Jason Furman Is a Serious Economist, and That's the Problem

When ESPN opened for business in 1979, its ongoing survival was much less than a sure thing. Future New York Times reporter Bill Pennington was one of four reporters who covered its launch, but thought at the time that “This is the stupidest thing I’ve ever heard.”

ESPN’s early existence was very “start-up.” A tiny headquarters the size of a living room, rent of $100/month, and desks made from plywood that were nailed to old doors. At one point founder Bill Rasmussen took out a $9,400 advance on his Visa to make payroll and pay bills.

Yet as readers know, the ESPN story has a happy ending. Not discussed enough is why. It’s thanks to the Getty family. When John Paul Getty died in 1976, he left behind a very large estate to his heirs. The family began diversifying Mr. Getty’s holdings, and this included a $10 million investment in ESPN.

The ESPN story instructs in many ways, but it does for the purposes of this column as a reminder that for the vast majority of businesses, there’s an endless search for funds. The early days for most businesses are defined by countless near-death experiences given how difficult it is to find investors willing to back what will invariably be seen by all too many as “the stupidest thing I’ve ever heard.”

All of which brings us to Jason Furman. A professor at Harvard’s Kennedy School, Furman also served Barack Obama as Chairman of his Council of Economic Advisers. The center-left leaning Furman is viewed as a serious economist, so serious that he rates regular columns on the Wall Street Journal’s editorial page; the latter the Holy Grail of serious opinion. To the Journal’s credit, its right-of-center editorial page makes a point of featuring opinions from both sides.

In his latest piece for the Journal, Furman called for the passage of legislation that would “automatically trigger stimulus” should a recession hit. Furman’s call for more federally-driven spending includes “stimulus payments to households” that would easily be paid for given the “robust international market for U.S. bonds” which “enables the borrowing that makes the stimulus possible.” Where does one begin?

Explicit in Furman’s growth is that when the economy weakens, the federal government should become a size bidder for precious capital. Think about this for a second, and not in terms of budget deficits versus budget surpluses. The latter is a waste of time. The focus should be on federal spending itself, not how the feds access precious resources.

In this case, Furman once again wants to legislate national action during recessions so that the federal government increases the amount of wealth it extracts from the private economy. And unless Furman can prove otherwise, as in prove that federal spending is a consequence of wealth extraction from alternative sources in another universe, his expressed desire for a federally legislated “trigger for stimulus payments” would increase the federal government’s power to allocate private sector wealth during economic slowdowns. It’s hard to know whether to laugh or cry.

Lest Furman or other Keynesians forget, the persistent reality for the entrepreneurs and businesses that create all the jobs is one of relentless search for capital. Thinking about the previous truth, it’s not unrealistic to assume that during economic downturns, the search for capital becomes even more pressing. The latter is hardly a reach. They don’t call them “recessions” because businesses are expanding at the time; instead, the word recession frequently signals business retreat thanks to tight capital conditions forcing the retreat. Getting right to the point, recessions usually occur in concert with job loss born of more difficult financial conditions for businesses.

Yet Furman, in his infinite wisdom, would empower the feds to become an even bigger competitor with private businesses for capital during recessions. The very private sector that created all the wealth must compete with an even more voracious federal government when financial conditions are most difficult.

To the above, Keynesians would respond that difficult economic periods coincide with reduced spending, so the federal government must make up for it. Ok, but even if true, there’s no need for government consumption when it’s remembered that unspent wealth doesn’t sit idle; rather what we don’t spend exists as wealth for other individuals to access assuming they have consumptive desires. More broadly, businesses ever in need of capital are constantly bidding against consumers for the wealth of savers.

Assuming a recession reduces the consumptive desires of the people, that just means businesses in need of capital to expand will have an easier time accessing what’s available. Unless, of course, legislation promoted by Furman empowers the federal government to expand its borrowing footprint right when businesses need a less crowded market for credit the most. To this Keynesians like Furman will reply that he’s trying to help the “people most hurt by recessions” with “flat sum” payments from the federal government, but by Furman’s own admission, recessions hurt the little guy the most precisely because they coincide with job loss. Yet Furman would empower the federal government to compete with the job creators right when they’re best positioned to enhance their financial situations…Really, you can’t make this up.

Recessions are a consequence of more difficult financial conditions in the private sector, so Furman’s solution is to exacerbate tight financial conditions by calling on the entity most able to borrow cheaply to expand its take of private wealth. And for that, he has a reputation as a very serious economist. Some would say that’s a problem.