Three years ago when I interviewed Mr. McCain, he admitted that he doesn't understand economics very well. Clearly neither does Barack Obama. But one thing that separates the two is that at least Mr. McCain has the good sense to know where to turn to for first-rate advice.
How will the budget be balanced in four years?
How will McCain work with a Democratic controlled Congress?
Want to catch a glimpse of how the Fed is going to keep inflation under control?
In Saturday's Wall Street Journal, senior economic writer Stephen Moore interviews Senator John McCain's almost certain Secretary of the Treasury nominee. He even poses the question:
So have I been speaking with the next Treasury secretary? Almost certainly, yes, if Mr. McCain wins in November.
Now, I'm not an economist, but "Almost certainly" is a better wagering indicator than "its a 50/50 chance" RIGHT?
I've clipped a few of the important quotes of the article headlined Return of Dr. No.
So, will Phil Gramm take the post of heading up the Treasury Department?
"Look, I had a great career and I quit when I was at the top of my game. I'm not eager to come back." Then he chuckles and says only half-jokingly, "I know a lot of people on the left, who would hate like hell to see me come back."
By all indications, the state of the economy will be in poor shape come next January. It sure is reassuring to have just the facts spelled out in straight talking ways.
Monetary policy under President Bush has been a disaster, so I ask Mr. Gramm if there is any reason to think it will improve under Mr. McCain. Mr. Gramm sees the possibility of "a 1970s stagnation" and he insists that he's "more concerned about inflation than most policy makers in Washington." While he praises Alan Greenspan as "the greatest central banker in history," he concedes that the current troubles began when Mr. Greenspan took his eye off the inflation threat: "The Fed should not have held interest rates low as long as they did."
How does Gramm justify these fat executive pay packages many in Congress are worried and talking about?
"In economics, we define labor exploitation as paying people less than their marginal value product. I recently told Ed Whitacre [former CEO of AT&T, who retired with a $158 million pay package] he was probably the most exploited worker in American history because he took Southwestern Bell, which was the smallest of the former Bell companies, and he turned it into the dominant phone company on earth. His severance package should have been billions."
How about those housing and financing changes he wrote, was that a bad idea in retrospect? Why were the Depression era regulations a bad idea needing a revamp?
"The law has come under fire from the same people whose solution to every problem is always more and more government control of the economy," he says. "Broadening the base of financial institutions had nothing to do with the subprime problem. There's every evidence that the markets were made more stable by the diversification. J.P. Morgan could not have bought Bear Stearns and prevented a meltdown without Gramm-Leach-Bliley."
Just how will McCain balance the budget in four years? Gramm has it all mapped out:
"John's going to cut the defense budget by making major changes in procurement. As we win the wars in Iraq and Afghanistan, we must use every penny of savings for deficit reduction. And we're going to restore strict fiscal spending targets like we had in the late 1990s."
And what about working with Democrats?
"If McCain is elected, he's going to have one thing Democrats in Congress desperately want: control of the money. And his ability to promote his agenda – the tax cuts, his foreign policy – will depend on his willingness to say no. Bush simply signed everything. They could blackmail Reagan by threatening to cut defense. But there is nothing John McCain wants from Congress. He wants to cut defense. There's no place they can take him in cutting spending that he's not willing to go."
In the person of Professor Gramm, John McCain has a twenty first century Rasputin in his camp, and if you read the full 20 paragraph interview, it will be like possessing your own crystal ball.
UPDATE: maybe I should have looked into the reporters credibility first, eh:
Snatching it right from Stephen Moore's wiki:
Stephen Moore (born February 16, 1960 in Chicago, Illinois) is an economist and policy analyst who founded and served as president of the Club for Growth from 1999 to 2004. He is currently a member of the Wall Street Journal editorial board and frequently opines on the pages of their Op-Ed section. He is also a contributing editor for National Review.
He possesses a B.A. from the University of Illinois and an M.A. from George Mason University in economics. Moore usually advocates views in favor of free-market policies and supply-side economics such as those promoted by the Free Enterprise Fund, which he founded.
From 1983 through 1987, Moore served as the Grover M. Hermann Fellow in Budgetary Affairs at the Heritage Foundation. Moore also was a fellow of the Cato Institute, a libertarian think tank.
Moore was the senior economist of the U.S. Congress Joint Economic Committee under Chairman Dick Armey of Texas. There, he was also an architect of the Armey flat tax proposal in 1995. The Armey Flat Tax still serves as a model for ideal flat tax legislation. He was also part of the research team hired by Americans For Fair Taxation to create the FairTax, the most cosponsored tax reform proposal in Congress. He is currently a partner in the econometrics firm Arduin, Laffer & Moore Econometrics.