The Price of Loyalty

Brad DeLong calls The Economist’s profile of Mitch Daniels, “A beat sweetener so sweet as to send us all into hyperglycemic collapse.” He continues:

When Mitch Daniels was in a position of power and authority, responsible as Director of OMB for maintaining fiscal sanity, he simply did not do his job:Mitch Daniels Did Not Do His Job: One of the threads of Ron Suskind’s The Price of Loyalty is that Mitch Daniels simply did not do his job as Bush’s OMB Director. The OMB Director is the principal–indeed, the only–voice inside the White House for fiscal prudence, for trying to ensure that the money the government spends is spent well and that the resources the government raises are adequate for the spending plans the White House evolves. While he was Bush OMB Director, Daniels simply did not do his job.

One revealing passage from the book in question:

And page 296: The Commerce Secretary echoed much of what had been said…. As usual, not a real discussion, O’Neill thought as he looked over at [Mitch] Daniels…. He knew Daniels was focused on the perils of rising deficits, but it would take gumption to air those concerns in a room full of tax cut ideologues. "I think we need to balance concerns," Daniels said…. "You need to be out front on the economy, but I am concerned that this package may not do it. The budget hole is getting deeper… we are projecting deficits all the way to the end of your second term." From across the table came glares from the entire Bush political team. Daniels paused…. "Ummmm. On balance, then, I think we need to do a [tax cut] package… accelerate the rate cuts and the double taxsation of dividends…" O’Neill looked with astonishment at Daniels… turn 180 degrees in midsentence…

From what I can tell, Mitch Daniels really is serious about governing. Whatever mistakes he made in the past appear to be mistakes based on wanting to keep his job and his reputation in his own party intact. Not a good excuse, but not exactly uncommon in politics either. And in many ways they reflect the mistakes of the country as we hurdled headlong into two wars, a series of major tax cuts, and other various follies. But this certainly doesn’t mean we should trust his commitment to fiscal sanity should he ever find himself in the Oval Office. Perhaps it would be different as boss, but perhaps, too, the pressure to take the popular but wrong approach to the unpopular but right one would simply be too great.

All that being said, I find myself less and less convinced that deficits per se are the right way to view our fiscal solvency at this point in time. I find the balance sheet recession theory very compelling. And though I have fears of underlying structural problems being glossed over by stimulus and increased spending without strings attached, I’ve also become more a Keynesian. If private balance sheets are in a state of shock and recovery, public spending might be necessary to keep the boat afloat – especially if it’s money spent on something useful like really fast trains. Either way we’re going to need to raise taxes in the future in order to balance the budget. We’ll likely need some sort of consumption tax, and a wider swath of the American public will need to become regular taxpayers. And we’ll likely need to increase the number of tax brackets at the top end also. All of this just strikes me as inevitable. Tax cuts? Probably not, though trade offs such as replacing part of the payroll tax with a carbon tax seem sensible enough.

Certainly Daniels saw that the tax cuts his boss wanted were fiscally unsustainable. Whether sticking to his guns would have mattered is another question entirely.

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3 thoughts on “The Price of Loyalty

  1. Overall, I mostly agree. I do take issue with the whole “a wider swath of the American public will need to become regular taxpayers” line, since that really only works if you limit yourself only to federal income tax. If you include other federal taxes and state and local taxes and various government licensing fees (and of course government mandates), practically everyone is already a regular taxpayer.

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  2. I worked on a Democratic campaign in Indiana a few years back when Daniels was first running for governor. I ran into Daniels a few times on the trail and – even though I was clearly supporting his opponent (although that wasn’t the candidate I was working for) Daniels was one of the nicest, most pleasant politicians I had come across. I don’t like his politics, but ever since I’ve had a bit of a soft spot for the man himself. That said, his personality completely fits with this anecdote: I don’t think he’s comfortable not being liked. That’s not always a bad thing in a President when the audience you aim to please is the American public (certainly the people’s opinion should at least be a part of decision-making). But trying to gain popularity in a group of ideologues – regardless of the ideology – usually doesn’t turn out well.

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  3. I live in Indiana and Mitch’s tenure has been a long term disaster. Selling state assets, turning essential services over to incompetent private companies, slashing funds to schools, and raising taxes on people like me TWICE (for a millionaire’s paradise of a Stadium, financed by the poor and middle class and the school bond my school district demanded so it could stay in business).

    Mitch is a classic conservative….slyly shifting economic “advantages” upwards towards the haves, refusing to update the state’s economy, and cutting state funding to ALL levels of public education.

    It’s enough to easily fool the reporting class, so attuned to their own upper middle class checkbooks and personality politics, but to citizens he’s a disaster. He’s only preferable compared to the other morons who are running for the R nomination.

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