DeLong Smackdown Watch: Ghost of Milton Friedman Edition
For the Virtual Green Room: June 18, 2011

On the Other Hand, Sometimes I Am Not So Smart...

When Obama got elected, I thought: "Gee, I won't have to listen to economists I respect say ridiculous things just because they are working for an administration with a silly message any more."

Silly me.

Jim Tankersley tallks to Becky Blank:

Possible Goolsbee Successor Not Big on New Stimulus: When news broke last week that Austan Goolsbee, the chairman of President Obama’s Council of Economic Advisors, will leave his post this fall to resume teaching at the University of Chicago, administration officials quietly suggested what they were looking for in a replacement: a standout academic economist who has already won Senate confirmation.

Perhaps no one in the federal government today fits that description better than Rebecca Blank. A poverty economist, a Clinton-era CEA member, and the former dean of the Gerald R. Ford School of Public Policy at the University of Michigan, Blank is now Commerce Secretary Gary Locke’s top economic adviser. She’s the acting deputy secretary at Commerce and the under secretary for economic affairs.

She’s also a pragmatic, progressive economist—like Goolsbee—who is reluctant to call for new government stimulus even as the economic recovery slogs through a “soft patch” of slowing growth.

“I think what the government is doing right now in terms of a push is not dollars of stimulus, but being smarter” in areas like streamlining regulations and cutting waste, Blank told National Journal, adding: “Could this economy take off again? The answer is absolutely yes. If you look at corporate profits, if you look at consumer balance sheets [improving] … gas prices are falling. I guess I understand the reason to say, let’s see if this economy can do it on its own.”

In the course of a 40-minute interview with National Journal, Blank deflected a question about whether she is a candidate to head CEA. “I’ve got two jobs here,” she said. “I’m not looking for other employment at the moment.”

She also:

  • Said that despite disappointing numbers for the first quarter, “There’s no question we’re in a steady, solid recovery. That’s the good news. The bad news is there are some sectors of the economy that aren’t recovered yet. Housing is the most dramatic … and unemployment is just way too high. Way too high.”

  • Expressed belief in what the economist and columnist Paul Krugman dubs the “Confidence Fairy”—the idea that psychological factors are restraining growth:  “An awful lot of this [soft patch] has to do with confidence about, has the economy taken off? Is it time for me to start hiring permanently.... There’s a lot of confidence game going on in the economy right now. When we talk about the debt ceiling, when we talk about gas prices, the tsunami, all of that is about confidence” in whether things are going to get better.

  • Stressed the need to tame budget deficits over “five to 10 years” but cautioned against steep cuts to federal spending immediately: “In the next quarter, do we need to slash trillions of dollars in government spending? The answer to that is no. The short-term economic effect would outweigh any deficit reduction. Deficit-reduction gains are slow and steady. They aren’t something you need to do next quarter.”

  • Named two economic indicators she watches with particular interest among the data avalanche that fills her day: retail sales figures, which tell an evolving story of what Americans buy and where the economy is headed, and labor-force participation for older workers, which, against historical trends, rose during the recession as dwindling wealth forced seniors back to work.

Let me note that a reporter would then have asked her the question:

You say we don't need stimulus now. But you also say we don't need deficit reduction right now. Have we by lucky chance happened to arrive at just exactly the sweet spot? That's hard to believe. Why don't you fess up and say that the two things you claimed are unlikely to both be true?

And a reporter would have asked:

Larry Summers and Christina Romer both say that the economy needs more stimulus--and that it is a mistake not to be borrowing more at the extraordinarily low Treasury rates in order to rebuild our infrastructure. Are they wrong? Why do you think they are wrong?

But asking Acting Deputy Secretaries tough questions does not appear to be part of the National Journal's modus operandi any more.

Why oh why can't we have a better press corps?