Sign on to the White House home page www.whitehouse.gov/infocus/economy, and you'll be treated to a dazzling display of seemingly fabulous economic news. "President Bush's actions are moving our economy forward," trumpets the first in a series of self-congratulatory billboard statements. The bragging goes on: "75,000 jobs created in May ... 5.3 million new jobs created since August 2003 ... Unemployment rate below the average of the 60s, 70s, 80s, and 90s." And all this is juxtaposed against a photo of a mostly beaming group of Republicans -- John Boehner, Bill Frist, Dennis Hastert -- watching last month as George W. Bush signed the cumbersomely named Tax Relief Extension Reconciliation Act of 2005. (The less-than-beaming exception was John Snow. Did then-Secretary Snow know that Hank Paulson would soon occupy both his Treasury office and his spot at the next "tax relief" celebration?)
But what really set me to thinking about the hypocrisy of the administration's economic pronouncements was a picture of Dick Cheney alongside a transcript of the president's remarks: "I'm proud to be up here with Vice President Cheney. I couldn't have picked a better person to be the Vice President of the United States."
Would the president's words have been quite so glowing, I wondered, had the recent news about Cheney's investment portfolio been known a few weeks back? It's one thing when a big majority of Americans don't approve of your handling of the economy, as recent polls show to be the case for President Bush. But when even the number two man on your team discounts your happy talk, I'd say you've got a real problem.
It turns out that the vice president and his wife have sizable positions in tax-free municipal bonds maturing in just over a year, which constitute a hedge against rising interest rates, while other Cheney millions are parked in an inflation-protected securities fund. What struck me as a particularly damaging commentary on the administration's deficit-spending and tax-cutting economic approach, though, was the $10 million to $25 million (precise amounts weren't disclosed) of Cheney money residing in a fund that buys mostly high-quality foreign bonds and has limited exposure to dollar assets. That means the vice president is betting on a further decline in the value of the dollar against other currencies, a sorry situation directly related to our huge trade deficit and our debt-ridden federal budget. We print greenbacks to finance our profligate spending, and we ship boatloads of those dollars overseas to buy foreign goods. All in all, we're in hock to foreigners up to our necks. And the falling dollar and rising interest rates indicate that foreign lenders are becoming disgusted with our fiscal irresponsibility.
The vice president's advisers were quick to point out that Cheney's portfolio is run by outside money managers. And to hear them tell it, he pays "no attention" to his investments. That may or may not be true, but I'd be willing to bet the veep would pay a whole lot of attention if he were losing serious money. (Which, by the way, isn't likely to happen. In my opinion, Cheney's investment managers have chosen wisely. And assuming they are principled people, they've invested their own money exactly the same way they've invested the vice president's. At Batterymarch, the company I founded, I assumed the same risks I chose for my clients. To do otherwise would have been, at least to my mind, immoral and unethical.)
So the Cheneys appear to be profiting from a decline in the United States' economic standing, a situation the vice president has helped to create. It may not be insider trading exactly, but it has an unseemly odor about it. Supporting policies that are detrimental to our country's economic health and then making money off the resultant dollar depreciation brings to mind what Ken Lay did when he sold a sizable chunk of his Enron stock at a profit right before the company imploded. Lay bailed out knowing that the situation he at least oversaw, if not outright encouraged, was threatening the health of his company and the well-being of its other shareholders.
In my opinion, this is no way to lead a company -- or a country.Â Maybe we really don't expect a captain or his first mate to go down with the ship anymore. But doesn't the first mate have to explain why his steering instructions differ from the whistles blowing from the bridge? At the very least, Cheney's investment choices, even though they are by proxy, call for an elucidating comment by the vice president. But don't hold your breath; Cheney seems to bristle at the mere notion of explaining anything to the public. Remember his energy task force? Five years later, we still don't know who the participants were or what they talked about.
A distinguished alumnus of the Harvard Business School, Dean LeBaron is founder of Batterymarch Financial Management, one of the inventors of index funds and a pioneer of quantitative and emerging market investing.Â He is the author of a number of articles and books, including Mao, Marx, and the Market.