In the spirit of the upcoming elections, ChiBus brings to you an interview with the professor who has had the most intimate relationship with the White House over the past presidency: Austan Goolsbee, the Robert P. Gwinn Professor of Economics at Booth. Outside of academics, Goolsbee most notably served as the senior economic policy advisor to President Obama during Obama’s first term and currently serves as a member of the Economic Advisory Panel to the Federal Reserve Bank of New York.
Goolsbee studied economics at Yale under James Tobin, who strongly encouraged him to pursue a PhD at MIT. While Goolsbee’s economic leanings may appear ideologically opposed to the Chicago School’s classic faith in the free markets, Goolsbee, a self-described empirical, data-oriented economist, clarifies common misconceptions about economics at the University of Chicago: “A lot of the outside view of the University of Chicago is about Milton Friedman and macroeconomics in the 1950s and 1960s. In a bit of an ironic turn, one of the main forces fighting Milton Friedman was Jim Tobin, my advisor at Yale. The entire economics field during the 1980s, 1990s, and 2000s moved more toward an empirical, data, microeconomics bent and became a lot less ideological than it had in the past. While the outside world still had this view that everyone at the University of Chicago was really conservative, and that the fight was still about Keynesian vs monetarism, that doesn’t really describe what this place was like. Most people don’t realize that yes, there was an ideological bent towards markets, but it was and is a place that is all about economics mattering, using it to understand the world, and going where the data takes us.”
Perhaps from his college days as an improv comedian and a debate team champion, Goolsbee has shown known no hesitation in developing a public presence to help bridge the gap between the academic and public discourse on economics. He has regularly contributed to the New York Times, Slate, and Fox News (the source of what Goolsbee describes as an “improbable friendship” with Sean Hannity): “I’d always thought that the world had been very good to the economics profession—especially the U.S. where they fund economic research and give a lot of credibility to economists—and that we owed it to society to be able to explain what it is we’re doing with the people’s money and attention.”
Despite this, Goolsbee never saw his term as a cabinet member in the White House as a natural career progression. On how he ended up in the White House, “I had known Obama for a long time. We had a lot of common friends, he was at the law school. I like to remind people that Michelle was more famous than him here. She had a major job at the University of Chicago Hospital. When he was first running for the senate back in 2003-2004, they called me to see if I would help, and it was like ‘you’re talking about Michelle Obama’s husband? The guy from the birthday parties?!’ His daughters and my daughter were all at the Lab School together. I stayed in touch with him and helped him during his time in the Senate. When he decided he was going to run for presidency, he called me up and told me ‘I’m really thinking of running, the campaign is going to be in Chicago, is this something that you can spend time working on?’ And at that moment—I’m kind of embarrassed by this—my response was ‘well, I don’t know, my research is very important. I don’t know if I have time to help you.’ My wife was the one who said ‘you always thought this guy was really something. If he runs and he loses the primary, which he probably will, will you be kicking yourself that he ran for presidency in your own hometown and you didn’t do anything? Take 6 months off and write one less paper.’ Then two years on the campaign and almost three months on the campaign I was working very hard.”
Goolsbee has and remains confident that the 2016 election will be favorable to the Democratic Party, there are economic issues we should be keeping our eyes on: “In the short run, the things to be worried about in the economy are China and Europe. If you have a list of fears of what could go dreadfully wrong, one of those two would be high on the list.” Longer term, what should the country be doing? “I think we should be investing in things to get the growth rate up and to raise productivity. That’s about investing in your people, training in the workforce, human capital. We have to get the educational attainment and skills up in the U.S. work force. That’s how we became the richest economy in the world.”
Does he see cutting taxes and de-regulation as a solution? Of course not!: “if you look at rich places like Silicon Valley or New York City, they’re not low tax or low regulation places. Companies don’t go to Silicon Valley because its cheap, they go because they can’t afford not to—because that’s where the people are. You can overtax and you can overregulate but if you keep cutting taxes and don’t have the money to invest into the things that are important, you’re shooting yourself in the foot.” Describing the evidence that tax cuts don’t stimulate growth as “overwhelming,” Goolsbee notes that Bill Clinton’s tax raises on high incomes earners did not wreck the economy, George Bush’s tax cuts never “paid for themselves” and that Europe, which has some of the lowest corporate tax rates in the world does not have high growth rates. “The argument that we didn’t cut high income earners’ taxes enough in the 2000s and didn’t de-regulate the financial markets enough is clearly absurd.”
On why the U.S. economy has not recovered faster: “There are a group of scholars that say that when you have a financial crises, it takes about a decade to get back to normal because of the debt overhang. Amir Sufi has highlighted a lot of the dangers of excessive debt. A second view says its policy uncertainty that has made the recovery slow. I think the fact that you see this [slow recovery] taking place in all of the advanced countries in the world strongly indicates that it has nothing to do with policy in the U.S. The third group, which I am part of, has the belief that the only way you can have a v-shaped, snapback economy is when the economy can go back to doing what it was doing before the recession began. In other words, when you don’t have a bubble popping. When a bubble pops and you have to shift directions—in our case, away from residential housing investment and consumer spending growth as the overwhelming drivers of GDP growth. We need more capital expenditure, more exports, more investment, more innovation led growth. The transformation has been happening, it just hasn’t been a fast transformation. To me, it feels like we’re not in danger of a recession but we’re not in danger of takeoff either. And the rest of the world isn’t helping us—the emerging markets are in the tank, China and Europe’s situations aren’t helping, so the chances of us ramping up our exports to be a driver of growth are not great.”
Sitting across from a chair in his office with “Bernanke” engraved on the top—a souvenir from his White House days—Goolsbee reflects on transitioning back to Booth “It was always my intention to come back and that was what allowed the White House to be an amazing adventure. A very stressful adventure—the economic crisis was a nightmare—but when it was time to come back, we came back. I learned many things there that have nothing to do with academic life. One was that a key difference is that the standard of evidence is this high and the time pressure is this low and in Washington, it’s completely the opposite. The standard of evidence is really low but it must be done by Friday. It was so nice to be back in the classroom. It was kind of like taking a warm bath. In Washington, in their heart of hearts, they believe that we’re all doomed and are fighting over the last meal on the titanic. And that’s why it can be so petty and bitter. And I come back in the classroom and Booth students are nothing like that.”
Araba is a second-year MBA student who enjoys her coffees only on the 3rd floor!