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Hullabaloo


Thursday, January 02, 2014

 
Reminder: walking joke "economist" Arthur Laffer was dead wrong, as usual

by David Atkins

Via Joseph Weisenthal on Twitter, it's worth reminding the world what noted conservative "economist" Arthur Laffer (he of the Laffer Curve) predicted for the economy in 2009:

Get Ready for Inflation and Higher Interest Rates

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP...

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs -- such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid -- are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.
As Paul Krugman often notes, almost no one in the conservative movement is ever accountable for being consistently and demonstrably wrong about everything. Not only did the stimulus and quantitative easing not cause inflation and higher prices, they frankly didn't go far enough. What they did was help create bubbles in assets like stocks and housing, but that alone doesn't lead to widespread inflation or higher interest rates (neither of which are necessarily a bad thing in moderation.)

What's wrong with the economy has nothing to do with the deficit, the ACA, government spending, regulation, or anything remotely related to what any conservative pundit might blather about. The weakness in the economy is a function of wages that are too law and jobs that are too few. And given the outlandish stock prices, corporate profits and executive salaries over the last few years, any claims that businesses are too overtaxed or overregulated to create jobs are an outright joke.

Everything conservative economists say is an attempt to distract from the most dangerous truth they face: that corporate profits and stock prices are at record highs, but that's not helping create middle class jobs and prosperity. If they ever admit that simple truth, the whole game is up.

But remember: they're wrong about everything. The disconnect between profits and salaries, stock prices and jobs, and assets and wages is all that matters in the economy. The rest is a sideshow, and any Democrat claiming progressive credentials without talking about this disconnect is a fraud who only hurts the country in the long run. The current situation is unsustainable, and someone will take the blame when it all comes crashing down. Democrats' only chance is to be like Elizabeth Warren, calling out the problems so that when the dam breaks they can have anti-establishment solutions ready at hand.


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