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Pres. Obama Appoints Non-Economists to Key Economic Positions
Pres. Obama’s latest appointment, last week, of a non-economist as head of the World Bank suggests that he disdains economists. Jim Yong Kim, , currently Dartmouth’s president, was formerly the Chair of the Department of Global Health and Social Medicine at Harvard Medical School, and was a co-founder and executive director of Partners in Health. All preceding appointments to head the World Bank were economists.
Pres. Obama’s first Chairman of his Council of Economic Advisers was Prof. Christina Romer, a Professor of Economics at the University of California at Berkeley. Prior to Pres. Obama’s inauguration, Romer worked with Jared Bernstein on the administration's economic stimulus plan for recovery from the 2008 recession. As a Keynesian, it apparently did not matter to Romer what the money would be spent on; it would stimulate the economy.
When she resigned as chair of the CEA to return to academia, she stated in a speech at the National Press Club that more stimulus was needed. She should have said that more ineffective stimulus was needed! (See below.) The first evidence of the non-existence of the Keynesian multiplier was the downturn in the economy between 1936 and 1937 which occurred as soon as the Roosevelt administration reduced expenditures in preparation for the 1936 election. Additional evidence is very recent. When Recovery Act expenditures moderated in 2010, the temporary increase in employment diminished.
The real architect of the Recovery Act of 2009 appears to have been Jared Bernstein who had no economics degree at all. He graduated from the Manhattan School of Music with a Bachelors Degree in Fine Arts. He earned a Masters Degree in Social Work from the Hunter College School of Social Work, a Masters Degree in Philosophy, and a Ph.D. in Social Welfare from Columbia University. In 1992, he was hired at the Economic Policy Institute (EPI), a think tank with ties to the labor unions. He was appointed Chief Economist at the US Department of Labor in 1996. It does not appear that he had the qualifications to be the chief economist of anything. Any economic knowledge that he may have gained must have come from osmosis, his association with economists.
It is no surprise, given his background, that the Recovery Act of 2009 transferred hundreds of billions of dollars to the states in support of teachers’ salaries and education infrastructure. It is no coincidence that teachers’ unions were and are huge supporters of Obama’s political ambition. The act subsidized expenditures on a variety of environmental projects, including hundreds of uneconomic wind and solar power companies and ear-marked hundreds of billions dollars for projects in every government agency.
The current Director of the National Economic Council, Gene Sperling, appointed in January, 2011, like Bernstein, does not have an economics degree. He has a B.A. degree from the University of Minnesota and a law degree from Yale University. He hitched his star first to Gov. Cuomo in his campaign for Governor of New York and later to Pres. Clinton during the latter’s successful run for the Presidency in 1992 and served in various capacities from 1993-2001. In an American Thinker piece that appeared on February 3 2011, we reviewed Sperling’s 2005 book, The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity (NY: Simon & Schuster, 2005), to learn more about him. We found him to be deficient as an economist and wrong, but politically correct, as a leftist on every topic he discussed.
On foreign trade, he argued that we have only two choices: free trade or protectionism. He opts for politically correct free trade. There is a third choice, a policy designed to achieve balanced trade. He apparently is unacquainted with the work of economists Baumol and Gomory which we have extolled on this site a number of times. Sperling seem totally unaware of the economics of international trade. He extols exports as creating jobs and does recognize that imports may cost jobs. We wrote:
“Sperling's solution to the job losses caused by our chronic trade deficits is to retrain workers for nonexistent jobs. But if trade were balanced, there would be no job losses. Those jobs lost to imports would be replaced by even better jobs producing exports. The balanced trade solution is obvious. But to Sperling, doing anything that makes imports more expensive for poor people is not "progressive."
What about the fact that many are poor because they lost well-paid manufacturing jobs that were outsourced abroad?
And as we noted, the horrible idea of a payroll tax cut apparently came from this non-economic economist:
And we would add, it would not and has not contributed to economic recovery for economic reasons that we have pointed out on this site.
In Sperling’s book, all his examples of American corporate executives are female. They are all referred to as “she”. Talk about being politically correct!
As we wrote: “We believe that nearly all of Sperling's social amelioration proposals would fail benefit-cost analysis. Just as he misses the economics of unbalanced trade, nearly everything he proposes is bad economics.”
On non-economic issues as well, Sperling appears to be politically correct but wrong. What should one make of this nonsense?
That all of us owe a great deal to the past goes without saying. But to make government the source from which all blessings flow is absurd.
We disagreed with Sperling on every one of the domestic issues. Here is what we wrote about his approval of affirmative action:
And what we wrote on public pre-schooling:
We believe that Gene Sperling is not qualified to serve in any important economic post. But he is the most powerful member of the President’s inner circle and personally handpicked two labor economists for the Council of Economic Advisors: (1) Prof. Krueger, as chief advisor, and (2) Kaherine G. Abraham. Some rationality did apply to the third member, Prof. Carl Shapiro. Shapiro is on leave from the University of California at Berkeley, where he is the Transamerica Professor of Business Strategy at the Haas School of Business and Professor of Economics in the Department of Economics.
It is clear from these appointments that Pres. Obama wants change, but clearly not rational economic change.
Comment by Michael J.Corrigan, 7/25/2012:
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