A brief guide to Kevin Hassett, Trump's new chief economist
Dylan Matthews - Vox
Feb 25, 2017
President Trump will name the American Enterprise Institute’s Kevin Hassett as the chair of his Council of Economic Advisers, according to multiplereports. The CEA chair serves as the White House’s chief economist, and while Trump has demoted the position from the Cabinet-level standing it enjoyed under past presidents, it remains one of the most important economic policy jobs in the federal government.
That makes Hassett’s selection important — and intriguing. Unlike Larry Kudlow, the CBNC host and syndicated columnist previously rumored to be Trump's top choice for the job, Hassett is a formally trained, PhD-holding economist who has been a faculty member at Columbia and a researcher at the Federal Reserve. That’s in line with history; every single CEA chair since Alan Greenspan has held a PhD (and Greenspan earned his shortly after leaving office in 1977), and picking someone like Kudlow who hadn’t even done doctoral coursework would’ve been totally unprecedented.
And unlike Peter Navarro, the vociferously anti-trade economist who is head of Trump’s newly created National Trade Council, Hassett is a fairly mainstream free market conservative. He was a senior adviser on Mitt Romney’s 2012 campaign and has been a mainstay in Republican economic policy circles for two decades now. Tellingly, a number of liberal economists, including Obama CEA chairs Jason Furman and Austan Goolsbee, cheered his rumored appointment — not because they agree with him, but because he’s a fundamentally serious thinker who could bring some rigor to the Trump White House:
Hassett’s reputation suffered a hit due to his co-authorship of the 1999 book Dow 36,000, in which he and James K. Glassman argued that stocks were extremely undervalued and that the Dow Jones average would in a matter of years reach the 36,000 marker (today, in 2017, it’s still well below that at 20,750). Hassett and Glassman even bet a critic that if, by the end of 2009, the Dow was closer to 10,000 than 36,000, they'd each give $1,000 to the Salvation Army; the Dow ended the year at 10,428, and they made good on their promise.
But that book isn’t the totality of Hassett’s work, and a fuller examination of his record shows someone who, while hardly likely to win over committed liberals, is more heterodox than his résumé might suggest, and who is sharply at odds with President Trump on trade.
Hassett is a fan of the government directly hiring people
Perhaps Hassett’s most surprising stance, if you know him only for his work with Romney and advocacy of lower taxes and entitlement reform, is his sympathy for government efforts to directly hire people. "Look at the stimulus and the number of jobs we've actually created, and it comes out to a couple million bucks per job created," Hassett told the Atlantic's Derek Thompson in 2010. "My idea is simpler. Find the unemployed and hire them."
He expanded on this idea in 2013 testimony to Congress’s Joint Economic Committee. While Hassett is generally skeptical of fiscal stimulus, and was vocally critical of President Obama’s stimulus package, he came to view long-term unemployment as a severe crisis requiring direct government intervention.
“It is clear that something terrible happens to individuals as they stay unemployed longer, but that this negative effect is not responsive to normal policy interventions,” he told the committee. “Accordingly, it is imperative that we think outside the box and explore policies that reconnect individuals to the workforce." Those policies could include, he continued, "a short-run jobs program that recruits the long-term unemployed to assist with the normal functions of government."
In an interview he did with me after his testimony, he argued that direct hiring actually made sense on fiscally conservative, cost-saving grounds, as well as humanitarian ones. “If somebody's 40 years old, and not employed for 25 years, that costs governments lots of money, and if we think rationally about reducing spending, maybe it's worth it to pay for their first year at a private employer,” he told me. “Direct hiring, or a direct subsidy for hiring, could save taxpayers a fortune. And it could save a life.”
In 2012, Hassett also teamed up with Dean Baker, a prominent liberal economist at the Center for Economic and Policy Research, to argue for German-style work-sharing programs, in which unemployment is averted by encouraging companies to reduce workers’ hours and subsidizing the workers’ lost wages. This can be cheaper for governments than paying for unemployment benefits, and prevents workers from exiting the labor force and losing skills over time.
These were arguments made back when the US unemployment rate was in the 7 to 9 percent range and job creation was a much more prominent part of the debate than it is now. While many economists believe there's still some slack in the labor market and job creation measures could do some good or boost wages, this isn't as obvious as it was four years ago, and it's entirely possible that Hassett's assessment of the situation has changed.
But Hassett’s openness to government employment dovetails nicely with the Trump administration’s stated interest in spending big on infrastructure projects and its aggressive focus on job creation. You could imagine Hassett moving Trump’s agenda in a direction that emphasized putting the long-term unemployed, or labor force dropouts, to work again.
Hassett is a free trader
It isn’t normally notable that a right-leaning economist is an enthusiastic supporter of free trade; that used to be a given. But Donald Trump has scrambled his party’s views on trade, and appointed protectionists like Peter Navarro and Wilbur Ross to high-level positions in his administration. That makes the selection of Hassett, a dyed-in-the-wool free trader, somewhat notable.
In January 2008, while serving as an adviser to the primary campaign of John McCain, he bemoaned the trade skepticism he perceived from Democratic candidates Barack Obama, Hillary Clinton, and John Edwards. “The part of President Clinton's record that I respected the most was his trade record and very aggressive pursuit of free trade,” he told the crowd at a New America event featuring advisers from the McCain, Obama, Clinton, and Edwards campaigns. “It seems to me that all the Democratic candidates but especially Mrs. Clinton have kind of apologized for that record when the right thing to do for all of the little people — the guys out there who benefit from free trade — is to celebrate it.”
"The success of the United States has come not from its natural resources or its large population but from its free-market system," he and Glassman wrote in a 2003 essay. "Liberalized trade — in broadly multilateral, regional, or bilateral agreements — is a key ingredient in the recipe for prosperity."
Hassett has been particularly vocal in promoting the benefits of trade to low-income developing countries. "The benefits for developing countries are even great — on a proportional basis — than for the United States," Hassett and Glassman continued. "If trade stops or even slows down, developing countries would be devastated."
Hassett was even more emphatic in a 2008 op-ed pegged to that year’s G8 summit. He blamed "agricultural subsidies and trade barriers in developed nations" for "stifling the growth of the agricultural industry in poor nations." “If the developed world announced today it would suspend all trade barriers (and end its own unnecessary subsidies) for agricultural products, then capital would flow to the developing world with unprecedented speed and force,” he wrote. “And by next year, you could be sure prices would be lower, and output higher.” He lamented the failure of the World Trade Organization’s Doha Round, which sought to reduce agricultural subsidies in rich countries to speed development in poor ones.
It’s hard to imagine that one staffer could turn around Trump’s entire protectionist agenda, especially with longer-standing advisers like Navarro and Ross in the equation. But Hassett has a chance to serve as the one vocal voice in favor of trade in the administration, and ensure that Trump’s more dramatic moves on the issue receive some pushback.
Hassett loves corporate tax cuts
Like any self-respecting conservative economist, Hassett is passionate about cutting the corporate income tax. But his arguments on this score are slightly different from the typical concerns that the US’s rate is too high relative to other countries, or that it’s out of step with international practice by trying to tax profits made overseas, or even just that corporate taxes discourage investment.
Hassett’s main argument instead is that corporate taxes strongly suppress wages, and that cutting them will rapidly raise the living standards of American workers.
There’s an active dispute among economists about who actually pays the corporate tax. Money that corporations earn goes, roughly speaking, to two groups of people: the people who own the company (capital) and the people who work for the company (labor). So the tax can be paid either by taking money from capital owners, or by reducing wages. This has huge implications for how progressive the tax is. The more it’s paid by capital, the more progressive it is and the less harmful it is to the middle class; the more it’s paid by labor, the worse a deal it is for workers.
Hassett thinks this is all wrong. His research, conducted with AEI’s Aparna Mathur, suggests that most or even all of the burden of corporate taxes is borne by workers, not capital. In an influential 2006 paper analyzing data in 72 countries across 22 years, they estimated that a "1 percent increase in corporate tax rates is associated with nearly a 1 percent drop in wage rates.” A second paper in 2010 found a slightly smaller effect (a 0.5 to 0.6 percent decrease in wage rates per 1 percent increase in corporate tax rates) but still concluded that labor was ultimately paying the tax.
That suggests that cutting corporate taxes would be a very easy way to raise wages for ordinary workers. Many other economists and tax researchers have argued that these results are implausible, and the consensus in the field remains that most of the tax is paid by capital (as Treasury and the CBO both assume). Hassett’s stance, then, marks him as an outlier.
It’s clear Hassett enjoys corporate tax cuts, but his stance on the specific corporate tax cut being devised by House Republicans, which would feature a “border adjustment” process for imports and exports, is less clear. He sounded enthusiastic about the idea in an interview with Kudlow in July, but he also argued that it was desirable because it would boost exports and eliminate an “uneven playing field” with foreign countries that use border adjustment on their sales taxes. This runs against the arguments of the tax’s proponents, who insist it wouldn’t change the balance of imports and exports at all.
Hassett is open to a carbon tax
Like many conservative-leaning economists and wonks, and unlike basically every actually elected Republican politician in the country, Hassett has expressed openness to a carbon tax, especially as an alternative to cap-and-trade schemes. Emissions trading, he has argued, is too susceptible to gaming and features prices on carbon that vary too rapidly. Carbon taxation, by contrast, is less corruptible.
“A program of carbon-centered tax reform, by contrast, lacks most of the negative attributes of cap-and-trade, and could convey significant benefits unrelated to GHG reductions or avoidance of potential climate harms, making this a no-regrets policy,” he wrote with AEI’s Kenneth Green and Steven Hayward in 2007. “A tax swap would create economy-wide incentives for energy efficiency and lower-carbon energy, and by raising the price of energy would also reduce energy use.”
He has also written twopapers with Mathur and Tufts economist Gilbert Metcalf arguing that a carbon tax would be less regressive than conventionally assumed, if you model its effect over a person’s whole lifetime rather than considering their income in a particular year. "This suggests that concerns over the distributional impact of a shift to a carbon tax may be overstated," they conclude.
56% of younger millennials identify as Christian. 2% as Jewish or Muslim. 1% as Buddhist. And 36% as nothing. That's double the number that made up the "nones" among baby boomers. Being a "none" often means having no sense of purpose, except to seek personal happiness and make the world a better place by recycling, opposing Trump and calling out racism. It also means a moral code based on academic analysis of power relationships between races, genders and sexual orientations.
An editor at The Atlanticwrites of girls educated by the mores of the fifties being "strong in a way that so many modern girls are weak". They were taught "over and over again that if a man tried to push you into anything you didn’t want, even just a kiss, you told him flat out you weren’t doing it. If he kept going, you got away from him... They told you to do whatever it took to stop him from using your body in any way you didn’t want, and under no circumstances to go down without a fight."
The conclusion appends the modern metric of consent to another era. But the girls of that era weren't taught to fight hard over consent. It's not that they didn't believe in consent. The great consent controversies of today were taken for granted then. But they also believed in something higher than mere consent. They weren't just fighting because of consent, but because of a moral purpose.
Resisting was more than a defense of their bodies. It was a defense of the meaning in their lives. They fought because they had something more to fight for than the exact definition of consent.
Consent is a legal formality, not a moral purpose. We consent to things we don't want to do all the time. Often it's because we make bad decisions. Consent is not a permanent state of being. It's a quantum state. The decision I made yesterday looks much worse when I see its consequences today. I'm not a finished being today. And I won't be one tomorrow. Legal agreements can bind me to the car I bought on a whim yesterday, and agonize over today, but no legal agreement binds sexual consent.
The retroactive withdrawal of consent is one of the more ambiguous topics of the consent debate. Can consent be withdrawn retroactively? What if new information emerges? Is consent formalized over an extended period or is it a momentary event? How do power relationships negate consent? That's not how the law works, but it is often how the human mind operates. And we hold people accountable to the law, not to psychological complexities.
Consent is legally significant, but psychologically meaningless. I know that I will regret tomorrow the beers that I drink today. I did buy 300 lottery tickets, but that was only because I thought I would win. Modern secular ethics treats consent as a defining moment, but the true opposite of consent isn't refusal, it's apathy. We don't make that many conscious decisions. Mostly we go with the flow.
That too is another aspect of the modern ambiguity of consent. The recent Aziz Ansari case, like so many others, didn't emerge from a crucial refusal, but instead featured a protagonist who was somewhat unwilling, but not truly conscious of her unwillingness. This general unconsciousness is how we often go through our days. We stumble into decisions without thinking about them. And only later do we realize that the decisions we made without really thinking about them mattered.
Previous generations understood that our decisions, our whims and consents, had to be ordered by a larger purpose. But the millenial "nones" are the least likely to understand that. As individuals, they have no higher purpose. The lefty ethics that govern their lives tell them what to do and how to feel, but don't meaningfully order their daily decisions into something resembling a whole person.
And without that purpose, there are only states of consent. Each state is governed by the emotions of the moment, hope, desire, disappointment, betrayal, loneliness, and is incomprehensible to any other state. Pain, joy, hunger, love and anger exist in the moment. They can be recollected, but the way that they drive us when we feel them cannot be duplicated in another moment. The decision we make under the impetus of one emotion can be swiftly negated by the conclusion of another emotion.
These are not new ideas. The history of human civilization is built on societies ordering the various states of human emotions to a higher purpose. That is one of the fundamental purposes of religion. Philosophers across thousands of years sought answers and offered solutions. And then in the last few generations, we tossed them all on the rubbish heap and exchanged them for Marxist pottage. Macroscopic analyses of class, gender and race have replaced individual meaning. Millennial nones know that they should never vote Republican, but they have no idea how to make personal choices in a way that reflects who they want to be, rather than what they are feeling right this second.
The moral ethos of the left has told them that people don't really make decisions. The mixture of Marxist macro-analysis and Freudian psychobabble that shaped the new age has left them with the conclusion that their gender, class and racial categories have shaped them at a subconscious level. They don't make choices, instead they have power relationships that reflect their privilege.
It's an ethos that produces the retroactive victimhood and preemptive guilt of people who don't really make their decisions, but are ready to apologize or rage for the inevitable outcome of the power relationships that define their lives. That's the striking difference between the ambiguous apologies of millennial celebrities like James Franco and Aziz Ansari, and the older and earlier boomer stars who clearly deny or admit their guilt. Millennial male nones live in a world where their gendered guilt exists as a permanent assumption apart from their behavior based on their original sin of privilege. That permanently indicts them even as it frees them to misbehave. Their admissions reference the ambiguous quantum states in which individuals exist, the challenge of bridging them through communication and the guilt assigned to them by their relative power relationships.
There is no moral awareness within these apologies, only the empathy and guilt of public relations. Human beings don't have a purpose, they have feelings. Some feelings are more valid than others. Feelings of oppression are the most valid of all. But none of them are truly true.
The lack of purpose makes all human relationships casual. Even the very serious moments are ultimately meaningless. But the casual ethics of two people passing on the street or a transaction at the grocery store are insufficient for those more important moments. The more serious the relationship, the worse the secular lefty ethics of the "nones" hold up in the face of it.
Religious people or those with a conscious philosophy of life are quite capable of wrongdoing. But they also have an awareness of what they are doing wrong. The "nones" often don't become aware of a moral component to their actions until they experience pain. Robbed of a meaningful philosophy, they experience only the breaches of it, the way that children raised badly only learn through pain.
Without a moral purpose, their realizations take place retroactively or in the moment. They don't understand a problem until they come face to face with it. And when they do, they don't see the bigger picture, only the painfully small one of the uncertain ebb and flow of their feelings.
Consent tells them that they have they absolute power to decide. But they have no basis for making their decisions. The abstract idea of consent has little to do with why people actually consent.
Reducing sexuality to the transactional ethics of consent satisfies legal, but not human requirements. It's a recipe for retrospective anger and pain. The ethics of consent don't make us better people. They reduce us to the barest and most exploitative ethics. And then they negotiate whether wrongdoing occurred within the narrow legal parameters of consent or the wider ones of intersectional privilege.
But morality goes beyond consent. Its ethics go beyond legality. It asks that we do more than just get the customer's signature on the dotted line for the overpriced junkheap we're selling him. Consent as the core of modern sexual ethics is Crowley's Do What Thou Wilt modified with, As Long As Maybe They Wilt It Too. But truly moral and ethical people don't ask or offer certain things. They don't condition the rightness of their actions on momentary reciprocal feelings, but on their own values.
Consent sets feelings against law. Then it asks the law to encompass the mutability and ambiguity of emotions. And the only way to do that is to remove any possible defense of legal consent. The law superseding morality, only to then be superseded by emotion, summarizes the entire history of the secular left which begins with fixed codes and then replaces them with the violent whims of outrage.
The debate over consent is only one of the many ways that this pattern is upending our societies.
The left doesn't believe that consent is absolute. It bases the degree of consent on the extent to which an individual has been educated about his privilege and the level of his oppression. It follows then that lefties and the oppressed should have the lowest rates of sexual assault. But the opposite is true.
The #MeToo movement has mostly entangled lefties who pursued consent in predatory fashion. And they did so by creating an environment in which consent could be obtained with sufficient pressure. But what can be obtained with sufficient pressure can also be withdrawn with sufficient pressure. And in the absence of meaningful relationships, all that remains is the power struggle of pressure.
This is the abusive way that people treat others when their actions are ordered by their emotions.
A moral society is a place of purpose where those particle states of emotion are ordered by higher moral laws. It asks us to treat people, not based on what we want them to consent to, what we want or even what they want, but as the principles of a higher being would want us to.
"We have no Government armed with Power capable of contending with human Passions unbridled by morality and Religion," John Adams warned. There is only one such government. Tyranny.
"Only a virtuous people are capable of freedom," Benjamin Franklin cautioned more simply.
These aren't abstractions. Nor are they measured on some vast scale of civilizations. They define how we live our ordinary lives. They are why this debate is taking place.
Free people consent. But freedom comes from virtue. Freedom without virtue is anarchy. And anarchy ends in brutality and tyranny. That outcome isn't only expressed in riots in the streets. It emerges in smaller and more intimate matters, like the debate over consent.
Freedom of consent is failing. The left wants to replace it with brutality and tyranny. The brutality of online smear campaigns and the tyranny of campus kangaroo courts. But a secular right has no replacement for it either except the more libertarian brutality and tyranny of the individual.
What we forgot is that we don't truly have freedom of consent, until we have purpose.