Good Riddance to President Obama’s First Economic “Brains Trust”
By William Shughart • Friday September 24, 2010 5:46 AM PDT • 2 Comments
Larry Summer’s announcement that he will return to Harvard’s faculty at year end, following hard on the heels of the resignations of budget director Peter Orszag and of Christina Romer, chairwoman of the Council of Economic Advisers, has summarily taken down the ornaments of President Barack Obama’s Christmas tree appointments to positions of influence on economic policy.
None of them will be missed.
Like Nobel laureate Joseph Stiglitz before them, all three apparently caught “Potomac fever”. Professor Stiglitz, it should be remembered, opportunistically supported an increase in the federal minimum wage during the Clinton administration despite having published evidence of its negative effects on employment, especially for low-skilled, minority group members seeking entry-level jobs.
Professor Romer, despite knowing better, predicted that passage of President Obama’s American Recovery and Reinvestment Act would keep the U.S. unemployment rate below eight percent. It nevertheless remains stuck at 9.5 percent.
Mr. Orszag always has been too much of a technocrat, with little appreciation for political realty (see my review of American Economic Policy in the 1990s, co-edited by Jeffrey A. Frankel and Peter R. Orszag, Cambridge: MIT Press, 2002, posted on Economic History Services, August 16, 2002, URL: http://www.eh.net/ bookreviews/library/0527shtml.)
In any case, perhaps economists appointed to positions of public trust are intellectually honest after all. It is to be hoped that the resignations of these three economic advisers to President Obama will force him back to the center. But don’t count on it.
Tags: Budget and Tax Policy, Economics 
Fred: How many stimulus jobs have we created?
CBO: Just a second (runs computer program model) 2,343,458 jobs.
Fred: Did this scan a detailed database of collected information?
CBO: No. It always says that.
CBO Creates Jobs On Paper
03/17/10 – Cato@Liberty – Daniel J. Mitchell [edited]:
AMG: Our economic future is being analyzed by CBO models that are entirely theoretical and are not compared to the reality that they are supposed to predict. It is the CBO that “scores” Congressional legislation, telling us what it will cost and how much we will save by “reducing the deficit”.
Does this inspire in you a warm feeling of trust?
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Spending is not an end in itself. Obama (and Christina Romer, Obama’s outgoing Chair of the White House Council of Economic Advisers) are pushing an economic analysis that is fundamentally, crazily backwards. We don’t spend money to create jobs, we organize jobs to provide useful things. We should apply the least resources (money) that we can toward producing those useful things.
The result of spending is what is produced. That is it. The money is not fairy dust spreading wealth to whoever touches it. The money represents say a basket of groceries that is traded in exchange for producing something useful.
At best, government spending buys absolutely necessary things such as military arms that only a government can control. At worst, government passes out money to friends and contributors, producing little of value to the general society, under the cover story of producing jobs.
Every dollar of government funds has been or will be taken from someone who has produced, or will be expected to produce something useful. He has worked hard for that dollar that the government takes away in taxes.
Christina Romer made revealing remarks at her farewell luncheon, and authored an official report to the President about the stimulus which is worthy of a freshman paper in Econ 101.
Romer and Obama are Theoretically Correct, but only in accord with a flawed theory and ridiculous analysis.
Andrew_M_Garland | Sep 24, 2010 | Reply