The only thing I have from my last blog.

I tried to maintain a "blog" a couple years ago,, but failed miserably. I only posted a few political "op-ed" pieces, and then I kinda forgot how to access my own blog. Ha! Fortunately for all of you, I was able to recover one of my favorites. It's a response to a letter written by a bunch of Ivy League professors to President George W. Bush... I'll post the letter, and then follow it up with my response. Keep in mind that these were originally written back in 2004. I'll let you decide whose magic 8-ball has proven more accurate...

From the Profs.:
Open Letter to President George W. Bush

October 4, 2004

Dear Mr. President:

As professors of economics and business, we are concerned that U.S. economic policy has taken a dangerous turn under your stewardship. Nearly every major economic indicator has deteriorated since you took office in January 2001. Real GDP growth during your term is the lowest of any presidential term in recent memory. Total non-farm employment has contracted and the unemployment rate has increased. Bankruptcies are up sharply, as is our dependence on foreign capital to finance an exploding current account deficit. All three major stock indexes are lower now than at the time of your inauguration. The percentage of Americans in poverty has increased, real median income has declined, and income inequality has grown.

The data make clear that your policy of slashing taxes – primarily for those at the upper reaches of the income distribution – has not worked. The fiscal reversal that has taken place under your leadership is so extreme that it would have been unimaginable just a few years ago. The federal budget surplus of over $200 billion that we enjoyed in the year 2000 has disappeared, and we are now facing a massive annual deficit of over $400 billion. In fact, if transfers from the Social Security trust fund are excluded, the federal deficit is even worse – well in excess of a half a trillion dollars this year alone. Although some members of your administration have suggested that the mountain of new debt accumulated on your watch is mainly the consequence of 9-11 and the war on terror, budget experts know that this is simply false. Your economic policies have played a significant role in driving this fiscal collapse. And the economic proposals you have suggested for a potential second term – from diverting Social Security contributions into private accounts to making the recent tax cuts permanent – only promise to exacerbate the crisis by further narrowing the federal revenue base.

These sorts of deficits crowd out private investment and are politically addictive. They also place a heavy burden on monetary policy – and create additional pressure for higher interest rates – by stoking inflationary expectations. If your economic advisers are telling you that these deficits can be defeated through further reductions in tax rates, then you need new advisers. More robust economic growth could certainly help, but nearly every one of your administration’s economic forecasts – both before and after 9-11 – has proved overly optimistic. Expenditure cuts could be part of the answer, but your record so far has been one of increasing expenditures, not reducing them.

What is called for, we believe, is a dramatic reorientation of fiscal policy, including substantial reversals of your tax policy. Running a budget deficit in response to a short bout of recession is one thing. But running large structural deficits over a long period is something else entirely. We therefore urge you to consider the fiscal realities we now face and the substantial burden they are placing on our economy.

We also urge you to consider the distributional consequences of your policies. Under your administration, the income gap between the most affluent Americans and everyone else has widened. Although the latest data reveal that real household incomes have dropped across the board since you took office, low and middle income households have experienced steeper declines than upper income households. To be sure, the general phenomenon of mounting inequality preceded your administration, but it has continued (and, by some accounts, intensified) over the past three and a half years.

Some degree of inequality is inherent in any free market economy, creating positive incentives for economic and technological advancement. But when inequality becomes extreme, it can be socially corrosive and economically dysfunctional. Problems of this sort are visible throughout much of the developing world. At the moment, the most commonly accepted measure of inequality – the so-called Gini coefficient – is far higher in the United States than in any other developed country and is continuing to move upward. We don’t know where the breakpoint is for the U.S., but we would rather not find out. With all due respect, we believe your tax policy has exacerbated the problem of inequality in the United States, which has worrisome implications for the economy as a whole. We very much hope you will take this threat to our nation into account as you consider new fiscal approaches to address the nation’s most pressing economic problems.

Sensible and farsighted economic management requires true discipline, compassion, and courage – not just slogans. Given the tenuous state of the American economy, we believe that the time for an honest assessment of the problem and for genuine corrective action is now. Ignoring the fiscal crisis that has taken hold during your presidency may seem politically appealing in the short run, but we fear it could ultimately prove disastrous. From a policy standpoint, the clear message is that more of the same won’t work. The warning signs are already visible, and it is incumbent upon all of us to pay attention.

Respectfully submitted,


Francis AguilarProfessor of Business Administration, EmeritusHarvard Business School
Ramon J. AldagGlen A. Skillrud Family Chair in BusinessSchool of Business, University of Wisconsin-Madison
Teresa M. AmabileEdsel Bryant Ford Professor of Business AdministrationHarvard Business School
Kenneth R. AndrewsRoss Graham Walker Professor Management Controls, EmeritusHarvard Business School
James E. AustinEliot I. Snider and Family Professor of Business AdministrationHarvard Business School
And about 50 other professors from across the coutry...

My response:
My rebuttal to the “Open Letter to the President” -- by MDE
05 October 2004

I’m very much surprised to see such prominent economic thinkers simply report trends and historical data without offering their own recommendations for a solution to our country’s economic woes. It’s easy to sit back, pick out selected statistics, and blame all of them on the President. It’s a lot harder to examine significant events that are affecting our economy, plan strategies to combat these effects, and implement policies that are hoped to ultimately have a positive overall economic impact. The fact of the matter is, that historically speaking, every time a nation suffers a significant event such as 9-11, the economy is shaken by decreased consumer confidence, decreased capital investment, and protectionist economic policies on a personal and national scale,,, and it takes time to recover.

After WWI, the nation experienced unprecedented economic growth during the “roaring 20’s”; The Great Depression really only recovered after WWII was over; the horrible inflation and unemployment rates of the 70’s didn’t recover until Reagan successfully out-spent the Russians during the cold war—which by the way, is the overriding reason this country is in a multi-trillion dollar national debt (small price to pay for avoiding war with the Soviet Union which easily could have meant nuclear holocaust). But look at the economic prosperity that America enjoyed during the mid to late 80s. That is the era that gave birth to the yuppie, and was marked by unprecedented personal spending on entertainment and personal luxury (recreational drug use, clothes, cars, new technology, etc.) Even in recent times, the Bush 41 wasn’t re-elected because his economic policies hadn’t taken hold as of election time. In fact, Bill Clinton enjoyed the post-war economic prosperity that occurred after the effects of Bush Senior’s economics were realized. He was able to ride out those effects through the end of his second term. I didn’t agree with Clinton’s politics, but economically speaking, Clinton was one of the more conservative Democrats on record. You’ll recall that critics of Clinton say that he didn’t do anything of significance during his presidency—rightly so. Way to go Bill!! I commend him for having the foresight and awareness to know that the economic policies put in place by George Sr. were going to work,,, just not quite in time to get him re-elected.

The thing is, that economic policy changes don’t have overnight results. Unfortunately, the pundits, the critics, and even the voting public don’t fully understand that very important fact. We as a nation are impatient. As a general rule, politicians are elected because they appeal to an ignorant public with short-term fixes for long-term problems. The politicians don’t care that their policies will wreak havoc on their constituents ten years from election day—they’ll be long gone. They know that the average American voter doesn’t have the capacity to think through a policy decision in terms of eventual effects. Unfortunately, that’s why Democrats get elected every election year—uninformed, short-sighted, gullible voters. Anytime fiscal or monetary policies are altered, it takes time for the market to adjust and re-stabilize. For instance, George W.’s tax cuts initially resulted in an increased deficit—true. However, once consumers (Joe Q. Public) begin to spend that new found money in their pocket, and once that money is turned over again and again in the open market, we’ll see a marked increase in GDP. Even accomplished economists don’t always look down the road quite as far as they should.

I was listening to a talk radio program the other day, and a caller was animated and very much upset because she was certain that the deficit and our subsequent national debt will cause the fall of America. She asserted that though she hates taxes, she knows that the only way we’ll ever get out of debt is to increase taxes—considering tax revenues constitute the lion’s share of fundraising for the government. She couldn’t believe that Pres. Bush was lowering taxes, and effectually widening the deficit. She said for this reason alone, she’ll vote for John Kerry. The talk show host calmly explained to her that the President’s economic advisors continually recommend tax cuts to the President because [historically speaking] more money in the pockets of American citizens, and less money in the coffers of the US government has resulted in increased economic growth. He continued to explain that in a period of economic prosperity, the government will raise more money in taxes without raising tax rates by a single percent. Think about it,,,, if an individual is making more money this year than last, that individual will be sending more money to the government this year than last—not because the tax rate was raised, like what the Democrats want to do, but simply because that individual is making more money and therefore the same rate is applied to a greater total income, resulting in more tax revenue to the government. Just think if this phenomenon occurs on a national scale!!! Corporations making more money, and therefore sending more money to the government, individuals making more money and therefore sending more money to the government, and small businesses making more money and therefore sending more money to the government—all without raising taxes a single percentage point.

The theory stands that by cutting taxes, Bush is giving middle class Americans money that they wouldn’t have otherwise had. With that money, they can grow their small businesses, re-invest in their respective corporations, and inject money into the marketplace in the form of consumer spending—all three of which have an exponential multiplier effect on the GDP. It’s my humble opinion, that no President should be “blamed” for the economic data collected in his first term—especially when his first term is ravaged by terrorist attacks and two wars. Four years simply aren’t enough to see the ultimate economic effects of major fiscal policy changes—and I’d be happy to point that out in any history book to every single one of those high-brow, think-tank bound, pompous, business professors from Harvard that will forever be shielded by academia. There’s a reason why these economic “masterminds” aren’t in business for themselves or actually sitting on Presidential advisory boards. Simply put, they enjoy the protection that their tenured status and their plush corner offices on-campus offer them—their theories are never actually tested because they don’t have the testicular fortitude it would take to put their own money and pride on the line by going into business for themselves, or by running for public office. It’s easy to find a model or a statistic that will support just about any position or assertion that they feel compelled to spew forth,,, it’s a lot harder to make those tough decisions that affect your own pocketbook, the pocketbooks of your employees and stockholders, or in the President’s case, the very way of life of the American people. Come back to me in four years,,,,, after George W. has well and faithfully served a second term, and then we’ll talk about his responsibility for the health of our economy. Mark my words, barring another 9-11 type event, the economy will be as strong as ever following four more years of Bushonomics.

Respectfully submitted,

MDE, Boise State University Business School, Class of 1999