Two Observations

by David Epstein

Two random thoughts on different topics, but with similar motifs.

First, there's much twitter in the blogosphere about how right-wing "fresh-water" economists are embarrassing themselves by showing that not only do they not really understand Keynes, they don't even understand their patriarch, Milton Friedman. They are spouting nonsense that was refuted half a century ago and was banished from polite discourse in the economics profession, only to reemerge at a time when the country most needs clear-thinking analysis of the tremendous problems that face us. Instead, though, these supposed great minds are spewing forth ridiculous garbage, cluttering up the debate and providing ammunition to those who really do want Obama to fail.

It occurs to me that while Republicans controlled the presidency, they rarely drew on the really talented conservative economists -- there was no Larry Summers equivalent in any recent Republican administration. This has been noted, usually in terms of regret that our economic policy hasn't been better formulated. 

True though this is, it occurs to me that the problem works the other way too. The fact that these economists haven't been in government means that they've been allowed to develop their theories completely detached from the real world. Economists are an arrogant lot to begin with, and if you add the fact that they come from Chicago -- and hence assume that they are superior to other economists -- and that they have no real-world experience to check these tendencies, you get.... Well, you get an economist making the sort of elementary error that British bureaucrats were embarrassed to make over 50 year ago.

Second, a number of my colleagues and I have been wondering why the Obama administration has been dithering over the stimulus bill. Amid great fanfare, they put it out there, then just kind of sat back and let the Republicans drive the debate. They may now be waking up to the sad reality that they have to fight for their bill to get it passed quickly and in something like its present form.

Here too, I think the answer may lie in an "other side of the coin" argument. I gave a lot of interviews around inauguration time saying how things wouldn't be so different, since Obama had effectively been president already for two months. He had tried to sit back after the election and let the Bush administration handle things, but everyone wanted to know what he was planning to do about the economy. So his daily press conferences and meetings with advisers turned a presidency-in-waiting into, really, the presidency.

But perhaps the relative smoothness of this period lulled Obama into a false sense of security. He had already been president for two months, he seems to have thought, so January 21 lost its sense of importance and urgency. He could just pick up where he left off on January 19.

Such, obviously, was not the case. Obama has discovered that, as the real president, people take shots at you they didn't take before. Once legislation is actually introduced, the other side does its darnedest to tear it down. You can call for bipartisanship, but if the other side doesn't play ball you end up looking weak, compromising, and losing the initiative on the most important policy moment in decades.

Obama has to shake himself out of this funk, stop moving in slow motion, and tell the Republicans: this is my bill. We have to pass it or something very much like it, and we have to do it soon. If you have alternatives, write them up as amendments and we'll have a look at them. But the time for theorizing is past. We had an election, the public voted for the Democrats' approach to getting the economy turned around, and that's what we're going to do. You can get on the bus or continue to be the party of Hoover (even making the exact same arguments against stimulus that were made in 1933) -- it's up to you. But this bill is going to be passed and passed soon, with or without your help."

One can only hope.

Comments

[Jay]

Dear Mr Epstein,

You are a doomed left-wing Keynesian. The "right-wing" economists you say were refuted half a century ago knew the crisis is coming because of government involvement. They can explain why bubbles occur and who gets them started.
You are so self-obsessed that you dismiss any other opinion than your own, just as you presented during the debate with Peter Schiff at Columbia University. Even your students can now see who got things right and won't be misguided by your big government policies any more.

Jay

[Tanya Domi]

Ditto to David Epstein's apt observations about the Republicans in driving the discourse on the stimulus bill. I would also add, Obama has a pretty weak partner in Leader Harry Reid. In fact, I think the Democratic leadership has a historically shoddy record in working with a Democratic President, going back to Tip O'Neil and Jimmy Carter, a good case in point. The same could be said of the Congressional Democrats with Clinton at times. So these political leaders, beginning with Obama better get out there and lead. I feel like Rome is burning and everyone is standing around and fiddling.