Posts filed under “Really, really bad calls”
We at the Big Picture have never been fans of economist Michael Boskin. The infamous Boskin commission was an intellectually dishonest exercise in clever ways to understate inflation, thus lowering Social Security obligations. (I found that approach cowardly, and instead offered up some SS truths).
His commission helped the BLS to habitually understate inflation, the net result of which was to encourage Greenspan’s rate recklessness, setting the table for the 2007-09 crisis. How about Boskin’s “discovery” of a 12 trillion dollar cash horde that the government had somehow “overlooked?” That was used to justify unfunded tax cuts. Afterwards, he issued an Oops, declaring “My Bad.”
Perhaps most unforgivable to investors, those who followed Boskin’s investment advice in March 2009 missed one of the best market rallies in decades. Indeed, Boskin’s partisan screeds costs any investor foolish enough to listen to him big money.
So when earlier this month, he published yet another partisan rant (Summer of Economic Discontent), I loathed having to fisk the intellectual dishonesty likely to be its main theme. Fortunately, Northern Trust’s Paul Kasriel has spared me the labor. His commentary eloquently disembowels Boskin, and reveals him to be a hypocrite to boot.
Boskin’s OpEd compared the anemic current economic recovery with more vibrant ones such as Q1 1983, when Martin Feldstein was chairman of President Reagan’s Council of Economic Advisers. He blames the lackluster recovery not on the prior crisis, but on Obama’s overly aggressive responses. Other’s, such as FT’s Martin Wolf, have called the Obama response “too feeble.”
Kasriel points out one notable omission from Boskin’s history: Q2 1991, when “Mr. Boskin himself was the chairman of the President’s Council of Economic Advisers at the time of the 1991 economic recovery.” Kasriel finds it “curious that he makes no reference to that recovery when critiquing the current recovery.”
To rectify that notable omission, Paul shows 2 charts (top right, below) – comparing various recoveries, including the 1991 Bush I that Boskin somehow overlooked. These include the year-over-year percent changes in real GDP and real bank credit one year after the final quarter. The current recovery compares favorably with the one Mr Boskin oversaw in 1991 — when the terms “double-dip” and “jobless recovery” entered the economic lexicon.
Perhaps Boskin’s omission is due to other factors:
Perhaps Mr. Boskin is not suffering so much from amnesia, as I have suggested, but rather is experiencing an episode of déjà vu. He intimates that if current economic trends continue, President Obama will have a difficult time being elected to second term in 2012. Yes, just as President George Herbert Walker Bush was unable to win a second term in 1992, which terminated Mr. Boskin’s tenure as chairman of the President’s Council of Economic Advisers.
I still think its intellectual dishonesty, which has been a hallmark of Boskin’s career. I will defer to Mr. Kasriel, and simply call it a case of déjà vu all over again.
The Danger of Dogma (July 27th, 2003)
Michael Boskin on “The Obama Crash” (December 7th, 2009)
Why Michael Boskin Deserves Our Contempt (January 19th, 2010)
Sheehan on Michael Boskin (January 19th, 2010)
Michael Boskin’s Summer of Economic History Amnesia
Paul L. Kasriel
Northern Trust Global Economic Research, September 07, 2010
Summer of Economic Discontent
WSJ, September2, 2010
> Martin Wolf, who has been more right during the period leading up to the crisis, and thereafter, than anyone else I can think of, blames the present economic malaise on political timidity: Obama was too cautious in fearful times: “Suppose that the US presidential election of 1932 had, in fact, taken place in 1930,…Read More
Invictus here. Been a while. Been a bit busy and, frankly, not much to say of late. As a general rule, I’d say that folks should refrain from posting on things they know nothing about. The old saying (Abraham Lincoln, I believe, Mark Twain, according to commenters’ citations, attribution in dispute) comes to mind, “Better…Read More
In this morning’s NYT column — Lehman’s Last Hours — Andrew Ross Sorkin wrote: “But what is clear is that the politics of the moment played a factor — or at least was discussed among senior and junior staff — in the decision not to lend to Lehman Brothers, perhaps the greatest mistake of the…Read More
Amongst the items coming out of the FCIC hearings last week were new docs that revealed exactly how over-reliant LEH was on daily, short term funding to cover their longer terms costs. It was a recipe for disaster, a trailer park in search of a tornado. Here is the WSJ: “In looking last week at…Read More
I have been arguing for the government to step away from propping up the housing market for several years now. It seems that economists are finally catching up with the idea. Today’s NYT has an article, titled Housing Woes Bring New Cry: Let Market Fall. Only I would argue its not new at all, and…Read More
We know the major ratings agencies suck. We know their business model was payola. We know they sold ratings for cash, committed fraud on structured product investors. We know they hid significant modeling errors, and then hid these problems from the public and regulators. Might their free ride be coming to an end? The SEC…Read More
“Lehman was forced into bankruptcy not because it neglected to act responsibly or seek solutions to the crisis, but because of a decision, based on flawed information, not to provide Lehman with the support given to each of its competitors and other nonfinancial firms in the ensuing days.” -Richard S. Fuld Jr., Lehman Brothers former…Read More
We have had a god-awful run of Housing data. New and Existing Home Sales, Defaults and Foreclosure data, even the Case Shiller report — all have been utterly horrific. In light of this, I want to make the following announcement: Attention RE Agents! The National Association of Realtors are doing you a terrible disservice. Consider…Read More
I am watching Squawk Box around 6:30am as I get dressed this morning. The conversation turns to various incentives in Germany, where firms are actually paid not to lay people off in a downturn. (Firms cut hours, but keep most of their staff). The lower German unemployment rate of 7% has less people with financial…Read More