Do Economists Support Obama Jobs Plan?

That is what Bloomberg says in the article below. The headline is: Obama Plan Would Boost GDP, Economists Say.

A more accurate headline would have said: Some Economists Say.

The article cites Mark Zandi of Moody’s, Michael Feroli of JP Morgan, Goldman Sachs, Unicredit Research, Macroeconomics Advisors, and Paul Krugman, all of whom had nice things to say about the plan except Krugman who offered grudging praise.

Only one critical voice was included: Stephen Stanley of Pierpont Securities. Other economists with negative things to say were left out.

Keep in mind also that Zandi and Feroli aren’t really speaking for themselves. They are telling us what their models say. The problem with the models is that they incorporate assumptions that Obama proposals will work. Given these assumptions, it is not surprising that the models spit out positive expected results.

The assumptions underlying these models, like much of modern macro-economics, defy common sense. They tell us that aggregate spending is all that matters. It doesn’t matter if the spending is consumption or investment. It doesn’t matter if the investment is a sound one or a senseless one. It doesn’t matter if the spending comes from savings or from borrowing. The road to recovery and wealth  lies not through saving and hard work and innovation and allowing entrepreneurs to get prices aligned in profitable configurations. It lies through borrowing and spending. This is classic garbage in and garbage out, but the media still takes it seriously.

It is not surprising that President Obama did not try to explain why his proposals would work. Like the models, he just assumes they will work. The closest he came to explaining was when he said that his ideas would “put more people back to work and put more money in the pockets of those who are working”. In short, his proposals will put people back to work because they will put people back to work. Got it?  All we really need to fix things is more spending, no matter where the money comes from.

Common sense tells us that employers will not hire because of a one year payroll tax cut. Yet that is $250 billion of the President’s $450 billion plan. This is worth getting even deeper in debt for? Even if the payroll tax cut does stimulate some hiring, it will just be hiring borrowed from 2013, the year after the election. Infrastructure spending, also featured, takes a long time to get started, so that clearly won’t provide any immediate stimulus, although it will please the president’s union friends, since federal projects can only be done with union labor.

The whole point of the president’s speech seemed to be transparently political: gin up some proposals that the Republicans would reject and that will  then be used as campaign issues. If so, let the political debate begin, but let’s not totally confuse the issue by presenting these failed policies as endorsed by economists in general, when they clearly are not.

Click here for the piece in Bloomberg.

Hunter Lewis 9-12-2011

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About Hunter Lewis

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Hunter Lewis is co-founder of He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 11 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times). He has contributed to the New York Times, the Times of London, the Washing­ton Post, and the Atlantic Monthly, as well as numerous websites such as,,, and His most recent books are Economics in Three Lessons & One Hundred Economic LawsCrony Capitalism in America: 2008–2012, and Where Keynes Went Wrong. He has served on boards and committees of fifteen leading not-for-profit organizations, including environmental, teaching, research, and cultural and global development organizations, as well as the World Bank.