Real Change…

…is repudiation of the no-nothing-ness of the past. From Bloomberg:

Dec. 7 (Bloomberg) — President-elect Barack Obama said the nation owes its military veterans “a sacred trust” and named retired four-star General Eric Shinseki to make the U.S. Department of Veterans Affairs “a 21st century” system.

“No one will ever doubt that this former Army chief of staff has the courage to stand up for our troops and our veterans,” Obama said at a press conference in Chicago, held on the anniversary of the 1941 attack on Pearl Harbor. “No one will ever question whether he will fight hard enough to make sure that they have the support that they need.”

Shortly before the 2003 U.S. invasion to oust Iraqi dictator Saddam Hussein, Shinseki told Congress it would take several hundred thousand troops to stabilize postwar Iraq, more than then-Secretary of Defense Donald Rumsfeld had estimated.

Rumsfeld roundly rejected Shinseki’s assessment, insisting the effort could be accomplished with a U.S. commitment of no more than 150,000 troops. He also cut short Shinseki’s tenure as chief of staff, which critics of the Bush administration said was punishment for Shinseki’s testimony.

Rumsfeld himself later resigned his post, his reputation damaged by the failure of U.S. planning for the invasion’s aftermath and the subsequent violence. As of Dec. 4, a total of 3,395 U.S. troops had been killed in action in Iraq and 30,852 had been wounded.


General Shinseki revealing his estimates of several hundred thousand men for the required complement to occupy Iraq. Senate hearing, February 2003; posted in “The Wartime Economy and Tax Policy: So Shinseki was right” (January 10, 2007).

While this is not an economics issue in and of itself, it does relate to economic policymaking. Many of the critics of Obama’s choices for his economics team have centered on the fact that some of the choices were in the Clinton Administration, or have been associated with the centrist wing of the Democratic party, and hence could not represent “change” (e.g., [0]). But I think this all misses the point. The “change” we need is not so much ideological in nature, but the return to policy authority of people who have expertise, and are willing to look to past experience and (most importantly to me) analysis to make their judgments about how best to proceed — in economics as well as in issues of war and peace. So I’m happy with the developments thus far (on my previous posts on Shinseki vs. Rumsfeld and the Iraq debacle, see: [1], [2], [3]).

In other words, just like it probably takes more than a hundred thousand troops to stabilize a country the size of Iraq, it probably is true that the elasticity of labor supply and capital is insufficient to yield a tax revenue increase that yields a net tax receipts gain, in response to a permanent tax rate cut holding all else constant (in other words, extreme supply side nostrums [4]
belong in the trashbin along with the Rumsfeld doctrine).


32 thoughts on “Real Change…

  1. calmo

    Thank you Menzie for taking these steps as a citizen and not merely professional ones…as always.
    The impact that ‘The Price of Loyalty’ should have had, but didn’t with the re-election of GWB, was thwarted by…a non-reading public? a non-comprehending public?
    O’Neill, a life long Republican, condemned the policy process as short-circuited politicization. It was not a claim that created a debate in the media, much less entertained by the WH…showing to some whose side the media was aiding and abetting…even to this day.
    Getting left behind is worse than the loneliness it implies: it means you are left behind to the mercy and abuses of CNN and the like.

  2. Bob_in_MA

    At this point, it seems unlikely that anyone with a semblance of intellect will be a vast improvement over GWB. The incompetence of this administration will likely be a running joke 50 years from now.
    So, yes, with Obama’s inauguration we can look forward to at least reasonably competent policy making.

    But I’m afraid people are expecting much more, and after Obama’s comments yesterday, I feel tat might be a mistake.

    Obama said, “If a state doesn’t act quickly… they’ll lose the money.” That sounds like the flip nonsense GWB spews and certainly doesn’t sound like sound policy to me. Speed is more important than usefulness? That’s a recipe for a lot of wasteful pork, not so unlike the last eight years.

    And the calls for broadband access for schools, does that really seem like a pressing need? Our students generally rank dead last in math and science. Is making it easier for them to crib homework off the Web really likely to improve that?

    Sure, we will be leaving behind the absurd stupidities of Bush. But I have a feeling anyone expecting the second coming of FDR will be sorely disappointed.

  3. MM

    “The “change” we need is not so much ideological in nature, but the return to policy authority of people who have expertise….”
    I’m hearing this quite a lot very suddenly, and it sounds quite a lot like shifting ground.

  4. K T Cat

    Being in the business, I’m a lot more sympathetic to Rumsfeld and Bush re: Iraq. I would bet that the general public has very little understanding of the foundational changes required to fight the kind of war we faced in Iraq. It was a deep, cultural change that, believe it or not, Rumsfeld himself got started with actions like the cancellation of the Crusader self-propelled artillery piece. That he failed to make the revolutionary doctrinal changes necessary to win the war doesn’t diminish him very much to me. He had a lot of experienced, wise company in that.
    Sorry to interrupt the hatred of Rumsfeld, but there you have it.
    As for Obama and change, well, the change America needs is cultural as well and that’s not likely to come out of either party. Let me know when we return to the concept of earning what we get.

  5. Kyle

    It’s telling that Rumsfield’s estimate of required troop numbers were much closer than Shinsekis’.

  6. roger klein

    I respect and enjoy your economic thoughts but I feel it is in appropriate and unnecessary to bring extraneous political issues into it. Honestly it makes me less likely to read your blog in the future.

  7. Lance

    Is it really justifiable to group together income and capital taxation by trashing both elasticity theories? The argument for a greater elasticity for capital income is much more solvent.
    Granted, the justification for a net-revenue increase through lower income taxes was faulty (and based more on an analysis of capital gains taxation), but the justification for increased revenue through a decrease in capital taxation was much more justified, specifically by the work done by Slemrod, Yitzhaki, and Feldstein.

  8. Hitchhiker

    Give me a guy that makes the right decision but, is unable to communicate or please the leftists over a smooth talker every time.
    I would wait to see what types of decisions are made by these experts and the results before bestowing too much praise.
    Usually, I am all for lots of analysis but, the decision to fight or surrender to islamic extremism does not seem to warrant much of that. It does require great strength of will to fight it when so many want to surrender. Analysis leads to lobbing a cruise missle or two. It takes a serious backbone to do the right thing in the face of certain derision from the illuminati and the press. I hope Obama has one hidden somewhere unlike our first black president.
    Shinseki was the consummate bureaucratic turf fighter in the lead up to 2003. Rumsfeld was giving too much time and credence to his combatant commander Tommy Franks, a pusher of joint warfighting and a thorn in the sides of the service chiefs. I am sure Shinseki will make a fine choice for head of a bureaucratic department. Under Bush and Rumsfeld, theater commanders gained the upper hand over the chiefs of staff. If you want someone to fight for funding and protect the turf of a department, Shinseki is a good choice. If you want someone capable of thinking outside the government box or bringing new ideas to improve things, then not so much.

  9. S

    GWB economic team is littered with the best and the brightest from GS. Indeed Bush merely carried the bucket for the Rubin policies that were put in place in the Clinton Admin.
    “The “change” we need is not so much ideological in nature, but the return to policy authority of people who have expertise, and are willing to look to past experience and (most importantly to me) analysis to make their judgments about how best to proceed — in economics as well as in issues of war and peace”
    To look past experience and analysis is to suggest what? Did Obama not appoint these popel becaseu of their experience and analysis? What we really need are people capable of getting outside their OODA loop. That requires being able to syntheaize your expeirenbce and analsysi with a mindl flexible enough to infuse opposing ideolgy. Rodrik gets it and those begginning to wonder whether a new Smoot is actually a better solution that the alternative. Sadly, we get a bunch of rewtread ideologues who have demonstrated an inescapable brilliance in ex post analysis – namely Summers.
    Change would ecompass a debate anbout the merits of the global construct and that is NOT what is happening. The establishment operates by its own laws of logic. BErnanke says we didn;t do X so we got Y therefore we must do the opposite. Summers says globalization is critical to the world, if only the rules were better. But isn;t that lack of rules what gives it the vitality.
    We need new thinking not change. And thinking unafraid to challnge the conventionalneo classical orthdoxy that bankrupted us. When that happens we’ll have crossed the rubicaon and not a momement before.

  10. Buzzcut

    I’m glad Menzie is happy with Obama. On one level, I am happy too (they seem to be moderates).
    I just wished Obama had campaigned and been elected on a platform of “I’ll appoint the best and brightest to every post, even if those people are Clintonistas or served in the Bush adminstration”, rather than “Change”.
    I can’t help but think that Obama voters didn’t vote for this (Clintonistas and Bush holdovers). I also think that a Hillary or McCain administration wouldn’t look much different.
    Some might think that that’s a good thing. I don’t. It just leads to a cynical “why vote” attitude among many, many people.

  11. Chad

    General Shinseki was appointed Army Chief of Staff for a four (4) year term in June of 1999. He served until his term expired in June of 2003. Claims that he was fired are manifestly false. An appointment of longer than four years has only occurred twice in the entire history of that position: General McArthur and General Marshall served five and six years respectively.
    Useful analysis (of any kind) begins with correct information.

  12. Footwedge

    My, there are a lot of conflicting issues and thoughts related to this post! As a retired AF officer I can only add to that confliction especially as it relates to Rumsfeld and the admisntration’s war on terror strategy and the future under Obama.
    First, I believe it is true that Rumsfeld was totally on the right path in trying to restructure the military for the 21st century. The realities of modern warfare have changed enormously – as our magnificient frontline troops have learned the hard way. The great battles on the plains of central Europe and masses of artillery and division-sized troops duking it out are mostly the dreams of old warriors (read generals of all branches). As Rumsfeld was trying to do, the military needs to be smaller, quicker, smarter with great mobility, both strategic and tactical mobility – and a lot less expensive. Finally, it should be used only when absolutely necessary.
    Second, Iraq was not failure of Rumsfeld’s theory, it was failure to pay attention to that last implication of Rumsfeld’s theory. (Which might also imply a reckless arrogance on Rumsfeld’s and the adminstrration’s part that they felt they could do anything they wanted and it would work.) The misnamed war on terror can’t be and should never have been fought in the conventional manner. I grant that while invading Afghanistan was maybe politically necessary, clearly it was not well thoughtout regarding exit strategy – a lesson we apparently still haven’t learned. Iraq was a mistake from conception to execution. (My son had two tours so I have had some important skin the game.) A tragic mess that we can hopefully extricate ourselves from soon. (Yes, Bush was very “brave” to support the surge but what else would he do – this was his tar baby. Surge or exhaustion by the combatants, it’s all in the context of an unnecessary war which for me kind of cancels out the brilliance of the tactic and its modest outcome.)
    Finally, regarding Obama, I am kind of camp of those that are confused on what to think. If we were looking for new ideas (and we should be) it wouldn’t appear that we are going to get many of those. I agree with those that feel that really there is no difference between the parties when if comes to leading the country and that would seem to be borne out by the preposterous solutions that are emanating from our capital. While I did not vote for Obama (I’m a Ron Paul guy) I did hold out some hope that he would shake things up one way or the other. Unfortunately, we may end up with the worst of all possible worlds -continuing failed policies of the past from the right along with new mistakes from the left.
    Another fine mess we’ve gotten ourselves into, Ollie!

  13. K

    I agree with S. This whole past year and a half has been a great monetary policy experiment, and a great failue – and saying “just think of what it would be like if we hadn’t done x,y, and z” is a tired, empty argument for success. When will the Keynesians admit failure? They will blindly follow their great theories (and failed realities) until the entire economic system melts down once and for all. Our Dear Leader has already announced a grand socialist infrastructure build, deficit be damned. I admit that Bernanke-san, Paulson and the rest of these idiot savants have got to go, but replacing them with more idiot-savants is not the answer.
    S is also on the ball talking about globalism. The establishment argument is that global free trade benefits everyone. I know the argument well, and it is logical as presented. But the argument does not take into consideration that there are political costs involved in free-trade that may be not worth the benefit. Some things are worth more than money. I would gladly sacrifice growth to preserve our domestic supply base, standard of living, and our American culture. (Not to mention the political risk and affront to our sovereignty involved with being the biggest debtor-nation) The free-trade facists of both parties won’t even allow a debate here.

  14. Hal

    Experts or expertise would not have made the Iraq war justifiable. It was stupid in concept from the start and pushed by Neocons for the benefit of Israel. It should not have been waged at all. And now there is no reason at all for us to be at war in Afghanistan where our attempt to impose a colonial regime is again stupid in concept. No “expert” is going to make the Afghan war a good thing or even a success. Ideology is important and cannot be replaced merely by “expertise.”

  15. Jon H

    “Usually, I am all for lots of analysis but, the decision to fight or surrender to islamic extremism does not seem to warrant much of that. ”
    Iraq had little or nothing to do with Islamic extremism, it was a largely secular state. If anything, Iraq is more dominated by Islamic extremism NOW than it was before the war. Women in Iraq are significantly less free, thanks to Islamic radicals who have gained power in the vacuum we created by taking out Saddam.

  16. don

    Analysis? I think TG may be a bit lacking on this aspect of his new job, though he may be a good practical applications guy.
    Obama seems to have a good attitude (open minded search for the best solutions without too much ideological baggage). That was also FDR’s forte – neither he nor Obama could be called an intellectual powerhouse.

  17. Menzie Chinn

    colonelmoore and Chad: You are right that technically, Shinseki’s term was not cut short. However, to the best of recollection, what happened was that the next incoming Army Chief of Staff was announced earlier than usual, thereby undercutting Shinseki’s influence. Hence, Shinseki’s term was not ended earlier than usual, except in an operational sense, just like when the White House is redacting a CDC testimony on global warming, even if over half of the document is removed, it’s only exercising its legal perogative. So, I think my central point is still valid.

  18. Menzie Chinn

    MM: I think I’ve been consistent in my calls for expertise over ideology over the past three years on this blog. I can’t speak for others.

    Buzzcut: Point of information: do you really think a McCain-Palin administration would have looked similar to an Obama administration? I have a suspicion Interior, Labor, EPA at the very least would have substantial differences.

  19. DickF

    Menzie wrote:
    it probably is true that the elasticity of labor supply and capital is insufficient to yield a tax revenue increase that yields a net tax receipts gain, in response to a permanent tax rate cut holding all else constant (in other words, extreme supply side nostrums [4] belong in the trashbin along with the Rumsfeld doctrine).
    I thought this was amusing. What we will see economically is a return to the mercantilism of the 17th Century. Our current economic crisis is primarily because of the mercantilist failures. One thing that it will give us is a good example of how not to generate a recovery.
    Understand that this is not a Democrat v Republican issue. The Bush administration has prove to be just an inept as any administration. What is sad is that we have such a host of excellent economists who are thrown in the trash bin.
    But I am not foolish enough to believe that those in power will accept that their policies have failed. They will blame others and especially the free market, even though we haven’t had anything close to a free market in almost 100 years.
    I have said it before anyone who speaks about supply side economics and only mentions taxes is ignorant of supply side economics.

  20. Menzie Chinn

    roger klein: If you do not see the connection between how policy was formulated in economic and non-economic dimensions over the past seven years, well, then we must be looking at different worlds. In any case, I will regret your departure from the Econbrowser audience (or at least my posts).

  21. Buzzcut

    Buzzcut: Point of information: do you really think a McCain-Palin administration would have looked similar to an Obama administration? I have a suspicion Interior, Labor, EPA at the very least would have substantial differences.
    First of all, Obama has not nominated for those positions yet.
    Second of all… aren’t we talking about Treasury, SOS, SOD, etc.? Those are the big dogs in the Cabinet, and no, I do not think that they would be much different in a McCain-Palin admin.
    Who cares about Labor? Interior? Give me a break. The only important thing about Interior is energy leases on public lands, and Obama needs to flip-flop on that one (which I’m sure he will, judging from all the flip-flops he’s made already).

  22. Menzie Chinn

    Buzzcut: Hmm. Well, maybe Labor (and workers safety) doesn’t matter in your objective function, and the rates at which the Government charges for use of public lands is irrelevant to you. What’s a little mountaintop strip mining here and there? And of course EPA probably also carries little importance as well as far as you’re concerned — after all what’s the problem with a little mercury here and there. So, sure, no difference. By the way, what did Palin say about global climate change?

  23. Buzzcut

    You’re making a trivial argument, Menzie. Espcially when your focus is ostensibly on economics.
    Treasury and Defense would be no different under McCain. Hillary as SoS is little different than a McCainiac.
    Dascle at HHS and Holder as AG are obviously different, but not different than who Hillary would have nominated.
    We’ll see about the others you mention. Obama might surprise me yet. I predict a bunch of warmed over Clintonistas, like Holder. I’m going to guess that the strip miners make out pretty well.
    And Obama is not going to implement the Kyoto accord either.

  24. Menzie Chinn

    Buzzcut: If you think mercury is just a trivial issue, then we obviously don’t see eye to eye (by the way, when I was on CEA staff, we did discuss mercury, so I guess we thought it was nontrivial — and of economic import).

  25. Buzzcut

    Haven’t Mercury emissions gone down every year that your nemisis, George W Bush, has been in office? Hasn’t that rate been no different than under Clinton?
    I speculate that it will be no different under Obama. He won’t change the new source review rules.

  26. jed

    I just don’t see how this is at all change. All the people he has for this economic thing have no real fundamental disagreement with the bailouts or the way this has been handled (obama has voted for alot of these). So the only thing people seem to say as that they are “smarter” but absent bush, people in his administration were “smart.” paulson and bernanke aren’t idiots. Even with iraq, while being “against the invasion” he has given himself so much wiggle room in the language he has used, it is quite clear that his effective iraq actions will not differ too much from what has occurred. obama will not remove all troops immediately. he will honor the reality on the ground.
    the people who saw all the financial riptide that is occuring beforehand, many did not like bush – this dislike helped them see the reality. However, since they are left leaning, they “like” obama, and generates execuse. i see this on alot of blogs that alerted me to all that is going on; now they act as if there is some change. it is merely a continuation of the course that bush has taken for the last year.

  27. rmark

    “…is repudiation of the no-nothing-ness of the past.”
    Ironic that this is written, followed a week later by Obama either meeting with or not meeting with the Illinois governor.

  28. Babinich

    “…is repudiation of the no-nothing-ness of the past.”

    In truth is: is the do-nothing-ness of the his (Obama’s) past

    Illinois is a disaster and all on the watch of total Democratic leadership that included Obama.

    Lets hope he shows greater leadership running the country than he did when he was an Illinois State Representative and US Senator.

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