Kerry's Economics Advisor; Roger Altman

["Henry C.K. Liu" <hliu@xxxxxxxxxxxxxx>]

Roger Altamn, formerly deputy Treasury secretary in the Clinton
administration, now chairman of investment banking and private equity
boutique Evercore Partners, is primary economics advisor for Democratic
Candidate John Kerry.

Statement by the President Clinton release July 25, 1994: "Secretary
Bentsen and I believe that Roger Altman has been an excellent Deputy
Treasury Secretary and we want him to continue in that capacity."

Notwithstanding strong support by Clinton, Altman resigned Aug. 29, 1994
following revelations he tipped the White House off to criminal
referrals made by Resolution Trust Corp. investigators related to
Madison Guaranty. Altman, a college friend of Clinton's, angered both
Republican and Democratic senators after giving conflicting testimony
about White House-Treasury contacts.  He was, in the wake of the Iran
Contra scandal, Vice Chairman of The Blackstone Group, chaired by
liberal Republican Peter Petersen, former Commerce Secretary under Nixon.

Testifying before the Senate banking committee in February 1994,
then-deputy Treasury Secretary Roger Altman (a college friend of
Clinton's) conceded he had given top White House officials, including
then-White House counsel Bernard Nussbaum, a "heads-up" on nine RTC
criminal referrals that in one instance targeted Clinton's 1985
gubernatorial campaign, and named the Clintons as witnesses in others.
Eight days after the "heads up," Clinton met with former Arkansas Gov.
Jim Guy Tucker in the Oval Office.  Clinton advisors George
Stephanopoulos and Harold Ickes also came under fire following
revelations they called Altman to protest the choice to head the RTC
probe, Pillsbury partner Jay Stephens, a former Bush-appointed U.S.
attorney fired by Clinton in 1993.

Usually mild-mannered GOP Rep. Jim Leach of Iowa, then the House banking
committee's ranking minority member, became the president's sharpest
Whitewater critic. He charged that the RTC was illegally withholding
Whitewater documents that would incriminate the Clintons, and that
regional RTC criminal investigators were being controlled by the
Washington office. Leach took to the House floor in March 1994 to air
his concerns.

As GOP pressure mounted, Democrats scheduled separate House and Senate
hearings (controlled by the Democrats) for the summer of 1994. A parade
of administration officials claimed under oath not to have remembered
the Treasury-White House contacts, even though Joshua Steiner, the
28-year-old Treasury chief of staff, had noted them in his diaries.
Government investigators eventually concluded at least 40 contacts
occurred.  Providing relief to the administration, Robert Fiske
concluded in July 1994 that the White House-Treasury contacts had not
run afoul of the law, though Nussbaum and Altman were ultimately forced
to resign. Further, congressional lawmakers felt that Fiske wasn't
thorough, and some observers speculated Kenneth Starr might bring
obstruction of justice charges related to the Treasury-White House contacts.

Altman went on CNBC last week to discuss the Kerry plan to stop the loss
of jobs through overseas outsourcing by a proposed cut of corporate tax
that would penalize cross-border outsourcing.  The main theme Allman
proposes is "the restoration of confidence."

Yet Roger Altman said about the stock market malaise in 2002:
"It's an incredible punishment, far worse than anything the executive or
legislative branch could exact. And that's why the ultimate solution to
this--the restoration of confidence--can't really come from Washington.
It never has, and never will. Sure, there are things governments can do
at the margins. But the real force for change has to come from the
capital markets themselves, and it will be a long time, I think, before
the lessons of the past few months are forgotten."

The U.S. budget gap has swelled to record levels on the back of a weak
economy, higher spending for defense and domestic security and tax cuts
won by President Bush amounting to $1.7 trillion over 10 years. Like
Kerry, Bush has vowed to cut the shortfall in half by 2009, even as he
calls to make permanent the tax cuts that would otherwise expire by the
end of the decade.

In an article in June 1994: Why Pressure Tokyo, Altman dismissed charges
that the Clinton administration is pushing managed trade, capitalizing
on anti-Japanese sentiment to score domestic political points or
needlessly bashing Japan over economically meaningless trade surpluses
that ended up in US treasurys.  He explained changed American priorities
and the pronounced drag of Japan's huge current account surplus on
global demand, economic expansion and job creation as the two fundmental
and related developments.

Below is  an Altman article:

Which Democrat Will Speak Fiscal Truth?
By Roger C. Altman
Sunday, May 25, 2003; Page B07 Washington Post

Voting along partisan lines, a bitterly divided Congress has passed
legislation embodying the third round of Bush tax cuts. This one looks
smaller than the administration wanted, and some are saying the
president was forced to retreat. But in reality the new tax bill is a
huge triumph for President Bush and the underlying "starve the
government" ideology he represents.

Officially, all three Bush tax bills, taken together, are estimated to
reduce federal revenue by approximately $1.2 trillion over the next 10
years. But many of the cuts in each bill are disingenuously designed to
lapse within this 10-year window. The administration knows that Congress
won't likely allow taxes to go back up at those moments. Those cuts will
be extended, and the ultimate reduction in federal revenue will approach
an astounding $3 trillion. This means an average annual budget deficit
of $420 billion over that period. We've never had a deficit that large
in any single year, let alone 10 straight.

Juxtaposed against the gargantuan Social Security and Medicare actuarial
deficits, this is ruinous fiscal policy and even worse social policy.
But in raw political terms, it is brilliant. It paints the Democrats,
and particularly their presidential candidates, into a corner. They are
forced to support even larger deficits or call for a rollback of certain
tax cuts or accept the utter absence of budget resources to pay for any
new initiatives, from health care on down. Each of these choices is
politically excruciating, just as the White House planned it.

But, perversely, there is a bright side. Problems this big lend
themselves to simple approaches, such as these: (1) The Bush tax cuts
are excessive and, in part, should be rolled back; and (2) future budget
deficits should be smaller than the president is proposing. A Democrat
with the courage to adopt these principles and communicate them
effectively becomes the truth-teller and could go far.

Americans don't yet realize the social consequences of these tax cuts
and the "strategic deficits" they will cause, to borrow the words of the
late Sen. Daniel Patrick Moynihan. Here are some of them: There is no
room for a valid plan to extend health care insurance to the 41 million
Americans who don't have it -- a number that is growing every day. There
is no room for a real homeland security initiative centered on first
responders. Although national service, exemplified by the U.S. military,
represents a hugely effective and socially cohesive success, there is no
room to extend it, say, to teach or to care for the elderly. None of
these three initiatives necessarily requires more government employees,
but they're not possible anyway.

Then there is the monster social issue -- the future of Social Security
and Medicare. These two programs are currently underfunded by a combined
total of $25 trillion. And the day of reckoning, when those programs
begin to pay out more than they take in, is only 15 years away. Our
children, not our great grandchildren, will face that music. They will
have to choose either to increase taxes by unimaginably huge amounts to
keep benefits flowing or to cut the benefits off and watch the elderly
become the poverty class. Would you want that choice?

The task for the Democrats is twofold: first, to help the public
understand these choices by explaining them effectively. That's not an
impossible task. John F. Kennedy could have done it and so could Bill
Clinton. Second, they must take the courageous step of advocating the
fiscal policy we require: rolling back some of these Bush tax cuts. Only
in this way can we pay for at least the few initiatives this society
must have and shrink the future deficits this administration has
created. Americans need to be reminded that just a few years ago, the
achievement of a balanced budget for the first time in 50 years, and
under a Democratic president, led to extraordinary prosperity.

Would this be politically suicidal? No. Just returning the top income
tax rate to 39.6 percent (the Clinton rate), retaining the estate tax
and leaving dividend taxation where it is saves nearly $1 trillion
compared with the Bush plan. And the first step would affect only those
with annual incomes over $400,000.
History tells us that Americans always respond to real leadership. We'll
see if there is a presidential Democrat with the courage and
communication skills to make this
case. If there is one, next year's election may be much more competitive
than you think.  End.

*********************************************************************************************

Granted, restoring taxes on those making over $400,000 to Clinton levels
is a great plan, but the following is simply misleading:

"Then there is the monster social issue -- the future of Social Security
and Medicare. These two programs are currently underfunded by a combined
total of $25 trillion. And the day of reckoning, when those programs
begin to pay out more than they take in, is only 15 years away. Our
children, not our great grandchildren, will face that music. They will
have to choose either to increase taxes by unimaginably huge amounts to
keep benefits flowing or to cut the benefits off and watch the elderly
become the poverty class. Would you want that choice?"

The problems is that this "underfunded" $25 trillion has a dedicated
income stream known as the payroll tax. It is true that under the gloomy
economic forecast used by the Social Security Trustees they predict the
Trust Fund starting to cash in its bonds in 2019, and exhausting those
funds in 2042. What is not true is that closing the gap would require an
"increase in taxes of unimaginably huge amounts". Per the Trustees' 2003
report an immediate payroll tax increase of 1.92 percentage points
(12.4% to to 14.32%) permanently closes the gap. (p.16). And if nothing
is done until 2042 the needed increase would be 4.54 points (12.4% to to
16.94%). (p.16) And consider this assumes a rate of productivity growth
of 1.6% (p. 94)., well under the historical average and a far cry from
the 3% many (including Greenspan) are claiming as a reasonable target.

The 2000 Report predicted an exhaustion date of 2037. After a continuing
tech meltdown, a flat economy and stock market, and 9/11, by this year's
report the exhaustion date was pushed back five full years. Meaning the
Trustees are seriously low-balling the economy.

Battling the Bush tax cuts is the right thing to do. National healthcare
and rebuilding the national infrastructure would not only create more
jobs directly than the indirect effect of tax cuts for the wealthy, they
would create a better America. But using Social Security as a bogeyman
really needs to stop.

MICHAEL DUKAKIS' loss to George Bush Sr. in the 1988 presidential
election left the Democratic Party leadership desperately assessing
blame and searching for some way to capture the seemingly unreachable
White House since Reagan. By creating and working with the Democratic
Leadership Council (DLC), Bill Clinton believed he could achieve that
goal. As a founder of the DLC, Clinton hoped to forge a "new Democratic
Party," one that could win back both voters and corporate contributors
lured away by the RepublicansÆ feel-good imagery and conservative fiscal
policy. As president, Clinton has seen his plan come to full fruition in
a cabinet that tilted towards Wall Street and Big Business.

Now, more than ever, multinational corporations are multi-partisan;
entrenched corporate influence extends well into the Democratic Party,
once dismissed by conservatives as the party of organized labor. The
Clinton cabinet's corporate ties are especially troubling to
environmental, consumer and labor activists who had hoped for a change
from the preceding administrations' business bent. Neither Reagan nor
Bush appointed as many millionaires to cabinet positions as Clinton has.

Lloyd Bentsen's deputy treasury secretary, Roger Altman, is directly
linked to the corporate world than his boss. As a treasury official in
the Carter administration, Altman helped to manage the federal bailout
of Chrysler, one of the more egregious examples of government-sponsored
corporate welfare to date. More recently, as vice chair of the New York
investment banking firm, the Blackstone Group, Altman completed four of
the six largest acquisitions of U.S. firms by Japanese corporations,
including Sony's much- publicized takeover of CBS Records and Columbia
Pictures. Altman and former Goldman Sachs chief executive Robert Rubin
are obviously both big-time Wall Street players.

Laura D'Andrea Tyson, the former chair of the President's Council of
Economic Advisors, is known as a liberal for her advocacy of industrial
policy, a view that the federal government should actively intervene in
the economy to promote strategic industries; she is also a friend of the
electronics and other high-tech industries. As a professor at the
University of California at Berkeley, Tyson co-founded and co-directed
the Berkeley Roundtable on the International Economy, a University of
California trade and technology research organization which has been
heavily financed by the Silicon Valley businesses and trade groups on
whose behalf Tyson advocates government intervention. Critics claim that
Tyson's "industrial policy" was implemented as nothing more than a big
business subsidy policy. "To have an administration coming into power
that is explicitly committed to moving money from taxpayers' wallets
into high-tech companies and politically favored industries is going to
mean a lobbying field day for every company and trade association,"
Brink Lindsay, director of regulatory studies at the CATO institute,
told the San Francisco Chronicle. High Tech firms turn out to be the big
overseas outsourcing culprit. Such much for industrial policy to protect
US workers.


Henry C.K. Liu