It’s hard not to feel sorry for respected economists who accept jobs with the Bush White House. They’re forced to defend policies they know are erroneous, and more importantly in the academic community, abandon their long-held principles.
One of the more recent examples came with Glenn Hubbard, who served as the chairman of the White House Council of Economic Advisors (before resigning this month). In order to adhere to the beliefs of his administration cohorts, Hubbard had to argue that growing budget deficits had no effect on interest rates, despite the fact that most economists believe the opposite. He dismissed the deficit/interest rate relationship as “Rubinomics” (in reference to Clinton Treasury Secretary Robert Rubin) and said there is “no link” between the two.
With this in mind, it was fairly embarrassing for Hubbard when UC-Berkeley economist and former Clinton administration official Brad DeLong found an economics textbook Hubbard had written that showed Hubbard arguing the exact opposite.
As DeLong discovered, Hubbard’s textbook, “Money, the Financial System, and the Economy,” said, “By the late 1990s, an emerging federal budget surplus put downward pressure on interest rates.” Hubbard’s book even included what Slate described as a “handy-dandy formula explaining the relationship.” The same textbook argued that higher budget deficits from the Reagan/Bush years created “pressures” on interest rates.
With Hubbard having left the White House to spend “more time with family,” Carpetbagger assumed Karl Rove would find a replacement that actually believed in the administration’s ridiculous and ineffectual economic policies. No such luck.
As the New York Times explained today, Hubbard’s replacement will be Harvard economist N. Gregory Mankiw. Like Hubbard, Mankiw will be forced to defend the indefensible. And like Hubbard, he’s already written a textbook that undermines the very policies Bush is putting into an effect.
In an article headlined, “A Salesman for Bush’s Tax Plan Who Has Belittled Similar Ideas,” the Times explains that Mankiw has ridiculed the idea that tax cuts will “pay for themselves” by making the economy grow — a principle that serves as the foundation for Bush’s entire fiscal policy.
Mankiw’s textbook, “Principles of Economics,” first published less than five years ago, included an analysis of the Reagan/Bush policies in a section of his book called, “Charlatans and Cranks.”
“An example of fad economics occurred in 1980,” Mr. Mankiw wrote, “when a small group of economists advised presidential candidate Ronald Reagan that an across-the-board cut in income tax rates would raise revenue.”
As the Times article explains, “After reviewing the impact of Mr. Reagan’s policies, which included a run of high budget deficits that lasted until the mid-1990’s, Mr. Mankiw wrote that the moral of the experience was that ‘when politicians rely on the advice of charlatans and cranks, they rarely get the desirable results they anticipate.'”
Won’t it be fun to see how the administration spins this one? Carpetbagger can’t wait.