McNomics

Back in December, I posted this quote from John McCain about not understanding economics:

McCain said ... "The issue of economics is something that I've really never understood as well as I should. I understand the basics, the fundamentals, the vision, all that kind of stuff,'' he said. "But I would like to have someone I'm close to that really is a good strong economist. As long as Alan Greenspan is around I would certainly use him for advice and counsel."

McCain said his staff hates it when he discusses his shortcomings on economics, even though he has read widely and studied the subject. "I've never been involved in Wall Street, I've never been involved in the financial stuff, the financial workings of the country, so I'd like to have somebody intimately familiar with it," he said of a potential vice president. [baltimoresun.com]

Some people responded that this was a good sign, that it showed McCain was willing to admit his shortcomings and turn to experts when needed. But Paul Krugman counters with:

Take, for example, John McCain’s admission that economics isn’t his thing. “The issue of economics is not something I’ve understood as well as I should,” he says. “I’ve got Greenspan’s book.”

His self-deprecating humor is attractive, as always. But shouldn’t we worry about a candidate who’s so out of touch that he regards Mr. Bubble, the man who refused to regulate subprime lending and assured us that there was at most some “froth” in the housing market, as a source of sage advice?

The point is that a president has to decide which advice to take, and if the president has no knowledge of economics, how is that decision made?

When Paul Krugman and The Weekly Standard see eye to eye, it's worth noting:

McCain..., on the more general matter of how he would make economic policy,... did say this:

But I as president, as every other president, rely primarily on my secretary of the Treasury, on my Council of Economic Advisers, on the head of that. I would rely on the circle that I have developed over many years of people like Jack Kemp, Phil Gramm, Warren Rudman, Pete Peterson and the Concord group...

Notice that phrase "people like." What makes it odd is that those people aren't like each other at all, at least when it comes to their economic views. A couple of them, if you put them in the same room, would set off an intergalactic explosion like the collision of matter and antimatter.

One adviser, Jack Kemp, is the man who talked Ronald Reagan into embracing supply side economics in the 1970s... He's the world's bubbliest advocate of tax cuts, dismissing the traditional Republican fixation on balanced budgets as "root canal" economics. Another adviser, Peter Peterson, is root canal economics. He's a dour Jeremiah who called the Reagan boom a "mad, drunken bash" and thinks steep tax increases on income, gasoline, tobacco, and alcohol, on top of a 5 percent consumption tax, are necessary to put the government's finances in order. He and Rudman run the Concord Coalition, an advocacy group that regards the federal government's budget deficit as the country's foundational economic problem.

Let's stipulate that a president should seek advice from a wide assortment of counselors. And McCain's list may very well reveal a refreshingly nonideological approach... Then again, it might reveal something else. You can't help but wonder: Does McCain know the unbridgeable philosophical differences among the men he mentioned, or are these simply the names that occur to him when someone asks about economic policy? There's good reason to think that in economic matters, John McCain doesn't know his own mind. He's even admitted as much...

McCain has since tried, implausibly, to disavow all these statements, protesting that his knowledge of economics is perfectly sufficient for a president. But the zigs and zags of his 25-year career as a congressman and senator suggest that, when he said he didn't know much about economic policy, he was giving us some of that bracing straight talk. ...

As for his team of economic advisers, they continue to see in McCain a picture of their own aspiration. "He's a deficit hawk above all," Rudman told me. "Has been since the day I met him."

"He understands that the solution to our long-term problems will involve some shared sacrifice," Pete Peterson says. ...

"I tell him: 'Stop mentioning Pete Peterson!'" Kemp says. "And he gets that. You look at Reagan. He ran a conventional Republican campaign in '76: limit spending, balanced budgets. Then [supply-side economist] Art Laffer and I and some others managed to talk to him. And in 1980 he ran as a growth candidate. I see something similar happening with John.

"It's true he doesn't have the same historical interest in economics that Reagan had. Reagan got it instinctively. But when I talk about the Bush tax cuts and John says, 'I don't think we should give money back to people who don't need it,' I say, 'John. John. That's not why we cut tax rates. ...

Though the particular worries differ, both sides are saying the same thing - John McCain does not know enough about economics to be trusted with the economy. He will simply follow the most persuasive advice he hears, but he won't know if it's the right choice to make, it won't be guided by underlying economic principles, and given his flip-flops on economic issues over the years, it's pretty hard to forecast what advice he might take at a given point in time.

Comments

[Peter Schaeffer]

The last few paragraphs of the Weekly Standard article are revealing, not so much about McCain but how others see him.

"As for his team of economic advisers, they continue to see in McCain a picture of their own aspiration. "He's a deficit hawk above all," Rudman told me. "Has been since the day I met him."

"He understands that the solution to our long-term problems will involve some shared sacrifice," Pete Peterson says. "And I think his leadership skills will be very effective in putting this idea of shared sacrifice across."

"I tell him: 'Stop mentioning Pete Peterson!'" Kemp says. "And he gets that. You look at Reagan. He ran a conventional Republican campaign in '76: limit spending, balanced budgets. Then [supply-side economist] Art Laffer and I and some others managed to talk to him. And in 1980 he ran as a growth candidate. I see something similar happening with John.

"It's true he doesn't have the same historical interest in economics that Reagan had. Reagan got it instinctively. But when I talk about the Bush tax cuts and John says, 'I don't think we should give money back to people who don't need it,' I say, 'John. John. That's not why we cut tax rates. We do it to incentivize people to put their capital at risk for new investment and capital formation.' And he gets that. He gets it. "I don't want John to be perfect. Politics is multiplication, not subtraction, and he needs support from all sides. He just has to listen to the right people." "

[robertdfeinman]

Not to be too snarky, but is there any evidence that those who do know the most about economics have been doing a good job?

There are plenty of people who think the most recent series of treasury secretaries, Fed chairman, and members of the Council of Economic Advisers have been (your choice): ill informed, ideologically biased, misguided, or in the thrall of some special interest or other.

There isn't even any agreement on whether steps taken in the past achieved the results desired.

It would seem that at this point in the campaign when a pol names of list of economists he is doing it as a signaling mechanism to potential supporters. If some group likes Kemp and he mentions Kemp then they are more likely to vote for him. They may even ignore the fact that he mentions the anti-Kemp as well. As long as people think their guy has a crack at influencing policy they may support the candidate.

[pgl]

Consider the fact that McCain thinks Jack Kemp is an economist. I can see it now - Art Laffer as head of CEA. If McCain trust this group of pseudo-economists and if he becomes President, I'm shortselling US Treasuries,

[anne]

http://krugman.blogs.nytimes.com/2008/01/22/can-this-be-true/

Paul Krugman pointed out that John McCain brought Phil Gramm along to the meeting with the Wall Street Journal editorial board and pointed to Gramm as his economics adviser while explaining his need for advice.

[2slugbaits]

It's hard to disagree with PK on this one; unfortunately, the same could probably be said of just about any of the candidates. Or just about any of our Presidents. It's a bit ironic that Reagan was the only President with at least a degree in economics. I remember that Larry Meyer once remarked that when he first met Clinton when being considered for a Federal Reserve job, Meyer was stunned at how ignorant Clinton was of economics. But Clinton did have the kind of intellectual curiousity that allowed him to press his economic advisors to give good advice and not just tell the boss what he wanted to hear. We forget that Bush 43 has also been able to pick some first rate economists. For example, Ben Bernanke is a worldclass mind by anyone's standards. And Mankiw and Hubbard had strong academic reputations before going over to the dark side. We don't expect our Presidents to be professional economists, but we do expect them to establish the kind of environment in which a thousand flowers can bloom.

[dissent]

Let's face it: this country has been indulging the inner dumbass since Reagan.

The Laffer curve: indulging the inner dumbass.
Decline of reading: indulging the inner dumbass.
Voting for Dubya, cause he seemed like a real regular guy: indulging the inner dumbass.
Ignoring global warming: indulging the inner dumbass.
Spreading democracy through war abroad while killing democracy through corruption at home, how sick & how stupid.
Etc ad nauseum.
As for the clowns in charge of our economy: only a society that puts 'You Deserve a Break Today' above all else would be run by such crew of charlatans, ideologues, and fools.

In the 60's hippies stood for a certain kind of self indulgence. What hasn't been recognized is that the conservative wave has brought with in another kind of self indulgence, which is even worse, because it has poisoned the well of American competence. (Paulson running off at the mouth about mortgages or the monolines, Bush in the Middle East, these guys are pathetic.)

The truth about McCain is that his posture of 'Gosh I don know too much about this awfully complicated economy!' is calculated to appeal to the American electorate. We forgive the dumbass politician because that is exactly what we indulge in ourselves.

The problem is that decades of willful stupidity, chasing stupid into every government agency, is that we end up faced with the problem posed by reality itself.

Be up to the task of life on life's terms or be taken advantage of on someone else's.

[zinc]

I find it incredible that Kemp and Laffer haven't been tarred and feathered and run out of town on a rail. How bad does it have to get and how many do-overs do these charlatan imbeciles get ?

I think the undeserved respect that Kemp has from his days with the Redskins have provided him a teflon skin. As an act of patriotism will someone please drag this rovian psuedo-economist out of the shadows into the sunlight. He's a backroom influence in this country.

[zinc]

or whoever he played for, as if I care

[billyblog]

And not to put too fine a point on it, the evidence would suggest, straight talk and media hype to the contrary notwithstanding, McCain also does not know a whole lot about a few other matters it might be thought desirable for a President of the United States to have a firm grip on. For example:

1. Constructing a rational global defense strategy. His comments on getting used to the fact of interminable less-than-defensive wars (to employ a euphemism) are positively chilling.

2. Fighting the so-called war on terror. Let's just arm ourselves to the teeth and go root terrorists and their fellow traveling jihadists out wherever they are. I mean, once we get rid of the few bad apples, the rest of the world, particularly the Islamic world, will have a chance to come out from their bomb shelters and express their undying affection for us.

3. Conducting an effective foreign policy. McCain has an almost neo-con theology about the core of international diplomacy being that unending string of projections of U.S. military force around the world mentioned in #1.

4. Implementing an enlightened healthcare policy. Patient education and choice are the keys to solving healthcare cost problems. And until we utilize these mechanisms to get costs under control, let's de-emphasize the role of the federal government in healthcare, and quietly shelve the objective of universal healthcare insurance for the time being. Though pump up those HSAs.

There is much more of this sort of thing to be found here.

And, of course, McCain has such a principled and inflexible position on torture, doesn't he? As Gail Collins put it deftly in her Op-Ed column in The Times today:

"Feb. 13: The Senate considers a bill, vehemently opposed by the White House, which would prohibit CIA interrogators from using tactics like waterboarding on detainees. McCain, whose ringing denunciation of waterboarding was the highlight of the Republican debates, votes — no. He says his own Detainee Treatment Act already bans use of physical force during interrogations. This would be the law that Bush, in one of his famous signing statements, said the president did not have to follow."

And his vote came in the wake of the following testimony on February 7 to Congress:

"Waterboarding is necessary though probably not legal, CIA Director Michael Hayden told Congress Thursday as Attorney General Michael Mukasey said he would not open a criminal investigation into the CIA's use of the technique."

My goodness, as Donald Rumsfeld might say, a good case could be made that economics is McCain's strongest suit.

[anne]

"Clinton when being considered for a Federal Reserve job, Meyer was stunned at how ignorant Clinton was of economics. But Clinton did have the kind of intellectual curiousity that allowed him to press his economic advisors to give good advice and not just tell the boss what he wanted to hear."

I suggest trying to explain that to Brad DeLong. Good grief.

[anne]

"But Clinton did have the kind of intellectual curiousity that allowed him to press his economic advisors to give good advice and not just tell the boss what he wanted to hear."

Among the most bizarre comments ever; no surprise there though.

Was that the President who presided over a stunningly fine economy gaining employment figures that it was assumed were impossible without wild inflation, the President whose 8 years in office saw a job creation figure of 225,000 a month, with no inflation to speak of and, yes, a balanced budget that turned to surplus, to large surplus. Wonderful productivity growth, following high investment levels, fine middle class income and wealth gains. Duh.

I must be thinking of the finest 52 months of tepid growth during the years of George Bush in which 160,000 jobs were created a month by contrast. I get so confused over nonsense.

[2slugbaits]

zinc,

It was the Buffalo Bills.

[Bruce Wilder]

rdf: ". . . is there any evidence that those who do know the most about economics have been doing a good job?"

Denote "who do know the most", define "know" and define "good job".

What passes through the public discourse is not just competing careful, fact-based analyses supporting a consensus vision of the public good -- the technocratic ideal -- but also propaganda to motivate adoption of policies to benefit competing and conflicting interests. The propaganda does not have to be good analysis; it may better serve its purposes if it obscures the connections between policy and outcome, than vice versa.

2slugbaits: "It's hard to disagree with PK on this one; unfortunately, the same could probably be said of just about any of the candidates. Or just about any of our Presidents."

I think it serves the Right to obscure just how powerful Presidents are, in relation, to the economy. Clinton ran on, "it's the economy, stupid" and very responsibly and earnestly tried to put the U.S. on a better economic footing. Cactus at Angry Bear has been collecting comparisons of Presidential and Party economic performance, and the case that Democrats are aiming at a target different from the one typically aimed at by Republicans is pretty strong. And, the case is pretty strong, too, that Republican Fed Chairman not only read the election results, but try to influence them.

2slugbaits: "Mankiw and Hubbard had strong academic reputations before going over to the dark side."

Mankiw is bright, but, in his personal preferences, practically incoherent. Hubbard is bought and paid for, and everyone knows it.

[david]

Bruce Wilder -- fantastic.

Phil Gramm, as I recall, is an accredited economist. Can't kick him out of the tribe no matter how much McCain likes him. (If it makes you feel better, we're stuck with Newt in my tribe (and my tribe is stuck with me)).

Imagine if we had had Phil Gramm as president. I don't think we got worse with Bush, though it is hard to imagine anyone worse than Bush.

[Student]

Not to be flippant about the subject, but I don't find this much different than either Democrat candidate. Neither Obama or Hillary have been formally educated in economics. Their health care plans are shambles. Even Paul Krugman admits that the best we can hope for is that they will eventually lead to a single payer system.

McCain may not know thing one about economics. But let's not pretend like any of the other candidates do either.

[anne]

Wall Street Journal columnist Stephen Moore noted some time ago that Phil Gramm would be McCain's Treasury Secretary. Gramm, not the others will be the adviser who matters to McCain. There was a reason McCain brought him to to Journal meeting.

[2slugbaits]

anne,

You missed my point. I wasn't criticizing Clinton's economic policies. I thought they were first rate. My point was that a President doesn't have to know a lot about economics to have good economic policies. Reagan had a degree in economics, but his policies were a disaster. Clinton didn't have a profound understanding of economics but his Administration fostered an atomosphere of intellectual curiousity. Remember all those stories of Clinton holding those college style BS sessions until 3:00 in morning??? Both Hillary Clinton and Barack Obama are intellectually curious in a way that neither Bush nor McCain are.

[anne]

"Their health care plans are shambles."

Nonsense, but keep on with such nonsense. The health care plans are both fine will only become more so if passed, but there will be no single payer plan for that is impossible politically as Paul Krugman understands.

Barack Obama has set down a terrific set of economic plans, but that takes, like, well, like, reading:

http://www.barackobama.com/2008/02/13/remarks_of_senator_barack_obam_50.php

[anne]

2SB:

Ah, I understand and agree. Curiously, I have not read about how Hillary Clinton has been currently working with advisers but Barack Obama is supposed to be incisive and flexible. Bill Clinton would always talk with advisers at length.

[anne]

I know for sure * that Hillary Clinton has dismissed a single-payer health care plan or even using Medicare more broadly as Jacob Hacker is currently advising and as John Edwards and Paul Krugman prefer.

Barack Obama is evidently nearest Jacob Hacker's plan, where both ask no personal requirements only wishing to offer incentives.

* By way of personal conversation at lunch with a specialist adviser.

http://www.sharedprosperity.org/bp180.html

January 11, 2007

Health Care for America: A proposal for guaranteed, affordable health care for all Americans building on Medicare and employment-based insurance
By Jacob S. Hacker

[anne]

Quietly, always using the cover of a weekend for what is best kept quiet, George Bush is this weekend suggesting scaling the cost of Medicare drug insurance according to income.

[Bruce Wilder]

2SB: "Both Hillary Clinton and Barack Obama are intellectually curious in a way that neither Bush nor McCain are."

My demur would be that Bush, and McCain, are not going to aim at the same things as Clinton and Obama.

Bush's lack of intellectual curiosity is not nearly as damaging as his eagerness, and that of many of his Republican allies, to promote political and business corruption.

It is possible to have the best of intentions, and still not know enough about what you are doing, to do a good job. But, if you have the worst of intentions, then competence or skill at the job you are actually trying to do badly are irrelevant. The hackocracy, which is the Bush Administration, from the California Electricity crisis through Iraq Reconstruction and Katrina to the surge in predatory lending, has no need of intellectual curiosity.

[ken]

Does anyone who really matters in life know anything about the dismal science of economics beyond a few simple ideas? I doubt it, so it doesn't matter what McCain knows. McCain will do just fine.

There isn't a single significant business exectutive who knows a whit more about economics than does John McCain. Didn't stop Michael Dell, Bill Gates, Steve Jobs, or millions of others from success.

[Bruce Wilder]

Student: "McCain may not know thing one about economics. But let's not pretend like any of the other candidates do either."

Oh, yes, absolutely, let's pretend that there's no choice at all in this election. "They" are all alike. Just like Gore's differences from Bush were barely discernible in 2000.

[Noni Mausa]

david said: I don't think we got worse with Bush, though it is hard to imagine anyone worse than Bush.

I don't often have nightmare, but one of them involves this: Bush 43 has made Reagan look good, and made Nixon look like a statesman.

Who's going to make 43 look good?

Yikes!

[anne]

Jacob Hacker's plan, if I understand it properly from my reading and conversation, appears to be politically realistic because it uses the current private insurance system while offering low administrative cost Medicare to extend coverage to persons away from the workplace and allow for an added employer coverage choice. Employers would be asked to extend coverage to workers and families, as so often the case presently.

What was drilled at me, was the need to be politically realistic in offering a plan even though any plan especially a more ideal plan would require modification simply because of the scope.

[anne]

"Does anyone who really matters in life know anything about the dismal science of economics beyond a few simple ideas?"

Quite a question, given the largest department is many of the most priminent universites is the economics department. The departments turning out remarkably successful business women and men for decades. But, there is always a reason to sneer at being well educated or highly curious at what we are not formally educated at any rate.

[btg]

"Quite a question, given the largest department is many of the most priminent universites is the economics department. The departments turning out remarkably successful business women and men for decades. But, there is always a reason to sneer at being well educated or highly curious at what we are not formally educated at any rate."

microeconomics is pretty valuable as a basis for going into the corporate world, or even the family business... macro is another thing. and unfortunately, like so many people who are supposedly" educated" being a technocrat in one specific field doesn't necessarily translate into having the wisdom to deal with things outside of that field, and can often make someone blind to the limits of their own speciality.

what worries me about a president with no fundamental knowledge of economics is that they lack the intellectual basis for critiquing any advice they are given - to see what is idealogy and bias. jfk got the US involved in the Pay of Pigs fiasco because he believed the advice he was given by the supposed experts in the CIA and the military - but at least he had the ability to learn from that mistake.

[btg]

oh... and jack kemp was a congressmand for Buffalo NY, because he had played for a number of teams, and ended his career with the 1969 Buffalo Bills - along with OJ!

Maybe McCain should ask OJ for some economic advice too!

[save_the_rustbelt]

Given what I read from economists lately, I;m not certain they are best source of sage advice on anything.

Anne: Business people are not turned out by the economics department, business people are turned out by the business college, and the two are not the same thing by a long shot (sometimes the economists are housed within the business college, sometimes not).

Most economists could not manage a two window Dairy Queen.

[Jay]

Anne:

"Was that the President who presided over a stunningly fine economy gaining employment figures that it was assumed were impossible without wild inflation, the President whose 8 years in office saw a job creation figure of 225,000 a month, with no inflation to speak of and, yes, a balanced budget that turned to surplus, to large surplus. Wonderful productivity growth, following high investment levels, fine middle class income and wealth gains. Duh."

You forgot, "just so happened to be president during the greatest increase in productivity in decades, thanks to the development of the internet and related technologies"

Do you want to point to an even remotely comparable private sector benefit (something outside of the president's control) that helped the U.S. economy since 2000 in the way the internet boosted the economy during the Clinton Administration? Not to mention that some of the growth over the last half of the 1990's turned out to be about as real as home price appreciation from 2004 to 2005 (see a chart of the NASDAQ from say 1997 to 2003. Plus then there is the fact that the effects of many political policies have enough of a lag that they don't show up until the next presidency (Clinton's NAFTA).

Anne, I think your problem is you try to make everything simple, if not simpler. You think that the economy can be modeled as y = mx + b and prefer these simple regressions which meet the eyeball test(so long as they fit the biblical narrative democrats = christians; republicans = samaritans).

[lonesome moderate]

"Does anyone who really matters in life know anything about the dismal science of economics beyond a few simple ideas?"

Quite a question, given the largest department is many of the most priminent universites is the economics department. The departments turning out remarkably successful business women and men for decades. But, there is always a reason to sneer at being well educated or highly curious at what we are not formally educated at any rate.

Anne - is the level of economics training you have in mind greater than that typically received by a Harvard MBA? I can think of at least one Harvard MBA who has convincingly demonstrated his appalling ignorance of the subject.

[2slugbaits]

Jay,

No doubt that Clinto was lucky and the productivity boom is what likely made the difference between a great economy and a merely good economy. But even getting to a "merely good" economy is quite an accomplishment. Clinton did manage to get the country's fiscal house in order, which increased national saving. That made it possible for interest rates to be lower than they otherwise would have been. Yes, interest rates were higher under Clinton than under Bush, but economic activity was also a lot higher.

"Not to mention that some of the growth over the last half of the 1990's turned out to be about as real as home price appreciation from 2004 to 2005 (see a chart of the NASDAQ from say 1997 to 2003."

I don't understand this statement. I'm assuming you have in mind the tech bubble. But when we're talking about economic growth, I think most people mean real GDP, which is a flow of final goods and services produced that year. Increases in NASDAQ prices, Enron share prices and tech bubbles do not directly add to GDP except possibly in some indirect way as a wealth effect. But that's not entirely convincing because a lot of the GDP growth in the 90s was in domestic private investment and not in consumption, which is where we would see wealth effects.

[Jay]

2slugbaits: The tech bubble was a massive pile of mal-investment left for Bush to deal with.

And to further show the sillyness of Anne's jobs argument. Think about how great our Presidents during the 1920's were and how crappy our 1930's presidents were using similar metrics as Anne points out.

[Lafayette]

Article: McCain has since tried, implausibly, to disavow all these statements, protesting that his knowledge of economics is perfectly sufficient for a president.

Sorry, but as the norm would have it, McCain is probably right.

Though it would be nice to have a President with some in depth knowledge of economics (meaning more than just EC101), such is unlikely. Bill was no better but gathered around him some knowledgeable people, like Rubin.

And, lest we forget, Billy-boy did not take Greenspan to task when most of Washington thought he walked on water in matters of Finance.

How wrong we were, weren't we? And, McCain will be more of the same. The Reps wont touch the Milk Cow Taxation that presently favours the plutocrats.

[Lafayette]

Boom and bust

Jay: Do you want to point to an even remotely comparable private sector benefit (something outside of the president's control) that helped the U.S. economy since 2000 in the way the internet boosted the economy during the Clinton Administration?

You mean, I gather, the boom part of that famous boom 'n bust economy?

The purpose of economic policy is to provide durable/decent employment for most people most of the time. The dot.com boom made zillionaires out of some crafty people in $ilicon Valley. But largely did not affect most of America as it came to an end in 2000 and put a great many people out of work subsequently. (Enhanced productivity has many fathers, but economic retraction is an orphan. ;^)

The Boom Economy did not survive the Chinese onslaught of lower-tech cheap goods that has hurt American industry. And we still have not understood that those jobs are gone forever.

That we need a Renewed Economic Infrastructure and massive government funded programs to bring America back into the race. No, nobody on the campaign trail is saying that, are they?

What we have had is a Dem "Golden Boy" President who handed an economic mess to an incompetent ... who thought an Idiot War over in the sandbox, for freedom, would jump start the economy.

Boom 'n bust, boom 'n bust, bust 'n bust.

[Jay]

Lafayette: Not so much the dot.com boom per se, but instead the success of Microsoft that had immeasurable effects on the entire U.S. economy throughout the 1990's. The success of Microsoft and early internet start ups were very beneficial to the economy, but ultimately led to the 20th century's Dutch tulip episode.

"The purpose of economic policy is to provide durable/decent employment for most people most of the time."

Still looking for that one in the U.S. Constitution. I guess the secular humanists not only believe that health care is a right, but so too is employment. Hopefully(for their sake) by the time my grandchildren roll around every luxury we have today will be a "right".

[Movie Guy]

I would like to see Mark provide a careful, detailed examination of the economic knowledge backgrounds of Senator Clinton and Senator Obama.

[Lafayette]

Message in a bottle

Student: McCain may not know thing one about economics. But let's not pretend like any of the other candidates do either.

Pertinent observation.

We are told that Hillary masters any subject that she puts her mind to. It's about time she put her efforts to Economic Revival of an economy that may not go anywhere in the state it is in, even with higher employment.

Fuller employment will just mask the rot that has set in lulling us into thinking that nothing need be done. Lots and lots must be accomplished.

We have a workforce that is skills challenged, obesity is a pandemic Health Bomb to explode in 10 to 15 years, after the sub-prime mess many quarters are thinking that top investors have left the dollar for some time to come, that even with a weak dollar we cannot seem to bring unemployment down, our country is an ecological mess still dependent upon oil for far too much of its energy source and wastes too much of it, a basic college education is unattainable by more than two-thirds of the nation, etc., etc., etc. .... ad nauseam.

If there was ever a time for New Deal Thinking it is now. Is there any intelligent life in the Dem camp reading this "message in a bottle"?

[Mark Thoma]

Well, the other candidates aren't advertising their ignorance like McCain is.

But if you are really interested in Hillary Clinton's knowledge about economics, I suggest you go read Jared Bernstein and others who have described meetings with her - and her knowledge of subjects like trade (and importantly the subtleties of the consequences) - in glowing terms. I have not heard any of the economists who have met with her say anything except that they have been surprised and impressed. And this isn't from people who are necessarily in her corner.

Obama I know less about, but again, he is not pushing his anti-intellectualism as a positive thing. McCain has said he knows nothing, and you should believe him.

[Lafayette]

Kemp (?): John. John. That's not why we cut tax rates. We do it to incentivize people to put their capital at risk for new investment and capital formation.

John, John ... that's why the rich are getting richer and the poor are barely surviving.

We have created a three-class nation: The Plutocrats at the top, the Impoverished (and delinquent/criminal) at the bottom with the Middle-class bailing water like crazy to remain afloat.

And, except for the up escalator at the top, all the others are broke. People have taken to walking up the down escalator ... and the lucky ones are staying even.

[lonesome moderate]

As an example, let me cite the reply I got a couple of days ago (from Groucho) when I asked what Ben Bernanke had done to facilitate the real estate bubble:lonesome, are you familiar with Bernanke's & Gertler'S work on the financial accelerator?

The interest rate channel driven through balance sheet expansions with a "virtuous" cycle of leveraging collateralized assets is their MO.

I think it is fair to say that a president does not need to understand the significance of "interest rate channel driven through balance sheet expansions with a virtuous cycle of leveraging collaterized assets" (not that I would know, though I'm trying). It would be nice, but there probably hasn't been any president ever who knew about that. It is important, though, that he have people close to him who do get stuff like that, and that the president have a solid, constructive relationship with those people.

[anne]

"Think about how great our Presidents during the 1920's were and how crappy our 1930's presidents were using similar metrics as Anne points out."

Competing lamely for the stupidest comment ever, as we find unemplyoment slowly growing, than growing faster and faster in the 1920s to the disaster through 1932. Now when, oh when, did Franklin Roosevlet become President, I do wonder, I do.

Franklin Roosevelt became President in March of 1933 with unemployment about 25% as a legacy of Republicanism and from the time Roosevelt came to the Presidency and New Deal programs began to be enacted, unemployment began to decline. Roosevelt presided over startling growth and employment increases almost from the beginning of the Presidency as New Deal programs took hold.

[Jay]

Anne: I said that as a setup. You are more blind than a Christian conservative that claims "everything happens because of God". Except in your delusional world "everything happens because of government". Unemployment rises, it was the government. Wages stagnate, it was the government. Foreclosures rise, it was the government. Spurious correlations arise, it was the government.

Europe is an interesting experiment and one should (and probably has) investigate(d) if it is possible for humans to not worship something/someone, because as Europe has shifted to the secular they have become worshipers of the government.

[lonesome moderate]

Krugman: Take, for example, John McCain’s admission that economics isn’t his thing. “The issue of economics is not something I’ve understood as well as I should,” he says. “I’ve got Greenspan’s book.”

His self-deprecating humor is attractive, as always. But shouldn’t we worry about a candidate who’s so out of touch that he regards Mr. Bubble, the man who refused to regulate subprime lending and assured us that there was at most some “froth” in the housing market, as a source of sage advice?

I've said it before, but it bears repeating; it has yet to be proven that Greenspan was wrong when he said that (2005). Housing has basically given back the gains it has made since then, but it remains to be seen whether it will drop further, and by how much, and how geographically spread out it will be. To me, saying that "there is no nationwide housing bubble but there is some localized froth" isn't substantially different from saying that "the bubble is primarily in the 30 percent of the market that is the zoned zone, and not the 70 percent that is flatland."

That is not to say that Greenspan did a good job with his managerial responsibilities to oversee the banking system--clearly he didn't. But I'm sure there are lots of excellent economists who couldn't manage a Dairy Queen, as Rustbelt said; I see no reason to think that Greenspan isn't one of them.

[calmo]

But lonesome with this (somewhat blinkered view?):Housing has basically given back the gains it has made since then, but it remains to be seen whether it will drop further, and by how much, and how geographically spread out it will be. To me, saying that "there is no nationwide housing bubble but there is some localized froth" isn't substantially different from saying that "the bubble is primarily in the 30 percent of the market that is the zoned zone, and not the 70 percent that is flatland." how can you ignore the financial fallout from the investment banks peddling all this "froth"? It's not (merely) the geography as we've seen writedowns from Helsinki to Shanghai, yes?

[gibbon1]

"microeconomics is pretty valuable as a basis for going into the corporate world, or even the family business... macro is another thing."

The potential is there then that perhaps the difference between Democratic presidents and Republican one is in the focus on Macro Economics. To wit, Democrats pretty much know that the only way to help their supporters is through macro economics (real investment, employment and productivity). I don't think that the same is true at all on the Republican side (witness the obsession with tax cuts over incentives towards real investment).

"and unfortunately, like so many people who are supposedly" educated" being a technocrat in one specific field doesn't necessarily translate into having the wisdom to deal with things outside of that field, and can often make someone blind to the limits of their own speciality."

Yes and that is where being intellectually curious comes into play.

[Lafayette]

Laff: "The purpose of economic policy is to provide durable/decent employment for most people most of the time."

Jay: Still looking for that one in the U.S. Constitution.

Yes, I agree. It should be there, even if it's not.

Jay: I guess the secular humanists not only believe that health care is a right, but so too is employment.

No, employment is not a right. It is a duty of any government to promote its fullness, however.

Birthrights are services like Defense, a fair Judicial system, Personal Safety, Local security (fire, police) and a decent Education.

I add to those above an education up to any level that a person should want it as well as suitable Health Care (that doesn't cost an arm and a leg). We'll get there, about half a century after Europeans have.

Jay: Hopefully(for their sake) by the time my grandchildren roll around every luxury we have today will be a "right".

Luxuries as rights? Not likely.

Who wants to live in a nation of plutocrats, where a Café Latté cost $5000 each?

[gibbon1]

"Still looking for that one in the U.S. Constitution. I guess the secular humanists not only believe that health care is a right, but so too is employment. Hopefully(for their sake) by the time my grandchildren roll around every luxury we have today will be a "right"."

Only a conservative would claim that employment is a luxury. Employment is important for a whole host of reasons that have nothing to do with the constitution. The hoariest reason of them all being that putting smart capable people in an unpossible situation results some very negative externalities.

[Jay]

"Only a conservative would claim that employment is a luxury."

Only a democrat would make such a blanket statement. Are we done with the name calling now?

[Justin Rietz]

To say that the New Deal helped the economy is false (note that I am not saying Hoover and his administration were any better).

Under Roosevelt, millions of acres of crops were plowed under, pigs were slaughtered and burned, and production of many food items such as milk was forcibly reduced by the government in order to keep prices up. This while millions of Americans went hungry.

That the government created jobs is questionable. Sure it "created" jobs, but it did so with tax dollars, meaning that those dollars were not used in the private sector, thus causing further private sector unemployment. Moreover, any government can create 100% employment by hiring everyone who is unemployed, a common tactic of communist countries. It goes without saying that 100% employment via government jobs is not equal to a healthy economy.

Under Roosevelt, the government forced businesses to keep wages high, implemented a minimum wage, and created Social Security which required an employer to pay additional taxes on a per employee basis. The result is that it was more expensive to hire people, and hence businesses hired less. Data from the Federal Reserve (www.greatdepressionsbook.com/datasets.cfm) reveal that the number of people employed in the private sector dropped from 1929 to 1940.

In what is known as the recession during the depression, unemployment jumped from 14% to 19% from 1937 to 1938, and even in 1940 unemployment was still at about 15%. It wasn't until after World War II when many of the government aid programs had been dismantled that the employment rate dropped to what we would consider low levels (this to the disbelief of many Keynesians who predicted that the decline in spending precipitated by the end of the war would result in another economic drop).

So to say that unemployment dropped during the New Deal years is not all that revealing.

[btg]

uh, justin, the new deal started in 1933, not 1929.

my limited understanding is also that the situation in 1937 was due to the scaling back of new deal programs - some because it was felt that the economy had improved and so less stimulus was needed, but also because the supreme court had ruled against many new deal programs... below is from ms encarta's history of the US:

At the start of Roosevelt’s second term in 1937, some progress had been made against the depression; the gross output of goods and services reached their 1929 level. But there were difficulties in store for the New Deal. Republicans resented the administration’s efforts to control the economy. Unemployment was still high, and per capita income was less than in 1929. The economy plunged again in the so-called Roosevelt recession of 1937, caused by reduced government spending and the new social security taxes. To battle the recession and to stimulate the economy, Roosevelt initiated a spending program. In 1938 New Dealers passed a Second Agricultural Adjustment Act to replace the first one that the Supreme Court had overturned and the Wagner Housing Act, which funded construction of low-cost housing.

Meanwhile, the president battled the Supreme Court, which had upset several New Deal measures and was ready to dismantle more. Roosevelt attacked indirectly; he asked Congress for power to appoint an additional justice for each sitting justice over the age of 70. The proposal threatened the Court’s conservative majority. In a blow to Roosevelt, Congress rejected the so-called court-packing bill. But the Supreme Court changed its stance and began to approve some New Deal measures, such as the minimum wage in 1937.

[Lafayette]

The Robber Barons

btg: But the Supreme Court changed its stance and began to approve some New Deal measures, such as the minimum wage in 1937.

This bit, quoted above, goes to show (1) how the Justices CAN legislate from the bench and (2) how inveterate is the resistance, even today, to changing any factor that might bring betterment to the lower classes in America, but affects industrial profits.

That mindset is ingrained deeply in American conservatism. To such a degree that it is a bit of a shame that, unlike Europe, a war did not happen in the US that threw the deck of cards into the air and reordered the resulting stack.

Reagan's reformation of the distribution of American wealth has only instated a plutocracy such as existed in the late 1800s and early 1900s -- they were then called the Robber Barons.

A quarter of a century later, one would think it is time to rectify the Social Injustice brought about by the resulting Income Inequality.

[Justin Rietz]

btg -

The point is that New Deal programs were not able to bring private sector employment to pre-New Deal levels. As far as the ms encarta passage, it makes fairly sweeping statements with little analysis. Frankly, its lack of objectivity is a bit surprising.

[reason]

I know it is not PC to mention, but why doesn't anybody mention McCain's age. If he has a second a term and doesn't die in office he will nearly 80 at the end. I know "you can't teach an old dog new tricks" just isn't true, but hell, he has had plenty of time to learn up to now.

[2slugbaits]

reason,

PC or not, it should be mentioned. Look at video of McCain from two or three years ago and compare what he looked like then to how he looks today. He's a very old looking 72. People need to pay attention to his Veep choice because it might be relevant.

[lonesome moderate]

I am indeed troubled by McCain's age, and I really hope we can have an open and honest discussion about it between now and November. There never was when Reagan was running, and in hindsight I have to think that he really was too old, at least in his second term.

[Lafayette]

JR: Frankly, its lack of objectivity is a bit surprising

Then try this, here, from WikiPedia and tell us what you think about it.

[Lafayette]

diss: We forgive the dumbass politician because that is exactly what we indulge in ourselves.

As doctors would say, a patient cannot be cured until they realize how sick they are ... and then want to get well.

It is senseless to blame politicians. Like any good democracy, they are simply reflections of ourselves. If the reflection is dumbass, why blame the mirror?

Tyically, in such a circumstance, what a nation needs is an individual with a message and the means to articulate it clear. I don't see any such message, just a petulant request to "trust me".

Hell, that's no where near enough to be the right stuff.