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Saturday, February 16, 2008

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.

    Posted by on Saturday, February 16, 2008 at 12:47 PM in Economics, Politics | Permalink  TrackBack (0)  Comments (59)

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