A new book, Confidence Men by Ron Suskin, talks about the making of economic policy in the Obama administration. One assumes that the Administration was expecting a somewhat favorable book when they gave Mr. Suskin access to write the book. And it appears that the Administration has not been overly happy with Mr. Suskin’s book. But that is not the point of this post. The point here is not what the book says about the President’s economic advisers. The point is what is says about the President’s own economic knowledge and philosophy. Consider this excerpt (from Brad DeLong via Tom Maguire):
“[Summers and Romer] were concerned by something the president had said in a morning briefing: that he thought the high unemployment was due to productivity gains in the economy. Summers and Romer were startled. ‘What was driving unemployment was clearly deficient aggregate demand,’ Romer said. ‘We wondered where this could have been coming from. We both tried to convince him otherwise. He wouldn't budge.’ Summers had been focused intently on how to spur demand, and on what might drive a meaningful recovery.... [W]ithout a rise in demand, in Summers's view, nothing else would work.... But productivity?... If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American business, then short-term government measures to spur hiring were not only futile but unwise. The two economists strained their memory... had they said something he'd misconstrued? ... After a month, frustration turned to resignation. ‘The president seems to have developed his own view,’ Romer said.
In August, in a campaign stop in Atkinson, Illinois (which wasn’t called a campaign stop because the federal government was paying for it and the federal government can’t pay for campaign stops, so therefore it couldn’t be called a campaign stop, even though it obviously was), the President explained his view of where jobs come from and where they go:
“When I go into factories these days, what’s amazing is how clean and how quiet they are, because what used to take 1,000 folks to do now only takes 100 folks to do. And one of the challenges in terms of rebuilding our economy is businesses have gotten so efficient that -- when was the last time somebody went to a bank teller instead of using the ATM, or used a travel agent instead of just going online? A lot of jobs that used to be out there requiring people now have become automated.”*
Wow. The idea machines reduce jobs is so wrong** – and has been shown to be wrong so often – that the fact the President apparently believes it is a little scary. I guess the President never took Economics 101, or if he did, he wasn’t paying attention.
What we have here isn’t a difference of opinion. It’s a lack of knowledge. What makes it scarier is that I’m not sure the President realizes he doesn’t understand economics. Back in 2008, he reportedly told an aide:
“I think I’m a better speech writer than my speech writers. I know more about policies on any particular issue than my policy directors. And I’ll tell you right now that I’m … a better political director than my political director.”***
If this is how he feels about economics, then the gridlock we have in Washington might be a good thing. It would probably be better than any economic theory the President came up.
* I wonder what the President thinks about the fact we don’t have elevator operators anymore or that people aren’t sending letters because of e-mail? On the other hand, maybe I don’t want to know.
** Actually, it is called Luddite.
*** Bret Stephens, “Is Obama Smart?” The Wall Street Journal, August 9, 2011.