Mankiw On the Decision Making Apparatus at the White House

Greg Mankiw is tougher on a Joe Biden statement than even I would be. I'd dissmiss it as Biden just blowing smoke. But, Mankiw has worked for an occupant of the White House before, and I haven't, so maybe he sees something I don't. Here's Mankiw:

In a TV interview last month, Vice President Joe Biden said

Every economist, as I've said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs.

That statement is clearly false.

As I have documented on this blog in recent weeks, skeptics about a spending stimulus include quite a few well-known economists, such as (in alphabetical
order)Alberto Alesina, Robert Barro, Gary Becker, John Cochrane,Eugene Fama, Robert Lucas, GregMankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales--and I am sure there many others as well. Regardless of whether one agrees with them or not on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the standard objective criteria by which economists judge one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.

So what is one to make of the vice president's statement? As a logical matter, I can think of only four possibilities:

Biden knew what he was saying was false.

Biden was saying what he believed to be true and somehow got this incorrect idea in his head without talking about the issue with the very talented team of economists working for the new administration.

Biden talked to his economic advisers about the issue, and they purposefully misled him into thinking that there was a consensus among economists, even though there isn't.

Biden's advisers were themselves mistaken. They expected an overwhelming consensus of support for their fiscal plans and were surprised at the number of prominent economists on the opposite side the issue.

I have no idea which of these hypotheses is correct. I suspect it is either the first or last. But any one of them should make us uneasy about how well the new administration's economic decision making apparatus is working.

Fear Mongers at Work

The United States economy is going through a readjustment period as a result of past Federal Reserve money printing that distorted the structure of the economy.

Left alone, the readjustment period would likely resolve itself within six months. The Fed, however, is currently flooding the economy with more money, which will result in a return to some form of the old distorted structure (With destruction of the dollar as a byproduct). Under both of these scenarios, though, there is no need for an economic "stimulus" package, which is nothing more than taking money from the politically weak and transferring it to the politically powerful.

The incoming president-elect and vice-president-elect are prepping the politically weak for the upcoming transfer of another near-trillion dollars to the politically powerful. Talk about the economy being in recession for years, or that the economy is "near tanking" is nonsense. The only thing that will prolong the readjustment period is Fed money printing or government intervention in the economy. The transfer of wealth has nothing to do with with the readjustment process. If anything, it will slow the economy as it will take money from the productive elements of society, and thus lower incentives.

When Barack Obama warned today that economic recovery will not be swift that "It will take longer than any of us would like — years, not months," and that a huge stimulus package will be required, it is fear mongering not based on sound economic analysis.

When Joe Biden says that the U.S. economy is in danger of "absolutely tanking" and will need a second stimulus package in the $600-billion to $700-billion range, it is more of the same, fear mongering not based on sound economic analysis.

Wealth transfers never help an economy, indeed, a near-trillion in transfers is going to negatively impact a lot of people, whether it is from higher taxes or inflationary deficit spending.

Notes Ahead of the Vice-Presidential Debate

The vice-presidential debate tonight between Sarah Palin and Joe Biden starts at 9 p.m. Eastern Time and will run for 90 minutes.

It will be carried live by all major networks, and video streamed at a variety of internet sites.

The format is changed somewhat from the presidential debate last week. The candidates will have shorter time periods in which to speak. They will have 90 seconds each in which to answer questions (It was two minutes during the presidental debate) from the moderator and the moderator will guide a two-minute discussion on each topic.

Gwen Ifill will be the moderator. She is the managing editor and moderator for Washington Week (PBS) and a senior correspondant for The NewsHour (PBS). Sha also appears frequently on a number of Washington-based talk shows.

On October 5, 2004, she moderated the vice-presidential debate between Republican candidate Dick Cheney and Democratic candidate Senator John Edwards.

Ifill is writing a book with the title The Breakthrough: Politics and Race in the Age of Obama, which is scheduled to be released January 20, 2009, Inauguration Day.