Sunday, August 05, 2012

The U.S. Economic Policy Debate Is a Sham

http://www.bloomberg.com/news/2012-07-23/the-u-s-economic-policy-debate-is-a-sham.html

By Betsey Stevenson & Justin Wolfers Jul 23, 2012
Watching Democrats and Republicans hash out their differences in the public arena, it’s easy to get the impression that there’s a deep disagreement among reasonable people about how to manage the U.S. economy.

Nothing could be further from the truth.

In reality, there’s remarkable consensus among mainstream economists, including those from the left and right, on most major macroeconomic issues. The debate in Washington about economic policy is phony. It’s manufactured. And it’s entirely political.

Let’s start with Obama’s stimulus. The standard Republican talking point is that it failed, meaning it didn’t reduce unemployment. Yet in a survey of leading economists conducted by the University of Chicago’s Booth School of Business, 92 percent agreed that the stimulus succeeded in reducing the jobless rate. On the harder question of whether the benefit exceeded the cost, more than half thought it did, one in three was uncertain, and fewer than one in six disagreed.

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How about the oft-cited Republican claim that tax cuts will boost the economy so much that they will pay for themselves? It’s an idea born as a sketch on a restaurant napkin by conservative economist Art Laffer. Perhaps when the top tax rate was 91 percent, the idea was plausible. Today, it’s a fantasy. The Booth poll couldn’t find a single economist who believed that cutting taxes today will lead to higher government revenue -- even if we lower only the top tax rate.

The consensus isn’t the result of a faux poll of left-wing ideologues. Rather, the findings come from the Economic Experts Panel run by Booth’s Initiative on Global Markets. It’s a recurring survey of about 40 economists from around the U.S. It includes Democrats, Republicans and independent academics from the top economics departments in the country. The only things that unite them are their first-rate credentials and their interest in public policy.

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The disjunction between the state of economic knowledge and our current political debate has important consequences. Right now, millions of people are suffering due to high unemployment. Our textbooks are filled with possible solutions. Instead of debating them seriously, congressional Republicans are blocking even those policy proposals that strike most economists as uncontroversial.

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