economists behaving badly

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Missteps on Economy Worry Bush Supporters
By Jonathan Weisman and Mike Allen
Washington Post Staff Writers
Saturday, March 13, 2004; Page A01


A string of glaring missteps by President Bush's economic team has raised
alarm among the president's supporters that his economic policymakers may
have lost the most basic ability to formulate a persuasive message or
anticipate the political consequences of their actions.

In recent weeks, the White House has had to endure its chief economist's
positive comments about job "outsourcing," or sending work overseas;
controversial passages in the annual Economic Report of the President;
questions over the legitimacy of Bush's 2005 budget; a California swing in
which Bush bragged about the possible addition of two or three jobs to a
14-person business in Bakersfield and a flap over a job-creation forecast
that not even the president could stand by.

On March 1, a host of U.S. industries began paying trade sanctions to
Europe because Congress and the White House have not replaced illegal
export subsidies with new aid for ailing manufacturers.

But the non-naming of Anthony F. Raimondo on Thursday as assistant
commerce secretary for manufacturing and services has brought the concerns
to a boil.

The long-anticipated announcement of a manufacturing czar was supposed to
be a good-news day for a White House struggling with its economic message.
Instead the planned, smiling photo op fizzled when it came to light that a
year ago Bush's choice had opened a major plant in Beijing.

"Clearly, the machinery's not working very well," said Bruce Bartlett, an
economist with the conservative National Center for Policy Analysis, who
noted that this White House has been known for its discipline on message.

Republicans on Capitol Hill and in the lobbying world of K Street say that
the incidents may be minor, but they are many, each amplified by the last.
And they are supplying a steady, nourishing diet for Sen. John F. Kerry
(D-Mass.), who has made jobs and Bush's economic policies a centerpiece of
his campaign to capture the White House.

Several former administration officials said the debacle over Raimondo
illustrated broader weaknesses in Bush's White House as he gears up his
reelection campaign. Some Republicans said the situation crystallized
their concerns about his weakened political position. These Republicans
refused to speak on the record because they said that if they did, they
could not be candid about the problems without infuriating Bush and his
most powerful aides.

These Republicans noted that several key officials who were steeped in
Bush's first campaign have moved out of the West Wing or out of the
government, and their replacements -- especially in the economic arena --
have weaker political antennae.

"People are doing their jobs, but most of them don't have the authority to
do something once they find a mistake," said a former official who stays
in frequent touch with the West Wing. "Somebody over there has to take
complete and utter responsibility for everything that is publicly released
from that White House. And no one is doing that."

They also noted that Democrats are drawing scrutiny to errors and
inconsistencies that might have passed unnoticed a few months ago. "This
is a hyper-charged political environment, and they have not adapted," the
former official said.

And Karl Rove, who is on the government payroll as the White House senior
adviser, is stretched thin between trying to watch what the administration
is doing and overseeing the ramping up of a campaign that has accelerated
its plans in response to Kerry's early lock on the Democratic nomination.

"There's a trade-off," said a Republican who advises both the
administration and the campaign. "It means you end up talking through
get-out-the-vote activities instead of looking at every single element of
the economic report before it is released."

A former White House official pointed to other personnel issues. Bush
loaded his first economic team with brash, outspoken officials full of
ideas, such as Treasury Secretary Paul H. O'Neill, National Economic
Council Director Lawrence B. Lindsey and economic adviser R. Glenn
Hubbard, he said.

But those ideas often clashed, and the officials proved too outspoken. So
Bush swung the team in the opposite direction, filling it with
replacements who would stick to the White House message and keep out of
the news. But those officials have not generated fresh policies.

"They've populated the place with an absence of ideas guys, which is fine
if you think you can put it on autopilot and win," he said. "But it
doesn't look like it's working."

Others say the economic team was kept straight in the first two years by
Joshua B. Bolten, the deputy chief of staff for policy. When Bolten left
last year to head the White House budget office, the wheels started coming
off the operation, one Senate Republican aide said.

Administration officials contend that as the economic recovery takes hold
and jobs begin proliferating, GOP concerns will disappear. Treasury
spokesman Rob Nichols said that, already, the unemployment rate has
fallen, disposable income has risen, single-family home ownership is at
record levels and worker productivity is high.

But outside the White House, allies are worried. The recent losing streak
has the administration "on its heels," said Daniel J. Mitchell, an
economist at the Heritage Foundation.

This week, Reps. Robert W. Ney (R-Ohio) and Donald Manzullo (R-Ill.), who
represent hard-hit manufacturing districts, requested a meeting with Bush
to get him to refocus his economic message. "Let me try to be diplomatic
about this," Manzullo said. "The president needs to bring together in a
single, simple focus the things he really believes in. He's got the right
stuff. He just needs to sharpen the focus."

The flap over Raimondo may be the most glaring breakdown, critics say. He
is a well-respected chairman and chief executive of a
prefabricated-building manufacturer. But his company -- Behlen
Manufacturing Co. of Columbus, Neb. -- laid off 1,180 workers from its
five U.S. plants in the past three years while opening a plant in Beijing.

That was only the most recent problem. The release last month of the
Economic Report of the President by the White House Council of Economic
Advisers has proven to be rich fodder for Democrats, who promise it will
appear in ads. First came the flap over a passage that appeared to praise
the recent movement of U.S. service jobs to such low-wage countries as
India: "When a good or service is produced more cheaply abroad, it makes
more sense to import it than make or provide it domestically."

Then, critics turned their attention to the report's anticipation that
2004 employment would on average be 2.6 million jobs higher than last
year. The secretaries of commerce and the Treasury, and then the
president, quickly backed off that projection.

Finally, Democrats latched on to an obtuse question in the report, "When a
fast-food restaurant sells a hamburger . . . is it providing a 'service'
or is it combining inputs to 'manufacture' a product?" The point,
administration economists said, was to question the practicality of
congressional proposals to offer tax breaks to manufacturers. But
Democrats accused the White House of wanting to reclassify burger flippers
as Joe Lunchpails.

The reactions were unfair, said two former White House officials, but in
an election year, they should have been anticipated. They said the
extensive vetting process that governed previous report releases must have
broken down. "Clearly, people didn't read it," one of the former officials
said. "This stuff was not hard to find."

As the White House was putting out those brush fires, officials had to
deal with the comments of N. Gregory Mankiw, chairman of the Council of
Economic Advisers. Mankiw managed to anger manufacturers, software writers
and even radiologists in his extended take on the "outsourcing" of jobs
overseas.

"Outsourcing is just a new way of doing international trade," he told
reporters. "More things are tradable than were tradable in the past, and
that's a good thing."

But administration officials concede that, so far, it has been a good
thing mainly for Democrats.