In its editorial today, "Bringing Back the 30—Year Bond," the New York Times once again demonstrates either its lack of economic knowledge or its lack of scruples in intentionally misleading its readers by allowing its anti—Bush ideology to trump reality.

The Times editors claim that the Treasury is disingenuous in saying that "...the nation's ballooning indebtedness is not a factor in its recent decision to consider reissuing the 30—year bond."   Reviving the long bond, the editors say "would mean acknowledging that the nation's growing debt burden will eventually cause long—term interest rates to rise."  While acknowledging a 30—year bond "would be a good thing for taxpayers,"  the Times claims that admitting to the real reasons "would expose one of the administration's biggest failings: it has created the conditions for higher interest rates by squandering the Clinton—era surpluses and piling on debt." 

Really?

The benchmark 10—year bond was 5.74% when President Clinton left office and has declined under President Bush to 4.25% today, providing ample room for the eventual cyclical increase in rates without ill—effect.  The Times could not avoid acknowledging today's favorable interest rates, but glossed over the four—year record of low rates despite budget deficits that have already peaked with a "Right now, however, those rates are abnormally low."

The Times goes on to express concern that "financial markets are fearful" because "Without a 30—year bond, the average maturity of the debt held by foreigners has been falling — to 54 months this year from 60 months in 2003."  It claims that "the 30—year bond would alleviate some of that anxiety" over "the danger of America's immense borrowing from abroad."  Do the editors really believe that a 30—year bond will make any difference to foreign investors who have shortened duration to less than 5 years?  What the Times thinks "flags the danger of America's immense borrowing from abroad" only highlights its own lack of understanding of the way capital markets work.

If the Times editors had their way, we would be mired in the recession inherited from the excesses of the Clinton years together with higher taxes and probably higher deficits to boot.  Instead, the recession was one of the shortest and mildest in our history, the economy has added almost 5 million jobs since its November 2001 trough, and the economy remains strong with nearly 1 million seasonably adjusted jobs added in the first four months of this year (1.7 million unadjusted) and a very robust employment report this morning.  Having nothing to criticize about the decison to consider bringing back the 30—year bond, the Times can not resist impugning the Treasury Department's honesty in order to to portray it as support for the editors' discredited economic prescriptions.

Mike Nadler   5 06 05