Economics and Head-butting
Economics isn’t science. Thomas Carlyle called economics the “dismal
science” and the name stuck. But it’s not dismal science. It’s dismal
history.
There are no labs in the university’s Economics Department. It’s impossible
to concoct economic experiments the way, say, a chemist or a physicist
composes experiments. All the economist can do is look at what’s happening
–- or, more frequently, what’s happened -- in the real world. The deep
scientific name for this economic study is econometrics. The result is a
Niagara of statistics.
That’s why the financial pages in a newspaper resemble the sports pages.
They report what happened yesterday. The sports and financial pages are
filled with indisputable facts (the players, the corporations, the fund
managers, the team managers) and statistical records (strikeouts, defaults,
home runs, completed passes, interceptions, losses, capital flows, earnings
per share, wins and bankruptcies.)
People who are very clever with
numbers sometimes make prediction as to what’s going to happen in sports or
finance. And if you’re the innocent person who believes whole heartedly in
what the deep-voiced sports forecaster predicts, you should not venture near
the stock market but keep your money under your mattress.
Now that we’ve come clean on the limits of economics as a science, let’s
turn to economic policy. The idea that economic policy is just economics in
action is equivalent to saying that deciding to bomb Hiroshima is just
putting nuclear physics to work. Economic policy is social policy hiding
under an assumed name.
President Barack Obama, who hoped to change the way Washington does
business, urged congress to get to work on economic policy in a bi-partisan
way. He invited some Senators and Representatives for bi-partisan cocktails
and had some others come round to watch the bi-partisan Super Bowl with him.
All very friendly. Everyone knew what the economic statistics showed: the
upsurge in unemployment and mortgage defaults, the collapse of banks, the
vanishing of credit, the plunge in stock values, the fall in commodity
markets, the implosion in derivative markets, the slowing of trade. The
numbers described a global economy falling to pieces. Furthermore, the
numbers had been getting worse for over a year and were now getting worse
faster.
So, after the football game, after the corn chips and beer, the Senators and
Representatives sobered up and got to work. The result was one of the most
partisan knock-down drag-out displays in recent memory. Most people were
surprised by the verbal slugfest, no matter whether they watched the
congressional debate on C-SPAN or got it second-hand from the news services.
But nobody should be surprised.
Economic policy is social policy – memorize that – and social policy is all
about constructing the kind of society you want to live in. As you’ve
probably noticed, Republicans and Democrats differ widely as to what form of
society is the best. It’s possible that in other ages Democrats and
Republicans might have had more agreement on what constituted the good
society, but not today. We live in a time when many Republicans don’t even
call the Democratic Party by its own name but insist on calling it the
“Democrat” Party. The awkward and ungrammatical usage has no purpose except
to vent a kind of juvenile spite.
Michael Steele, the new Chairman of the Republican Party, addressed the
nation on Saturday as our senators were butting heads on the stimulus bill.
According to Steele, Democrats were “trying to force a massive spending bill
through Congress under the guise of economic relief.” Well, yes, any decent
stimulus bill is going to spend massively.
The Republican Chairman went on to mis-characterize the Democratic bill a
couple of times (no, Mr. Steele, it’s not a trillion dollars; no, it doesn’t
take money from struggling families and “run it through a slow and
inefficient government, and hope that does some good.”) Steele boasted that
“Republicans have offered innovative ideas to help struggling families and
small businesses.” By my count he offered a grand total of two ideas: “stop
the taxation of unemployment benefits” and “lower taxes for all working
American families.”
Economists believe that cutting taxes, when done correctly, produces quicker
but much smaller benefits when compared to stimulus spending. It has a
smaller effect because – just as Mr. Steele says – families will “spend it,
save it, or invest it.” But most families are not going to invest their
dollars in today’s lethal stock market and saving their money won’t
stimulate the economy. Spending will help, but if they buy foreign goods –
and many, many goods are foreign – the final dollar goes to China or Sri
Lanka or some other country. On the other hand, if you pay our workers to
repair our bridges and build our schools, the money energizes this country
and we end up with a safe bridge and a new school building.
Cutting taxes for “all working American families” sounds egalitarian, but
among other things it means cutting taxes for the top percent of the
population. The last time I looked, the top 20 percent of the people held
over 84 percent of the nation’s wealth, leaving less than 16 percent for the
bottom 80 percent of the population. But building a truly egalitarian
society is not what Congressional Republicans want.
It may strike some of us as unthinkable that a group of conservative
Republicans would purposely weaken the stimulus plan in order to have it
fail. It’s scary to think rational senators and representatives would put so
much at risk. On the other hand, the last Republican president was willing
and eager to lead the nation into an optional war that had catastrophic
consequences. Nothing is really unthinkable.
—Gene Mirabelli