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**AUGUST 22, 2022**
Kuttner on TAP
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**** Jason Furman's Lazy Economics
Why do reporters covering recession, inflation, and interest rates keep
treating Furman as a sage?
You'd have to be asleep not to notice that Furman, a protégé of
Robert Rubin and former chair of Obama's Council of Economic Advisers,
is the go-to expert. I counted eight recent stories in the
**Times** and
**Post** alone that rely on interviews with Furman, not just for quotes
but for their analysis.
Ezra Klein
did a whole podcast with Furman. Klein's tagline: "Jason Furman helps
me understand why so many economists got this economy so wrong." It's
taken for granted that Furman got it right. Furman is all over cable and
the op-ed pages as well, where editors treat him as an expert worth
publishing.
Furman, at Harvard's Kennedy School with his friend Larry Summers, is
at the extreme end of the inflation-hawk continuum. Even as price
pressures have eased, Furman insists that the Fed should stay the course
and impose another three-quarter-point rate hike in September.
Unlike Summers, Furman doesn't have the personal baggage and history
of self-promotion that makes some reporters wary. This makes Furman's
role as credible inflation hawk that much more insidious. As a senior
Democratic economist willing to criticize as well as praise Biden,
Furman seems fair-minded, guided only by his research findings.
But a closer look at his technical economics
makes clear that
Furman has failed to take even a cursory look at what has actually
occurred with supply bottlenecks. Consider this emblematic rookie error:
Writing in the L.A. Times
in April, Furman breezily contended that because indicators such as port
volume and global semiconductor production are up on average, "our
problem is not mainly reduced supply but increased demand."
But semiconductors are not interchangeable. Automakers were stymied when
the specialized chips they use were simply not available. Car production
stalled.
This bottleneck and resulting scarce auto supply, not a sudden consumer
hunger for new cars, produced steep price hikes, which in turn drove the
general inflation rate. Since late-model used cars are a close
substitute for new ones, their prices soared as well.
The true supply-demand story was all on the supply side. The auto
semiconductor story was widely reported. How could Furman have missed
it? Studied incuriosity? Didn't he take micro as well as macro?
Doesn't he have research assistants?
As shortages slowly subside, only one immediate policy variable
matters-interest rates. Furman's prime audience is the Fed. I'm
not a great fan of Fed Chair Jay Powell. But Powell doesn't want to be
remembered for having created a needless recession.
Powell and the regional Fed banks have large staffs of technically
competent economists. Unlike Furman, they look at the actual evidence.
Let's hope Powell acts on it.
~ ROBERT KUTTNER
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