How and What to Count

"A conservative does not risk the entire economic system to score an ideological victory. That is what a fanatic does." — Erstwhile conservative Andrew Sullivan for Newsweek's The Daily Beast

"To find the answers, look beyond economics..." — Barry Ritholtz for The Big Picture Blog
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Most Americans are sadly innumerate, a term coined by mathematician John Allen Paulos in his 1988 book Innumeracy: Mathematical Illiteracy and its Consequences.

Worse, most of our leaders are clearly in the same boat. As noted by Paulos, a generation ago now, despite having some of the most expensively obtained educations in the Western world, many of our finest "respectable" elites inside and outside of government fare no better.

This goes far beyond the simple errors of statistical reasoning made famous by the book and many subsequent studies of recurring errors to be found in newspapers and the mass media every day. Making matters far worse is the irrefutable fact that few have any consistent, comprehensive or even very useful understanding of economics, resulting in the predicaments we see all too often all around us in our government and national life.

Economist Dean Baker, co-director of the Center for Economic and Policy Research, has made a lively second career out of trying mightily just to correct some of the important "newspapers of record" and major media outlets on their constant streams of economic disinformation and repeated rank ignorance.

In their quieter moments, however, some economists will only now admit their confusion as well.

“After more than a quarter-century as a professional economist, I have a confession to make: There is a lot I don’t know about the economy. Indeed, the area of economics where I have devoted most of my energy and attention — the ups and downs of the business cycle — is where I find myself most often confronting important questions without obvious answers,” said Greg Mankiw, George W. Bush's chairman of the Council of Economic Advisors, in the New York Times.

I usually try to suggest — an attempt to alleviate such problems of ignorance early — recommending to youngsters they start to get a general sense of the size of things in the universe with the wonderful film and book Powers of 10. It is based on a book and concept that's only about 50 years old and was made into an award winning film by Ray and Charles Eames for IBM. There's also a useful companion book on basic scientific literacy by the late MIT physicist Phillip Morrison — The Ring of Truth: An Inquiry into How We Know What We Know.

While all this learning is certainly helpful and useful for general educational purposes, which is still a very good thing, it really does not seem to help matters in later life with political-economic questions and preferences on recurring policy issues. And most serious-thinking people will come to recognize this "cognitive dissonance." Our persistent biases and internal preferences will long since have colored our opinions and directed our responses to most situations in our lives.

"As I understand, economics is a science that starts off with a pidgin toy model of human psychology (rational actors) because this methodological simplification makes it possible to develop models with great predictive power," said Nobelist Milton Friedman in the preface to Positive Economics.

Indeed, further cognitive research down through the years has reflected poorly on the biases and ideology built into the "dismal science" and perceptions of same, and is one reason why so much "junk economics" litters the media landscape.

This has also given rise to the relatively new field of Behavioral Economics. But often the facts simply don't matter much, or not enough to those elites who control our discourse and our government.

And that sense of general bewilderment is of course bipartisan with Berkley economist Brad DeLong correctly noting here that we've yet to reckon with many of the reliable economic lessons of the 19th Century, let alone those of the Great Depression of the 1930s, to face our current predicament. This is also noted here by Reuter's Felix Salmon.

Hence, we arrive at the current impasse in Washington, where a benighted, feckless and reckless do-nothing Congress is now "holding a gun to your [and the national economy's] head," as famed investor and Berkshire Hathaway CEO Warren Buffett puts it.

"We raised the debt ceiling seven times during the Bush administration," Buffett told CNBC on Thursday. Now, the Republican-controlled Congress is "trying to use the incentive now that we're going to blow your brains out, America, in terms of your debt worthiness over time."

As early as April when this theatre of the absurd was just heating up, former Bush-era U.S. Treasury Secretary Paul O'Neill called the people advocating such foolish and dangerous brinkmanship on the deficit "terrorists."

Indeed, as also noted by Finance guru Edward Harrision:

"During the Bush administration, when a budget surplus turned to deficit and debt piled up, Republican leaders in Congress [repeatedly] voted to raise the debt ceiling...increasing the limit nearly $4 trillion. We’re talking about Speaker John Boehner, House Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell and Senate Minority Whip Jon Kyl. Combined, they voted 19 times for a debt ceiling increase without complaint or conditions."

What changed? GOP Senate Majority Leader Mitch McConnell and his radical Republican crew thought that the better part of wisdom was to block and impede any sort of progress on job creation or aid for the struggling middle class in favor of cleaving to their ultra wealthy Wall Street benefactors.

They decided early on that their best political strategy was to vehemently oppose any and all of the president's economic initiatives and that gridlock and inaction was a better response than pulling together as Americans to solve our common economic problems.

That gridlock and abject refusal to do much of anything is quite telling, and easy to compare. As noted here in the Chicago Tribune, "The 112th Congress is on pace to be one of the least productive in recent memory — as measured by votes taken, bills made into laws, nominees approved. By most of those metrics, this crowd is underperforming even the 'do-nothing Congress' of 1948, as Harry Truman dubbed it." 

Dithering during an economic crisis is what they do best. As noted here by Huffington Post writer Kelly Moore:

"Through the first six months of the year, the House and Senate have been in session at the same time for a mere 60 days. That's an average of a whopping two weeks of vacation a month. Meanwhile, the average American (lucky enough to have a job) has put in twice as many work days — 125 to be precise — in the same span of time."

As the Chicago Tribune noted: "From January until the end of May, the last date for which comparable statistics are available, 16 bills had become law — compared with 50 during that period last year, or 28 in 2007, also a time of divided government."

Moore has a capital suggestion — put Congress on a commission pay basis:

"Congress lacks seriousness of purpose. They are too busy tearing one another down. Maybe if they were compensated like so many Americans — by commission — they would get more done. They could receive a base salary, say, equivalent to the median American salary of around $50,000. Beyond that, they would be paid only for performance. No federal budget, no paycheck. National default? No paycheck (and no re-election)."

Sounds good to me.

As Jared Bernstein notes, actual successful deficit reduction plans of the past decades were more balanced with a mix of spending cuts and revenue enhancements (to use a term Reagan made famous). All this avoidance of the mere concept of taxes by the GOP radicals is complete madness. And for all the months of media-wide gibbering on this self imagined and created debt crisis, still only a minority of voters actually considers this truly crucial to address ahead of jobs and "fixing" the economy.

Again, if we only could convince the Congress to do something they do well — nothing — then the budget would be strangely on it's way to being balanced. Magic huh?

The details are here via the Congressional Budget Office figures.

As noted in a blog in The Hill newspaper, 235 prominent economists, including six Nobel Laureates, say the failure to raise debt limit could lead to recession or far worse. That and mere common sense would recommend a simple clean bill to do so soon.

But as the famous Baltimore sage H.L. Mencken put it, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

I fear that by now any rational person should be stocking up on provisions for the impending man-made disaster, yet again.