Wednesday, May 21, 2008

Berkeley Holds on to Obama Economic Advisors

As I've noted earlier, Berkeley husband-and-wife economist team David and Christina Romer are both advisors to the Obama campaign. This article explains how Harvard offered a job to David but not Christina, after the Harvard President vetoed the economics department's decision to offer Christina a job. This seems really bizarre, because I think if anything Christina is a more prominent economist than David (although this is just my subjective take.)


MattYoung said...

Looking up Christina Romer I find she discovered:

"The results [tax survey] provide no support for the hypothesis that
tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending."

Odd, the American system was designed to increase government as we reduce the price of government.

We designed this into the system some 230 years ago. We did this precisely because the Founders knew we would have bouts of government expansion and bouts of government contraction, precisely on eight year boundaries. It is the basis of Manifest Destiny, the result of the conflict between Alexander Hamilton and Jefferson, the cause of the civil war, the reason Social Security gets regular 16 year updates.

For those of you who execute this plan on cue in the legislature, what you do, is expand government in one half the cycle, then charge the wealthy for the expansion while it is being shrunk on the next eight year cycle.

But, as supporters of Obama and sensible economists, we all know this, and Obama's constituents know this; hence, no one should expect any big changes in entitlements under Obama.

It's a system founding economists created, and it is no surprise that periodically, every year for 200 years, we tell ourselves this truth as we execute this truth.

MattYoung said...

We aren't making progress here, so let me throw out this Goolsbee quote about entitlement taxes:

"How it is that a guy making $90 million a year is paying the same tax as a guy making $97,000 a year? I think that at best it would strike them as highly weird and at worst grossly unfair."

This quote points out the problem we have with economists understanding counter party agreements. The power of social security is that it is the optimum investment in the wealth curve, we cannot invest in America any better then investing in a sanitized measure of income in proportion.

The reason we have disagreements about social security is precisely because Goolsbee wants to make it suboptimum. In addition to Goolsbee, we leave out very important groups of income from SS investment, like government workers.

Goolsbee necessity for the progressive income tax is to solve the problem of differential gain from government services. If the rich gain proportionally more than they pay for government services, then we have unending government growth, an impossibility and the lead to fiscal messes.

We make progressive taxes to cause the rich to use government more efficiently, and when government is inefficient, progressive taxes cause government to equilibriate to a smaller ration of the economy.

Goolsbee cannot change the equilibrium point of government and its interaction with the private sector, at this point Obama is part of the government reconciliation process.

Goolsbee can subtly change the speed with which government and private sector equilibriates, mainly by having the government engage in shorter term agreements so we can track the dead weight opportunities.

If this is a policy election, then both economic advisers are going to get creamed if they pretend equilibrium can be defeated.

Richard H. Serlin said...

It should be noted there are two highly accomplished male economists named Romer, David and Paul. Growth economist Paul is more prominent than either David or Christine, and is on the short list to receive a Nobel prize.

donpedro said...

Yes, that's right. See my earlier post where I re-tell David's joke about this: