The Enron sugar daddies include Weekly Standard editor William Kristol ($100,000), CNBC host and National Review Online columnist Lawrence Kudlow ($50,000), New York Times columnist Paul Krugman ($50,000), Weekly Standard contributing editor and Sunday Times of London columnist Irwin Stelzer (approximately $50,000) and Wall Street Journal columnist Peggy Noonan ($25,000-$50,000; apparently she cannot recall the exact sum).

We’re assured this is a very big deal. “The burgeoning scandal [has] replaced the war as the Beltway’s reigning obsession,” the Washington Post reported on Wednesday.

A review of the charges makes clear that none of the Enron media players, who were all slow to cop to their Houston boondoggles, come out looking very good. But that also goes for their chief accuser, conservative columnist Andrew Sullivan. His selective prosecution raises suspicion about whether he is simply trying to right an ethical wrong or, more likely, hoping to damage one of the left’s most effectively critical voices — Paul Krugman, a former MIT economist who has landed punch after solid punch on the Bush administration over the past year.

Right from the outset, Sullivan, using his daily online column, called for an “investigation” into Krugman’s alleged ethical lapse. (By who, the Pundit Police? Is that run out of the Department of Justice?) He suggested Krugman and others “recuse themselves” from the Enron situation, the way Attorney General John Ashcroft did, since as a senator he received Enron contributions. According to Sullivan, the Times columnist should return his Enron money, just as Senator Hillary Clinton had returned the campaign contributions she’d received from Enron. (In Washington, contributions and paychecks are seen as one and the same.)

“Disclosure is a must,” wrote Sullivan. “We demand it of politicians. Why should we not demand it of the journalists who police them? If it’s corrupting for politicians, why is it any less corrupting for pundits, who can exercise as much power as many Congressmen and often have more influence than individual Senators? ”

Yes, both politicians and the press depend on public trust, but the last time we checked pundits did not have the power to pass legislation, prosecute criminals or declare war. Nor were pundits answerable to the voters. Indeed, the level of importance granted by the media to this Enron media tempest is more proof than we need of the warped sense of self-importance such pundits have about themselves and their colleagues.

The absurd levels of self-absorption are reminiscent of the time, early in George Bush’s campaign, a Boston television journalist sprang a pop quiz on a befuddled W. While the cameras rolled, the reporter asked him to name several foreign leaders. Bush stumbled badly. More than a few pundits then rushed forward to defend Bush, suggesting even they wouldn’t have been able to ace such a tough test. Their courage in admitting to just skimming the international news section every morning was commendable, but unlike Bush, those columnists weren’t angling to become the leader of the free world.

So, just what crimes did these pundits commit?

Irwin Stelzer, contributing editor for the Weekly Standard and a columnist for the Sunday Times of London.

To date, Stelzer still has not disclosed to readers how much he was paid to serve on an Enron advisory board that he helped organize. In a Weekly Standard piece about Enron last November, Stelzer defended the company by stressing there was “no indication that the mistakes were other than honest ones, or that investors were deliberately kept in the dark or misled about the company’s finances.”

In that piece, Stelzer told readers about serving on the advisory board, but not that he was paid tens of thousands of dollars. This came after years of writing favorably about Enron without giving readers a hint of his financial ties to the company.

Bill Kristol, editor of the Weekly Standard.

Not much better than Stelzer’s situation. Kristol collected $100,000 for serving two years on the same lightweight Enron advisory board while editing a weekly magazine that routinely covered energy and deregulation, policies Enron was actively trying to shape. It wasn’t until Stelzer’s column last November that readers were told about Kristol’s Enron involvement. Just how much Kristol pocketed was revealed only later, by other publications. If there’s an ethics crime for Sullivan to prosecute, it’s the Weekly Standard’s nonexistent conflict-of-interest guidelines.

Last week, the New York Times reported that Ralph Reed, the former head of the Christian Coalition, was given a plum, $10,000-per-month consulting gig at Enron at the request of Bush strategist Karl Rove. The clear implication being that the Bush camp was trying to win over Reed as an ally by using Enron’s payroll. Was a similar strategy at work with Kristol? Kristol was not known as a Bush booster — he backed Sen. John McCain in the Republican primary. Could the board membership have been designed as a way to quietly lead him to the Bush camp? Only Enron execs know the answer to that question.

Peggy Noonan, columnist for the Wall Street Journal.

The conservative opinion maker outed herself last Friday; in a column critical of Enron and its culture of wealth, she informed her readers that she’d once done speechwriting for the failed Houston energy company. Like almost everyone else involved, however, Noonan had trouble coming right out and telling readers how much she pocketed. Instead, she wrote that “if memory serves,” she earned between $25,000 and $50,000 for her work. But even those numbers were hard to come by — readers had to calculate on their own the number of hours she worked (between “100 to 200 hours”), and multiply that by the rate she charged ($250) in order to get the final eye-popping invoice.

Noonan then admitted the speech she wrote for Enron wasn’t very good and that only portions of it were even used. Yet going by her high-end estimate of 200 hours billed, Noonan spent five weeks straight, working 40-hour work weeks, to deliver contributions that, she conceded, “weren’t helpful.”

After initially criticizing Noonan, Sullivan reversed course, writing that he’d been “a little harsh” on her and that Noonan had been “had” and “used” by the energy giant. Some at Enron might quibble with that assessment.

Lawrence Kudlow, cohost of CNBC’s “America Now” and an editor for National Review Online.

Kudlow earned $50,000 for a year’s consulting and two speaking fees. In his National Review column on Monday, Kudlow claimed he had been “completely forthcoming with respect to my brief consulting role with Enron and the fees I received for this consulting.”

Not quite. Kudlow didn’t reveal his generous fees until Sullivan began his Enron pundit watch. And that was after Kudlow had already written about the company without letting readers in on his Enron finances.

When Kudlow finally did come clean, he explained he had been “attracted by the personable Kenneth Lay.” Not Lay’s checkbook, mind you, his personality. That was odd, because in his previous column Kudlow undressed the “characters” at Enron (presumably including Lay) who had “no moral fiber, no character, no courage and no corporate responsibility.”

Also worth noting is that it took Kudlow several months to even address Enron’s Page 1 debacle. That seems like an odd oversight for somebody with the title of “financial economics editor.” Did the Enron money help keep Kudlow quiet?

Paul Krugman, columnist for the New York Times.

This whole game of gotcha began when the New York Times, deep in a recent Enron news story, reported that Krugman had once received $50,000 to serve on Enron’s now famous advisory board. Months earlier Krugman himself had informed readers about his Enron work but conveniently left out the five-figure number. Same was true when he wrote a puffy Enron piece for Fortune magazine in 1999; the advisory board was mentioned, handsome paychecks were not. (Today, Krugman is among Enron’s harshest critics.)

Sullivan’s probably correct in his surmise that the numbers were originally left out because most Times readers, and even Fortune’s white-collar readers, would probably be stunned to read about that kind of pay for two days’ work.

But Krugman, who cut his Enron ties when he joined the Times in order to comply with the newspaper’s strict conflict-of-interest policy, flagged his association well before Enron cratered, which is more than any of the other pundits can say.

By Sullivan’s standards, though, Krugman’s the worst of the bunch, and that’s where Sullivan’s partisan instincts drive his accountability crusade off the track. Rather than calling all the pundits out for not disclosing their questionable Enron paydays, Sullivan largely gives the other (conservative) commentators a pass, and zeroes in on the only liberal among them.

For instance, assessing Kudlow’s Enron writings, Sullivan concluded, “Since [his] pieces were harshly critical of Enron, there’s no scandal.” Yet no pundit this year has been as harshly critical of Enron as Krugman has, so why is his work a scandal?

Applying a sort of retroactive responsibility, Sullivan accused Krugman of “absconding with $50,000 worth of dirty money from a criminal enterprise.” Of course, Krugman took the money three years ago, long before Enron’s problems were apparent. By contrast, Kudlow was cashing Enron checks for a speech given last August, just as the company was beginning to unravel.

Sullivan patted Kristol on the back for “getting [his $100,000 payment] out in the open.” In the open? Kristol pocketed twice as much as Krugman, yet the Weekly Standard still hasn’t printed any details about Kristol’s cushy Enron payment.

Meanwhile, Sullivan accused Krugman and the New York Times of somehow trying to cover up his Enron affiliation. “Most readers of the Times would think [the $50,000 payment] is relevant,” Sullivan complained. Yet how did he find out about the $50,000? He read it in the New York Times.

Later, Sullivan bemoaned “vast amounts of corporate cash being handed over to journalists,” and how those vast amounts “might actually give an appearance of conflict of interest for a journalist.”

But was Krugman a “journalist” in 1999 when Enron came calling? Over the years the economist has undoubtedly been a prodigious writer, with outlets in Fortune and Slate, among others. But to suggest Krugman was a journalist the way Noonan, Kristol, Kudlow or Stelzer are is disingenuous. In 1999 He was primarily known as a MIT professor of economics who, according to his own explanation, accepted the Enron gig based on a long tradition of high-profile economics professors cashing out at the expense of corporations.

So why, after the fact, does Sullivan try to hold Krugman to a conflict-of-interest standard his future employer would insist upon? Was Krugman supposed to know in 1999 that later in the year he’d be hired by the New York Times, and therefore he shouldn’t have accepted the Enron money?

Krugman answered his critics by claiming he was being smeared by a “broader effort by conservatives to sling Enron muck toward their left, hoping that some of it would stick.”

He’s onto something. Clearly, Krugman’s constant flurry of punches over the last year have hit the White House in the gut a few too many times for some conservatives. And his punches hurt — Krugman is an economist who knows his topic better than the White House does. He’s also untainted by the Clinton sex scandals. (He joined the Times after those bloody battles had been fought.) And he’s unusually blunt in his assessment that President Bush is either a fool or a liar for pushing his tax cut strategy.

Sullivan may have inadvertently revealed his true motivation for targeting Krugman when he immediately launched another media crusade: criticizing the New York Times’ “left-wing lurch” in its aggressive Enron news coverage. (Specifically, Sullivan didn’t think that a poll that found a vast majority of Americans felt Republicans, not Democrats, had close ties to Enron was Page 1 material.)

There is an important lesson about politics, money and power to be learned from the Enron pundit tale, but it’s not necessarily the one that Sullivan is shouting about.

But for the most part, Krugman’s work has earned him wide acclaim among his peers. Krugman, 47, has won the John Bates Clark Medal (given by the American Economic Association every two years to an economist under 40) and many economists believe that he’ll eventually take home the Nobel Prize. But Krugman is equally proud of the criticism he’s received. “You know you’ve achieved something,” he says, when you manage to inspire collective anger.

“My belief is that if an op-ed or column does not greatly upset a substantial number of people, the author has wasted the space,” he says. “This is particularly true in economics, where many people have strong views and rather fewer have taken the trouble to think those views through — so that simply insisting on being clear-headed about an issue is usually enough to enrage many if not most of your readers.”

These days, Krugman — who generally votes Democratic but also worked in the Reagan White House as an advisor — has been particularly busy. He was one of the first economists to criticize Alan Greenspan, and he’s used his New York Times column to rail against everything from the Bush tax cut to the electricity generators that manipulated California’s energy market.

But with a China-U.S. diplomatic crisis looming, a recession on the horizon and an energy crisis reaching deep into everyone’s pockets, even Krugman is cautious with his predictions.

Let’s talk about China first. You’re an expert on international trade; do you think that China will choose its desire for trade over its penchant for nationalistic showmanship?

China obviously has something to gain from U.S. goodwill, though I don’t know that these things usually play a big role when tempers are high. As for U.S. business, some people are anxious to be on good terms with China, but others are not. All I know is the general rule that for all we talk about how “the bond market rules the world,” nationalism always trumps economic interest in extreme situations.

Look at the Palestinians in Israel. They essentially have no economy. Their only export is workers having day jobs in Israel, and so intifada II is extremely counter to any concept of economic self-interest.

What might the standoff with China do to the American economy?

Well, nothing per se, nothing you’d notice. China is not a big export market; it’s not yet a crucial source of supply for anything in particular.

And yet the markets continued to free-fall this week, in part because of the perceived threat from China. Could the situation with China push us closer to a recession?

I have no idea. One nuclear bomb can ruin your whole day. And actual shooting wars are incredibly expensive. But luckily I’m not contemplating that at the moment.

You recently wrote about the California energy debacle. You argued in your column that generators manipulated the energy market, but that their efforts don’t amount to a profit-driven conspiracy. How is that possible?

I’ll give you a numerical example. Imagine that you’re right at capacity; everything is running flat out. Now, what we know about electricity is that demand is very inelastic — it takes a big price increase to get people to cut back even a little bit. So suppose that things are working flat out and you are a generator who happens to have 15 percent of the generating capacity. Ask what would happen to your profits if for some reason, one of your plants — amounting to 1 percent of total capacity — went offline. It would be a very modest estimate to say that a 1 percent reduction would lead to a 10 percent increase in the price of electricity.

If you work it out, you’ll discover that you’ll be getting more. You’ll still be selling electricity from the other 14 percent you have online. You’ll be selling it for a higher price, so you’ll actually be receiving more dollars for electricity by taking one of the plants offline. And of course, you also will be saving the cost of fuel that you use to generate the power.

So if you’re in that tight situation, there’s a clear incentive for a generator who has a substantial share of the generating capacity to take some of it out of service. If he’s smart, he’ll never say that, which means that [proving the manipulation] requires digging for only circumstantial evidence.

There’s a long history behind this. There was a lot of evidence of market manipulation in Britain in the early ’90s, which is what alerted people to the possibility even before California deregulated.

What happened in Britain?

They privatized the power system and it was very extreme. There were just two generators and, basically, when you looked at the downtime for most of the generating facilities, they tended to happen during times of peak power demand — which was a sign that they were doing it to drive up prices.

How did Britain resolve the problem?

It ended up not being particularly controversial that market power was an issue. They ended up reformulating the system, putting in place temporary wholesale price controls and windfall profit taxes on the generators while trying to work out a new system.

You’ve suggested that wholesale price controls — put in place by the Federal Energy Regulatory Commission, or FERC — would help alleviate the problems here too. How would they work and how long should they last?

Until new capacity has the time to come online. What people have been saying — those who know a lot about this — is that you could set prices at a point that’s way, way above normal, way above the level at which it would be profitable for people to build new plants. They would just be a way of getting through a transition period.

Could this problem have been avoided if those caps had been in place from the start?

Not really. Suppose California hadn’t deregulated; there would probably be a power shortage anyway. It’s probably true that the deregulation confused people, so they didn’t build plants. But it’s a pretty good bet that even if they had never done the deregulation, the surge in the California economy in the late 90s and NIMBY-ism would have led to a shortage of plants.

So there would be power shortages in California, though not as severe as what we’re now seeing. What you wouldn’t have is a financial crisis. The utilities would be short of power and there would be occasional brownouts, but you wouldn’t have $2 billion a month of windfall profits for out-of-state generating companies.

This thing is going to resolve itself in three years, when the capacity is online. The question is whether the consumers and taxpayers should pay whatever it turns out to be — $30 billion or $40 billion in windfall profits to the generators.

Why don’t we just make the generators give back the money?

It’s impossible to disentangle who manipulated the market and how much of the windfall profits are due to market manipulation and how much are due to just general shortage.

Is there another way to get some money back from them?

If Tony Blair were president, I would say that there should be a windfall profit tax — not an extreme one. But really, we should do a little bit of everything. We should be raising rates for consumers, having a wholesale price cap, having a windfall profit tax — and all of it should have a sharp time limit. Because this is not the way you want to run any market for the long term. We’re just talking about managing a crisis for two to three years.

Given that the Bush administration has pretty much said that it won’t intervene in California, are taxpayers going to get stuck footing the bill for this crisis?

Well, it’s very difficult for the state to do anything. It can’t extract any more money out of the utilities. It can’t unilaterally impose a price control because it’s part of a larger grid [which extends beyond California and California law], and that doesn’t really work unless the whole region is under it. It’s very difficult to see the state doing the windfall profit tax. Again, a fair amount of capacity is out of state and I’m not sure what the legal ramifications would be. So yeah, roughly speaking it looks like $1,000 will be extracted from each California resident.

Will that figure keep going up? The big debate going on now in California deals with whether the proposed 40 percent rate hike will be enough. What do you think?

It probably won’t be enough. But it’s the right thing to do. What else can you do when you’re stuck? What can you do if you have no help from Washington? The answer is that you can raise consumer prices to encourage people to use less electricity, which reduces the demand for wholesale electricity, and therefore drives down wholesale prices. The virtue of a rate hike is not just that it reduces the subsidy that has to come out of the state budget but that it also probably reduces the prices that the state has to pay.

This gets back to your elasticity comment: Does demand become elastic when prices increase by 40 percent or more?

There’s some elasticity. The ideal thing — and I don’t know when they’re going to get around to it — would be time-of-day pricing, real-time pricing. There’s probably quite a lot of ability to substitute things around, to put off heavy power-using activities until the middle of the night. This is a situation that fluctuates minute by minute. The story I wrote about generators having an incentive to restrict output — well, that only works when the system is very close to capacity. Otherwise, if you try to restrict your output, some other generator who has spare capacity is going to say, “Now I have the opportunity to produce some more.”

But in order set these prices within real time, and in order to set a cap on wholesale prices, someone would have to simulate the market — determine what a fair market price should be. Isn’t that a dangerous bit of power to give someone or some entity? How is it even possible to simulate a market?

Well, you could do the real-time pricing just by having the actual price paid by users reflect the actual wholesale price at that moment, through a formula. I’m not an expert in this but I know it’s being discussed extensively. In fact, I just got a report from the New York state ISO [independent service operator] that goes on at some length about the need for real-time pricing. They know about this stuff, and they’re quite obviously very nervous. A hot summer in New York could look a lot like California.

Then it’s possible that there’s a silver lining in all of this. The California crisis could transform the way we all pay for electricity, across the country? It could make the market more efficient?

I guess so. I suspect, in the long run, if we are going to have deregulated electricity, we’re probably going to end up concluding that we need to have something like real-time pricing as a way to limit market power.

Of course, that would seem to be a long way off. Switching gears a bit, it looks like we may be headed into a recession. You’ve come out and publicly criticized Alan Greenspan for not doing enough to stimulate growth. Where is “the bottom”? Are we there yet?

Wouldn’t we all like to know. That’s what we’re looking for, right?

But do you think we’re in danger of falling into a lengthy Japan-like recession? Do you think we could use another rate cut, of say a half-point or whole point?

I’ve been saying that the rate cuts are inadequate. But I’m not 100 percent sure that they are. I’m just more nervous than the Fed is. But you can see the positive effects of the rate cuts already. It’s clear that housing is doing better than it would have been doing without the rate cuts. It’s clear that people are getting substantial money in their pocket by refinancing their mortgages. Another full point would be a lot, and even then we have room for more. So a Japan scenario is possible — but it’s not likely.

Can it be done? Can Bush be the hero who will lead us out of the current economic darkness? Is there some mix of tax cuts, interest rate adjustments and federal tinkering that will halt the slide? Such questions, certainly, are on the tips of everyone’s tongues. But as the markets continue to stumble, a growing chorus of economists is asking another, more pointed question. Never mind whether he can fix what’s wrong — is Bush making things worse?

The current situation is by no means all Bush’s fault. It’s been commonplace for months to observe that the technology and new economy companies that fueled the ’90s boom are now leading the markets down. And it’s very easy, and not at all unjustified, to lambaste the new economy leaders, especially the frothy dot-com start-ups that popped up in the late ’90s, for their excesses and poor fundamentals — including, all too often, their inability to turn a profit. There’s also little point in denying that when the new economy speculative bubble finally popped, it did so on Clinton’s watch.

Technically, the country isn’t even actually in a recession, and some stalwarts are still convinced that we may yet avoid the worst. Unemployment is still at historically low levels and inflation is negligible. But consumer and corporate debt is sky high, and the long, slow decline of NASDAQ and the Dow shows every sign of a sustained bear market. Certainly, the “R” word is on everybody’s mind. As is the “T” word, for “tax cuts.” Because for Bush, that’s the essence of good public policy: giving the people back their money.

But are tax cuts in general, and Bush’s tax cut plan in particular, the answer? As Princeton economist and New York Times columnist Paul Krugman observes, the benefits of the Bush tax-cut plan are mostly “back-loaded” — they won’t take effect for years to come and will be of little benefit to anyone right now. If Bush really wanted to stop the oncoming recession, say both conservative and liberal economists, he would push for an immediate — and temporary — tax cut. And instead of a plan that puts most real dollar gains in the hands of the wealthy, who are the least likely people to run out and spend their refunds, the best stimulus for our flagging economy would be a tax cut for the poor and working class, the people who would spend it immediately.

Most economists deem it unlikely that Bush will suddenly abandon the constituency that bankrolled his campaign, give in to Democratic opposition and focus a tax cut primarily at the working poor and lower middle class. They are not even sure that any tax cut would make a significant effect. But what alarms them most is that the political strategy Bush has been employing for months to push for the tax cut — criticizing the current state of the economy — may well be increasing consumer fears. In effect, the strategy is a self-fulfilling prophecy that could tip the country from a downturn into a full-blown recession.

“I don’t know that we’ve ever before had the experience of a slowing economy where the administration talks it down,” says Krugman. “Remember the financial crisis of 1998, which was severe and sharp? Then you had [former Treasury Secretary Robert] Rubin and [Federal Reserve chairman Alan] Greenspan going all out to reassure the public. Now, instead of that, we have an administration that’s saying it will get even worse unless you pass our tax cut.”

Are we in a recession? Peter Leyden, co-author of “The Long Boom: A Vision for the Coming Age of Prosperity,” is skeptical.

“You’ve got to be very clear that the stock market is not the economy,” says Leyden. “We always talk about that when we are talking about the long boom — a fundamental boom, not an up and down in the stock market…. The macro trends that have been driving the growth of the ’90s, like the fundamental spread of computer technology, the telecom buildup, the global integration economy, are still in motion. Maybe they’re not as robust as they were in the late ’90s, but they’re still stable and proceeding at a consistent pace. The pain we have typically associated with recessions — mass layoffs and horribly contracting economies, huge interest rates — is not here.”

But Leyden is in a minority. Economists of every political stripe see the word “recession” written on the walls.

“We’re either in a recession now or heading into one,” says William Niskanen, chairman of the Cato Institute and a former senior economic advisor to President Reagan. “The market is almost always a leading indicator and it suggests that things are going to get worse before they get better.”

“A lot of consumer and capital spending was tied to the high levels of the stock market,” says Jeff Madrick, author of “The End of Affluence.” “For the consumer, it’s the wealth effect — if you have a lot of money in the market, you are spending money or you aren’t afraid to borrow against your credit cards and house. Now people will still stop doing that. And for corporations, falling stock prices mean that capital is more expensive, so they are cutting back on capital spending. … Other issues include the Japanese problem, the higher oil prices and of course the stock market is suffering from the absurd speculation on dot-coms.”

The Bush administration has loudly and publicly agreed. For months, Bush, Vice President Dick Cheney and their aides have been expressing worries about the economy. In December, Cheney warned that “we may be on the front edge of a recession here.” In February, Bush declared, “A warning light is flashing on the dashboard of our economy.”

But to economists of nearly every political stripe, the Bush administration’s statements have been appalling strategic mistakes. In a calculated attempt to build political support for tax cuts and dump responsibility for the economy on the Clinton administration, Bush is helping to create the very reality that the vast majority of Americans want to avoid.

“In [a potentially recessionary] environment, for a president to be talking about us entering a recession is dangerous, highly insensitive,” says Madrick, who also places some of the blame on Federal Reserve chairman Alan Greenspan. “Economies are built on psychology, and here we have the president and vice president talking about recession… But most important, in early January Greenspan panicked and suddenly cut interest rates, which sent a signal to the market and Americans in general that he thought there was something seriously wrong with the American economy.”

“Initially, Bush wanted the bad economy to be associated with the Clinton era and was framing it as worse than it was,” says Leyden, “and now he is framing things as being worse than they are in order to promote his tax cut to create support and rationale for his tax cut. It was disingenuous, and a really bad move. Because he’s drumming up a pessimism about the economy that’s a self-fulfilling prophecy.”

Even Niskanen, who is adamant in his belief that the economic slowdown started during the Clinton administration, would rather Bush kept quiet about his opinions on the economy.

“He shouldn’t comment on the economy by and large,” says Niskanen. “It’s good to maintain good but private relations with the Fed. He shouldn’t argue with or even agree with the Fed in public. It’s a dangerous game. His father didn’t get it. Clinton learned that early on and Bush Jr. is learning that now. He and Paul O’Neill have to create understanding with the Fed, then leave it up to them to restore demand growth.”

Congressional Democrats have seized upon the issue of Bush’s rhetoric as well. On Thursday, Sen. Majority Leader Tom Daschle, D-S.D., said at a press conference: “I think we’re talking down the economy. And in talking down the economy, I think we’re beginning to see the results in the market. The Bush administration has been talking down the economy now for some time.”

“But why are they doing that?” continued Daschle. “Well, I think everybody knows why they’re doing that. They’re doing it for the short-term political gain of passing a tax cut we can’t afford and don’t need. They’re doing it in a way that I think is very, very harmful to the economy.”

Would a tax cut really be harmful to the economy? Economists are divided on that question. But they are united on the topic of whether the Bush tax cut, as currently envisioned, would do anything to help the economy escape or avoid recession.

Not a chance.

“Bush’s tax plan will have nothing much to do with the recession,” says Niskanen. “He hasn’t changed the plan, though he has changed the marketing. And I regret that. He’s trying to sell his tax plan not as a solution to long-term issues but rather as a way to abort the recession. That’s not consistent with what we know about how the economy works, and it invites political risks. It allows Congress to pile on in their own interests, and — if the economy turns up before the tax cut passes — it risks losing his primary argument. And it wouldn’t do anything for the economy in the near term anyway. Fiscal policy is always too little, too late.”

“The tax cut is wrongheaded in terms of helping the recession,” says Dean Baker, co-director for the Center for Economic and Policy Research, a Washington think tank. “It’s helping the richest people. If we give Bill Gates more money, we’re not going to affect his consumption very much. If we give people who are earning far less than that another $10,000 or $20,000 a year, then they’ll spend it and the economy will grow.”

A tax cut, suggests Madrick, may well exacerbate the lack of consumer confidence in the economy. “I think the Bush administration is undermining confidence because people aren’t as dumb as they think they are — you can’t tell them you really need a tax cut because of the recession. People realize this tax cut is a longer-term tax cut, not related to current events, which will undermine the ability for the government to do what it needs to do.”

“There isn’t a lot of evidence to believe that tax cuts actually act as a stimulation to the economy,” agrees Michael Borrus, co-director of the Berkeley Round Table on the International Economy. “And to the extent that tax cuts create a situation in which the government does not pay down its own debt, to that extent we can expect long-term higher interest rates. As the impact of the government’s own indebtedness — our indebtedness to ourselves, so to speak — plays its way through the system, it’s a long-term negative.”

So what should Bush be doing? Is there any kind of tax cut that would offer succor to the economy? Niskanen says no — the only thing to do is let the Federal Reserve handle it. Krugman agrees, for the most part.

“This [the solution to the downturn] is mainly about the Fed’s job,” says Krugman. “But a front-loaded working class tax cut would help, a temporary cut in the payroll tax, in the child-related tax credits — something that puts dollars in the pocket of ordinary people. It may not do anything but why not? It couldn’t hurt.”

But that would still only be a very limited stimulus. If Bush is really serious about improving the economy, says Borrus, “he could engage in a bunch of government spending that’s targeted at specific areas, like infrastructure — utilities, roads. In fact, there’s very little the president can do in the short term. The best thing the president can do — but this is not part of his agenda — is to prepare us for more rapid and more robust growth when we come out of this recession, however long it lasts.”

Leyden agrees: “There’s two ways to go with the government surplus. You can actually take that unprecedented amount of public money and start aggressively investing it in long-term strategic things that will make society more adaptable, productive and adept with dealing with the future: Transforming education, moving into new technologies like biotechnology and nanotechnology, or energy technology. You can rebuild infrastructure at a fundamental level. Or you can do what he’s doing — going back to a policy of the past, conceptualized by Reagan, and hand the money back primarily to well-off people that don’t really need it on the blind faith that they will invest it in the right places.”

But what are the chances of a renewed emphasis on infrastructural spending actually occurring? On Thursday, the Bush administration announced that it wanted to halt the Advanced Technology Program — a Commerce Department initiative that funnels about $145 million a year into strategic high-technology research efforts. What better evidence could one ask for in trying to determine the priorities of the new administration?

Whatever strategic course Bush and his administration decide to embark on, it seems pretty clear that — in the words of his father — slagging the economy just isn’t very prudent.

Additional reporting by Janelle Brown, Damien Cave, Amy Standen and Anthony York.

The string of economic crises over the past two years in Asia, Russia and Brazil pushed the IMF into the spotlight and provoked waves of criticism, not simply from angry workers and students in the streets of some crisis countries but also from high-powered economists — like Jeffrey Sachs at Harvard and Paul Krugman at MIT — think tanks on both the left and right and nongovernmental watchdog groups. Even more surprising, criticism also came from the World Bank itself, especially senior vice president and chief economist Joseph Stiglitz.

While Stiglitz rarely mentioned the IMF by name, he very publicly attacked “the Washington consensus” that the IMF, backed by the United States Treasury Department, has tried to enforce around the world. The consensus is that poor countries that rely on IMF intervention are expected to adhere to a series of “structural adjustments” that are supposed to be implemented within three years. Those adjustments include balancing budgets (or run surpluses), cutting subsidies for food and other necessities, raising interest rates, privatizing as many functions as possible, reducing trade barriers, eliminating controls on foreign investment and focusing on increasing exports.

Stiglitz, a former Stanford professor who also served as chief of Clinton’s Council of Economic Advisors before taking the World Bank job, has argued that the IMF applies a one-size-fits-all solution in these countries without taking the country’s specific history and institutional development into account. What might work in the United States may not work in countries with much different political and economic cultures.

Stiglitz is particularly harsh on how the IMF acted in Russia after the fall of the Soviet Union. He called the reforms “an ideological, fundamental, root-and-branch approach to reform as opposed to an incremental, piecemeal, and adaptive approach.” He described the Western advisors — including the IMF — as “market Bolsheviks” who thought that simply because they had the right textbooks, they could instantaneously revolutionize society, much as the Bolsheviks in 1917. Also, “some economic cold-warriors seem to have seen themselves on a mission to level the ‘evil’ institutions of communism.” This approach — which elevated rapid privatization of state property above all other goals — halved Russia’s economic output in a decade, while China, pursuing a more incremental approach that emphasized competition more than privatization, doubled its output in the same period. While growth plummeted, inequality in Russia shot up, as the privileged few plundered the country, shipping capital out (through the Bank of New York, among other places) as the IMF was trickling money in.

“The failures of the reforms that were widely advocated go far deeper [than how the reforms were implemented in Russia] — to a misunderstanding of the very foundations of a market economy,” Stiglitz told a development economics conference last spring. “At least part of the problem was an excessive reliance on textbook models of economics.” Moreover, he said, “even the creation of a market economy should be viewed as a means to broader ends. It is not just the creation of a market economy that matters, but the improvement of living standards and the establishment of sustainable, equitable and democratic development.”

In Asia, Stiglitz blames much of the economic crisis on many countries’ decisions, strongly encouraged by the IMF and the United States, to open up their financial markets rapidly without proper regulation. Then partly because of shortcomings in the regulation of financial markets in such developed countries as Japan and the United States, too much short-term investment rushed in, then rushed out. The IMF demanded high interest rate, tight money policies, designed to lure those foreign investors back into Thailand, Indonesia and Korea. But those policies pushed fragile businesses into bankruptcy, wreaking havoc on what were flawed but still basically vibrant economies. Borrowers in these countries certainly made mistakes, Stiglitz said, but the lenders were just as much at fault. Moreover, the powerful rating agencies — like Moody’s — were doubly in error. Stiglitz argues that they failed to alert banks and investors to the increasingly risky financial condition of countries like Thailand, then after the crash turned around and exaggerated the risk of returning to those countries, simply to make themselves look less foolish.

“Many countries followed the dictums of liberalization, stabilization, and privatization, the central premises of the so-called Washington consensus, and still did not grow,” he told a United Nations conference late last year. Similarly most of the countries that have grown most successfully in the past quarter-century — in East Asia — rejected much of the Washington consensus, he noted.

Stiglitz has a different approach to economic development than many of the traditional macro-economist number crunchers. Development, he argues, involves the transformation of society, including such non-economic processes as improving the status of women, not just creation of pockets of wealth. Effective strategies to develop poor countries must have the support of the population and empower them. Imposing strict economic rules on countries, as the IMF does in its structural adjustment policies, “reinforces traditional hierarchical relationships” and creates a sense of impotence, Stiglitz claimed. People are more likely to accept and take part in reform “if there is a sense of equity, of fairness, about the development process,” Stiglitz said last year in Geneva. “By contrast,” he continued, taking a barely veiled shot at the IMF, “a decision to, say, eliminate food subsidies that is imposed from the outside, through an agreement between the ruling elite and an international agency, is not likely to be helpful in achieving a consensus — and thus in promoting a successful transformation.”

Occasionally, World Bank president James Wolfensohn either appears to rein in Stiglitz or distance himself slightly. (He recently referred to Stiglitz as a “free spirit.”) But most close observers think that the two men largely agree on broad outlines and that there is a real, if at times overstated, difference between the Bank and the IMF. The IMF defends its record but rarely attacks Stiglitz.

This is not the first time there has been tension: the IMF role has changed and greatly expanded since the 1970s and often encroached on the long-term development turf of the Bank. With their different histories, missions and constituencies within member governments, the two institutions should naturally disagree to some extent.

But over the past two decades the “Washington consensus” has prevailed and largely shut down debate, despite the hammering of citizen groups, environmentalists and advocates of the world’s poor against both the Bank and the IMF. Indeed, many of Stiglitz’s critiques also apply to the actual practices of the Bank. Despite its pledges to pay more attention to the poor, to the environment and to aspects of development other than growth, two-thirds of the Bank’s outstanding loans are in support of “structural adjustment” programs (though at times to cushion the harsh blows on the poor). Also, environmentalist and human rights groups are attacking two big Bank projects nearing final approval — a massive relocation of Chinese farmers into a fragile region designated an autonomous region for Tibetans and a huge oil pipeline from Chad through Cameroon that critics say will ravage rain forest and simply benefit corrupt elites in the two countries.

Experts say the increased debate may ultimately lead to a less monolithic approach to global economic reform. “The biggest significance [of the split between the IMF and the Bank] is the willingness of the Bank and Stiglitz to challenge the macroeconomic policies of the IMF,” observes Robert Naimann, a research associate at the Preamble Center, a progressive think tank in Washington. “They’ve been forced to debate, and that creates more space. It’s one thing when developing countries face the IMF alone, and people say there’s no alternative, and it’s another thing when there’s this wide open policy debate.”

Even Ian Vasquez, director of the Project on Global Economic Liberty at the ultra-free market Cato Institute, agrees that Stiglitz’s arguments have been “constructive.” “It shows how when you give an institution like the IMF so much influence it monopolizes development views,” he said, “and I don’t think that’s a good idea.” Likewise, even though Andrea Durbin, director of international programs at Friends of the Earth, thinks that Stiglitz hasn’t incorporated environmental issues enough into his model, she sees Stiglitz as a “revolutionary” and “anomaly” within the global banking circles. “What’s refreshing about Joseph Stiglitz is he calls it like he sees it,” Durbin said, “even when his own institution is going the wrong way. And that’s unusual for a man in his position.”

As the IMF and World Bank meet, government finance ministers and bank officials will be discussing such issues as debt relief for poor countries and dealing with bankers mad about a recent IMF decision to permit Ecuador to default on some debts. The wider debate that Stiglitz has opened on the meaning of development, the constructive role of government, the limits of the market and the need for democratic transformation will be addressed tangentially, at best. But the record of car crashes and false starts on the road to global economic well-being suggests that the engineers of both economic engines and highways need to listen to Stiglitz and other critics of the “Washington consensus,” then start considering some fundamentally different designs.