The Economic Troika Seems Confused

There are three economists that I read almost every day because I share a lot in common with their value system and their approach to the subject area.  That would be Brad DeLong, Paul Krugman, and Mark Thoma.  The three are probably the most visible group of liberal economists on the web with the exception of Joseph Stiglitz. All three of them just don’t seem to get why President Obama does what he does given that he said what he said during the election.

Now I admit to being a relative newcomer to academia compared to these three. I’m old and will never garner the prestige they’ve achieved.   I spent most of my career in financial institutions and the FED so maybe  that’s where the difference comes.  I don’t know.  But all three of them were on the same track today and the centralized blog theme began on Thoma’s Economist’s View where the topic germinated.

Is giving some one an overly generous portion of the benefit of the doubt something that liberals academics do? I’m beginning to wonder.   All this year, the troika appeared  to be baffled by the continuing not democratic, not progressive/liberal, and not wise economic policy coming out of the District.  Did they listen to the same presidential primary debates that I listened to?  Did they watch the appointments of folks like Austin Goolsbee and just miss something?  Is it just me?

From the keyboard and fingers of Mark Thoma comes a series of not so rhetorical questions and a thought.  The title of the thread is The Administration’s “Communication Problem”.

I find it incredible and disturbing that on the eve of the recent election in which Democrats got trounced, the administration was still trying to figure out if the unemployment problem is structural or cyclical.

Chiming in with a  reply–even quoted by Thoma–is Delong. (They all obviously read each other too.)  He titled his thread  ‘Mark Thoma Watches Barack Obama and His Political Advisors Go Off Message Yet Again…Can we please get the White House back on message?’

Okay, so now we come full circle as Paul Krugman also responds to Thoma with his NYT blog and this title: Lacking All Conviction.

“Now”, I thought as I braced for the read, “we might be getting a little closer to the true source of this ‘communication’ or ‘message’ problem.”  But, Krugman’s take on the meeting was concern that POTUS is just getting bad advice.  I’m going to bold Krugman’s relevant assertion.

What I want to know is, who was arguing for structural? I find it hard to think of anyone I know in the administration’s economic team who would make that case, who would deny that the bulk of the rise in unemployment since 2007 is cyclical. And as I and others have been trying to point out, none of the signatures of structural unemployment are visible: there are no large groups of workers with rising wages, there are no large parts of the labor force at full employment, there are no full-employment states aside from Nebraska and the Dakotas, inflation is falling, not rising.

More generally, I can’t think of any Democratic-leaning economists who think the problem is largely structural.

Yet someone who has Obama’s ear must think otherwise.

No wonder we’re in such trouble. Obama must gravitate instinctively to people who give him bad economic advice, and who almost surely don’t share the values he was elected to promote. That’s what I’d call a structural problem.

Okay, there are two prominent Noble Prize winners that I’ve mentioned in this thread.  Krugman is one and Stiglitz the other. Any truly Democratic President seeking a Roosevelt/Kennedy Style economic program would call on Stiglitz in a minute’s notice.  Krugman’s the obvious choice for trade and international economics under similar policy goals.  There is a rich legacy of  Paul Samuelson acolytes out there.  Heck, Samuelson only died a year ago, so he was even available for some time; especially during the historic ‘transition’ presidency when we even got that new fangled seal.  Samuelson even went to the University of Chicago and Harvard.  Samuelson was the consummate neoKeynesian. He was the yang to the Milton Friedman yin.  He was friggin’ brilliant.

Now, I’m feeling a bit like Inigo Montoya here except that it’s not the word inconceivable that’s confusing me. What’s confusing me is that I keep reading these guys.  These guys work with models and data.  They also–of course–make assumptions.  I think the models are okay, but they keep using the wrong assumptions.  After two years, you have to question the assumptions when the data results keep confusing you, guys!!

Let’s start with some fresh assumptions that don’t start with he said this, yet he’s doing this, it must be the message, the adviser, or the communication style.  Let’s try, he said what it took to get elected.   Now, he’s doing what he believes in.  If he was all that interested in being the next FDR, at least one of you and Joseph Stiglitz would be on the CEA right now.   He’s just not that into you, Keynes, or unemployment unless he thinks it’s going to help in 2012.

M’kay?

Susie at Suburban Guerilla had a slightly different take but with a somewhat similar line of thought.

Obama would rather preside over a graduate seminar than make hardnosed political decisions, and that continues to be a major flaw.

I think it runs even deeper than that.  I think the ‘graduate seminar’ was a public relations exercise.

Digby at Hullabaloo has a little stronger sentiment than that.

If anyone’s wondering why the administration hasn’t been able to get on message about jobs and unemployment, it might be because they just don’t know what the hell they are doing.

Well, that too.