Monday, September 17, 2007

Alan Greenspan is a liar:

Paul Krugman has the proof.

UPDATE: Brad DeLong defends Greenspan. Says that in technical econo-speak, Greenspan did not speak falsely. DeLong writes: (emp add)
Now it is, of course possible that Greenspan was playing a subtle reputation-enhancing game, anxious to give testimony that the administration and its press lapdogs would spin as a green-light endorsement, but in which economists like me and financiers like Robert Rubin would be unable to find any sentence that was truly objectionable.

But let's give the mike to Alan Greenspan, p. 220 ff.:
Bob Rubin phoned.... With a big tax cut, said Bob, "the risk is, you lose the fiscal discipline."...

"Bob, where in my testimony do you disagree?"

There was silence. Finally he replied, "The issue isn't so much what you're saying. It's how it's going to be perceived."

"I cant be in charge of people's perceptions," I responded wearily. "I don't function that way. I can't function that way."
"Perceptions" are not a concern for Greenspan, and DeLong is sympathetic to that viewpoint. That's a huge opportunity for a specialist in any field (economics, computers, health care, national security) to get away with just about anything. Just be sure to be technically accurate and if it fools the rubes into making bad decisions, well, tough luck. Haven't we had enough of that already - with the Iraq War the prime example? (Saddam "had contacts" with al Qaeda, Saddam "was working on" WMD, aluminum tubes "could be used" to enrich uranium. All technically true, and therefore presumably DeLong-approved.)
  • If something is comprehensible, there is no excuse for obfuscation. There is no excuse for allowing a mistaken "perception" to take root.
  • If it isn't (like abstract mathematical theories or interpreting a complicated set of medical tests) there is nothing to be said other than "trust me to do what's right, and I'll take responsibility".
In a counter to DeLong (sort of), Felix Salmon of has this:
Here's some of the Greenspan testimony [from 2001]:
Continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer-term fiscal policy issue of whether the federal government should accumulate large quantities of private (more technically nonfederal) assets. At zero debt, the continuing unified budget surpluses currently projected imply a major accumulation of private assets by the federal government. This development should factor materially into the policies you and the Administration choose to pursue.
In January 2001, it seems, the prospect of the goverment paying down the federal debt to zero is and should be at "center stage", and "should factor materially" into the decision whether or not to cut taxes.
DeLong is perceived in some quarters as a liberal economist, but there's always been something about his positions that didn't feel right. He defends Greenspan, in part, because Greenspan thought Bush would restrain domestic spending. Okay, it's true that a corresponding cut in spending to match the tax cuts is mathematically sound (if you want to keep the debt from expanding), but that ignores the practical effect of actually cutting domestic spending: Fewer people get help when they are in distress. There is less spending on infrastructure. Or the Arecibo Observatory is shut down.

Where's DeLong's moral compass? Is he neutral about any statements regarding econoimic policy as long as the equations are valid?


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