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Wrongstradamus: The Money Losing Forecasts of Michael Boskin

Posted By Barry Ritholtz On March 6, 2013 @ 7:15 am In Bailouts,Really, really bad calls,UnGuru | Comments Disabled

 

“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 [1]“) 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 [2]; and how he officially distorted how CPI data is modeled [3].

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 [4] to an amusing New York magazine column: World’s Wrongest Man Ventures Latest Prediction [5]. 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 [6]. 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” [7] (December 7th, 2009)

Why Michael Boskin Deserves Our Contempt [3] (January 19th, 2010)

Boskin’s Bottom Tick: Obama’s Killing the Dow [1] (March 9th, 2011)

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

 

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


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2013/03/michael-boskin-wrongstradamus/

URLs in this post:

[1] Obama’s Radicalism is Killing the Dow: http://www.ritholtz.com/blog/2011/03/boskins-bottom-tick/

[2] damaging  how economic data is assembled: http://www.ritholtz.com/blog/2010/01/economists-serving-their-political-masters/

[3] distorted how CPI data is modeled: http://www.ritholtz.com/blog/2010/01/why-michael-boskin-deserves-our-contempt/

[4] linked: http://www.ritholtz.com/blog/2013/03/tuesday-pm-reads-17/

[5] World’s Wrongest Man Ventures Latest Prediction: http://nymag.com/daily/intelligencer/2013/03/worlds-wrongest-man-ventures-latest-prediction.html

[6] politics influence your investing: http://www.washingtonpost.com/business/why-politics-and-investing-dont-mix/2011/02/06/ABnAlvQ_story.html

[7] Michael Boskin on “The Obama Crash”: http://www.ritholtz.com/blog/2009/12/michael-boskin-on-the-obama-crash/

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