Project Syndicate: Keeping US Policymaking Honest: Last month here at Berkeley I heard great optimism from the illustrious Alice Rivlin. What “technocracy” in the good sense the United States has—what respect is paid to sound analysis and empirical evidence in the making of policy—is due more to Alice Rivlin than to any other living human.
When young, she was denied admission to the graduate program of Harvard’s Littauer Center for Public Administration because of “unfortunate experiences“ with previous admissions of “women of marriageable age“. In those phrases we can hear the echo of some New England Puritan divine’s sermon on the alliance of Eve with the Serpent and her subsequent Temptation of Adam. Her founding of the Congressional Budget Office is only one, albeit the most important one, of the times that Alice Rivlin has indeed eaten from and forced the rest of us to eat from the tree of knowledge. And we are all massively better for it.
Alice Rivlin asserted with great confidence that high-quality policy analysis would continue to flourish in the 21st-century public sphere and would continue to carry substantial weight, if not its full due weight, in the decisions of legislators and presidents and their staffs. And, indeed, she is correct. The CBO she founded has never been more influential than it has been this year. And this year its influence has not been through its place in congressional procedure. Rather, this year its influence has been high because its assessments have been taken as highly-informed good-faith—dare I say “non-partisan”?—estimates of what legislative proposals are likely to do to change the country. So far, so good. So far she has been right.
But I am not so optimistic about the future. She asserted that there was and would remain substantial near-consensus within the body of good economics, and that near-consensus would guide the assessments and estimates and models used in public policy discourse and debate. She noted that there used to be many economists of note and reputation who thought a simple monetary rule was is a magic bullet for avoiding depressions and outbreaks of inflation; and now there are none.
That is true. But by the time you read this Stanford economist John Taylor will will either have been designated or have come to the edge of being designated the next chair of the Federal Reserve. And Taylor has his own particular monetary rule that he clings to extremely strongly in spite of the complete lack of any theoretical argument that is it is indeed optimal or any empirical evidence that it would have performed better than the Federal Reserve actual procedures in any decade since the 1970s.
And on the fiscal policy side of the Trump administration, assurances I heard in the spring that Kevin Hassett, if he became CEA chair, would be a “normal“ CEA Chair have not been fulfilled. He would understand the importance of keeping the CEAs estimates credible, and thus the necessity that they remain within the range of the main screen policy analysis community. He would understand the importance of building up analysis groups like the JCT staff, OMB, CBO, OTA, TPC, CBPP and others who is principal allegiance was to getting the estimates right rather than pleasing their funders or their political masters.
Yet Hassett has devoted a lot of effort to tearing down the estimates of the Tax Policy Center—the TPC—even though there will be times in the future when its estimates will be as or uncomfortable for his political and partisan adversaries as they are for him today. In our world the near-consensus estimates of the share of the corporate tax born by labor and the share of the initial revenue reduction from a corporate income tax cut will be recouped via higher future investment are both a quarter. Yet Hassett has the CEA claim to estimate numbers that makes sense only if both are 82%—that made Larry Summers both angrier and more frightened that I can remember him being about an issue of public policy, and let him to call Hassett “some combination of dishonest, incompetent, and absurd” https://www.cnbc.com/2017/10/17/hassetts-flawed-analysis-of-trump-tax-plan-larry-summers-commentary.html.
Benjamin Franklin famously told the American people that the Constitution would provide them with “a republic, if you can keep it”.
In her long and very distinguished career Alice Rivlin and company have provided us with a rational policy process, if we can keep it.