May 07, 2005

Maintain Your Integrity!

Here's a wide-ranging lecture by Jeffrey Frankel that, among other things, gives new CEA chair Ben Bernanke advice on how to preserve his academic reputation while supporting a president with dismal economic policies:
Bernanke has one major factor working in his favor: in these situations, the press seldom asks persistent or sophisticated questions, or at least (whey the do) seldom finds the responses worth printing. So one can usually formulate a careful sentence that appears to be consistent with the White House line and yet is not literally false, and get away with it.

Bush’s first CEA chairman, Glenn Hubbard, crafted the White House statement "Interest rates don’t move in lockstep with budget deficits." He, like Mankiw, has a textbook with the standard model linking interest rates to budget deficit. But because the sentence is true as written, Hubbard had nothing to fear from his colleagues when he returned to university life. The press did not ask the obvious follow-up questions. ("OK, we understand that budget deficits are not the only factor that determine interest rates. But, in your view, doesn’t a budget deficit cause interest rates to be higher than they otherwise would be? And regardless whether that increase is small, doesn’t the deficit crowd out investment?")
-- Brad Plumer 3:54 PM || ||