Lindsey is famous for spotting the emergence of the late 1990s U.S.
stock market bubble back in 1996 while a Governor of the Federal Reserve. According to the meeting transcripts for September of that year, Lindsey challenged the expectation that corporate earnings would grow percent a year continually. He said, "Readers of this transcript five years from now can check this fearless prediction: profits will fall short of this expectation." According to the Bureau of Economic Analysis, corporate profits as a share of national income eroded from 1997 until 2001. Stock prices eventually collapsed, starting their decline in March 2000, though the S&P500 remained above its 1996 level, casting doubt on the assertion that there was a stock market bubble in 1996. In contrast to Chairman Greenspan, Lindsey argued that the Federal Reserve had an obligation to prevent the stock market bubble from growing out of control. He argued that "the long term costs of a bubble to the economy and society are potentially great.... As in the United States in the late 1920s and Japan in the late 1980s, the case for a central bank ultimately to burst that bubble becomes overwhelming. I think it is far better that we do so while the bubble still resembles surface froth and before the bubble carries the economy to stratospheric heights." During the 2000 Presidential campaign, Governor Bush was criticized for picking an economic advisor who had sold all of his stock in 1998. According to
The Washington Post, Lindsey was on an advisory board to
Enron along with
Paul Krugman before joining the White House. Lindsey and his colleagues warned Enron that the economic environment was riskier than they perceived.
Cost of the Iraq War On September 15, 2002, in an interview with
The Wall Street Journal, Lindsey estimated the high limit on the cost of the Bush administration's plan in 2002 of invasion and regime change in Iraq to be 1–2% of GNP, or about $100–$200 billion.
Mitch Daniels,
Director of the Office of Management and Budget, discounted this estimate as "very, very high" and Defense Secretary
Donald Rumsfeld stated that the costs would be under $50 billion. Rumsfeld called Lindsey's estimate "baloney". As of 2007 the cost of the invasion and occupation of Iraq exceeded $400 billion, and the
Congressional Budget Office in August 2007 estimated that appropriations would eventually reach $1 trillion or more. In October 2007, the Congressional Budget Office estimated that by 2017, the total costs of the wars in Iraq and Afghanistan could reach $2.4 trillion. In response,
Democratic Representative Allen Boyd criticized the administration for firing Lindsey, saying "They found him a job outside the administration." == Presidential campaign leadership ==