Minimum Wage

There Is No Economic Consensus on Obama's Policies

Yet the president insists "every economist" is pro-stimulus and in favor of the raising minimum wage.

|

Since its inception, the Obama administration has engaged in the deceptive routine of claiming that "economists," "every economist" or a "consensus" among economists is in lockstep agreement over whatever policy prescription the White House happens to be peddling at the moment.

It began with the stimulus, when President Barack Obama misleadingly asserted that "economists from across the political spectrum agree that if we don't act swiftly and boldly, we could see a much deeper economic downturn that could lead to double-digit unemployment and the American dream slipping further and further out of reach." Swiftly and boldly, perhaps, but not in the same way. The Cato Institute found 200 economists, three of them Nobel laureates—James Buchanan, Edward Prescott and Vernon Smith—who disagreed that all economists supported the president's stimulus plan.

Then there's Nobel laureate Thomas J. Sargent, who in 2010 took the White House to task for its incorrect assertions about economists' views of the stimulus bill's likely effects: "President Obama should have been told that there are respectable reasons for doubting that fiscal stimulus packages promote prosperity and (told) that there are serious economic researchers who remain unconvinced."

And after the stimulus failed to come close to achieving the rosy predictions set by the president's own Council of Economic Advisers, Obama attacked critics, ratcheting up the rhetoric to claim that "every economist"—yes, every—"from the left and the right, has said, because of the Recovery Act, what we've started to see is at least a couple of million jobs that have either been created or would have been lost."

Obama's chief economist Jason Furman wrote on his blog this week that the stimulus saved or created an average of 1.6 million jobs a year through the end of 2012. That piece of, um, data, like many contentions made by economists with an agenda, is nearly impossible to prove or disprove—and it should be nearly impossible to believe, because it comes from a White House shop that trumpeted pie-in-the-sky forecasts about recovery to begin with.

Obama talks minimum wage at a Maryland Costco ||| MDGovpics/Flickr
White House

This week, the Democrats' big push for a minimum wage hike hit a bit of a speed bump when the Congressional Budget Office (CBO) estimated that if a $10.10 wage were implemented in the second half of 2016, we would see a reduction in employment of anywhere from 500,000 to 1 million workers. Further, only 19 percent of the $31 billion in wage increases would accrue to families with earnings below the poverty threshold. Naturally, Furman, who has used CBO numbers to bolster arguments over the years, told reporters that this time around the numbers are completely wrong. The report "does not reflect the overall consensus view of economists, who have said that the minimum wage would have little or no impact on employment," he said.

Consensus view of economists? Is that true? For many years, the  the broad consensus said that raising the cost of hiring low-skilled workers would mean fewer jobs. Economist and columnist Thomas Sowell put it like this: "One of the simplest and most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired."

This seems to be the most basic of basic economics. Yet in the past decade, there have been competing studies claiming to show an array of results. Democrats will most often refer you to a letter from the left-wing, union-funded Economic Policy Institute that's signed by 600 economists who support the wage hike. How many of those findings are driven by partisan and ideological concerns rather than empirical outcomes? I'll let the social scientists argue over it.

But when the Initiative on Global Markets at the University of Chicago's Booth School of Business queried a panel of 38 top economic experts on the subject of the minimum wage and low-skill employment not long ago, the results suggested anything but a consensus. They were presented with this statement: "Raising the federal minimum wage to $9 per hour would make it noticeably harder for low-skilled workers to find employment." Thirty-four percent agreed, and 32 percent disagreed; 24 percent were uncertain.

So the minimum wage debate splits economists in many ways these days, but what it doesn't do is offer us any consensus that asserts Obama is right. It never does.

Advertisement

NEXT: Utah, Colorado Moving to Raise Smoking Age to 21

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Obama doesnt know anyone who voted for Nix….I mean any economists who disagree with him on economic policy.

    1. Shorter and better than what I said. Of course Obama thinks there is a consensus on the minimum wage. Everyone he talks to has the same opinion about it.

      1. Furthermore, if anyone DID disagree with him, he wouldn’t hear them. The perfect Liberal; completely sealed inside his own self-generated delusion.

      2. I’ve made $80,000 so far this year working online and I’m a full time student. Im using an online business opportunity I heard about and I’ve made such great money. It’s really user friendly and I’m just so happy that I found out about it. Heres what I do, , WORKJURY.COM

  2. “Obama Lies”
    Easier, shorter, more honest.

  3. I don’t think this is intentional. I think it reflects intellectual insularity amoung Obama and his top advisors.

    Progressives, in general, are extremely insular. They are entirely convinced that they, and they alone know the truth and that everyone who disagrees is in the pay of some sinister corporation or evil billionaire. They don’t honestly engage opposing ideas, they just shut them out, and because they shut them out and surround themselves with like-minded people they become convinced that “everyone” thinks the same way they do. The occasional intrusion of some differing opinion is treated as automatically suspect. Only crazy people and Repupublicans (same thing) think X so therefore if you think X, you must be a crazy person or a Republicans, so therefore we should ignore you.

    1. There’s an uncanny resemblance between academic lefties and fundamentalists that’s hard to miss if you’ve spent much time with either. The main difference being that the academic left has developed a convoluted method of convincing themselves that they aren’t insular, which is how you have progressives patting themselves on the back for their love of diversity one moment while calling libertarians reactionaries and neoconfederates the next, whereas fundies have never bothered to rationalize their beliefs beyond the level of “God wills it.”

      1. They convince themsleves they aren’t insular by going out and finding Marxists from South America to hang out with.

        Look! I hang out with leftists who think just like me from ALL OVER THE PLANET! I’m not insular! I watch MSNBC and Al Jazeera!

        1. Do people actually still get their news from TV?

          I watched the Weather Channel at work for 5 minutes during that last mini-blizzard, and I found it to be entirely unbearable. How the fuck could anyone get their actual news from such a medium?

          1. “I watched the Weather Channel at work for 5 minutes during that last mini-blizzard, and I found it to be entirely unbearable.”

            That’s a shame. I used to watch it while traveling to check the weather where I was going. Now it’s ‘human interest stories’ with FEMA-love tossed in.

            1. They named a snowstorm. When I finally realized what “pax” was is when I finally laughed out loud and walked away, loudly proclaiming anyone still watching to be an idiot.

      2. They also call themselves tolerant and pro-gay. Then use the word Teabagger as a pejorative to describe fiscal conservatives.

        1. I still wonder who they think teabaggers are teabagging. Seems more an insult to the person being teabagged than the teabagger.

          1. I remember the first time I heard the name I thought it sounded like a junior high boy was polled for mean sounding names. Now I just sort of wonder if they get all their policy ideas from junior high boys. “Yeah, minimum wage sounds mean…let’s make it the law that everyone has to make a million dollars a day!”

          2. Yea I’ve never understood that, I mean if one is the teabagger then its YOUR balls in THEIR face.

    2. I don’t think this is intentional. I think it reflects intellectual insularity amoung Obama and his top advisors.

      With all due respect, they don’t deserve any benefit of doubt. Were we talking about some religious fundamentalists who lack the resources to travel outside their immediate intellectual boundaries, your assumption of non-intention might fit. But not for academics.

      Their intellectual island is of their own making. They have near infinite access to contrary thought and a professional and academic responsibility to take contrary ideas into account. Yet they choose to surround themselves with like-minded stooges and to ignore the seemingly un-ignorable and popular ideas that contradict their own. They are, as you say, insular, but it is intentional.

      1. They are just bipedal hominids like the rest of us, though, and everyone but the neurotic has an extraordinary capacity for ego reinforcement and self-deception. That’s how statists can still convince themselves that they have the moral high ground even while they’re advocating state violence/laws on behalf of any pet cause.

        It’s in the human psyche to find reinforcement for inherited beliefs, and the progressive doctrine of aggression in the name of democracy is dug in well enough that it’s going to take a long time for free markets to destroy. Though with enough wealth and technology, it may just wither and die like the outmoded religious sect it is.

        1. I agree, but wadair is also right that our elected officials–of all political stripes–have a duty to look beyond their own biases in search of the most effective, efficient policies. Not just according to “expert opinion,” but according to what has been proven to work in the real world. (Or, in the absence of such evidence, to genuinely consider and debate–before acting–the merits of all policy recommendations.)

          That makes their “mistakes” much more serious than those of the average civilian.

      2. Perhaps you are right. They are willfully ignorant.

        Anyone claiming there is a “consensus” on the minimum wage is someone who chooses not to pay attention to contrary opinions.

    3. According to Jonathan Haidt, liberals have a tougher time understanding conservatives than the other way around.

  4. *Nobel Memorial laureates

    Obama’s chief economist Jason Furman wrote on his blog this week that the stimulus saved or created an average of 1.6 million jobs a year through the end of 2012. That piece of, um, data, like many contentions made by economists with an agenda, is nearly impossible to prove or disprove?and it should be nearly impossible to believe, because it comes from a White House shop that trumpeted pie-in-the-sky forecasts about recovery to begin with.

    “It’s not even wrong” comes to mind. If economists want the numerical certainty of the hard sciences (or even the softer ones like psychology), they’re going to have to start employing the scientific method someway, somehow. Until then, the numerical barrage of econometrics and statistical meta-studies is nothing but covering fire.

    Yet advocates of minimum wage laws seem to think that the government can raise the price of labor without reducing the amount of labor that will be hired.

    And now Krugman will dedicate a column to explaining why Sowell doesn’t understand statistics or the importance of dummy variables in designing econometric meta-analyses of the effects of minimum wage on unemployment. The hand waving will be astonishing.

    The more I read about post-Keynes economics, the more chimerical the whole discipline becomes. The work may be laborious and challenging, but the same could’ve been said for soothsayers and astrologers a few generations ago.

    1. The issue is one of humility. Economics is complicated, the future is difficult to predict, and the impact of a particular policy is difficult to measure with precision because you can’t isolate variables. However, the humble economist realizes these limits. Krugman and company are many things, but humble ain’t one of them.

      1. Not difficult, impossible. Quantitative precision implies a standard of measurement. Prediction assumes invariance at some fundamental level. The object of economic study, the purposeful behavior of human beings whose values are incommensurable and whose choices interfere with any deterministic pattern, cannot be the subject of any such analysis. The attempt to do this was mere folly before subjectivism and praxeology. 100 years on, it is indeed hubris, thanks in no small measure to Milton Friedman.

        1. “Quantitative precision implies a standard of measurement.”
          Yes.

          “Prediction assumes invariance at some fundamental level.”
          No.
          Predictable variance will suffice.

          1. Not sure I understand your second point: Predictable variance will suffice for what? Prediction?

            My point (perhaps worded poorly) was that prediction cannot occur in the absence of deterministic, uniform observable events. I would be hard pressed to find counter examples to that because it seems definitive. Perhaps you can help.

            1. I don’t think he’s disagreeing with your sentiment, just the precision of your wording. Variance is allowed even in deterministic processes. The ability to reject the null hypothesis to a sufficient level is what really matters.

              Or that just may be the Black Bush talking (gotta save the 16yr stuff).

              1. “Variance is allowed even in deterministic processes.”
                Thank you.
                I don’t need to predict to the dollar or Euro the result of M/W increases, what I need to predict is the change in positive or negative values and predict the range in which those values will fall.
                Even in engineering, I can’t predict the specific failure of a structural element as a part of a system. I can predict the system will fail in X, +/-Y as a result of the design of that part.

    2. The work may be laborious and challenging,

      I deny the premise that making shit up can be laborious or challenging on any level.

      1. Regardless of the level of pretension? I’m sure the esteemed Prof. Krugman would beg to differ, although likely not in civil tones.

  5. my best friend’s step-sister makes $78 hourly on the laptop . She has been laid off for five months but last month her check was $18550 just working on the laptop for a few hours. check here……
    http://www.Jobs84.com

    1. Who cares. Go away.

    2. Show us your tits.

    3. This is slightly more believable than most of the crap coming out of the Obama administration.

  6. I think every discussion of the minimum wage should include the embarrassing facts about its origin in Progressive thought. People think it was just to improve the lot of the poor. No, it was to improve the lot of some poor: white men. It was part of the goal of a minimum wage to disemploy white women (so they would stay home and have babies), black men (so they wouldn’t be able to afford children) and the disabled (ditto). The minimum wage is racist, sexist eugenics.

    I have brought this up before and one response was that this was merely history. But if someone invented a medicine 100 years ago to remove hair, is it not relevant when the same medicine is now promoted as curing baldness?

    1. Yeah Papaya, but the list you give is pointless. Doesn’t matter where it came from when you can easily prove how fucking stupid it is.

      1. You cannot “easily prove” the stupidity of the minimum wage to the average person, and certainly not to leftists. However, being obsessed with racism and sexism, the racist and sexist argument should give them pause.

        1. However, being obsessed with racism and sexism, the racist and sexist argument should give them pause.

          I guess it just comes down to the disgusting thought of caving to the racist/sexist bullshit argument. I’d feel dirtier than a $2 whore after fucking Warty if I resorted to that.

          Probably wouldn’t feel dirtier than being Warty though.

          1. Well, some things really are racist and sexist. Unfortunately those terms have been devalued from overuse. But this is not false charges of racism and sexism (i.e. playing the left’s default rhetorical game), but an historic reminder of the roots of the policy itself, which deftly undercuts the argument about the wonderful goodness of the minimum wage. I think it’s just as valid and important as bringing up the fact that many gun control laws were specifically aimed at disarming blacks.

      2. No, it is not pointless. A large part of progressive thought is based on the assumption that women and minorities are inferior. Only now it’s hidden in layers of elaborate verbiage about misogyny and inherent racism. New to the forum, hello all.

    2. PapayaSF|2.21.14 @ 7:21PM|#
      “I think every discussion of the minimum wage should include the embarrassing facts about its origin in Progressive thought”

      But this time, it’s DIFFERENT! It’s promoted by a black man! It’s, well, really intended to direct attention away from his fuck-ups elsewhere.

      1. Of course, and if it disemploys more blacks, so what? They’ll vote Democrat anyway, and their unemployment can be blamed on greedy capitalist white Republicans.

  7. It’s time to quite pretending that these Keynesian sycophants are economists at all. What they are is court astrologers, using a burlesque of mathematics to help tyrants pretend that their ham-fisted interventions in the economy are carefully considered and benevolent.

    -jcr

    1. Jupiter rising in the age of Aquarius begs to differ…

      They don’t even do a very good job os using mathematics. The majority of their supposedly rigorous analyses consists of conveniently omitting data. Better off killing a fucking goat and seeing what its last meal was.

  8. I’m an economist, I disagree with Obama on ALL of those issues.

    Feed the ‘stimulus’ through any decent macro model of an economy (ie Ramsey, Solow, Tobin or Sidrowski) and you get what we saw- stagnation and low growth.

    The /illusion/ of an multiplier effect from government spending comes from Keynes, who did not separate real and nominal effects, and wrongfully concluded that purely inflationary spending effects were actually real growth.

    Additional government spending will NEVER ‘stimulate’ the economy, it simply can’t. More spending means more taxes (either immediately or deferred but with accrued interest, the market takes those expected higher future taxes into consideration immediately and you have immediate effects), and taxes have a large negative impact on the economy via the Excess Burden of Taxation (long subject, see the Wikipedia article).

    In the US today the marginal Excess Burden is about 75%. So to put an additional $1 in government’s pocket requires that $1.75 be taken from everyone else. That 75c government does not get is simply lost to the economy as output that would have taken place but now does not.

    A spending program that will ‘save or create 4 jobs’? It will destroy 7 jobs to pay for it.

    No, the answer to losing money on every transaction is not “volume”…

  9. I have a very skewed perspective on what I’m about to say… because I’m an engineer, but anyway…

    Engineers are (typically) trained to problem solve. This involves things like using physcial LAWS (not made up laws from economist “George blowhard”) and identifying actual causation. Try publishing a paper in an engineering Journal, without being able to prove the physics you have no chance. Krugman would be a very very poor engineer.

    Most economists I talk to do nothing but spew quotes from famous economists. Well “blowhard” said in 1947 that your reasoning sucks because…. Why do we not train economists, who deal with numbers and statistics to problem solve, think for themselves, and use the damn data they are working with anyway? In my opinion, modern economics degrees are (mostly) bullshit. Make these clowns get an engineering degree first.

    1. maybe you should tell that to the blowhard that commented above you, fellow engineer.

    2. Ah, how cute, the engineer thinks economics is as simple and straightforward as engineering…

      Economists have tons of laws, all every bit as solid as yours. They don’t cover everything though. And everything we deal with is really the sum of myriad contributing forces, forces whose intensity and importance are not fixed and can change with time. This is not to mention people and their constantly changing motivations.

      ‘Krugman would be a poor engineer’? Hell, he’s a piss poor ECONOMIST…

      Don’t mistake the qualities of the economists you see on TV or working for government for the real thing. We aren’t like them. We DON’T like them…

      1. “And everything we deal with is really the sum of myriad contributing forces, forces whose intensity and importance are not fixed and can change with time. This is not to mention people and their constantly changing motivations.”

        I wish this thread wasn’t dead, because I wholeheartedly agree with this. It’s precisely why I think most economics degrees are BS.

  10. “how many of these findings are driven by ideological and political concerns…”

    you mean like when a “libertarian” columnist, who gets paid through donations from right-wing foundations, tells us how terrible it is that a company has to pay its workers $420/wk.

    you mean conservative and libertarian politicians haven’t made definitive arguments that raising the min. wage is going to slow job growth when no such consensus exists? that’s not the argument i’ve been hearing from saint rand paul.

    1. Asshole, how long are you going to claim triumph for your stupidity posting to dead threads?
      It’s obvious you are lacking the intelligence of the average pet dog, but proving it by hiding in the shadows only makes it more obvious.
      Oh, and please tell us how you excuse the millions of murders resulting from your fave dictators.
      Oh, and fuck you with a rusty shovel.

    2. Libertarian economics buffs and Austrian economists study how markets work in order to understand the effects and plot it’s patterns. Keynesians and government bureaucrats claim that they can control outcomes and need only be granted the power to steer the econmy and “we’ll” all be fine.
      Libertarians know that you can’t control outcomes and that there are always I intended consequences.
      You simply don’t understand that the “socialists” at the top are still capitalists and that they are flawed because they are human. The lust for power and control can only reach it’s worst outcomes when it controls large numbers.
      Just look at the United States. It’s much, much more a socialist economy than it is a free-market one. Do you like the results?

  11. Shouldn’t there be more discussion in the wider media of the severe depression of 1921 which nobody remembers?

  12. Last night the Independents committed a SoundCrime by playing Green Day.

    Tonight, we have our ears raped by Soul Coughing.

    I am considering a class-action lawsuit for poor taste. I blame Welch.

  13. “The Cato Institute found 200 economists, three of them Nobel laureates?James Buchanan, Edward Prescott and Vernon Smith” … “How many of those findings are driven by partisan and ideological concerns rather than empirical outcomes?”

    That second quote is of course from later in the article about the EPI’s 600 economists. I juxtaposed the two quotes because I think it’s disingenuous to take Cato’s 200 economists at face value while dismissing EPI’s 600 economists (which btw include 7 Nobel Prize winners).

Please to post comments

Comments are closed.