Oh Dear. Larry Kotlikoff Fails to Read...: Let's Make This This Week's Monday Smackdown
No, Larry Kotlikoff, Paul Krugman does not think Paul Ryan is stupid. Paul Krugman does not write that Paul Ryan is stupid--he writes that Ryan "is a con man... his budgets were sold on false pretenses... magic asterisks claiming huge but unspecified savings from discretionary spending and huge but unspecified revenue gains from closing loopholes he refused to name."
This is worth this week's smackdown...
Larry Kotlikoff: Paul Krugman: Stop Calling People Names: "Paul Krugman [has] a responsibility to act like [a] grownup...
...If they start calling people with different views “stupid,” they demean themselves and convey the message that name calling rather than respectful debate is appropriate conduct.... None of we economists know anything for dead sure.... A key job economists have is to explain the different views we have about how the economy works before explaining why we prefer our view. Simply saying “You’re wrong, I’m right, and, furthermore, you’re stupid for not agreeing with me.” is something you’d expect from a child, not a grown up and certainly not from a columnist for the New York Times who sports a Nobel Prize.... I’m sorry, but Paul Ryan is not stupid.... I’m very proud to call Paul Ryan my friend even though we don’t agree on everything and even though I voted for President Obama twice...
I read this, and my first reaction is: did Larry Kotlikoff read?
Let's back up: What does Paul Krugman write? He writes:
One of the best insults I’ve ever read came from Ezra Klein, who now is editor in chief of http://vox.com. In 2007, he described Dick Armey, the former House majority leader, as “a stupid person’s idea of what a thoughtful person sounds like.” It’s a funny line, which applies to quite a few public figures. Representative Paul Ryan, the chairman of the House Budget Committee, is a prime current example....
Did Ezra Klein call Dick Armey "stupid"?
No.
Ezra Klein said that a stupid person would think that Dick Armey was thoughtful.
Does Ezra Klein think that Dick Armey is stupid?
No.
Ezra Klein's point is that Dick Armey is not an "honest, thoughtful, crackling-with-ideas type conservative... [with high] intellectual energy", but rather something else, something else that presents a simulacrum of thoughtfulness that is convincing to stupid people.
Does Paul Krugman call Paul Ryan "stupid"?
No.
Paul Krugman's point is that Paul Ryan is like Dick Armey--someone who presents a simulacrum of thoughtfulness that is convincing to stupid people (or, I would argue, simply not paying a great deal of attention).
Does Paul Krugman think Paul Ryan is "stupid"?
I really do not think so. Anybody who has gotten where Ryan has gotten has lots of smarts along lots of dimensions. But I do think Ezra's description of Armey applies: Ryan gives no signs of being especially thoughtful, honest, crackling-with-ideas, or possessing high intellectual energy.
So why does Larry Kotlikoff think that Paul Krugman calls Paul Ryan "stupid", when what Paul Krugman says is that Ryan produces not the reality but only a simulacrum of thoughtfulness?
The answer I leave as an exercise to the reader...
OK.
There's more.
When Larry Kotlikoff takes his show on the road to economists, he generally faces four big questions:
(1) The CBO writes that the 25-year fiscal gap is "1.2% of GDP... the fiscal gap would be roughly 50 percent larger [i.e., 1.8% of GDP] over a 75-year period." That is not large enough to be a huge problem: long-run deficit-reducing Reconciliation Bills larger than that have been routinely passed by Democratic Presidents Clinton and Obama and Republican President George H.W Bush (and large long-run holes have been blown in the fiscal gap by Republican Presidents Reagan and George W. Bush). Is there a reason to think a current-law fiscal gap like the one we have now is a huge problem?
(2) The worrisome 25-year and 75-year fiscal gaps of 3.4% of GDP and 7.4% of GDP are found in the CBO's alternative fiscal scenario--which assumes that future congresses will pass and future presidents sign laws that massively raise spending without covering the increased spending by raising taxes. But anything congress and the president do now cannot bind future congresses and presidents: all spending cuts now will do is increase the number of goodies in terms of spending increases and tax cuts that future politicians can decide to do when they decide to be irresponsible. Why then do you think we should pass spending cuts now?
(3) Since 1933 there has not been a single year in which the interest rate the U.S. government has had to pay on its debt has been higher than the growth rate of GDP. Since 1789--since the establishment of the Constitution--the interest rate the U.S. government has had to pay on its debt has averaged comfortably less than the growth rate of GDP. The right way to conceptualize the U.S. government debt, it seems, is not that issuing debt burdens future generations that must levy taxes to repay it. The right way, it seems, is that issuing debt attracts wealthholders who want to keep their money safe--that it is more a profit center for than a burden on the government. Why then--until the interest rate on the debt at least comes close to the trend growth rate of GDP--should we worry about the size of the national debt?
(4) The imbalance in the federal government's long-run accounts is more than 100% due to the fact that our health-care sector spends much, much more than the health-care sectors of other industrial countries. Isn't there good reason to think that we will eventually--through some means--get our health-care sector back into line? And shouldn't the policy focus therefore be on fixing the health-care system so it approaches the level of efficiency found in other countries, rather than on cutting other "entitlements"?
In my view, Larry doesn't have terribly good answers to any of these four questions. They all are major weaknesses in and pose major problems for his shtick.
But does he acknowledge any of these weaknesses and problems? No, he dodges them.
Does he explain what different views other economists have of the situation, and why they think these four questions raise issues that seriously undermine Kotlikoff's point of view? No:
Larry Kotlikoff: The Government Should Report Its ‘Fiscal Gap,’ Not Just Official Debts: "HOUSEHOLDS can’t spend, on a continuing basis...
...more than they earn. Countries can’t either, at least not over the long run.... Dig deep into the appendix of the most recent Social Security Trustees Report, released on Monday, and you’ll find that the program’s unfunded obligation is $24.9 trillion 'through the infinite horizon'... nearly twice the $12.6 trillion in public debt held by the United States government... True, Social Security benefits could be cut by Congress and the president. But so can official debt, as Argentina’s likely default reminds us.... Two weeks ago, the Congressional Budget Office... raised what’s called the alternative fiscal scenario, the most realistic projection.... I calculate that the 'fiscal gap'... was $210 trillion last year, up from $205 trillion the previous year. Thus $5 trillion was the true deficit.... What we confront is not just an economics problem. It’s a moral issue. Will we continue to hide most of the bills we are bequeathing our children? Or will we, at long last, systematically measure all the bills and set about reducing them?
And this column of Kotlikoff's raises three additional questions:
(5) The CBO's Long-Run Budget Outlook already reports CBO estimates of fiscal gaps. In what sense do we need to start reporting it? Isn't the CBO part of the government?
(6) Is the "$210 trillion" you mention the same as the 7.4% of GDP fiscal gap reported by the CBO? If it isn't the same, why and where do you disagree with the CBO's analysis, and why do you attempt to invoke its authority? If it is the same, why not say so--and why not put it in perspective? After all, nobody can make anything of "$210 trillion" other than as a really big number, while "7.4% of GDP" tells the reader that the AFS has the government taxing 22.6% of GDP and spending 30% of GDP, right?
(7) For the president and congress to, say, raise the Social Security retirement age or cut Medicare Advantage reimbursement payments to insurance companies does not bring on a financial crisis and a recession--which a government debt default does. Why say that the two are the same?
We would have more patience with and more charity toward Larry K. if he would at least try to answer these seven questions--to explain the different views economists have about how the economy works...
