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Obama's NAFTA Gaffe: Economists, Stay Out of Politics!

While Barack Obama promised Ohioans he would change NAFTA as president, his main economic adviser, Austan Goolsbee, met with Canadian diplomats about the free-trade treaty. What happened in that Chicago consulate is not clear, but the Canadians decided Obama’s anti-NAFTA stand was insincere political posturing. Now Goolsbee is finding himself at the center of a political firestorm. Did he deceive the Canadians? Did Obama lie to Ohio? Only electing Obama will show whether Canadians or Ohioans have been deceived. Meanwhile, Goolsbee is learning an important fact of public policy life. All economists considering involvement in public policy should remember one guideline: just don’t.

Goolsbee is the latest in a long line of distinguished economists to learn this the hard way. John Law, the Scottish monetary theorist, died poor, sick and exiled after he was scapegoated for the South Sea Bubble. Karl Marx is remembered not for his novel theories of productivity and the business cycle but for the sour fruits of his purple prose. Gregory Mankiw had been chairman of the Bush’s Council of Economic Advisors for less than a year when he remarked that outsourcing is a good thing; in an election year it brought out John Kerry’s yammering about “Benedict Arnold CEOs.” After the election, Mankiw left the job.

Economists might seem to be better off doing what politicians to in these situations — deceive and pander. That doesn’t work either. Columbia Business School dean Glenn Hubbard seemed likely to be the next chairman of the Federal Reserve until he testified that whopping budget deficits wouldn’t affect interest rates — yet his own textbook gave a detailed mathematical explanation the effect government borrowing has on credit markets. Slate called Hubbard a “yes man” and a “political hack.” The Fed job instead went to Ben Bernanke, who almost immediately put himself in hot water by talking shop with Maria Bartiromo.

People are deeply reluctant to surrender prejudices about the world’s functioning, no matter how strongly reason and evidence point toward a less instinctive conception of the order of things. How much angrier, then, will people get when told that job-destroying productivity increases are a feature, not a bug? That rising gas prices are a solution, not a problem, to scarcity? That inequality is ineradicable? Economics doesn’t just threaten our world views; it appears to threaten our food and safety. No wonder Alan Greenspan once told the Senate, “I have learned to mumble with great incoherence. If I seem unduly clear to you, you must have misunderstood what I said.” Saying anything cogent about economics is a ticket to public fury.

Goolsbee is a star at the University of Chicago business school. He has a knack for small policy adjustments rooted in behavioral economics. Tax paperwork sucks up billions of unproductive work-hours; tax simplification would be political suicide. Goolsbee gets around both by proposing electronic, auto-filled tax returns. Workers don’t enroll in 401(k)s, leaving money on the table; changing these pension plans from opt-in to opt-out regimes would essentially create private retirement accounts without government custody. People’s foibles are turned from policy obstacles to policy tools. Goolsbee calls it “iPod government,” after the music player that popularized MP3 players by looking at what people would use.

So the irony of the NAFTA debacle is that Goolsbee is to economics what Obama is to electoral politics. Just as Obama has risen by transcending — or gingerly sidestepping — the most tired tropes of American politics and partisanship, Goolsbee’s policy ideas tend to be post-partisan. Unlike the traditional right- and left-wings, Goolsbee’s best ideas avoid talk of government size, spending and taxation. He focuses on simple changes to make government do what it does with minimal work or confusion or waste. Obama has rhetorically repudiated the Clinton-Bush politics of base turnout and swing-state victories; Goolsbee renounces the Medicare drug donut.

This is why ultimately, it doesn’t matter what Goolsbee told the Canadians that Obama thinks about NAFTA — or what the candidate himself thinks. Obama has crafted his statements on the trade agreement so carefully, giving himself so much wiggle room while appearing to take a firm stand, that it reminds me of another president, one who happened to sign NAFTA. Whatever Obama actually does about NAFTA, he will have to sacrifice his reputation either for straight talk or for simple government.

Television advertising in Ohio was a veritable Springsteen album last week, down and out Delphi layoffs from Youngstown in Carhartts grumbling about the Chinese; both Democrats are playing on the worst economic instincts of their party. Obama and Goolsbee want to bring us simpler, friendlier government. But free trade agreements are essentially programs in mutual governance-streamlining. Ohio has seen iPod government, and it doesn’t particularly want more. Like most consumer electronics, iPods are manufactured in China.

Nic Duquette is a writer living in Ohio.