Economist, Heal Thyself

Economists need to make more of an effort to understand politics and their place in it, writes Eric Alterman.

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Nouriel Roubini, a professor of economics at New York University, speaks during the Global Financial Forum in New York in April. Roubini has made claims in his lectures that are untrue and reveal a misunderstanding of economic policy in a democracy. (AP/Mark Lennihan)
Nouriel Roubini, a professor of economics at New York University, speaks during the Global Financial Forum in New York in April. Roubini has made claims in his lectures that are untrue and reveal a misunderstanding of economic policy in a democracy. (AP/Mark Lennihan)

The president’s approval numbers are lower than ever, particularly on the economy. A year after President Barack Obama’s political honeymoon ended, his job approval rating dropped to a negative 44-48 percent, his worst net score ever. American voters say by a narrow 39-36 percent margin that they would vote for an unnamed Republican rather than President Obama in 2012, according to a Quinnipiac University poll. And as Republican consultant Mark McKinnon writes in The Daily Beast:

The economy is the number one issue on American’s minds. And a year and half into the Obama administration, the public is already impatient with the president’s handling of the economy. In a Bloomberg poll, 71 percent say that we’re still in a recession no matter what economists may say. And in a CBS poll, 51 percent of respondents say they expect effects of the recession to last two more years.

So everyone agrees that things are not going well and a majority of people appear to believe it to be Obama’s fault. Thing is, the economy is really complicated. Everybody knows that unemployment is unacceptably high, but if you casually follow the issue in the media, you’ll find little consensus on what’s really going on, much less what’s to be done about it.

One would hope that economists might shed light on this problem. But there’s a problem with economists—or most of them anyway—which is that they don’t like or even much try to understand politics. Let me give you an example.

I happened to spend an hour or so this weekend attending a lecture at a local synagogue by the much-lauded economist Nouriel Roubini on the fate of the U.S. and global economies. The man has quite the resume, and has earned himself the reputation of being a “prophet” and a “sage” after long being called a “Cassandra” for his frequent pre-crash predictions that the housing market threatened global prosperity. He is now putting those admirable labels to use as the chairman of Roubini Global Economics and the author of what he calls “a crash course in the future of economics.”

My attendance, however, was pretty much a waste of time. This wasn’t because Roubini said nothing of any value. Rather it’s just that I could have read pretty much everything he said in this column in about two minutes and stayed home and gone swimming with my kid. (It was an awfully hot weekend.)

But he did say a few things in his talk that I found both annoying and disturbing—and these have more to do with economics than politics. First off was Roubini’s consistently stated belief that “politicians” got in the way of sound economic policy. This is undoubtedly true often, if not all of the time, but it misunderstands the point of economic policy in a democracy.

Roubini kept insisting that levels of social spending in Europe were unsustainable. This is a longstanding conservative argument, and one to which they often turn to the economics profession for support. “If you want a lower standard of living,” argue conservative policy experts Grace-Marie Turner and Robert Moffit, for example, “the Europeans have the right prescription.” Their argument echoes views, as the New Republic’s Jonathan Cohn has noted, that are popular across the conservative spectrum, from Newsweek’s Robert Samuelson (“Europe is history’s has-been”) to the National Review’s Jonah Goldberg (“Europe has an asthmatic economy”) to New York Times pundit David Brooks (“The European model is flat-out unsustainable”).

Conservatives have been making exactly these arguments for roughly five decades now, yet these same European nations have by almost every measurement—individual rights and community, capitalist enterprise and social solidarity, and even personal mobility—proven superior to the United States. In fact, before the recent economic crisis workers in France, Belgium, Ireland, the Netherlands, and Norway all produced the same goods and services as the United States or more, and thereby enjoyed higher productivity-per-hour worked than U.S. workers.

Europe’s more generous welfare system has actually proven more successful than America’s in reducing the size of these payments by moving people off welfare—which is, after all, supposed to be the goal of such programs. In the Nordic nations, for instance, three-quarters of those on welfare had moved up and out of the system by the time they reached their forties, but barely more than half of their American counterparts had.

As the editors of The Economist put it: “In other words, Nordic countries have almost completely snapped the link between the earnings of parents and children at and near the bottom. That is not at all true of America.” In Britain, too, fully 70 percent of those enmeshed in the welfare system had moved out within a single generation—again, a higher percentage than in America.

The magazine points to the generous tax and welfare provisions for families as “the obvious explanation for greater mobility in the Nordic countries . . . especially when compared with America’s.”

So perhaps Roubini is right this time. But we have heard this tune for decades, and the fact is that the kind of social spending that has characterized European nations in the past—and of which the United States is desperately in need of right now—has never led these nations to behave as economists’ models have predicted they would. What’s more, these policies represent political choices by democratic populaces. Countries are not run by economists for perfect efficiency. They are run—or should be run—according to the professed values of voters. And so Roubini insisting that politicians need to cut spending and show extreme caution regarding a second stimulus indicates that he, like so many economists, is uncomfortable with that fact.

More annoying/disturbing than the above was Roubini’s aside that a big part of the problem was the fact that “All Republicans refuse to support tax increases and all Democrats refuse to support spending cuts.” This statement, frequently stated as cliché by lazy pundits and television hosts, is flat-out false.

It’s true that it has been nearly impossible to get a Republican to support a tax increase since George H.W. Bush did so nearly 20 years ago, but the incontrovertible fact is that hundreds of Democrats have supported hundreds of spending cuts beginning with Jimmy Carter’s assault on the federal budget in 1978. This continued through Ronald Regan’s draconian cuts and every president in-between, including considerable support for such cuts during the second Bush presidency.

During Obama’s presidency, not so many cuts have been on the table, since as Roubini agrees, it was necessary for the government to supply a desperately needed stimulus to an otherwise failing economy. Still, the health care plan contains any number of such cuts and, to give one obvious example, the president ended production on the F-22 Raptor and delayed procurement of aerial refueling tankers by five years—much to the chagrin of right-wing pundits, who are today crying about deficits.

When I sought out Roubini privately after his talk to let him know that his statement was false, he did not try and defend it but rather amended it. Democrats, he said, had not shown any real enthusiasm to tackle long-term entitlements. He also pointed out that he himself supported Democrats and so he did not understand my concern.

Well, here’s my concern. Conservatives already operate from an enormous propaganda edge over liberals, and this edge is magnified by the willingness of lazy reporters and pundits to repeat the clichés they spout without bothering to check them or even consider them for longer than it takes to repeat them. Academics, much less “prophets,” are supposed to do better. A lack of enthusiasm for tackling long-term entitlements is hardly the same thing as a refusal to consider any and every proposed spending cut.

This kind of misinformation, particularly when passed along by so prestigious a source—and one who calls himself a Democrat to deflect criticism—merely reinforces the power of these false clichés, and this reinforcement has consequences. Take, for instance, Annie Lowrey’s observation of the manner in which conservatives managed to weaken what had originally been intended as a bill to address America’s undeniable jobs crisis:

The bill does not include an extension of the $25-a-week Federal Additional Compensation funds, tacked onto many unemployment checks. It also does not include any of the other provisions originally included in or proposed for the jobs bill or extenders package: It does not close tax loopholes, or provide Medicare funding to states, or include funds to keep teachers and other state employees working. It also does not create an additional fifth tier of benefits; federal extensions only continue in states with higher than an 8 percent unemployment rate, and the maximum weeks of state and federal benefits remains ninety-nine.

But for economists like Roubini, one irrational political party is the same as any other—and this includes a willful blindness that invites one of them to be as irresponsible out of power as it wishes. (Or as Rep. Mike Conaway (R-TX), a member of the Republican Steering Committee, put it, “I think, in the minority, you’re not responsible for governing,” and hence, “You can be a little purer in your ideology than when you’re trying to get things done.” This problem has only progressed during Obama’s first year.)

As Trotsky said of history and the dialectic, economists may not care about politics, but politics sure cares about them. It’s time economists learned to factor this messy fact into their otherwise pristine theoretical models, because they are likely to be around at least as long as politicians are.

Eric Alterman is a Senior Fellow at the Center for American Progress and a Distinguished Professor of English at Brooklyn College. He is also a Nation columnist and a professor of journalism at the CUNY Graduate School of Journalism. His most recent book is, Why We’re Liberals: A Handbook for Restoring America’s Most Important Ideals. His “Altercation” blog appears sporadically here and he is a regular contributor to The Daily Beast.

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Eric Alterman

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