I’m a little late to this party, Matt and Ezra in particular have been all over it, but where the hell do celebrity journalists learn economics? In every deabte thus far the meganame moderator has insisted on pressing the candidates on which proposal of theirs they’re going to “have” to give up in the face of the ‘$700 billion” bailout package. The idea, of course, is to make headlines, but it does seem like the media really believes this stuff.
The problem with this is twofold. First, and most importantly, this cuts against the basic way we look at macroeconomics since Keynes. When economic times get tough, households tighten up, and the idea seems to be that the government ought to operate like your family. But the government is not your family in 2 important respects; means and focus. In terms of means, the government has the authority to lay taxes, making raising revenues and keeping cash flowing much more easy than it is for your family. As far as focus goes, the government is really the only actor in the economy who can act in a truly macro fashion. That is, they don’t have to be so concerned with their bottom line, instead focusing on the economy at large. This is, of course, the exact opposite of the way firms and households must think.
So, generally speaking, when the economy turns downward we want the government to spend more money to do their best to prop the economy up. Now obviously money has to be spent effectively in ways that can drive consumption. You need to send assistance to local governments, you need to extend unemployment benefits, food stamps, and other programs that keep the middle class spending. But the last thing you want the government to do is cut back, and cause further contraction to the economy.
Secondly, and maybe most problematically, it’s becoming increasingly clear that journalists still don’t have any understanding of the bailout package whatsoever. Of course, they’re not economists, but they don’t seem to understand the basic facts surronding it, and that’s a problem if they’re going to talk about it and ask policy makers questions about it. Case in point, I just watched Wolf Blitzer interview Robert Rubin. Rubin was talking about the need for a new stimulus package, and Blitzer was incredulous, asking him where the money would come from in the wake of a “$700 billion bailout deal.” Rubin then tried to explain to him that the bailout wouldn’t cost that much, because we’re buying assets, at which point Blitzer interrupted him with “we hope.” We hope? What the hell does that even mean? Robert Rubin, who I think we can all agree knows more about this than Wolf Blitzer, points out that we’re buying assets and Wolfie responds with “we hope?” It doesn’t make any sense, and the only explanation for it is that Blitzer doesn’t understand the economy, doesn’t know what the bailout legislation entails, and has no business interviewing, much less interrupting, someone like Robert Rubin.
But then, there’s no limit to the knowledge of a celebrity journalist is there?