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This I Believe – David Brooks on the Economy

May 8, 2012   ·   0 Comments

Source: NYTX

By Marie Burns:

The Lord set the Earth on its foundations. It can never be moved. – Psalm 104:5

We indeed are not ignorant that the circuit of the heavens is finite, and that the earth, like a little glove, is placed in the center. – John Calvin

In clement weather, David Brooks steps out onto his back porch, snifter of brandy in hand, to watch the sun set. It is a daily miracle, the bright orange orb dropping behind the trees each evening as it makes its way around the globe. Brooks smiles, knowing that as sure as the sun will come up in the morning, the sun will come up in the morning, a reassuring event which Brooks will observe when he steps out onto his front porch at sunrise to pick up his copy of the Washington Times. It would be as impossible to convince Brooks – armed as he is with his own observations and the attestations of sacred scripture – of heliocentrism as it is to convince him that the certified practitioners of the dismal science have the slightest fucking idea of what they’re saying.

In his New York Times column today, Brooks speaks of his “belief” in structuralism: This is appropriate, as structural purity at the expense of cyclical controls is a belief system as strong and as fact-free as was 16^th-century Christianity. Copernicus and Krugman be damned! The problem Brooks had in composing his column today was that he had to misrepresent the views of the apostates in order to make his case for his belief system. This he does happily enough, because any belief system is dependent upon taking leaps of faith, and Brooks readily accepts the necessity to leap over his adversaries with boundless pretense. Faith is a grand and mysterious thing.

Thus Brooks sets on a familiar course: refuting the hairbrained and heretical notions of Paul Krugman and his band of glum economists. Brooks labels Krugman and Co. “cyclicalists,” shortsighted fools who “rail against what they see as American austerity-mongers … [and] really rail against the European ones,” even though “the so-called European austerity is partly mythical.” These cyclicalists “fail to address the core issues.” The all-knowing Brooks and his ilk “look at the cyclicalists and shrug.”

By contrast, Brooks and superior right-wing economists “believe the core problems are structural, not cyclical.” Brooks asserts that economists who identify cyclical economic problems have ruled out structural problems: “Unlike the cyclicalists,” he writes, “we structuralists do not believe that the level of government spending is the main factor in determining how fast an economy grows.” Unfortunately, Brooks’ cyclicalists do not exist in the real world, especially not in the person of the unnamed Demon Krugman, whom Brooks merrily crucifies in absentia. In a post titled “David Brooks’ Parallel Universe,” Dean Baker wonders, “What could Brooks possibly be drinking when he thinks that he has identified a group of economists/policy wonks who are only concerned about the cyclical problem of high unemployment and not the structural problems that created them?” (See Brooks, back porch, above.) “I don’t know anyone who looks like cyclicalists that Brooks writes about,” Baker writes. “It would be good if he could toss out a few names for readers so that we know such people actually exist in the world and are not just Brooks’ hallucinations.”

Brooks goes on to cite some of the structural problems which the “good” economists in Brooks’ camp have identified: “globalization and technological change…, political sclerosis…., deficit spending…., tax breaks…, tax cuts … and consumer … borrowing.” I can tell you off the top of my head that liberal economists regularly address each of these issues, though their prescriptions differ from some that Brooks advocates, particularly in regard to deficit spending.

By way of proof, I offer one of thousands of articles, columns and blogposts, not to mention academic papers: a Vanity Fair article which liberal economist and Nobel laureate Joe Stiglitz wrote to describe a project he and a colleague have been working on for years. Stiglitz and Bruce Greenwald identified an underlying cause of the current economic depression by studying the 1930s Great Depression: “The underlying cause [of the Great Depression] was a structural change in the real economy: the widespread decline in agricultural prices and incomes, caused by what is ordinarily a ‘good thing’ – greater productivity,” Stiglitz wrote. What ended the Great Depression, he explained, was “government spending [which] soared in preparation for global war.”

It is important to grasp this simple truth: it was government spending – a Keynesian stimulus, not any correction of monetary policy or any revival of the banking system – that brought about recovery. The long-run prospects for the economy would, of course, have been even better if more of the money had been spent on investments in education, technology, and infrastructure rather than munitions, but even so, the strong public spending more than offset the weaknesses in private spending.

Structural problem identified. Check. Structural repair. Check. Cyclical repair. Check.

Just to mention a few of the other structural problems Brooks claimed only his people recognize, here’s a recent New York Times column by Paul Krugman, who linked two of the structural issues Brooks cites: income inequality and political paralysis. Krugman wrote, “The real structural problem is in our political system, which has been warped and paralyzed by the power of a small, wealthy minority. And the key to economic recovery lies in finding a way to get past that minority’s malign influence.” However, Krugman also noted that to get the economy moving in the short term, “all the evidence … points to a simple lack of demand, which could and should be cured very quickly through a combination of fiscal and monetary stimulus.” Structural problem identified. Check. Structural problem repaired. Nope. Cyclical repair. If only.

In performing his structural faith rituals, Brooks must explain away inconvenient facts – like soaring income inequality. So Brooks sees “superstar salaries surg[ing] while lower-skilled wages stagnate” as a result of globalization. The surging superstar salaries evidently have nothing to do with the corrupt system of corporate compensation boards that hand out multimillion-dollar bonuses to incompetent and competent corporate leaders alike. The low wages have nothing to do with Republican in Southern and Midwestern states decimating unions and enacting other laws that favor corporations over workers. Income inequality has nothing to do with tax and trade policies, including those policies that incentivize corporations to outsource manufacturing jobs.

Brooks also faults our educational system for not teaching workers proper skills: “The United States, once the world’s educational leader, is falling back in the pack.” I would agree that our educational system does not do a good enough job teaching workers general skills. But it should be up to employers, for the most part, to teach specific skills. “Unemployment is high,” Brooks writes, “but companies still have trouble finding skilled workers.” This is an Eric Schmidt, the Google guy, trope. In fact, as economist John Schmitt of the Center for Economic and Policy Research testified before Congress,

The available statistical evidence provides little support for the idea that the anecdotal experiences of employers facing skills shortages are widespread, let alone typical…. Even the best functioning economy will always have some employers, particularly the most innovative ones, that are looking for particular kinds of workers that are in short supply in that moment. This holds in the same way that there were some employers still hiring in the depths of the recession and some employers laying-off workers even at the peak of the last boom.

In a post published late this morning, Paul Krugman addresses some of Brooks’ claims. For instance, Brooks writes, “… we structuralists do not believe that the level of government spending is the main factor in determining how fast an economy grows. If that were true, then Greece, Britain and France would have the best economies on earth.” Krugman responds,

Anyone who says something like ‘If deficit spending were the route to prosperity, Greece would be in great shape’ should be immediately considered not worth listening to. People in my camp have repeated until we’re blue in the face that the case for fiscal expansion is very specific to circumstance – it’s desirable when you’re in a liquidity trap, and only when you’re in a liquidity trap.

Finally, I don’t know how to say this more nicely: Brooks’ closing paragraph is a lie, every word of it. Here it is: “Make no mistake, the old economic and welfare state model is unsustainable. The cyclicalists want to preserve the status quo, but structural change is coming.”

Make no mistake? The graf is all a mistake. I don’t know what Brooks means by “the old economic model,” and I doubt Brooks does either. Maybe he means, “Whatever Krugman says.” If he means the “welfare state,” the U.S. is not a welfare state. It never has been. The social safety net – which is what Brooks means by “welfare state” – is certainly sustainable and should be enhanced to give more Americans a better shot at full participation in the economy. The social safety net is, in fact, an essential structural element of the U.S. economy. When it fails, the economy struggles. What would make the social safety net unsustainable is if Mitt Romney and Paul Ryan – who Brooks says “understand the size of the structural problems” – have their way and are able to further cut taxes on corporations and the wealthy. The economists Brooks labels as cyclicalists do not want to preserve the status quo, as any person who reads anything any of them writes knows. Lastly, structural change is not coming as long as right-wing political sclerosis continues to harden. This I believe.

Update: in an article published in today’s Daily Beast, Paul Krugman explains once again — contra Brooks — why austerity policies are a disastrous reaction to an economic downturn. Within the piece, Krugman writes,

… the current jobless recovery suggests the US has to undertake deep structural reforms to improve its supply side. The quality of its financial sector, its physical infrastructure, as well as its human capital, all need serious, and politically difficult, upgrades. If this is our goal, it is unwise to try to revive the patterns of demand before the recession, following the same monetary policies that led to disaster.

There is nothing in this graf that Krugman hasn’t written before, and it is as fine a pre-buttal to Brooks’ phony assertions as one could find. Keep the faith, Brooks. It’s all ya got.

Marie Burns blogs at RealityChex.com

By marieburns

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