Tuesday, May 21, 2002

In another column that is sure to provoke a loud response from ideologues (both blogger and non-blogger), Paul Krugman traces both the reasons for and the opposition to accounting reform. In essense, it's about executive compensation: thanks to the popularity of stock options executives were compelling to do whatever it took to create a smoothly rising stock price whether the fundamentals of the business warranted it or not. That's fairly uncontroversial, except perhaps among chapter-and-verse market fundamentalists. But Krugman goes on to show us where the opposition is:

Time for reform? Not according to some people. Today the Senate Banking Committee is scheduled to take up a bill drafted by Paul Sarbanes, the committee's chairman... Senator Phil Gramm, throwing his weight behind an all-out lobbying effort by the accounting industry, has made it clear that he will try to kill the bill.

I'd like to be nonpartisan here — really I would. And there are indeed Democrats who have gotten large contributions from accounting firms. But the current effort to prevent any meaningful accounting reform is explicitly a Republican initiative, one directed from the very top: The New York Times reports that Mr. Gramm is "working closely with the Bush administration" in his efforts to block the Sarbanes bill.

It seems those "partisan" comments and that ludicrous "study" have actually hit their mark a little bit. Krugman's earlier defense of his columns still applies, however: it isn't simple partisanship if the criticism is valid. You'd think the attack-dog Right would know this implicity- their entire case against Bill Clinton was built on this basic idea. Now that their boy is in the White House, though, they've changed their tune. Not surprising. That was the entire idea all along.

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