The presidential race between George W. Bush and John Kerry is rather buoyant. The outcome is still highly uncertain. Among the issues that are fiercely debated is the current state of the US economy. President Bush's economic policy has been under attack for a while now. The critics are now joined by a squad of famous and respected scholars who have addressed the following open letter to President Bush:
"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....
To be continued Download open_letter_to_the_president.pdf
This letter has not been written by some obscure scholars. The list of signers is rather impressive and includes some heavyweights of the academic profession: Robert C. Merton (Harvard and Nobel Prize Winner), John W. Pratt (Harvard), Birgen Wernerfelt (MIT), etc... The Ivory Tower is often criticized for tackling issues that have nothing to do with real life (whatever real life may mean). This time, it sticks its neck out. Interstesting to see whether it is going to be listened too. At least, this letter should make an interesting material for economics classes.
By the way it is interesting to see that there seems to be a longstanding tradition of open letters to US Presidents. One example among others is the open letter John Maynard Keynes, the famous British economist, wrote to President Franklin D. Roosevelt.
I may be wrong on this one but it does not seem that French economists voice their concerns to the President in the same open manner.
Eric, thank you for sharing this open letter.
I think it is one of the role (beside teaching and researching) of academics to go - sometime - in the political arena. In that case, it is more than necessary. Beyond all the political aspects (Irak, Ben Laden and so on...) that we reproach to this pity president, I find it great that a person like Merton takes the risk to criticize the American government. But the risk is not so high: what a terrible economic situation for the US budget. Hopefully China will pay for the deficits!
Who can make such criticisms in France? Elie Cohen? Alain Cotta? I don't know...but the situation is different and less crystal clear in France.
Cheers from Copenhagen!
Posted by: Alex | October 21, 2004 at 10:29 PM