And The Prize for the Worst Economist Goes To …
by Veronique de RugyWell, it’s hard to choose these days. The resurgence of Keynesian economics shows how fragile and insecure economists are in general. They are, of course, important exceptions. But while I have a special dark place in my economist heart for the New York Times‘ columnist Paul Krugman, I think today the prize should to economist Mark Zandi, of Moody’s Economy.com.
Zandi is constantly quoted in the media as the go-to-person on what do for the economy to recover. For instance, how many stories have we read in the Washington Post saying “nearly all economists support the stimulus,” with for only evidence a Zandi quote. Many. Who cares that Zandi’s model shows that the stimulus is working because the answer is built into the equations of Keynesian models. Here is a job for an economist: Take apart and demolish these reality-defying macro models once and for all.
The media loves him and as a result there are countless quotes of him out there about how we need more government intervention into the economy to jump start the economy, how passing the $800 billion stimulus bill would create jobs, how more spending programs are yet still needed.
For years, he has mainly been wrong on economic issues. For instance, this is the guy who was warning us in the last eight years about the effects of a 3 percent of GDP tax cut created deficit on the economy (here). Yet, he is not that worried about a 10 percent deficit when Obama is in charge and in fact, often, he wants to increase the deficit for the sake of the economy.
You can count on him to be supporting every bad idea out there, as long as they have been tested and have failed. Take the rebate checks that people received in 2008 and also in 2009, in the name of stimulating the economy. He thought it was a great idea to send people checks in order to increase consumption and increase the aggregate income. In Newsweek he wrote, “The key is the rebate checks taxpayers are receiving this summer—worth more than $100 billion. Without the rebates, households would be cutting back on spending, and there would be no debate about whether we are in a recession.”
Wrong. People spent little if anything of the temporary rebate, and consumption did not recover.
The chart shows how personal disposable income jumped at the time of the rebate while personal consumption did not increase noticeably.
The theory of economic stimuli from tax rebates suffers from several serious problems, the main one being that it assumes people are stupid. Tax rebates presume that if people get some money to increase their consumption, businesses will expand their production and hire more workers. Not true. Even if producers notice an upward blip in sales after the rebate checks go out, they know it’s temporary. Companies won’t hire more employees or build new factories in response to a temporary increase in sales. Those who do will go out of business.
Formal statistical work by Joel Slemrod, a professor of tax policy at the University of Michigan, has shown that rebates and tax credits generally produce no statistically significant increase in consumption. Are you listening Zandi? Obviously not. Today, our hero is arguing for the implementation of a tax credit for new hires to jump start the economy.
“If you wanted to give some juice to the job market towards the end of 2010, the best thing probably would be a jobs tax credit with a twist. You’d say, ‘I’ve got $25 billion to spend on this_ first come, first serve.’ You do a ‘cash for clunkers’ on the tax credit,” said Zandi, chief economist for Moody’s Economy.com.”
As this quote suggests, The only purpose of the tax credit would be: not a long term recovery, but an image boost for the democrats before the 2010 elections. And here is the interesting part. According to the National Federation of Independent Business, small businesses are opposed to tax credits for new hires. And NFIB should know, since it is the biggest association of independent and small businesses in America.
“Our member surveys for plans to add inventory and plans to hire are all coming in at 35 year lows. They have no reason to hire anybody because they don’t have anything to do. That’s why the tax credit is a silly idea,” their chief economist said.
So please, can the media stop calling Zandi? They should call me instead. I have lots to say about the economy.
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31 Comments
It is a rather bizarre scenario where people who are regularly not only incorrect but blatantly wrong are quoted repeatedly. For instance, reporters are still asking Alan Greenspan his opinion on the economy as if he had a clue!
don't forget former Enron advisor.
“If you wanted to give some juice to the job market towards the end of 2010, the best thing probably would be a jobs tax credit with a twist. You’d say, ‘I’ve got $25 billion to spend on this_ first come, first serve.’ You do a ‘cash for clunkers’ on the tax credit,” said Zandi, chief economist for Moody’s Economy.com.”
And in Time Magazine's Special Edition "Global Warming: The Debate Is Over!!!" Mark Zandi continues to argue the merits of the 2005 "Hummers For Housekeepers" bill championed by Chris Dodds and the 2006 "Cash Outs For Chicanos" bill spearheaded by Barney Franks. While he concedes that giving undocumented illegal immigrants essentially an open checkbook could come back to haunt unsuspecting pensioners in Iceland he does point out that it was a windfall for untaxed American banksters…..er bankers.
How do you feel about "Keynesian Dietetics"?
THE BARACK OBAMA DIET PLAN
http://naturalfake.wordpress.com/2009/11/28/the-b...
Here's a novel idea to jump start the economy– Promise the American taxpayer and business owner that There will be no government takeover of health care and no cap and trade. Those two promises alone will improve the economy. Why would anyone want to start a new business with those two business killers hanging over their heads.
Do you think it would be any different if Republicans were in charge? Didn't Bush send a $300 rebate to us when he got elected? It's totally ignorant to think this is a product of liberal or Democratic philosophy. The Federal Reserve calls the shots here. The Fed is the one championing Keynesian economics, endless debt, and deficit spending. My point is, we need an entirely different change, not just a change in party.
Let's add in there no needless invasions of countries based on propaganda, and while we're at it let's close some of those 800 bases in 130 countries, and stop spending $600 billion a year in corporate welfare to the military-industrial complex. We can protect ourselves just fine without all that.
His ideas only make sense once he admits to being a student of the Cloward-Piven strategy. If he truly thinks Keynesian policies will create jobs he's economically illiterate. He's not. He's got his eye on the endgame of the CP strategy: system collapse, followed by "necessary" control (for more, see "Chavez, Hugo" and his nationalization decrees.
“The avoidance of taxes is the only intellectual pursuit that carries any reward.”
(John Maynard Keynes)
This idiot knows about as much about the economy as Karl Marx did. Probably because his "learning" was done at the altar of Commie Karl. My 6 yr old grandson has more knowhow on economics that this idiot.
By the way-I agree. Any coincidence we have had the 16th and 17th amendments enacted at the same time we created the Fed reserve. Want to start an absolute economic renasscaince? Eliminate the Fed, the IRS, the 16th amendment.
Keynesian economics is a statist policy, implemented by "Republicans" and "Democrats" alike. The Rep-Dem paradigm is moot today. The paradigm is statist-vs-market. Bush was a statist in fiscal matters, as evidenced by his spending record. So no, it wasn't any different. The Bush rebates were just as economically ignorant as the Obama ones. A sense of security, instilled in the entrepaneurs (sp) is the best way to jumpstart business. This is logically obvious since 99% of small business owners are not going into business to pay more taxes… they're going into business to make a profit, and rightfully so (profit's not a dirty word).
Without all what? The military-industrial complex? How exactly do you plan to protect yourself without any guns, missiles, tanks, bombs, flak jackets? Who do you think makes them? And being that it isn't the Red Cross making them, there is payment involved. If you read the Constitution, the money our Government spends on keeping us safe is their number 1 spending priority, before any social expenditures.
But, really, I'd like to know exactly how you plan to keep a nation safe without the companies that exist to provide our Armed Services with the tools to do so.
I think it is more to the point that he is not practising Keynesian economics at all. Keynes wrote about what he observed and he proposed some answers. He even stated that his proposals work best in a closed communist society. At the same time he was Chancellor of the Exchequer in Great Britain during the Great Depression.
FDR economics is not Keynesian economics at all, since Roosevelt went a lot further than the Keynesian proposals.
I might add that at the time the proposed solutions included working for the dole, rather than just handouts which is what we see in most countries today.
On saying that I agree with your mention of the Cloward-Piven strategy, which is one reason why Keynesian economics does not wok.
Also, it was Keynes himself who stated that it was only a theory, and that theories need to be tested and that they can be wrong.
Sigh…I never said we don't need guns, missiles, tanks and bombs. Of course defending the country is a prime responsibility of the government. But do you really think we need 800 bases in 130 countries to be safe within our borders, or did we need to invade Iraq to be safe? I would argue that those things make us less safe. There's a reason why parts for jet fighters are assembled in all 50 states. It's political engineering to sustain a bloated military budget, one that is not even subject to audit and "lost" a trillion dollars in 2000. The two biggest parts of discretionary spending are entitlements and "defense". You can't seriously reduce government spending without cutting both.
I'm a generally upbeat, positive person. I don't like to be around negative people. So it really bothers me when I look out across the great plains right now because it's really hard to find positives in terms of the economy.
Here’s some sobering facts as heard out on the Great Plains:
-The Omaha[Nebraska] World Herald reported last week that "significant economic weakness remains in the rural Midwest," based on a survey of small-town bankers in 11 states, including Nebraska. The survey by a Creighton University economist "indicates that job losses continue and that home sales and retail sales are still weak."
-Layoffs and business closers continue as 2009 enters its final month. I’m willing to bet that if you have not personally been involved in a layoff or closure then you know someone who has. I was fortunate in that the small company I was with was a head of the curve so to speak when it closed in August 2008 and I was very fortunate to find another job by late September. For far too many today, that isn’t the case. I know how gut wrenching it was for me following the closing of the company. Unless you’ve gone through it, it’s really hard to describe but I can say that it was a very challenging time for me internally and one that I will not soon forget.
-The Lincoln[Nebraska} Journal-Star reported that "The [Nebraska] Legislature ended its special session recently with a bill that balanced the state budget and filled a $334 million revenue gap" with no tax increases on individuals or businesses. The session was called following several months of shortfall in state tax revenue. Meanwhile, a report in the Omaha World-Herald says "economists and state senators alike predict that budget woes in state government will continue into 2012 and possibly longer, even if the effects of the recession have bottomed out." According to the story, "that means lawmakers will face more difficult and unpopular choices when they return in January for their regular session." “This just may be the first Band-Aid. I hope not,” said State Sen. John Wightman of Lexington[Nebraska]. The story quoted Scottsbluff Sen. John Harms, who said "if the economic recovery is slow, we're going to be talking about closing agencies."
-And in a related story, the web site Stateline.org reports that "tax collections declined in the third quarter in 44 states for which early data are available, according to a report released Nov. 23 by the Nelson A. Rockefeller Institute of Government." According to the report, states collected 10.7% less in tax revenue in the July-September period than during the same three months a year ago. "Corporate income tax collections declined more in Ohio than in any other state in the quarter, falling more than 111%."
So there you have it. Not real uplifting news but it's the reality as we know it. Maybe those in Washington DC should come out and live with the rest of us and taste reality.
You are exactly right! I work for NFIB and many businesses see that the end is very near if either of these pass. The concern is to keep the house and family if the business goes under so they are leary of investing back into the business until these two issues are off the table.
Like we have seen in the global warming fraud, economic "science" is often based more on political ideology than on facts and reason.
Nobel award winner paul krugman, also enviromental expert, lib genius
Sooo Right. There are alot of folk out there criticizing Obama that are all to happy to forget Bush's deficit spending spree. Spend, spend, spend. The two parties are a chimera: elephant and donkey heads sprouting from a pig's body.
Agricultural subsidies, highway bills and trillion-dollar prescription drug entitlement program (the first since LBJ) have rendered any protests coming from the GOP sounding bit hollow. And what's all this protesting about cuts to medicare? The Dems are right: it IS socialism. If we allowed people to keep their incomes and provided incentives to save for their health and old age care, would we need to spend billions of dollars on a system that by every estimate is corrupted by fradulent billing?
Own it boys: you're either for limited government and individual control over wealth, or you're for statism. The choice between the parties isn't based on anything other than preferences over the specific ways the government will interfere with our lives. Who will be our James Madison, our Ronald Reagan?
Now that Zandi has been singled out and identified, I wouldn't be surprised if he were quietly thrown under the bus by the Obama administration. Of course, there are plenty of would be "economists" ready to take his place.
Keynesianism is the liberal progressives' toll bridge to full on Marxism, make no mistake about that.
I think it's time for a check-out for both Dodds and Franks, followed by an investigation of same. They were at the helm of Fannie and Freddie while the books were being cooked and they were the ones telling Bush that everything was hunky dory when he wanted to regulate F&F.
I just hope that when the Repubs take over they don't look the other way in the interest of bi-partisanship. It's time to put on the gloves and get an honest AG who's willing to use RICO.
Right on man, uh how do we protect ourselves without a military again?
I mean I get kind of confused, if we do what you Anarchist want then wont we have, like Anarchy?
Anyway Scott_Z says hi and hopes you can make it "Hide the Sausage" 2009 at the largest mens public restroom outside of New York.
Man, if we cut entitlements how are we going to get our free meds?
So like your saying the Government, like Nancy Pelosi should start a "Jet Fighter" factory in one state and kind of like hire the homless to assemble them? Where are we going to buy the kits?
Wow, maybe we could both get jobs doing that, do you think we could still drink on the Job like we do now?
Capitalism sucks man all it does is provide jobs and a high standard of living for anyone that works at it, what about slacker leeches like us???
Right on man kill captialism, it created the middle class, who the hell wants to be in the middle much better to be on top, or on the bottom, being in the middle sucks!
What were you talking about, oh not what I thought I guess. See you at "Hide the Sausage 2009" even though your a loser in life your always sought after there man!
Thanks for pointing out what a clown Zandi is. I have often wondered about the use of him as the authority for the MSM's progressive economic agenda.
The Mises Institute has all the truth about economics that you need to know.
http://mises.org/story/2726
Above is a link to "The Revolution Was," or how the New Deal came about.
A well researched site, I’ll link to it from my site thanks
Took me awhile to read all the comments, but I really love the article. It proved to be very helpful to me and I am sure to all the commenters here! It's always nice when you can not only be informed, but also entertained!
I found your blog on google and read a few of your other posts. I just added you to my MSN News Reader. Keep up the good work. Look forward to reading more from you in the future.