Bush’s Economic Advisor Lindsey Is Man of Contradictions


Republican front-runner George W. Bush has faced accusations lately of being an intellectual lightweight. His chief economic advisor most definitely has not.

Lawrence B. Lindsey has all the academic and policy heft (former Harvard associate professor, former senior White House economist, former governor of the Federal Reserve) that any candidate could want. And compared with the candidate’s spare frame, he has a substantial amount of physical heft as well.

“Let’s put it this way, I weigh too much,” he concedes.

Lindsey, 45, leads a team of economic luminaries that has already designed the Texas governor’s proposed $483-billion tax cut, played a role in his education proposals and steered him through the shoals of Social Security reform and free trade. He has made himself indispensable to the effort to flesh out Bush’s claim of being a “compassionate conservative.” And he has clearly won the candidate’s confidence.


“I am very fond of Larry Lindsey and I value his advice,” Bush said in response to a question. “I trust Larry’s judgment and admire his intellect.”

But for all that, Lindsey is an odd choice for Bush and could produce some surprising results as the campaign heats up. For where Bush is consistently affable, Lindsey is described by some as abrasive.

Where the candidate is an unstinting optimist, the advisor can be deeply pessimistic. And where Bush seems open, straightforward and even simple, Lindsey is often maddeningly, aggressively, proudly complex.

“Larry is a very complicated guy,” said Alicia Munnell, a former senior Treasury Department official and Clinton White House economist who has clashed with Lindsey in the past.


Lindsey’s reputation for complexity rests most immediately on his stint at the Fed from 1991 to 1997. Though a staunch conservative, he took to lecturing the nation’s banks about improving their lending to poor and minority communities.

But his instinct for the unexpected runs far deeper. And while such behavior is a trademark in the academic circles he once traveled, it is substantially rarer--and sometimes more dangerous--in the sound-bite simplicity of campaign politics.

“Some of his views have surprised me,” said William Niskanen, chairman of the economically conservative Cato Institute. “I don’t know whether he really believes them, and they’re subject to misinterpretation.”

In a recent interview, Lindsey sought to portray himself as a technician who does little more than assemble policy options for the candidate, as a homebody with few interests beyond work and family.

“I don’t watch TV. I don’t go to football games. I lead a very narrow life, a very simple life,” he said.

That doesn’t quite jibe with evidence of the economist’s growing influence on the campaign. The most recent example: the tax plan in which Bush, apparently following his advisor, dropped any mention of what has long been Republican theology--slashing the capital gains tax rate. “I think capital should be taxed,” Lindsey said.

And the self-portrait does not square at all with what has been a consistent pattern in Lindsey’s career of taking surprising stands and picking unusual forums in which to pursue them.

In the late 1980s, he wrote what the Economist magazine recently called “the most valiant intellectual defense of the Reagan tax cuts” just as the economics profession was labeling them failures. And he chose to do so as part of getting his doctorate degree at that bastion of generally liberal economics, Harvard University.


In the early 1990s, Lindsey carried his enthusiasm for tax cuts into the Federal Reserve, which has considerable influence over the economy but little over tax policy. According to colleagues at the time, he used board meetings to give long disquisitions on tax and budget issues that had little immediate bearing on the panel’s job of setting interest rates.

Most recently, he wrote a book called “Economic Puppetmasters,” whose ostensible purpose was to show how world leaders such as Fed Chairman Alan Greenspan influence events, but whose pessimistic conclusion seemed to be that leaders have precious little power to influence anything.

None of this is to suggest that Lindsey seeks only to shock. To the contrary, he is a firm believer in equal opportunity; in the notion everybody has a right to run the economic race and to begin from a fair starting point. It’s just that he has a knack for expressing himself in provocative ways.

Nor is it to say that Lindsey is the first economist in a long time to attempt the transition from academic provocateur to political advisor and policymaker. One of his PhD thesis advisors, then-Harvard professor Lawrence H. Summers, crossed similar terrain a few years ago (but only just barely) and is now Treasury secretary.

Soon after coming to Washington for the World Bank, Summers signed off on a study that suggested poor countries could make money by accepting the trash of rich ones. The idea so horrified Vice President Al Gore that he blocked Summers from joining the administration for several years.

In fact, Lindsey may be more cautious than Summers was, and he is certainly more moderate than his most startling positions seem to indicate. That’s apparent from a close look at the issue that more than any other won him his bona fides as a compassionate conservative: bank lending to poor communities.

Few people question the genuineness of Lindsey’s concern for poor and working-class Americans. The son of public school teachers in the backwater of Peekskill, N.Y., he sees himself as coming from this tier of society. “A few generations ago, we were the functional equivalent of peasants,” he said of his family.

But his background hardly made him the fire-breather portrayed by bankers when he embraced the community-lending cause.


For starters, he did not seek out the issue when he arrived at the Fed. He was assigned it by Greenspan, who asked him to keep tabs on the Fed’s role in two laws: the Community Reinvestment Act, which requires banks to serve the whole community in which they operate, including poor parts; and the Home Mortgage Disclosure Act, which requires banks to collect data on the race, gender and income of mortgage applicants.

Lindsay did cause a stir in 1992 when he supported Munnell, then research director of the liberal Federal Reserve Bank of Boston, in using the Home Mortgage Disclosure Act data to study racial discrimination by local lenders. “Larry was the only senior person willing to find out whether people were being discriminated against,” Munnell said.

But agreeing to the study was about as far as Lindsey would go. While Munnell thought its results showed a great deal of discrimination, Lindsey found only a little. He opposed activists’ use of the study and the laws to force banks to increase lending.

“Larry may be compassionate, but first and foremost he’s a conservative, which means he doesn’t want to upset business or his candidate’s chances,” said John E. Taylor, head of the National Community Reinvestment Coalition, a Washington-based activist group.

Nevertheless, Lindsey continues to take surprising stands even as the presidential campaign begins in earnest.

He argues, for example, that the economic expansion is largely the product of a stock market bubble that could pop at any time. This puts him at odds with millions of American investors and seems to require a dizzying pirouette for someone who believes in the wisdom of markets.

He insists that the first aim of any tax cut must be to help the have-nots climb into the ranks of the haves, a stand that may not be shared by affluent voters who would just as soon see a cut in their capital gains tax rate.

Perhaps most important, he doubts the ability of any leader--including presumably a newly elected George W. Bush--to make much difference on the economy or almost anything else, and, in doing so, exposes a fundamental tension in the conservative position.

“Conservatives say they don’t believe in government, either because it can’t or shouldn’t do anything, but they still want to be in positions of power,” said Alan Blinder, a liberal Princeton economist who was Fed vice chairman during part of Lindsey’s tenure at the central bank. “It’s a contradiction.”

How Lindsey resolves the contradiction--and, more important, how Bush does--could prove to be one of the more intriguing political exercises of the campaign.