Monday, April 06, 2009

When Pundits Talk About Economic Policy

Last week, I argued that the emergence of the economic crisis has made it especially unfortunate that the current crop of op-ed columnists for The New York Times (with two notable exceptions) is not up to the task of discussing the critical issues of our time in anything but superficial terms. While training in economics is neither necessary nor sufficient to allow one to discuss the crisis in a helpful way, it is turning out that the talents of the Times's current opinion columnists are particularly ill-suited for writing about the economic crisis in a way that enhances public discussion of the issues.

A particularly frustrating case is Maureen Dowd, whose columns tend toward
(sometimes genuinely funny) barbed comments about political personalities in the service of an overall message of cynicism about the culture in Washington. For me, these columns amount to a guilty pleasure (an assessment in which I suspect that I am not alone). Unfortunately, Dowd is so embedded in the political culture that, when she occasionally comments in passing on economic and budgetary issues, she simply accepts the conventional wisdom and repeats without apparent reflection anything that she might have heard that supports her overall thesis that politicians are a bunch of charlatans who ignore real problems.

This overall thesis is, of course, all too easy to believe. There is plenty of raw material to work with if one's daily purpose is to write about politicians who seem to be obsessed with superficial issues or are incapable of getting anything done. The problem with Dowd's approach is that she repeats and amplifies the stupid things that too many political figures are saying, and she does so in a way that enhances the conventional wisdom even while lampooning those who live by it. A few examples from the past few months will demonstrate the point.

On January 10, in a column that generally involved saying nasty things about Dick Cheney and Donald Rumsfeld (opening line: "
In the past week, I’ve twice been close enough to Dick Cheney to kick him in the shins.), Dowd ran through a list of failures of the Bush years. While I agreed with her assessment that "[i]t's frightening to think where a lot of people would be now if [Bush's partial privatization of Social Security] had succeeded," she also offered this: "From Gaza to the unemployment figures to the $10.6 trillion debt, things keep spiraling while W. keeps fiddling. Just as when he was in the National Guard and didn’t bother to show up, now, as the scabrous consequences of his missteps shake the economy and the world, he doesn’t bother to show up."

The $10.6 trillion debt? First, it is notable that the announcement that the total federal debt had risen to $10.6 trillion was one of the headlines of the week in which Dowd was writing. This is the kind of context-free fact that every columnist can use as proof that something is seriously wrong, safe in the knowledge that they need not understand what the number means or why it might be a "scabrous" result of policies that "shake the economy and the world." Dowd is hardly alone in this, but her willingness to simply repeat a big number as if its wow factor was enough to prove her point contributes to public misunderstanding of an important issue. (Jon Stewart, about whom I generally have very positive things to say, went down this unfortunate road this past Thursday when he interviewed Obama's budget director. He couldn't use the word "trillion" often enough.)

Why is this a big deal, at least to budget geeks like me? Of the $10.7 trillion in Total Public Debt Outstanding in December 2008 (the most recent data available when Dowd was writing -- although, to be fair to her, the papers did report it as $10.6, not $10.7 trillion), $6.4 trillion was held by the public, of which $5.8 trillion was held in marketable securities (which are the Treasury bonds that drive the financial markets). The debt not held by the public is held as "intragovernmental holdings," i.e., accounting entries as various U.S. government entities hold IOU's issued by the federal government -- essentially, nearly $5 trillion worth of accounting for the government's having moved money from one pocket to another. As the Treasury puts it: "Debt held by the public is the most meaningful of these concepts and measures the cumulative amount outstanding that the government has borrowed to finance deficits."

So the $10.6 trillion number that Dowd dutifully repeated really should have been $5.8 trillion. Off by a mere forty-five percent! Even so, what does the $5.8 trillion figure mean? The only meaningful way to express these numbers is as a percentage of GDP (roughly, national income), because that ratio compares money owed by the national government to the capacity of the nation's economy to service the debt. As the CBO demonstrated in a recent slide show, debt held by the public in 2008 was about 40% of GDP, which is actually lower than it was in the mid-1990's (and, although not shown on the linked graph, much lower than it was in the decades after WWII).

Of course, as the CBO shows, that percentage is sure to rise above 50% this year, with the worst of the recession (at least, we hope it's the worst) now upon us. Is that bad? Compared to what? There is no "right" level of public debt, by either historical or theoretical standards. (Zero debt would actually be harmful, for reasons too complicated to discuss here. Even if it weren't harmful, however, if zero debt is good, why is negative debt -- overall surplus -- not better? Where's the limit?) Moreover, if we tried to prevent the debt from rising in 2009, we would have to either cut spending or raise taxes to balance the budget. This would be a move that would make Hoover look like a Keynesian. (Even the Republicans' proposed budget freeze falls well short of that.) In other words, even if one believes that the public debt is a meaningful datum that we need to manage as a primary policy goal, stating it as an out-of-context large number tells us nothing about the nature of the problem or even the right direction for current policy.

What part does Dowd play in all this? It is all kind of trivial, in its way -- but that is exactly the point. She eagerly becomes part of the chorus of uninformed voices that simply repeat certain facts as if they matter. A few weeks after writing the column discussed above, she wrote about the confusion over the bank bailouts. In her eagerness to trash the party in power, she lamented "the Democrats’ bad judgment in accessorizing the stimulus bill with Grammy-level 'bling, bling,' as the R.N.C. chairman, Michael Steele, called it." Why worry about the fact-free nature of Steele's claim when you have a snappy quote? Even worse, she added: "Geithner is not even requiring the banks to lend in return for the $2 trillion his program will try to marshal, mostly by having the Fed print money out of thin air, thereby diluting our money, or borrowing more from China. (When, exactly, can China foreclose on us and start sending us toxic toys again?)" As I discussed last week (here and here), these claims are also mere repetitions of popular talking points that are worse than empty.

Finally, on March 3, she joined the anti-earmarks carnival of triviality (how's that for a Dowd-like turn of phrase?) by dutifully listing a number of funny-sounding spending items about which John McCain had recently complained ("$2.1 million for the Center for Grape Genetics in New York. 'quick peel me a grape,' McCain twittered."). We certainly would not want our money going to geneticists to study an economically important agricultural product, would we?

As Dowd so amply demonstrates, the danger is not just that a tiny bit of knowledge is a very dangerous thing. The fundamental concern is that her misunderstanding of economic issues shows up in her columns only indirectly, as presumptions that she confidently states in passing because they will be perceived by her readers as obviously true and profound, allowing those facts to be used as set-ups in the service of her ultimate zingers. She confirms the misinformed conventional wisdom, helping to perpetuate myths that distract us and that stand in the way of clear thinking about how to address our economic problems. She might do better simply to kick Cheney in the shins.

-- Posted by Neil H. Buchanan

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