Sunday, September 21, 2008

Comparing Obama's and McCain's economic advisors

McCain's economic advisors:
Doug Holtz-Eakin source
Holtz-Eakin is a formerly respected academic and government economist who has been reduced to making distortionary arguments to paper over the massive deficit black hole McCain's tax cuts would create.

Arthur Laffer source
Laffer is the originator of the Laffer curve, the fringe view that claims government revenue increases when tax rates are lowered. There is zero empirical evidence this is true at current tax rates. McCain has repeatedly said that he believes this foolishness, but Holtz-Eakin has said (also repeatedly) that McCain does not.

Phil Gramm source
Gramm is a lobbyist who was vice president of one of the investment houses most heavily implicated in the mortage industry scandal. As a senator he pushed for the banking deregulation that contributed to the current crisis. See more here.

Kevin Hassett source
Hassett has been widely ridiculed for writing the book Dow 36000: The New Strategy for Profiting from the Coming Rise in the Stock Market in 1999, predicting that the Dow would hit 36,000 within five years, if not sooner.

Donald Luskin source
Luskin has been repeatedly named the Stupidest Man Alive by Brad Delong. See here for an example. I can attest based on my own interaction with him a few years back that in addition to being not the sharpest tack in the box, he is also an extremely unpleasant person.

Nancy Pfotenhauer source
Pfotenhauer is a pure distilled product of Koch Industries, an oil company which funds much of the right wing message machine. See here for details.

Carly Fiorina source
Fiorina was spectacularly fired from her previous job as CEO of HP. According to the Times,
... Republicans say Ms. Fiorina is using the McCain campaign to rebuild her image after her explosive tenure at Hewlett-Packard. They also say it is hard to see why a woman widely criticized for mismanaging one of Silicon Valley’s legendary companies is advising and representing a candidate who acknowledged last year that he did not understand the economy as well as he should.
Regarding Fiorina, Jeffrey Sonnenfeld, the senior associate dean for executive programs at the Yale School of Management, says "What a blind spot this is in the McCain campaign to have elevated her stature and centrality in this way. You couldn’t pick a worse, non-imprisoned C.E.O. to be your standard-bearer.”
Obama's economic advisors:
Jason Furman (director of economy policy) source bio
Austan Goolsbee (senior economic policy advisor), University of Chicago tax policy expert source Wikipedia website
Karen Kornbluh (policy director) source bio Wikipedia
David Cutler, Harvard health policy expert source Wikipedia website
Jeff Liebman, Harvard welfare expert source Wikipedia website
Michael Froman, Citigroup executive source bio
Daniel Tarullo, Georgetown law professor source bio
David Romer, Berkeley macroeconomist source website
Christina Romer, Berkeley economic historian source website
Richard Thaler, University of Chicago behavioral finance expert source Wikipedia

Robert Rubin, former Treasury Secretary source Wikipedia bio
Larry Summers, former Treasury Secretary source Wikipedia bio
Alan Blinder, former Vice-chairman of the Federal Reserve source Wikipedia bio website
Jared Bernstein, Economic Policy Institute labor economist source bio
James Galbraith, University of Texas macroeconomist source Wikipedia website

Paul Volcker, Chairman of the Federal Reserve 1979-1987 source Wikipedia
Laura Tyson, Berkeley international economist, Bill Clinton economic adviser source Wikipedia
Robert Reich, Berkeley public policy professor, former Secretary of Labor source Wikipedia weblog
Peter Henry, Stanford international economist source website
Gene Sperling, former White House economic adviser source Wikipedia
My comment on the Laffer curve--Laffer's basic point is obviously correct, that there are points at which raising taxes further would cause revenues to decline and points where lowering taxes further would cause revenues to increase (most obviously at a 100% tax rate), but to the best of my knowledge he never did any empirical or mathematical work to show what the Laffer curve actually looks like and what factors play into it. If you don't know the shape of the curve or where we currently fall on it, you don't know without testing that raising taxes will reduce revenue or lowering taxes will increase revenue. Factcheck.org looks at the actual effects of some U.S. tax cuts in this regard.

I do think that we can speculate that reducing U.S. corporate taxes (currently the highest in the OECD with the exception of Japan) could increase corporate tax revenue, given Ireland's experience with just that happening. Multinational companies will do their best to book their profits in the countries with the lowest corporate tax rates, thus increasing the tax revenue in those countries. Of course, there are other factors, such as regulatory environment, cost of labor, risk of litigation, etc.

20 comments:

Hume's Ghost said...

Before Laffer even came up with the curve he was considered a laughing stock. He had made some prediction about the economy regarding Nixon that turned out to be dead wrong. I suppose in movement conservatism spectacular failures in analysis only count against you if your conclusion is ideologically suspect.

Hume's Ghost said...

"I do think that we can speculate that reducing U.S. corporate taxes"

In Supercapitalism Reich proposed doing away with the corporate income tax, giving dividends back to shareholders then taxing that as personal income. I'm not sure how this would work out with foreign companies, and I don't recall Reich addressing that point in the book.

Einzige said...

I suppose in movement conservatism spectacular failures in analysis only count against you if your conclusion is ideologically suspect.

I don't believe that movement conservatism has the monopoly on this practice.

Jim Lippard said...

That's for sure. There are still people who give credence to Paul Ehrlich after _The Population Bomb_.

Hume's Ghost said...

Oh man ... I was flipping through my notes and I see that back around Dec. 06/Jan. 07 I have jotted down that Art Laffer was on the Rush Limbaugh radio progam saying that the United States currently has the greatest economy in the history of the world. One would think that monumental level of wrongness would disqualify someone from being a presidential advisor.

I really wish I could track down that progam and get the exact quote.

Ktisophilos said...

So any criticism of Obama's economists? Not even that Larry Summers was forced out of the presidency of Harvard because of accusations of sexism?

JL's source on the Laffer Curve:
"the fringe view that claims government revenue increases when tax rates are lowered."
You mean the view expressed by Obama's hero JFK:

"It is a paradoxical truth, that tax rates are too high today, and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut the tax rates."

Factcheck: ‘This economic theory is what George H.W. Bush called “voodoo economics”.’
During his debate with Reagan, who proceded to cut tax rates anyway and help America come out of the Carter stagflation. At the time Bush said it, America's tax rates were likely above Laffer's maximum. And even Factcheck agree that tax cuts can spur economic growth that will at least partly pay for the lost revenue, a partial payment that is often ignored when the media claim that "tax cuts will cost X billion dollars." I wouldn't mind seeing economic growth and smaller government anyway.

Einzige said...

I wouldn't mind seeing economic growth and smaller government anyway.

This seems unlikely regardless of who gets in office.

Jim Lippard said...

I thought the Summers issue was overblown--don't you agree?

When JFK made his statement, the highest marginal income tax rate in the U.S. was 91%. It was at 70% when Reagan took office, which I agree is still confiscatory. It's now at 35%, which is pretty low by comparison to most of the world--the tax rates in the U.S. that are excessive by world standards are corporate income tax rates, not personal income tax rates.

Reagan didn't do anything to shrink the size of government or reduce the debt--he increased both. Welfare reform and budget surpluses occurred under Clinton when the Republicans controlled Congress. When either party controls Congress and the presidency, they cannot be trusted to keep spending in check.

Ktisophilos said...

Of course the Summers issue was overblown. But the feminazis who had his head are now flocking to Obama, so the double standards are glaring.

All Summers did was try to explan why there are fewer females in science. He mentioned several possibilities, but one caused the feminist ire. That is, males and females have about the same mean in ability, but have a higher standard deviation, so there are both more geniuses and more male dunces. But this was enough to give some feminists the attack of the vapours. Upon which Summers, instead of grovelling and trying in vain to appease, should have said, "See what I mean" :P

And of course Obama dutifully repeats in his policy list the "women earn only 77% of what men earn" furphy, and promises more government intervention to fix. But if that were true, no employer would hire men if he can save 23% by hiring women.

Ktisophilos said...

"It was at 70% when Reagan took office, which I agree is still confiscatory."
Yet this is when Bush Sr. called the tax cut strategy was "voodoo economics", with approval from the ostensibly neutral Factcheck crowd.

"It's now at 35%, which is pretty low by comparison to most of the world--the tax rates in the U.S. that are excessive by world standards are corporate income tax rates, not personal income tax rates."
What is really excessive is the bloated tax code that costs so much merely to comply with it, and so complex that many professionals don't understand it.

America should also adopt Australia's fair policy of dividend imputation that avoids double taxation.

"Reagan didn't do anything to shrink the size of government or reduce the debt--he increased both."
He had a Dem congress, and he was also spending to win the cold war instead of the previous strategy of letting the Communists expand. This produced a "peace dividend".

"When either party controls Congress and the presidency, they cannot be trusted to keep spending in check."

A very good reason for opposing the Obamessiah, one would think.

Einzige said...

And of course Obama dutifully repeats in his policy list the "women earn only 77% of what men earn" furphy, and promises more government intervention to fix. But if that were true, no employer would hire men if he can save 23% by hiring women.

He's a politician. How can you expect him to avoid the easy pander?

The numbers are probably true, but the origin of the discrepancy is almost certainly not due to sexism (qua sexism, that is). Attempts to "correct" the "imbalance" will undoubtedly lead to higher female unemployment.

Ktisophilos said...

Einzige: right you are (on all three above).

Ktisophilos said...

BTW Jim, what's your view on the Libertarian Party? Would they be worth voting for if, it were not a wasted voted?

Jim Lippard said...

I don't think much of the Libertarian Party. I've voted for LP candidates many times, but (a) there are too many kooks in the party (including many of the candidates) and (b) they have suffered the same kind of ethical scandals as other political parties, even without getting anybody into office (with a very few exceptions). _Liberty_ magazine exposed misuse of funds by LP presidential candidates Andre Marrou and Harry Browne.

The LP tries to maintain that it is more ideologically pure than the Republicans and Democrats, and while that is probably true, there still seem to be a lot of distinctly different groups that call themselves libertarian.

I think groups like the Institute for Humane Studies, Institute for Justice, and the Cato Institute (and locally, the Goldwater Institute) are far better at getting serious consideration for classical liberal and libertarian ideas than the LP.

After reading Brian Doherty's _Radicals for Capitalism_, I became less enamored of the libertarian label than I ever had been, because I think there are some seriously bad arguments for some claimed libertarian first principles. For example, the claim that governments can never have any legitimate powers beyond those of the individuals in them is something like a sorites paradox, and ignores the possibility of emergent properties. I also think a lot of libertarian arguments treat government as a kind of magical evil institution, completely different in nature from all others, when in practice governments are much like many other kinds of institutions--even the claim of monopoly on force isn't really accurate when there are multiple layers of governmental institutions which compete for jurisdiction.

I think libertarians tend to overlook the degree to which they are being conservative about existing institutional structures that are dependent upon government (and have evolved over time as a result of various competing forces). But it's also clear that rules for social order spontaneously form quickly in the absence of government or in the gaps between governments or spheres slightly outside their control, as I find most interestingly exemplified in the history of Kowloon Walled City (a no-man's-land squatter city between British Hong Kong and China) and the squatter cities studied by Robert Neuwirth. (Or in the TV show "Deadwood," or in the drug trade, the Sicilian mafia, or in cybercrime on the Internet.)

Hume's Ghost said...

'Yet this is when Bush Sr. called the tax cut strategy was "voodoo economics",'

That's because it is and was voodoo economics. Reagan's supply side economics started racking up the defict and debt. Arguing for reducing a top tax rate is not the same thing as endorsing the monocausal supply side theory which posits that top tax rate cuts generate profit, period.

Even the conservative economist Greg Mankiw who favors supply side cuts when coupled with spending reductions called Reagan's economic advisors "charlatans and cranks."

Ktisophilos said...

HG, so the big spending Dems don't share any of the blame for the Reagan deficits? Reagan was determined to spend on the military to win the cold war, which was a good move.

I wonder if the naysaying on Reagan and hero-worship of Obama is partly due to people forgetting how atrocious Carter was: stagflation, waiting lines at gasoline stations ... and those are just the economic policies. Obama's policies sound eerily similar.

Jim: thanx for the info.

Hume's Ghost said...

"HG, so the big spending Dems don't share any of the blame for the Reagan deficits? Reagan was determined to spend on the military to win the cold war, which was a good move."

Both points are red herring.

lauren said...

Wow! Looking for an impartial list of names and backgrounds.... Obviously I didn't find it here.

Jim Lippard said...

Lauren: You got an accurate list of names, along with both objective and opinionated descriptions. Sorry you're not satisfied with that.

Let us know if you find any evidence of a competent McCain economic advisor other than Holtz-Eakin.

Ktisophilos said...

LOL, Larry Summers pays due attention to his Commander's soaring rhetoric to credit card executives.