Ricochet is the best place on the internet to discuss the issues of the day, either through commenting on posts or writing your own for our active and dynamic community in a fully moderated environment. In addition, the Ricochet Audio Network offers over 50 original podcasts with new episodes released every day.
Forecasting Is Hard: Larry Kudlow Edition
The Trump White House could sure use a passionate and persuasive advocate for the value of free markets and open economies. And it is my hope that Larry Kudlow will ably fill that role as the new director of the National Economic Council.
But I can see how people might disagree with the appointment. Perhaps you think the role should be filled by a Ph.D. economist, which Kudlow isn’t. Fine. Nor has Kudlow recently been in a position with significant management responsibilities. Also a perfectly reasonable opinion. And I myself have become highly critical of Kudlow’s “supply-side” economics and the almost magical power it attributes to tax cuts.
(Then again, perhaps, better a super-optimist than someone who might want to, say, dismantle the global trading system that has produced peace, prosperity, and drawn a billion people out of deep poverty.)
Less valid or compelling, I think, is the criticism that Kudlow is unqualified for the job because he is a bad economic forecaster. In particular, Kudlow’s critics have pointed to his December 2007 opinion that the “Bush boom continues.” Of course that was the very month the National Bureau of Economic Research now dates as the start of the Great Recession.
But Kudlow was hardly alone in thinking that the economic expansion started under President George W. Bush still had legs. For instance: In October 2007, New York Fed economists were predicting that the US economy would grow by a snappy 2.6% in 2008, rather than, you know, shrinking. (And who can forget Fed Chairman Ben Bernanke’s May 2007 opinion that “we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system?”)
One might also point to forecasting errors by the Obama economic team, which repeatedly predicted a de facto Obama Boom was just around the corner rather than a slow-growth New Normal. Furthermore, when one looks at the folks who did “call” the Great Recession, you find some permabears who were always predicting a new crisis was nigh. And if you want to go further back, let’s reexamine all the 1980s experts who predicted the utter failure of Reaganomics and were in love with the Japanese planning model for growth. (Here’s looking at you, Atari Democrats.)
All that said, the White House Council of Economic Advisers should probably be headed by a trained economist, which it currently is. And Kudlow should make sure the NEC staff is filled with high-quality policy experts, especially on technology policy and the impact of the growing digital economy.
Published in Economics
Then again when the free traders realize their policies may have drawn a billion people out of deep poverty but at the cost of the personal prosperity of millions of Americans and replaced it with an opioid nightmare they might realize that the rise of Donald Trump is really their doing.
That is what David Stockman’s book says.
Kudlow has a proven track record of excusing and ignoring central bank created asset bubbles. Trump is a “low interest rate man.” Seriously, this is not a good situation.
Blaming sixties economic shocks on free trade gets most of the situation wrong. Our new manufacturing industry and its unions had enjoyed a monopoly for 20 years, and were too bureaucratic and rigid to compete with the new post war industries from Germany and Japan, then the Asian tigers. Nor did they understand how Japan drove its export economy into our market which Korea followed a few yers later. The role of the dollar was simply not understood so we allowed the dollar to be consistently overvalued, we continued to socialize the economy, and taxes remained confiscatory. There were ways to deal with all these problems but we failed to understand them. To the extent we pursued protectionist policies we made matters worse. Protectionism will always get matters worse because the protections will flow to old companies who have powerful k street presence and are losing competitiveness as much to new US companies which can’t get protection as to copy cat foreign companies.
I love this.
Also, be sure to vote. Your vote matters.
I keep trying to tell people this, but I’m pretty sure it’s impossible to politically control spending for this reasaon. GOP Representatives Steve Scalise, Jason Lewis, and Tom Emmer are trying to wipe out the Fed dual mandate, which will help a lot.
Yes we must remove the FED’s role of promoting full employment, they can’t do anything about it, but it keeps them from doing the one thing they have some influence on, price and currency stability. I’m not so pessimistic about spending, but it can’t be done by Congress. A White House has to give them specific guidelines which he must get from his cabinet heads and he can’t get zero based budgeting and cuts from his cabinet unless he makes it one of the first priorities to keep their jobs. Trump has to learn that Congress can’t do anything but log roll and won’t do anything unless seriously threatened.
I would not be in the least bit concerned that Kudlow is a poor economic forecaster. All economic forecasters are incapable of forecasting the future; economics is a science which does not allow even the logical possibility of forecasting.
If I were to be concerned, it would be because he is an economics advisor who knows so little of economics that he is unaware of that fact.
But I am unconcerned by the fact that Kudlow doesn’t know, or pretends not to know, any of those basic facts of economics which statist politicians do not want to hear, and have wanted not to hear for millennia. That there is no possibility of any form of economic oppression delivering on its promises of improving the well-being of the general public.
There is no point in being concerned. It is a fact of life that politicians don’t hire economic advisers who fulfill their responsibility, which is to tell politicians what they can’t do.
Whatever of the age-old fallacies the master wants to have reaffirmed–that economists can forecast, or the tragic stupidities of inflationism, mercantilism, control of prices and wages, restrictions on free exchange, the magical incantation of “job creation”–an economic court magician is required to swear to, and swear to it he will. The “second-hand dealers in ideas”, even some on Ricochet, will endlessly repeat the lies, and the people will maintain their chains and their prison cells like good submissive prisoners.
This is great. We are going to get Ron Paul world the hard way. That is what is going to happen. It might even be after a world war three.
We’re Living in the Age of Capital Consumption
Money, Markets, and Democracy: Politically Skewed Financial Markets and How to Fix Them
Bill Whittle: Why a Flat Tax would be the End of Leftism
If you don’t understand these three things, what is the point of arguing about politics? Everything got far too centralized under Woodrow Wilson and we have been doing one stupid thing after another ever since. It quit “working” about 25 years ago.