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Why liberals like numbers

By Ezra Klein

David Brooks wonders why liberals have adopted "an economic philosophy that excludes psychology, emotion and morality." The answer, of course, is that they haven't. Brooks chides his ideological opponents for dismissing business leaders who say they are holding off because they're worried about the future, but I don't actually know anyone who doubts that viewpoint. The question, rather, is how to help.

The GOP has said the problem is "policy uncertainty." The government, Republicans say, is doing too much. But there's no evidence of that, and the argument isn't consistent. Consider the formulation by Sen. Jim DeMint (R-S.C.):

"I hope we can get a permanent extension [of the Bush tax cuts]," he said, "but if the president wants to compromise on a two- or three-year extension," that's acceptable, too. "What's important here is that businesses know to plan growth and plan to add people. If we keep things in a state of flux, I'm afraid we're going to continue to have a jobs problem."

Unpack that: He's saying that what's important for businesses is certainty about tax rates. But he'd prefer a two- or three-year extension to President Obama's proposal, which is a permanent extension of the tax cuts for income under $250,000 and a permanent end to the tax cuts for income of more than $250,000. In other words, DeMint doesn't really care about certainty, and he doesn't think businesses do, either. He cares about his favored policy proposal. If asked to choose between long-term certainty on tax rates and more tax cuts, he chooses the latter.

Another common variant of this argument is that businesses are worried about the debt. As the story goes, office parks in Ohio aren't hiring because they're concerned that the federal government won't be able to meet its obligations in 20 or 30 years. I find that a bit peculiar, but even if I didn't, the same people making this argument want to spend $4 trillion on further tax cuts -- and do it without offsets. You're either worried about the debt or you aren't.

Liberals, by contrast, think businesses are worried about the future, but they think the problem is that there's no demand and too much tail risk in the economy. Why invest in more capacity before the employment levels necessary to support that capacity come back? Why stop hoarding cash when Ireland could default and force another panic in the credit markets?

The preference for numbers that Brooks identifies comes because, well, these arguments have numbers and evidence behind them. That's a strength, not a weakness. The preference for unfalsifiable concepts such as policy uncertainty comes because the arguments are not really on the level, and attaching numbers to them would expose the flaws. Brooks takes this a step further and attacks the practice of attaching numbers and using historical models to make arguments, but by the end of his op-ed, he's back to citing economic estimates that favor his position, so it's hard to believe he's really so skeptical of empirical rigor.

By Ezra Klein  | November 16, 2010; 11:20 AM ET
 
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Comments

NYT puts Gail Collins and David Brooks together to debate issues. NYT will do favor to we Americans instead if it brings Books versus Krugman. Because it is obvious that Brooks has been trying to argue Krugman theories for a while. This snipping on sides is unbearable.

But may be, taking Brooks seriously is hardly going to be feasible. The guy talks all abstract, non-falsifiable theories with all sorts of soft corners for Conservative lunacy. It is all right to point deficiencies in the logic of Left. But beyond that, there is much less value in Brooks articles.

The only thing we may however like is if Brooks undertake psychoanalysis of Dems and President to determine why are they never able to play 'hardball, politically alpha animals'; why are Dems always like 'tail in legs' type?

Posted by: umesh409 | November 16, 2010 11:45 AM | Report abuse

There's so many inconsistencies and absurdities in that Brooks article it's hard to know where to start.

- He argues that government shouldn't be spending when private individuals are having to cut back, betraying a worrying ignorance about the need for counter-cyclical government spending.

- He says the stimulus has not "responded as predicted", given that it was "supposed to create hundreds of thousands of jobs". Even though it did.

- He tries to argue that the stimulus was not effective because economists in an NBER paper found that stimulus is not on average as effective in countries with high debt, conveniently ignoring both his own exhortation to ignore economists, and the economists at the CBO who found that the stimulus created 1 to 2.5 million jobs and significantly improved growth.

- He cites Germany as an example of country thriving because it had the "best economic fundamentals" before the crisis rather than a fiscal stimulus program, even though Germany did employ a significant fiscal stimulus.

- He says what countries need is not the "macroeconomic mastery" of having good fiscal stimulus, but the "art" of having strong economic fundamentals. What? Do you not need some degree of macroeconomic mastery to produce strong economic fundamentals?

- "It all makes one doubt the wizardry of the economic surgeons and appreciate the old wisdom of common sense: simple regulations, low debt, high savings, hard work, few distortions. You don’t have to be a genius to come up with an economic policy like that." That's because that economic policy is so vague it's trite. What 'simple regulations' do you impose on an incredibly complex financial sector? Which wildly popular spending programs should we cut to get back to 'low debt'? Medicare, social security, defense? Or should we raise taxes? If *distortions* are a problems, should we eliminate all the tax breaks for business and corporations?

Brooks is living in the same sealed echo chamber as much of the American right. If facts get in your way, ignore them. If the facts don't support your positions, well, who needs facts anyway? All we need is our morals.

Posted by: bigmandave | November 16, 2010 11:48 AM | Report abuse

Doesn't David Brooks ever get tired of being wrong?

Posted by: harold3 | November 16, 2010 11:49 AM | Report abuse

The perfect moment to inform those who might be interested: The University of Chicago Magazine is currently sponsoring a tongue-in-cheek "Write Like David Brooks" contest: "500 words analyzing anything on the socio-cultural-politico-intellectual spectrum—from Afghanistan to the zeitgeist—in your best Brooksian prose. The Magazine's editors will cull the most knee-slappingly centrist, most side-splittingly sober, most fire-breathingly bipartisan, most spit-takingly intelligent entries for Brooks to public-think about and select the winners." Details at http://magazine.uchicago.edu/1012/every_issue/lite-of-the-mind.shtml

Unfortunately, the prize (in addition to publication in the magazine) is a signed book from the object of your parody. But still, it could be fun if you have nothing better to do. A treatise on the moral vacuity of facts could be amusing.

Posted by: JJenkins2 | November 16, 2010 12:00 PM | Report abuse

It is indeed hard to believe that David Brooks is "really so skeptical of empirical rigor". Much of what Mr. Brooks writes is, in fact, unbelievable - because it's flatly false.

It's almost enough to make one suspect that David Brooks in not a very honest person at all.

Posted by: eb53 | November 16, 2010 12:05 PM | Report abuse

Wal-Mart just announced its SIXTH consecutive decline in same store sales.

If that's not pretty much ironclad proof the economy is suffering from lack of demand, I don't know what is.

Posted by: Jasper999 | November 16, 2010 12:06 PM | Report abuse

Brooks has always been a reminder to me that we all have our emotional biases that allow us to cherrypick facts to our own liking.

His socio-scientific approach to the world is nearly identical to many liberal columnists, but he draws different conclusions, often based on the same information. It's easy to see what's wrong with the argument if you disagree, harder if you don't.

Knowing that there's an undercurrent of emotional biases behind every argument, on all sides, I believe it's incumbent on liberals not only to make the factual arguments, but also to state why it matters morally that, say, there are 50 million uninsured, or whatever else.

It's ok to be biased. I think there's an inherent weakness in using facts as first principles in policy discussions, rather than moral beliefs. What matters more? 50 million uninsured, or working people and kids who can't go to the doctor and end up getting sick? Both matter, but only one side tells the story.

A healthy balance of the two approaches would be nice. Both sides are far from such a balance.

Posted by: itstrue | November 16, 2010 12:10 PM | Report abuse

You all give Brooks too much credit. His patrons have decided that tight money and tax cuts for the wealthy are all that matters. Brooks will support this with all the tricks at his command. It’s impossible to justify tax cuts and tight money in a recession using economics and logic, so Brooks has to invoke a magic intermediary. In this case, the famous Confidence Fairy.

Yes, all the business people Brooks meets (Are they real, or are they invisible friends?) are worried about policy uncertainty and the debt and regulation and scared about the future. If their sales were up 20% they’d still be worried about policy uncertainty and the debt and regulation and scared about the future; but they’d be investing and hiring.

Posted by: gVOR08 | November 16, 2010 12:31 PM | Report abuse

There's a begged question here, which is what Brooks and conservatives base the business problems on *tax* uncertainty.

When my company laid off employees after a 6th consecutive quarter of exceeding goals, they cited uncertainty in the market. When the SBA studied reasons for lack of hiring movement. Their study showed that taxes weren't even among the top 5 concerns.

What about the impact of housing prices on small business growth? http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.american.com%2Farchive%2F2010%2Faugust%2Fwhy-small-businesses-arent-hiring&h=f1eac

The difference isn't one of facts vs. emotions but the simple ability to parse and analyze a problem. Republicans pull their claims out of the air.

Posted by: txasbubba | November 16, 2010 12:34 PM | Report abuse

If the GOP is really earnest in its concern about uncertainty (an unlikely possibility), one thing they could do is pledge that they won't shut down the federal government in the next two years. A good bit of our economy depends on federal contracts, Social Security, Medicare, and etc., so not having a shutdown as a possibility is one less thing to worry about.

The GOP could also pledge that they won't slow down the next vote on raising the debt ceiling. Sure, there are valid complaints about the level of debt and the deficit, but those are pretty small compared to the potential global chaos from a U.S. default (or even the possibility of such an event).

An here's an even more dramatic way that the GOP could reduce uncertainty for the business community: refuse to run a candidate for president in 2012. After all, not knowing who will be in the White House from 2013-2017 is a major piece of uncertainty, and not running a candidate would assure the business community that there will be continuity of leadership in the White House.

Posted by: meander510 | November 16, 2010 12:34 PM | Report abuse

The only thing certain in this life is that David Brooks has 2 column a week to fill and he'll do it one way or another. He stumbled into a pretty good one the other day with the linked nation thing, but he's usually a waste of time. Yet I gather he's influential. The world is so weird.

Posted by: bdballard | November 16, 2010 12:45 PM | Report abuse

I believe you are glossing over Brooks primary point, which is the models that liberals/progressives love so much haven't proven in practice to be all that accurate with their predictions.

"The performance of the economic machine can be predicted with quantitative macroeconomic models.

These models can be used to make highly specific projections. If the government borrows $1 and then spends it, it will produce $1.50 worth of economic activity. If the government spends $800 billion on a stimulus package, that will produce 3.5 million in new jobs.

Everything is rigorous. Everything is science."

The best recent example which Brooks alludes to is the Christina Romer analysis of the American Recovery & Reinvestment Act (aka the stimulus) that was significantly wrong on the unemployment predictions.

http://www.politico.com/pdf/PPM116_obamadoc.pdf

That coupled with the Obama administration's refusal to concede Paul Krugman's critique (i.e. the stimulus was too small from the beginning due to political considerations) has pretty much discredited Keynesian solutions going forward.

The first two years of the Obama administration were probably the best opportunity to put actual Keynesian economic theory into practice, and it still came up short.

Posted by: jnc4p | November 16, 2010 1:08 PM | Report abuse

jnc4p wrote:

"The best recent example which Brooks alludes to is the Christina Romer analysis of the American Recovery & Reinvestment Act (aka the stimulus) that was significantly wrong on the unemployment predictions."

You would never make it as a government economist. It wasn't the model that was wrong it was the economy, or the amount of the stimulus, or where the money was spent, or under inflation or something else.

The model is a beautiful thing!

Posted by: 54465446 | November 16, 2010 1:34 PM | Report abuse

Because I'm bored, here's some advice based on today's numbers for anyone stupid enough to take advice from an anonymous poster.

There's a pullback on shorting Treasuries today, so buy the dips if you're a manly man (or woman) or take profits if you're worried the Fed's strategy might actually work the way it was drawn up.

The dollar is up again today. Stay long if you can sleep at night knowing the EU debt crisis will resolve itself eventually while you sleep one of these nights and knock the heck our of your holding by morning. We just don't know when.

If you don't worry about morality in investing, go long Goldman today. It's down only about a third of what the market in general is and about half what the other financials are. It doesn't carry the same headline risk over mortgages as most of the other financials do.

Goldman's biggest worry is the economy in general, but Ben Bernanke swears that he will kill one dollar every second until the economy improves, so run with Blankfein and visit a confessional about it on Saturday.

Now back to your regularly scheduled game between the University Professors vs. The Young Bloggers.

Posted by: 54465446 | November 16, 2010 1:48 PM | Report abuse

Ezra,
I find it completely disingenuous that anyone would offer the statement that "there is too much uncertainty" to expand their business. If you were launching a business and knew for a fact that the tax on your business would be between A (today's rate) and B where B=A+/- 10% would you launch your business or invest in 0% T-bills? Just a ridiculous claim where the parameters are so small as to be non-existent.

Posted by: tlnixon | November 16, 2010 2:47 PM | Report abuse

That was really David Brooks unplugged, wasn't it? Or unhinged, more like it. It's not a piece about economics, but rather his favorite topic, the cultural Zeitgeist. It's not about truth, but truthiness, where the reality-based and faith-based communities are on equal footing.

Posted by: fortboise | November 17, 2010 5:07 PM | Report abuse

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