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Trickle-Down Economics, Art Edition   The Romer-Harvard Affair
May 22 2008 3:08PM EDT

The Economics of Carl Icahn

Carl Icahn has an interesting take on basic macroeconomics:

Icahn kicked off his political rant by saying that it would be "devastating" if this country elected a Democratic president... He said that "Obama doesn't understand the economy," adding that he and a Democratic-weighted Senate would boost spending significantly, sending inflation soaring.

There are two big assumptions here, both of them false. The first is that Obama's fiscal policy would be looser than Bush's - between Bush's tax cuts and his defense spending, that's hardly feasible. And the second is that loose fiscal policy has a clear upward effect on inflation. As Rick Mishkin explains, a one-off spike in spending can result in a step-rise in prices - but not in sustained inflation.

In any case, Icahn should relish the prospect of soaring inflation, which is a great way of redistributing wealth from the poor to the rich. Or is he hinting at some hitherto unsuspected socialistic tendencies, that what he really cares about is the fate of the poor?

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