Five years ago, Arthur Laffer — creator of the Laffer curve and a member of President Ronald Reagan’s Economic Policy Advisory Board from 1981-89 — wrote an op-ed article. It was a grab bag of his pet peeves: opposition to Federal Reserve policies in response to the financial crisis and concern about the “unfunded liabilities of federal programs,” including Social Security and Medicare. And, of course, he decried deficits, which in large part are the result of his thesis that tax cuts often increase revenue. As it turns out, for the most part, they don’t.

The article he penned on June 11, 2009? “Get Ready for Inflation and Higher Interest Rates.” “Alas,” he wrote “I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates.”

At the time, the yield on the 10-year Treasury was 3.86 percent, and we were in a crisis-driven deflationary environment of negative 1.4 percent inflation. Today, the 10-year yields 2.65 percent and inflation is running at less than 2 percent.

Inflation wasn’t the only thing Laffer whiffed on. Continues here

Category: Markets

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.

15 Responses to “Why Don’t We Hold Pundits Accountable?”

  1. ComradeAnon says:

    And just who is going to hold them accountable? The Press? Network Television?

  2. rd says:

    Modern macro-economics is a belief system, not a science. So the pundits are more like church pastors than spokesmen for science. It is much harder to hold a church pastor accountable than an accountant or scientist.

  3. wally says:

    It;s too bad there isn’t some variation of the Amazing Randi’s million-dollar challenge. Something like challenging a pundit to post a bond when making predictions and having an impartial (ha-ha) committee decide in a year or two if the bond should be forfeited.
    Though the cash forfeiture itself would be painful, the more important thing is that it would make people notice the losers and winners; it would establish a scorecard.

  4. manifoldsrme says:

    “Unfortunately, the dismal science has become the vehicle of choice for those who seek to further their own political agenda.”

    Had to remind myself I was not reading about another alarmist article on GW or CC or whatever the description of the hour is upon reading the quote above in this article.

  5. Livermore Shimervore says:

    Word association game. apple…pie. Beer….nuts.
    Laffer….spectacularly wrong
    http://www.youtube.com/watch?v=T67keZzv3Tc

  6. gman says:

    Foreign Policy has the same type of hacks who are always wrong and promote an agenda. Salesmen who were wrong on everything about Iraq are still held up sources of wisdom.

    Always another “Hitler” out there, always need to “seed a message” ..”convey strength” and spend more on defense.

  7. Singmaster says:

    Narratives trump facts. Humans need narratives. We don’t experience reality; it is filtered through our narratives. Every successful person knows that.
    Narratives adopted by masses of people become mass hypnosis and feeds on itself.
    For example:
    Obama will Change the way things are done in Washington. He will save America. That narrative allowed a junior Senator to beat the formidable Clinton machine.
    Obama is a Communist, Socialist, Muslim dictator out to destroy America. That is one narrative that drives the right. Along with that though, he is a weak feckless President who leads from behind and does not have the respect of the rest of the world. In both examples, Obama destroys America.
    Take a topic, any topic, and there will be a narrative to drive passions.
    Capitalism: Allows humans to succeed through their own efforts and promotes upward social mobility.
    Capitalism: Oppresses the Little Guy
    Religion: Life after Death
    Humans love narratives.

  8. sellstop says:

    The win by the Tea Party in Virginia over Eric Cantor got me steamed over the continued and ongoing free market Friedman/Reagan indoctrination that this country has endured of the last decades.

    More here if Barry will allow:

    http://ghickeyblog.blogspot.com/2014/06/tp-still-alive.html

    Thank You Barry Ritholz

  9. Jojo says:

    The concept is great. But who would enforce it? And if you could ding someone for failed predictions, then what reward would they get for correct predictions?

    Regardless, Laffer was and still is a photogenic loser.

  10. t3rse says:

    Perhaps this is an opportunity? Something along the lines of Politifact but for Economics? Econofact?

    I have always wondered how guys like Peter Schiff make money and maintain credibility with anyone. It would be great to have a simple lookup for each person and a chart recording the accuracy of their claims.

  11. NoKidding says:

    “Why Don’t We Hold Pundits Accountable?”

    Accountable for what? If you start jailing fools, who brings the donuts?

  12. ch says:

    Barry – he was wrong about inflation? Really? For a data-driven guy, that is weak. Run the cost of oil, food, rent, healthcare – the things people need to live – from the date of the article and compare it to your CPI quote.

    If you came out to any working class household in the Midwest and read your article at the dinner table, you’d get laughed out of the room.

    And regarding higher rates? Really? Here’s your article from earlier this year – why do you think the Fed bought 71% of UST’s last year? B/c they preferred 0% bonds to a stock market that rose 30% with record low volatililty? Please. http://www.ritholtz.com/blog/2014/02/biggest-buyer-of-treasuries-in-2013-da-fed/

    Laffer was wrong about his understanding of how inflation would be measured (only the stuff that falls in price) and about the politics of the Fed (that they would buy 71% of all UST issuance 4 years after the article was written)…but wrong about his assertions? No. If we measured inflation accurately and let the market price UST’s instead of the printing press, he would’ve been 2 for 2.

    I agree with your point on politics obfuscating discussions, but you picked the wrong statements to pick on. Where Laffer was wrong is he didn’t understand the structure of the US currency and financial system enough to understand that the Fed would print money to buy every last asset in the US to avoid deflation in nominal terms.