As we noted in these pages a few weeks ago, Paul Kasriel gave Michael Boskin’s selective memory a who-dat-what-for.
This morning, Barron’s picks up the same theme:
IT’S PERVERSE OF US, WE ADMIT, but we get a real kick out of a dust-up between economists. If nothing else, it demonstrates that the dismal science is not a science and not necessarily dismal.
What occasions this somewhat less than profound observation is a recent commentary of Northern Trust’s director of economic research, Paul Kasriel, taking issue with an op ed piece in our sister publication, The Wall Street Journal, by Michael Boskin, a former chairman of the Council of Economic Advisers under the first President Bush.
Mr. Boskin blamed the lackadaisical recovery on the Obama administration’s economic policies, a view that is widely shared these days. Paul avers his intention is not to argue for or against those policies, but to express wonder that in fingering the causes of the feeble recovery Mr. Boskin somehow neglected to include the extraordinary contraction in bank credit.
In making his case, Mr. Boskin compared the current recovery with more robust ones, particularly the first quarter of 1983, when Martin Feldstein was chairman of the Council of Economic Advisers under President Reagan.
On that score, Paul finds it “curious” that Mr. Boskin makes no reference to the 1991 recovery when he was the Council’s top dog. Our initial reaction to the omission was, for gosh sakes, Paul, since when is modesty a sin?
Paul then proceeds to note that one year into the rebound in 1983, GDP growth weighed in at 7.7%, accompanied by a 6.4% growth in bank credit. That’s significantly better than the 3% rise in the first year of the present recovery, when bank credit actually contracted an awesome 7.9%.
And it also happens to be a heap better than the 2.6% rise in GDP in 1991, when bank credit rose only 1.4%.
It goes without saying, Paul concedes, that other factors besides bank credit play a part in GDP growth. But he insists that the shrinkage in bank credit has been a substantial element in the disappointing pace of this dispiriting recovery.
As for perhaps the most distinguishing aspect of the current recovery—its abysmal failure to create jobs—he’s quick to affirm its performance on that score pales in comparison with that of the average bounce-back since 1961. Still, he points out, presumably with a mischievous glint in his eye, it exceeds that of 1991.
Paul concludes his critique by suggesting that “perhaps Mr. Boskin is not suffering so much from amnesia, but rather is experiencing an episode of déjà vu.” Mr. Boskin, he explains, intimates the sluggish pace of the current recovery may suggest that President Obama will have a tough time being reelected in 2012.
Yes, agrees Paul, just a the first president Bush failed to gain a second term n 1992, which “terminated Mr. Boskin’s tenure” as chairman of the Council of Economic Advisers. “
Its déjà vu all over again!
Smackdown: Paul Kasriel vs Michael Boskin (September 10th, 2010)
Suddenly, Everyone Is Not Bearish
Barron’s SEPTEMBER 18, 2010