Former White House economic adviser Austan Goolsbee has stated regret for two of the shortsighted quick fix programs the Administration put into place shortly after taking office, “Cash for Clunkers” and the home buyer tax credit:
“Because we didn’t know if [economic recovery was] going to be short or long,†the Obama administration tried measures to address both scenarios, Goolsbee explained on MSNBC’s Morning Joe.
“If you look at cash for clunkers or the first home buyer tax credit, they were geared to trying to shift [recovery] from 2010 into 2009. Given it’s taken this long [to recover], I don’t think you would do that short-run stuff,†Goolsbee added.
Is he out of his ever-loving mind? A schoolkid could have told him that the economic downturn was severe enough and the problems pervasive enough that their assumptions for a speedy recovery were full of beans. If they thought that recovery would come that quickly they should have done nothing at all. They’d still have had two years before the president needed to run for re-election. I seem to recall that at the very same time the president was repeatedly talking about the most serious financial crisis since the Great Depression of the 1930s. Cognitive dissonance? Political posturing? Not letting the right hand know what the left hand is doing? Accidentally being right?
That strategy wasn’t hedging. At the very best it was diluting the effects of what they were doing in either case and at the worst it was making things worse.
These guys have really got to get out more.
I think some of the economic advisors believe the problems in Europe have exacerbated the recover, risked a double-dip. But this isn’t a useful political analysis, which needs to trace everything back to George W. Bush.
Dave Schuler: I seem to recall that at the very same time the president was repeatedly talking about the most serious financial crisis since the Great Depression of the 1930s.Cognitive dissonance? Political posturing? Not letting the right hand know what the left hand is doing? Accidentally being right?
Not to disagree with your point that they should have known better how deep the financial crisis was, but there’s a large gap between the previous “most serious financial crisis since the Great Depression” and the Great Depression.
No argument there. I said much the same back in 2008 and 2009, attributing the conflation to political posturing.
Is he out of his ever-loving mind? A schoolkid could have told him that the economic downturn was severe enough and the problems pervasive enough that their assumptions for a speedy recovery were full of beans.
Okay, calm down, Mr. Grimm. The whole point of their programs was so that they could (a) show that they cared about the little guy, and (b) take credit for the recovery later.
Also, don’t you know that the economic downturn was much worse than anybody knew? I hear it all the time, especially from one of your rent seeking commenters.
There fixed it for you.
I agree. I think the problems in Europe are what is causing the recovery to stall. We haven’t done some of the more boneheaded things we did during the Great Depression (can anyone here at least admit the economists got that part right? No? Didn’t think so.). If Europe goes into a major crisis over the Euro and their financial system, then it will likely spread very quickly to the U.S. I, and probably nobody else, has any idea of the magnitude of the U.S. exposure to a financial meltdown in Europe and that uncertainty has to be spooking people over here.
Add on the dampening effect of our own near default from late in the summer and yeah, I can see why the economy is sputtering. Of course, the brinksmanship on the part of the Republicans was totally the fault of economists, right?
Novel idea of simply letting the free market lead the way!
But, don’t you think the dems wanted to capitalize on the financial crisis to grow a more socially progressive agenda? I keep think about Emanuel’s much publicized comment of, “Never letting a crisis go to waste.” Much of the economic tinkering and quick targeted fiscal fixes, such as Cash for Clunkers and the buyer credit programs, IMO, had more to do with pursuing a larger social agenda, than applying sound ideas addressing broad spectrum problem.
Are you talking about the republican brinksmanship of trying to get the economic conversation focused on the growing deficit, rather than continuing the enormous spending?
I tend not to deal with motives very much. I don’t think they’re simple things. In general, I think that people tend to believe that the course of action they’re advocating is the one that will be the most effective/do the most good and that’s true whether they’re Republicans, Democrats, libertarians, Stalinists, or what have you.
I’m more concerned about pragmatic results. It was patently obvious that “Cash for Clunkers”, at the very best, would time-shift auto purchases from the near future into the time frame during which the program ran. Basically, it was a subsidy to people who were going to buy cars anyway and scrappers at the expense of taxpayers in the United States and consumers outside the United States. And yet there were people who should have known better, whose professional training should have taught them better who stood up and defended the policy.
Those kinds of economists very rarely work for Presidential Administrations at that level.
Interesting. One comment completely eaten.
Well, here goes again…
Steve V, how about when all the economists miss on their predictions in the same direction, often badly? I’m thinking of (I believe) the predictions on the May BLS labor report and the Q1 GDP predictions, among many others. How about when almost none of the economists can see the
elephantbubble in the room, as in 2006 and 2007?My beef is that economists frequently provide cover for political choices by claiming there is some scientific basis behind what they want done. I’m thinking of Laffer and Krugman, amongst others. You don’t see physicists typically coming out and saying, “The field equations clearly indicate that if we just change DOE grant proposal acceptance policies, then the economy will grow by an addition 0.5% over the following two fiscal years.â€
“I tend not to deal with motives very much. I don’t think they’re simple things. In general, I think that people tend to believe that the course of action they’re advocating is the one that will be the most effective/do the most good and that’s true whether they’re Republicans, Democrats, libertarians, Stalinists, or what have you.”
Sounds nice. But really, Dave, listened to any of the last 5 speeches given by Reid or Pelosi? C’mon, man. C’mon.
“Novel idea of simply letting the free market lead the way!”
To paraphrase the old SNL skit: ‘jan, you ignorant slut!’ 😉
The first one is based on statistical modelling and those are always problematic. These types of models are problematic in that they often rely on historical data and unless the models are really well designed will likely miss things like recessions a priori.
As for the bubble, I don’t know how many economists talked about the financial bubble in 2006 or 2007, but the thing is that bubbles tend to be unpredictable–i.e. you can’t see them coming. You can only see them once they are going or even when they burst.
If economists had that kind of predictive power, then bubbles wouldn’t be an issue.
As I’ve been saying over several of Dave’s posts now, many of the economists that you have a beef with are of liberal persuasion. I don’t think you’d find too many New Classical, Real Business Cycle, or Austrian school of though economists making a statement like that.
If economists had that kind of predictive power, then bubbles wouldn’t be an issue.
Well, some of us could see the bubble back in 2004 and 2005. You only had to go shopping for a house and look at how the property values had sky-rocketed in the previous half-decade. How did almost all the sophisticates miss that?
And the quoted statement above does not mesh with what you’ve been saying. Either economists have power, and can do things like stop a bubble from happening, or they don’t. If they don’t have power they couldn’t stop the bubble anymore than my wife or I could have in 2005.
Steve Verdon: If economists had that kind of predictive power, then bubbles wouldn’t be an issue.
The problem is, as Icepick suggests, is that they often have policy viewpoints that override their scholarly work. Hence, Greenspan can find himself in “shocked disbelief” that lending institutions don’t necessarily protect shareholders’ equity, even though it is basic human nature, and there is a long history of such behavior.
The bubble was quite easy to see for those with eyes.
http://jeffmilner.com/2007/04/a_history_of_home_values.png
More specifically, once a bubble develops, then commodity pricing becomes detached from intrinsic value, and money rushes in to flip the asset to the “greater fool” while the prices are rising rapidly.
A lot of people saw the housing bubble. It’s one thing to see something, it’s quite another to formulate a policy to deflate the bubble (especially without the benefit of hindsight), and it’s a third thing to get political buy-in for that policy. What politician would get up in front of the American people in 2005 and say, “hey, your houses are worth too much – I want you to support my plan to keep their value from growing any further. Oh, and we’re building too many houses – I have this other policy that will decrease housing starts to more reasonable levels. Please call your representative.”