One of the great public services that the opinion/commentary pages of the Wall Street Journal does is to allow Conservative economists who are pandering to Republican Presidential nominee Mitt Romney to expose their ignorance. In the latest example of this we have two men who, incredibly, have Ph. D.’s in economics explaining how Mitt Romney is going to create jobs. The key, according to former Senator and Ph. D. economist Phil Gramm and Glenn Hubbard, Dean of the Columbia School of Busienss is corporate profits.
Here is the gist of their argument, in their own words.
In a recent criticism of Mr. Romney's experience as CEO of the private-equity firm Bain Capital, Mr. Obama said the president's job is "not simply to maximize profits." He warned, "if your main argument for how to grow the economy is 'I knew how to make a lot of money for investors,' then you're missing what this job is about." But aren't private-sector jobs generated by profits?
Jobs are sustainable only when profits are sustainable. The American economy was built on the profits earned by serving consumers, and it will only be saved by earning profits. The president apparently does not understand that basic point.
This has kind of a nice ring to it, doesn’t it. And it certainly sounds reasonable, after all profits provide both the incentive and the funding for business investment and additional hiring. So what’s the problem, why does The Dismal Political Economist heap such scorn on these two revered and intelligent men?
Okay, let’s put it in a way that even Mr. Gramm and Mr. Hubbard can understand, i.e., a picture because apparently actual data is too difficult for them.
That’s right, in 2009 when Mr. Obama took office corporate profits had plunged to near 2001 levels, thanks in large part to policies of George W. Bush. Now everyone look closely at what corporate profits have done since Mr. Obama took office. That’s right, corporate profits plunged in the latter years of the Bush administration and have since rebounded to an almost uninterrupted streak upward, to a level where they are almost triple where they were at the beginning of Mr. Obama’s term.
So in taking Mr. Obama to task for not supporting corporate profitability Mr. Gramm and Mr. Hubbard show that they are just plain ignorant of the data. But more importantly the chart shows the utter fallacy of their argument. If large and rising corporate profits were the key to job creation, then given the record of the Obama administration and the experience of corporate profits the
should be a job creating mecca. That it
is not can only mean that the position of Mr. Gramm and Mr. Hubbard, and by
extension Mr. Romney is just completely and totally and utterly false.
But don’t show them the data or this chart, it will only confuse them.