Economists Need to Learn History
Editor’s Note: The Wall Street Journal column below discussing political polarization notes that “economists…argue that presidents of both parties have politicized the bureaucracy by appointing partisan loyalists and shifting key decisions to White House staff not subject to confirmation.” Economists and other commentators need to recognize that White House review and supervision of key agency regulatory decisions goes back to the Nixon Administration and has continued, uninterrupted, since then. In short, it is misguided to blame more than forty years of bipartisan White House policy for the current political and economic climate. Moreover, the implied suggestion, that the President should not interfere with the government he leads, is difficult to understand.
From: Wall Street Journal
Blame Polarization for Tepid Economic Growth?
By David Wessel
Chalk up another reason to worry about intensifying political polarization.
There has been a running argument among economists on the extent to which uncertainty over U.S. government policy –taxes, spending and regulation – is a big reason the economy has been so distressingly sluggish.
In a skirmish over the weekend at the annual meeting of the American Economic Association, Harvard’s Larry Summers challenged the case that uncertainty is a big problem: Do I want my doctor to be “consistently predictable or responsive to” a particular health emergency, he asked. Better, he answered, to have a doctor “evaluating my condition and responding appropriately.”
Stanford’s John Taylor responded: “It’s great to have the all-knowing doctor,” but history bears out that the economy does better when policy is “predictable…and rules-based.”
Now the leading advocates of the case that uncertainty over policy is hurting the economy — a band of academics from Stanford, and the University of Chicago – have come up with a new hypothesis: Political polarization is adding to the uncertainty that is hurting the economy.
The partisan divide, they argue in a paper presented at the AEA meetings, leads consumers, businesses and investors to expect “more extreme policies, less policy stability and less capacity of policy makers to address pressing problems.”