Bush's spectacular failure: a former Clinton policy adviser argues the Bush team has failed miserably at global economic leadership

International Economy, The, Spring, 2004 by Jeffrey Frankel

Fiscal deficits tend to spill over into the international balance of payments. The reason, of course, is that the budget deficit usurps private saving; the shortfall in national saving at home then has to be made up by borrowing from abroad. The U.S. current account deficit is now approaching danger levels. In other words, the twin deficits of the 1980s are back with a vengeance. The long-term macroeconomic implications are serious. Over the coming decade, the United States will find itself increasingly constrained by the need to borrow abroad in a capital-scarce world.

IS IT IDEOLOGY?

Krugman and Stiglitz warn that the Bush Administration is pushing the country far to the right, roughly speaking in the small-government free-market direction. But the main problem is different, and in a sense worse. The overarching pattern appears not one of excessive and rigid commitment to any particular ideology so much as one of hypocrisy and incompetence. Those are harsh words. Are they accurate?

The Bush Administration consistently says one thing and then does another--hence the charge of hypocrisy. They act as if they will do anything for a few votes, even if their behavior is against the national economic and security interests and blatantly inconsistent with things they claim to stand for: small government, free trade, macroeconomic discipline, good neoclassical economics, and so forth. And they will favor political expediency even if it creates big trouble for themselves a few months or a few years down the road--hence the charge of incompetence. Perhaps they are genuinely unable to think ahead. Perhaps they don't realize that if they impose steel tariffs, the virtually inevitable response a year later will be an adverse WTO ruling. Or that if they talk recklessly about not bailing out Brazil because the money will "go into Swiss bank accounts," the cost of the necessary bailout they engage in a few months later will rise. Or if they tell Asia to stop buying U.S. treasury bills, because they think it will help diffuse anger at the loss of jobs in a few key electoral states, then U.S. interest rates will soon go up. Or if they launch a military takeover of Iraq, a bill of a $100 billion or more will come due a year later. Or that if they speak precipitously regarding North Korea, the result in South Korea will soon be to elect an anti-American president and in North Korea to accelerate the nuclear program past the point of no return.

To be sure in some areas what they have had to say sounds like steps in the right direction: bold proposals for long-run global trade liberalization, increases in foreign aid from its very low levels, and better treatment for Mexican immigrant workers. It is wise to be on the lookout for confirmation of the proposition that nobody can be wrong all the time.

But this Administration's record of broken promises, misleading labels, cynical motives, and foreseeable cost overruns (usually deferred to someone else's term in office) has been so extensive that one can't help but entertain skeptical interpretations even of the initiatives that sound good.