Goolsbee's Daft Obamacare Apologia

I have always warned on this blog of academic economists commenting on developments in markets and business, because the results are usually pretty awful (see here, here and here).  Today is no exception as former Obama economic adviser Austan Goolsbee takes to the pages of the WSJ with a positively daft analysis of markets in the wake of John Robert's switched vote on Obamacare.  Here is Goolsbee's main point and the big laugher:

Of all the public reactions to last Thursday's surprise ruling from the Supreme Court on the Affordable Care Act, one of the most interesting came from the markets: Nothing happened.

That probably disappointed those who spent the past two years saying that the costs from increased regulation and fear of the health plan explain why U.S. companies have not hired faster and have accumulated huge amounts of cash on their balance sheets. If that were so, the court ruling should have had a big impact on expected future profits. Stocks should have tumbled.

Um, no.  This is typical of how academic economists have no clue how markets and business work.  ObamaCare was the law of the land on Wednesday June 27th and on Thursday June 28th, after Roberts announced his 4-4-1 decision, Obamacare was...the law of the land.  With no material change in the policy environment, one would expect markets to do precisely nothing. 

Goolsbee goes on with a lame attempt to say that damaging effects of Obamacare are non-existent because there is no data saying companies with more than 50 employees are doing worse than companies with less than 50 employees. Huh?  The law isn't fully implemented yet, so there is no ability to make these distinctions now.  Goolsbee's argument is a chimera.  What is real however is the numerous and constant criticism of the law and description of its chilling effects by businesses and business groups. And I (along with Nobel-prize winning economists) have laid it all out for my readers as to why the recovery is non-existent. 

I have discussed here many times how businesses are hoarding cash and shrinking rather than expanding.  I know because 1) I am not an academic economist who believes crazy sh*t that isn't remotely sensible and 2) I actually talk to business leaders all the time.  Goolsbee mentions briefly that businesses have been hoarding cash, glossing over how integral this effective boycott has been to the anemia of the recovery, and dismisses this as a factor because it's been happening for a long time.

What about the companies that have hoarded so much cash? It turns out that the hoarding began years before the Obama administration even took office. Researchers with the National Bureau of Economic Research have documented a major rise in cash holdings as a share of assets beginning in the 1990s.

Yes, cash accumulation has been going on since the 1990s, mostly because of terrible tax policy that incentivizes companies to keep cash from foreign profits parked abroad.  However the cash hoarding in the wake of ObamaCare and the many other policy depredations of the Obama administration has been pronounced and well-documented as stemming from the uncertainty at best and hostility at worst coming out of the White House.   Furthermore, much of the cash hoarding has come in the form of balance sheet shrinking that wouldn't show up in Goolsbee's cited data.  I doubt Goolsbee talks much to CEOs and businessmen and women, which is probably why he doesn't know what is actually happening on the ground. Hell, even Democrat businessmen have been decrying Obama's terrible economic policy.

The rest of the article is not worth fisking because there is nothing substantial or even sensible offered.  Goolsbee says that everybody hoards cash, George Bush was bad and something about Cass Sunstein.  That's it.  This guy is putatively a rising star in the academic economics world.  I've never understood why and this effort makes my see it even less.

The truth is had John Roberts stuck with his original, law-based, opinion and ObamaCare was struck down, the stock market would have rocketed up.  As it is, the events of June 28th have changed nothing and markets yawned because there was no reason to get excited, so they put their gaze back on Europe for a few months before they focus on the main event for the future of the US economy, the November election.

Austan Goolsbee, Politics of Fear Frontman

Like alot of his other discharges, Austan Goolsbee's dire warnings on the debt-ceiling issue are all wet and he is, once again, doing the cynically dishonest work of the administration that he has tethered his career to. Goolsbee warns that not increasing the debt ceiling would bring on the certain, immediate default of the United States of America and consequently trigger unfathomly bad things, like a global recession. No such thing would happen, and I think that Goolsbee knows it. If he doesn't know it, he's making the classic mistake that academic economists make (and he ought not to have such an important job, but that is another point altogether) by not factoring in markets. First of all the debt ceiling is precisely what it says it is, a ceiling, so the US Treasury would be free to issue plenty of new bills to roll over existing debt, so long as new issuance doesn't take us above the ceiling, so there would be no default. What's more, if Congress can set and reset the debt ceiling, surely they can specify that new debt can be issued only to rollover existing debt. Furthermore, the markets are smart and bond investors are likely to see through the capping of the debt ceiling. The massive collective entity known as the bond market understands quite well that the USA is not really anywhere close to "defaulting" in the truest sense, so the reaction would not be the cataclysmic event that Goolsbee postulates. In fact, the impending restriction of US debt supply would make the existing obligations more valuable and likely promote a rally in US bonds driving down interest rates. The Democrats for decades have loved low interest rates, so what it not to like now? That's easy. The one place where the debt ceiling would be cataclysmic is on the federal government's "business model" so to speak: deficit-fuelled spending on the great utopian social engineering projects of the last century (ObamaCare inclusive) and thousands of piddly, not-so-great social engineering projects. You would have to make significant cuts to nearly everything that Democrats since Wilson have ever done that requires money. Only the really, truly poor among the elderly will get a Social Security check. Those Native Americans will no longer have our billions in welfare, they'll have to make it in life on their own. The government is just going to have to buy less than 40% of the healthcare services sold in America each year. The ethanol producers are going to have to find another line of work. Aspiring young people are just going to have to save for college. Et cetera, et cetera. Frankly I think it is pure genius - the idea that our government would have to REALLY prioritize and spend only where it is truly needed and critical - but you can see why Goolsbee has to say what he's saying. It's scare tactics really, the kind of fear-mongering that we were told was the sole purview of Republicans and perfected under ChimpyBushHitler, the pure antithesis of the Lightworker Obama. There's a Reynoldsesque "They told me if I voted for McCain..." formulation in there somewhere.

UPDATE: Douglas Holtz-Eakin agrees with me.

Goolsbee Gone

No doubt other economists will greet this departure like they've greeted other departures from Washington DC (Christy Romer's comes to mind)...noting how brilliant such and such economist is thus how "unfortunate" their tenure in DC was. Well, here at NBfPB we are not so collegial. Romer was a disaster and Goolsbee was not much better. Here, Ed Morrissey hints that Goolsbee was pushing for a more private sector approach, but I find that hard to swallow given his performance spouting administration gibberish. The administration has been full stream ahead with an overt and aggressive anti-private sector approach from day one with no let up. If Goolsbee was somehow hoping for something else, he his hopelessly naive. I can assure you that Goolsbee would be basking the glow of success had the economic data been better. He gambled and now finds himself on a sinking ship, so he's out.

On Goolsbee

An avid NBfPB reader who also contributes over at SayAnything (as do I) has a great post up on the departure of Austan Goolsbee from the Obama White House economic team. As Bat One notes, it is obvious poppycock that Goolsbee is leaving to preserve his tenure at U of Chicago. You don't take a job knowing you have leave nine months later. Goolsbee is abandoning the sinking ship.

Aside: is it just me or is even the Obama administration's bullshit amateurishly incompetent??

Goolsbee: Yeah, The Economic Policy I Shilled For, For Years, Stinks

This is rich.  Austan Goolsbee, the former wunderkind economist who shilled for Obama's crap Keynesian, redistributive, anti-capitalist economic policy during his tenure at the CEA, has the temerity to come out and blame the sequester for an economic malaise that has been a slow drip water torture for working Americans (for "fat cats" it's been pretty good though, I must say) since the day these losers took office.  I've taken Goolsbee to task before, for which he is richly deserving.  America is better off now that he is safely ensconced on campus somewhere (although as his replacement we got the guy who doesn't believe that demand curves slope downward).  Anywho...

Austan Goolsbee, a former economic adviser to President Obama, called this morning's jobs report "a punch to the gut":

Punch to the gut, Austan?  Yes, another punch to the gut in a long line of punches via Obamanomics, which you are partly responsible for.  What can struggling Americans do about your sad brand of centrally planned fiscal wreckage?  Nothing, which puts me in mind of this...

Doom and Gloom From the Experts

Over at SayAnything, avid NBfPB reader Bat One, picks up on a report out of Royal Bank of Scotland - hardly crackpots - that minces no words: doom and gloom are warranted. You won't get much of an argument out of me, I've been saying that we are skirting a Depression by the skin of our teeth but that we could well be headed there due to egregious policy mistakes (here, here, here, here, here, here and here). Obama and the Pelosicrats have done almost everything wrong in the sphere of economic policy and they have succeeded in beating the animal spirits of the US economy into a coma. And we are powerless, to wit we stand only a small chance of a reprieve from the latest policy blunder only due to the death of a 92 year old man. Without such an intervention of fate, a last minute add-on $19 billion bank tax would be sailing onto Obama's desk to be signed into law, representing just one more blow to the economy that we can ill afford. This wounded beast of a Congress and administration is thrashing about wildly, still able to take hunks of prosperity out of our hides when it connects. Hang on tight.

UPDATE: It is worth remembering what Nobelist Robert Mundell said would happen when we raise taxes on dividends and capital gains...nose dive.

UPPDATE: Allen Meltzer sums up nicely what I have been saying on this blog for almost two years now, Obama and the Pelosicrats have gotten nearly everything exactly wrong on economic policy - the stimulus was never going to be anything more than an expensive waste, our leaders have absolutely chilled the entrepreneurial spirit with both legislation and rhetoric, and tax and fiscal policy is sucking resources out of the private economy. They've done, literally, nothing right. Romer, Summers, Bernstein, Goolsbee, Furman...the whole sorry lot have botched it to the point of malpractice. If it was the politics then they should have resigned in protest.

UPPPDATE: I almost forgot that Obama-supporter and voter, Mort Zuckerman has been mincing no words for ahile now about Obama's economic policy program. Niall Ferguson makes an appearance too. Recent reports have Dick Fischer talking about how "regime uncertainty" hurts job creation. There is a chance that these voices are just now coming to the surface and will be absorbed and acted upon by the White House and Congress. Just a chance mind you. My belief is that these voices, if they've even gotten through the highly cloistered walls of officialdom, have been saying this for some time and the White House has simply ignored them because 1) they simply don't jibe with their idealogical bent or 2) they actually don't think that the terrible jobs picture will hurt them in coming elections or in 2012.

Reversal: Obama Up, Market Down

Last week I said that the market was rallying on Obama's stumbles. This week it appears that the market is tanking on Obama's successes. Although the final vote isn't done yet, the administration and Harry Reid successfully peeled off (bamboozled) three squishy Republicans in order to foist this dishonest and dangerous stimulus package on the American people. This constitutes a success for the President. Markets not so much. Previously this week, the one tax scofflaw that Obama did get through the confirmation process - another Obama success - made his contribution to the markets rather inauspiciously.

So far the pattern has emerged. Obama's agenda slows, markets are up. Obama's agenda advances, markets are down. Not that Obama's priority is the stock market, but it is a barometer of the economy and of our future. If it stays in the tank, Dear Leader is a One Termer. How much hedge fund money and Goldman Sachs money will be lining up for Obama 2012 if we've had dead markets for four years? Not much. Maybe that is why Obama is ramming the stimulus, with its government employees' union and ACORN goodies - down our throats. This is not surprising. During the campaign Obama was smooth, he lined up Buffett, Volcker, Furman, Goolsbee and a parade of financial luminaries. That looked like a solid bet economically. What happened? Either he got rolled by Pelosi, Obey, Reid & Co. or he was simply lying all along. The market has to adjust to that new reality, the reality that, in the economic sphere, we bought usselves a pig in a poke.

UPDATE: Wall Street is realizing..."Holy Shit, these guys are awful. Volcker? Where's Volcker? Where is anybody with a brain?"

Brilliant Economists??

Here is something I have pondered. Barack Obama has some young hot-shot economists as his advisers, who did yeoman's work stumping for BO during the campaign making BO's economic policies sound reasonable. Well, the scale and scope of BO's economic policies are turning out to be truly atrocious and stand in stark contrast to the reasonableness laid out over and over by Jason Furman and Austin Goolsbee. Greg Mankiw highlights this contrast today in this post. Also, throughout the campaign, Mankiw (as is his manner) vouched for these two economists as nothing short of brilliant, even though they do not share similar political affinities. So how could these brilliant economists say all this stuff that could never have been true if the policies then contemplated are the policies now on the table? Were they lying? Were they just wrong? Did Obama use them to mask his policy goals? I suspect they were naive. Most likely they actually thought that you could craft reasonable policy towards a certain goal, like healthcare reform, but were clobbered over the head by reality that nothing reasonable or sensible comes out of Washington (especially a Washington run by crypto-insane medocrities like Nancy Pelosi) once they got into office. So why don't they resign or speak out? Same with this Romer gal. She did academic work touting tax cuts over spending, but she still got out there and stumped for the $787 billion dollar porkulus dud. Something is amiss here. These economists are either not as brilliant as their colleagues claim or are somehow incredibly naive to a point that calls into question their common sense. Or they are blinded by the ambition of holding one of these plum, high-profile jobs in a presidential administration. Either way, these people need to be seriously called out onto the mat. Why is the policy we are getting nothing like what they described to us and why are they still working for an administration that has made them look like fools, willfully or otherwise?

UPDATE: Mankiw notices this happening again.

Repeating the Mistakes of the Great Depression

This is simply terrible economic policy. If Summers, Romer, Goolsbee and other various Obama braintrusters aren't strongly advising the President against this, they are professionally negligent. If they are and Obama isn't listening, he is negligent.

UPDATE: In the name of fairness I must note that George W. Bush, just as stupidly, imposed tariffs on imported steel. The only thing that makes the two tariff impositions different, and the Obama version slightly more damaging, is the timing. A trade war right now, the given the global economic environment, would be much more damaging than in 2004.

Hennessey Answers Goolsbee

Keith Hennessey is an invaluable resource in debunking leftist economic gibberish.

Obama Last Guy in American that Thinks Stimulus Worked

Obama thinks the stimulus worked. He even said that "the vast majority of economists are convinced, that the steps we took in the Recovery Act saved millions of people their jobs."

Oh yeah? If it was so wonderful why did Summers, Romer, Orszag, Bernstein and Goolsbee - stimulus advocates all - quit rather than bask in the success of their policy creation? Also, what of the five prominent economists noted here that have already publicly stated that the stimulus was a waste of money?

In fact very few economists believe that the stimulus worked. Most acknowledge that the stimulus was largely transfer payments to states who used the money to temporarily plug the holes in what are widely seen as unsustainably large deficit budgets. So yes, the stimulus kept the government employee gravy train motoring down the tracks awhile longer, but nobody equates this with fostering the long term health of the economy.

In my view, even if the stimulus could have possibly worked (which I believe it couldn't have), it was neutered by the damaging rhetoric and policy agenda of this President and the Pelosicrats as I have noted here. What the stimulus offered with one hand, the poisonous anti-business stance of Washington DC caused to be withdrawn by the other hand. For all their purported expertise in Keynesian economics, they were ignorant of what Keynes dubbed the "animal spirits" of the economy, which they have succeeded in thoroughly and relentlessly crushing. Obama's economics is all wet here. Perhaps because there's nobody left on the economic roster at the White House.