Situational Use of Economic Models

Dean BakerDean Baker made a great observation this weekend, Robert Samuelson Says Economics Is An Inexact Science, Except When He Wants to Cut Social Security and Medicare. For those of you who don’t know him, Robert Samuelson is a Washington Post columnist who spends much of his time talking about how we have to cut entitlements for the kids. You see, his great interest is that we are taking money out of the pockets of future generations. But of course, raising taxes (like the payroll tax cap) is unacceptable to him. So he isn’t really interested in future generations in a general sense. He’s worried that the taxes of the rich in the future might go up a bit.

What Baker noted is that Samuelson’s arguments are generally dependent upon long-term projections from the Congressional Budget Office. Like all long-term economic projections, they are famously useless. But okay, you use the best economic information that is available. This week, however, Samuelson has written a column calling for the Federal Reserve to increase interest rates because he’s afraid that inflation will go up and “take on a life of its own.” And he specifically says that we shouldn’t listen to those economic models that he so loves to use to argue for cuts in Social Security. It’s truly amazing.

Economic policymaking is often an exercise in educated guesswork, built on imperfect statistics, shaky assumptions, incomplete theories and political preferences. This is an instructive case in point.

Note why this is an instructive case in point: because it is necessary to make his point. It is not an instructive case in point when it comes to entitlement “reform” (the smart conservative word for “cuts”). In fact, reading his constant stream of articles about how we have to cut Social Security now now now, you would never get the impression that economic projections weren’t handed down to Moses himself on Mount Sinai.

More broadly, Samuelson is making the argument that low inflation is a Very Big Deal. But as regular readers here note, modest inflation is good for everyone who actually works for a living. About the only ones who would suffer due to 4% inflation would be Robert Samuelson’s rich friends who have a lot of money in bonds. Dean Baker went on to note what it all means:

Let’s just be clear what Samuelson is advocating. He wants the Fed to keep millions of people from getting jobs. He wants to keep tens of millions of people from getting pay increases because when the unemployment rate is high most workers do not have the bargaining power to secure wage increases. He wants children to grow up with unemployed parents.

And he ended the article with, “But hey, we all have our priorities.” And that is the ultimate problem with Samuelson and the scores of other conservative pundits like him. They have their priorities, which are to enrich the rich at the expense of everyone else. But they know they can’t say that. So they claim that they are looking out for the common good. I appreciate the bind that they find themselves in. But that doesn’t take away from the fact that they represent a small slice of society without admitting it. And that makes them pernicious. But hey, what do you expect from Fox on 15th Street.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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