Reviewing Old Critiques of Robert Samuelson
I wrote critiques of a couple of Robert Samuelson's columns way back in January, 2000.
Here is one of his 1/3/2000 column:
One Line Summary - Clinton did almost nothing during his 8 years and should have done something about Social Security and Medicare
Primary Weakness - Really disses Clinton's contribution to the economy and to the surplus
Detail Summary - Clinton "so dominated the public stage and so little affected the public agenda." "His central failure" was not redrawing "the political compact between workers and retirees by modernizing Social Security and Medicare." Clinton didn't cause the drop in crime or the booming economy, and there is a federal surplus only because of defense cuts due to the end of the cold war. "Clinton mostly tinkered with the government." What he should have done was to defuse the major future problems of Social Security and Medicare. "In 1995, the Republicans bravely proposed overhauling Medicare", but Clinton "denounced" them for it. Clinton may have refused to reform these programs because he wants "the middle-class elderly ever-more dependent on government."
Critique - I have heard lot of excuses for how Clinton is not responsible for the booming economy and the deficit being turned into a surplus, but Samuelson's "As for the economic boom, it was largely self-propelled" takes the cake. To me, the economy boomed because Clinton was committed to reducing the deficit and increasing the real income of the poor. As unemployment for the poor dropped and their real income increased, many of them moved away from crime and welfare to the working world. Clinton caught some breaks (like the collapse of several Asian economies keeping inflation low while the economy was booming), but I can't see how anyone can seriously argue that Clinton doesn't deserve the lion's share of the credit for the record current economic boom.
Samuelson uses a funny way of determining how much Clinton saved from cuts in the military. Instead of comparing the military budget now to the military budget in 1992 in dollars adjusted for inflation, he compares the military budget as a % of GDP. But there is no link between our GDP increasing and our need for more military, and as GDP has greatly increased under Clinton, his method greatly overstates the amount of savings from military cuts.
I don't remember the Republicans suggesting much in the way of changes in 1995 other than to cut how much was paid for services. See this post on the Daily Howler. As you can see from this article, there is a very good reason for Clinton denouncing them. Samuelson ignores the Clinton administration's crackdown on Medicare fraud, which has greatly contributed to the rate of increase in Medicare costs staying under the rate of increase in medical costs for private insurance.
What really irks me is Samuelson stating the Clinton has done nothing to defuse the problems of Social Security and Medicare. As more people have joined the workforce and real wages have increased, the amount of money going to Social Security and Medicare has increased, putting off the time of their bankruptcy. Now that the government is running a surplus, it is possible to talk about using general funds to extend the life of these programs, to added needed new services to them like a prescription drug plan, or to fund the transition cost to a private Social Security system. Clinton is leaving these programs far more secure than they were 8 years ago, no matter how much Mr. Samuelson would like to believe otherwise. Here is one of his 1/9/200 column:
One Line Summary - We need a big tax cut because the economy is slowing
Primary Weakness - Weak on economic facts and theory
Detail Summary - I [Samuelson] have always opposed a big tax cut, but now that there is a looming economic slowdown or recession, I am in favor of one. "...most commentators missed the economy's emerging weakness." Industrial production is down slightly, Christmas sales were miserable, auto sales have declined 8%, and Montgomery Ward went bankrupt. The Fed even had to cut interest rates. "A tax cut is now common sense" to give money to consumers so they can pay off their debts and make some purchases. Bush's tax cut is poorly designed to fight a recession because it is "back-loaded". Bush should accelerate the tax cuts while limiting the long term costs. Instead of phasing the tax cut in from 2002 to 2006, the tax cut should be retroactive to Jan. 1, 2000 and be in full force in 2002. "...the tax cut should be tilted more towards the bottom and less towards the top." The case for a tax cut assumes that the slowdown will be long, deep or both. Just as the current boom was unprecedented, so may its aftermath. The boom was driven by consumers and businesses spending beyond their means, and it can't continue, so it looks like the economy may be starting a prolonged readjustment. "It's self-defeating for government to exert a further drag through growing budget surpluses."
Critique - First off, I don't think Samuelson made his case for a looming recession. The economy is slowing from the third quarter's 2.7% growth rate, but there is no sign that the economy will actually shrink. Unemployment is at 4%. The private sector created 49,000 new jobs in December. Average earnings rose $0.05 for December, the rate it has averaged for the last 6 months. As long as unemployment is low and wages are rising, I think people are willing to continue to increase their debt (personal debt rose 10.2% in November). Profits are not as rosy as they once were, but most large companies are comfortably profitable.
What is really terrible about the article is that the argument is all the handwaving and no numbers. The size of Bush's tax cut was based upon forecasts that assumed a steady economic growth. If the economy is really slowing down as much as Samuelson claims, then a big tax cut would result in a large deficit. The forecasted surplus is mostly in the future, so accelerating the tax cut means a large deficit now. There is no attempt to quantify the cost of his tax cut.
Another sin Samuelson makes is to grossly simplify the economy - the only effect of a tax cut is more personal spending and the only effect of more personal spending is more economic growth. The economy is not that simple. If a tax cut happens, interest rates will probably go up because of the deficits and because the Fed will be concerned that, with unemployment so low, that the stimulus will cause severe inflation. Increased interest rates always slow down the economy. To argue intelligently for a tax cut means discussing ALL of its effects.
Lastly, the type of tax cut Samuelson is talking about - reducing marginal rates - will benefit the wealthy the most as they pay the most federal income tax. The poor rarely pay any federal income tax, though they pay a large portion of their income in social security tax, medicare tax, sales tax, property tax, etc. A far more just tax cut would be a refundable tax credit which would start out small for the poor, increase steadily to the median income of $40K, then decrease to zero at $80K. But my gut feel is that the whole "tax cut to fight off a recession" argument is a smokescreen to cover a plan to make the rich even richer.
Samuelson still gives Clinton no credit for the good things that happened to the economy and the country during his administration. I missed the coming of the recession, but I was right about people continuing to spend. I completely missed the huge job losses in 2001. The tax cut did have bad consequences that Samuelson ignored, but it was long-term interest rates which have gone up because of the deficit, not short-term. And I still believe that "the whole 'tax cut to fight off a recession' argument is a smokescreen to cover a plan to make the rich even richer."
10:41:39 PM 
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