5.25.00
Goldilocks Was Wrong

5.18.00
Stop That Train!

5.09.00
States of Confusion

5.08.00
Congress Busts the Bank — Again

4.26.00
Soak the Rich: Cut the Capital Gains Tax

4.12.00
How the Other Half Thinks

4.06.00
Taxing Fantasies

hese days one is embarrassed to call oneself an economist. Has there ever been a profession where the conventional wisdom has been so wrong, for so long? For years now, academic and Wall Street economists have vastly understated the growth path of the U.S economy. Blue-chip forecasters have estimated for the past five years that the U.S. would grow at a 2 to 2.5 percent clip. In fact, the economy has grown twice that fast. Today's GDP number for the first quarter of 2000 was a galloping 5.4 percent. Folks, these are big — no, gigantic — errors we're talking about. The whole blasted profession should be collectively sued for malpractice.

All of this is to say that economists have no predictive power. (NR economist Larry Kudlow is a rare glaring exception: Kudlow's been one of the very few who's gotten the story right in the 1990s.)

It pains me to say this, but the economics profession no longer adds value. About 10 years ago the Wall Street Journal editorial page showed that you could predict growth more accurately using a dart board than by listening to blue-chip forecasters. And that was when economists were much more accurate than they are today.

Every time I hear an economist on TV or radio these days, I cringe. It's like listening to someone dragging their fingernails along the chalkboard. Reagan proved 20 years ago that through good monetary policy you can sweat inflation out of the economy. Where we have failed is in sweating the dysfunctional Keynesian Phillips-Curve model out of the minds of a whole generation of second- and third-rate Ivy League economists. They were so brainwashed with Paul Samuelson's neo-Keynesian dogma, that they've entirely missed the "new economy" phenomenon.

We still see the remnants of the "growth causes inflation" creed when economists use their favorite metaphor of the "Goldilocks economy." This means that the economy is not too hot to cause inflation (there's the Phillips-Curve curse again), and not too cold to cause a recession. But we've been growing at near 5 percent for the last year, in real terms. That's so hot you could fry an egg on the sidewalk. But guess what? No inflation.

Reagan, Kemp, Laffer, and Kudlow were right: Supply-side expansions — like this 18-year growth spurt — don't cause the economy to overheat. We've had robust growth, declining inflation, and 30 million new jobs created since 1982. The rest of the economics profession had better hustle back to Econ 101. This time, no using Samuelson's textbook!

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