This article was published by The McAlvany Intelligence Advisor on Monday, April 10, 2017:
One way to test a hypothesis is to apply it to the real world. Two renowned, highly-regarded, and elite-college trained economists did just that. In 1999 James Glassman, the founding executive director of the George W. Bush Institute (Harvard-trained with a BA in government), and Kevin Hassett, BA in Economics from Swarthmore and Ph.D. in Economics from the University of Pennsylvania, wrote Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market. So sure were they about their prediction they went on the road to promote it, claiming that “stocks are now in the midst of a one-time-only rise to much higher ground – to the neighborhood of 36,000 on the Dow Jones Industrial Average.”
On December 31, 1999 the Dow stood at 11,497. A little over three years later the Dow closed (on March 6, 2003) at 7,673, a drop of 3,823 points, costing those who bought the book and took their advice one-third of their investment.
But both persisted, overcame their embarrassing “miss,” and moved on to positions of influence, especially Mr. Hassett. President Donald Trump announced on Friday that he would nominate Hassett as Chairman of his Council of Economic Advisors. Immediately, Glenn Hubbard, a neo-con serving as a visiting scholar at the so-called “conservative” American Enterprise Institute (AEI), piped up to laud Hassett’s nomination and Trump’s wisdom in selecting him for the position: “He’s not just a standard-issue really good economist, [Hassett is] someone who knows how policy works. The tax changes being considered are really aimed at boosting investment, so I think Kevin is exactly the right person.”
He’s the right person if Trump wants someone whose CV includes stints at the Federal Reserve with experience advising Presidents George W. Bush and Bill Clinton. He’s the right person if Trump is looking for a Keynesian who believes with all his heart that the economy can be managed and manipulated into certain behaviors with certain predictable outcomes. He’s the right man for the job if Trump doesn’t care where his political sympathies lie.
For instance, even though Hassett has been a resident scholar at the AEI for 20 years, he has no problem teaming up with other “scholars” at outfits like the far-left Center for Economic and Policy Research (CEPR). In 2012 he partnered with Dean Baker, a co-director of the CEPR, in writing an op-ed piece for the liberal New York Times, “The Human Disaster of Unemployment.” In that piece he advocated for more government spending that “should appeal to the left and the right [and] spend money to help expand public and private training programs … expand entrepreneurial opportunities by increasing access to small-business financing … [and] explore subsidies for private employers who hire [the] long-term unemployed.”
The CEPR has for years trumpeted the “success” of the socialist revolution taking place in Venezuela. As an example, in June 2016 Mark Weisbrot, the other co-founder of the outfit, got the New York Times to publish “A U.S. Policy of Non-Intervention in Venezuela Would Be a Welcome Change,” in which he claimed that “Washington has caused enormous damage to Venezuela in its relentless pursuit of ‘regime change’ for the last 15 years.” The CEPR boasts far-left ideologues Danny Glover and Julian Bond as board members, and financial support from the Ford Foundation, the Joyce Foundation, George Soros’s Open Society Institute, the Rockefeller Brothers Fund, and the Rockefeller Foundation.
More troubling than his embarrassing “miss” in stocks is Hassett’s close relationship with the American Enterprise Institute (AEI). Long touted as somehow “conservative,” the group is the brainchild of the “godfather of neo-conservatism,” Irving Kristol. Kristol explained his shift from “Trotskyist” to conservative in his article, again published by the ever-willing New York Times, “Memoirs of a Trotskyist,” in 1977. Without exploring the interventionist philosophy in detail, suffice it to say that neo-cons in the George Bush administration played a major role in promoting and planning the 2003 invasion of Iraq. That war lasted nearly nine years, costing an estimated 600,000 Iraqis and thousands of Americans their lives and American taxpayers untold billions of dollars.
For the record, Hassett has lots of company at the AEI, including Dick Cheney, Bush’s vice president, John Bolton (former ambassador to the United Nations), Lynne Cheney (former chairman of the National Endowment for the Humanities), Paul Wolfowitz (former Deputy Secretary of Defense), Martin Feldstein, Milton Friedman, and Newt Gingrich.
Trump may possibly be excused for selecting someone like Hassett, who fervently believes that his background, education, training, and experience qualify him to guide the president on economic matters. After all, Trump doesn’t have an economics background or training. Instead he learned what he knows from the school of hard knocks. And so when someone like Hassett comes along, having been under consideration for the position for some time and able to excuse his own real-world mistakes and tout instead his certainty that he can improve the free market by intervening in it, he might look like just the man the president needs to help make America great again.
For the record, on Friday the Dow closed at 20,656, still 17,500 points away from 36,000.
The New York Times: The Human Disaster of Unemployment
The New York Times: Memoirs of a Trotskyist by Irving Kristol