neck for his presidential ambitions - RomneyCare. As readers may know, I have mapped out a path for Mitt Romney to take on the Dems in 2012. As well, I have addressed the flaw of RomneyCare. Although not as full throated as I would like (or Strassel), I think the repudiation of RomneyCare has been established in the adoption of the Hubbard/Cogan/Kessler plan. Romney can very easily say that RomneyCare was what was thought to be best for Massachusetts at the time, but that for the nation there is a better way in Hubbard/Cogan/Kessler. Is the electorate really that hung up on past policy failures? In America, you can admit to a mistake, adopt a powerful symbol that you've learned from that mistake, and still win elections. Romney should do this and the putative millstone of RomneyCare will hardly hold him back.

Healthy, Wealthy & Wise

I went to a great lecture last night, where Glenn Hubbard, dean of Columbia Business School and former Chairman of the Council of Economic Advisors, introduced his new book, Healthy, Wealthy & Wise: Five Steps to a Better Healthcare System. Not alot in Glenn's book is new but what is striking is that the book is a clear and accessible assessment of what is wrong with the current system and an equally clear and simple plan to fix it that is eminently achievable. This is hardly a ponderous treatise, but a simple handbook on how to make progress (if you believe that progress means better outcomes) toward positive healthcare reform.

I won't go into too much of Glenn's arguments because the book really is a quick read, but there are some salient points to emphasize. First, our current healthcare system is not characterized by freely and correctly operating markets, so to say that markets have produced a failed system is wrong. Second, health insurance today is NOT insurance. What we call 'insurance' is actually government subsidized "pre-paid" healthcare spending. Freeing up insurance markets to offer actual, real insurance, not something just called 'insurance' will go along way to reducing the uninsured (tidbit: 30% of "the uninsured" make over $50,000 and choose not to purchase coverage, so alot of the problem of the uninsured is not because people are too poor but that people see no value in it). Furthermore, as people are free to make real choices about what kind of insurance they need, they are likely to opt for high-deductible, catastrophic policies, which will result in them taking higher wages (i.e. less compensation in the form of healthcare) which will be taxed. The incremental taxes from those increased wages, can fund government subsidies for the thorny problems of the chronically ill and the truly poor.

Helathcare is likely to be THE issue in the 2008 presidential campaign. This is a great place to start if you want to intelligently assess who is saying what.

UPDATE: In this article you can see how parts of Hubbard's plan are working their way into reform legislation around the country. Further proof that 1) innovative approaches and true reform actions are likely to come at the state level before the feds ever get a clue, and 2) that we need more folks like Dr. Tom Coburn in Washington.

This Just In. Commie Pinko Reporter at NY Times!!

OK, here is my best Claude Raines..."I am shocked, SHOCKED...that David Leonhardt has written a ridiculously biased piece in the NY Times." From Greg Mankiw's blog we get a link to Leonhardt's 'exploration' of the economic advisors to the presidential candidates. The article is ridiculous beyond belief. I can sum it up for you: "Republican advisors = all about tax cuts, thus boring and awful. Democrat advisors = all about nationalized healthcare and saving the environment, thus cool and exciting."

It strikes me as particularly dishonest of Leonhardt to go on like he does that Democrats have exciting and "serious" proposals about healthcare and lamely states that guys like Hubbard and Cogan merely, "like tax cuts." Hey man, ever heard of THIS BOOK (mentioned here and here )!! I find it hard to belive that Leonhardt doesn't know of this book, he'd be a terrible journalist if he didn't. Obviously Leonhardt knows about this book, but he chose to ignore it. What a jerk.

OK, I will concede the small probability that Leonhardt is ignorant, yet good faith ignorant as opposed to willfully ignorant, of his subjects' policy work. In which case the remedy is easy. I, Donny Baseball, will accept a small fee from the NY Times Company to provide my commentary and analysis to NYT's economic columnists on an advance basis.

Second Look at "Healthy, Weathy and Wise"

Amid all the debate over ObamaCare, I routinely see and hear the notion that Republicans, Romney especially, have no plan as an alternative to ObamaCare.  This is bogus.  (First, a return to the staus-quo ante is much preferable to ObamaCare as it is a monstrously destructive and authoritarian law.)  Romney's chief economic advisor (and the man who will guide economic policy for the nation should Romney win the election) wrote a little book on pro-market healthcare reform years ago. I pointed out his book and his healthcare ideas on this blog in 2006!!  Alas, 2006 was the year that the eletorate decided that Nancy Pelosi and Harry Reid would be the best stewards of our future.  Whoops.  So, these ideas never saw the light of day, but they've been there all along.  Alas, with the nation craving for an alternate solution in the wake of yesterday's SCOTUS decision, what do you know, Hubbard and his co-authors are on the Op-Ed pages of the WSJ today with exactly the ideas they have for healthcare reform first enumerated in their little book.

UPDATE: The original link to the book is dead.  Here is some background on the book and here is more.

Columbia Law and Business Deans Do Damage Control

In this post, I referred to how balkanized alumni giving is at Columbia. It is a refelction that few Columbia alums feel an allegiance to Columbia University as a whole, but only to their school. I imagine this is the case at many schools, particularly Ivy League schools, but I have a sense that it is more pronounced at Columbia. (This is not scientific, but I have gleaned this from my interaction with other people and my assessment of their loyalties to their schools.)

Two of the prestigous graduate programs at Columbia, business and law, typify this balkanization. They produce graduates who go on to stunning success and have the capacity to give, yet most don't feel a true kinship with Columbia. During the Bollinger years especially, it has been a key task of the leaders of these schools to keep alumni interested in giving even as the greater institution appears decreasingly mature. No doubt Dean Hubbard and Dean Schizer had this in mind in feeling the need to express their disagreement with Bollinger's decision to invite Ahmadinejad to campus.

Mitt, Jim...Say It...ABBO

Guys! Guys! Calm down would you??!! ABBO! Seriously, who gives a rat's arse, it's water under the bridge. We have a job to do now. ABBO! Jim, don't worry, talk to Hubbard. ABBO. Mitt, don't get all defensive, it's competence and a clue we all want. ABBO, boys. ABBO. We cool? We cool? Say it, say "We cool." Good.

Romney Says "2 out of 3" Is Good

One strike against Mitt Romney's bid for the highest office in the land is that 'Romneycare' silliness he unleashed in Massachusetts while Governor. But today comes news that John Cogan has joined Romney's team of economic advisors. That means that 2 of the 3 authors of this book, are now on Team Romney. So are they just gettin' together for a little economic chit chat or are they formulating a big bang, comprehensive, free-market-oriented healthcare reform policy proposal that will stand tall as a contrasting vision to Hillarycare, EdwardsCare or ObamaCare? Hmmm. I know that Hubbard, at least, thinks that healthcare is too important to be ceded to the collectivists. Something is a' brewing and I feel it could be exciting. Then again I could be wrong.

Bloomberg News' New Bash Target...Free Markets in Healthcare

I am not sure why or how Bloomberg reporter Ryan Donmoyer extrapolates from an unreleased Joint Committee on Taxation report that President Bush's healthcare reform proposal from the SOTU will do nothing for healthcare costs. As mentioned the report hasn't even been released and even Donmoyer characterizes it as "very preliminary", yet it "calls into question administration claims of cost and tax savings."

The report apparently says that the reform proposal will begin imposing higher taxes by 2011, and somehow this is supposed to mean that healthcare costs won't go down. Not even the Brookings Institution analyst that Donmoyer hauls in knows what it all means. The tone and content of the article is clearly meant to make Bush's reform proposal look dubious, either by being convoluted or simply unsuited to the putative goals. As someone employed by a leading financial media firm, Donmoyer ought to know that prices for goods and services and taxes are not the same thing and that higher taxes paid does not mean higher prices paid. In fact, if Donmoyer was at all proficient in healthcare economics he would find nothing wrong with Bush's reform ultimately generating higher tax revenue. As I posted on this blog, Glenn Hubbard - one of Bush's former advisors, a current Romney advisor, and a pro-free market healthcare reform advocate - has outlined in his book how removing the distortions currently embedded in the tax code will cause people to buy low cost, high-deductible insurance that is truly insurance and thus opt for increased cash wages in lieu of employer-provided healthcare and thus pay taxes on those higher cash wages. Here is how I reported it (here):

"Furthermore, as people are free to make real choices about what kind of insurance they need, they are likely to opt for high-deductible, catastrophic policies, which will result in them taking higher wages (i.e. less compensation in the form of healthcare) which will be taxed. The incremental taxes from those increased wages, can fund government subsidies for the thorny problems of the chronically ill and the truly poor."

If Donmoyer doesn't understand this he is overemployed, but I think he is just acting on orders from Al Hunt. It appears to be an institutional mission at Bloomberg to attack free market healthcare reform just like it was an institutional mission to spread the fiction of the jobless recovery. Donmoyer has been caught before peddling his biases as news, but I'm afraid his attempt to sow deeper doubt and skepticism was probably effective.

Walking Back From RomneyCare?

I speculated on what was brewing within Mitt Romney's campaign on healthcare policy given that two leading proponents of free-market driven healthcare reform had joined the campaign. Well, here is a bit of a clue via Powerline:

"Next, we discussed health insurance. My question here was whether he considers the approach he used in Massachusetts -- basically requiring all citizens to have health insurance -- to be a viable and desirable approach for the nation as a whole. He answered that the Massachusetts plan was to some extent the product of special circumstances in the state: (1) a low numbere of uninsured and (2) the availability of over a billion dollars from various sources for use in taking care of the uninsured that could be converted to helping them obtain insurance. Romney's view is that each state, as a laboratory for our democracy, should find its own solution, but that the "overarching" market-based approach used in Massachusetts is the best way to go. Romney said he would not have the federal government mandate that everyone obtain health insurance, and he denounced the European model as well as "Hillarycare." "

If Hubbard, Cogan and Mankiw have Romney walking back from RomneyCare, that is a good thing.

Dammit Lady, I'm Trying to Raise $4 Billion Here!

Too funny. Bloomberg carried this story a few days ago, about how Columbia University President Lee Bollinger is embarking on a $4 billion fundraising drive. I can just picture Bollinger's "aw shit" reaction when news got out that the dean of the International Affairs school has invited Iranian apocalyptic whackadoo Mahmoud Ahmadinejad to speak at the university. Apparently SIPA Dean Lisa Anderson got a little jealous that her competitor, the Kennedy School at Harvard, was getting all the press. Clearly she thought, 'we're just as good as Harvard, we will get our own women-beating, gay-bashing, terrorist-sponsoring theocratic dictator to speak!' I'm sure Dean Anderson got a call from Bollinger post haste to the effect "you flumin' idiot, I'm trying to raise $4 billion with a b here! You're killing me!"

A little side color for readers that may be unfamiliar with the dynamics up at Columbia (and why would you be my globally-minded readers, parochial concern that it is?). Columbia has always been a bit balkanized in that the prestigious graduate programs produce alumni that are loyal to their graduate school and not the university in a larger sense. This is particularly true of the business school which produces capitalist movers and shakers who generally see the rest of the university as a silly hive of aging 60s radicals and neo-collectivist idealogies. Bollinger pissed alot of alumni off with his antics and it has exacerbated this balkaniztion, which has impications in the fund-raising sphere. Rich alumni are making donations specifically to their graduate schools. You get a faint whiff of this in the Bloomberg article. Russ Carson for example gives big dollars to the b-school but I doubt he would give one red cent to the university at large for Bollinger to get his grubby hands on. Bollinger sounds high-minded, but truth is he isn't enamored of not having more control over the funds that current b-school Dean Glenn Hubbard and particularly former Dean Feldberg have brought in. ``I want to draw alumni into the whole university, not just the parts they went to,'' Bollinger says. Yeah well, Bollinger is a big part of the reason behind the fund-raising balkanization.

Anyway, Bollinger appears to be deftly slinking out of this with a mild condemnation of Ahmadinejad and a "ah...er...(think dammit!), um... too short notice to pull off."