Updating a previous story on Who Believes What About the US Budget?: Berkeley economist Brad DeLong continues to wonder who's making the decisions on current US fiscal policy.
In short: is Bush receiving good budgetary advice and ignoring it? Or is he receiving bad advice and believing it?
One option implies President Bush is so stupid as to ignore the experts hired to be experts on matters he is not expert in. The other suggests people with professional expertise are compromising their academic standing to please political masters who have a clear pre-designed agenda. DeLong would like to believe that well-respected academics-turned-policy-advisers like
Glenn Hubbard and Greg Mankiw are providing sober advice and resisting the urge to pander to political pressure. But DeLong is learning to be disappointed, and laments that then-CEA chief Hubbard was willing to give shonky advice about the effect of deficits on interest rates. Hubbard worked on the presumption that the deficit was only going to last for one year before budget balance would miraculously be restored -- meaning the increase in interest rates would be quite small.
In Ron Suskind's The Price of Loyalty, Hubbard never openly clarified in his comments to high level staff meetings that the upward pressure on interest rates would be much higher if the deficits continued. In other words, Bush is clearly receiving tainted advice.
It also seems current CEA chair Mankiw is succumbing to the temptation to please the regime rather than advise it dispassionately, by determining when recessions begin and end.
(This is not to say Delong believes Bush's policy would be more coherent if he were better advised. Having a blind man in a room full of deaf people doesn't augur well for sensible policy making.)
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