“If you chained a thousand Boskins to a thousand keyboards for a thousand years, eventually one of them would make a correct prediction.”

 

Over the years, I have been critical of economist Michael Boskin: I have critiqued his market forecasts (“Obama’s Radicalism is Killing the Dow“) that were made literally on the day markets hit their lows and began a 5 year, 136% rally; I abhor his artifice in damaging  how economic data is assembled; and how he officially distorted how CPI data is modeled.

In 2010, I made the following observation about Boskin:

“For those of you who may be unaware, Boskin is the economist/weasel/fraud who helped to officially distort the CPI, making it more or less worthless as a measure of inflation. The Boskin Commission was an act of fraud, a backdoor method to suppress Social Security cost of living adjustments (COLAs). To be blunt, it was an act of cowardice. Rather than man up and say “fix this, its broken, we can’t afford it” the commission took a different route — they fabricated a series of nonsense adjustments  that artificially lowered CPI by 1.1%.

The Boskin Commission’s massive government falsehood allowed former Fed Chair Alan Greenspan to take rates to absurdly low levels, as the official CPI data showed no inflation, despite double digit price increases.”

Thus, it was not just that he is merely intellectually dishonest, or just a terrible economist, or also a political hack — it is that these combined to contribute to the financial crisis. His Orwellian artifice in mucking about the BEA/BLS data actually made inflation appear far more tame than it was. This contributed to then Fed chair Alan Greenspan’s irresponsible ultra-low rates. Easy Al was under the false impression that inflation was contained, at least according to the official Boskin adjusted inflation data. It was not.

While we cannot blame Boskin for the financial crisis, we can recognize that he, in his own small way, was one of the many contributing factors.

I was reminded of all this yesterday when I linked to an amusing New York magazine column: World’s Wrongest Man Ventures Latest Prediction. The piece details many of the hack predictions that Boskin has made.

New York points out that investors who listened to Boskin over the past 3 decades have gotten annihilated:

“If you are an investor, Boskin’s doomsaying is a sure sign of a coming bull market. Four years ago, Boskin penned a Journal op-ed whose thesis was captured in the headline, “Obama’s Radicalism Is Killing The Dow.” That was the signal for the Dow to go on a tear, doubling over the next four years. As Kevin points out, the Dow’s current “high” is an overstated artifact of dumb, unweighted statistics, but the underlying reality remains that the stock market has enjoyed an incredibly good four years under Obama’s radicalism.

One might suppose that Boskin has simply suffered a single unfortunate coincidence. In fact, his career is a mighty testament to the power of enduring, invincible wrongness. In 1993, Bill Clinton enacted an economic program centered around some public investment, coupled with deficit reduction with higher taxes on the rich. Boskin was very, very sure it would fail. In a Journal op-ed entered into the Congressional Record by grateful Republicans, he accused Clinton’s administration of “fundamental distrust of free enterprise.” He made a series of predictions: “The new spending programs will grow more than projected, revenue growth will be disappointing, the economy will slow, and the program will reduce the deficit much less than expected.”

Boskin repeated his prophecies of doom in a summerlong media blitz. Boskin labeled Clinton’s plan “clearly contractionary,” insisted the projected revenue would only raise 30 percent as much as forecast by dampening the incentive of the rich, insisted it would “take an economy that might have grown at 3 or 4 percent and cause it to grow more slowly,” and insisted anybody who believed in it would “Flunk Economics 101.” (The preceding pre-Internet quotes are all via a Lexis-Nexis search.)”

The article details how “literally every Boskin prediction turned out to be the opposite of reality.”

In the new radical right movement, being consistently wrong is some kind of a badge of honor, and so he rose through its ranks, failing upwards as an economist, but scoring points as a propagandist. As a former George W. Bush economic adviser, we expect him to have made bad decisions, as that was seemingly a requirement for any job in that worst of all administrations. As a fellow at the Hoover Institute, we expect him to continue pursuing the brilliant policies that made President Hoover such an economic success story. (Note its called the “Hoover Institute” because the name “Clusterfuck Foundation” was already taken).

But all of that is just so much political bullshit. What is most unforgivable, is that he sandbagged investors for political reasons. Anyone who listened to the advice of this ‘respected economist,’ wrapped in the language of investing (but in actuality partisan political tripe) was crushed.

That is the real reason you should ignore anything and everything Boskin writes or says — because he is so contemptuous of you as an investor that he is willing to throw you under the bus in pursuit of his own radical right ideology.

You see, it was never Boskin’s intentions to give you investing advice — indeed, from all appearances, he could not care less about that. His agenda was an attempt to scare you politically. That he did so in financial papers like the Wall Street Journal or Investor’s Business Daily simply reveals the contempt he (and their OpEd managers) hold for their readers — saps, marks, subscribers, investors — suckers all.

Over the years, I have mocked the WSJ OpEd pages as filled with drunks and cads hell bent on losing you money. Boskin is a classic example of why you should never let anyone’s politics influence your investing. He is part of the reason why I quarantined money-losers  like the WSJ OpEd pages.

And think, it only took 30 years of money losing advice for the rest of the world to wise up to him . . .

 

 

 

Previously:
Michael Boskin on “The Obama Crash” (December 7th, 2009)

Why Michael Boskin Deserves Our Contempt (January 19th, 2010)

Boskin’s Bottom Tick: Obama’s Killing the Dow (March 9th, 2011)

Why politics and investing don’t mix  (February 6, 2011)

 

Source:
World’s Wrongest Man Ventures Latest Prediction
Jonathan Chait
New York Magazine, March 5, 2013
http://nymag.com/daily/intelligencer/2013/03/worlds-wrongest-man-ventures-latest-prediction.html

Category: Bailouts, Really, really bad calls, UnGuru

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

24 Responses to “Wrongstradamus: The Money Losing Forecasts of Michael Boskin”

  1. rd says:

    In the end, the GOP lost the presidential election because the decision-makers were willing to believe fake data that supported their ideological views instead of looking at hard data that would have told them they were going down the wrong path. Michael Boskin is just one the fabricators.

    It will be interesting to see how the party figures out to change course or if the GOP goes the way of the Whig Party. BTW – I am a registered GOP voter but the candidate slates I get from the GOP are forcing me to vote as an independent. Theoretically, I am in the demographic segment that the GOP assumes would vote for them every election.

  2. Moss says:

    Can’t agree more. To ‘scare you politically’ is what these ideologically rigid demagogues are all about. The NRA is right up there with the best of them. They have scared the gullible into buying more and more guns and ammo. Exactly what the gun makers pay Lil Wayne to do. The socialist, anti-business, un-american, gun hater Obama is the perfect bogeyman for these charlatans.

  3. MiloD says:

    “(Note its called the “Hoover Institute” because the name “Clusterfuck Foundation” was already taken).”

    There are tears rolling down my cheeks from laughing so hard. I’m not much of a sycophant but godamnit Barry, when I grow up I wanna be just like you. (sadly, I’m older than you)

  4. lefty gomez says:

    See opposition to Chuck Hegel as Sec. of Defense due to his opposition to the Iraq war as a demonstration that, in certain circles, it is more important to confirm to the ideology than it is to be right.

    This is the conservative counterpart to the Marxist college professor.

  5. krice2001 says:

    Barry, please don’t hold back! :-)
    If there’s one thing I’ve learned from following you since 2006 is that having political positions is fine (I have stong ones) but allowing them to play a role in investing decisions is foolish at a minimum.

  6. capitalistic says:

    So who is wrong, the message or the messenger?

  7. gordo365 says:

    The Hoover Institution – where expectations are low and to the right.

    Not sure where I saw that. But thought it was funny.

  8. gordo365 says:

    Wow – right there on Hoover Institution homepage – “Larger spending cuts would help the economy” Michael Boskin.

    Seriously?

  9. Pantmaker says:

    …fat lady has yet to sing. This guy might end up looking like Nostradamus.

    ~~~

    BR: The market has already run 136%, and you are defending his call? THIS IS WHY YOU ARE MODERATED.

    #NOASSHATS

  10. A says:

    This is a better predictor of market direction:
    http://www.newyorkfed.org/markets/tot_operation_schedule.html

  11. jjsocrates says:

    If pundits like Michael Boskin were intellectually honest, then they would have put their money where their mouth is. Michael Boskin should be bankrupt now (financially, not intellectually) because he put all of his money into shorting Indexed Funds. Did he? Doubtful – chances are he said one thing, yet kept his money invested in the stock market all along.

    You will also notice all of the political pundits did NOT plunk down $$ over on Intrade back in Nov 2012 to back up their confidence that Romney would win the election.

    Want to shut a blowhard up? Make a bet with them. Chances are you’ll get GREAT odds, so take them up on it. They won’t put their money where their mouth is – because even THEY don’t believe their own bullshit.

  12. elliotts1961 says:

    By the way, Boskin’s work lives on to teach tricks to the current administration. Within the last week I read an article reporting that the US government could save billions of dollars if they modified the CPI calculation to take into account, for example, people substituting less expensive alternatives as prices of their goods rise.

    So let’s see, if someone can’t afford ground beef they’ll switch to dog food so the cost of living hasn’t really increased? Reading the article was a real OMG! and WTF! moment. Why not simply declare that inflation is 0% and call it a day? It would be a great way to commemorate the passing of Hugo Chavez.

  13. RW says:

    I’m reasonably confident that the coincidence of the Dow record with the sequester will lead Boskin or someone of his ilk (and George Will or someone of his ilk) to assert that the former is a consequence of the latter.

    I’ve given up asking if any of these people actually believe what they say; the only thing that seems relevant any more is the damage they do.

  14. Edoc says:

    @RW

    “I’m reasonably confident that the coincidence of the Dow record with the sequester will lead Boskin or someone of his ilk (and George Will or someone of his ilk) to assert that the former is a consequence of the latter.”

    That meme already started on FOX News yesterday. They started right out of the gate with that one, so you’re late with that prediction. :)

  15. Slash says:

    Wrongstradamus may be my new favorite word.

    And I also have to LOL at the characterization of the WSJ op-ed pages. Sometimes I glance at it to see what fresh idiocy its contributors have managed to yack up that day. But no more than 30 seconds worth, because I have better things to do, like watch cat videos or clean my bathroom. The WSJ op-eds are like the racist, drunken uncle at a nice family gathering.

  16. Slash says:

    I also admire “Clusterfuck Foundation.” Somebody should hurry up and register that as a think tank or PAC or something. You could have a website up in less than a day. Sounds like a job for Stewart or Colbert.

  17. toddtdf says:

    I don’t see anything obviously wrong about the BLS methodology of calculating CPI. Not accounting for things like substitution effects would quite evidently be biased. I don’t know all the history, but if CPI at one time did not take into account substitution, it would have strongly overstated inflation that is experienced by consumers.

    Perhaps a good check would be to compare it to the Billion Prices Project.

    http://bpp.mit.edu/usa/

    Over a 4.5 year time period the BPP is about 1% higher in total over CPI, or about 0.2% per year. The difference doesn’t appear to be statistically significant, and in addition, the BPP is goods only, which I would think have inflated more than services due to commodity price increase. I would be very surprised if the CPI understated inflation by a full percentage point.

    Politically, I’m a bit left-leaning, and I would strongly disagree with with Boskin’s political/economic views. But, my assessment of the legitimacy of CPI is based on my understanding of statistics (and I do have a statistics background), not based on my personal admiration of Boskin

    Inflation is difficult to measure, but I disagree with the implicit assertion that CPI is being understated by a full percentage point annually over the long-run. I see very little evidence of understatement.

  18. jd351 says:

    ” (Note its called the “Hoover Institute” because the name “Clusterfuck Foundation” was already taken)”

    This is priceless.

  19. carleric says:

    Easy Al was under the false impression that inflation was contained, at least according to the official Boskin adjusted inflation data. It was not.

    I have to disagree to the point that Easy Al knew full well what the Boskin Group was doing and played along so that he could whore himself out to Wall Street. Have we forgotten the Greenspan Put so soon? What is it a very smart guy penned “The Greenspan bubbles, the age of ignorance at the federal reserve” This is not meant to justify Boskin’s screwing of the Amerian’s seniors but Alan can hardly be held to be have been duped by Boskin. He was an eager and willing supporter of the whole damnable mess.

  20. klhoughton says:

    We shouldn’t ignore Boskin. Perfect negative indicators are difficult to find.

  21. boveri says:

    Love it — Wrongstradamus!

  22. [...] Wrongstradamus: Everything economist Michael Boskin has ever said turned out to be the opposite of what actually happened.  (TBP) [...]