Not long ago, economists argued in public over basic economic policy issues. Foremost among the debates was the clash over equity and efficiency.
Efficiency promotes economic growth and overall prosperity. Equity deals with how much of peoples income should be shifted to the less fortunate. Generally, more equity risks less efficiency, hence the so-called equity-versus-efficiency tradeoff that economists often debate.
Welfare transfers that provide a hand up can improve efficiency, but handouts might encourage unemployment. The taxes needed to pay for welfare transfers by themselves also generate distortions that raise inefficiencies.
Economists are now strangely silent while watching public policies unfold that are neither equitable nor efficient.
Take President Bidens college loan forgiveness program. College-educated people earn more on average than the less educated. So how can loan forgiveness be justified on equity grounds? This giveaway is also inefficient because it will distort incentives and likely raise already too-high college costs.
Former Treasury Secretary Larry Summers argues that college debt forgiveness would be inflationary and suggested that the money might be more usefully spent elsewhere. Rep. Alexandria Ocasio-Cortez (D-N.Y.), a member of the progressive wing of the Democratic party, wrote an Instagram post several days later implying that anyone objecting to the forgiveness plan is selfish. No outpouring of support from fellow economists for Summers was forthcoming.
Ocasio-Cortezs proposed Green New Deal also fails equity and efficiency tests. It is massively expensive with relatively little benefit. One would expect a program with subsidies and taxes totaling trillions of dollars to trigger a spirited debate among economists.
What are the expected benefits and costs of the rush to electrify the country and destroy the gas and oil industries? If wind and solar power are truly cheaper for consumers, why do utilities need mandates and subsidies to convert away from fossil fuels?
Further, Bidens Inflation Reduction Acts clearly inequitable subsidies go primarily to wealthy electric-vehicle buyers. So is the certain increase in the price of electricity that will fall most heavily on lower-income people. Expect another subsidy program, this time on electricity for the poor.
If successful, the Green New Deal would destroy existing capital infrastructure by requiring the destruction of existing fossil fuel plants and saddling the economy with more expensive, less dependable energy that would weaken Americas competitiveness.
Where are our economists?
Not long ago, when economists debated federal deficit spending, many of them, including some Democrats, concluded that balancing the budget when the economy reaches full employment is desirable. Today, the economy is at full employment, and the budget deficit is 7 percent of our nations GDP.
This level of deficit spending might be expected in a severe recession when tax revenues have declined, but to allow it during full employment is reckless and unsustainable. The burden of our national debt, now over $34 trillion ($103,000 per citizen), will likely hamper economic growth. Interest payments on the national debt already exceed the defense budget.
Unless major cuts in federal outlays occur, higher tax rates will be needed to avoid an unsustainable debt explosion. Higher tax rates themselves increase economic inefficiencies. Where are our economists?
Despite sharing a common tool kit, economists argue about issues. I observe that Democrats lean more towards equity while Republicans lean towards economic efficiency.
But all economists understand the concepts of economic efficiency and opportunity cost; the acknowledgment that in a world of scarcity, more of something requires less of something else. Larry Summers, a Democrat, raised this issue with the loan forgiveness program. He was called selfish. He was just being an economist.
Each of these issues needs a spirited public debate. Yet economists are broadly silent, especially those on the left, and silence implies assent.
But leaving public policy to sociologists, political scientists and politicians without economists scrutiny and evaluation all but guarantees well have bad policy.