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October 23, 2005
David Warsh, Proprietor


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Special Run-Amok Edition:

The Fed, Columbia University
and the New York Times

President George W. Bush, under stress, is being pestered by the go-for-broke supply-siders among his backers to take an even bigger plunge than he did when be nominated White House Legal Counsel Harriet Miers to the Supreme Court.

His candidate to succeed Alan Greenspan as chair of the Federal Reserve Board is expected to be announced within ten days, to allow for confirmation hearings in January, when Greenspan must stand down at the end of month. The nominee should be someone whose top priority is making Bush’s tax cuts permanent, according to columnist Daniel Henninger of the editorial page of The Wall Street Journal.

“If Mr. Bush’s nominee has internalized this basic supply-side growth-and-tax dynamic as well as [the president] has, then the new Fed chairman’s monetary guideposts and fiscal incantation should drop nicely into place,” Henninger wrote Friday.

Ten days earlier, also on the Journal’s editorial page, Vice President Dick Cheney’s former assistant for domestic policy, Cesar Conda, wrote that “Bush should choose someone who not only shares his low-tax, free-market economic philosophy, but who agrees with the fundamental premise that supply-side economic growth does not cause inflation.”

And who might that be?  Conda cited former Fed governor Manuel Johnson, former Bush chief economic adviser Lawrence Lindsey and Dallas Fed president Robert McTeer among his top choices.  Economists Glenn Hubbard and Ben Bernanke would also do, he wrote. As a dark horse he mentioned a name that is sometimes heard from participants in financial markets these days: former Sen. Phil Gramm, Republican from Texas, currently serving as vice chairman of the investment banking arm of UBS, the Swiss banking and financial services giant.

It was Gramm who, according to his biographer, Richard Nadler, played a more decisive role in launching the Reagan agenda than any other member of Congress — ahead of Jack Kemp, Newt Gingrich and Bob Dole. As a member of the House of Representatives, Gramm delivered the 40 southern “Boll Weevil” Democrats whose cooperation was necessary to pass Reagan’s tax cuts into law, then became a Republican himself and went on to the Senate (and a seat on its Finance Committee) until 2002.

A PhD economist with more than 20 years of legislative politics behind him, Gramm has a degree of stature that the other frequently-mentioned candidates lack, with the exception of Harvard’s Martin Feldstein. He would be the beneficiary of a certain amount of senatorial courtesy in confirmation hearings. But he also possesses a slew of negatives, many of them which became apparent in the course of an abortive run for the Republican presidential nomination in 1996.

“There are two things you’ve got to remember about Phil Gramm,” said former Texas Democratic congressman Marvin Leath. “Number one, he’s smarter than you are. Number two, he’s meaner than a junkyard dog.”

In advocating that Bush choose a Fed chairman who was pledged to put his political agenda ahead of maintaining price stability, the supply-siders (who still form an important segment of the president’s restive base) are willfully ignoring the hard-won lessons of nearly thirty years of commitment to price stability. Politicizing the mission of the central bank would be a colossal mistake.

* * *

An interesting turmoil has been unfolding in the economics department at Columbia University. That Columbia has been recruiting extensively among economists is no secret. Once one of the world’s leading centers of economic research, Columbia fell off the peak in the years after World War II and fetched up on a plateau where it remained until the 1970s, whereupon it fell off once again.

For years its greatest success has come in adding celebrities — notably Nobel laureate Joseph Stiglitz and development economist Jeffrey Sachs — to the ranks of its aging stars, the late William Vickrey and Kelvin Lancaster; the altogether vigorous trio of Robert Mundell, Edmund Phelps and Jagdish Bhagwati.

Meanwhile, downtown, New York University’s economics department surged past its older rival professionally, on the strength of a wing, a prayer, and an ambitious president. The Columbia department slowly built its traditional strengths in international trade, industrial organization and public finance, while the business school next door positively thrived. (Former Bush chief economist and Fed possibility R. Glenn Hubbard is its dean.)

After Lee Bollinger took over as Columbia’s president in 2002, he pledged $10 million to create 13 new positions in the economics department, part of a drive to move the entire university up a notch. Chair Donald Davis’s first pronounced success came in prying macroeconomist Michael Woodford out of Princeton in 2004, thanks to an accompanying offer to his wife by the New York Fed.

Earlier this year, Columbia snagged seven more of those to whom they had made offers, including contract theorists Patrick Bolton from Princeton and Pierre-Andre Chiappori from Chicago. The achievement was celebrated earlier this month in a lengthy feature story in New York magazine by New Republic senior editor Noam Scheiber.

But Scheiber’s interesting piece ended with a dark foreboding. “Could something akin to an eclipse cause everyone to decide at the same time that Columbia’s economics department was in a downward spiral?”

The answer, apparently, was yes.

Scheiber wrote, “Consider the case of a recent Nobel Prize winner from Chicago who had been actively pursued by Columbia.  He is a brilliant research and despite his age (he’s 61), continues to be one of the most prolific economists around. But, as one senior economist at a top-five school puts it,’ He is one of those guys best appreciated at a distance — personally, he’s very much a menace.’

“The prickly genius poses a dilemma:  On the one hand, it is hard to say no to a Nobel Prize winner still in his productive years. On the other hand, with someone who has a reputation for being particularly hard on younger economists — precisely the kind of people Columbia still needs to recruit and retain — Ôit could be like 1929 on Wall Street, where you’re watching assistant professors jump out the window,’ says the senior economist.”

The Chicagoan is James Heckman, who taught at Columbia for a couple of years in the 1970s after graduate school at Princeton. The last few years haven’t been easy ones at Chicago, thanks, in part, to Heckman’s various battles with his peers. In the end, he wanted to move back to New York.

Alas, Columbia and Heckman failed to come to terms. The department was said to be deeply riven. Among those said to have been leading the charge against Heckman was said to have been Bhagwati, a trade theorist now presiding over an interdisciplinary center for the study of immigration.

It’s true that Heckman is a handful: quick to anger, slow to relent, unusually highly paid. It is also true that he is one of the brightest, most thoroughly engaged economists of his generation, deeply liberal and positioned at the intersection of the most interesting controversies in labor economics. It was disappointing in the extreme that Columbia and Heckman couldn’t find a way to agree.

* * *

Are you perplexed at the uproar over New York Times reporter Judith Miller — “Miss Run Amok,” as she has described herself to friends?   She is the reporter recently released from jail after she finally decided to testify before a grand jury investigating various government leaks.

Enthusiasm for the investigation itself is, of course, mainly rooted in disagreement over the decision to go to war in Iraq.

But to understand the newspaper’s failure to give a convincing account of the internal byplay in the intricate case, you need look no further than page 560 of The Trust: The Private and Powerful Family behind the New York Times, the 1999 biography of the Ochs and Sulzberger clans by Susan Tifft and Alex Jones.  

You learn that, after 27-year-old Arthur O. Sulzberger Jr. and his wife moved to Washington D.C. in the autumn of 1978, they shared a house some summers on the Eastern shore of Maryland with Steven Rattner and Rattner’s then-girlfriend, Judith Miller.

Sulzberger worked with Rattner and Miller in the Times‘ Washington bureau. They and six or seven other reporters formed the kind of “reportorial brat pack” that is common enough in the news business among the young and mostly unattached, meeting nightly after work for drinks.

Twenty-five years later, Sulberger, 54, is chairman of the New York Times company and publisher of the Times.  Rattner, having left the newspaper after a few years to become a remarkably successful investment banker, remains one of his closest friends. According to writer Michael Wolff, they regularly go together to the gym.

And Miller?  Sulzberger has famously said that he can’t be friends with Times reporters. But reporter Franklin Foer, writing in New York magazine a year and a half ago, noted that Miller’s professional success is often ascribed at least partly to “the Sulzberger factor.”  

And certainly the publisher was conspicuous before and during the 85 days of her incarceration, visiting her in jail, accompanying her to her grand jury testimony, treating her to a massage, a manicure, a martni and a steak dinner at Washington’s Ritz-Carlton hotel after her release. The Times editorial page, which he supervises, thundered repeatedly in her support. 

Foer writes, “There’s no evidence that Sulzberger ever directly intervened to help Miller, and Miller has undergone enough career reversals to make this hard to believe. Still, that friendship has become well-known within the newsroom. Fairly or unfairly, there’s a sense that Miller has protection at the absolute top.”

Yet these details weren’t included in the paper’s October 16 story about “The Miller Case” by Don Van Atta Jr., Adam Liptak and Clifford Levy. They weren’t mentioned in an otherwise authoritative New York Observer article a few days later which described the Times‘ account  as “a tale of a dysfunctional staffer  running loose at a dysfunctional institution, with historic consequences.” 

Instead, near the end of the newspaper’s own story, a well-respected Times reporter, Todd Purdum, was quoted talking about the controversy in what amounted to code. “[M]ost people I talk to have been troubled and puzzled by Judy’s ability to operate outside of conventional reportorial channels and managerial controls. Partly because of that, many people have wondered about whether this was the proper fight to fight.”

The New York Times is a great and generally beloved newspaper. Historically, its owners have been accorded a cloak of near-invisibility. But, because of accidents of history, the Times today is being run by an insecure publisher who is temperamentally ill-suited to the task. The reasons that Arthur Sulzberger feels the need to prove himself are complicated. It took a book as thorough and persuasive as The Trust to make them clear.

It was one thing when his ambitious schemes were confined to the organization itself: the early passion for mission statements, cross-functional committees and “total quality management” metrics; the hare-brained scheme at the height of the stock market bubble to enrich a few executives by spinning off an Internet “tracking stock”; the plunge into television production and the subsequent retreat.

But now the publisher’s itch to make his mark has put the credibility of the Times itself at risk — for a second time.  Sulzberger’s decision to commission a dramatic overhaul of the paper he inherited from his father produced the first debacle — well-documented by Howell Raines, the prepotencia executive editor who devised it and sought to carry it out, and whom he abruptly fired when things didn’t work out.

The decision to back reporter Miller to the hilt (and, afterwards, blithely assert, “This car had her hand on the wheel because she was the one at risk”) has produced a significantly more serious crisis. Last week Miller told Times public editor Byron Calame, “He galvanized the editors, the senior editorial staff…. He metaphorically and literally put his arm around me.” The newspaper’s own account, however, published a few days before, ascribed no such role to a man who, as publisher, ordinarily is expected permit the newsroom to manage itself.

The editorial staff can’t fire the publisher. And, as Manhattan chronicler Kurt Anderson writes in New York magazine the upcoming week, Sulzberger won’t fire himself. Only the thirteen cousins of the fourth generation of the Sulzberger family, who have pooled their shares in a single trust that votes 85 percent of the company’s controlling Class B shares, can do something about the situation. 

Like what? The alternative to Arthur Sulzberger Jr. is 53-year-old Lynn Iphigene Dolnick, his cousin.  Her mother, Ruth Sulzberger, took over as publisher of the family’s ancestral newspaper, The Chattanooga Times, in 1965, after her first marriage broke up. Dolnick’s grandmother, the founder’s daughter, Iphegene Ochs Sulzberger (1892-1990), steadied the paper behind the scenes for 70 years.

And Dolnick’s own fifteen-year career at Washington’s National Zoo has been a model of out-of-the limelight success. (Never mind her PhD in molecular biology from Brandeis University.) In 1996 she was the first fourth-generation member of the family elected by her cousins to join her aunts and uncle on the board of the Times‘ controlling trust. She was named to the board of the company itself earlier this year.

Thirteen years is long enough for a favorite son who has embroiled the newspaper in one steadily-growing crisis after another since becoming publisher.  The Times‘ reputation is at stake. Replacing the publisher with his cousin is the answer.

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