Comes Another Soothsayer
In a previous post, I compared economists and soothsayers, opining that there isn’t much difference between the two. I used Paul Krugman as an example. He’s firmly (to understate the fact) in the liberal camp. He thinks that President Obama and Congress aren’t going to spend enough money to resolve the economic crisis.
Now comes Kevin Hassett, a conservative economist. He believes that Obama is headed down the wrong road. To make his point, he imagines Obama as a “Manchurian Candidate” put among us by a mysterious enemy for the purpose of destroying our economy and “finishing off” the country:
Imagine that some hypothetical enemy state spent years preparing a “Manchurian Candidate” to destroy the U.S. economy once elected. What policies might that leader pursue?
He might discourage private capital from entering the financial sector by instructing his Treasury secretary to repeatedly promise a brilliant rescue plan, but never actually have one. Private firms, spooked by the thought of what government might do, would shy away from transactions altogether. If the secretary were smooth and played rope-a-dope long enough, the whole financial sector would be gone before voters could demand action.
Another diabolical idea would be to significantly increase taxes on whatever firms are still standing. That would require subterfuge, since increasing tax rates would be too obvious. Our Manchurian Candidate would have plenty of sophisticated ideas on changing the rules to get more revenue without increasing rates, such as auctioning off “permits.”
These steps would create near-term distress. If our Manchurian Candidate leader really wanted to knock the country down for good, he would have to provide insurance against any long-run recovery.
There are two steps to accomplish that. …
First, one way the economy might finally take off is for some entrepreneur to invent an amazing new product that launches something on the scale of the dot-com boom. If you want to destroy an economy, you have to persuade those innovators not even to try.
Second, you need to initiate entitlement programs that are difficult to change once enacted. These programs should transfer assets away from productive areas of the economy as efficiently as possible. Ideally, the government will have no choice but to increase taxes sharply in the future to pay for new entitlements.
A leader who pulled off all that might be able to finish off the country.
Let’s see how Obama’s plan compares with our nightmare scenario.
Treasury Secretary Timothy Geithner has been so slow to act that even liberal economist and commentator Paul Krugman is criticizing the administration for “dithering.” It has gotten so bad that the Intrade prediction market now has a future on whether Geithner is gone by year’s end. It currently puts the chance of that at about 20 percent. …
Hassett continues with specific examples of what this “Manchurian Candidate” might do to further his nefarious plan.
Is Dr. Krugman right because he’s a liberal and has a Nobel Prize? Well, Al Gore is a liberal with a Nobel Prize, as is Jimmy Carter, so…please. (Spare me the tutorial; I know the difference.) Or is Dr. Hassett right because he’s a conservative? There are those on the left and right who actually think that way. And spare us the argument that conservative economists failed during the past eight years, so now it’s time to listen to liberal economists. Anyone who thinks Bush & Co operated under conservative economic principles misapprehends both conservative economic theory and the actions of the Bush Administration.
So, whom do we believe? I’ll just point out that Hassett was co-author with James K. Glassman of the 1999 book Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market. Krugman gave Hassett a kick in the nether regions on that one:
Mr. McCain doesn’t know much about economics — he’s said so himself, although he’s also denied having said it. That wouldn’t matter too much if he had good taste in advisers — but he doesn’t. …when the McCain campaign announced that the candidate had assembled “an impressive collection of economists, professors, and prominent conservative policy leaders” to advise him on economic policy, who was prominently featured? Kevin Hassett, the co-author of Dow 36,000. Enough said.
Now, children, play nicely. Paul, stop hitting Kevin!
Of course, Krugman himself said in 2005,
Social Security as it is currently constituted is very efficient. We’re talking about a system that really works quite well.
And on global warming, he believes that
The only way we’re going to get action, I’d suggest, is if those who stand in the way of action come to be perceived as not just wrong but immoral.
President Obama obviously isn’t a “Manchurian Candidate;” he’s just a guy who should have listened to the wisdom of the old admonition, “be careful what you wish for.” Should he, and we, put the future of our nation in the hands of soothsayers who pontificate from ivory towers, think-tank sinecures, and op-ed pages of the agenda-driven media? Or would we be better off taking economic advice from a committee of 100 people chosen randomly from the Kansas City phone book? At this point, I’ll go with the phone book.
(This article was also posted at Opinion Forum.)
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