Jacquelyn Martin/AP Photo
Then-chairman of the Council of Economic Advisers Jason Furman speaks about the economy during a daily briefing at the White House, December 16, 2014.
You’d have to be asleep not to notice that Furman, a protégé of Robert Rubin and former chair of Obama’s Council of Economic Advisers, is the go-to expert. I counted eight recent stories in the Times and Post alone that rely on interviews with Furman, not just for quotes but for their analysis.
Ezra Klein did a whole podcast with Furman. Klein’s tagline: “Jason Furman helps me understand why so many economists got this economy so wrong.” It’s taken for granted that Furman got it right. Furman is all over cable and the op-ed pages as well, where editors treat him as an expert worth publishing.
Furman, at Harvard’s Kennedy School with his friend Larry Summers, is at the extreme end of the inflation-hawk continuum. Even as price pressures have eased, Furman insists that the Fed should stay the course and impose another three-quarter-point rate hike in September.
Unlike Summers, Furman doesn’t have the personal baggage and history of self-promotion that makes some reporters wary. This makes Furman’s role as credible inflation hawk that much more insidious. As a senior Democratic economist willing to criticize as well as praise Biden, Furman seems fair-minded, guided only by his research findings.
But a closer look at his technical economics makes clear that Furman has failed to take even a cursory look at what has actually occurred with supply bottlenecks. Consider this emblematic rookie error: Writing in the L.A. Times in April, Furman breezily contended that because indicators such as port volume and global semiconductor production are up on average, “our problem is not mainly reduced supply but increased demand.”
But semiconductors are not interchangeable. Automakers were stymied when the specialized chips they use were simply not available. Car production stalled.
This bottleneck and resulting scarce auto supply, not a sudden consumer hunger for new cars, produced steep price hikes, which in turn drove the general inflation rate. Since late-model used cars are a close substitute for new ones, their prices soared as well.
The true supply-demand story was all on the supply side. The auto semiconductor story was widely reported. How could Furman have missed it? Studied incuriosity? Didn’t he take micro as well as macro? Doesn’t he have research assistants?
As shortages slowly subside, only one immediate policy variable matters—interest rates. Furman’s prime audience is the Fed. I’m not a great fan of Fed Chair Jay Powell. But Powell doesn’t want to be remembered for having created a needless recession.
Powell and the regional Fed banks have large staffs of technically competent economists. Unlike Furman, they look at the actual evidence. Let’s hope Powell acts on it.
