There is significant agreement among conventional economists, including those from both the left and right, on most key macroeconomic issues. But watching Republicans and Democrats constantly go after one another in public over economic theories reminds me of the theatrics of “professional wrestling”. It’s easy to assume that there’s a world of difference in their core beliefs about how to manage the U.S. economy. Easy? Yes. But wrong.
The truth is, the debate in Washington about economic policy is snake oil. It’s contrived. It’s bad theater. And it’s entirely political; not patriotism, not brain surgery, not rocket science; not even economics. And our fourth estate, our “news” from the broadcast networks is mostly for entertainment value and owned by entertainment companies. It’s in the networks best interest that we have close elections (more advertising buys), contentious parties (more disagreements to “report”), and no solutions (nobody watches the news when there’s only good news).
So what we’re left with in politics is two groups: Good guys and bad guys (professional wrestling), one side who plays fair and one side who cheats (professional wrestling), one side who is bombastic, blowhards who think the best defense is a good offense and one side who thinks the best offense is a good defense (professional wrestling); and all the people around them who are making money off of their willingness to be smashed around in public.
Take the now-infamous stimulus that President Obama used to jump start the economy after it fell apart in the waning months of George W. Bush’s disastrous administration. The standard Republican talking point is that the stimulus failed. The implication, of course, is that it didn’t reduce unemployment. But in a survey of leading economists conducted by the University of Chicago’s Booth School of Business, 92 percent agreed that the stimulus succeeded in reducing the jobless rate.
Or think about the widely despised bank bailouts. Populist politicians on both sides have taken to pounding the podium about what a waste of taxpayer money they were (in many cases, the politician is in the middle of a fit of hypocrisy having actually voted for the bailout at the time). But while the public may not like the ideas of these governmental assists, there’s a striking consensus among actual economists (not economic pundits like you see on CNBC) that they helped.
No Foundation for Claims
There was a Republican concern during the primary run, led by the always-bombastic Newt Gingrich, that President Obama or his policies had somehow caused gas prices to rise, which was particularly ridiculous. There’s simply no support among economists for this view; there are only politicians and pundits giving a partisan, gullible public what they wanted to hear; be they conservative or liberal. The same survey found that economists unanimously agreed that “market factors,” rather than energy policy, drives changes in gas prices.
How about the Republican claim that tax cuts will boost the economy so much that they will pay for themselves? This idea had to be the result of a Reagan administration intern or low-level staffer scribbling the idea on the back of his hand, or maybe a cocktail napkin, one night after one too many apple-tinis. Conceivably, when the top tax rate was 91 percent, the idea was reasonable. Today, it’s a flight of the imagination. The Booth poll couldn’t find a single economist who believed that cutting taxes today will lead to higher government revenue. The “trickle-down” theory has been controverted so many times that the napkin it was scribbled on had to be laminated so that it wouldn’t turn to dust. And yet, it lives on in Republican lexicon.
The agreement on these issues to which I’ve alluded isn’t the result of a fake, partisan poll of left-wing ideologues. These are the findings from the Economic Experts Panel run by Booth’s Initiative on Global Markets. It’s a recurrent survey of about 40 top-tier economists from around the U.S. It includes Democrats, Republicans and independent academics from the top economics departments in the country. The only similarities among this group are their first-rate qualifications and their interest in public policy.
To be crystal clear about what this remarkable consensus means, let me emphasize that the economists are not contending to know all the answers. They do agree, however, on the best understanding of what is at best, murky evidence. The organization performing the survey understands this uncertainty, and have asked the economists to rate their confidence in their answers on a scale of 1 to 10. Strikingly, when the responses are weighted according to confidence, the consensus is even stronger.
The dispute over economics in Washington is completely removed from this consensus, or reality for that matter. Angry Republicans have pushed their representatives to adopt positions that are at odds with the best of modern economic thinking. They sign oaths and pledges that are essentially legal blackmail. They obviously feel that this is good politics, but it’s a terrible guiding principle for a party; much less a country.
The schism between the state of economic knowledge and our current political debate has significant consequences to 99% of us. The other 1% are like roaches and could easily survive anything man or god could throw at the country. But right now, millions of people are suffering due to high unemployment. Our textbooks, scholars, and businessmen alike are overflowing with plausible solutions. Better solutions that anything coming out of Washington. Instead of debating them seriously, congressional Republicans are blocking even those policy proposals that most economists consider trivial; at the very least, uncontroversial.
Worse, the inaction has no basis in economics. Instead, it’s simply Political Theatrics 101; essentially, it’s nothing more than contemptuous efforts to score points in a phony rhetorical war to thwart their opponents from scoring a policy win. What the hell have we become?
The debate about the long-term challenge posed by the federal budget deficit has also become detached from economic reality. The same panel of economists was almost unanimous in agreeing that “long run fiscal sustainability in the U.S. will require cuts in currently promised Medicare and Medicaid benefits and/or tax increases that include higher taxes on households with incomes above and below $250,000.” Only one in 10 was uncertain. None objected.
Likewise, popular tax deductions such as mortgage interest didn’t fare well in the surveys and would be on almost any economist’s list of targets for reform. Yet neither party is willing to propose such policies because of the political fallout that lawmakers are afraid will jeopardize their own jobs rather than thinking about what is good for the country.
My own FTT (Financial Transaction Tax) idea, (The One Penny Solution ) is the best vehicle for meaningful long-term deficit reduction, but I suppose unless it also cures male pattern baldness, or obesity, has naked pictures of Kate Middleton, or has cool apps…nobody in Washington will pay attention to it anyway.
The consensus, of course, can be wrong like anyone else. On the plausible consequences of economic reforms, though, leading economists are more likely to be right than politicians whose primary focus is getting re-elected. The fact that this diverse group of economists taking the recurring survey had such commonality in their assessments should be taken seriously. Too much of what passes for economic debate in Washington is for the sake of political expediency, not economic sustainability.
I think it’s high time to put economics back into the economic debate. Don’t you?