Brad DeLong had exposed the White Paper from Romney’s economic team (Kevin Hassett, Glenn Hubbard, Greg Mankiw, and John Taylor) to be a collection of things that don’t follow, things that are wrong, and things that are just plain false if not lies. Something tells me that the Romney economists are not going to rush out and acknowledge Brad’s many and excellent points. Instead we see
Greg Mankiw show casing something
John Diamond provided to the Romney campaign. Diamond claims that the Romney tax reforms will add 5.4 percent to GDP over the next decade.
Contrast this prediction to what Brad wrote:
The CBO currently estimates potential real GDP at the end of 2022—what we would expect without policy changes to boost economic growth—to be $18.5 trillion real dollars. Current real GDP is $13.5 trillion. Applying HHMT’s lower-range growth numbers produces an end-of-2012 real GDP not $2.1 trillion higher than CBO projects but rather $0.6 trillion higher. $1.5 trillion of their claims thus arise not from faster growth of the economy’s productive potential but from an implicit—and unmotivated—assumption that under Romney policies aggregate demand in 2022 is equal to potential output, but under other policies it is not.
Interestingly, 5.4% of CBO’s $18.5 trillion in potential GDP would represent a $1.0 trillion improvement. But how does Diamond get there. He assumes a specific policy of tax rate reductions with tax revenue offsets (“base broadening”). His model also ignores any crowding-out effects which must mean that any failure to offset the rate reductions were paid for by cuts in government spending. Again, let’s turn the microphone back over to Brad:
Similarly, Romney has not even the outlines of a plan for how to reduce federal spending to 20% of GDP, or how he could possibly broaden the tax base to keep his tax cuts for the rich revenue-neutral. If you do indeed fear uncertainty about tax and regulatory policy, you need to vote against Romney as you would vote against the plague—and urge everybody you know to vote against Romney, and urge them in the strongest possible terms.
I’m sure Team Romney will tout the results of the paper from Diamond but something tells me that they are not going to be so willing to address the legitimate questions about whether their alleged policy proposals match the assumptions made in this paper. If they don’t – this is not a real policy debate. It is just propaganda dressed up to look like economics. Didn’t we see this movie back some 32 years ago?
We did see this movie 32 years ago, but it was better done then, because Reagan was a better actor.
ReplyDeleteElections have been decided by swing voters for a long time now, so in order to win an election, it is only necessary to convince a relatively small number of "undecided" (meaning "slow to make up their minds about stuff") voters to vote for your side (or to not vote for the other side). This can best be done though an emotional appeal, since rational thinkers already know the score. So, let's hit some emotional hot buttons of the low-analysis crowd. Gay rights, evil empire, radical feminists, welfare queens, terrorists.
It is actually a point in Romney's favor (as a human being) that he wants to appear to have the backing of "serious" economists, instead of simply using the language of fear (Reagan, Bush II) and resentment (Nixon, Reagan) to get these undecided voters motivated enough to vote. This inability or unwillingness to focus on what's effective will probably cause him to lose the election.