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Tags: General Shenanigans

Today in Fiscal Foolishness



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On the Corner: Delaware considers a bailout for casinos.

Texas plans to spend millions of dollars to replace thousands of new computers (via Pratt on Texas). 

Hey, let’s all have a big fight about a highly speculative forecast involving 3 percent of the federal deficit ten years hence!

Florida county pays $144,000 for phantom signage — but tips room service generously.

Quebec is worried about wasteful spending. Solution: Spending $500,000 on a committee to study wasteful spending.

Tags: Fiscal Armageddon , General Shenanigans

Detroit Defaults



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The City of Detroit has defaulted on a portion of its bonds, specifically on payments to unsecured creditors. Those who invested in bonds with dedicated revenue streams attached have been spared, for the moment, but the reorganization plan drawn up by emergency manager Kevyn Orr envisions a great deal of “shared sacrifice,” which apparently is what they’re calling it these days.

Typically, bondholders in the past have lost interest due them, but not their principals. That is not going to be the case in Detroit. Specifically, Detroit is expecting its creditors to take less than 10 cents on the dollar for having been foolish enough to lend money to the collection of misfits, miscreants, and criminals who govern that poor city. That’s step one. Step two is . . . borrowing more money, in order to pay for a program meant to rebuild the city’s institutions, reinvigorate its economy, and improve basic services. Who, I wonder, would be foolish enough to lend Detroit money hot on the heels of a default? The answer is likely to include the unwilling taxpayers of Michigan and those of the United States.

Detroit’s tax revenues are declining, and the city already is at or near the legal limit for the various taxes it imposes. It has a city income tax, but that will not do it a tremendous amount of good: In 2000, Detroit had 353,813 employed persons; today it has only 279,960. In 2000, it had an unemployment rate of 7.3 percent; today, it has an unemployment rate of 18.6 percent. It is a blighted and crime-ridden city — now the second-most-dangerous city in the country, according to the FBI, with nearby Flint leading the pack — which in addition to being a broader social problem is specifically a tax problem: Property values, and hence property-tax collections, are declining. 

Kevyn Orr has also made it clear that reductions in pensions and health-care benefits for city retirees are a necessary part of any long-term solution for Detroit, which of course they must be: The city currently spends 40 percent of its revenue on so-called legacy costs, mostly retiree benefits.

That 40 percent number jumped out at me: Under current Congressional Budget Office projections, the federal government’s spending on its legacy costs (Social Security, Medicare, and interest on the debt) will be more than 50 percent of revenue in ten years. And, though the total impact will be small, you probably can add to those federal totals a little bit to account for the fact that Detroit plans to get out from under its health-care costs in part by dumping its liabilities onto Medicare and Obamacare. Thanks, Detroit!

As has been discussed at some length here, it is not entirely clear that Detroit, to say nothing of fiscally moribund states such as California or Illinois, legally can reduce its pensions and retiree benefits. In Michigan as in most states, those payments are protected by statute and/or constitutional provision. Orr is making it clear that he believes Detroit can reduce those payments — it simply does not have the money to make them and cannot raise sufficient funds through taxes. There are federal bankruptcy protections available to cities, though Detroit apparently plans to try to reorganize without a formal bankruptcy — Orr says there is a 50/50 chance that the city will not enter formal bankruptcy. But there are no such bankruptcy protections for states, and, unless the public-sector unions agree to a haircut for retirees (stop laughing) the pension mess probably is headed for the Supreme Court.

Detroit already is looking for federal assistance. For example, it is planning on spinning off the city water authority as a quasi-autonomous entity in the hopes that it will generate a nice revenue stream. It will be looking for federal loans to help make that happen. It will be looking for more federal funds to address its blight problems, to fix up the Coleman A. Young airport, to help fund services through grants, etc. It will be looking for money from the state of Michigan, too.

The problem is that the same political leadership that brought Detroit to this sorry pass remains in power. There probably is not much that can be done about that, and very little, short of mass seppuku in front of the Spirit of Detroit statue, that would convince me that they have mended their ways. Detroit cannot be trusted with its own money, it cannot be trusted with its creditors’ money, and it certainly cannot be trusted with federal taxpayers’ money.

— Kevin D. Williamson is a roving correspondent for National Review and author of the newly published The End Is Near and It’s Going to Be Awesome.

 

 

Tags: Bankruptcy , Bonds , General Shenanigans

Stimulus Before Keynes



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Everything you need to know about the economy and presidential politics, you can learn from Sir James George Frazer and The Golden Bough:

 

OF THE THINGS which the public magician sets himself to do for the good of the tribe, one of the chief is to control the weather and especially to ensure an adequate fall of rain. Water is an essential of life, and in most countries the supply of it depends upon showers. Without rain vegetation withers, animals and men languish and die. Hence in savage communities the rain-maker is a very important personage; and often a special class of magicians exists for the purpose of regulating the heavenly water-supply. The methods by which they attempt to discharge the duties of their office are commonly, though not always, based on the principle of homoeopathic or imitative magic. If they wish to make rain they simulate it by sprinkling water or mimicking clouds: if their object is to stop rain and cause drought, they avoid water and resort to warmth and fire for the sake of drying up the too abundant moisture. Such attempts are by no means confined, as the cultivated reader might imagine, to the naked inhabitants of those sultry lands like Central Australia and some parts of Eastern and Southern Africa, where often for months together the pitiless sun beats down out of a blue and cloudless sky on the parched and gaping earth. They are, or used to be, common enough among outwardly civilised folk in the moister climate of Europe. I will now illustrate them by instances drawn from the practice both of public and private magic.

Thus, for example, in a village near Dorpat, in Russia, when rain was much wanted, three men used to climb up the fir-trees of an old sacred grove. One of them drummed with a hammer on a kettle or small cask to imitate thunder; the second knocked two fire-brands together and made the sparks fly, to imitate lightning; and the third, who was called “the rain-maker,” had a bunch of twigs with which he sprinkled water from a vessel on all sides. To put an end to drought and bring down rain, women and girls of the village of Ploska are wont to go naked by night to the boundaries of the village and there pour water on the ground. In Halmahera, or Gilolo, a large island to the west of New Guinea, a wizard makes rain by dipping a branch of a particular kind of tree in water and then scattering the moisture from the dripping bough over the ground. In New Britain the rain-maker wraps some leaves of a red and green striped creeper in a banana-leaf, moistens the bundle with water, and buries it in the ground; then he imitates with his mouth the plashing of rain. Amongst the Omaha Indians of North America, when the corn is withering for want of rain, the members of the sacred Buffalo Society fill a large vessel with water and dance four times round it. One of them drinks some of the water and spirts it into the air, making a fine spray in imitation of a mist or drizzling rain. Then he upsets the vessel, spilling the water on the ground; whereupon the dancers fall down and drink up the water, getting mud all over their faces. Lastly, they squirt the water into the air, making a fine mist. This saves the corn. In spring-time the Natchez of North America used to club together to purchase favourable weather for their crops from the wizards. If rain was needed, the wizards fasted and danced with pipes full of water in their mouths. The pipes were perforated like the nozzle of a watering-can, and through the holes the rain-maker blew the water towards that part of the sky where the clouds hung heaviest. But if fine weather was wanted, he mounted the roof of his hut, and with extended arms, blowing with all his might, he beckoned to the clouds to pass by. When the rains do not come in due season the people of Central Angoniland repair to what is called the rain-temple. Here they clear away the grass, and the leader pours beer into a pot which is buried in the ground, while he says, “Master Chauta, you have hardened your heart towards us, what would you have us do? We must perish indeed. Give your children the rains, there is the beer we have given you.” Then they all partake of the beer that is left over, even the children being made to sip it. Next they take branches of trees and dance and sing for rain. When they return to the village they find a vessel of water set at the doorway by an old woman; so they dip their branches in it and wave them aloft, so as to scatter the drops. After that the rain is sure to come driving up in heavy clouds. In these practices we see a combination of religion with magic; for while the scattering of the water-drops by means of branches is a purely magical ceremony, the prayer for rain and the offering of beer are purely religious rites. In the Mara tribe of Northern Australia the rain-maker goes to a pool and sings over it his magic song. Then he takes some of the water in his hands, drinks it, and spits it out in various directions. After that he throws water all over himself, scatters it about, and returns quietly to the camp. Rain is supposed to follow. The Arab historian Makrizi describes a method of stopping rain which is said to have been resorted to by a tribe of nomads called Alqamar in Hadramaut. They cut a branch from a certain tree in the desert, set it on fire, and then sprinkled the burning brand with water. After that the vehemence of the rain abated, just as the water vanished when it fell on the glowing brand. Some of the Eastern Angamis of Manipur are said to perform a some-what similar ceremony for the opposite purpose, in order, namely, to produce rain. The head of the village puts a burning brand on the grave of a man who has died of burns, and quenches the brand with water, while he prays that rain may fall. Here the putting out the fire with water, which is an imitation of rain, is reinforced by the influence of the dead man, who, having been burnt to death, will naturally be anxious for the descent of rain to cool his scorched body and assuage his pangs.

Other people besides the Arabs have used fire as a means of stopping rain. Thus the Sulka of New Britain heat stones red hot in the fire and then put them out in the rain, or they throw hot ashes in the air. They think that the rain will soon cease to fall, for it does not like to be burned by the hot stones or ashes. The Telugus send a little girl out naked into the rain with a burning piece of wood in her hand, which she has to show to the rain. That is supposed to stop the downpour. At Port Stevens in New South Wales the medicine-men used to drive away rain by throwing fire-sticks into the air, while at the same time they puffed and shouted. Any man of the Anula tribe in Northern Australia can stop rain by simply warming a green stick in the fire, and then striking it against the wind.

In time of severe drought the Dieri of Central Australia, loudly lamenting the impoverished state of the country and their own half-starved condition, call upon the spirits of their remote predecessors, whom they call Mura-muras, to grant them power to make a heavy rain-fall. For they believe that the clouds are bodies in which rain is generated by their own ceremonies or those of neighbouring tribes, through the influence of the Mura-muras. The way in which they set about drawing rain from the clouds is this. A hole is dug about twelve feet long and eight or ten broad, and over this hole a conical hut of logs and branches is made. Two wizards, supposed to have received a special inspiration from the Mura-muras, are bled by an old and influential man with a sharp flint; and the blood, drawn from their arms below the elbow, is made to flow on the other men of the tribe, who sit huddled together in the hut. At the same time the two bleeding men throw handfuls of down about, some of which adheres to the blood-stained bodies of their comrades, while the rest floats in the air. The blood is thought to represent the rain, and the down the clouds. During the ceremony two large stones are placed in the middle of the hut; they stand for gathering clouds and presage rain. Then the wizards who were bled carry away the two stones for about ten or fifteen miles, and place them as high as they can in the tallest tree. Meanwhile the other men gather gypsum, pound it fine, and throw it into a water-hole. This the Mura-muras see, and at once they cause clouds to appear in the sky. Lastly, the men, young and old, surround the hut, and, stooping down, butt at it with their heads, like so many rams. Thus they force their way through it and reappear on the other side, repeating the process till the hut is wrecked. In doing this they are forbidden to use their hands or arms; but when the heavy logs alone remain, they are allowed to pull them out with their hands. “The piercing of the hut with their heads symbolises the piercing of the clouds; the fall of the hut, the fall of the rain.” Obviously, too, the act of placing high up in trees the two stones, which stand for clouds, is a way of making the real clouds to mount up in the sky. The Dieri also imagine that the foreskins taken from lads at circumcision have a great power of producing rain. Hence the Great Council of the tribe always keeps a small stock of foreskins ready for use. They are carefully concealed, being wrapt up in feathers with the fat of the wild dog and of the carpet snake. A woman may not see such a parcel opened on any account. When the ceremony is over, the foreskin is buried, its virtue being exhausted. After the rains have fallen, some of the tribe always undergo a surgical operation, which consists in cutting the skin of their chest and arms with a sharp flint. The wound is then tapped with a flat stick to increase the flow of blood, and red ochre is rubbed into it. Raised scars are thus produced. The reason alleged by the natives for this practice is that they are pleased with the rain, and that there is a connexion between the rain and the scars. Apparently the operation is not very painful, for the patient laughs and jokes while it is going on. Indeed, little children have been seen to crowd round the operator and patiently take their turn; then after being operated on, they ran away, expanding their little chests and singing for the rain to beat upon them. However, they were not so well pleased next day, when they felt their wounds stiff and sore. In Java, when rain is wanted, two men will sometimes thrash each other with supple rods till the blood flows down their backs; the streaming blood represents the rain, and no doubt is supposed to make it fall on the ground. The people of Egghiou, a district of Abyssinia, used to engage in sanguinary conflicts with each other, village against village, for a week together every January for the purpose of procuring rain. Some years ago the emperor Menelik forbade the custom. However, the following year the rain was deficient, and the popular outcry so great that the emperor yielded to it, and allowed the murderous fights to be resumed, but for two days a year only. The writer who mentions the custom regards the blood shed on these occasions as a propitiatory sacrifice offered to spirits who control the showers; but perhaps, as in the Australian and Javanese ceremonies, it is an imitation of rain. The prophets of Baal, who sought to procure rain by cutting themselves with knives till the blood gushed out, may have acted on the same principle.

What else but superstition can explain the belief that if the president (priest-king) only cared enough about (observed the ritual governing) health care or the economy (the rain and the crops), then scarcity will be abolished and we can consume more than we produce?

Tags: General Shenanigans

Another Fine Moment in Republican Statesmanship



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Those of you who have criticized me for being soft on taxes may have a point: Back home, I’m something of a liberal:

A Lubbock County, Texas, judge, the panhandle county’s chief administrator, is asking for a tax increase to hire deputies for the inevitable civil war he believes would follow President Obama’s re-election.

The way he puts it, Judge 
Tom Head wants to prepare for the “worst”, which to him means “civil unrest, civil disobedience” and possible “civil war”, according to a report from Fox 34 Lubbock.

Judge Tom Head and Commissioner 
Mark Heinrich told the station this week that a 1.7 cent tax increase for the next fiscal year was necessary to prepare for many contingencies, including Obama’s re-election. He also mentioned to the station that the county needs a pay increase is needed for the district attorney’s office and more funds to pay for more sheriff’s office deputies.

He’s going to try to hand over the sovereignty of the United States to the (United Nations), and what is going to happen when that happens?” Head asked the station during a Monday interview. “I’m thinking the worst. Civil unrest, civil disobedience, civil war maybe. And we’re not just talking a few riots here and demonstrations, we’re talking Lexington, Concord, take up arms and get rid of the guy.”

Wrote a local columnist: “His words border on sedition, the incitement of discontent or rebellion against a government.” That’s the good part, of course — but an unnecessary tax increase? The budget’s already balanced.

Tags: General Shenanigans

The China-Hating Season Is Upon Us



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It must be an election year: Washington has noticed that the brutes in Beijing still aren’t reading their Bastiat, and a World Trade Organization complaint is in the works. I do not think that the Obama administration, even if it knew what to do, would be willing to do what it takes to radically improve U.S. economic competitiveness vis-à-vis China, since he was carried to Washington upon a great swell of votes from the less productive corners of the fruited plain, but it’s nice to have inscrutable foreigners to blame. Really, what would Washington do without the Chinese?

On the one hand, it is good that the United States and China are members of a free(ish)-trade convention, giving them a forum at the WTO for resolving differences. WTO rules are arcane and convoluted, but the organization enjoys reasonable credibility in settling disputes that arise under its purview. As China becomes a more mature and normal country, it is important that it learn to comply with the obligations into which it has freely entered. (Not that the people of China can be said to have “freely entered” into anything, but you know what I mean.) U.S. China hawkery does tend to ebb and flow with election cycles, one cannot help but notice.

So, free trade would be a good thing, and free(ish) trade under the WTO is probably a second-best outcome preferable to other politically available options. So, rah-rah for us.

Sort of.

I cannot help but notice that our own customs regime is an embarrassment. (“Not as bad as in China!” isn’t exactly a ringing endorsement of public policy.) For example: We charge a relatively straightforward protectionist duty on imported passenger cars and special-purpose vehicles, depending on various features (interior capacity, size of engine, number of engine cylinders, etc.), but then, of course, we mess with it. Some car parts get attached post-import, so Mercedes-Benz is required to do a separate parts-duty calculation for the aluminum roof racks that are permanently affixed to M-class sport-utility vehicles. (Read all about it here.) Never mind the 2.5 percent duty — consider the trade consequences of the fact that Mercedes-Benz has to go to the federal government for an official ruling about its roof-racks before it can do business. It’s not just the cost of the tariff per se, but the cost of compliance, too — Mercedes sells five different classes of SUVs and crossovers in the United States, with multiple models in most classes.

So, Mercedes-Benz gets hassled, but sometimes imported parts get preferential customs treatment. If you’re Nissan Forklift, you get to participate in the foreign-trade zone program that allows for delayed or reduced duties on imported parts — provided, of course, you are doing your business in the home district of a sufficiently powerful member of Congress. American mercantilism is a lot like Chinese mercantilism, but less patriotic. It’s the makework fallacy as national policy.

Lest you think that there is anything other than straightforward protectionism going on, take the program administrators at their own word:

This event was notable in that it opens the door for a new industry sector to lower its Customs-related costs through the Foreign-Trade Zones Program. How does this event benefit the the Marengo area? “By utilizing the FTZ program to level the playing field with its overseas competitors, Nissan Forklift can be more competitive. This results in job retention, and capital investment; and both of these lead to increased economic activity in Marengo as well as providing much needed support to the U.S. manufacturing base,” says Craig Pool, President of the Foreign-Trade Zone Corporation. 

Clear enough? U.S. trade policy provides publicly funded benefits for rent-seeking business interests and acts as a tax on U.S. consumers of foreign goods and many domestic goods containing foreign components. There is little or no evidence that it accomplishes anything that makes the U.S. economy more productive, or that it improves wages or employment. But it is a good way for congressman to send goodies back to the district.

And it is not as though the United States is totally shut out of the Chinese market: It’s worth noting that the best-selling passenger vehicle in China is a Buick — weirdly enough, a Buick is a status symbol in China. Consumer preference still matters, and in many sectors in which the Chinese economy is relatively open to imports, the United States is outperformed by other countries.

So, sure, make China play by the WTO rules — but don’t expect to get too much out of it.

Tags: China , General Shenanigans

Emotional Onanism



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If I have learned anything over the past few years in my part-time employment as The New Criterion’s theater critic, it is that unless it is articulated with great skill and artistry, there is nothing so boring as a display of human emotion. Ideas, even mistaken ones, have a great potential to be interesting; sentiment less so. But of course you could learn as much reading the op-ed page of the New York Times or the comments section of any website publishing disputatious content.

I was put in mind of that fact reading two books recommended by left-leaning friends: The first was Paul Krugman’s End This Depression Now! (I am generally skeptical of policy books with exclamation points in their titles, and Professor Krugman’s book has fortified my skepticism.) The second was the late Tony Judt’s Ill Fares the Land. To the existing criticism of Professor Krugman’s policy preferences I have little to add except to reiterate my belief that while I can see the overall logic of Keynesian stimulus-spending arguments, I do not share the Keynesians’ belief that it does not matter what we spend that money on. To Professor Judt’s policy prescriptions I have nothing at all to add, inasmuch as his platform is almost entirely content-free, consisting in the main of an incontinent fondness for railroad stations. (I am not exaggerating — please do read the book if you doubt me.)

What struck me most about the two books, and about Professor Krugman’s recent journalism, is the constant exhortation to anger. End This Depression Now! begins and ends with such exhortation, and, writing in the New York Times, Professor Krugman is forever going on about the necessity of being “angry at the right people.” Among those people he believes it is right to be angry at are academic economists who do not share his views, and who therefore must be, in his analysis, acting out of bad faith in order to pursue ends that are “cruel and wasteful.” Professor Judt likewise fills his little book with demands that we be enraged at the alleged malefactors he identifies, and similar demands that we regard post offices and train stations with sucrotic sentimentality.

The problem with being enraged is that it prevents thinking, and causes one to write dumb things, e.g.:

For the alleged productivity surge never actually happened. In fact, overall business productivity in America grew faster in the postwar generation, an era in which banks were tightly regulated and private equity barely existed, than it has since our political system decided that greed was good.

What about international competition? We now think of America as a nation doomed to perpetual trade deficits, but it was not always thus. From the 1950s through the 1970s, we generally had more or less balanced trade, exporting about as much as we imported. The big trade deficits only started in the Reagan years, that is, during the era of runaway finance.

And what about that trickle-down? It never took place. There have been significant productivity gains these past three decades, although not on the scale that Wall Street’s self-serving legend would have you believe. 

So there is the obvious: Professor Krugman writes that the productivity surge “never actually happened,” and then a few sentences later concedes that there were “significant productivity gains,” but they didn’t work out the way he’d have liked. But the main problem with the paragraphs above is that they entirely ignore the uniqueness of the post-war economic situation. In short, it is easy to be a trade-balancing industrial powerhouse when a cataclysmic war has cleared the economic playing field of competitors. The economic conditions that prevailed from the late 1940s to the middle 1970s were not the result of ingenious industrial policy at home but the result of the destruction of the rest of the world’s economic infrastructure. Dead men make no widgets, and the factories and shipyards of Nagasaki weren’t doing a hell of a lot of business after getting nuked. Real incomes for American men 25 and over began to decline in 1973, not after the ascent of high finance in the 1980s. One minute’s thinking would reveal that the story is much more complicated than Professor Krugman suggests, but thinking is not on his agenda, at least so far as his New York Times work is concerned. And he is not alone in that: Have a look at William Cohan’s “Don’t let go of the anger” for further evidence.

Josef Joffe, writing in the New York Times, noted that Professor Judt’s book is “a cri de coeur – an outburst of rage and sorrow in equal parts,” but then added the critical qualifier that “unless the reader belongs to the choir to which Tony Judt preaches — call it the Europhile liberal left, who would rather sell their Prius than forgo their New York Review of Books — he or she may ask: Where have we heard this before? A pugnacious reader might stab a felt pen at every other paragraph and scribble: ‘Caricature!’ or ‘What about . . . ?’” Which is correct. But Professor Judt’s book is not an invitation to think; it is an invitation to feel. Like Rachel Maddow, Professor Judt has very warm feelings about large-scale public-works projects such as the Hoover Dam, which, while indeed majestic, was obsolete before it ever came on line and generates about one-third the electricity of a typical nuclear power plant. Our aesthetic appreciation of such enterprises should not stop us from asking the relevant questions: Does it work? It is the best use of our scarce resources? I admire New Deal–era post offices and Paul Cret’s fascist architectural vibe as much as the next guy, but we should probably fire a great number of the people who work in those buildings, because they do not produce much of value.

I have written about the surfeit of emotion on the right from time to time, and it is, needless to say, no more useful or interesting than the perpetual emotional adolescence on the left. We have extraordinarily difficult problems in front of us. And we are not alone: I have just returned from Spain, where the unemployment rate among the young is 50 percent and where public finances are probably unsalvageable. (My report will appear in the next issue of National Review.) We need clear thinking and cold-eyed analysis, not wishful thinking or blinkered emotionalism. Getting righteously angry is an exercise in self-gratification, a fruitless indulgence.

Tags: General Shenanigans , Paul Krugman

The Economics of Ann Romney



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Ann Romney, after a boorish attack from Democratic operative Hilary Rosen — who sneered that she “has actually never worked a day in her life” — responded in traditional family-first terms. Which is fine, but I wish she had responded in plain economic terms.

The Romneys are unusual in that they have five children and in that they are very wealthy. But like families with fewer children and less money, Mitt and Ann Romney as parents faced essentially two kinds of scarcity in their household: scarcity of economic resources and scarcity of parental time. (It is worth remembering that the word “economy” comes from the Greek word for household.) The Romneys solved that problem with a classic application of gains from trade and comparative advantage.

Mrs. Romney is by all accounts a very bright and ambitious woman, but there is not much in her educational background (Harvard B.A. from the extension program) or subsequent biography that suggests she was going to be well suited to a career like her husband’s. But let us assume, for the sake of argument, that she could have, had she so chosen, become a senior-level executive at a medium-to-large business enterprise — not CEO of ExxonMobil, but not making minimum wage, either. The typical salary range for chief financial officers at U.S. corporations runs from $61,786 to $265,882, according to Payscale.com, depending upon the size and complexity of the business and the particular industry. Let’s assume that Mrs. Romney would have earned top dollar, $265,882. Would it have been a good idea for her to go to work?

According to one estimate from a hostile party, Mr. Romney earned about $6,400 an hour at Bain Capital. The Romneys’ personal net worth is somewhere between $190 million and $250 million, but that understates things a bit: The Romneys set up a trust for their grandchildren worth an additional $100 million or so.

Assuming a 2,000-hour work year, Mrs. Romney as a higher-end CFO would have earned about $132.94 an hour, or about 2 percent of her husband’s hourly wage. A 40-year career at $265,882 would have given Mrs. Romney lifetime earnings equal to about 3.5 percent of the family’s net worth.

The Romneys, who are notably charitable people, have given away far more money than Mrs. Romney probably would have earned in a career that would be considered by most of us wildly successful and highly paid.

Conclusion: Ann Romney is economically a hell of a lot smarter than Hilary Rosen.

The marginal value of the wages earned in a typical C-level career would have been almost nothing to the Romneys. But there is that other scarce resource: parental time.

It is difficult to put a dollar value on parental time, but it is clear that to the Romneys one hour of Mrs. Romney’s time at home with the family was worth far more than one hour in C-level wages; further, a 2,000-hour annual block of time invested in earning C-level wages would have fundamentally changed the character of the Romney household for the worse, while providing negligible economic benefit. Instead, she provided the family with a critical good that Mr. Romney, for all his riches, could not acquire without her cooperation. If we think of the household as a household, Ann Romney’s decision to stay at home makes perfect economic sense: Her decision to be a full-time mother enormously improved the quality of life for Mr. Romney, for the couple’s five sons, and — let’s not overlook this critical factor — for Mrs. Romney herself.

Mrs. Romney’s personal investment model — marry a man who turns out to be wildly successful in business and politics, escape the tedium of what is sometimes described romantically as “a career,” have five children and the pleasure of raising them — is not open to everybody, of course: The supply of future centimillionaires is limited, and they are not easy to identify. But making intelligent decisions about forming a household and about the division of labor within that household is an option open to many of us, though unhappily not to all of us, given the state of the family.

Ms. Rosen’s remarks were criticized as being snide; the real problem is that they were stupid.

Tags: General Shenanigans

Obama Subsidizes Dirty Chinese Coal Power



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The Obama administration has done something I would call odd, if odd weren’t the norm in this White House. The administration is worried about global warming. It also is worried about the American economy, particularly manufacturing, and international competition, particularly from China. The administration’s response, as you might expect, has been to enact new regulations that will increase greenhouse-gas emissions worldwide, cripple one U.S. industry and increase costs for practically all others, discourage domestic manufacturing, and subsidize manufacturing abroad, particularly in China. It takes a kind of perverted genius to do that much wrong in one move, as though the Marquis de Sade had been reincarnated as an economist advising the president.

I refer, of course, to new EPA regulations that will in effect ban the construction of new coal-fired power plants in the United States. And that is not all it will do: Power-plant operators have already said that they will be forced to shut down some 300 facilities producing a total of 42 gigawatts, or nearly 4 percent of the nation’s total generating capacity.

There are many laws that are not amendable by EPA fiat or by acts of Congress. Among them are the laws of China and the law of supply and demand. This inconvenient fact makes the administration’s move particularly bone-headed.

What happens is this: With new coal-fired plants off the table, future U.S. demand for coal is reduced. Lowered demand reduces the price. Demand for coal is still very strong in the rest of the world; India and China in particular are full of people who will want to consume more energy and energy-intensive goods as they continue to lift themselves out of poverty, and lower coal prices will encourage and enable them to do so. Energy-intensive industries, such as heavy manufacturing, also will benefit from cheaper coal, unless those businesses have the misfortune of being located in the United States, where they will be denied that benefit.

Reducing U.S. consumption of coal will not reduce world consumption of coal; it will shift consumption from the United States to other countries — including countries with electricity-generation infrastructure that is relatively old and unsophisticated compared to that of the United States. Coal will be redirected from relatively clean U.S. plants to relatively dirty Asian plants.

By way of illustration, here is a Chinese coal ship, demonstrating China’s famous environmental sensitivity by tearing a two-mile hole in the Great Barrier Reef and dumping fuel oil in it:

China, to be fair, is building a lot of greener, high-tech coal-fired plants. It’s also building a lot of old-fashioned ones. And the plants equipped with the green tech do not always use it, because it is expensive and cumbrous to do so.

If you are worried about global warming — and let’s just grant the entirety of the anthropogenic thesis for the sake of argument here — then what you have to worry about is not emissions from the United States but emissions from the globe, global warming being a notoriously global phenomenon.

Coal at its very best is environmentally problematic, to be sure. There are no pretty coal mines. But burning coal, like fracking for gas, presents environmental problems that are manageable, unless your idea of management is imposing arbitrary and counterproductive rules that achieve the opposite of everything you had hoped to achieve, in which case you might want to think about a career in politics.

The United States may be the first country in history to colonize itself, reducing the world’s most advanced and complex economy to a raw-materials supplier for sophisticated manufacturing economies abroad. Worse, we may not even be able to do that: One of the few U.S. firms that stand to benefit from increased Chinese coal consumption, SSA Marine, is having a terrible time trying to build a new West Coast coal terminal, called Gateway Pacific, to enable it to better serve our competitors abroad. Everybody from the EPA to the Whatcom County (really) municipal government is standing in the way of the project, and the main impetus behind the opposition is not local environmental concerns but ideological opposition to the world’s use of coal, period. Given the rarity of hearing something coherent from somebody affiliated with the Chamber of Commerce, it’s worth hearing at length from the chamber’s man in Whatcom:

These opponents wish to end the world’s use of coal and they intend to make a point by derailing the Gateway Pacific Terminal.

Stopping the terminal will not stop China from using coal; the world has plenty. It will only stop China from using our cleaner coal, which has less mercury, sulfur, and nitrogen oxides. Opponents say the coal China uses affects our air quality. So if they use our coal, our air will actually be cleaner.

Stopping this terminal will not even stop U.S. coal exports. The U.S. has at least 10 coal-export terminals and will export more. British Columbia has three coal-export terminals, and all are capable of expansion. If opponents succeed in stopping Gateway Pacific, the coal trains will continue to run right past us up to Canada, which will get the jobs and tax revenue.

Frankly, what we should be concentrating on is taking care of our local environment. The project is starting an exhaustive environmental review under the oversight of federal, state and local agencies. Let’s allow these agencies — and SSA Marine — to do their jobs instead of arbitrarily opposing something without all the facts.

As with opposition to fracking, most of the opposition to Gateway Pacific is really about opposition to the use of the commodity per se. It may be that the Obama administration is cowed by the malignant antihumanistic environmentalists who play an outsized role in Democratic affairs, particularly in campaign financing. It may be that the administration really believes its risible rhetoric about the so-called green-energy economy that’s always right around the corner (waiting for a federal handout). But a policy cannot be judged by the intentions of the men behind it; it must be judged by its actual results, which in this case means subsidizing dirty Chinese coal at the expense of the U.S. economy.

Tags: General Shenanigans

30-Second Fact Check on David Sirota



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David Sirota writes:

In the apartment building the Times profiles, domiciles go for $7 million a year, including a 300-square-foot “en suite sky garage” that “would be valued at more than $800,000 if priced at the same rate per square foot as the rest of the apartment.” No doubt, the view from the garage is so good, the car’s owner can see the vast swaths of the city’s outer boroughs — the places where people are lucky to make $800,000 in their entire lifetimes.

This sounded fishy to me. It is: The apartments are for sale, not for rent, and the apartment in question is on sale for $7 million; it does not rent for $7 million a year.

Easy enough mistake to make (and Sirota corrected it after I pointed it out). But what about this? “No doubt, the view from the garage is so good, the car’s owner can see the vast swaths of the city’s outer boroughs — the places where people are lucky to make $800,000 in their entire lifetimes.”

The poorest borough in New York City is the Bronx, where the median household income is $34,264 a year, or $1.37 million over a 40-year working life. Given that they would have to be making a good deal less than the median Bronx income, you’d have to be unlucky to make only $800,000 in your lifetime. (About 44 percent of people living in the Bronx are either under 18 or over 65, so I’m using household income rather than per capita income.)

I lived in the South Bronx for a few years, and it is indeed poor. (My congressional district was the poorest in the United States.) But people in the Bronx would not be any wealthier if rock stars and movie stars (I’m told Mick Jagger and Nicole Kidman live in the building in question) had to park their Rolls-Royces  on the ground level. The two things are not related.

UPDATE:

Even if you take the less representative measure of per capita money income, New Yorkers outside of Manhattan would have an average 40-year income of $975,760, meaning that an income of $800,000 would make them unlucky, not lucky.

UPDATE 2: 

Sirota writes that even at $7 million once rather than $7 million per annum, the apartment is still [expletive deleted] “nauseating.” But why?

The apartment in question is selling for five times the median in Manhattan. Sirota lives in Denver. Here is an apartment selling for five times the Denver median. Two bed, two bath — nauseating? And it doesn’t even have a Ferrari elevator! If anything, Mick Jagger et al. seem to be getting a relatively good deal. New 1 percent motto: Better with money than you are.

Tags: General Shenanigans

Armageddon at the Strip Mall



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Remember 2007? Glory days, right? Everything was booming, and nothing was booming quite as much as real estate — especially commercial real estate. Malls, hotels, warehouses, industrial parks: Everything was being built, and everything was being financed on ridiculously generous terms. Remember interest-only loans? Good times.

But commercial real estate is different from residential in one important way: Your standard residential mortgage goes 20 to 30 years. Your standard commercial loan goes for five years, at the end of which you either make a big balloon payment (what it is that balloons remind me of?) or you refinance, the idea being that five years is long enough to get your project built or developed, to secure tenants and leases, get your cash flow flowing, etc. Five years: Seems like it was only yesterday. By my always-suspect English-major math, that means that a whole bunch of commercial mortgages written at that poisonous sweet spot when prices were highest but lending standards were lowest are coming due . . . oh, any minute now.

In New York City alone, there’s about $70 billion worth of commercial mortgages — some of which have been sold off as mortgage-backed securities, naturally — coming due this year. The national total is more than $150 billion, or a bit more than 1 percent of U.S. GDP. That’s going to be a little awkward: The value of U.S. commercial properties has declined by an average of 45.7 percent since their all-time high in 2007, according to Real Capital Analytics. Those 2007 vintage loans weren’t exactly bulletproof: Typical terms included a 20 percent down payment and a five-year payment schedule that required little more than interest payments. An $80 million mortgage on a $100 million property is not so bad, but an $80 million mortgage on what is now a $60 million property is a problem. More than half of the 2007-vintage loans are expected to have trouble refinancing, and maybe well more than half.

This is true even for borrowers who have never missed a payment. Banks are required to take into account a number of factors when rating commercial mortgages. One of the most important is the loan-to-value ratio, which has a lot of borrowers over a particularly uncomfortable barrel: They may have the cash to make their payments, and they may have the cash flow to continue making payments on a refinanced loan, but their properties still are worth less than their mortgages, so nobody wants to refinance. And those are the lucky ones: Just as those loans were mostly for five years, most commercial leases are for about the same length of time. With retail and office-space rentals down, lots of commercial borrowers are sitting on largely vacant properties that are not producing much in the way of cash flow. Among the more high-profile cases, the WTC 3 tower at the World Trade Center still has not located an anchor tenant, which could put the much of the project on ice. Thousands of strip malls across the fruited plains have empty storefronts, and thousands of office buildings have floor upon vacant floor.

Standard & Poor’s advises: “One-third of maturing loans are for office properties, for which five-year lease terms are fairly common — and if tenants don’t renew these leases, securing new, long-term lease commitments may be more difficult in the current environment. Those leases [were] signed in 2007, at peak rents will likely reset to lower levels as five-year leases roll.” S&P’s bottom line: “50%-60% of the 2007 vintage five-year-term loans maturing next year may fail to refinance, and retail loans are at the greatest risk.”

Translation: Armageddon at the strip mall.

And it’s not just a problem for New York City and other big, coastal cities. Richmond, Va., has it worse than Manhattan, Washington, or Los Angeles, according to the local Times-Dispatch, which reports that a dozen large commercial properties have gone into foreclosure recently and that 12 percent of the commercial properties in the Richmond-Norfolk market are “distressed.” In Bergen County, N.J., commercial foreclosures are up 7 percent this year over last year. In the first year of the recession, there were 373 foreclosure actions filed in Bergen County, while in 2011 there were 1,586. Commercial foreclosures are up 10 percent for the state as a whole.

In hard-hit Phoenix, about half of the commercial mortgages backing securities are at risk of default, and a couple of hundred, mostly strip malls and other retail, office buildings, and apartments, already are in default.

Taking a look at the commercial MBS (CMBS) market, Standard & Poor’s issued this advice: “Buckle Up.”

Trepp, a CMBS-analysis firm, in its most recent report (data as of October 2011) finds that the delinquency rate for multifamily-property mortgages is 16.73 percent; for hotels, 14.12 percent and rising; for offices, 8.95 percent and rising; for industrial properties, 11.59 percent and rising; and for retail, a steady 7.61 percent. Trepp managing director Matt Anderson does not sound like a ray of sunshine: “Overall, we do not expect 2012 to be a repeat of 2008, but there will be more disappointments than pleasant surprises in the New Year. The banking sector has not yet returned to ‘normal’ despite two years of earnings growth. With increased regulation and the temptation for banks to take additional risks in order to preserve margins, 2012 should be a very interesting year.”

Not as bad as 2008 — is there a better example of damning with faint praise?

Trepp gets to the real concern here, which is that these mortgages and mortgage-backed securities are sitting on the balance sheets of a bunch of still-wobbly banks. How wobbly? About 100 banks went under last year, and about 250 are expected to go under this year. Trepp finds that, of the banks that went toes-up in 2011, bad commercial real estate accounted for two-thirds of their failing loans.

This is a textbook case for the Austrian business-cycle theory: Artificially low interest rates and loose money produce overinvestment, by both bankers and builders, in a bubble — this time, offices, apartment buildings, and retail space — that can’t be sustained once the artificial stimulation comes to an end, as it must. In this case, that malinvestment has to be worked out at two levels: At the financial level, among the lenders and borrowers, but also at the physical level: There’s going to be a lot of dark storefronts out there, with serious long-term consequences for nearby neighbors and for local real-estate markets: Foreclosures will put more property onto the market, driving down rents and subsequently making existing loans less tenable as the cashflow of commercial properties is diminished. They called the Depression-era tent cities “Hoovervilles.” The next time you see a mile of half-abandoned strip malls, think “Obamaville.” 

Not as bad as 2008? Probably not — and let’s hope it is not even close. But there’s a $3 trillion commercial-mortgage market lurking out there, and a lot of CMBS investors — banks and insurance companies in particular — that Washington thinks are “too big to fail,” a problem we persistently refuse to address.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialismpublished by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Bailouts , Banks , General Shenanigans

The Political Economy of Chuck Berry



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1964: “It was a teenage wedding and the old folks wished ’em well / You could see that Pierre did truly love the mademoiselle.”
2012: New York Times: “Families Resigned as Young Americans Put Education, Careers on Hold.” — “The New Face of Poverty.” 

1964: “And now the young monsieur and madame have rung the chapel bell.”
2012: New York Times: “Economic Downturn Brings Backlash against Working Women.” Associated Press: “Child Brides, And Not Just in Afghanistan.”

1964: “C’est la vie say the old folks.”
2012: New York Times: “Elderly Americans in Desperate Need of Additional ESL Funding.”

1964: “It goes to show you never can tell.”
2012: New York Times: “For Elderly, a Time of Uncertainty.”

1964:  “They finished off an apartment with a two-room Roebuck sale.”
2012: New York Times: “With homeownership increasingly out of reach for young Americans, Pierre and his partner were forced to move into a sparsely furnished two-room rental.” — “The New Face of Poverty”

1964: “The Coolerator was jammed with TV dinners and ginger ale.”
2012: New York Times: “With food-stamp funding failing to keep up with soaring need, more young American families are resigned to a diet of cheap, frozen food and sugary soft-drinks. First lady Michelle Obama has declared her nutrition campaign ‘the moral equivalent of war.’” — “The New Face of Hunger.”

1964:  “And when Pierre found work, the little money coming worked out well.”
2012: New York Times: “Young Americans, still feeling the pinch of the Bush recession, are increasingly reliant upon low-wage jobs. ‘Little money is coming,’ says one marginally employed and wretched and basically destitute young man.” — “The New Face of Unemployment.”

1964: “C’est la vie say the old folks.”
2012: New York Times: “A Generation Later, Overlooked Immigrant Community Remains Largely Unassimilated.”

1964: “It goes to show you never can tell.”
2012: New York Times: “Elderly Americans Increasingly Insecure about Prospects.”

1964: “They had a hi-fi phono, boy did they let it blast / Seven hundred little records, all blues, rock, rhythm, and jazz / But when the sun went down, the rapid tempo of the music fell.”
2012: New York Times: “Though spending on consumer goods remained strong, the savings rate remains precariously low, especially among the young.” 

1964: “C’est la vie say the old folks / It goes to show you never can tell.”
2012: New York Times: “Among Elderly Non-English-Speakers, a Sense of Helplessness, Resignation.”

1964: “They bought a souped-up jitney / it was a cherry red ’53.”
2012: New York Times: “Americans Struggle to Keep Up with Car Payments.”

1964: “And drove it down to New Orleans to celebrate their anniversary.”
2012: New York Times: “With family vacations increasingly out of reach, young Americans make do with weekend road trips to nearby cities.” Associated Press: “For one young couple, the year brought a bittersweet anniversary.” — “Families Struggle in an Age of Reduced Expectations.”

1964: “It was there where Pierre was wedded to the lovely mademoiselle.”
2012: New York Times: “Gays Still Denied Marriage Rights in Much of South.”

1964: “C’est la vie say the old folks / It goes to show you never can tell.”
2012: New York Times: “For Struggling Elderly, Future of Social Security Remains Uncertain.” — “The Wrinkly Old Face of Poverty”

1964: “They had a teenage wedding and the old folks wished ’em well / You could see that Pierre did truly love the mademoiselle / And now the young monsieur and madam have rung the chapel bell  / C’est la vie say the old folks, it goes to show you never can tell.”
2012: New York Times: “Rural Americans Caught in a Cycle of Poverty.” — “Poverty: The Familiar Refrain”

Tags: General Shenanigans

Paul Krugman and the Ivy Fallacy



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Paul Krugman has a notably sloppy column today, about which one could write words of criticism outnumbering the words in the article. (And, as it turns out, I have.) His argument is that Mitt Romney, and Republicans at large, do not really care about the equality of opportunity they are fond of celebrating. Because, as you know, conservatives hate the poor, their hatred for poor men being surpassed only by their hatred for poor women and poor children, which itself is surpassed only by their hatred of clean air and water. (If there were poor homosexuals, Republicans would hate them the most, but of course no Republican ever has encountered a poor homosexual.) Everybody knows this, if by “everybody” one means Paul Krugman and the voices in his head.

What is particularly irritating is that Professor Krugman’s opening gambit includes the Ivy Fallacy, the act of implicitly generalizing from the circumstances of elite institutions and the people associated with them to the general public. Professor Krugman’s opening data point:

At the most selective, “Tier 1” schools, 74 percent of the entering class comes from the quarter of households that have the highest “socioeconomic status”; only 3 percent comes from the bottom quarter.

Muppet News Flash: Nobel laureate economist sifts the data, engages in esoteric statistical regressions, and concludes that Princeton is expensive. Allow me to posit that attendance at our most selective, Tier 1 universities is not the best indicator of the general accessibility of the good life in these United States. But if you are the sort of person who finds it impossible to believe that one might achieve a satisfying and productive life without having attended Princeton—or, angels and ministers of grace defend us, without having secured a college degree at all!—then Tier 1 admissions stats are the first data point that leaps to mind, apparently. Tuition (just tuition) at Princeton runs about $148,000 for four years, or about 300 percent of the median household income in the United States, or 111 percent of the median price of a home in the Midwest. Four years of tuition at Princeton costs about as much as an Aston Martin Vantage, ownership of which, I am willing to wager, also is concentrated among the top quarter of wage-earners. Not every Tier 1 school is Princeton expensive, but they fall in the aggregate on the spendy end of the education market. It takes a special kind of economist to be surprised that very expensive goods are disproportionately consumed by the well-off.

It is because of this kind of thinking that the battle over affirmative action has been waged at places such as the University of Texas law school. Which is to say, it has been waged on behalf of the people who are the least likely to need intensive institutional help in life: If you are right on the edge of being admitted to UT law and do not get a little nudge to put you over, your next stop  is not Skid Row—it is UCLA. And that’s not so bad. I am not much worried about who goes to Tier 1 schools. I am worried about who drops out of high school and why. You can tell yourself a very pleasing story about the relationship between Tier 1 admissions and Head Start, food stamps, or your favor welfare program, but that is not the same thing as doing the intellectual work of figuring out the facts.

Professor Krugman is right to be concerned about the relative lack of economic mobility in the United States, which does lag behind many other developed countries on that front. But of course it is easier to assume bad faith on the part of the other side than to engage the other side’s ideas. As it turns out, even the running dogs of plutocratic privilege at your favorite magazine are concerned about the state of economic mobility. To care about improving the prospects of the poor is not the same as improving the prospects of the poor. (Merely to say that one cares is another degree of separation removed from reality.) So, what to do? Professor Krugman writes:

Someone who really wanted equal opportunity would be very concerned about the inequality of our current system. He would support more nutritional aid for low-income mothers-to-be and young children. He would try to improve the quality of public schools. He would support aid to low-income college students. And he would support what every other advanced country has, a universal health care system, so that nobody need worry about untreated illness or crushing medical bills.

Notice that Professor Krugman, when confronted with the high price of college, seeks not to lower the price but to increase the subsidy, i.e. to extract more money from taxpayers, including middle-class and poor taxpayers, and shunt it into the institutions from which Professor Krugman, his professor wife, and his professor colleagues draw professor paychecks. Confronted with the poor quality of public education, he seeks not to reform the system with choice and accountability on behalf of the poor but to fortify the position of his political party’s upper-middle-class financial benefactors. Because he cares about the poor so much that he is willing to have his friends and benefactors and colleagues accept more of your money on their behalf.

One might as easily write: If Paul Krugman really wanted equal opportunity, he would be very concerned about the inequality of our current system. He would support education reform that would bring more choice and resources to the poor instead of entrenching an overcompensated public-sector monopoly insulated from even the most rudimentary forms of accountability. He would support initiatives to reduce tuition at public universities. He would support entitlement reforms that helped the poor to build wealth across generations instead of consigning them to lifelong welfare dependency. He would support reforming a perverse and shameful welfare system in which only 35 percent of all transfer payments go to the poorest 20 percent of Americans. And he would support what every other advanced country has, a sensible immigration  regime, so that neither the social safety net nor the lower end of the labor market would be strained by the large-scale importation  of poverty.

Or he could save himself (and us) 795 words and just write “Republicans bad! Ooga-booga!” next time, which is what he has written amounts to.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: General Shenanigans , Paul Krugman

Governor Cuomo Backslides



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New York’s fiscal situation is so dire that Gov. Andrew Cuomo was doing a pretty good Rick Perry impersonation there for a bit: cutting spending and generally behaving like a fiscal adult. Deroy Murdock voiced the pleasant surprise shared by many conservatives: “Cuomo’s performance thus far has advanced the cause of limited government in the Empire State far more than did his past three predecessors — the hapless David Paterson, the pantsless Elliot Spitzer, and the clueless Republican, George Elmer Pataki.”

Unhappily, that golden hour was not destined to last. Governor Cuomo is under pressure from union goons and other progressive groups, and probably from his own hereditary inclinations, to make the New York State tax code more “progressive,” meaning more redistributive and therefore more amenable to political manipulation. Rather than the current system, which applies a single rate to all taxable income — an arrangement that puts all taxpayers on the same side of the fight — the Left wants a graduated, class-warfare income tax. Putting taxpayers at odds with one another, rather than at odds with the tax-consumers, is a necessary step in the progressive divide-and-conquer campaign. And Governor Cuomo is obliging.

The deal being hammered out in Albany right now will be presented as an across-the-board tax cut for everybody in the state. And, technically, that’s true. The sneaky part is that the highest income group is currently paying a surcharge on top of the regular state income tax, and that surcharge was due to expire. Under the nascent deal, the top bracket will pay a lower effective tax rate than it is paying today, but not as low a rate as it would have had the surcharge simply expired. Basically, the surcharge has been reduced but made permanent.

As Capital Tonight puts it:

An overhaul of the state’s tax code will likely see five different brackets that will generate $1.9 billion in revenue for New York, a source with knowledge of the plan said.

The brackets under consideration are $40,000 and lower; $40,000 to $150,000; $150,000 to $300,000; $300,000 to $2 million and $2 million and higher.

There would be no change for those making less than $40,000, while the rate for those making $2 million and higher will decrease from 8.97 percent to 8.82 percent.

Those high earners would actually be in store for a larger cut if a surcharge is allowed to expire at the end of the month, but pushing this plan through now would allow lawmakers and Gov. Andrew Cuomo to claim they are slashing taxes for nearly everyone.

So, that’s a $2 billion tax increase, roughly, over current law — about half of what the progressives wanted.

Tax increases are not a categorical evil: Budgets have to be balanced, and spending has to be paid for. If you’re going to buy yourself an aircraft carrier, a highway, or a splendid little war in the Congo, you’re going to collect taxes to pay for it. What’s bothersome to me in this story isn’t the tax increase per se: It is first and foremost the revision of the tax code in a destructive way, and, secondarily, the fact that the additional revenue is going to be used not for essential and necessary services but for such Democrat-enrichment schemes as a stimulus-spending campaign and, as the New York Times puts it, “new programs to train poor urban youths,” i.e., using the unemployed to employ the unemployable through employment programs employing those who administer employment programs for the unemployed who are going to stay unemployed.

But long after the fiscal damage is done and the fruitless (at best) spending has been forgotten, the graduated tax system will remain as a cudgel in the hands of the political class.

Why should New York State have graduated income-tax brackets? Why should the country, for that matter? Here’s what Governor Cuomo has to say: “In New York under the permanent tax code, an individual making a taxable income of only $20,000 pays the same marginal tax rate as an individual making $20 million. It’s just not fair.” If Governor Cuomo were taking my writing course, I’d knock ten points off for question-begging. Why is a single rate inherently unfair?

A single rate is not only progressive, it is perfectly progressive: One’s income-tax liability is perfectly proportional to one’s income: At 10 percent, that means $10 on $100 in income, and $10 million on $100 million in income. Income taxes progress proportionally to income. What would be onerous would be a capitation tax, meaning that if government spending averages $25,000 per capita, then everybody owes $25,000 in taxes, regardless of income. (There is, in my view, an excellent moral case for precisely that kind of tax, but that’s an argument for another day.) Under a flat tax, if my income is 20 times yours, my tax liability is 20 times yours. I do not see how that is unfair, or why a tax liability 25 or 50 times as large would be more fair, or why the definition of “fair” necessitates that one’s tax liability be disproportionately increased relative to one’s income. Governor Cuomo has not made that case, probably because nobody ever has challenged him to do so. The “fairness” of graduated tax rates is just part of the intellectual weather, something that progressives present as though it required no argumentation or explanation. Conservatives should take the opportunity to force them to make the case — they’ll still get away with the robbery, of course, but maybe not the glibness.

Governor Cuomo deserves the thanks of his constituents for the good work he did in his first months in office, and he deserves the thanks of the nation for demonstrating the life expectancy of fiscal rectitude among Democratic governors: about the same the life expectancy of a robin, and there’s a long winter ahead before New York can expect to see another one of those.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Fiscal Armageddon , General Shenanigans , States , Taxes

Mitt Romney Is Still Wrong about China



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I certainly hope Mitt Romney is as insincere as he appears to be. The alternative is that he really does, as he says, “see eye to eye” with Donald Trump on the question of China. In case you’ve forgotten Trump’s position on China, it is:

“Listen, you m—–f—–s” (and he didn’t say “muffins”) “we’re going to tax you 25 percent.”

If Romney sees eye to eye with Trump, he’s seeing eye to eye with Barack Obama as well. As I noted earlier:

The administration has been stepping up the anti-China rhetoric for a year now, and Treasury secretary Timothy Geithner underwhelmed the G-20 meeting in Gyeongju, South Korea, in late October with non-credible demands that each country adopt policies to keep both trade surpluses and trade deficits “below a specified share” of GDP, with his preferred target being about 4 percent. The Indian delegation responded with whatever the Hindi is for “Get the hell out of here!” — or, as finance minister Pranab Mukherjee, New Delhi’s man at the G-20, put it, “Protectionist policies are not acceptable.” Japan’s representative called the plan “unrealistic,” apparently ignorant of the fact that “unrealistic” is the defining adjective of the Obama administration. The Germans denounced Geithner’s proposal as a move toward a “command economy,” demonstrating a fine Teutonic flair for the obvious. Too protectionist for the Indians, too authoritarian for the Germans — that’s our economic policy.

Much of what is wrong with Romney’s born-again China hawkery was spelled out in this editorial:

China is, to be sure, a particularly brazen and impenitent currency manipulator. The renminbi is probably undervalued by at least 15 percent, though estimates vary greatly. China keeps its currency artificially weak to keep employment high in its export-driven economy. Another way of saying this is that China keeps the standard of living artificially low for its workers in order to prevent unemployment, and Mr. Romney promises to retaliate by lowering the standard of living of U.S. workers by raising the prices they pay for imported goods. Beijing’s long-term strategy is to allow the renminbi to rise, gradually, over a long period of time, as China makes the transition from being a poor exporter to a higher-wage economy more driven by internal demand. In the meantime, the United States receives a subsidy from China in the form of lower prices for consumer goods made there. 

Yes, China manipulates its currency. So does the European Union. So does the United States — that’s what we pay Ben Bernanke for. So does every country that has the ability to do so and finds it in its interest to do so.

China is not the reason that manufacturing began to decline in the United States in the second half of the 20th century. The United States was an uncontested manufacturing powerhouse in the 1950s in no small part because Germany and Japan had been bombed to smithereens, along with much of the rest of the civilized world, while potential global competitors in much of Europe, Latin America, and Asia were suffocating under socialism in various forms. That is no longer the case.

The United States is a country with an average household money income of some $50,000 — we are not going to be the world’s leader in low-margin injected-plastic manufacturing. That is not going to happen, and we should not be eager for it to happen.

If I thought Mitt Romney were just being a Machiavellian calculator, I might be a little more kindly disposed to him: I am all for Machiavellian calculators in the White House, provided they are ruthlessly pursuing our national interests. But I half-suspect that Mr. Romney half-believes what is coming out of his mouth, which is worrisome. If he really intends to slap a 25 percent tariff on Chinese goods, he is embarking on a dangerous and destructive path. If he is just sucking up to Donald Trump . . . I honestly do not get why Romney, and Rick Perry, and Sarah Palin, and others feel the need to kiss that particular ring. It is a mystery.

Here is something that is not a mystery: China will soon be the world’s second-largest consumer market, and India will be fourth or fifth in a decade or so. We Americans excel at making high-end stuff: Technology, aircraft, industrial machinery, etc. It’s easier to sell high-end stuff to rich people than to poor people. China’s trade imbalances with the world at large are well on their way toward being sorted out, and have been for some time, and the fact that the United States continues to have a large trade deficit vis-à-vis China is at least as much a reflection of policy decisions in Washington as of those in Beijing. (And it is worth remembering that about half of our trade deficit with the world at large is from a single product: oil.)

The only thing that will raise wages in the United States is real long-term investment in productive capital. That’s it. Romney is better placed than most to appreciate that — I think. I’m skeptical of the cult of the businessman, whether your businessman is Romney, Herman Cain, Donald Trump, or Ross Perot. The United States of America is not Bain Capital, and it is not a pizza chain. If you really think that being a fabulously successful businessman is a knock-’em-dead qualification for being president, keep this face in mind:

Tags: General Shenanigans

Easy Questions



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Round and Round It Goes . . .



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A critic writes:

 

Williamson still wants to pretend, in his words, that “capital investment is where growth and jobs come from.”

It isn’t. It never has been, and the sooner we recognize that America’s prosperity came from labor gaining the purchasing power to support other people working and producing goods and services for consumption, the sooner we will be able to pry away the usurers’ death grip on the revenues labor’s work created in the first place and the sooner we will get our economy back on the right track.

And where might labor purchasing power come from? The wealth fairy? Say’s what?

Quick question for Mike Maneval: Why does the guy operating the high-tech cotton combine make more money than the guy picking cotton by hand? 

Tags: General Shenanigans

The Burden



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There are about 12.4 million local-government employees in these United States, with a monthly payroll of about $51 billion. There are about 4.4 million state-government employees, with a monthly payroll of about $19.4 billion. And there are about 3 million federal employees, with a monthly payroll of about $15 billion. (For detailed figures, the Census: The federal numbers are from 2009; it’s worse now.)

More than 50 million Americans are on Medicaid. More than 100 million Americans receive health-care benefits at public expense, either through entitlement programs such as Medicaid and Medicare or through benefit programs for government employees.

So that’s a public sector of about 20 million government employees administering a welfare state with at least 100 million clients (and here I’m just combining Social Security and Medicaid, to avoid double-counting). Another way to say that is that 40 percent of the U.S. population is living at the expense of the other 60 percent (and it probably is more like half and half). More than a third of working-age U.S. adults are unemployed, and the central government is the largest employer. Economically speaking, we’re a fighter with one hand tied behind his back.

I recently spoke with a charming young woman who is a Ron Paul supporter. She said Representative Paul’s ideas have “universal appeal.” I asked her why, if his appeal is universal, he is so unpopular. She responded: He hasn’t had a fair chance to get his message out. Earlier this week, I spoke with a charming older gentleman, who is a former member of Congress. He said the solutions to our national fiscal problems are obvious. I asked him why, if the solutions are obvious, implementing them is so unpopular. He said it was a question of educating the American people. Both of these explanations are preposterous.

The American people are excruciatingly well educated about the relevant fact: the checks hitting their bank accounts, monthly or fortnightly. They will not be educated out of them. A generation ago, they might have been shamed out of it, but shame is now impotent. They will not willingly give up those checks, and there will always be a Barack Obama out there to profit by pretending that pillaging half of the country to bribe the other is a kind of moral crusade, rather than a lightly disguised form of armed robbery. Bear in mind that most of this money does not go to help the poor: This is not a country in which 40 percent of the people are poor. Government workers are routinely overcompensated, often lavishly so. This is not government inefficiency; this is corruption, on a scale that is vast and grotesque.

Pres. Ronald Reagan was fond of citing this passage, misattributed to Alexander Fraser Tytler, Lord Woodhouselee:  “A democracy cannot exist as a permanent form of government. It can only last until the citizens discover they can vote themselves largesse out of the public treasury. After that, the majority always votes for the candidate promising the most benefits from the public treasury with the result that the democracy always collapses over a loose fiscal policy, to be followed by a dictatorship, and then a monarchy.” And here we are, at the inflection point — not at the brink of becoming undemocratic, but at the brink of becoming a deeply dysfunctional democracy with a loose fiscal policy indeed.

Some 35 cents out of every dollar in take-home pay in this country comes in the form of a welfare benefit, and about 10 percent in the form of government salaries: The total burden is about 45 percent of personal income. I propose we make that a standard metric for judging the seriousness of small-government programs: Reduce that burden, and you’ll have done something worthwhile.

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Fiscal Armageddon , General Shenanigans

Paul Krugman Is Still Wrong about Texas



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Paul Krugman continues his campaign to discredit the economic success of Texas, and, as usual, he is none too particular about the facts. Let’s allow Professor K. to lay out his case:

[Texas] has, for many decades, had much faster population growth than the rest of America — about twice as fast since 1990. Several factors underlie this rapid population growth: a high birth rate, immigration from Mexico, and inward migration of Americans from other states, who are attracted to Texas by its warm weather and low cost of living, low housing costs in particular.

. . . But what does population growth have to do with job growth? Well, the high rate of population growth translates into above-average job growth through a couple of channels. Many of the people moving to Texas — retirees in search of warm winters, middle-class Mexicans in search of a safer life — bring purchasing power that leads to greater local employment. At the same time, the rapid growth in the Texas work force keeps wages low — almost 10 percent of Texan workers earn the minimum wage or less, well above the national average — and these low wages give corporations an incentive to move production to the Lone Star State.

What, indeed, does population growth have to do with job growth? Professor Krugman is half correct here — but intentionally only half correct: A booming population leads to growth in jobs. But there is another half to that equation: A booming economy, and the jobs that go with it, leads to population growth. Texas has added millions of people and millions of jobs in the past decade; New York, and many other struggling states, added virtually none of either. And it is not about the weather or other non-economic factors: People are not leaving California for Texas because Houston has a more pleasant climate (try it in August), or leaving New York because of the superior cultural amenities to be found in Nacogdoches and Lubbock. People are moving from the collapsing states into the expanding states because there is work to be had, and opportunity. I’ll set aside, for the moment, these “middle-class Mexicans” immigrating to Texas other than to note that “middle-class” does not broadly comport with the data we have on the economic characteristics of Mexican immigrants. To say the least.

Krugman points out that New York and Massachusetts both have lower unemployment rates than does Texas, and he goes on to parrot the “McJobs” myth: Sure, Texas has lots of jobs, but they’re crappy jobs at low wages. (My summary.) Or, as Professor Krugman puts it, “low wages give corporations an incentive to move production to the Lone Star State.” Are wages low in Texas? There is one question one must always ask when dealing with Paul Krugman’s statements of fact, at least when he’s writing in the New York Times: Is this true? Since he cites New York and Massachusetts, let’s do some comparison shopping between relevant U.S. metros: Harris County (that’s Houston and environs to you), Kings County (Brooklyn), and Suffolk County (Boston).

Houston, like Brooklyn and Boston, is a mixed bag: wealthy enclaves, immigrant communities rich and poor, students, government workers — your usual big urban confluence. In Harris County, the median household income is $50,577. In Brooklyn, it is $42,932, and in Suffolk County (which includes Boston and some nearby communities) it was $53,751. So, Boston has a median household income about 6 percent higher than Houston’s, while Brooklyn’s is about 15 percent lower than Houston’s.

Brooklyn is not the poorest part of New York, by a long shot (the Bronx is), and, looking at those income numbers above, you may think of something Professor Krugman mentions but does not really take properly into account: New York and Boston have a significantly higher cost of living than does Houston, or the rest of Texas. Even though Houston has a higher median income than does Brooklyn, and nearly equals that of Boston, comparing money wages does not tell us anything like the whole story: $50,000 a year in Houston is a very different thing from $50,000 a year in Boston or Brooklyn.

How different? Let’s look at the data: In spite of the fact that Texas did not have a housing crash like the rest of the country, housing remains quite inexpensive there. The typical owner-occupied home in Brooklyn costs well over a half-million dollars. In Suffolk County it’s nearly $400,000. In Houston? A whopping $130,100. Put another way: In Houston, the median household income is 39 percent of the cost of a typical house. In Brooklyn, the median household income is 8 percent of the cost of the median home, and in Boston it’s only 14 percent. When it comes to homeownership, $1 in earnings in Houston is worth a lot more than $1 in Brooklyn or Boston. But even that doesn’t really tell the story, because the typical house in Houston doesn’t look much like the typical house in Brooklyn: Some 64 percent of the homes in Houston are single-family units, i.e., houses. In Brooklyn, 85 percent are multi-family units, i.e. apartments and condos.

Professor Krugman knows that these variables are significant when comparing real standards of living, but he takes scant account of them. That is misleading, and he knows it is misleading.

Likewise, he knows that the rest of the picture is much more complicated than is his claim: “By the way, one in four Texans lacks health insurance, the highest proportion in the nation, thanks largely to the state’s small-government approach.” Is small government really the reason a relatively large number of Texans lack health insurance? Or might there be another explanation?

Houston, as it turns out, is a less white place than Boston (no surprise) and also less white than Brooklyn. All three cities have large foreign-born populations, but Houston is unusual in one regard: It is 41 percent Hispanic, many of those Hispanics are immigrants, and many of those immigrants are illegals. Texas is home to 1.77 million illegal immigrants; New York is home to about one-fourth that number, according to the Department of Homeland Security, and Massachusetts doesn’t make the top-25 list. Despite Professor Krugman’s invocation of “middle-class Mexicans” moving to Texas, the great majority of Mexican and Latin American immigrants to Texas are far from middle class. The fact is that, in the words of a Fed study, “Mexican immigrants are highly occupationally clustered (disproportionately work in distinctive “very low wage” occupations).” Nationally, Hispanic households’ median income is barely more than half that of non-Hispanic whites. And low-wage occupations also tend to be low-benefit occupations, meaning no health insurance. (That is, incidentally, one more good reason to break the link between employment and health insurance.) 

Further, some 28 percent of Texans are 18 years old or younger, higher than either New York or Massachusetts. Younger people are more likely to work in low-wage/low-benefit jobs, less likely to have health insurance — and less likely to need it.

The issues of immigration and age also touch on Professor Krugman’s point about the number of minimum-wage workers in Texas vs. other states. The Bureau of Labor Statistics, which seems to be his source for this claim, puts the average hourly wage in Texas at 90 percent of the national average, which suggests that wages are not wildly out of line in Texas compared with other states. (And, again, it is important to keep those cost-of-living differences in mind.) In general, I’m skeptical of this particular BLS data, because it is based on questionnaire responses, rather than some firmer source of data such as tax returns. People may not know their actual wages in some cases (you’d be surprised), and in many more cases might not be inclined to tell the truth about it when the government is on the other end of the line.

Interestingly, the BLS results find that, nationwide, the number of people being paid less than minimum wage — i.e., those being paid an illegal wage — was 40 percent higher than those being paid the minimum wage. What sort of workers are likely to earn minimum wage or less than minimum wage? Disproportionately, teenagers and illegal immigrants. You will not be surprised to learn that just as Texas has many times as many illegals as New York or Massachusetts, and it also has significantly more 16-to-19-year-old workers than either state.

Another important fact that escapes Krugman: The fact that a large number of workers make minimum wage, combined with a young and immigrant-heavy population and millions of new jobs, may very well mean that teens and others who otherwise would not be working at all have found employment. That is a sign of economic strength, not of stagnation. New York and Massachusetts would be better off with millions of new minimum-wage workers — if that meant millions fewer unemployed people.

All of this is too obvious for Paul Krugman to have overlooked it. And I expect he didn’t. I believe that he is presenting willfully incomplete and misleading information to the public, and using his academic credentials to prop up his shoddy journalism.

ADDENDUM:

Also, Professor Krugman owes his readers a correction, having written: “almost 10 percent of Texan workers earn the minimum wage or less, well above the national average.” Unless I am mistaken, that is an undeniable factual error: The number of Texas workers earning minimum wage is about half that, just over 5 percent. The number of hourly workers earning minimum wage in Texas is nearly 10 percent, but hourly workers are, in Texas as everywhere, generally paid less than salaries workers. But hourly workers are only about 56 percent of the Texas work force. Can we get a correction, New York Times

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism,published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: General Shenanigans , Intellectual Malpractice , Paul Krugman , Unemployment

Extortion, the Left, and the Make-Work Fallacy



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Andrew Leonard’s column is called “How the World Works,” and there is some unintended irony in that. It ought to be called, “How Andrew Leonard Wishes the World Would Work.” Where to start with his latest, “The final nail in the supply side coffin”?  

The theory of supply-side economics tells us that if you cut taxes on rich people and corporations, the newly liberated moguls and businessmen will take their windfall and invest it, creating jobs and accelerating the rate of economic growth. The benefits of a light hand on the upper class, therefore, will “trickle down” to the working man and woman.

Ever since Ronald Reagan first attempted to make supply-side economics a reality and proceeded to inaugurate an era of persistent government deficits and growing income inequality, it has become harder and harder to make the trickle-down argument with a straight face. But we’ve never seen anything quite like the disaster that’s playing out right now.

This is tendentious even by Mr. Leonard’s standards. I’d define supply-side economics as the esoteric doctrine that you can’t eat an omelet made from theoretical eggs. Which is to say, you can’t consume what hasn’t been produced, production logically precedes consumption, you cannot consume your way to prosperity but must instead produce your way to prosperity, etc.  

(And is it true that “we’ve never seen anything quite like the disaster that’s playing out right now”? I suppose it depends on whom you mean by “we.”)  

It’s always worth making the correction — even if it is for the 10,000th time — that “supply side” is not synonymous with “trickle down.” “Trickle down,” in fact, is a term largely devoid of meaning; it is merely rhetorical and pejorative, a way of trying to introduce old-school class warfare into the debate, and does not describe much of anything about how supply-side economists or policy thinkers think. Supply-side isn’t about privileging the privileged, but privileging production: Low tax rates on capital gains, for instance, benefit investors of modest means as well as wealthy ones, and in fact help make future gains from investing more attractive to the non-wealthy than present consumption. Helping producers produce more efficiently benefits workers by making their labor more profitable, which is the only sustainable source of real wage gains. Etc.  

That being said, Leonard is particularly wide of the mark here:

What makes this “recovery” so different? Perhaps the simplest answer is that labor has been broken as a force that can put pressure on management, so there’s little incentive for employers to turn profits into wage hikes or new jobs. Instead, employers are squeezing more out of the workers that they’ve got, and investing in equipment upgrades and new technology instead of human assets — labor productivity has risen sharply since the end of the recession.

Angels and ministers of grace defend us, businesses are investing in equipment and technology — in capital. Mr. Leonard is seemingly oblivious to the fact that this is an excellent, desirable thing. He stops just short of bemoaning these gains (squeezing!) in labor productivity.

This is an interesting window into the Left’s worldview. Mr. Leonard probably would not put it this way, but his view is that “labor” (as though there were a real entity in the world to be called  “labor”) can bring jobs and wage raises into existence through extortion (“pressure on management”) and that this is not only a substitute for real investment but is in fact preferable to it.

In reality such extortion has created acute incentives for businesses to invest in substitutes in order to avoid high U.S. labor costs, and to develop complex global production chains that allocate labor-intensive production to markets where labor prices are low. Extortion may be profitable, at least in the short term; being victimized by extortion is unprofitable, immediately, and firms respond to it. (Washington State’s machinists’ unions are creating lots of Boeing jobs — in South Carolina.) 

The United States led the world in manufacturing for 110 years (China is estimated to have surpassed the United States in manufacturing output in 2011) but employment in manufacturing steadily dropped as worker productivity went up but rising labor costs made substitutes for U.S. labor more attractive.  Gains in productivity need not necessarily lead to fewer jobs; but lower labor productivity usually will not lead to more jobs and most assuredly will not lead to sustainable, long-term jobs — it will lead to less output and lowered standards of living. (How does your theoretical omelet taste, Mr. President?)

American labor unions and their friends in Washington could learn something about productivity from their German counterparts. Consider the fact that of the world’s largest exporting nations, only a few are low-wage countries: Among the world’s 15 top exporters, only one is a truly poor country (China). The rest are mostly wealthy, high-wage countries, including the United States, Canada, Singapore, Belgium, etc. Prominent on that list is Germany, the world’s No. 2 exporter, a manufacturing powerhouse that ships out more goods than the United States with less than one-third of the population. As Matthew Yglesias points out, German unions have been engaged in the opposite of the profit-destroying extortion favored by their American counterparts, working closely with firms to practice what Yglesias calls “very severe wage restraint,” which is another way of saying “improving labor productivity.” Germany’s median household income is not as high as the U.S. median, but Germany is hardly a poor country, and many a job-seeking industrial worker would, I suspect, be happier with German opportunities at German wages than with American opportunities at American wages. If U.S. labor leaders were as intelligent as they are power-hungry, they’d be encouraging both Washington and Wall Street to create conditions favorable to even more capital investment, especially investment in hard capital such as equipment and facilities. That is where jobs and wage growth come from.

Mr. Leonard is distressed that most of the income growth in the United States during this feeble recovery has come in the form of corporate profits (88 percent) rather than wages (1 percent), as though wages would be higher if profits were lower. In fact, the labor market is like any other market in that, ultimately, consumers rule. (If you don’t believe it, ask a guy who’s been out of work for two years.) Sellers who don’t have a product and a price that the market wants don’t make sales. That’s true whether you are selling software or an hour’s worth of work.

A great deal of our present unemployment is long-term and structural, and the only way those workers are coming back into employment is through greater productivity, which means either higher output or lower wages, or some combination of the two. Lower wages are not wildly popular, so higher output is where we probably want to go.

How do you get productivity gains? Stop treating productivity gains like a sin, for starters.

And perhaps start thinking about the uncomfortable fact that U.S. unemployment and wage stagnation probably is in no small part the result of the declining quality of our work force. Producers want to produce, and there is a reason they are not buying labor on the U.S. market.

Highly skilled and highly educated workers thrive in the United States, even though most of them do not work in industries in which “labor” extorts management for higher wages, relying instead on competition to bump up their compensation. This is a pretty great place to be an engineer or a pharmacist and a rotten place to be an unskilled high-school dropout, a non–English speaking job-seeker, or a 30-odd-year-old man looking for his first regular job. But we are getting more of the latter workers every year. Critical public-policy failures have left the United States with a large population of low-quality workers who are only marginally employable at U.S. wages, if employable at all. Those key failures include catastrophically inept government-monopoly schools, an immigration policy that pays little or no attention to worker productivity, and a welfare state that discourages early-life labor-market entry, which all together have left us with a population in which one-third of adults are illiterate or barely literate, have negligible skills, and in many cases lack even the basic competence to reliably perform routine tasks. We’re all stocked up on farmhands and off-the-books dishwashers, but good engineers are hard to come by. Ask a Democrat how to change that, and the answer will be to dump another $1 trillion into the criminally negligent education system that helped get us here in the first place, a second $1 trillion into training the unemployable for work on newly dreamt-up “shovel-ready” projects that don’t exist, etc.

When it comes to the woes of the American labor market, the problem may indeed be on the supply side, and all the political tinkering in the world isn’t going to make unproductive workers productive. Neither will union extortion or wasting money on government-subsidized make-work projects. And only the most lumpen of the lumpenleft could believe that the answer to stagnant wages and scarce job opportunities is to make businesses less profitable.

—  Kevin D. Williamson is a deputy managing editor of  National Review and author of The Politically Incorrect Guide to Socialism,published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: General Shenanigans

Forbes Continues to Indulge Intellectual Fraud



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A thousand apologies for continuing to bore everybody with this, but Forbes’s Ralph Benko now protests that the problem with my growth piece (discussed here) is that it was not clear that I was talking about per-capita GDP.

Here is what I wrote:

 

“If you chart the growth in real per capita GDP of the United States — the growth in economic output relative to the size of the population — you will see a remarkably straight line indicating about 2 percent real growth per year.” What followed was a chart labeled “Real Per Capita GDP.”

What part of “per capita GDP” do the financial sophisticates at Forbes not understand?

I have written to Forbes’s Lewis D’Vorkin seeking a correction, to no avail. 

There are two possible explanations. One is that the editors of Forbes do not read Mr. Benko’s work. For this I would not blame them, as it is tedious and intellectually dishonest. (I do blame them for publishing it.) The second possibility is that they are aware of these errors and simply do not care about them, in which case it is a sad day for a once-proud name in American journalism.

Tags: General Shenanigans

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