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Tags: Paul Krugman

Fiscal Insanity Is Now the Coin of the Realm



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The Tuesday edition of the Morning Jolt features a look at how Chuck Hagel is the president’s “self-esteem pick” for the Pentagon, how the president compares his performance to that of a major actress, and then this bit of unreal reality…

Fiscal Insanity Is Now the Coin of the Realm

I’ll let Stephen Green get you up to speed:

In case you missed it, yes, there have been calls for the Treasury to mint itself a platinum coin, stamp a one and a dozen zeroes on it, and call it money. Yes, Tim Geithner has the Constitutional authority to do so. Yes, he’d be removing a trillion dollars from productive use by the stealth tax of inflation.

To date, most of the idiots and vile progs (but I repeat myself) hopping on this particular bandwagon have been low-level blogger types. Like me, but viler and even dumber. Now they have Paul Krugman on their side, which will drum up big support in Blue States where political idiocy is what people have with their coffee every morning.

I’ll give you a moment for your head to stop spinning. Now, our Dan Foster lays out a couple reasons why this is a bad idea:

Of course, there’s a hitch or two in the plan to mint The Coin. For one thing, numismatizing the debt by striking trillion-dollar debt discs is not exactly what former representative Mike Castle (R., Del.) had in mind in 1995 when he introduced the legislation that turned into the provision in public law 104-208. Dylan Matthews of theWashington Post tracked down this “unsuspecting godfather” of the platinum gambit, and Castle confirmed as much. “That was never the intent of anything that I drafted or that anyone who worked with me drafted,” Castle told Matthews. Indeed, the legislation was designed to give the Treasury flexibility to create more affordable platinum coins for collectors. To use that authority to backdoor the 17th and 18th trillion dollars of the national debt would be, according to Castle, “so far-fetched and so black helicopter-ish a type of methodology of trying to resolve something like this that I think the public would totally scoff at it.”

Some on the left understand this. Take, for instance, Kevin Drum of Mother Jones, who flatly titles a post on the subject “No, a $1 Trillion Platinum Coin Is Not Legal.” Drum, doubting there is enough of the requisite straitjacket brand of strict constructionism in the U.S. court system to uphold such a tortured reading of the statute, dismisses the ploy as “the kind of thing that Herman Cain would come up with” (the dread reductio ad Hermanum, a conversation-stopper in progressive circles).

They say that because the coin isn’t meant for general circulation – “hey, can anybody make change for a trillion?” – it won’t be inflationary. Yet like a lot of folks with a lot more financial savvy than myself, I’m a bit wary of telling the world financial markets, “hey, don’t worry about the U.S. federal government’s ability to pay for everything that it wants to buy and to pay back the unimaginable sums it has borrowed; we’ve got a magic trillion dollar coin now, so we’ve got a trillion bucks more than we did a little while ago.”

And Dan explains why he thinks this idea is going nowhere: “If the president minted The Coin, it might win him a few cheers from the same folks on the professional left who have called him a wuss for four years. But it would convince just about everybody else that he’s back on the Choom Gang. That’s why it won’t ever happen unless the luck of the GOP is as good in 2013 as it was bad in 2012.”

For what it’s worth, at least one Republican congressman wants to make such a move illegal:

U.S. Rep. Greg Walden (R-Ore.) today announced plans to introduce a bill to stop a proposal to mint high-value platinum coins to pay the federal government’s bills.

“Some people are in denial about the need to reduce spending and balance the budget. This scheme to mint trillion dollar platinum coins is absurd and dangerous, and would be laughable if the proponents weren’t so serious about it as a solution. I’m introducing a bill to stop it in its tracks,” Rep. Walden said.

“My wife and I have owned and operated a small business since 1986. When it came time to pay the bills, we couldn’t just mint a coin to create more money out of thin air. We sat down and figured out how to balance the books. That’s what Washington needs to do as well. My bill will take the coin scheme off the table by disallowing the Treasury to mint platinum coins as a way to pay down the debt. We must reduce spending and get our fiscal house in order,” Rep. Walden said.

Frank J.: “If you put a trillion dollar coin into a soda vending machine, you now own all soda manufacturers.”

Tags: Barack Obama , Debt Ceiling , Paul Krugman

Liberals Always Believe Implausible Tales of GOP Disarray



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From the Thursday edition of the Morning Jolt:

Politico Columnist Writes Anti-GOP Satire; Lefties Completely Fooled, Repeat as Fact

You want to talk cocooning?

When Roger Simon wrote in Politico Wednesday that Paul Ryan’s new nickname for Mitt Romney is “Stench,” a number of news outlets — from MSNBC to Mediaite — took it seriously.

Simon told BuzzFeed: “Some people always don’t get something, but I figured describing PowerPoint as having been invented to euthanize cattle would make the satire clear. I guess people hate PowerPoint more than I thought.”

Among those fooled? Paul Krugman.

The thing is, every cycle we see this sort of thing. Back in 2004, this Democratic Underground post was making the rounds in the final days:

Sent: Saturday, October 30, 2004 9:51 PM

To: Class of 1976 discussion group.; Class of 1976 discussion group.

Subject: RE: Notes from a friend on what Kerry’s team is saying

ok, got a call on my cell phone this am while taking my son to hockey. my friend in the kerry campaign spoke late last night with mark mehlman of the bush team. mehlman was a roomate of my friend when they were both at the harvard law school. they are at opposite ends of the politcal spectrum, but are very good friends.

mehlman says the bush team is in “major melt down” because their polling has them losing in ohio and florida, so they are in a mad dash to pull something out in the upper midwest. michigan isn’t really in play. he called it a “head fake”. wisconsin is slipping away, bush spoke in green bay today to less than 5,000 people (kerry drew 80,000 in madison on thursday). iowa has the numbers potentially but they’ve focused on it way too late, after the dems had a massive absentee push, so iowa is unlikely. they can’t win with minnesota alone and even that state doesn’t look good. 

mehlman says that there is incredible discord at the top. cheney is absolutley livid with rove on the overall strategy (“we peaked too soon you bastard”) and with karen hughes for not adequately preparing bush for the debates (“he looked like a g** d***** mental patient”). cheney is apparently a “real monster”. the rnc doesn’t know what to do because they can’t get any clear direction from the top. mehlman says that bush’s slide in their polls began about three weeks before the debates when kerry when into attack mode with major foreign policy speeches at nyu and at a national guard convention, the day after bush spoke. the slide accelerated big time after the debates, “everyone was as bad as the first with no let-up in free fall” according to mehlman. cheney freaked during the first debate, convinced that bush “‘lost the f****** election in front of 65 million people”. Now they simply don’t have the numbers to win in Florida, have not got their ducks in a row to “deflect” the massive number of early voters and are having real trouble maintaining the base in Florida and elsewhere (“our people are just turning away”). in ohio they’ve been simply overwhelmed with the new voter registrations and have been unsuccessful in court challenges. bush’s number actually go now when he visits ohio after Treasury Secretary Snow’s comments in the state that job losses were a “myth”. Additionally many repubs are pissed about the financial proligacy of Bush and Cheney and their incompetence in Iraq, so a lot are simply going to “take a pass”, read not vote. bush apparently has been totally “out of it” believing Rove and Hughes that everything was fine and that victory was assured, but is finally and slowing catching on that he might lose this thing. yesterday morning when made aware of the bin laden tape in nh, simply said. “It’s over.”

The first clue that entire above message is BS: Bush’s campaign manager was KEN Mehlman, not Mark Mehlman.

As we all know, none of the above “rumors” were true. I reprint all that to illuminate how people are A) willing to make up elaborate tales of chaos in the opposition  in order to boost morale on their own side and B) how credulous people are when they hear what they want to hear – i.e., the other guys are hapless and doomed, the public is breaking to our side, a landslide victory is at hand, etc.

Tobin Harshaw:            

As Ben Smith of Buzzfeed, a former Politico blogger, tweeted: “So uh a lot of people seem not to have picked up that @politicoroger’s column was satire.” Put more succinctly by conservative blogger JammieWearingFool: “Satire should actually be funny.”

Or, at least it should be pretty obvious. There is no underestimating the literal-mindedness of the American reader: Years ago when I worked at the Times we published a satirical op-ed column by Steve Martin riffing on the idea that a NASA Mars probe had discovered millions of kittens on the Red Planet. Shortly thereafter, a subscriber sent a terse letter to the editor asking us to “inform your science correspondent” that the lack of oxygen on Mars made kitten infestation highly unlikely.

Naturally, no writer wants to put a blinking sign indicating “This Is a Joke” above his or her parody piece. But editors should realize that if there is even a chance that such a sign is necessary, it’s probably best to spike the whole idea. Otherwise, you might end up fooling a lot of people, maybe even a Nobel Prize winner.

In Simon’s defense, it’s not that hard to fool Paul Krugman.

A lot of people believe what they want to believe because they see what they want to see.

Tags: Paul Krugman , Paul Ryan , Politico

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

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

A Beautiful Sentiment



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Reader Jonathan P. passes along the quote of the week:

“The Dallas Fed will henceforth be providing monthly updates on employment in Texas through our website. We hope it will be a useful tool for everyone, ranging from columnists who write for The New York Times to the pundits who provide commentary for Fox News, as well as serious economists.”

Tags: Paul Krugman

More on Texas



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Tons of Texas economic insights here.

Tags: Debt , Deficits , Intellectual Malpractice , Paul Krugman , Unemployment

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

Statistical Chicanery: Texas Budget Edition



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The Paul Krugman–led chorus trying to discredit Texas’s economic model has been claiming that Texas relied more heavily than any other state on federal stimulus money to close its budget gap. And there is an element of truth to that: Stimulus funds, they point out, covered 97 percent of Texas’s shortfall. Is that because Texas is, in the words of Jason Kuznicki (who should know better), a “welfare queen?” Or is it because Texas had a fairly small gap to begin with, so the federal funds went a lot further in covering it?

That 97 percent figure got retailed all over the place — CNN, Jon Chait at The New Republic, etc. But it is basically meaningless to say that “Texas was the state that depended most” on stimulus funds without taking into account the size of the gap covered. Texas’s was just $6.6 billion. For comparison, California’s deficit in 2009 was more than $26 billion.

The fact is that Texas, at $985 per capita, received less stimulus funding than almost any other state. (Virginia and Nebraska were lower.)

It is no surprise to find Paul Krugman manipulating figures, but I am surprised by the number of people who fell for this storyline.

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

Tags: Deficits , Paul Krugman , The States

Texas Scandalizes Liberals



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Today’s breaking news: Texas took stimulus money. Yeah, I know — breaking news from eons ago. The Left is currently engaged in a fairly transparent campaign to discredit governor Rick Perry and the Texas model of limited, pay-as-you-go government, largely because Democrats cannot abide the idea of a state with a strong economy and no income tax. Former economist Paul Krugman is leading that particular chorus, and the recent nattering from the likes of Jon Chait and Kos over the state’s accepting federal stimulus funds is silly. It is also a rather naked attempt to defuse the continued disgust with Democrats inspired by that particularly spectacular pork-a-thon: “See! See! Republicans took the money, too!”

If Rick Perry had had his way, there would have been no stimulus bill of the sort we saw and will be paying for (for a long, long time). Yes, that would have made balancing Texas’s budget more difficult — to the tune of $6.6 billion in a state with a $1.2 trillion economy. Shock, horror, etc. Texas had more than enough money in its reserves to cover that sum. Perry could have gutted those reserves to make a political point, but he chose not to. That is prudence, not grandstanding. It does not make the stimulus any less of a national shame.

Republicans lost the stimulus fight but are under no special obligation to leave money sitting on the table when Uncle puts it out there, which Texas did rather than tap the billions in its rainy-day fund. If I had my way, there would be no Social Security or federal highway system, but I’ll drive on the interstates, anyway: They’re there, and I pay for them, and I am under no obligation to deny myself the use of the things Joe Government funds out of the money extorted from me. If Texas could have negotiated a deal whereby it neither received stimulus payments nor saw its citizens put on the hook for funding them, I suspect Texas might have taken that deal — just as I would  opt out of Social Security today (yesterday!) if I had a choice. But to treat it as a scandal that a state is accepting some of the money being appropriated from its residents is boneheaded.

Texas’s government revenue is running about $15 billion less than expected this time around. So, what is the state doing? Senate Republicans have just submitted a bill that will — radical idea! — limit spending to the available revenue. AP:

The Senate bill calls for $73.8 billion in expenditures, exactly what the state comptroller said Texas will earn in revenues over the next two years.

The state agencies and the bureaucrats’ lobby want about $100 billion. They are not going to get it. That’s what legislatures are for — not that you’d know from the way our national one operates.

Chait and Krugman cannot abide by Texas’s “Just Say No” model of appropriations, because they are ideologically beholden to the belief that people cannot thrive without a very robust and paternalistic state to mind them. But they can, and do — and, once the bond markets get done with Washington, they will, nationally.

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

Tags: Balanced Budgets , Debt , Deficits , Despair , Paul Krugman , States

No, Paul Krugman, Texas Is Not Broke



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In terms of harbingers of the apocalypse, it isn’t exactly dogs and cats living together or John Bolton exchanging facial-hair-grooming tips over sugary mint tea with ayatollahs, but, brace yourselves: Texas is facing a projected budget deficit. I know, I know: horrors, right?

Paul Krugman is practically rubbing his hands together with glee like some thin-mustached and top-hatted melodrama villain: Bwahahaha! If Texas goes down, conservative economics goes down with it!I shall rule the world! Look for the usual liberal snots to be talking up the story: Texas is finished, baby!

Keep your pants on, professor. Texas is not going to have a budget shortfall.

Texas’s present situation is not exactly unprecedented. It happens in Texas from time to time: You have a state with no income tax, property taxes assessed at the local level (where the taxpayers are apt to fire the taxspenders), and very little else, revenue-wise — Texas has one of the lowest tax burdens in the country — which leaves the state sales tax and the 1-percent “franchise” tax, which is a fancy way of saying a weird little business-revenue tax on firms with more than $1 million in sales. (Hey, New Jersey:  How’d you like to trade your current state-tax burden for a 1-percent business tax and a 6.25 percent sales tax? You get most of the nation’s  new jobs in the deal, too.) So, money’s always tight for Lone Star State government, and lots of Texans kind of like it like that.

But Texas, despite its small-government reputation, is not exactly Galt’s Gulch — you’ve still got to pay those menacing state troopers and the surly fat lady down at the DMV, etc. On top of all that, Texas has a boomier-bustier economy than most other states do, mostly because of the outsize role the oil business plays in the economy, and hence in the tax-revenue stream.

Ergo, the occasional shortfall projection.

Except that Texas doesn’t do shortfalls. Texas starts from scratch: Every year is basically Year Zero when it comes to the state budget — there is no assumption that next year’s funding will match or exceed this year’s, and the state’s constitution explicitly forbids any legislature to tie the hands of a subsequent legislature, financially or otherwise. When necessary, Texas implements zero-baseline budgets, in order to keep the state living within its means, even if Paul Krugman thinks it beastly.

Rick Perry established a pretty good standard for gubernatorial brass-dangling the last time there was a projected budget shortfall, in 2003. Governor Perry and his colleagues in the Texas legislature took a radical right-wing approach to government budgeting, inasmuch as they started by asking: “How much money do we have?” (Insane, right?) After they figured out how much money they were going to have, they then decided how to divvy it up, in total and radical and right-wingish contravention of the Washington model of budgeting, which goes: Spend everything you have, spend everything you can borrow, and then spend some more, regardless of how much you actually have to spend. And then spend some more; repeat. Which is totally how James Madison wanted it, I am sure.

In 2003, Governor Perry and Texas Republicans took the state’s budget baseline to zero, and told state agencies to write new budgets, based on what they actually needed to spend to accomplish their missions, rather than based on increasing by 3 percent or 4 percent or 30 percent or 40  percent what they spent last year. And the Republicans handled the politics pretty well: Instead of calling state agency chiefs down to the legislature to be dressed down by pompous elected types or denouncing them from the governor’s office, they had a bunch of what must have been drearily tedious private meetings with them, and helped them to sweat their budgets down in a rigorous but respectful way. It worked. Texas balanced the books, and the place does not look like Afghanistan.

Republicans like to brag that they balanced the budget with no tax increases, which is almost true (some fees and such went up, and some new ones were created). The franchise tax, which had originally kicked in at around $300,000 in revenue but had been pushed up to $1 million, is coming back down to a $600,000 threshold. It’s a tax increase, but it’s not much of one. If congressional Republicans in D.C. performed as well as Republicans in Austin, we’d be pinning medals on their chests.

Texas’s low-B.S. approach has had some salubrious effects, as I’ve documented here and here. It also left Texas with surpluses that allowed the state to put about $10 billion in its rainy-day fund, which could come in handy now that the economy seems to be clouding up a little. Could, but probably won’t: Republicans plan to introduce a budget that comes in within current revenue without touching the rainy-day fund. Get your head around that: There’s a multibillion-dollar pot of cash sitting there in front of politicians who must be just slavering inside at the thought of it, and they aren’t going to touch it — even though they have a pretty good excuse. Imagine a Congress that could do that.

They haven’t delivered yet, but Perry’s Republicans did the stand-up thing last time around and reaped the rewards. Expect them to do it again.

And it may not be all that hard: Pace Krugman et al., Texas’s potential shortfall probably is not $25 billion. The inside guys talk about $11 billion to $15 billion, spread out over a two-year budget. (Texas writes one budget every two years, and has a legislature that meets every two years.) Even the liberal bedwetters over at the Center for Budget and Policy Priorities expect the budget hole to amount to about 10 percent of the whole enchilada, as compared to more than 50 percent in basketcase California.

Of that $11–$15 billion, about $8 billion will be Medicaid  — and that is the real budget problem faced by Texas and many other states. Rules changes associated with Obamacare will add about 71 percent to Texas’s Medicaid expenses over the first ten years of implementation — that’s Texas’s out-of-pocket expense, not money that the feds reimburse under Medicaid — an increase that quite literally threatens to bankrupt the state. Analysts predict that Medicaid expenses could outstrip all state revenue within a few decades — meaning that Texas could not pay its Medicaid expenses, even if it dedicated 100 percent of its tax revenue to them. That is going to have to change, and I’m going to bet that Texas has better ideas for fixing that problem than Paul  Krugman does.

Texas doesn’t need a new tax to fix it; it ain’t broke.

UPDATE: A reader points out something I should have pointed out:

Krugman points to our middlin’ unemployment rate, saying “it’s about the same as the unemployment rate in New York or Massachusetts.”

Well, that is true. But he forgets one thing. Texas has a 7.9% unemployment rate after a net inflow of 1.78 million job seekers and their families over the  last ten years, while New York’s 8% unemployment rate come after 847,000 people left the state.

If Mr. Krugman would look at the data with a more discerning eye, he’d realize how amazing this statistic is.

Indeed, it is. I also winced a little at Krugman’s assertion that Texas has to create lots of jobs just to keep up with all the people moving there. Why does the good professor think people are moving there in the first place? Ballet Lubbock is great and  all, but I suspect it’s the jobs.

– Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, now available at Amazon.com. You can buy an autographed copy through National Review Online here.

Tags: Deficits , General Shenanigans , Melodrama Villains , Pants , Paul Krugman , The States

70 Percent: The Myth of the Consumer Economy



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Thomas Aquinas warned against homo unius libri — the “man of one book.” Harvard president Edward Everett followed that up, warning against “not only to the man of one book, but also to the man of one idea, in whom the sense of proportion is lacking, and who sees only that for which he looks.”

God defend us from man of one datum, particularly if that man is an economist, and particularly if the datum is wrong.

Exhibit A is the constantly repeated but entirely untrue statement that consumer spending represents 70 percent of the U.S. economy, and that it is therefore imperative that we give consumers some stimulus, in the form of tax rebates, more generous unemployment checks, or cocaine-monkey research grants, in order to put some schmundo in Joe Consumer’s hip pocket, the better for him to carry that seven-tenths of the economy he allegedly holds upon his shoulders like some debt-ridden Atlas chained to Mount Wal-Mart, his liver pecked by a winged and deathless Visa bill.

Who is guilty of repeating this? My occasional sparring partner Robert Reich, for one, who recently sent my head spinning all the way around by writing: “The problem is consumers, who are 70 percent of the economy. They can’t and won’t buy.” This is a problem, Reich argued, because Americans need to be driven further into debt: “Without consumers, businesses have no reason to borrow more. Except to speculate by buying back their own stock and doing mergers and acquisitions, which is exactly what they’re doing.”

The New York Times repeated the same idea in Sunday’s editorial denouncing the Republicans’ new Pledge. The Times’ editorialists probably heard it from Robert Reich, and they framed their argument similarly: “The pledge asserts that letting the high-end tax cuts expire would kill job creation. With the economy weak, letting all the tax cuts expire would be a big hit to consumer spending and, by extension, job growth. But richer Americans tend to save, not spend, their tax cuts.”

Reuters repeats this canard. Martin Crutsinger, the clueless economy reporter for the Associated Press, publishes it all the time. Fareed Zakaria and Pauly K. sing from this hymnal. Practically everybody saying the stimulus should have been bigger (and, for those of you outside New York and Washington: yes, such creatures walk among us) cites that datum.

It is not true.

As Michael Mandel documents copiously in his Bloomberg Businessweek column, what government statistics call “consumer spending” is not — get this! — consumer spending. Most of it isn’t, anyway. Lots of that so-called consumer spending is in fact government spending; Medicare and Medicaid, for instance, are lumped in there, as is most health-care spending, which amounts to, oh, $2 trillion a year, which might tend to throw the consumer-spending numbers off a bit. Health-care spending isn’t really driven by consumers (which is why our health-care market is so messed up, incidentally!), but by insurance companies, government, and other non-consumer enterprises. Something on the order of 15 percent of health-care spending actually comes out of consumers’ pockets. Chickenfeed, in the vulgate.

All sorts of other stuff is dumped into that category: the money spent by nonprofits, for instance, along with political parties and campaigns. Never mind, for the moment, that a big chunk of that actual consumer spending goes to things like clothes and electronics and shoes made abroad (and the consumption of which therefore has little direct impact on domestic economic activity), the truth is that consumer spending, in reality, represents less than half of U.S. economic activity, probably around 40 percent.

That’s a specific kind of error to make. But let’s take a step back from the specific to the categorical: Whatever fraction of our economy is represented by household consumption, 100 percent of our economy — and every economy — is represented by production. We cannot consume that which has not been produced. Consumption is not really the problem: People like to consume. Americans consume eagerly, even to excess. In fact, when the economy is good, these same liberal scolds fretting at present about our momentarily lean consumption will lecture us about the evils of over-consumption, which makes Americans obesely face-stuffing SUV-ridden despoilers of pristine rainforests and Makes Them Hate Us, etc.

The problem of economic policy is not getting people to consume. It is getting them to produce. You can train a monkey to consume. (In fact, he requires no training, especially once you get him coked up on the taxpayers’ dime.) Americans are extraordinarily productive people, but our economy has taken a hit because we have a couple of trillion dollars’ worth of capital locked up in dead real estate, dead securities, and the swelling sovereign debt upon which our pet Leviathan battens. If you have a trillion dollars locked up in residential real estate that still is over-valued — its inflated price being sustained by hook and by crook by the geniuses in Washington — that capital can’t be put to real productive uses. (Also, people who could otherwise buy or rent cheap real estate will be paying too much for housing, taking yet more potentially productive capital out of the markets.)

It’s worth revisiting the sage words of the New York Times and its horror of the fact that “richer Americans tend to save, not spend, their tax cuts.” But jobs don’t come from consumption; jobs come from production. People have jobs because they make useful things and provide useful services, which people want, in any event (but not at any price). You want people to produce, you need capital. You need investments.

And you know where investment capital comes from? Savings, geniuses. Real savings, i.e. the savings that come from consuming less than you produce. Reich, the Times, Krugman, and every stimulus-happy pundit on the Democratic side of the aisle is arguing for an economic policy specifically and particularly designed to discourage saving and discourage investment, while encouraging consumption and encouraging borrowing. That’s the ultimate in magical thinking: We’ll just borrow another few trillion dollars and consume our way out of what ails us! You want fries with that?

I’ve got some bad news for you, Sunshine, some ancient and unalterable and inescapable bad news: As ye sow, so shall ye reap. We’re presently sowing jack, and the Obama administration, the Pelosi-Reid Congress, the Krugmans and Reichs of the world are working hard to make sure that we sow even less. Real prosperity only comes from real productivity, which means real savings and real investment. Everything else is a Beltway full-employment program for social engineers, unicorn wranglers, and fairie-dust sprinklers.

I might point out that Robert Reich was secretary of labor, is presently a chancellor’s professor at Berkeley’s Goldman School of Public Policy, is a former Harvard professor, and a former Brandeis professor, and apparently does not know what is in the U.S. Bureau of Economic Analysis data. But he wants a government composed of wise men such as himself to spend your money on your behalf, because you are too stupid to invest it yourself. Hell, a rube like you — you might even save it, much to the horror of the New York Times.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Tags: Debt , Deficits , Despair , Fiscal Armageddon , General Shenanigans , Paul Krugman , Robert Reich

Listen to the CBO, Learn from the Greeks



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Two things to keep in mind in light of today’s news: One is that the CBO keeps ringing the alarm bells — even today, in the course of trimming, a little bit, its deficit estimate for 2010: “Continued large deficits and the resulting increases in federal debt over time would reduce long-term economic growth.”

Which is to say, Paul Krugman & Co. aside, spending and deficits can be a brake on growth as well as an accelerator of it. Today’s stimulus is tomorrow’s burden.

The second thing: Take another look at Greece. Greece is falling apart. Krugman & Co. will tell you that’s the result of too much austerity and not enough stimulus spending. But there is another lesson to take away from Greece: When you let the public sector get that big — so big it dominates the economy — then it is nearly impossible to cut back public-sector spending without creating an economic crisis. Our stimulus programs are geared, in no small part, toward achieving permanent expansions of the public sector. Which is to say, we’re stimulating ourselves into a Greek corner. Best to reverse course now before we’re locked in good and tight.

Tags: Debt , Deficits , Fiscal Armageddon , General Shenanigans , Greece , Paul Krugman

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