## Friday, August 29, 2008

### Next time, let's remember to turn off his microphone

Last night's acceptance speech gave Barack Obama an opportunity to attack John McCain and his campaign for being out of touch with average Americans. Fortunately for Obama, the McCain campaign gave him some easy targets. McCain himself couldn't even remember how many houses he owns, a plight most Americans will never have to worry about.

Then there were the unfortunate words of McCain's chief economic advisor, Phil Gramm. Back in July, Gramm brushed off public concerns about the economy, claiming that America was suffering from a "mental recession" and that we had become a "nation of whinners".

This is far from the first time that an economic advisor has gotten his politician in trouble. Obama's advisor, Austan Goolsbee, caused a small stir when it surfaced that he quietly reassured Canadian officials that Obama's protectionist stances “should be viewed as more about political positioning than a clear articulation of policy plans.” And in 2004, Gregory Mankiw got the Bush administration in trouble when he told Congress that outsourcing was "probably a plus for the economy in the long run".

That economic advisors get politicians in trouble should come as no surprise. For one thing, economic theory is often counter-intuitive and poorly explained. Further, economic jargon can seem cold and aloof, and economists' focus on macrobehavior and average experience sometimes alienate people who are hurt by economic change.

But there is an important difference between Phil Gramm's comments and those by Goolsbee and Mankiw. Goolsbee and Mankiw articulated mainstream views in the field. We have nothing to gain (and much to lose) by cutting off trade with Canada. And Mankiw's outsourcing comments (though poorly phrased) reflect a similar logic: outsourcing, like trade, leads to efficiency gains that lower prices, strengthen competition and increase prosperity. Mankiw also cited on his blog a McKinsey Global Institute report showing that "for every dollar the United States sends abroad, we get back about $1.12, resulting in a net gain of$0.12." (Follow the proceeding link for more of Mankiw's views on the costs and benefits of outsourcing).

Gramm on the other hand spoke more out of ideology and frustration than theory. While people can reasonably debate the precise state of the American economy, it's hard to argue that this is all in our heads.

What's strange is that while Goolsbee and Mankiw are career academics, Gramm is a career politician, all be it one with a Ph.D in economics. You'd expect academics to get into this kind of trouble; politicians should know how to talk to voters.

It begs the question, though: if Phil Gramm is a bad economist and a bad politician, how exactly did he get this job?