Since the election, liberals have been hammering much of the right-of-center punditocracy for predicting a Romney victory. The bad forecasts, they argue, represent a rejection of math and science since basic statistical modeling showed a huge likelihood of an Obama win. That accusation is terribly unfair, of course. Models are only as good as their underlying assumptions. And many conservatives and Republicans — including the Romney campaign — thought the composition of voter turnout would be different than it was. Gallup, too.
But election forecasts are a fleeting thing, irrelevant the day after (though errant ones will hurt the reputations of those making them). What’s far more serious is when supposed “thought leaders” and “influencers” — I’m trying to use those terms without irony — consistently fail their audience on matters of true import.
Liberal pundits have a real problem here. Now I’m not talking about old-fashioned, substance-lite stylists such as Maureen Dowd or Gail Collins. But Paul Krugman is a Nobel laureate. He’s supposed to know something. And Krugman surely does. But he’s just playing to his liberal fan base when he writes, as he did the other day, a paen to the high-tax, union-heavy 1950s economy as if it’s a relevant model for 2012 America. Many liberals would love to believe that if only we sharply raised taxes on wealthier Americans and corporations and slashed defense, we could not only leave Social Security, Medicare, and Medicaid as is. Unfortunately for them, the math doesn’t work.
But it’s not just Krugman. During the campaign, President Obama argued that the economic policies of George W. Bush caused the Great Recession and Financial Crisis. Indeed, this was a major theme of the Democratic National Convention. “We can’t go back!” Talk about a teachable moment that was wasted. Understanding what went wrong in the 2000s is critical to avoiding such economic catastrophes in the future. But where were the liberal econ pundits going on MSNBC and myth-busting the idea that Bush’s tax cuts and deficits were to blame?
Or pointing out the role of the Clinton administration in financial deregulation and housing policy?
Or explaining that the Great Recession might have been just a mini-version of the Great Depression, and thus it was overly tight Fed policy that really sunk the economy in 2007-2009, not Bush or the banks.
That last omission is particularly troubling. Many liberal econ writers now accept the theory, most famously advanced by economist bloggers Scott Sumner and David Beckworth, that the Fed should conduct monetary policy by targeting nominal GDP rather than inflation or interest rate levels. (I buy it, too.) But a major part of this theory argues that the Fed blew it in 2008. Here’s Atlanta Fed economist Robert Hetzel:
A moderate recession became a major recession in summer 2008 when the [Federal Open Market Committee] ceased lowering the federal funds rate while the economy deteriorated. The central empirical fact of the 2008-2009 recession is that the severe declines in output that appeared in the [second quarter of 2008 and the first quarter of 2009] … had already been locked in by summer 2008.
But while many liberal econ pundits push the part of the theory that says the Fed should be conducting a sustained bond-buying program to boost growth — or at least communicating that it will sustain demand — they never seem to get around to the bit of the theory which mostly absolves Bush and the banks and nails Ben Bernanke. If you buy one part, you really need to buy the other, even if it is politically inconvenient to talk about the latter part. Is the general public even aware that there are competing theories as to the cause the economic and financial meltdown? Epic fail.
Or how about the issue of whether to tax investment income at a preferential rate — if at all? Mitt Romney was attacked for his low tax rate since his income mostly comes from capital gains. But with the exception of Dylan Matthews of The Washington Post and Slate’s Matthew Yglesias, there was very little push back on the left or mainstream media even though the broad consensus among liberal and conservative economists is that investment income should be taxed more lightly than labor income, and maybe not at all. In other words, Obama’s plan to crank up capital gains and dividend taxes is likely not positive for economic growth at a time when the economy continues to grow below trend. Where’s the outrage? You sure can’t find it on the left.
This country needs a serious debate on economic policy, from taxes to spending to immigration to education. (And I will admit that I disagree with some commonly held center-right positions when it comes to monetary policy, consumption taxes, and the realistic size of government.) It would sure help to have an informed electorate across the political spectrum.