The vast majority has no clue what economic science is. To them economics is about political ideology or practical business. There are no laws of economics. We economists have permitted this to occur. We have allowed politicians and the public to demand of our discipline results which the discipline cannot produce but which nevertheless if we pretend we can produce those results will provide power and prestige. Hayek argued in the early 1930s that the fate of the economist was to be called upon to address questions of pressing political concern only to have his advice discounted as soon as it was uttered. Why? Because economics as a discipline puts parameters on people's utopias. It gives us primarily "negative" knowledge --- we live in a scarce world, there is no such thing as a free lunch, we cannot assume what it is we hope to prove, ought cannot presuppose can, and can doesn't mean we ought, etc. In the 1980s, Hayek wrote that: "The curious task of economics is to demonstrate to men how little they know about what they imagine they can design."
But that is not the "economics" we heard about last night from President Obama. The economics is a POLITICAL economics. It is an economics that at the service of political parties in power --- either right or left. Conservative Keynesianism and Liberal Keynesianism, but it is still Keynesianism however you slice it. And as Deirdre McCloskey has put it, when your intellectual range is from M-N you think you are being open minded when you look at M and you look at N, but you certainly don't see A or Z. President Obama actually argued that no serious economist has argued against the need for government action with respect to the stimulus package. The leading economists, he argued, for Bush I and Bush II, as well as his team of economists all agree that only government can break the economy out of this vicious spiral downward. He must not have read the Christian Science Monitor yesterday. Robert Higgs's op-ed is best on his historical research, which is among the best on the subject, dealing with the 1920s-1940s.
President Obama presents himself as a pragmatist who wants us to get beyond the stale ideological debates of the past. But he is simply trapped in the conventional wisdom of Keynesian economics. Why not take a few minutes --- since we are talking about actions which will transform the economic landscape of the US --- and think in a "non-Whig" fashion about economic ideas. Consider once again the arguments that "lost" due not to intellectual defeat, but political expediency. What were those pre-Keynesian ideas regarding the economy and the proper role of monetary and fiscal policy? President Obama said he cannot take seriously criticisms of fiscal irresponsibility from politicians that when they were in power doubled the national debt. Good point. But does that mean that fiscal irresponsibility is off the table as a concern? How pragmatic is thtat, as opposed to how politically convenient is that excuse? If President Obama wants to break from the stale ideology of the past, then he should start with breaking with the policy path of the past. NOTHING he is doing is radically different from what President Bush did before him. It is the same strategy being pursued just on "steroids" (and he is disappointed with A-Rod?!). No answer has yet been given as to why President Bush's bailout package didn't work while his stimulus package will. In fact, when pushed on that question President Obama really just said, we might even need to spend more down the road when this doesn't give us the result we want. And the claim is just that confidence has to be restored to the market and only government can do that.
The belief that only government can do this is the real stale ideology of the past. What is really causing the problems in this economists opinion, is that government action has produced an uncertain investment environment. The rules of ownership and control are unclear, or clear but counter-productive for indiviudual initiative; monetary policy guided by the rhetoric of fighting inflation, but fearing deflation has been so loose that long term inflation that threatens the viability of the dollar should be a real concern to investors; and fiscal policy which is so out of control that US public debt will bankrupt the future generations with an astronomical tax burden and/or a monetization that will destroy the currency through hyper-inflation. Whatever way you slice it, our current policy path is the PROBLEM not the SOLUTION. But if your intellectual range is from M-N (lets say Larry Summers to Paul Krugman), then don't be surprised when in being "rational", examining the "evidence", weighing the "arguments" and assessing the "theories", you fail to consider the fiscal arguments of a James Buchanan, the monetary and capital theories of F. A. Hayek, the comparative institutional analysis of law and politics in Ronald Coase, and the monetary and fiscal policy arguments of Milton Friedman. Each of these gentlemen, President Obama, won the Nobel Prize in Economic Science. Their ideas may have been used by politicians in rhetoric, but none have been political appointees (well Friedman served as an economist during WWII, Hayek and Buchanan fought for their countries in WWI and WWII respectively) and their ideas have not been used in political practice --- no denationalization of money; no balanced budget ammendment; no full scale school voucher program, drug legalization, monetary rule, etc.. Friedman had more success than the others in carrying the day, but compare the policy prescriptions in Capitalism and Freedom and Free to Choose with the reality of public policy that we got even under Ronald Reagan, and compare the policy prescriptions in Hayek's The Constitution of Liberty with what was achieved under Margaret Thatcher. There is a far distance from the ideas in these books to the reality of the policy world. A really radical notion of hope and change might be to get government out of the business of attempting to manage the economy, stop demanding of economics results that it as a discipline cannot produce, and lets depoliticize political economy.
Economics is NOT social engineering, it is instead a phiosophical science. Political economy is the best label for it, but at its best it is not political in the ordinary meaning of that term. And the intellectual range is not limited to M-N, but instead travels at least from A-Z. Because President Obama has failed to grasp this, to him economics disagreements are inherently political, economics science is Keynesian, and economic policy is pro-active.