"Completely Unfounded"

Allright. I've been looking forward to disagreeing with Megan McArdle about a crucial issue of public significance and here we go as she accuses Paul Krugman of making "completely unfounded aspersions on the competence of the Treasury Secretary."

That's totally insane.

The foundation of my massive suspicion of Hank Paulson's competence is that he voluntarily went to work for George W. Bush and Dick Cheney. I'll grant that this is a defeasible suspicion and if Paulson manages to perform some skilled financial wizardry I'll revise my view, but for Paul Krugman and I to assume ineptitude or corruption at this point is just common sense. The Bush administration has, up until now, never made economic policy in the public interest so I would be shocked if they were to do so now. My instinct is to say that columnists overrate the odds of major financial crises (columnists always overrate the odds of something dramatic happening), but that insofar as things happen Bush and his subordinates will use it to try to further redistribute wealth upwards rather than to improve living conditions for ordinary people.

Comments

"is that he voluntarily went to work for George W. Bush and Dick Cheney."

Well, at least you admit your opinions are based on Bush Derangement Syndrome and not any substance. Thats always a good first step.

Posted by Dave | August 10, 2007 11:11 AM

Exactly right Matt. The burden has long been off of the publics shoulder to find malevolence and/or incompetence within the Bush administration. At this point it is a given.

Posted by DanF | August 10, 2007 11:12 AM

"...but that insofar as things happen Bush and his subordinates will use it to try to further redistribute wealth upwards rather than to improve living conditions for ordinary people."

It is still possible to be competent or incompetent given one has bad motives. There are competent bank robbers and incompetent ones. Incompetence in such people is not always desireable either. An incompetent bank robber can easily do more harm - shooting people in panic - than a competent one, who gets away with no commotion.

Posted by Njorl | August 10, 2007 11:12 AM

The foundation of my massive suspicion of Hank Paulson's competence is that he voluntarily went to work for George W. Bush and Dick Cheney.

I don't think I'd trust Hank Paulson to manage my IRA. But it's poor journalism--of the Fox News variety-- to tar-and-feather him just because he works for an administration that's shown itself for be largely corrupt and incompetent.

If you (or Paul Krugman) can't point up specific malfeasance on Paulson's part, you have nothing to write about.

Posted by James Gary | August 10, 2007 11:13 AM

I disagree James Gary. At this point in time, after six plus years of Bush, no one working for the Bush administration deserves the benefit of the doubt. Bush squandered that resource. That is not Matt's fault. That is not Krugman's fault. I believe Bush put it this way: "Fool me once, shame on ... you. A fool... We don't get fooled again."

Posted by DanF | August 10, 2007 11:21 AM

Krugman didn't say anything about Bernanke or Paulson (at least in the excerpt quoted by McArdle). He refered to the administration's record of incompetence. One suspects that if anyone other than Krugman had said this, McArdle wouldn't have bothered to pick the fight.

Posted by Tyrone Slothrop | August 10, 2007 11:29 AM

Paulson had something like a $700 million dollars in Goldman Sachs stock, and by taking the job he could divest himself of it and diversify his portfolio without paying capital gains.

It's a little perk that could save him $700 million * 15% = $105 million.

Posted by Chris | August 10, 2007 11:36 AM

I have to disagree with Matt (and DanF) here. Obviously the government has to be staffed by someone, and an honorable, competent person could well decide that it would be better (for the country) for him/her to be the person staffing it than someone else less competent.* To assume that anyone who serves in the Bush Administration is ipso facto incompetent is unfair and unworthy of the blog.

*This is what might be called the Powell Dilemma-- how does one balance the good one can potentially do working within an Administration to shape policies with the repugnance one has for carrying out policies of the Administration with which one disagrees. I don't think there's a straightforward answer, or that one approach is always right.

Posted by Doh | August 10, 2007 11:38 AM

This just shows how hard up the Krugman haters are. That's the best they can do. "Whah, Krugman was mean! Whahhhh."

The truth hurts, wingers. Maybe if they'd listened to PK they wouldn't be so screwed now.

Posted by Chris | August 10, 2007 11:40 AM

chris reminds everyone of an important motivation for paulson to take the job.

and why should we have to remind everyone that being treasury secretary in the george bush administration is a completely empty and powerless position?

and especially why should we have to remind anyone with such inferior reading comprehension skills as to misread what krugman said as a questioning of the competency of hank paulson (as tyrone slothrop notes, this is entirely about insane right-wingers who hate paul krugman for being correct such a high percentage of the time).

Posted by howard | August 10, 2007 11:40 AM

Doh, that was a reasonable question in 2001 or 2002; it's not a reasonable question in 2007.

Posted by howard | August 10, 2007 11:42 AM

What Tyrone says - in the extract McArdle quotes, there is no specific mention of Paulson at all. One could imagine that individual players within the administration are competent (and certainly Paulson has a reputation for competence, whether or not it's justified), but that the administration as a whole is so incompetent that the policy recommendations of competent people are never listened to. Certainly this seems to have generally been the case with the Bush administration, on both foreign and domestic policy.

McArdle is making out an attack on Paulson where none exists.

Posted by John | August 10, 2007 11:46 AM

> Obviously the government has to be staffed by
> someone, and an honorable, competent person could
> well decide that it would be better (for the
> country) for him/her to be the person staffing it
> than someone else less competent.* To assume that
> anyone who serves in the Bush Administration is
> ipso facto incompetent is unfair and unworthy of
> the blog.

You have to go back and read the econ blogs at the time Paulson was appointed - particularly those by former Treasury staffers such as Brad deLong. They were convinced to a man that Wall Street had stepped in and installed a grown-up to take financial policy out of the hands of Cheney and Rove and instill some rigor and discipline into the Bush Administration's fiscal policy. deLong eventually came as close as he ever comes to admitting he was chumped on this one, but the rest just sort of stopped mentioning Paulson and the Treasury Dept.

Now, it may well be that _Paulson_ didn't believe this going in, and just wanted a chair to sit in, wingnut welfare burnishing of his resume, federal medical benefits, etc. But I have met people of that type before and I have never known one to be willing to take a retire-in-place position. So I suspect Paulson was chumped too.

Cranky

Posted by Cranky Observer | August 10, 2007 11:50 AM

The capital gains advantage doesn't explain why he hasn't quit yet though.

If he's smart he's funneling info to a buddy's hedge fund!

Posted by chris | August 10, 2007 11:54 AM

As far as this issue is concerned, Paulson is "the administration"--arguing otherwise is like excoriating "the administration" on its Iraq policy, but claiming you didn't mean Gates or Condi.

This might be a legitimate criticism if Bush/Rove had shown any propensity to override Paulson on major issues, but they haven't; Paulson has done a pretty good job of steering administration financial policy, with the full cooperation of Bush. Bush's Treasury policy has never been particularly bad (though Snow was a nonentity, and O'Neill was a PR fiasco), but under Paulson it's really been quite good. There's no reason to think that Paulson will screw this up--other than the fact that liquidity crises, if one exists, are so hard to manage that the Archangel Michael might find this a toughy--and no reason to tar him with the administration's failures in Iraq and elsewhere.

As for the "willingness to work for Bush/Cheney" thing, that might be true if the guy had just taken office, but he has a track record, and it's good. Moreover, I'd be very surprised if Paul Krugman thinks its other than good, though I confess that since the advent of Times Select I read him very irregularly.

Posted by Megan McArdle | August 10, 2007 11:56 AM

"Paulson had something like a $700 million dollars in Goldman Sachs stock, and by taking the job he could divest himself of it and diversify his portfolio without paying capital gains.
It's a little perk that could save him $700 million * 15% = $105 million."

Yep, completely tax free gains from the sale of highly appreciated shares of stock would be a very rational reason for taking the job. So taking the job should not be a factor to consider in whether Paulson is incompetent or not. It was a rather shrewd move that any one of us would have considered if we were in his shoes. But, whether he is incometent as a treasury secretary is a whole nuther question.

Posted by bubba | August 10, 2007 12:13 PM

"Skilled wizardry" is precisely what the financial markets need less of. Wizardry of the sort that said, "You work at Quickie Lube? No problem! We'll just write you a 5-1 option arm with a special double bonus 2% teaser rate, and Presto! Change-O! You can afford a $250,000 house!"

Posted by Jalmari | August 10, 2007 12:18 PM

As far as this issue is concerned, Paulson is "the administration"--arguing otherwise is like excoriating "the administration" on its Iraq policy, but claiming you didn't mean Gates or Condi.

Unless and until it's established that the White House has decided to let Treasury make policy on this issue, that's just wishful thinking. In other administrations, Treasury has had quite a bit of autonomy, but not -- as of yet -- on any significant issues in this one.

Paulson has done a pretty good job of steering administration financial policy, with the full cooperation of Bush.

Well, Paulson certainly has been given some running room on issues -- China policy -- but it's not clear that when push comes to shove, he will get to prevail over, e.g., Cheney or Rove. Here's Brad DeLong writing six months ago:

Cheney appears to have cut Paulson off at the knees and killed Paulson's back-channel Social Security negotiations--with no effective response from Paulson: there has been no statement from Bush that Paulson is Bush's chief economic policy adviser and speaks for him on economic policy issues.

If Krugman had been assailing the admininstration's record on issues of interest to those who really care about the Treasury Department and not about other stuff, then interpreting what he said as an attack on Paulson would have been more reasonable. That, patently, is not what he was saying.

Posted by Tyrone Slothrop | August 10, 2007 12:19 PM

The Bush administration has undermined the American "brand" across the board. It's naive to think that the broad lack of trust and confidence engendered by this administration in other areas won't have consequences in the area of economic policy too. Actions that are correct and effective in a confident environment are likely to be discounted, and therefore prove much less effective, in one in which confidence (in the competence and good will of the actors) is waning. Psychology matters.

Posted by esmense | August 10, 2007 12:40 PM

I've been looking forward to disagreeing with Megan McArdle about a crucial issue of public significance

And it took you this long to find one?

Posted by Christmas | August 10, 2007 12:42 PM

i have to say, it takes a special kind of delusion to say that treasury policy under Paulson has been quite good. what the hell does that mean and where does it come from?

that is: have we restored fiscal responsibility under Paulson?

no.

has the administration stopped telling lies about "tax increases" that they supported in order to get their first tax cut passed?

no.

have we come up with an intelligent policy towards china?

no.

has the theft of the social security trust fund been ended?

no.

is there a single sign that treasury is a policy-making entity under Paulson?

no.

is it completely rational to note that all policy in the bush white house is set by the mayberry machiavellis and not by technocrats?

yes.

has paulson changed this one whit?

no.

Posted by howard | August 10, 2007 12:58 PM

have we restored fiscal responsibility under Paulson?

I think the answer to this question is yes.

Posted by Al | August 10, 2007 1:07 PM

Al - I hope for your sake that you're being paid for being wrong, because you obviously work at it very hard.

Posted by Barry | August 10, 2007 1:29 PM

As has been pointed out, Megan's quotes don't have Paul 'far more correct than any rightwinger who ever lived' Krugman directly insulting Paulson. Krugman pointed out that the guys whom Paulson works for, who give him orders, and who can cut him off at the knees at their discretion, are incompetant, corrupt, scum. Who have a history of making pessimists look somewhat optimistic.

Megan also doesn't seem to (a) know that Mark Thoma at The Economist's View prints most of Krugman's columns, and that (b) any columnist for The 'desperately wants to be acquired by Murdoch' Economist should be able to have her Times Select subscription paid for. Or, last but not least, that an .edu address can be used to set up a free account (if U Chic isn't allowing alums to keep their addresses, they're pretty dumb).

Megan: "As for the "willingness to work for Bush/Cheney" thing, that might be true if the guy had just taken office, but he has a track record, and it's good. "

How many supposedly good people have had their reputations turned into Cheney sh*t in the past six years?

Posted by Barry | August 10, 2007 1:39 PM

Posted by Doh:
"*This is what might be called the Powell Dilemma-- how does one balance the good one can potentially do working within an Administration to shape policies with the repugnance one has for carrying out policies of the Administration with which one disagrees. I don't think there's a straightforward answer, or that one approach is always right."

In the beginning, this was a valid question. Of course, we've seen how it turned out for Powell - Bush and Cheney told Powell to put his (much better than deserved) reputation on the line, and then trashed it.

Now, we've had year after year of disasters from this administration, lies from this administration, refusal to change course as disaster unfolds, and massive profiteering from disaster. It's also been made very, very clear that power is held unusually closely in this administration - if you weren't in the inner circle in 2000, you aren't in it now.

So at this point, the excuse of trying to work within the system is just that, and excuse.

Posted by Barry | August 10, 2007 1:50 PM

Barry,
The U of Chicago does allow alumni to keep their .edu email address.

Posted by Joe Klein's conscience | August 10, 2007 2:08 PM

Joe Klein's conscience, I figured as much; it's really great for the alumni office.

Posted by Barry | August 10, 2007 2:20 PM

Bush Derangement Syndrome? Isn't that the syndrome where people still believe, despite much evidence to the contrary, that Bush and Cheney are remotely honest or competent?

Posted by mwg | August 10, 2007 7:04 PM

Bush Derangement Syndrome? Isn't that the syndrome where people still believe, despite much evidence to the contrary, that Bush and Cheney are remotely honest or competent?

As far as I have worked out, Bush Deragement Syndrome is when you have reviewed a situation with a critical eye, and decided, from the facts at hand, that the situation is negative, and that the present administration has a substantial level of culpability in said situation having become negative.

Because, in the eyes of folks like the above first commenter, even to think such a thing is completely f***ing bonkers.

Posted by jonathan | August 11, 2007 2:30 PM