This week, George W. Bush hosts a conference in Waco, Texas,
near his Crawford ranch, to discuss the economy. Some 250 experts and
average Americans are expected to participate, with more than 300 reporters
looking on. The meeting may help break the monotony of an otherwise dreary
morning in the dog days of August. But the likelihood that anything
worthwhile will be achieved is close to zero.
No doubt, one of Bush's political advisers probably decided it
was unseemly for the president to be vacationing while many big companies
are announcing layoffs, bankruptcies and lower earnings. This has left
workers standing in unemployment lines, fearing for their jobs and uneasy
about retirement, as their 401(k) plans nosedive.
This political adviser probably thought that a great way to
counter the bad press was to hold a conference conveniently near where the
president was vacationing. This adviser also probably came up with the idea
of having "real" people participate. It shows that the president empathizes
with them, cares about their opinions and is not detached from the problems
they face.
The only problem with this neat theory is that it won't work. It
is just a complete waste of the president's time and will accomplish
absolutely nothing. None of these conferences ever do. Does anyone remember
the gabfest Bill Clinton held in Little Rock in 1992? Of course not. Why
should you? It, too, was a purely political event devoid of substance.
It may be impolitic to say so, but the fact of the matter is
that average people really don't know anything about the economy. They are
too busy living their lives to pay attention to much beyond their immediate
surroundings.
And there is no reason why they should. There is nothing they
can do to affect the overall economy. They are like flotsam floating on the
ocean waves that are the macroeconomy. The possibility that one of them may
have some perceptive observation or worthwhile idea that would not be known
without the Waco conference is virtually nonexistent.
President Bush already has many fine economic advisers who are
in constant contact with businesspeople and others outside Washington, and
are well aware of local economic conditions. They also have a steady flow of
economic and polling data that give as complete a picture of the economy's
state as it is possible to have. There is no new information to be gleaned
by having a lot of people convene together for a one-day conference that
could not be discerned just by reading the newspaper.
I do not mean to imply that economists are all-knowing. Far from
it. They make errors all the time. But these nearly always result from a
lack of information that is simply unknowable at the time a decision or
forecast must be made. Later, this information usually does become
available, and economists must then revise their opinions and predictions.
This does not necessarily mean that they were mistaken earlier or even that
they are right now. Economic analysis is a continuing process in which
ultimate truth may never be known.
A good example of what I am referring to is the extensive
revision to the gross domestic product data released by the Commerce
Department on July 31. Economists had been operating on the assumption that
last year's recession was exceptionally mild. Previously published data
showed only one quarter of negative real growth. Now it appears that there
were three quarters of negative growth.
Corporate profits data for 1999 and 2000 were also marked down
sharply, leading columnist Robert Novak to suggest that the Clinton
administration had artificially inflated the data to keep the stock market
up through the election. Even if it had wanted to do such a thing, the way
the data are constructed would have made it impossible to do so. Moreover,
the Commerce Department's data on profits have little, if any, impact on
stock prices because they come out only with long lags. Also, the data are
for the economy as a whole, not individual companies.
I think that if Bush wants to learn what is going on in the
economy, he would be better advised to simply spend more time listening to
the economists he already has working for him. He should also stop listening
to his political advisers when they give him economic advice. Had he done
so, the nation might have been spared tariffs on imported steel, massive new
subsidies for farmers and a budget that is rapidly spinning out of control.
There is a growing perception that Bush looks primarily at the
political implications of economic policy and only secondarily at what is
right. Reversing that formula would do far more to restore confidence and
boost the economy than 100 conferences.
Notebook