Paul Krugman: Secretary, Protect Yourself

Paul Krugman sends a memo to Treasury Secretary nominee Henry Paulson:

Secretary, Protect Yourself, by Paul Krugman, Commentary, NY Times: To: Henry Paulson, Treasury secretary-designate

So you decided to take the job, after all. It's no surprise that they wanted you. As the joke that's making the rounds puts it, they're so desperate they're scraping the top of the barrel. But most of us are surprised that you accepted.

No doubt you received assurances that ... unlike your predecessors in this administration, you'll get to be a real Treasury secretary. And you probably believe that those assurances can be trusted...

But ... the ... fact is that you'll be treated well as long as you are perceived as someone who adds credibility with people outside the administration, and not a moment longer. Yet I'm sure you're already under pressure to say things that will fatally undermine your credibility.

Before we get to the specifics, you need to disabuse yourself of any illusion that this administration rewards loyalty. Nobody was more loyal than Larry Lindsey, President Bush's first top economist. Yet when Mr. Lindsey blurted out an inconvenient truth — that the Iraq war was likely to cost a fair amount of money (... we now know that his estimate was only a small fraction of the true cost) — he was fired. ... in as insulting a fashion as possible, including snide remarks about his personal appearance. ...

So what are you being asked to do that will undermine your credibility? Right now, I'd guess, you're being pressed to support the administration's illusions about how the economy is doing. Americans are very unhappy with the state of the economy. ... most workers are significantly worse off than they were a year ago.

The official line, however, is that it's a great economy, but that Americans for some reason aren't hearing the good news... Mr. Bush ... doesn't seem as if he realizes that the economy isn't all that good; in his public appearances he seems peeved that he isn't getting credit for a great economy. And he expects you to explain to working Americans that the trouble they're having paying their bills is just a figment of their imagination.

Moreover, if past experience is any guide, you won't be pressured just to spin on the administration's behalf, you'll be pressured to lie.

Look at what happened to Edward Lazear, the chairman of the president's Council of Economic Advisers. Last month Mr. Lazear and another member of the council published an op-ed ... containing this astonishing assertion: "The president's tax cuts have made the tax code more progressive, which also narrows the difference in take-home earnings."

Now, you can play games with the meaning of the word "progressive," but by any measure the Bush tax cuts have made differences in after-tax earnings wider, not narrower. And just like that, any credibility that Mr. Lazear ... may have brought to the job was gone.

What will they ask you to lie about? Maybe you'll be asked to declare that we're on track toward a balanced budget. Or maybe you'll be asked to lie about environmental policy...

Right now, you're being flattered. You have a natural urge to be a team player. But if you play the game your new bosses want you to play, your credibility with the public will evaporate in no time at all. And when you're no longer useful to your new friends, you'll be tossed aside.

Previous (5/29) column: Paul Krugman: Swift Boating the Planet
Next(6/5) column: Paul Krugman: Shameless in the Senate

Comments

[hj]

I rather enjoyed this post on Brad Setser's blog, by "Roast":

you point out that Paulson "took a large pay cut" to be Treasury Secretary. Are you saying that by doing this Paulson somehow acquires some sort of beneficent halo and that we can expect him to use this most powerful position for the good of all...from the Wal-Mart Greeter to the Wal-Mart financier, and that in the popular image of Alan Greenspan he will act Delphic wisdom and extraordinary evenhandedness?
This is disingenuousness in the extreme. Would you say the same of Dick Cheney...that he took a pay cut and the innocuous position of Vice President so that he could (pardon the phrase) "serve the people?" Or after a sufficient application of Vizene, would you possibly alter your view and say that Paulson is a member in good standing of the financial power elite and to take the position of Treasury Secretary is not so much a sacrifice as it is a class-duty that will be rewarded 100-fold with increased prestige and manifold honors including assurances that all economic transgressions both past and future (short of screwing the alter boys on the village green at high-noon on Sunday) will be forgiven and ignored as simply the way we do business here in the Land of the Free?

[anne]

Poor dear sacrificial Henry Paulson, whom I like, the poor dear will take away a mere $700 million, which, which, which, will not be taxed when Goldman and other shares are sold and exchanged for an index fund because Congress has provided an exemption. So, who the heck gives a darn what or whether sweet Henry is paid at Treasury.

[calmo]

Could be a 'tongue in cheek' remark hj --something to remind us that the wealthy are doing this out of the goodness of their hearts --such philanthropists!
(mere money having lost its allure) [But perhaps not so, Big Money] Something to make us nervous that behind the stipend of this modest (pitiful, subsistent rationing!) salary, there are lucrative but undisclosed (secret, classified, possibly even un-wiretappable) remunerations.

So, why does Paulson accept the offer eventually? ...is the (ok, maybe just my) question, no? Yes!!

A detail:

This is disingenuousness in the extreme. Would you say the same of Dick Cheney...that he took a pay cut and the innocuous position of Vice President so that he could (pardon the phrase) "serve the people?"

Speaking of disingenuousness, the phrase to pardon is "service the people" --just like those gas stations, yes?

[anne]

This gushing over a fabulously wealthy savior of us all, as though the wealth is why we should be impressed, and the wealth will save us all, though the same wealth was at Treasury these last years, is rubbish. [Henry loves birds :) though.]

[anne]

No; the point that Henry is taking a pay cut is repeated endlessly and is of no significance. What is significant is that sweet Henry supports Republican economic policy completely and will continue to do so, but what would we expect?

says...

Would Gates think birder Paulson was "fabulously wealthy"? (Would Paulson gush over how "fabulously wealthy" Gates is?)
Are all birders sweet? (I suspect falconers are not.)
Are any "fabulously wealthy" people (ok, not exactly persons, but a long ways from 'folks', yes?) sweet? [It will cost us to find out, I bet.]
Gates, no longer CEO, most likely best candidate for the tag "fabulously wealthy" --was he approached as "the wealthy savior"? [I don't think so. But I wonder if he had approached them, whether they would have fallen down on the ground crying 'We are saved!!'?]

They tried the academic (In their not-so-academic estimate, Snow, holder of a PhD, was an academic...hey they got it right with Bernanke.) and now it was time for Real business experience (no offense to CEO Snow).

So can sweet Henry carry water?
Paul and me (real folks is us) want to know.

[lonesome moderate]

My guess is that Paulsen has, or thinks he has, an understanding with the political hacks in the White House that goes something like this. "Look, we're desperately worried about the midterm elections. We need somebody who can help us hold congress this fall by giving our economic program credibility and not saying anything that implies our economic program has been anything but great. After November, we don't care--most of us will be leaving anyway, to work on someone's presidential campaign or cash in in the private sector. Then, you can say what you want and do what you want, and probably even have some influence in naming our replacements."

Of course, you don't get to be head of Goldman Sachs without knowing how to say nothing of consequence in response to very tough questions. For the next six months, I expect to hear a lot of "it's too early to discuss", "we are seeing the influence of external factors", "the data is still incomplete", etc. Next January is when we'll find out if the White House now has some adult supervision.

[calmo]

Plausible enough lonesome, but the initial refusal? These guys (Cheney, Rove and Rummy) do have a problem with Sec Treasurers (I do mean O'Neill started this cleavage between being whip smart and whipped smartly.) and finding someone respectable and respected has been a problem, yes?
The first question I want to hear raised by his investigating committee is why he had 2nd thoughts. The first lie I think we'll hear is that he had no 2nd thoughts.

[Emmanuel]

Work for Bushy, play the patsy.

To paraphrase Paul O'Neill, that's the price of loyalty (unless of course you're a dyed-in-wool neocon).

[lonesome moderate]

Well, I would imagine that Paulsen bided his time until it became obvious to everybody in the White House that they needed him more than he needed them, which accounts for the initial refusal. He now thinks that he's got a good enough "deal" to make it worth his while to take the job. We shall see.

Btw, Paul O'Neill's book was terrific, and a valuable service to the country, but he was a terrible Secretary of the Treasury.

[calmo]

I have the highest regard for Paul O'Neill because he came out and spoke 'truth to power'. Suskind's book provides a picture of how the WH runs (and how policy development is short circuited by political motives) that is more convincing as time passes. The man is more honest than Greenspan and towers over that runt, Snow.

[lonesome moderate]

An MSNBC/Washington Post article today suggests that this is part of a larger trend, and that the main reason for it is the appointment of Joshua Bolten as chief of staff. One can only hope.

http://www.msnbc.msn.com/id/13108106/

[lonesome moderate]

towers over that runt, Snow

Hehe, talk about faint praise. Bush could have appointed Jay Leno as Secretary of Treasury and he would have been able to do everything that Snow did, and probably do it better.