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Bush/Romney Economic Advisor Claims Stimulus Helps

August 13, 2012

From 2003 to 2005, N. Gregory Mankiw was chairman of the Council of Economic Advisers under President George W. Bush. In 2006, he became an economic adviser to Mitt Romney and continued during Romney’s presidential campaign in 2012. According to him, 90% of economists agree that cutting taxes and/or increasing government expenditures has a significant stimulative impact on a less than fully employed economy. In other words, Obama’s stimulus plan helped the economy significantly. See #4 below:

The recent debate over the stimulus bill has lead some observers to think that economists are hopelessly divided on issues of public policy. That is true regarding business cycle theory and, specifically, the virtues or defects of Keynesian economics. But it is not true more broadly.

My favorite textbook covers business cycle theory toward the end of the book (the last four chapters) precisely because that theory is controversial. I believe it is better to introduce students to economics with topics about which there is more of a professional consensus. In chapter two of the book, I include a table of propositions to which most economists subscribe, based on various polls of the profession. Here is the list, together with the percentage of economists who agree:

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)

From → Economics

  1. Point number 8 is also relevant

    • Michael permalink

      Agreed! It seems very obvious to me that we should run a surplus when the economy is healthy. Trying to balance budgets when the economy is weak only makes things worse.

  2. We’ve been all through this already.

    Any such hypothesis like “the stimulus helped” is worthless without a control that is at least defined, if not actually tested.

    No one can claim that the stimulus helped, or that some newly discovered medication helps–unless he can define what the control is.

    In this case, that’s impossible–because no one can know for sure what would have happened if Congress had failed to enact the stimulus package.

    • Michael permalink

      Unfortunately, we can’t test economic theories the same way we test new medications. There aren’t several identical economies that we can experiment with to see which approach is most effective for a given situation.

  3. Came clueless, left worried. Thanks for the post. Time is natures way of keeping everything from happening at once. Woody Allen Born 1935

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