While each of us has different views on the particulars of various economic policies, we all agree that Joe Biden's economic agenda is vastly superior to Donald Trump's. In his first four years as President, Joe Biden signed into law major investments in the U.S. economy, including in infrastructure, domestic manufacturing, and climate. Together, these investments are likely to increase productivity and economic growth while lowering long-term inflationary pressures and facilitating the clean energy transition.
This is from an open letter signed by 16 winners of the Nobel Prize in economics.
The “investments” they write about, which would more correctly be called “spending,” include the Inflation Reduction Act, which has nothing to do with inflation and everything to do with spending. Do they really believe that this huge increase in spending will reduce “long-term inflationary pressures?” What’s their basis for this? Do they think that the federal government spends money wisely? And if they do, why do they think that?
They also write:
Many Americans are concerned about inflation, which has come down remarkably fast. There is rightly a worry that Donald Trump will reignite this inflation, with his fiscally irresponsible budgets. Nonpartisan researchers, including at Evercore, Allianz, Oxford Economics, and the Peterson Institute, predict that if Donald Trump successfully enacts his agenda, it will increase inflation.
They’re right to worry about Trump’s fiscally irresponsible budgets. But they say nothing about Biden’s fiscally irresponsible budgets. Have these 16 economists even been paying attention?
Also, they praise the rule of law and they have some basis for worrying about how faithful Donald Trump will be to the rule of law. But we have an actual example of a President currently in power who, after being stymied by the Supreme Court’s decision against his illegal attempt to cancel student loan debt, actually bragged that he would go ahead and do it anyway. They don’t think this is a serious attack on the rule of law? [Note: it is possible that Biden thought he had found another way around the Court decision that complied with the law. However, this week, 2 federal courts have disagreed.]
I think one of the most shocking things is the first quote above. When government spends a lot of money, at least some of it is usually financed by the Fed printing money. Whether you believe that increased growth of the money supply leads to higher inflation (a view I hold) or that increased federal debt per se leads to higher inflation (a view that my Hoover colleague John Cochrane holds), you get the same result: a growth in the rate of government spending increases inflation.
The signers of this statement were, in alphabetical order:
George Akerlof
Angus Deaton
Claudia Goldin
Oliver Hart
Eric S. Maskin
Daniel L. McFadden
Paul R. Milgrom
Roger B. Myerson
Edmund S. Phelps
Paul M. Romer
Alvin E. Roth
William F. Sharpe
Robert J. Shiller
Christopher A. Sims
Joseph E. Stiglitz
Robert B. Wilson
Sometime after Friedrich Hayek was co-winner of the 1974 Nobel Prize in economics, he expressed his concern that Nobel Prize winners would be called upon to opine on subjects that they knew little about, and would oblige. Unfortunately, he said, they would be given undue credit.
I think that’s what we have here.
This morning I was in a meeting with community leaders and one other economist. The leader of the discussion stated to the group that my economist friend and I were among the country’s best economists. I never know what to say when someone makes such an unjustified statement. In this case, I just smiled. But if I had been quicker on my feet, I might have said, “I don’t think I’m among the country’s best economists, but I do think that in certain important ways, I’m a better economist than 16 Nobel Prize winners.”
An unrealistic "agenda" is usually far better than any realistic set of policy outcomes. Trump's outcomes were far far better for most workers than Biden's outcomes.
Tax cuts are a more productive deficit strategy than more govt spending, especially middle class tax cuts for reducing unexpected high unemployment.
Trump had the most deficits possible without big inflation - Biden's deficit spending created the high inflation which has recently come down to merely medium high inflation.
It would be nice to have more economists on record for which set of policies they support -- and track the outcomes. I'd guess all 16 also thought Trump was terrible in 2020, but the last 3 years under Biden have been far worse than the years under Trump. But that's probably because they get paid for supporting govt spending, which they usually falsely call "investment", rather than lower taxes so productive folk have more resources to produce more.
This post is filled with incorrect assumptions.
This says, "Do they really believe that this huge increase in spending will reduce 'long-term inflationary pressures?' What’s their basis for this? Do they think that the federal government spends money wisely?"
There are ONLY two ways to decrease inflation:
1) Burn money the way the fictional Joker did with $6 billion in cash.
2) Slow the economy generally by raising the cost of capital, which the fed did a dozen times.
You cannot spend you way out of inflation (caused by printing funny money and overspending) just as you cannot spend your way out of debt. There are in fact times when the govt more wisely spends $$$ - as on your kid's K-12 education. Doesn't matter. YOU CAN'T SPEND YOUR WAY OUT OF INFLATION.
These 16 Libtards are ONLY talking about switching to "Green" energy, which...
1) ALL make Global Warming worse.
2) ALL make the economy worse.
If you start off with stupid you end up with stupid. Duh. It has nothing to do with economics but the engineering of how recycling, EVs, solar, paper bags, planting trees, using dirtier Middle East oil are bad for everything that is outside of their expertise. The dumbest people in the world are medical doctors specifically because they are the most knowledgeable. They most often wrongly assume they can transfer such smarts to things they really haven't a clue about. This is all we're seeing here. Biden's legislation is nothing but pork barreling and corruption. They should know this... but politics is not in their toolbox either.
BUT the response is not much better. Dems often LIE and suggest Trump's deficit spending was higher than Biden's. That's not the president's responsibility. That is Congress. And they are talking about the Dem Congress of Trump's second term. These people (on both sides) SHOULD be talking about the need to END overspending Dems are doing in federal, state, and local govts at record levels. The only person putting forth a balanced budget bill EVERY YEAR is Rand Paul. THAT is where the conversation should be. And then, Obama created a 25% tariff on Chinese products BUT then quickly removed it (as if some check had cleared). President Trump used the threat of bringing it back to force China to break up with North Korea but then brought it back anyway - causing a LOT of manufacturing to come back to the US (like 43 tire plants). Where's the discussion of Biden maintaining this tariff and raising it... only to tell China it MIGHT go away (what, for another check?)??
When two people disagree, usually both are wrong. It's just how the world works.