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Dropping Report's Iraq Chapter Was Unusual, Economists Say

Concern About Impact on White House's Credibility Cited

By Jonathan Weisman
Washington Post Staff Writer
Wednesday, February 23, 2005; Page A17

At the National Security Council's request, the White House excised a full chapter on Iraq's economy from last week's Economic Report of the President, reasoning in part that the "feel good" tone of the writing would ring hollow against the backdrop of continuing violence, according to White House officials.

The decision to delete an entire chapter from the Council of Economic Advisers' annual report was highly unusual. Council members -- recruited from the top ranks of economic academia -- have long prided themselves on independence and intellectual integrity, and the Economic Report of the President is the council's primary showcase.

The annual report was upbeat on Iraq.

The withholding of a completed chapter struck some economists from both political parties as evidence of the council's waning influence.

"This is extraordinary," said William A. Niskanen, a CEA member in the Reagan White House and the chairman of the libertarian Cato Institute. "The council has been unfortunately weakened."

Outgoing CEA Chairman N. Gregory Mankiw declined to comment.

White House spokeswoman Dana Perino dismissed the excision as insignificant, saying the chapter may still be published in some form in the future. The piece dealt with the development of the Iraqi banking system, financial markets and other economic institutions after the end of Saddam Hussein's rule. It painted a positive portrait of Iraq's emergence as a potential free-market bulwark in the Arab world.

Perino said the chapter did not belong in the Economic Report of the President. "A decision was made not to include a chapter on Iraq's economy in the report, as the Economic Report of the President is an analysis of the American economy," she said.

Administration officials and economists who read the chapter said that was only part of the story. Against a steady drumbeat of suicide bombings, assassinations, sabotage and mile-long gasoline lines, some White House staff members believed that such a positive take on the Iraqi reconstruction would undermine the White House's credibility.

There was also a basic turf battle. The National Security Council believed the Council of Economic Advisers strayed too far from its domain, according to officials who spoke on the condition of anonymity to avoid the appearance of dissent within the White House.

In fact, the Economic Report of the President almost always addresses international trade issues and has often dealt with the economic policies of other countries. The 2001 report, the Clinton White House's last, contained two sections on raising the economic performance of other countries and bolstering incomes in the developing world. The 2003 report, a product of the Bush administration, contained a section on economic "Developments in the Rest of the World." A section on "Economic Freedoms" discussed at length economic policymaking from Chile to Austria, from India to Cote d'Ivoire.

Past administrations had their share of disputes with their economic councils. After Chairman Martin Feldstein's comments on rising budget deficits, the Reagan White House told council members "to shut up," Niskanen said. But officials never interfered with the economic report.

In the Clinton years, Chairman Joseph E. Stiglitz had fights with the White House over his desire to question the use of trade laws to sanction the emerging economies of the former Soviet Union, said Laura D'Andrea Tyson, a former council chairman who is now dean of the London Business School.

During the writing of the 1997 report, council members and the White House argued heatedly over a chapter on Social Security, but in the end, the chapter did appear, with some changes extracted by White House and Treasury staff members.

"We had a general sense that while we would not ever say something we did not think to be correct, there were some issues we would choose not to deal with," Tyson said.

But the removal of a completed chapter, "that one's extreme," she added. "I've never heard of anything quite like that."

Suspicions about this year's report emerged even before the volume was released last Thursday. The release was later than usual, and it did not occur on the morning of Feb. 14 as initially planned.

The 188-page analytical section was 76 pages shorter than last year's and 85 pages shorter than the average since 1990, according to Bruce Bartlett, a conservative economic commentator.

Council members said they were striving for brevity even before the Iraq chapter was removed. But the White House intervention heightened concern among some economists that the Bush administration does not value lengthy, reasoned analyses of its policies.

"They just don't seem to show that serious study is an important part of politics," Bartlett said. "It's a very casual, hands-off, almost lackadaisical approach to the policy process."

At the White House, Perino disputed that characterization, saying: "The annual report to the president is only one the many things [council members] do to help the president monitor the economy and make economic policy."

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