Economists Don't See Us, So Whole Economy Pays The Price

We’re used to getting the short end of the stick out here in Flyover Country, whether it’s from a lack of regular news-media attention or from our vastly inequitable share of investments by venture capitalists.


Now you can add the dismal science to the list of coastal biases against the heartland that are doing real harm not just to how we’re perceived, but also to how we live.


“They don’t see the economy that many of us see and that I see,” Ernie Goss, an economist at Creighton University in Omaha, told me. “We’re speaking to farmers and bankers, and what they see isn’t the same as what [economists] in New York or D. C. see. They have blinders on. They don’t even have a feel for the distances involved our here for EV chargers.”


This major problem with the “experts” who run America’s economy has had real consequences. By now, it’s accepted wisdom that an early and urgent red flag from economists trusted by the fed and the Biden administration could have helped us avoid the inflation conflagration that now seems to be burning down the American economy, coast to coast.


It’s of little consolation that former fed chair and now Treasury Secretary Janet Yellen, herself an economist, recently admitted to Congress that she erred in assuming last year’s strong inflationary signals indicated merely a “transitory” phenomenon. Nor is it helpful that among all the awful things it has done, Russia’s war on Ukraine has given the Biden administration’s off-target monetary policy a fig leaf in the form of the extra inflationary pressures the conflict has created on food and energy.


No View


Why did the president and the fed err so badly? Setting aside deeper theories about how a loose monetary stance was intentional for the politics behind it, one clear reason for this policymaking disaster is that the Biden administration and the Federal Reserve were listening too intently to the emanations of economists who were based strictly on the coasts and had little idea about — or interest in — what happens in Flyover Country.


Seventeen Nobel laureates endorsed the Biden economic agenda in an open letter in September, 2021, and 16 of them hailed from a coastal institution of higher learning: Yale, Princeton, Georgetown, MIT, Stanford, and Cal Berkley prominent among them. The specific subject of this open letter was their support for Biden’s Build Back Better plan for nearly $5 trillion in new government spending, which these economists endorsed even though the president had described the package as a cure for inflation that even then was rising.


It's hard not to see the coastal economists’ drastically wrong assessment as partly stemming from their lack of a broad view of the American economy or at least deep appreciation for important sectors of it. Most of the nation’s energy is produced not by windmill arrays set in the Atlantic Ocean or solar-panel farms in California but in the oil fields of Texas and North Dakota. And most of our food comes not from the vineyards of Napa Valley but from the row-crop fields of the Plains.


Listen To Us


Before signing their names to the ultimately damning open letter in September, the cadre of coastal economists and Biden administration advisors could have paid attention to warnings being issued out here in the heartland by economists who live in our region, such as Goss. He was talking no later than August about troubling trends in inflation that he saw unfolding around him.


Coastal economists are “part of the bureaucracy,” Goss said. “We are in the midsection of the country, and they aren’t part of that. When you’re there depending heavily on getting your next appointment to the president’s team of economic advisors, or the Congressional Budget Office, where I was at one time, the groupthink is oppressive.”


But is the groupthink the result of ignorance or a deliberate looking down their dismal noses at us out in Flyover Country?


“It’s more ignorance than bias,” Goss said. “It’s like, when you’re in the belly of the beast, you can’t think outside the beast,” Goss said. “It’s not so much about the east coast and the west coast as it is that there’s no diversity in the Federal Reserve and its governors. There’s a swinging door between New York and D.C. and Berkley, and occasionally you throw in [the University of] Michigan.”


Even someone who should have been counted upon to bring a grounded view of the goings-on in the economy, Charles Evans, head of the Federal Reserve Bank of Chicago, basically took the same tack as the 16 errant economists from the coasts in reckoning with inflation last year as a relatively innocuous force.


Indeed, when you examine votes of the fed governors across the country, you see repeated instances when the dissenting votes mainly come from Jim Bullard, president of the fed in St. Louis, and Esther George, head of the fed in Kansas City. That was the case recently, Goss said, when each dissented from fed chief Jerome Powell’s recommendation for a 75-basis-point increase in interest rates, which passed.


Coastal members of the fed “are seeing things from a different sensibility,” Goss said. “It’s not a bias against the center of the country, but they don’t see the same things going on as we do when they ride public transportation every day.”


It’s not whether the cause is bias, ignorance or a combination that matters as much as it is a recognition that there’s this perceptual deficit by coastal economists — and that it matters. And until that happens, you can count on the people who listen to them continuing to make our life difficult out here in Flyover Country.