• 30 Jun 2008 at 8:35 AM
  • politics

Meet John McCain’s Economic Brain: Phil Gramm

Phil Gramm gave his first political interview in years to Stephen Moore in the Wall Street Journal’s weekend edition. The interview is clearly meant to reassure conservative voters about Republican presidential candidate John McCain. What separates McCain from Obama, Moore writes, is that although neither of them know much about economics, “McCain has the good sense to know where to turn to for first-rate advice.”
Gramm was something of a hero to a lot of conservative activists. He cut his teeth as a Reagan Democrat in the House of Representatives, championing Ronald Reagan’s tax cuts in the early eighties. Later he switched allegiances to the Republican party and got elected to the Senate. With the GOP victories in 1994, Gramm became the chairman of the powerful banking committee. Moore writes that he played a “decisive role in nearly every fiscal conservative victory in the 1980s and 1990s.”
But that was then and this is now. Gramm is now 65 years old, and he vanished from the political stage six years ago when he took a high-rolling investment banking job at UBS. So what does Gramm offer voters now?


He’s a skeptic of financial regulation. “Mr. Gramm’s biggest worry about Wall Street is that, in the wake of the Enron scandal and now the subprime meltdown, the reguatlory pendulum has swung too far toward more government meddling–which could put America’s financial-market supremacy at risk,” Moore writes.
He wants cuts in the corporate tax. “Mr. Gramm urged Mr. McCain to add a corporate income tax cut (to 25%) as part of his economic package.”
Spending cuts and deficit reduction. Gramm says that McCain will win the wars in Iraq and Afghanistan, and then cut the defense budget by making major procurement reforms. The savings will be used to reduce the deficit, and strict spending limits put in place.
That sure sounds great but we’re skeptical of any promise that begins with a project as big as winning wars. It’s like Dick Fuld promising that Lehman Brothers will be totally profitable again once the credit crisis is over.
CEOs Are Underpaid. “Today, CEO decisions about whether to acquire or not acquire a company, get into a market, get out of a market, where those decision means billions of dollars, is it surprising that people are willing to pay tremendous amounts of money for people who make those decisions right?”

The Return of Dr. No
[Wall Street Journal]

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Comments (26)

  1. Posted by Bugs Meany | June 30, 2008 at 8:43 AM

    It annoys the fuck out of me that McCain is honest enough to admit he’s no economics expert. That just gives Obama the perfect soundbyte to to play over and over, when it’s not like Obama knows jack shit. If he did, maybe his wife would have a more nuanced understanding of business than thinking there’s the “moneymaking industry” and the “helping-people industry.”

  2. Posted by ab | June 30, 2008 at 8:43 AM

    I’m sure once John McCain brings the leadership we need to cure cancer he’ll be able to cut Medicare spending substantially as well.

  3. Posted by guest | June 30, 2008 at 9:18 AM

    Well said, Ab!!!

  4. Posted by strangebrew | June 30, 2008 at 9:30 AM

    A trillion dollar budget deficit under Barry O! Change we can beleive in!
    http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2008/IO+July+2008.htm

  5. Posted by guest | June 30, 2008 at 9:31 AM

    Here’s a tidbit: If you read Obama’s first book you will learn that he worked as an analyst a financial firm for a short time after graduating from Columbia. Obama may not know much about economics but he knows more than John “I’ll give you a gas tax holiday to reduce gas prices” McCain.

  6. Posted by guest | June 30, 2008 at 9:34 AM

    Whatever, the moneymaking industry always manages to appoint guys who serve its own interests anyway. The president doesn’t really need to know much what good is a rudimentary understanding of supply and demand going to do him against a harvard educated economist?

  7. Posted by guest | June 30, 2008 at 9:37 AM

    John McCain doesn’t know much about campaign finances, but he knew enough to co-sponsor a campaign finance reform bill which he is in current violation of (’cause he doesn’t know much about it).

  8. Posted by guest | June 30, 2008 at 9:54 AM

    Ahem…windfall taxes. In terms of economic stupidity this is several orders of magnitude larger than McCain’s gas tax pander.
    McCain’s tax holiday leaves demand unchanged to slightly up, has no/small supply impacts. Obama’s windfall profit tax results in job losses, decreased production and in extreme cases corporate relocation (id est more job losses).
    Mind you, they’re both stupid, but in this Hobson’s choice of an election…

  9. Posted by guest | June 30, 2008 at 10:03 AM

    How can Gramm even mention Enron when he wrote the Enron loophole into legislation? Kenny Boy Lay convinced Gramm that electronic trading markets would be more “efficient” if they were not regulated. The lesson that Enron and the mortgage crisis should have taught us is that too much regulation is bad and no regulation is worse.

  10. Posted by guest | June 30, 2008 at 10:07 AM

    Graham is currently conducting black hole experiments at UBS…..I wonder how that is working out for them??
    HE is not what the system (from a participant’s standpoint) needs. Now from an I-banks position he is exactly what a failing, broken system craves…more accounting “fun”.
    Just more wind from a tired “old school” banker.
    MS

  11. Posted by guest | June 30, 2008 at 10:12 AM

    Ugh…and wasn’t Gramm’s wife on Enron’s board? This is repulsive, and I am a Republican.

  12. Posted by guest | June 30, 2008 at 10:16 AM

    Phil Gramm is skeptical of financial regulation because it is putting America’s financial-market supremacy at risk!! Why am I not surprised? Afterall, he is the Vice-Chairman of UBS America, the bank that epitomizes gross management failure at all levels.
    Excuse me, but the reason the rest of the world invest in the United States is because they have faith in the financial system of the United States of America. If more regulations are needed in order to rebuild the integrity of the US financial system and to regain the confidence of the international investors, then so be it. If more well thought-out and carefully implemented regulations can salvage the situation, then do it.
    I think Gramm is in denial about the appropriateness and effectiveness of self-regulation. The system has failed and you cannot trust Wall Street to regulate itself. Government regulation has to come back. At least for as long as Wall Street is living on the Fed liquidity life support.

  13. Posted by Bugs Meany | June 30, 2008 at 10:30 AM

    @ guest 9:31: “Obama may not know much about economics but he knows more than John “I’ll give you a gas tax holiday to reduce gas prices” McCain.”
    Someone beat me to this, but nothing beats these chestnuts:
    “I’ll raise taxes on oil companies to make them lower their prices and increase supply.”
    “I’ll create jobs and make America more competitive by raising taxes on business of all stripes.”
    And, from the Charlie Gibson debate:
    “I don’t care if raising the cap-gains tax means less revenue for my social programs, I will do it anyway.”

  14. Posted by guest | June 30, 2008 at 12:00 PM

    Oh, and how do you forget
    “The economy is slowing and unemployment is rising so I will raise the minimum wage”?
    or the clincher
    “Trade is bad”?

  15. Posted by guest | June 30, 2008 at 12:00 PM

    You’ve got to be kidding! Is he the same Phil Gramm who once famously stated, “Sure I represent rich people because no poor person ever offered me a job!”

  16. Posted by diablo | June 30, 2008 at 12:25 PM

    Carney, you forget to mention that Gramm was not only hired by UBS, he was also registered as a lobbyist by UBS while “advising” McCain.

  17. Posted by guest | June 30, 2008 at 12:48 PM

    Re Enron,
    Wasn’t Gramm’s wife on their Bd? That’s always good for a campaign

  18. Posted by guest | June 30, 2008 at 1:04 PM

    Gramm’s nickname is “turtle”.

  19. Posted by guest | June 30, 2008 at 1:25 PM

    Jimmy Cayne and Seargent McGriddle for President and Vice President!

  20. Posted by DrederickTatum | June 30, 2008 at 1:56 PM

    Austan Goolsbee > Phil Gramm

  21. Posted by Anal_yst | June 30, 2008 at 2:08 PM

    Anyone read Bill Gross’ July investment outlook? “500 billion in additional government spending?”
    Seems to me like a little bit of the “be careful what you wish fors”

  22. Posted by guest | June 30, 2008 at 2:15 PM

    Is that the same Austan Goolsbee that told the Canadian Gov in private to ignore the public comments from Obama about unilaterally changing NAFTA and how trade was bad?

  23. Posted by onetwo | June 30, 2008 at 2:37 PM

    @2:15 & Bugs Meany – Bravo pick ups.
    @10:03 – While this is no defense of “Black Hole at UBS” Gramm you are mixing your arguments ad absurdiam. Enron didn’t fail because “Kenny Boy Lay convinced Gramm that electronic trading markets would be more ‘efficient’ if they were not regulated.” Enron failed because of their accounting for non-cash accruals and “lazy susan” financing structures. Electronic trading is indeed more efficient (quick test: check the old b/a spreads when NYSE was floor-run and NASDAQ was “the” electronic house). Enron fucked up by marking all their non-cash “revenues” into the quarter where they implemented a system instead of when the revenues actually “hit”. Electronic trading didn’t fail, their accounting did. I don’t see how that’s an argument against Gramm.

  24. Posted by DrederickTatum | June 30, 2008 at 4:12 PM

    @2:15 – Yes… the same Austan Goolsbee.

  25. Posted by guest | July 2, 2008 at 1:34 PM

    @ onetwo…oh right, and regulation of the trading markets would not have made one iota of difference in when they booked those revenues…and Gramm simply didn’t do his diligence about Enron which is why listening to their lobbyists while his wife sat on their board was so egregious.

  26. Posted by guest | July 2, 2008 at 1:35 PM

    @ onetwo…oh right, and regulation of the trading markets would not have made one iota of difference in when they booked those revenues…and Gramm simply didn’t do his diligence about Enron which is why listening to their lobbyists while his wife sat on their board was so egregious.