The Politics of Economics

When Alan Blinder was advising the Clinton Administration from his economics perch, he would often find himself thinking “There is no election next Tuesday.” The thinking of the political class is so far removed from anything else, we find economic advice ignored, public opinion ignored, and the good of the nation ignored. What’s important is the next sound bite, tweet and poll that will aid in re-election. For an economist, it feels like automatic rejection every time.

Advice and Dissent is based on the hundred year-old Lamppost Theory, which says that drunks depend on lampposts for support, not illumination. So with politicians, apparently. They use economists to support their own positions, not for insights or solutions.

The main problem is the Madison Curse, Blinder says. James Madison bequeathed a system so hoary , cumbersome and slow that little or nothing could be accomplished in it. That was the actual idea, and we see the results daily.

Having chaired Clinton’s Council of Economic Advisors and vice-chaired the Federal Reserve board, Blinder had a front row seat to the disconnect between politicians and economists. He says economists are all about data and equity, while politicians are all about the popular vote and re-election. These two galaxies rarely cross paths. That is why tax reform is so difficult, why boondoggles continue to exist and why common sense is not a factor. It’s to the point, he says, where even a bipartisan panel of economists would not necessarily agree with a bipartisan panel of lawmakers.

Blinder goes into exquisite detail of how things get derailed in the process. How the budget needs to be passed by scores of committees. How local politics can destroy national programs. How linkages and logrolling top proven practices and corrective initiatives. The government is there for the needs of the politicians and the process. Economists don’t figure in that, unless they support the politicians’ stands.

There is a separate room in economics hell for supply-side theories. Blinder quotes newly-minted Nobel laureate George Stigler, invited to comment on Reagan’s new cure-all: “It’s a gimmick, or if you wish, a slogan.” There are essentially no economists who support the supply side, trickle-down theory of cutting taxes to increase government revenues. Which is why you never see them backing the president. Blinder stabs the supply-siders numerous times throughout the book. The whole concept is an embarrassment to the discipline. But that doesn’t stop politicians from trying it again and again, claiming it is a proven solution.

Economists have the numbers, and the politicians ignore them. Blinder shows that while politicians bemoan the disappearance of American manufacturing, output has been stable for 60 years (Jobs have disappeared, but production continues). And while politicians claim government has ballooned, the civil service is the same size it was in the Eisenhower Administration. This stops absolutely no one from winning elections based on government-bashing.

The government is twisted so far out of shape that Blinder’s suggestions for nudging it back to the mean would have seemed crazy not long ago. He thinks we need more backroom negotiations where deals can be done out of the sunshine. He thinks we should bring back earmarks to exchange for votes on bills. And he thinks we can safely implement otherwise impossible tax hikes if we pass them now but put them off for years. The intellectual dishonesty is breathtaking.

On the other hand, Blinder argues for a Tax Board, made up of economists and other technocrats, to structure a fairer and simpler tax system, without input from special interests. Taking this away from the politicians is not unprecedented. He points to the Federal Reserve, which Congress created because it was out of its depth trying to reign in panics and recessions. Similarly, fast track approvals allow specialists to devise an entire package, and Congress gets to vote yea or nay on the whole thing. We have the resources to make government work, but politicians have other priorities.

Another great old idea is the parliamentary system of civil service. The US president must appoint 9000 people to Administration positions. The vacancies can last for two years or more, what with finding candidates, having the FBI investigate them, and the senate confirm them. The UK and Canadian governments carry on with a full and neutral civil service, without missing a beat. Only the ministers (cabinet secretaries) change.

The one great weakness of Advice and Dissent is Blinder’s clear and omnipresent status as a Democrat. He wears it proudly, and demonstrates it often. This is not merely beneath the lofty pedestal he puts economists on, but ironically, points right back James Madison, whom Blinder cites repeatedly. Madison was totally against political parties for gumming up the works. Which is saying something, considering Madison’s design. If we had politicians devoted to issues instead of ideologies, even the government might work better.

After reading Advice and Dissent, your appreciation of how government works changes; you realize it is a miracle if anything productive comes of it, ever.

David Wineberg ( )