Sunday, October 20, 2013

Economic analysis today: the clueless lecturing the equally clueless

Robert Kuttner and Thomas Friedman walk into a bar...

There is a semi-fun website a friend introduced to me some time ago called the Thomas Friedman Op/Ed Generator. It "creates" new op-eds in the style of Friedman based on a couple of different templates, but with some key terms varied within those templates. I haven't actually sat down to determine how many different variations the engine can create, but the number is probably not very high; there aren't that many templates or terms to vary (it's repeated itself sometimes after only ten or fewer creations). Still, it's cute.

The point being made by the website is pretty good, though: Friedman doesn't say a whole helluva lot in his New York Times columns anymore. He really hasn't for years. One might even say he's the poster child for "mailing it in." His recent books are not much better, in my opinion. He just doesn't have anything significant or original to say and hasn't for quite some time. Here's a piece on Friedman's peccadilloes by Matt Taibbi of Rolling Stone from way back in 2009. It's hilarious, well worth reading, and still completely accurate. A sample:
Remember Friedman's take on Bush's Iraq policy? "It's OK to throw out your steering wheel," he wrote, "as long as you remember you're driving without one." Picture that for a minute. Or how about Friedman's analysis of America's foreign policy outlook last May: "The first rule of holes is when you're in one, stop digging. When you're in three, bring a lot of shovels."

First of all, how can any single person be in three holes at once? Secondly, what the fuck is he talking about? If you're supposed to stop digging when you're in one hole, why should you dig more in three? How does that even begin to make sense? It's stuff like this that makes me wonder if the editors over at the New York Times editorial page spend their afternoons dropping acid or drinking rubbing alcohol. Sending a line like that into print is the journalism equivalent of a security guard at a nuke plant waving a pair of mullahs in explosive vests through the front gate. It should never, ever happen.
Fast forward to the here and now. Here's a recent column by Friedman entitled "Sorry, Kids. We Ate It All." In it, Friedman urges young people to get involved with what is going on in their government because "seniors, unions, and Wall Street" are more or less destroying the future of the "Facebook generation" (which in and of itself shows just how clueless Friedman is, as the average age of Facebook users is now over forty and going up).

The entire piece is really just a big "attaboy" for Friedman's friend, Stanley Druckenmiller, and the latter's attempt to incite young people (college students) to action. It's short on analysis and long on rhetoric (like the typical Friedman column):
With graph after graph, they [Druckenmiller and Geoffrey Canada] show how government spending, investments, entitlements and poverty alleviation have overwhelmingly benefited the elderly since the 1960s and how the situation will only get worse as our over-65 population soars 100 percent between now and 2050, while the working population that will have to support them — ages 18 to 64 — will grow by 17 percent. This imbalance will lead to a huge burden on the young and, without greater growth, necessitate cutting the very government investments in infrastructure, Head Start, and medical and technology research that help the poorest and also create the jobs of the future.

Druckenmiller is not looking to get his taxes cut. He considers Social Security and Medicare great achievements for how they’ve reduced poverty among the elderly. He and Canada are simply convinced that only a Vietnam-war-scale movement by the young can break through the web of special interests to force politicians to put in place the reforms that would actually secure both today’s seniors and future seniors, today’s middle class and the wanna-be middle class.
The problems we are facing as a nation, thanks to the growing population of retirees and the aging of the population as a whole, are nothing new of course. And it's certainly reasonable to worry about the future, especially for those facing the financial burdens of this future. But the idea that--somehow--these problems can be blamed on "seniors, unions, and Wall Street" is questionable, to say the least. They are a consequence of many things, most of which were unavoidable because of changing demographics, particularly that of life expectancy. Nonetheless, Druckenmiller and Canada have the supposed solutions, which Friedman apparently endorses:
Druckenmiller urges young people to design their own solutions, but, when asked, he recommends: raising taxes on capital gains, dividends and carried interest — now hugely weighted to the wealthy and elderly — to make them equal to earned income taxes; making all consumers more price sensitive when obtaining health care; means-testing Social Security and Medicare so they go to those most in need; phasing in higher age qualifications for entitlements and cutting corporate taxes to zero, so the people who actually create jobs will have more resources to do so.
Before I dive into these "solutions," let's take a look at the response to Friedman's piece from Robert Kuttner at The American Prospect, cleverly entitled "Tom Friedman's Worst Column Ever" (hey Bob, they can't all be the worst column ever). Kuttner quite fairly jumps on Friedman for what I noted above: using his New York Times column to pimp for his friend, Stanley Druckenmiller. It really is appalling, such obvious favoritism. Or it least it would be if it weren't for the fact that a huge percentage of politicos, inside-the-beltway "journalists," and various kinds of DC insiders weren't every bit as intertwined as a matter of course. Sure, Friedman is obviously biased towards his friend here. And maybe that should be a problem, but having Kuttner--of all people--jump up and down and act all outraged about it is, well, just too damn funny. The man co-founded--with Robert Reich and Paul Starr--and runs a website dedicated to serving the interests of progressive politicians. Sycophantic love ballads to Barack Obama-- masterfully disguised as editorial pieces--are a near-daily feature there. Kuttner complaining about bias from someone else is like driving Thomas Friedman without a rubber band. But I digress.

Kuttner does take issue with Friedman's actual thinking--as far as it can be ascertained--in the op-ed. In criticizing it, Kuttner writes the following:
Let’s start with the backward economics analysis. Whether the next generation thrives or stagnates has nothing to do with Social Security and seniors “on average” getting too good a deal, and everything to do with whether equitable economic growth can be restored. Cutting the deficit will only slow growth.
And Kuttner is right. For just a moment. Social Security won't make or break the next generation (the one after that, I'm not so sure about) and economic growth is what drives prosperity (duh). Though I have to wonder what Kuttner means by "equitable" economic growth, since he--in saying it can be restored--is allowing that such growth must have occurred, must be a factor really at any time there was a "thriving" generation.

A search for "equitable growth" and "equitable economic growth" on the Prospect.org website yields two columns, the one above penned by Kuttner and a lengthy piece by Harold Meyerson on the need for Big Labor to re-assert itself as a political force to counter the influence of Big Corporations. Meyerson doesn't bother to explain his usage of the term "equitable growth" either, though in context it appears he sees the economy of the 1950's through the late 1970's as the ideal, as the locus of "equitable growth."

Assuming Kuttner is on the same page, that's a pretty scary prospect isn't it? A return to the Carter years as a means of achieving economic growth. Or a return to the post-World War II era, when the American economy grew mostly because of the state Europe was in, wrecked after a devastating war, and because of the opportunities created by shortage of labor, thanks to the War. What else is there? The Clinton years, when the gini coefficient increased more than under Reagan or either Bush?

But that's the beauty of non-specific calls for returns to imaginary pasts: one can't really criticize them without more information, information that will never be forthcoming.

As bad as that portion of Kuttner's thinking is, the last line in the above quote is even worse. Let's look at it again:
Cutting the deficit will only slow growth.
There's no "might" or "maybe" here. Kuttner just takes it as a fact that the above is true because he assumes the corollary is true: government spending increases economic growth. Mind you, he has no evidence to actually make this case and all of the evidence to the contrary he--like so many of his ilk--just ignores. So of course it is the height of comedy to see Kuttner employ such an assertion to counter what he calls "backward economic analysis." What we really have here are two guys engaging in fact-free economic analysis. Despite their impressive academic bona fides, neither one--Kuttner nor Friedman--appears to have a clue, when it comes to the economy. How sad is that?

Look at some of what Friedman is recommending via his homage to Druckenmiller: 1) "raising taxes on capital gains, dividends and carried interest," 2) "means-testing Social Security and Medicare," and 3) "cutting corporate taxes to zero." Stupidity. The first--raising taxes on capital gains--would create incentives to minimize economic activity, when it came to buying and selling assets. The second would create incentives to minimize savings (or to hide assets) in order to qualify for these programs. And the third is just patently unfair: corporations need to pay their taxes just like everyone else. Getting rid of corporate taxes in total would incentivize even more bad behavior, the movement of more personal assets under corporate umbrellas and the use of corporations as tax shelters by the wealthy.

Is it any wonder that economic policy is so incredibly screwed up right now? The arguments over right and wrong in this regard are being fought mostly be people who don't really have a clue what they are talking about, who are operating within a broken paradigm of economic analysis, trapped by their own egos, their belief in their own superiority when it comes to the subject matter. So what we get are pointless discussions and analysis, like those of Friedman and Kuttner, cluelessness as an art form, as it were.

Cheers, all.

3 comments:

  1. i actually liked Friedman's piece on Facebook, but you went a lot deeper than I did into it. I took it more for the country's entitlement regime is on a course for national insolvency, but the current beneficiaries will be unmotivated or unwilling to do anything about it. Without more research into it, I still sort of like the three suggestions offered by Friedman's friends. I appreciate your more profound analysis. Happy birthday, belated!

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  2. I am not an American citizen. In fact, I am not even a Caucasian. I am an Asian living in Asia. From my perspective as an 'outsider', as it were, it is very clear to me that your analysis of Friedman's analysis, is, in itself, skewed too. In fact, from my own point of view, from someone living in a country that is consistently rated tops by global think tanks and other world bodies for good governance and economic development, I find that Friedman makes a lot of good, accurate, and honest analysis about the state of American governance and its economy. Much of what he has pointed out and recommended, is, and I find rational, really what America needs to do right now. I can understand why you cannot accept Friedman's perspective, because as someone who comes from the West, you probably subscribe to a very different culture, as it were, regarding 'bitter pills'.

    A bitter pill is really what America needs right now. And honestly, I find Friedman's commentaries hitting the nail on the head more often than not. My country is where it is right now on global rankings, thanks not to people with your kind of thinking, running my country, but because there are more people who think like Friedman, running my country.

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  3. Thanks for the comments Anonymous. But honestly, I don't think you have a clue about what I "subscribe" to, at all. Also, as regards global economics and comparative economics, you may imagine what you wish about your country and global rankings. The fact of the matter is that the ability of nations to operate successfully under various models is a consequence of open markets. Thus, the idea that one nation has it "figured out" is nonsense.

    As to Friedman, what exactly does he have right here? He's not really saying much of anything, just spouting off. Though I will say this: he makes a lot more sense than Paul Krugman...

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