Alice Rivlin is speaking this afternoon at Berkeley's GSPP in honor of John Ellwood's retirement on EVIDENCE AND POLICY ANALYSIS IN THE AGE OF FAKE NEWS. A question I will not have time to ask:
Alice, I listen to you, and I think of Irving Kristol, who explained his “rather cavalier attitude” to technocratic questions of what economic policies would actually do thus:
The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority-so political effectiveness was the priority, not the accounting deficiencies of government...
I think of New Mexico Senator Pete Domenici, who would always talk an excellent technocratic game in the Brookings auditorium, but he would then turn around to assure his donors that he understood the magic of economic growth from tax cuts and to assure his base that practically all government spending—save the small fraction that went for Medicare, Social Security, defense, and the Los Alamos Lab—was wasted. He was grifting somebody. And we know who he was grifting from the way he always voted: and he did not vote the Brookings line.
I look around now, and I see CEA chair Kevin Hassett—endorsed by many of your Brookings colleagues—claiming that not 25% but 300% of the incidence of the corporate tax is on labor, and that not 75% but -200% of the incidence is on capital. I see Greg Mankiw—Greg Mankiw!—putting forward a model in which (a) international capital mobility is frictionless, (b) the United States is a small open economy, and (b) lump sum taxes are available as an alternative funding source, and putting that model forward in the context of it being in some way relevant to analyzing the effects of a corporate tax cut.
It seems to me that certainly since 2001 and the return of Dick Cheney, overwhelmingly since 1993 and the rise of Newt Gingrich, and substantially since 1981, when Howard Baker worn with the Reagan tax-cut was an unwise riverboat gamble, but went along with it anyway, it has been a fool's game to seek any technocratic bipartisan common ground with Republicans. Attempting to do so has been positively harmful: it has reinforced a Grisham’s Law process by which bad Republican economists drive out good, good economists become bad in order to stay relevant and keep a seat at the table, and bad economists then become worse—because they can. And then the WaPo, the NYT, and the networks assure us that truth is somewhere between the Brookings types have have paid out substantial technocratic coin in search of bipartisan compromise and the bad Republican economists who have used this move as an opportunity to become even worse.
Larry Summers seems, in the past month, to have finally recognized this dynamic. He now seems to be thrashing around seeking a constructive way to try to counteract it.
But it seems that you still don’t see what Larry now sees. Why not? What do you see instead?