I read a lot of articles written by economists. I know. Boring, right? But fun for geeks like me. Lately, I have come to a conclusion about their writings. For the most part, they don’t write about economics. They write about their political views.
Many who have done break-through work have become celebrities of a sort, at least among the business press. Robert Shiller predicted the dot.com bust while most were smoking cigars and drinking Champaign. He also won the Nobel Prize for Economics in2013. He recently wrote about FDR’s coining of the phrase “The only thing we have to fear is fear itself”. He would have us believe that the main reason that consumers and businesses are not spending enough to boost economic growth is fear manifesting itself as “performance anxiety”. His follow up point is that such anxiety becomes a self-fulfilling prophecy.
He extends this metaphor to our government’s failure to invest in infrastructure at a time when interest rates are at historic lows. Is that the result of fear? I think not. It’s the result of political dysfunction.
Shiller’s political views are not as much in evidence as some of his colleagues. Fellow Nobel winner Joseph Stiglitz is a former chair of the President’s Council of Economic Advisors. In a 27-page whitepaper, he lays out his prescriptions for reforming the tax code.
There is little doubt that the “hollowing out” of the middle class, as he puts it, affects the performance of the economy. However, he connects this factor to the presumption that “one of the reasons that our economy is not performing is the high level of inequality”. The middle class has suffered as a result of other macroeconomic factors, globalization and technology for example. Inequality didn’t cause those things.
Stiglitz goes on to propose more complexity for our already onerous tax code. He proposes higher tax rates on the rich “who save a large fraction of their income” having an effect on aggregate demand. He fails to mention that, in economic terms, savings equal investment and investment creates jobs.
Stiglitz also decries the schemes that corporations use to legally avoid taxation and lobby for preferential treatment in the tax code. I quite agree with him on that point. However, his prescription is to raise the corporate tax rate without regard to the impact on investment capital. The high marginal tax rates we endured in the 1950’s had a terrible long-term effect on capital investment. We paid the price in the 60’s and 70’s when we couldn’t compete with German and Japanese manufacturers and their newer plants and equipment.
Robert Reich, another liberal economist, does a great job of presenting his views in short YouTube videos. Generally, he supports the perspective of Democrats in Washington even when he contradicts himself. Recently he argued in favor of the President’s proposal on corporate taxes despite having suggested doing away with them in his 2009 book, Supercapitalism: the Transformation ofBusiness, Democracy and Everyday Life.
Then, he argued that eliminating the corporate income tax would make corporate profits subject to a progressive personal tax and create greater equality for middle class investors. It’s a sound argument.
Everyone has a bias. However, learned economists who become thought leaders have an obligation to raise the level of political dialog above the petty, partisan politics we endure daily. Presenting your political opinion as though it is derived from analysis is simply punditry. Do we really need more punditry?
WHO WILL LEAD?