New York Times: "We have followed the dot-com bubble with the 9/11 bubble"
- December 2, 2004
The 9/11 Bubble
By THOMAS L. FRIEDMAN
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
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."