I am more and more convinced that I missed the boat by not becoming an economics pundit. I had naively assumed that my substandard arithmetic skills would be a hindrance to understanding economics, and it certainly is a barrier to being an actual economist. But any idiot can be a pundit. And economic punditry seems a particularly fertile and lucrative field for the ability challenged.
Take, for example, Robert J. Samuelson. Please. He writes in the Washington Post,
Japan’s economic eclipse shows the limited power of economic stimulus and the exaggerated threat of modest deflation. There is no substitute for vigorous private-sector job creation and investment, and that’s been missing in Japan. This is a lesson we should heed.
I don’t want to get into a discussion of what happened to the economy of Japan in in the 1980s and 1990s, but here is an article I found from a link at Krugman’s blog that explains it more clearly than Samuelson’s does. See also Krugman himself.
Where I wanted to reach out and smack Samuelson in the head was at the sentence “There is no substitute for vigorous private-sector job creation and investment.” Well, duh. No one is arguing with that, dude. The argument is over how to somehow entice (notice my avoidance of the “s” word) the private sector to create jobs and invest, and what it is that is discouraging the private sector from doing those things now.
The argument that makes sense to me is that business is not hiring and expanding because people aren’t buying stuff, and it’s stupid to increase supply without evidence there will be an increase in demand. So the key to getting the private sector cranked up is to somehow get people to buy stuff. But Samuelson doesn’t see it that way.
The lesson for us is that massive budget deficits and cheap credit are at best necessary stopgaps. They’re narcotics whose effects soon fade. They can’t correct underlying economic deficiencies. It’s time to move on from the debate over “stimulus.”
Economic success ultimately depends on private firms. The American economy is more resilient and flexible than Japan’s. But that’s a low standard. Neither the White House nor Congress seems to understand that growing regulatory burdens and policy uncertainties undermine business confidence and the willingness to expand.
First, I don’t think anyone argues that budget deficits by themselves stimulate the economy. The point, as I understand it, is that allowing the government’s budget to go into deficit is sometimes necessary to release money for other purposes, such as getting dollars flowing through the economy so that people buy stuff.
But this thing about “uncertainty” seems to be the new talking point dictated by the Puppet Masters to explain why the economy is stagnant. I’ve seen it crop up in several places lately. The argument is that businesses are not willing to spend money in expansion and hiring because they are so afraid the government is about to slap them with new taxes or regulations, and this uncertainty has turned American business into a twitching, thumb-sucking wretch, curled under its bed in fetal position, afraid to come out.
There was other nonsense about “uncertainty” repeated by some economists in the Los Angeles Times today. Kevin Drum explains in some detail why the uncertainty argument is nonsense. Ezra Klein argues that if the uncertainty theory holds water, it should have crippled the economy during the Clinton Administration even more than now. As you might remember, it didn’t.
In my heart of hearts, I assume that most Republicans know their talking point on this is garbage. They’re using it, I suspect, because they can’t think of anything else — they can’t blame the economy on tax increases, since taxes have gone down not up, and they can’t blame the recession on Bush since they still support his economic policies. They need to figure out a way to blame health care reform, industry regulations, and the rest of the Democratic agenda, so “uncertainty” becomes a convenient catch-all.
But it’s still ridiculous. Businesses have been reluctant to hire because they need more customers. It’s really not a mystery.
In other words, “uncertainty” is the best argument the Puppet Masters can muster right now. I’d like Samuelson to explain (1) exactly why business is more hamstrung by uncertainty right now than it was in the 1990s or, for that matter, the 1960s; (2) even without “uncertainty” over taxes and regulations, why would businesses expand unless there is growth in demand; and (3) where does he think growth in demand will come from, considering business is not investing and hiring, if not from stimulus generated by government?