If I were teaching a college-level course on political economy, my midterm exam would ask students to spot the errors in an op-ed with the headline, “Do You Want Reagan’s Economy or Obama’s? ”
Why? Because this particular article, by former Republican Senator Phil Gramm and Michael Solon, a GOP policy adviser, provides a perfect opportunity to show how partisan biases get in the way of clear analysis. And maybe, by showing the flaws in a poorly constructed argument, I can save you from making similar errors in your investment processes.
But first, since I mentioned bias, I want to disclose mine: Over the years, I have been a frequent critic of Gramm, mainly because his record of analysis and forecasting is so poor. He was a prime and unrepentant architect of the deregulatory regime that contributed so much to the financial crisis. In July 2008, he scolded Americans for being “a nation of whiners” and suffering from a “mental recession”: “Thank God the economy is not as bad as you read in the newspaper every day,” he wrote as the economy tumbled into a recession that was much worse than what you were reading in the paper every day.
With that out of the way, let’s take a look at Gramm’s recent commentary:
Continues at: Be Smart When You Compare Reagan’s Economy to Obama’s