Searching for the One-Handed Economist

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

As Carla Marinucci reports in the San Francisco Chronicle, a debate has flared among economists on the effects of Meg Whitman’s plan to revive the California economy. A liberal think tank produced a document written by liberal professors calling Whitman’s plan flawed. A conservative economist responded that the plan would jump start the economy.

This back and forth of different economic views reminds me of the famous quote by President Harry Truman who wanted to consult with a one-armed economist. The president was tired of economists advising him, "On the one hand this could happen… On the other hand that …."

The report by UC Berkeley economist Michael Reich that started the brouhaha argued that Whitman’s plan to cut capitol gains taxes would deprive the state of billions of dollars in revenue. In addition, Reich claimed that California is not the unfriendly business climate that Whitman talks about.

I suspect Reich doesn’t get out of the Ivory Tower too often. He should talk to the average business person about the difficulties of doing business in California.

The professor should take a look at the website put together by Joseph Vranich, an Irvine based consultant who keeps a record of companies leaving the state. He calls himself a "business relocation coach" and he’s been busy of late. In just over six months this year, he counted 85 corporations moving from the state, twice the number in all of last year.

And, of course, that does not count the jobs California loses when businesses decide to expand in other states besides California.

Reich’s attack on Whitman’s capitol gains tax cut assumes revenue lost but doesn’t project the generating power of cutting those taxes to stir economic growth and job creation. Michael Boskin, of the Hoover Institution, responding on behalf of Whitman, said her plan is a "well-planned road map to create new jobs."

Still, to the average voter this debate among economists can be confusing. As economist Jeff Thredgold notes in promoting his book, "The Economist’s Joke Book," "Economics is known as ‘the dismal science.’  It can be a bit intimidating, boring, frustrating, and confusing in the hands of an amateur.  It gets even worse in the hands of a professional."


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