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.

Republican Economists Admit “Long Run” Could be as Short as a Decade

If achieved over a decade, the associated increase in the annual rate of GDP growth would be about 0.4% per year…”

The “If” at the start of the second sentence in the second quote is an assertion that the long run could well be as short as a decade. That is a claim about the lower bound of the speed of adjustment to a long-run result if I have ever seen one.

How Tax Reform Will Lift the Economy

We believe the Republican bills could boost GDP 3% to 4% long term by reducing the cost of capital.

Economists generally think of fundamental tax reform as a set of tax changes that reduces tax distortions on productive activities (for example, business investment and work) and broadens the tax base to reduce tax differences among similarly situated businesses and individuals. Fundamental tax reform should also advance the objectives of fairness and simplification.

.. According to one leading model using an alternative framework, the proposal would increase the U.S. capital stock by between 12% and 19%, which would raise the level of GDP in the long run by between 3% and 5%.


.. Robert J. Barro, Paul M. Warburg Professor of Economics, Harvard University

Michael J. Boskin, Tully M. Friedman Professor of Economics, Stanford University; Chairman of the Council of Economic Advisers under President George H.W. Bush

John Cogan, Leonard and Shirley Ely Senior Fellow, Hoover Institution, Stanford University; Deputy Director of the Office of Management and Budget under President Ronald Reagan

Douglas Holtz-Eakin, President, American Action Forum, former director of the Congressional Budget Office

Glenn Hubbard, Dean and Russell L. Carson Professor of Finance and Economics (Graduate School of Business) and Professor of Economics (Arts and Sciences), Columbia University; Chairman of the Council of Economic Advisers under President George W. Bush

Lawrence B. Lindsey, President and Chief Executive Officer, The Lindsey Group; Director of the National Economic Council under President George W. Bush

Harvey S. Rosen, John L. Weinberg Professor of Economics and Business Policy, Princeton University; Chairman of the Council of Economic Advisers under President George W. Bush

George P. Shultz, Thomas W. and Susan B. Ford Distinguished Fellow, Hoover Institution, Stanford University; Secretary of State under President Ronald Reagan; Secretary of the Treasury under President Richard Nixon

John. B. Taylor, Mary and Robert Raymond Professor of Economics, Stanford University; Undersecretary of the Treasury for International Affairs under President George W. Bush

Economists respond to Summers, Furman over Mnuchin letter

The studies we cite all find that reductions in corporate taxation have important positive effects on economic growth.

Ultimately, we are confident that the estimates in our piece are closer to the mark and are at the same time broadly consistent with other estimates from empirical studies of effects of corporate tax changes on growth.

 .. We state explicitly in the letter that the figure calculated on the basis of the OECD study is a long-run estimate (the OECD study estimates effects on GDP per capita, not GDP per se).
.. By this method, the proposed changes would raise long-run GDP per capita by approximately 1.8 percent.
.. Robert J. Barro, Michael J. Boskin, John Cogan, Douglas Holtz-Eakin, Glenn Hubbard, Lawrence B. Lindsey, Harvey S. Rosen, George P. Shultz, John B. Taylor
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