Magazine article The American Prospect

Let Them Eat Rates

Magazine article The American Prospect

Let Them Eat Rates

Article excerpt

HE MEANS WELL, BUT LAWRENCE LINDSEY, GEORGE W. BUSH'S TOP ECONOMIC POLICY ADVISER, EPITOMIZES THE FALLACY OF "COMPASSIONATE CONSERVATISM."

Ever since George W. Bush announced that he subscribes to something called "compassionate conservatism," people have been trying to figure out just what this slogan really means. There are two broad possibilities. The first is that conservatism is inherently compassionate, in which case the adjective simply points out one of conservatism's lesser-known qualities. (The descriptive function of "compassionate," in this case, would be the same as that of "tough-actin'" in "tough-actin' Tenactin"--i.e., not to imply the existence of a weak-acting Tenactin but rather to accentuate a quality already present in the basic product.) The second possibility is that "compassionate" conservatism actually differs from garden-variety right-wingery (in the way that, say, Diet Coke differs substantively from regular Coke).

"I'd probably pick the first one," says Larry Lindsey when offered a choice between the two possibilities. He ought to know. As chief economic adviser to Bush, a notoriously empty vessel, Lindsey has perhaps the largest role in defining "compassionate conservatism" and, hence, in defining the fiscal policy of the Republican Party in the post-Clinton era.

Lindsey's resume does not reflect the usual career path of a man seized by a concern for improving the lot of the poor. Lindsey received his economics Ph.D. at Harvard, where he was a protege of the prominent conservative (and onetime Reagan chief economic adviser) Martin Feldstein. After leaving Feldstein's tutelage, Lindsey went to work for Ronald Reagan's Council of Economic Advisers. He subsequently served as a domestic policy adviser to President Bush, was appointed a governor of the Federal Reserve, and has since hung his hat at the American Enterprise Institute for Public Policy Research, a conservative think tank. Lindsey, in short, has spent most of his adult life in the company of white guys in dark suits who have a passion for reducing taxes and government.

Yet there have always been signs of soft-heartedness in Lindsey that belie his establishmentarian conservative background. Brad DeLong, a former Clinton adviser who taught with Lindsey at Harvard, recalls an incident in which Lindsey stuck up for the graduate assistants in his department. Harvard had a rule limiting graduate assistants to teaching one class per semester. This regulation was in place ostensibly to protect the grads from a heavy work load but, in practice, spared Harvard from paying for their health insurance. Lindsey fought for the health insurance.

But Lindsey is not one of those conservatives whose generosity of spirit is limited to those with whom he comes into daily contact. He has spent an extraordinary amount of time (for a Beltway Republican, anyway) thinking about the condition of the non-rich. He is working on a book examining whether markets work in inner cities. During his tenure at the Federal Reserve, Lindsey delved into the Community Reinvestment Act, a measure designed to force banks to provide loans to poor neighborhoods, and he surprised community activists with his support for the notion. "If you want a guy who actually is a compassionate conservative, it's Larry Lindsey," says Richard Medley, a Democratic Wall Street investment adviser who knows him.

Lindsey's sensibility is reflected in the tax proposal Bush unveiled in November. The compassionate premise in Bush's plan is that even the poor face high "marginal" tax rates. As they earn more, they lose the benefits of the Earned Income Tax Credit (EITC). So, in the worst case, a worker with a very large family whose job-related income goes from, say, $20,000 to $35,000 could face a "tax" (in the form of lost EITC benefits) of close to 50 percent on the increase, almost what a millionaire pays.

Lindsey wants to reduce the marginal tax rates faced by low-income workers. …

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