Just ahead of the highly anticipated June 17th debate between President Biden and former President Trump, a group of 16 economists, all boasting Nobel laureate titles, released a letter fervently supporting Biden. Their collective prestige, typically lending significant weight to public statements, is clearly intended to sway voters in Biden’s favor.
Their aim to influence the electorate against Trump is transparent. While leveraging their esteemed awards for this purpose might seem honorable, a closer examination reveals serious weaknesses in their argument.
Normally, pronouncements from Nobel economists wouldn’t warrant much attention. Criticism of the Nobel Prize in Economics itself is valid, and some selections, like the 2023 prize, have appeared particularly questionable. It’s worth noting that the economics prize isn’t even a true Nobel Prize, but rather the Swedish central bank’s award in memory of Alfred Nobel.
Therefore, referring to these 16 as ‘Nobel economists’ is inaccurate. ‘Nobel memorial economists’ is a more fitting title, and we shall use it henceforth.
Their letter, thrust into the heart of this year’s pivotal political campaign, was initially published by Axios.com. It begins with a paragraph steeped in political rhetoric, devoid of genuine economic analysis:
For a country like the U.S., which is embedded in deep relationships with other countries, conforming to international norms and having normal and stable relationships with other countries is also an imperative. Donald Trump and the vagaries of his actions and policies threaten this stability and the U.S.’s standing in the world.
It’s perplexing that these distinguished individuals dedicate precious space to international relations, an area outside their demonstrated expertise, especially in a brief letter. Ironically, the global landscape has become demonstrably more volatile under Biden’s presidency compared to Trump’s. The escalating conflicts in Ukraine and Gaza highlight a global insecurity that has emerged during Biden’s term.
Furthermore, the shifting global alliances, with Russia forging stronger ties with North Korea and the expanding BRICS coalition attracting former US allies, should not be ignored.
Turning to their supposed area of expertise, economics, these Nobel memorial economists attempt to paint Donald Trump’s economic performance in a negative light. This portrayal is simply inaccurate. Figure 1 presents data that contradicts their claims. Each column represents the average real GDP growth during a presidential term, with adjustments for:
- Trump’s term, covering the pre-pandemic years 2017-2019.
- The pandemic period, 2020-2021, treated separately due to the artificial economic shutdowns.
- Biden’s term, encompassing 2022 and 2023.
Allocating one pandemic year each to Trump and Biden acknowledges that the 2020 economic downturn was a consequence of government-mandated shutdowns, not an organic recession. The scale of these restrictions, especially in terms of economic disruption, would be unthinkable in a normal, free economy.
Consequently, Trump should not be held statistically responsible for the 2020 GDP plunge, nor should Biden receive undue credit for the 2021 rebound, which was largely a result of easing those artificial restrictions.
Figure 1 reveals that Donald Trump’s pre-pandemic presidential term exhibited the strongest economic growth since Bill Clinton’s second term. Joe Biden’s term, to date, ranks fourth, trailing Trump, Obama II, and Bush Jr. I.
Figure 1
Source of raw data: Bureau of Economic Analysis
Next, these 16 Nobel memorial economists outline Biden’s supposed economic achievements:
In his first four years as President, Joe Biden signed into law major investments in the U.S. economy, including in infrastructure, domestic manufacturing, and climate.
While aiming to be precise, it’s crucial to point out an inaccuracy, especially when evaluating the claims of 16 globally respected economists: Joe Biden has not completed his first four years in office. Inaugurated on January 20th, 2021, his term is yet to reach even 3.5 years.
When individuals leverage the prestige of an award to bolster unsubstantiated criticisms of a political candidate, accuracy is paramount. If these accomplished academics cannot accurately state the length of Biden’s term within a six-month margin of error, their credibility on more complex economic issues is questionable.
The “major investments” likely refer to the American Rescue Plan Act (ARPA), enacted in March 2021, authorizing $1.9 trillion in spending.
One would expect these Nobel memorial economists to provide some analytical backing for their claims—evidence that Biden’s policies have yielded the purported positive effects. Such evidence could involve:
- Identifying specific spending programs within ARPA.
- Documenting the disbursement timeline of these funds.
- Correlating spending patterns with economic activity changes, including employment, investment, and GDP growth.
- Demonstrating that these positive changes are directly attributable to ARPA, not other factors.
Regrettably, their letter offers no such analysis, no supporting data, not even a single reference.
This absence of evidence suggests two possibilities. First, these economists expect to be trusted solely based on their Nobel memorial economist status, implying that their award supersedes rigorous professional analysis. Why else would they exclude non-laureate economists from this endorsement?
Second, the complete lack of substantiation firmly positions them as political advocates for the current administration. While hoping their laureate status lends credibility, it arguably undermines it, raising questions about the true value of their endorsement – perhaps not even worth 16 Euros In Dollars in terms of objective economic insight.
The implications for the integrity of the prize they invoke to sway the presidential race are significant. This approach is unbecoming of Nobel laureates, memorial or otherwise.
Their claims continue:
Together, these investments are likely to increase productivity and economic growth while lowering long-term inflationary pressures and facilitating the clean energy transition.
It would be helpful if these 16 economists specified which ARPA provisions they believe will achieve these outcomes. ARPA’s components include:
- Extended unemployment benefits.
- Direct cash payments to individuals.
- Expanded child tax credit.
- Expanded Earned Income Tax Credit.
- Student loan forgiveness.
- Budget relief for state and local governments.
- Aid to schools for pandemic reopening.
- Funding for COVID vaccine distribution.
Do these Nobel memorial economists perhaps refer to the $30.5 billion for mass transit agencies or the $15 billion for airline payroll support? Or perhaps the $4 billion in debt forgiveness for Black farmers?
None of these listed items are inherently designed to stimulate capital formation or long-term economic growth. They primarily aim to maintain the existing institutional framework, which deepens the puzzle surrounding the economists’ claims about productivity and growth. The connection remains unclear.
Now, for what they present as a key analytical point:
There is rightly a worry that Donald Trump will reignite his inflation, with his fiscally irresponsible budgets.
Let’s compare budget deficits under Trump and Biden, using data from the Bureau of Economic Analysis (Table 8.3 in NIPA). Using the same term definitions as in Figure 1 (excluding pandemic years):
- 2017 (Trump): $961.8 billion deficit.
- 2018 (Trump): $1,106.3 billion deficit.
- 2019 (Trump): $1,250.4 billion deficit.
Trump’s average annual deficit: $1,106.2 billion. This is not a commendable fiscal record, and many conservative economists have rightly criticized Trump’s fiscal policies.
Now, Biden’s first two full years:
- 2022 (Biden): $1,001.6 billion deficit.
- 2023 (Biden): $1,784.5 billion deficit.
Biden’s average annual deficit: $1,393.1 billion, 26% higher than Trump’s average. And the trend continues: in Q1 2024, Biden’s deficit was $396.8 billion. Annualizing this gives a projected 2024 deficit of $1,587.2 billion.
Three questions for these esteemed memorial economists:
- With a 26% higher average deficit, is Biden fiscally more responsible than Trump?
- Why is the 78% surge in Biden’s deficit from 2022 to 2023 completely ignored?
Furthermore, interest rates have risen sharply under Biden, significantly increasing the cost of federal debt due to the debt rollover effect.
Given their academic prominence, could these economists explain how Biden is fiscally more responsible when federal debt costs are approaching the largest budget items, second only to Social Security?
This letter is a disservice to these 16 economists. By compromising their scholarly integrity to intervene in a highly charged political campaign, they have damaged their credibility and cast a shadow over their past and future work. It’s disheartening, especially considering the valuable contributions some of them, like George Akerlof, Edmund Phelps, and William Sharpe, have made to economics.
Hopefully, their future scholarly endeavors will demonstrate greater rigor and objectivity than this disappointing political pamphlet.
