Greg Mankiw: People are Confusing the Economy with Iraq

Here's former Bush administration economic adviser Greg Mankiw's offering an alternative to Krugman's explanation of why people aren't overly excited about the economy:

Bush Begins Effort to Allay Concerns on the Economy, Bloomberg: The war in Iraq also makes it tougher for Bush to reassure Americans, said Harvard economist Greg Mankiw, chairman of Bush's Council of Economic Advisers from 2003 to 2005. ''The perception that things are going badly in Iraq often makes people think that this economy is doing badly even when it's not true,'' he said.

So that's all it is. Just convince people that, rationally, the economy has nothing to do with how badly things are going in Iraq and they will gush at their economic good fortune. Good luck with that one.

Comments

[Hedgehog]

All too often, when experts have no idea what is going on, they resort to the "confusion" argument, instead of simply admitting they don't know. Remember Greenspan's "irrational exuberance"?

Granted, I am not trying to make a claim that "confusion" never occurs - it often does. I simply don't buy this explanation very easily, before at least some "hard evidence" is presented.

[anne]

What an interesting idea. We are at war under the saddest of circumstances and the stark awareness that we are at war and that war is so tragic darkens our mood when we should be wildly celebrating the latest employment numbers which for a month and only a month are almost where they were for 8 years during the Presidency of Bill Clinton. Interesting.

[anne]

The President has adopted a public relations approach suggested by a researcher from Duke University, Peter Feaver. The idea is to declare victory on any issue, declare victory at once and repeatedly. As long as the public believes in victory, details will be forgotten and support will be maintained. This is what the President is doing on the war in Iraq and on economic conditions at home. The rest of the Administration and supporters are of course following.

[ilsm]

The economy is great!!

If you have a mixed prtfolio, covered with non US D assets as well and your financial advisor had connections in the fed and DoC.

If you work, struggle to pay bills, keep the meager assets you may have accumulated, bear the burden of lending out your SS money and paying your progressive (only for the working middling) income taxes. The economy ain't so hot.

[anne]

http://www.nytimes.com/2005/12/04/politics/04strategy.html?ex=1291352400&en=667fce7a6641bd1b&ei=5090&partner=rssuserland&emc=rss

December 4, 2005

Bush's Speech on Iraq War Echoes Voice of an Analyst
By SCOTT SHANE

WASHINGTON - There could be no doubt about the theme of President Bush's Iraq war strategy speech on Wednesday at the Naval Academy. He used the word victory 15 times in the address; "Plan for Victory" signs crowded the podium he spoke on; and the word heavily peppered the accompanying 35-page National Security Council document titled, "Our National Strategy for Victory in Iraq."

Although White House officials said many federal departments had contributed to the document, its relentless focus on the theme of victory strongly reflected a new voice in the administration: Peter D. Feaver, a Duke University political scientist who joined the N.S.C. staff as a special adviser in June and has closely studied public opinion on the war.

Despite the president's oft-stated aversion to polls, Dr. Feaver was recruited after he and Duke colleagues presented the administration with an analysis of polls about the Iraq war in 2003 and 2004. They concluded that Americans would support a war with mounting casualties on one condition: that they believed it would ultimately succeed.

That finding, which is questioned by other political scientists, was clearly behind the victory theme in the speech and the plan, in which the word appears six times in the table of contents alone, including sections titled "Victory in Iraq is a Vital U.S. Interest" and "Our Strategy for Victory is Clear."

"This is not really a strategy document from the Pentagon about fighting the insurgency," said Christopher F. Gelpi, Dr. Feaver's colleague at Duke and co-author of the research on American tolerance for casualties. "The Pentagon doesn't need the president to give a speech and post a document on the White House Web site to know how to fight the insurgents. The document is clearly targeted at American public opinion." ...

[ilsm]

Goebbels advised Hitler that a 'lie repeated often enough becomes truth'.

Goring said at Nuremburg that all is needed to subdue a population is fearmopngering screeching about external threats and accusing anyone disagreeing with any thing you say of being treasonous.

The parallels with the third reich are staggering.

Saddam was coming to get us...........

[anne]

Forgive me. Many millions of households have been saving and contributing to retirement accounts and taxable accounts and investing to secure the future. Many millions of households can and do save, and they need to understand how to investment well, but they surely do not need financial advisors with connections to the Federal Reserve or any other such institution. They do not even need financial advisors. They need to read a fine paper such as the New York Times or Wall Street Journal, and pay attention to what a fine company such as Vanguard has to teach and offer. Investing is necessary and reasonable for middle class households.

[ilsm]

They need fiscal and monetary rationality to protect their "savings"!

[anne]

Monetary policy has indeed been rational and excellent, while fiscal policy has been poor. But, macro economic considerations in investing should generally be avoided, other than by the most skilled investors, and often not then as they well know.

[Bruce Webb]

We are constantly being told that we simply can't afford social programs, but that we can simply not NOT afford to spend billions of dollars in Iraq. And some people are drawing a straight line connection? Imagine that.

The profound contempt people like Mankiw show for the fundamental intelligence of the American people is staggering.

Americans by and large are not well informed. Part of this is due to disinterest and lack of effort, a larger part is because the major media has found it more profitable to entertain than to inform, but for the most part they can count.

I work with a couple of wingnuts but even early in the war I got a laugh from them with this jab. "I've got Good News and Bad News. The Good News is that Bush came out for Universal Health Care. The Bad News is that it for Iraq."

Bush supporters may dutifully mouth "Democracy is on the march" "Look at all those new schools" but I doubt their hearts are it it. Generally they oppose foreign aid and are not that excited about having their suburban tax dollars go even to American urban schools. If we want to play "Heighten the contradictions" we might start asking what exactly Americans got for their $250,000,000,000. We have invested roughly $10,000 for every Iraqi man, woman and child and in return we have a shiny, new ..... uh, okay bloody broken country. Even the most fanatical Bush backer may want to think about what he could have done with his near $1000 dollar share (and another near $1000 for each of his dependents).

[anne]

Look to John Bogle and David Swensen, look to Vanguard, and you will find how readily a portfolio can be diversified and secured in a way that will bring near index returns. There is always time to become more knowledgeable and possibly skilled, but a few index funds at Vanguard regularly added to can secure a lifetime and have these 30 years.

[Emmanuel]

Mankiw may be many things, but a good marketer of administration policies he is not. Isn't he the genius behind the "outsourcing is good" fiasco? My suggestion for the Bushites: leave marketing to the marketers.

Since brainwashing seems to be a common theme here, I suggest that Karl & Co. investigate neuromarketing to reinforce the idea that we should all be happy for this is the best economy of our lifetimes. They need to find the best ways to create the following mental representations, and everything will be alright:

Economy: Great
Iraq: Fun (and adventurous!)
Debt: Abstract, wishy-washy non-reality
Insolvency: Pure science fiction

[anne]

We do not seem to understand fully that this Administration is like no other since the time of Herbert Hoover. This Administration does not believe that government service is desirable nor helpful though curiously willing to spend amply. Imagine what programs Franklin Roosevelt might have already formed and instituted in New Orleans. We may or may not be interested in public works development in Iraq, but we are just not interested in public works for New Orleans and beyond.

[anne]

http://www.nytimes.com/2005/12/06/opinion/l06iraq.html

Looking at Polls for 'Victory' in Iraq

To the Editor:

Peter D. Feaver, the political scientist who helped draft the administration's unclassified war playbook, "Our National Strategy for Victory in Iraq," knows there is truth in advertising.

But despite slick tactics to convince skeptical Americans that "victory" is attainable in Iraq, the truth is that after three years of being misled by the president about the run-up to war and its current status, the American public no longer accepts the bill of goods sold by Dr. Feaver and other Bush sympathizers.

The only "victory" will be when the administration stops misinforming the public and comes clean about how it plans to extricate us from this war it wanted so badly.

David Jacobson
New York, Dec. 4, 2005

•

To the Editor:

It is pathetic to see our president deliver a sales pitch for "staying the course," renamed "Our National Strategy for Victory in Iraq," that a political scientist helped draft based on attitude polls.

The pitch itself is of fairly low quality by Madison Avenue standards, as it includes many factual distortions that are easily verifiable without any specialized knowledge.

But the White House designated these talking points as the unclassified version of our original secret military plan to achieve a "victory" that is yet to be defined. Heaven help us if it were true. Amit Sarkar
Scarsdale, N.Y., Dec. 4, 2005

•

To the Editor:

The focus on public opinion at the heart of President Bush's speech at the Naval Academy last week is not new. The war policy has always been about marketing.

In 2002, before the invasion of Iraq, Andrew H. Card Jr., the White House chief of staff, said about the timing, "From a marketing point of view, you don't introduce new products in August."

You can trace the rest of the history of this war in banners, from "Mission Accomplished" on the carrier Abraham Lincoln in 2003 to the "Plan for Victory" at the Naval Academy.

If all we need to get our troops home safely is to convince the public that we've won, let's unite, declare victory and withdraw. I'd be willing to accept it even if the president announced the victory against a backdrop of red, white and blue "I Was Right" banners.

Hugh Crossin
Walnut Creek, Calif., Dec. 4, 2005

•

To the Editor:

When American belief emerged that World War II should be fought at any cost, it was not because Americans were convinced that success was guaranteed: in 1942, Hitler controlled most of Europe and parts of North Africa. Support for casualties grew because Americans were convinced that their security depended on defeating the Nazis.

So when the political scientist Peter D. Feaver and his colleague found that in 1999, support for casualties in a war against Iraq was high among the population, it was because Americans were convinced by the Clinton administration that if Saddam Hussein obtained W.M.D.'s, this would be a major threat to them.

The relevant question now is whether addressing the foremost threat to the United States - international terrorism - crucially depends upon defeating the insurgency in Iraq and creating a stable state there, assuming that is possible.

Deborah Boucoyannis
Cambridge, Mass., Dec. 4, 2005
The writer is a lecturer on social theory at Harvard.

•

To the Editor:

The focus on the theme of victory and the conviction that Americans would tolerate heavy casualties if they believed that the war would ultimately succeed underscore the administration's disregard for objective fact in planning for this war.

This focus reveals a desperate drive to fit public sentiment - as President Bush once fit intelligence - around a flawed policy.

Alan S. Fintz
Brooklyn, Dec. 4, 2005

[anne]

http://www.nytimes.com/2005/12/06/opinion/06tue3.html

December 6, 2005

Profiles in Pusillanimity

Q. When is a self-proclaimed moderate Republican lawmaker just another malleable vote?

A. When House G.O.P. leaders hold a budget-cutting showdown open after midnight for extended arm-twisting on the eve of their long holiday break.

Back home on that Thanksgiving break, spineless lawmakers were unlikely to share with their well-fed constituents the shameful result: for the lack of just two votes from the majority's vaunted "moderate" coalition, more than 200,000 poor Americans each face the loss of food stamps worth $140 a month in nourishment.

For weeks before the vote, coalition members won national praise and hometown headlines as they held their leaders at bay, vowing unity and demanding that the poor not be punished just as another tax-cut package for the affluent was being greased for passage. Then they buckled, after winning only cosmetic changes in what remains a truly draconian package to slash beyond food stamps to Medicaid, child care and other safety-net programs for the poor. A dozen supposedly moderate lawmakers turned tail as aptly named floor whips tested the rebels' steel. They feared embarrassing the G.O.P. in its shabby attempts to make the debt- and deficit-crazed Congress seem fiscally responsible. The vote was an appalling display of budget theatrics over responsible lawmaking. A number of the midnight retreaters apparently forgot that they had previously co-sponsored something called the Hunger-Free Communities Act of 2005....

[me]

I don't really think people are confused at all. Republicans have the booming economy that they want. Things are great for them.

But let's take a look at some underlying issues and see how the little guy feels, and whether a few speeches by an incoherent presindet will chagne their minds.

First we have M. Michelle Burns. Who is she you ask. She was the financial chief at Delta. She received at least a million dollar pension protected from bankruptcy and also received an $846,000 bonus as Delta flew towards bankruptcy. Then she heads to Mirant for 20 months and walks away with another $8.2 million in severance.

What is her beef? She wants Delta to keep giving her free plane rides. If anyone could afford their own ticket it would be her. Employees have lsot pensions and healthcare at Delta and she wants hauled around for ree.

http://www.ajc.com/news/content/business/delta/1205/06bizburns.html

Or how about this, some goof named John C. Goodman says in today's WSJ to ditch the prescription drug plan in the next couple weeks. I kid you not:
"Seniors don't understand the options. The government instructions contain mistakes. Taxpayers suspect they're going to get soaked. So why not junk the new Medicare prescription drug program before it kicks in on Jan. 1? Throw it out kit and caboodle, go back to the drawing board, and start all over."

Now my mother lost her drug plan through my father's employeer and had to join this program. Does this jerk actually believe the company will just give back my mother's benefit? I doubt it too.

http://online.wsj.com/article/SB113384041867614875.html?mod=opinion_main_commentaries

Or maybe this from today's WSJ, let's share the wealth

"As white-collar workers look forward to base salary increases for 2006, they shouldn't look further than this year's average 3.7%, according to projections from Sibson Consulting, a human-resource consultancy unit of Segal Co. of New York. Sibson examined data from its own clients and from six studies conducted by other corporate and consulting institutions, surveying a total of more than 3,000 employers.

Despite the economy's continued growth, increases forecast for 2006 match those from 2005, and only inched up 0.2 percentage point from the increase seen in 2004."

http://online.wsj.com/article/SB113383306765014719-search.html?KEYWORDS=raises&COLLECTION=wsjie/6month

Never mind that the little guys healthcare went up more than their raise.

One last Republican issue they are proud of.From todays Journal again

"A group of Federal Reserve Board economists concludes that the tax cut, which slashed the dividend-income tax on stocks to 15% from about 30%-38%, was a dud when it came to boosting the stock market when it was announced and passed in 2003 -- a time period, they say, that the stock market should have reacted most strongly.

Nor did the tax cut lead to a significant increase in the amount of money companies paid out to investors as a proportion of their earnings, the study adds."

Not only that, they sure haven't created any jobs either.

http://online.wsj.com/article/SB113384015144314861-search.html?KEYWORDS=dividends&COLLECTION=wsjie/6month

So if you are a rich Republican, your economy is doing great. I mean, IBM's Palmisano even has a sluch fund that covers his medical copays and prescriptions. Live is good.

This is America today, republican America. It will take far more than Bush talking up the eonomy to change minds. So Mankiw, we are not confused. You want us to be confused but we are far smarter than you give us credit for.

[me]

And how could I forget. While Bush is out "talking" about saving pensions, what does Verizon? Wipes out 50,000 pensions. Again, I kid you not.

"Verizon to cut managers' pensions"

Verizon Communications, the second-biggest U.S. telecommunications provider, said on Monday that it will restructure retirement benefits for 50,000 managers in a bid to save $3 billion over the next 10 years.

Under the plan, for which Verizon will take an estimated fourth-quarter pretax charge of $97 million, managers will no longer earn pension benefits or receive service credits toward health care benefits as of next July.

http://news.com.com/Verizon+to+cut+managers+pensions/2100-1036_3-5983804.html?part=rss&tag=5983804&subj=news

We are still not confused Mankiw, just you.

[Skeptic]

In response to ILSM comments starting: Forgive Me...

OK, I will buy that middle class americans do need to save, and do need to plan for retirement. But in REAL DOLLARS, we are taking home less. Yes, less, even accounting for the savings we curently have.

1) My current employer has raised health insurance for us, and is no longer including certain benefits that were included in the past. This has decreased my after tax take home by 3%. More cost for less benefits.

2) My raise this past year was a wonderfully generous 3.2% (.4% "bonus" for performance)

3) My expenses have increased. Costs of basic goods and services have gone up. For example, we are looking at a natural gas increase of 20-25% this heating season, and groceries have increased in cost since Katrina. Sure, this is a limited time event, but the increase in cost more than offsets the increase in income.

From 1992 through 2000, I averaged about an 8% pay raise a year. Same industry, same clients as now (government contracting). Since 2001, the avearage raise has been decreased to about 3%.

Speaking of savings, it was not until this year that I recovered the 30% loss of principal I suffered in the 2000-2002 stock market bubble pop. These were held in what Wall Street considers "safe" investments, mostly in the form of index funds, through my 401k plan.

Of course my home has almost tripled in value...

[me]

And of course those index funds haven't moved up a single percent since Bush has been president.

[paul]

anne (Dec 6, 2005 7:19:28 AM) writes:

We do not seem to understand fully that this Administration is like no other since the time of Herbert Hoover.

That strikes me as very unfair to Hoover. Yes, he was philosophically opposed to active government. That is not true of the current administration, just an opposition to useful government activity. The most striking characteristic of this administration, even more than its incompetence, is its mendacity, or more precisely, its complete lack of concern with truth and accuracy: FEMA, EPA, FDA, all aspects of the war in Iraq, the list is near endless. It is for repeatedly pointing this out that deLong has promoted Krugman to the position of Grand High Poobah of the Ancient and Hermetic Order of the Shrill. I am not aware that anyone has ever claimed that the Hoover administration's achievements on this score were noteworthy.

[anne]

Agreed; though productivity and corporate profits have been excellent, though general inflation is low, middle class workers have gained relatively little in wages and benefits since 2001. Many workers have lost benefits. There is a problem here. However, that can make saving and investing carefully all the more important. The total stock market index is just that and will lose and gain as the market loses and gains, but the index has gained 9.2% a year over the last decade even with the fierce bear market.

[save_the_rustbelt]

Send Mankiw to Ohio, I will give him the tour.

(bankruptcy, foreclosures, job losses)

[calmo]

``To have this kind of job creation is truly remarkable,'' Hubbard said at a White House press conference Dec. 2.
(another self-fulfilling statement)[Uncontested by both sides though as some just knew it was remarkably bad]
I see Harvard standards have slipped. This professor might as well move back into the WH.
So which is it Professor, are Americans too busy to notice how happy they are or are they getting depressed watching (what I imagine you might perceive as very biased coverage of) the war in Iraq?
We need more clowns like him articulating the American experience to a thinning choir of Bushites.

[anne]

As Brad DeLong would have it: And Mark Thoma watches as Greg Mankiw tries to say that it's somehow Donald Rumsfeld's fault....

Who else's fault could it be?

[calmo]

BDL's view is that "Mankiw plays the best hand he could"? I recall that BDL had mixed views of O'Neill, even after 'The Price of Loyalty' was examined in great detail on SDJ. It was such a huge step in the right direction by O'Neill.
I salted everthing BDL said after that with a dash of anti-Dem dust to achieve some perspective.
O'Neill is the man, Mankiw the mouse.

[Lord]

But people are confusing the economy with Iraq, people like Mankiw, that is.