5 Powerful Men Who Were Catastrophically Wrong About the Economy—But Reaped Rewards Anyway

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3. Alan Simpson;and 4. Erskine Bowles. They’re funded by anti-government billionaire Pete Peterson. They were made co-chairs of President Obama’s “Deficit Commission.” And they’re repeatedly, remarkably wrong. They also very right-wing, according to the polls, which consistently show that their proposed government cuts are too extreme for many Republicans and are widely disliked by the public at large. And yet, in the distorted worldview of Washington and the major media, they’re repeatedly presented as “moderate” or “centrist.”

They’re also presented as economic experts—despite their penchant for wildly inaccurate predictions.

Alan Simpson is a former Republican senator from Wyoming. Erskine Bowles is a former Clinton White House apparatchik and hedge fund millionaire from Morgan Stanley. Two years ago, in June 2011, they made a  bold prediction:  The United States will experience another terrible economic crisis—"the most predictable economic crisis in history"—if people don’t listen to them and radically cut government spending.

How was this disaster going to happen? It will come, they said, when “the ratings agencies find out we have no plan” to cut spending.

It’s July 2013. Their two years are up. There was no “crisis.” There’s terrible ongoing hardship, but there’s increasing consensus (even Larry Summers is on board) that the primary source of this continued difficulty is the spending reductions advocated by Bowles and Simpson.

Of course, the Terrible Two have suffered no career consequences for this or any other failed prediction they have made. They’re still quoted worshipfully in many newspapers, are seen frequently on television, and are treated as if they were people who understood economics.

This isn’t Bowles’ first rodeo, or his only one. He’s been serving on a lot of corporate boards, where a director’s guidance is instrumental to the success of the firm. Dean Baker co-authored  an analysis of his work in that field, finding that “the Erskine Bowles index considerably underperformed the S&P 500 over this period”:

In boardroom life, unlike real life, there is no penalty for failure. Mr. Bowles was handsomely compensated for his board work, just as he is warmly recognized for the probity which led him to predict that a new and massive debt-caused crisis would shatter our nation by sometime last month.

5. Rick Santelli. Government officials aren’t the only ones who can get their predictions spectacularly wrong and be rewarded for it. Tea Party hero Rick Santelli, who prognosticates on the economy for CNBC, has shown that economic ineptitude can be privatized.

Santelli screamed for years (literally, as  this clip demonstrates) about government stimulus spending, an anti-recessionary technique that has worked reliably over and over during economic times like these. “Stop spending!” Santelli shrieked.

Europe “stopped spending”—or at least slashed its spending—and the resulting austerity budgets have caused GDPs to collapse and unemployment to soar all across the continent. The United States did the same thing. The result? Our GDP also took a hit, while our unemployment figures linger somewhere between quasi-depressionary and catastrophic for large swathes of the population.

And yet Santelli’s visibility actually went up over this period. Why? Because Santelli also went into a hysterical fit on the floor of the Chicago Mercantile Exchange. He was furious at the idea that homeowners, who had been victimized by crooked bankers, might get some help deal with underwater mortgages, while expressing no such outrage about the hundreds of billions in aid given to Wall Street banks; aid that benefited both Santelli and his irate audience of traders. Santelli used the felicitous phrase “Tea Party,” and a movement had a new name.

We almost wrote “and a movement was born,” but the Tea Party was actually born in corporate boardrooms, and in meetings with Republican party functionaries like Dick Armey. Santelli merely stumbled on a phrase. Despite his cockeyed predictions, his visibility went into overdrive—and a thousand silly hats were born.