Thursday, December 22, 2011

Why Is Macro So Hard: What Passes for Expert Advice

I am not making this up.

After a marathon session of decorating cutouts for Christmas, my family — covered with specks of frosting and and stray jimmies — went to McDonald’s to scarf dinner. Because we were exhausted and surly we were blankly watching the TV news programs.*

Anderson Cooper 360 was on. This is, allegedly, a serious cable news magazine.

They were discussing the troubles Republicans and Democrats are having over extending the payroll tax holiday.†

So, they turned for expert advice to … wait for it … John Paul DeJoria … the man most people think of as “Paul Mitchell” after his haircare products.‡

And my wife blurts out … in McDonald’s … in front of the kids … “Are you f***ing sh***ing me!”

She has never taken a macroeconomics class, but is certainly aware that if you want expert advice on macroeconomic policy, you should probably talk to a macroeconomist or policy advisor first.

* I can see why the news is always on in airport concourses, but of all places, why is the news always on in McDonald’s?

† Macroeconomically, the payroll tax holiday is … kind of stupid. What are we most worried about: people who don’t have jobs or people who do? Most people say the former. And what do we think is the cause of people being without jobs: because no one is hiring, or because most people don’t want to work? Again, it’s the former. The payroll tax holiday addresses neither of those problems. It is a holiday on the collection of some taxes that are withdrawn from paychecks. So, it is only available to people who work, and then helps most the people who get their income primarily from salary and wages (which are the only kinds of income from which these taxes are collected) rather than net business income. So, it’s a tax that is labeled as helping everyone, when in fact it is a tax targeted to help people who already have jobs but who’s primary focus is not employing others. In sum, it’s a double fail. Having said that, like most tax cuts, I think the money is probably better spent by households than by government, so there are some positives to it. Interestingly, when the payroll tax holiday was originally proposed by macroeconomists, it was a tax break on the contributions that employers make on behalf of their workers, and it would have helped the two groups in trouble from the top of this paragraph. But, the idea has been perverted.

‡ In his defense, Mr. DeJoria is an extremely successful businessman, who has been trying to garner media attention as someone whose life experiences are indicative of someone whose perspectives and opinions should be taken seriously. Fair enough. I think he should be trying to get on Anderson Cooper 360. I just wish the show’s producers took their jobs more seriously.

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