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New York Times: "We have followed the dot-com bubble with the 9/11 bubble"

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  • Tarek Fatah
    December 2, 2004 The 9/11 Bubble By THOMAS L. FRIEDMAN The New York Times http://www.nytimes.com/2004/12/02/opinion/02friedman.html?oref=login&hp The
    Message 1 of 1 , Dec 3, 2004
      December 2, 2004

      The 9/11 Bubble

      The New York Times

      The Washington Post had a story on Monday that contained possibly the
      greatest hint to a sitting cabinet secretary to start looking for another
      job that has ever been printed. The article reported, "One senior
      administration official said Treasury Secretary John W. Snow can stay as
      long as he wants, provided it is not very long."

      Provided it is not very long!

      Yo, Mr. Secretary, I'd say someone in the White House wants you gone! If I
      were you, I wouldn't renew any leases for more than a month at a time - or
      buy any really green bananas for the office. And those books you checked out
      of the Treasury library? Could you, like, maybe return them in the next few
      days? You know, just in case. I mean, it all depends on what the meaning of
      "long" is.

      I feel sorry for Mr. Snow. Reading your career obituary over breakfast can't
      be much fun. But I feel even more sorry for the country. I can't recall a
      time when the Treasury Department has been so emasculated by a White House.
      I went by the Treasury the other day and noticed a big sign outside saying
      it was being remodeled. Why bother? Who would know if it was gutted? The
      country would get more fiscal benefit by renting out the Treasury rooms for
      weddings, graduations and bar mitzvahs than it's gotten in the past four
      years from any advice coming from there.

      Here's a trivia question for you: Who is the deputy Treasury secretary? It's
      a pretty important job, but I have no clue who it is.

      This is a time when we really need a strong Treasury secretary capable of
      speaking up for fiscal sanity. We are about to embark on a 10-year period in
      which recent tax cuts and runaway spending are expected to add $5 trillion
      to the cumulative deficit. In my lifetime we will have gone from the
      Greatest Generation to the Profligate Generation to the Bankrupt Generation.
      Yes, I'm talking to you 20-year-olds. President Bush has called for
      sacrifice - but not by his generation. He's passing the bill onto your

      "The 9/11 crisis has been used as a license to spend and cut taxes rather
      than to set priorities and focus our resources on what is critically
      important to our nation's security," said Robert Hormats, vice chairman of
      Goldman Sachs International.

      And Congress has played right along, as have people like Josh Bolton,
      Stephen Friedman and Gregory Mankiw - Mr. Bush's key White House economic
      advisers. "You know that all these guys know better," said Clyde Prestowicz,
      head of the Economic Strategy Institute.

      There have been lots of strong Republican and Democratic Treasury
      secretaries in recent years: George Shultz, Nick Brady, Jim Baker, Bob
      Rubin, Larry Summers. But right when we really need one with common sense
      and the will to set priorities, all indications are that this White House is
      looking for someone even weaker than Mr. Snow.

      David Rothkopf, a former Clinton Commerce Department official who just wrote
      a history of the National Security Council, said that President Bush is
      obviously "seeking consensus and homogeneity. But the system works better
      when the president gets choices. If everyone is on the same page and it
      turns out to be the wrong page - you're really up a creek."

      The very reason Mr. Bush had the luxury of launching a war of necessity in
      Afghanistan and a war of choice in Iraq, without a second thought, was
      because of the surpluses built up by the previous administration and
      Congress. Since then, the Bush team has been slashing taxes in the middle of
      two wars, weakening the dollar and amassing a huge debt burden - on the
      implicit assumption that nothing will go wrong in the future.

      But what if there is another 9/11 or war of necessity? We're cooked. The tax
      revenue won't be there, so the only option will be more borrowing and a
      weaker dollar. But what happens if the Chinese and other foreigners, who now
      hold over 40 percent of our Treasury securities, decide they don't want to
      hold these depreciating dollars anymore, let alone buy more?

      It is now clear to me that we have followed the dot-com bubble with the 9/11
      bubble. Both bubbles made us stupid. The first was financed by reckless
      investors, and the second by a reckless administration and Congress. In the
      first case, the public was misled by Wall Street stock analysts, who told
      them the old rules didn't apply - that elephants can fly. In the second
      case, the public was misled by White House economists, peddling similar
      nonsense. The first ended in tears, and so will the second. Because, as the
      dot-com bubble proved, elephants can fly - "provided it is not very long."
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