Elections: The Silly-Season for Economics

I don't know how many of you have seen this ad from the White House, but it's the perfect example of how politicians use shoddy economics as propaganda during the election season:

This kind of thing drives me bonkers. I won't go through all of the things that are wrong in the video (there are a lot), but there are two big things that really stand out: First, he's making it sound like the president (either Bush or Obama) is the main driver of job growth/losses in the economy. This is just foolish. True, governmental policies can have large impacts on the economy, I won't argue against that. But there are dozens of factors that caused the recent recession, and I can think of at least 10 that are far more important that Bush's policies. At the same time, the reduction in job losses that has occurred since Obama took office are due to a multitude of other factors. In terms of the full jobs picture, Bush and Obama should just be footnotes, in my opinion.

Second, he's making it sound like the policies that are enacted have immediate impact on the economy. I love how he makes the point that job losses hit their worst in the month Obama took office, as if things turned around exactly at that time because of Obama. This is ridiculous! Think of the economy as a very heavy, very large boat. If it's going in the wrong direction, even if you throw it in to reverse at full throttle, you're going to keep going forward for a long time before you can slow the momentum down and get things turned around. It seems unlikely that there is anything that Obama could have done that actually shows up in the jobs numbers in February or March 2008, after he took office on Jan. 20th. In my opinion, at the earliest you might see something show up about six months after a policy is enacted.

What gets me about all of this is that Goolsbee (the economist in the video) is a smart guy. He's got a Ph.D. in economics from MIT and is generally well-respected within academia. Either he has been severely brainwashed from his time in Washington, or he knows that most of what he is saying is bunk. I'm guessing it's the latter. Don't be fooled!

Side note: This wasn't meant to be a defense of Republican policies or an attack on Democratic policies. Both sides like to use sham economics to make their points. This was just a particularly awful display, and since elections are on Tuesday I thought it was timely. I actually think that Obama has done as good a job as could be expected with regards to the economy. I don't agree with everything, but he's doing alright in my view.