Tuesday, May 08, 2012

David Brooks and the Hollow Man

As is his wont, David Brooks is telling us that there are two types of people - in this case, stupid people, and people like him. The type of person who doesn't think like Brooks?
Many people on the left are having a one-sided debate about how to deal with a cyclical downturn. The main argument you hear from these cyclicalists is that the economy is operating well below capacity. To get it moving at full speed, the government should borrow and spend more....

Unlike the cyclicalists, we structuralists do not believe that the level of government spending is the main factor in determining how fast an economy grows. If that were true, then Greece, Britain and France would have the best economies on earth.
Dean Baker calls Brooks out on his hollow man argument - his creating an opponent who does not actually exist, in order to more easily swat down an argument that nobody is actually making:
I don't know anyone who looks like cyclicalists that Brooks writes about. It would be good if he could toss out a few names for readers so that we know such people actually exist in the world and are not just Brooks' hallucinations.Since the views Brooks attributes to the cyclicalists are sufficiently bizarre, it is hard to believe that such people exist.

For example, he tells us that the cyclicalists believe:
"the level of government spending is the main factor in determining how fast an economy grows."
I have never come across anyone who had a view anything like this. I do know many economists, who argue that in a downturn more stimulus will lead to more economic growth, but this is nothing like the view that Brooks attributes to the cyclicalists. Does Brooks really think it is the same thing to say that more stimulus leads to more growth in a downturn and saying that government spending is the main factor determining growth in general? This is scary.
But we all know who Brooks is attacking in his column, don't we? Even if he doesn't name the name (or present either an honest or accurate summary of his argument)? In a stunning display of the Dunning-Kruger effect, he's going after Paul Krugman. Whether or not it's official policy that New York Times columnists aren't supposed to disparage each other on the Times' own pages (print or virtual), there's been quite a bit of back-and-forth between Brooks and Krugman, and Brooks seems to be chafing at the fact that he always comes out on the losing end of the argument. By not naming Krugman, Brooks gets another advantage - he can caricature and misrepresent Krugman's arguments and then, as an ostensible defense, claim he was speaking more broadly... you know, about the other unnamed people who aren't actually making this argument.

Meanwhile, Paul Krugman has published a note to (cough) himself, pointing out the absurdity of the structuralist argument that Brooks endorses. Krugman observes,
Anyone who says something like “If deficit spending were the route to prosperity, Greece would be in great shape” should be immediately considered not worth listening to. People in my camp have repeated until we’re blue in the face that the case for fiscal expansion is very specific to circumstance — it’s desirable when you’re in a liquidity trap, and only when you’re in a liquidity trap. I know that some people like to project their own crudity onto others, but what they’re actually demonstrating is their own ignorance.
Brooks identifies three structural problems that he believes are impeding the economic recovery:
  1. Productivity Increases: "Hyperefficient globalized companies need fewer workers. As a result, unemployment rises, superstar salaries surge while lower-skilled wages stagnate, the middle gets hollowed out and inequality grows." The first argument is ridiculous - Brooks thinks this is the first time in history that technology has improved or worker efficiency has increased? Or that it's somehow different from all the other times when exactly the same thing happened? And who are the "superstars" Brooks imagines to be making out like bandits? The rent-seekers he later describes - because it really seems like the biggest gains have been by those who have manipulated the system or who have survived their own incompetence by the grace of government handouts.

  2. A Lack of Skilled Workers: "The United States, once the world’s educational leader, is falling back in the pack. Unemployment is high, but companies still have trouble finding skilled workers." Brooks presents no evidence in support of this claim. The actual problem appears to be that companies aren't hiring, and those that are hiring want to get "skilled workers" at bargain rates. I've seen little evidence that jobs offering competitive wages aren't getting plenty of qualified applicants. It's fair to also note that huge numbers of jobs have been lost domestically due to the availability of cheap unskilled overseas labor - it's not that domestic workers can't do those jobs, it's that the jobs are no longer in this country.

  3. Rent-Seeking: "Over the decades, companies and other entities have implanted a growing number of special-interest deals into the tax and regulatory codes, making it harder for politically unconnected, new competitors, making the economy less dynamic." Which is, of course, the result of policies endorsed by David Brooks and the Republican Party.

Brooks also complains that "Running up huge deficits without fixing the underlying structure will not restore growth", which is not the argument anybody is actually making. What somebody who actually cares about the problem might observe is that the economy can benefit if the government demonstrates fiscal responsibility when the economy is strong and engages in deficit spending when the economy is weak - and positions itself to stimulate the economy that is up against the zero bound. The overt policy of the Republican Party and of David Brooks is the opposite - engage in absolute fiscal recklessness, running up huge deficits when the economy is strong, and leaving the nation unable to afford to fix the mess created by those policies during recessionary periods.

Stimulus spending would not fix the problem, but it can soften the blow. It's a bit like using raw eggs to seal holes in your radiator when you break down in the middle of the desert - you know it's not idea, you know it's not a permanent fix, but it can get you out of a bad situation much more quickly and with much less harm than is otherwise likely to result. More stimulus spending that prevented layoffs at the state level could have had a significant impact on the unemployment rate, and with more people working and consuming the rest of the economy was more likely to rebound. Although Brooks seems to find these concepts to be elusive, they're actually quite obvious. Dean Baker points to history:
...Brooks gives us the line freshly drawn from the 1935 Washington Post:
"Then there are the structural issues surrounding the decline in human capital. The United States, once the world’s educational leader, is falling back in the pack. Unemployment is high, but companies still have trouble finding skilled workers."
If you think you have seen this one before, that's because you've seen it before, and heard it repeated endlessly in all sorts of contexts. Here's the Washington Post in 1935:
"unemployment may run into the millions, but as the iron, steel, and metal-working industries improve, a scarcity of skilled workmen is developing, states the magazine Steel this week."
There are clear market signals of the sort of mismatch of jobs and skills that Brooks describes. We should see sectors of the economy where there are large numbers of job openings relative to the number of unemployed workers. We should see sectors where the average workweek is increasing rapidly. The logic is that firms who cannot find additional workers make the existing workforce work longer. And most of, we should sectors of the economy where wages are rising rapidly.

People who believe in markets would look for this evidence before making bold assertions about employers being unable to find qualified workers. By contrast, Brooks just makes this assertion with no evidence whatsoever.

Our economy has some structural problems, particularly in terms of health care costs, and many states have only addressed serious problems with their budgeting in the face of economic catastrophe. Structural problems exist and can be addressed. But Brooks' "structural" issues are, for the most part, as vaporous as the "cyclicalists" he imagines oppose him. Where do Brooks and his "structuralists" stand on the Affordable Care Act, the most serious legislation this nation has ever passed to try to address healthcare inflation?

Brooks attempts the Beltway version of "reasonableness", which is to say that our nation should prioritize dismantling the social safety net in the interest of... I guess that would be justifying the next round of tax cuts for the rich. Although Brooks states,
Mitt Romney and Representative Paul Ryan understand the size of the structural problems, but their reform plans are constrained by the Republican Party’s single-minded devotion to tax cuts.
The criticism is less of the focus on tax cuts and more of their unwillingness to actually state the social spending cuts they would make. Brooks' argument is inherently dishonest, first because Romney has run away, screaming, from any suggestion that he be specific with his actual plans, and second because Ryan's "plan" is an economic catastrophe in the making - if the structural problem is that our deficits are too large, Ryan's plan makes things worse. If Brooks is going to pretend that he cares about education and allowing the unwashed masses to get a sufficient education to compete with his elite rent-seekers "superstars" for decent jobs, Ryan should not be his hero. Ryan's beholden to the rent-seekers.

Dean Baker responds,
Finally Brooks concludes by telling us:
"make no mistake, the old economic and welfare state model is unsustainable."
This should prompt a really big, "huh?" Brooks had just been touting the German model. Germany certainly has a much more generous welfare state than the United States, even if it has been rolled back somewhat in the last decade. We could also look to Netherlands and the Nordic countries, all of whom have much more generous welfare states than the United States, yet don't in any obvious way appear to be on an unsustainable growth path. It's not clear what point Brooks thinks he is making.
Krugman comments on the absurdity of trying to fix the long-term economy instead of focusing on the short-term, pulling out Keynes' famous observation, "In the long run we are all dead".
Anything along the lines of “we need long-run solutions, not short-run fixes” may sound sophisticated, but it’s actually just the opposite.
He's right - particularly in our political system. Brooks cannot reasonably claim that our government is so beholden to special interests that it harms the economy and then pretend that those special interests will disappear from the political scene the moment that the budget is balanced. We know exactly what happened the last time we had a budget surplus, don't we? As long as the present Congress cannot bind future sessions of Congress to follow its budgets and policies, the only budget that matters is the next one.

When people claim we need some sort of overarching budgetary plan that extends over decades, and that nothing short of that is sufficiently "serious" to address our nation's economic woes, they're betraying an ignorance of even recent history - the manner in which the G.W. Bush Administration squandered the surplus with an express attitude of "deficits don't matter", and the manner in which events that are outside of our control, whether in the form of a terrorist attack, a war, a global economic meltdown, or something else, can throw a monkey wrench into the most carefully constructed long-term economic plan. They're also displaying abject ignorance of how our political system functions (some might say malfunctions). Yes, long-term plans and projections are helpful, but if you care about fixing things you need to look at what is happening right now, and any actual, observable trends.

I'll note in closing that Brooks' distinction between "cyclicalists" and "structuralists" is a false dichotomy. You won't find a single person conversant with economic issues who cannot identify structural problems in the economy, and (other than, perhaps, Brooks) you won't find a single such person who emphasizes structural problems as the root cause of our economic malaise who doesn't recognize that economies go through cycles.

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