We're still months away from the election, but my favorite political forecaster, Larry Sabato, has drilled down to important realities in The Electoral College: The Only Thing That Matters. He notes that it's too early to call the contest, but he finds Hillary Clinton to have a strong lead over either Donald Trump or Ted Cruz.
As I noted in my Forbes.com article, How Bad Will The New President Be For The Economy, a President Clinton would have difficulty implementing her program if at least one house of Congress is held by Republicans. If Clinton has coattails long enough to pull both houses to the Democrats, then it's time to re-think our economic and investment forecasts. But I'm not there yet.
I don't incorporate much politics into my economic forecasts. I'm no better than average at predicting electoral outcomes. Even if I knew who was going to win, I wouldn't know what that person would do as president. (I didn't expect Bush II to push for steel tariffs or a Medicare drug benefit; I didn't expect Obama to maintain war in the Middle East or domestic surveillance without warrants.) And finally, even if I knew who would win and what that president would try to do, I wouldn't know that Congress would go along.
The most interesting pollster is Larry Sabato, who recently had this to say about the presidential candidates:
... most of them are human tape recorders. On the top 25 or 30 issues, each has memorized a paragraph or two; mention the issue and the candidates push the “play” button in their heads. Almost word-for-word each time, they recite the pollster-researched, consultant-approved soundbites designed to produce a Pavlovian response in partisans.
Problem is, Americans would generally prefer to elect a human being, not an automaton. It’s at least possible that a few more intractable problems would get solved if potential presidents were less inflexible — or so it appears to many voters.
That helps explain the popularity of the unscripted (or less scripted) Trump, Carson, Fiorina and Sanders. Sabato adds
not caring about electability sometimes makes a politician more electable.
We've heard it (and I've said it) thousands of times: correlation does not mean causation.
Yet we still make the mistake (and I do mean "we").
Tyler Vigen has developed a correlation machine. He has scraped lots and lots of data series, then gone searching for correlation. Take a look at the Spurious Correlations website, and watch Tyler's video down at the bottom. (Hat tip: Greg Mankiw)
A distinguished economist was disqualified for an Obama administration appointment because she had talked about the need for redistribution policies. Rebecca Blank, a highly regarded researcher on poverty and inequality, had been considered to chair the President’s Council of Economic Advisors. According to a New York Times story, the key statement that sunk her chances was made in 1992:
“A commitment to economic justice necessarily implies a commitment to the redistribution of economic resources, so that the poor and the dispossessed are more fully included in the economic system.”
Of course, the Obama administration is not opposed to redistribution, but the word was considered politically risky.
Should economists talk about redistribution of wealth or income? Apparently not, if they want presidential appointments. But let’s talk more broadly: should economists opine on such an issue?
Economic policy cannot derive strictly from economics. Economics is a set of if-then statements: if this occurs, then that happens. It’s a collection of statements about the way the world works, or at least a world of people. There is nothing within the body of economic thought that, by itself, dictates what policy is best.
To determine economic policy, or any other policy, one must start with values. What is important? Rebecca Blank obviously thinks that some level of equality is so important that it merits the use of force to seize wealth from some people. Others, such as libertarians, would say that violence against honest people is not justified even to promote equality. Both positions are philosophical, not economic.
This point is reinforced by the context of Blank’s statement, which appeared in an article entitled “Do Justice: Linking Christian Faith and Modern Economic Life.” Her support for forced redistribution lies in the context of a Christian trying to determine what economics says about how best to pursue one’s religious values. Economics certainly cannot determine what religious values a person should hold. It cannot prove Christ’s role in our lives, nor God’s plan for us. Thus, economics by itself cannot lay out a plan for Christians.
An economist has as much right to express statements about value as anyone else does. However, the economist is not doing so from a position of professional expertise. Blank being an expert on poverty does not mean that she is an expert on the morality of using force to solve social problems. In fact, I doubt that we should grant anyone “expert” status on such philosophical positions.
Incidentally, Blank is to be congratulated for brining economics to bear on questions of implementing Christian values. All too often someone expresses values without an understanding of how the world works. Just as economic policy conclusions must have a foundation in values, they must also incorporate an understanding of how the real world works. Many programs that are proposed in flowery language purporting to help the poor (or stop drug use or bring peace to the Middle East) have the opposite effect. It’s not enough to want the right thing; one also has to make sure that the particular proposal will bring it about.
As a student, I thought that economics had the answer to all policy questions. I learned that I was wrong, in the usual conceit of one who has mastered a single topic and wants to apply it everywhere. I now believe that economics is a secondary consideration, though a necessary consideration. The most important foundation of any policy are philosophical: what are the most important values?
The Urban Institute's Tax Policy Center has a nice whiteboard video explaining who pays no federal income tax. The tone is liberal, but it is factually accurate. (I have not double-checked their facts, but it is consisent with my recollection of the facts.)
The video omits two important issues: one is the disincentive effects of our tax system, and the second is the ethical issue: should anyone be relieved of a responsibility to support the government?
Greg Mankiw has an excellent article in the New York Times. I've summarized the article in my title, but here are two telling excerpts:
One point, however, cannot be disputed: Even if President Obama wins all
the tax increases on the rich that he is asking for, the long-term
fiscal picture will still look grim. Perhaps we can stabilize the
situation for a few years just by taxing the rich, but as greater
numbers of baby boomers retire and start collecting Social Security and
Medicare, more will need to be done.
Ultimately, unless we scale back entitlement programs far more than
anyone in Washington is now seriously considering, we will have no
choice but to increase taxes on a vast majority of Americans. This could
involve higher tax rates or an elimination of popular deductions. Or it
could mean an entirely new tax, such as a value-added tax or a carbon tax.
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