More than 20 years ago, Harvard’s N. Gregory Mankiw, who would later serve as George W. Bush’s chief economic adviser, published the first edition of his best-selling Economics 101 textbook. Early in the book, trying to explain why economists are often perceived as disagreeing about everything, he wrote about the role of “charlatans and cranks.” When economists appear to be at odds, he wrote, you should be aware that sometimes the apparent dissent is coming from “some snake-oil salesman who is trying to sell a miracle cure.” He was referring to the people who told Ronald Reagan that cutting taxes would pay for itself, above all a guy named Art Laffer. As Mankiw noted, the charlatans and cranks were wrong: Reagan’s tax cuts sharply reduced revenue. And the same thing has been true every time tax-cut proponents have promised a miracle. Most recently, the 2017 Trump tax cut has led to a precipitous collapse in corporate tax receipts, twice as much as projected. Yet decades of being wrong again and again has done nothing to reduce the influence of tax-cut cranks on the G.O.P. On the contrary, their grip has gotten ever tighter. Even supposed Republican moderates like Maine’s Susan Collins justified their support for the 2017 bill by saying that it would pay for itself. And on Wednesday, Laffer will receive the Presidential Medal of Freedom. To be fair, Laffer is known for other things besides his utter faith in the miraculous power of tax cuts. He’s also known for warning about the dire effects of the Federal Reserve’s efforts to fight the financial crisis: “Get ready for inflation and higher interest rates,” he thundered a decade ago. Actually, no: Inflation has stayed low, and interest rates are close to their lowest levels in history. Now, anyone with a long career of making economic pronouncements will have made some bad calls. God knows I have. But what makes Laffer and others like them so special is both the utter consistency of their wrongness and the fact that their influence just keeps rising despite that wrongness. Or maybe I should say that their influence grows because of their wrongness. Constantly predicting great results from tax cuts for the rich and catastrophe should top tax rates go up is a bad way to devise economic policy but a very good way to ingratiate yourself with wealthy political donors. Attacking any policy that might have helped the economy while a Democrat was president was a pretty good career strategy too. What’s striking is that at this point the G.O.P. apparently has no use for economists who aren’t snake-oil salesmen. There are serious economists — like Mankiw — who happen to be conservatives, out of some combination of personal values and judgements about the proper role of government. I can respect their positions, even when I disagree. But they have no political home. Laffer’s medal, like the appointment of the fundamentally ludicrous Larry Kudlow as chief economist and the attempt to install Stephen Moore at the Fed, is like putting up a sign saying “Only charlatans and cranks need apply.”
Bad Faith, Pathos and G.O.P. Economics
On professionals who sold their integrity, and got nothing in return.
As 2018 draws to an end, we’re seeing many articles about the state of the economy. What I’d like to do, however, is talk about something different — the state of economics, at least as it relates to the political situation. And that state is not good: The bad faith that dominates conservative politics at every level is infecting right-leaning economists, too.
This is sad, but it’s also pathetic. For even as once-respected economists abase themselves in the face of Trumpism, the G.O.P. is making it ever clearer that their services aren’t wanted, that only hacks need apply.
.. Professional conservative economists are something quite different. They’re people who even center-right professionals consider charlatans and cranks; they make a living by pretending to do actual economics — often incompetently — but are actually just propagandists. And no, there isn’t really a corresponding category on the other side, in part because the billionaires who finance such propaganda are much more likely to be on the right than on the left.
.. Even during the Obama years, it was striking how many well-known Republican-leaning economists followed the party line on economic policy, even when that party line was in conflict with the nonpolitical professional consensus.
Thus, when a Democrat was in the White House, G.O.P. politicians opposed anything that might mitigate the costs of the 2008 financial crisis and its aftermath; so did many economists. Most famously, in 2010 a who’s who of Republican economists denounced the efforts of the Federal Reserve to fight unemployment, warning that they risked “currency debasement and inflation.”
Were these economists arguing in good faith? Even at the time, there were good reasons to suspect otherwise. For one thing, those terrible, irresponsible Fed actions were pretty much exactly what Milton Friedman prescribed for depressed economies. For another, some of those Fed critics engaged in Donald Trump-like conspiracy theorizing, accusing the Fed of printing money, not to help the economy, but to “bail out fiscal policy,” i.e., to help Barack Obama.
It was also telling that none of the economists who warned, wrongly, about looming inflation were willing to admit their error after the fact.
But the real test came after 2016. A complete cynic might have expected economists who denounced budget deficits and easy money under a Democrat to suddenly reverse position under a Republican president.
And that total cynic would have been exactly right. After years of hysteria about the evils of debt, establishment Republican economists enthusiastically endorsed a budget-busting tax cut. After denouncing easy-money policies when unemployment was sky-high, some echoed Trump’s demands for low interest rates with unemployment under 4 percent — and the rest remained conspicuously silent.
What explains this epidemic of bad faith? Some of it is clearly ambition on the part of conservative economists still hoping for high-profile appointments. Some of it, I suspect, may be just the desire to stay on the inside with powerful people.
Unicorns of the Intellectual Right
the real problem here is that media organizations are looking for unicorns: serious, honest, conservative intellectuals with real influence. Forty or fifty years ago, such people did exist. But now they don’t.
.. First, while there are many conservative economists with appointments at top universities, publications in top journals, and so on, they have no influence on conservative policymaking.
.. What the right wants are charlatans and cranks, in (conservative) Greg Mankiw’s famous phrase. If they use actual economists, they use them the way a drunkard uses a lamppost: for support, not illumination.
.. under Obama the director was always someone who was interested in real policy research, listened to what experts had to say, and was willing to change views in the face of evidence.
.. Obviously none of this is true in Kudlow’s case. He’s basically a TV personality, whose shtick is preaching the magic of tax cuts, and nothing – not the Kansas debacle, not the Clinton boom, not the strong job creation that followed Obama’s 2013 tax hike – will change his mind. And it’s not just that he’s incurious and inflexible: selling snake oil is his business model, and he can’t change without losing everything. And that’s the kind of guy Republicans want.
All this means that if you get a conservative economist who isn’t a charlatan and crank, you are more or less by definition getting someone with no influence on policymakers. But that’s not the only problem.
.. even aside from its complete lack of policy influence, it’s in an advanced state of both intellectual and moral decadence – something that has been obvious for a while, but became utterly clear after the 2008 crisis.
I’ve written a lot about the intellectual decadence. In macroeconomics, what began in the 60s and 70s as a usefully challenging critique of Keynesian views went all wrong in the 80s, because the anti-Keynesians refused to reconsider their views when their own models failed the reality test while Keynesian models, with some modification, performed pretty well. By the time the Great Recession struck, the right-leaning side of the profession had entered a Dark Age, having retrogressed to the point where famous economists trotted out 30s-era fallacies as deep insights.
.. What accounts for this moral decline? I suspect that it’s about a desperate attempt to retain some influence on a party that prefers the likes of Kudlow or Stephen Moore. People like John Taylor just keep hoping that if they toe the party line enough, they can still get on the inside... we’re looking at asymmetric polarization... Am I saying that there are no conservative economists who have maintained their principles? Not at all. But they have no influence, zero, on GOP thinking... News organizations don’t seem to have figured out how to deal with this reality, except by pretending that it doesn’t exist. And that’s why we keep having these Williamson-like debacles.
Gary Cohn and Steven Mnuchin Risk Their Reputations
When Cohn joined the Trump administration, many corporate executives were relieved, seeing him as a steadying influence.
.. Now, unfortunately, both Cohn and Mnuchin are endangering their reputations in their attempts to sell a tax cut.
.. Within the administration, there are real differences among how top officials have behaved and how they are perceived. Several — Tom Price, Reince Priebus, Sean Spicer and Rex Tillerson — have badly sullied their standing with virtually everyone outside the administration. After long careers, they have turned themselves into punch lines.
.. The clearest exception is Jim Mattis, the defense secretary. Mattis has done so partly by avoiding scandal and minimizing conflicts with Trump. But he has also been careful to set his own ethical boundaries. Can you recall a single time when Mattis has said something outright untrue? I can’t. That’s how he has retained his dignity in the eyes of so many people.
.. In the early stages of promoting Trump’s tax cut, they have made a series of statements that are blatantly false — not merely shadings of truth or questionable claims but outright up-is-down falsehoods mocked by various fact-checkers. The statements make the two look more like Trump press secretaries than serious business executives whom members of Congress can trust.
.. They fall into two main categories. The first is who benefits from the tax plan. “Wealthy Americans are not getting a tax cut,” Cohn said on “Good Morning America.” He was echoing a promise that Mnuchin had made before the inauguration: “Any reductions we have in upper-income taxes will be offset by less deductions, so that there will be no absolute tax cut for the upper class.”
.. Want to guess how many families in New York State — population 20 million — are wealthy enough that they’re likely to pay any estate tax next year, according to an estimate based on I.R.S. data? Just 470. The number is so low in Montana, Vermont, West Virginia and four other states — likely fewer than 10 families in each — that the I.R.S. doesn’t provide details, to avoid privacy concerns.
.. Then there are the two men’s deficit claims. “This tax plan will cut down the deficits by a trillion dollars,” Mnuchin said. Cohn claimed that “we can pay for the entire tax cut through growth.”
.. The Harvard economist Greg Mankiw coined the phrase “charlatans and cranks” specifically to describe people who claim that tax cuts pay for themselves. And Mankiw is a conservative who’s worked for George W. Bush and Mitt Romney.
.. Neither one of them has yet turned 60 years old. These won’t be their last jobs.