They're just not that into economics


Daniel Klein's recent Wall Street Journal article ("Are You Smarter Than a Fifth Grader?") is one you'll want to clip and save for handy reference. He documents how characteristically more ignorant liberals are of basic economics than conservatives are. Politicians in general are poorly versed in the dismal science, but the farther left you are on the political spectrum, the more clueless you are likely to be on the subject. This is alarming because, while politics is not reducible to economics, most of what government does involves economics, directly or indirectly, and the farther left the politician, the more likely he is to occupy himself with economic matters . . . sadly.

Here is an example of a question Klein posed to a range of respondents:

"Consider one of the economic propositions in the December 2008 poll: 'Restrictions on housing development make housing less affordable' People were asked if they: 1) strongly agree; 2) somewhat agree; 3) somewhat disagree; 4) strongly disagree; 5) are not sure. Basic economics acknowledges that whatever redeeming features a restriction may have, it increases the cost of production and exchange, making goods and services less affordable. There may be exceptions to the general case, but they would be atypical.

"Therefore, we counted as incorrect responses of 'somewhat disagree' and 'strongly disagree.' This treatment gives leeway for those who think the question is ambiguous or half right and half wrong. They would likely answer 'not sure,' which we do not count as incorrect.

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"In this case, percentage of conservatives answering incorrectly was 22.3%, very conservatives 17.6% and libertarians 15.7%. But the percentage of progressive/very liberals answering incorrectly was 67.6% and liberals 60.1%. The pattern was not an anomaly."

Liberals generally answer with what they want to be true, what they believe ought to be true, or perhaps with what they can force to be true with properly executed legislation, not with what actually happens in the world when it is left to itself. Klein observes, "[T]he left has trouble squaring economic thinking with their political psychology, morals and aesthetics." May I venture to say that they don't think; they feel?

Klein ends with this: "Governmental power joined with wrongheadedness is something terrible, but all too common. Realizing that many of our leaders and their constituents are economically unenlightened sheds light on the troubles that surround us."

David Ranson provides us with an all too real example of this economic ignorance and wishful thinking in an article he wrote in the Journal last month:

"The feds assume a relationship between the economy and tax revenue that is divorced from reality. Six decades of history have established one far-reaching fact that needs to be built into fiscal calculations: Increases in federal tax rates, particularly if targeted at the higher brackets, produce no additional revenue. For politicians this is truly an inconvenient truth."

This little nugget of the way things work even has a scientific sounding name: "Hauser's Law." On the basis of 60 years of consistent data, W. Kurt Hauser of the Hoover Institution found that there is an impenetrable ceiling on what wealth-squeezing government can ring out of the economy in the form of tax revenues. No matter how we try, federal tax receipts will not exceed about 19 percent of GDP under the best of circumstances. Under present conditions, which are far from the best, any attempt to raise taxes will reduce GDP and thus actually reduce revenues. Ranson's article is another one for my "keeper" file.

But liberal politicians don't care. They're just not that interested in economics. What matters to them is "fairness," even if it means bankrupting the country to pay for it.

Consider this golden moment during the final stages of the 2008 Democratic primaries. Barack Obama, saying what he knows the American people believe and want to hear him say but is completely alien to his way of operating, said he believes in paying as you go. But in response to Charles Gibson's question, he shows his complete indifference to economic constraints when it comes to the egalitarian moral imperative of "fairness."

Sen. Obama weaved back and forth between advocating fairness at the expense of revenue considerations and sounding fiscally responsible for the right-of-center American voter. But the two came crashing together in an embarrassing display of either contradiction or hypocrisy-Gibson caught it---when he said, "But what I also want to make sure is that our tax system is fair and that we are able to finance healthcare for Americans who currently don't have it and that we're able to invest in our infrastructure and invest in our schools. And you can't do that for free." In other words, we want a tax system that seems fair to a progressive liberal and yet one that can pay for the generous social programs for which that same sense of fairness requires.


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