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Friday, August 15, 2003

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"..taxation is essentially a relic of feudalism. It is the rent that kings took for allowing the serfs and others to work the land that the kings owned. But we don't have a monarchy any longer. People shouldn't have to pay to be able to work and to be able to own land. This [is] just the relic of feudalism. It's like extending serfdom into a free Republic"

-- Tibor Machan, Mises Institute

"Warren Buffett, the billionaire financial adviser to Arnold Schwarzenegger's campaign for California governor, strongly suggested in an interview that the state's property taxes need to be higher... said Mr. Buffett, the taxes on his Omaha home rose $1,920 this year, compared with $23 on the Laguna Beach home.

"'This property-tax illustration, that tells you, you can draw certain conclusions from that,' said Mr. Buffett."

-- "Schwarzenegger Adviser Buffett Hints Property Tax Is Too Low," The Wall Street Journal, August 15, 2003

Thanks to reader Art Patten for the link.

Posted by Donald L. Luskin at 6:25 PM | link  

MILITARY PRIVATIZATION: READERS SPEAK    On our letters page, readers speak out about Paul Krugman's clams in his August 12 New York Times column that Iraq has become a military logistical disaster, and that it's all the fault of "privatization" (see my vivisections of that column here and here). Robert Avery and John Corn point out examples of showing that privatized military support services have been the norm for many decades. Mike Cacora explains the economics of why the skills necessary to deliver military support are best marshaled in the private sector. And a former Navy Seal and military dad worries about "a mistake of 'Vietnam' proportions" that could be made if the US military caves in to kvetching by critics like Krugman.

Posted by Donald L. Luskin at 1:33 PM | link  

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"Kudos to you for highlighting Arnold Schwarzenegger's terrible decision to choose the Sage of Omaha, er, the Emperor of Emerald Bay -- Warren Buffett -- as an economic adviser. This is clear: Any advice given by Buffett will harm the state and its entrepreneurs. Schwarzenegger appears, now, a much different political agent than the days of the 'eighties when I saw him at all of the major fundraisers for Jack Kemp. I guess that he's bought into the secrets of success of the Kennedy money: when you cannot produce money, buy political protection to preserve what you have.

"In any event, my counterproposals to Buffett follow:

1) Special tax assessments on See's Candy. A 50 cent tax per piece on the really good stuff: the Bordeaux, the Scotch Mallows, the Butter chews, any of the new-fangled truffles; a 25 cent tax per piece on the good stuff: the chocolate creams, the good milk chocolate varieties, the peanut brittle, and Ms. See's Fudge; a 10 cent tax on the remaining items, except those really weird nougaty things that nobody eats anyway. This should be good for some $100 million per annum, which we can annuitize for a special See's bond that should allow at least a $1.5 billion issuance;

2) Special tax assessment on Coke, Cherry Coke, and all related corporate products: 50 cents per can. Hey, it'll help reduce obesity as well! This should be good for at least $200 million per annum, which, when annuitized as a Cola bond should allow for a $3.0 billion issuance;

3) Special tax assessment on car insurance policies: $1,000 per car per annum. This is a slam dunk. Californians have to drive and Berkshire Hathaway is well positioned by its ownership of GEICO and Twenty-first Century insurance companies to become a wonderful tax collector for the state. Assuming these two companies have a 20% market share of 50 million cars, this could raise an amazing $10 billion per year! We could wipe out the deficit in two years with this tax and use the above referenced bond issues to finance Arnold's after-school programs;

4) Special tax assessment on re-insurance policies issued in California: again, a $1,000 assessment per policy per annum; $3,000 assessment for 'specialty' policies conceived of and written in Omaha by really smart mathematicians from India;

5) Special tax assessment on shoes: $3 per pair, except for Dexters, which will be assessed $30 per pair because Warren wants to help out the state;

6) Special tax assessment on privately chartered jets: Wow! What a treasure trove with a state populated with the likes of Spielberg, Hanks, Cruise and the like, not to mention all of the investment bankers and VC guys in the Bay Area. $1,000 per seat per flight. Assuming your 'average' G4 has eight seats, that's $8,000 per flight. At 100 flights per day, this amounts to $292 million per annum. Annuitize this as a 'capital flight' bond and the state has created another $4.38 bil in bonds to re-finance itself.

"And this is just a beginning. We haven't explored special wealth taxes assessed against Berkshire Hathaway, its shareholders, or the Emperor himself, let alone Arnold, his prized cigar industry, or the funky real estate that he owns in Venice. Please feel free to pass this along to the muckity-mucks in the campaign or in Omaha, er, I mean, Laguna Beach.

"Very truly yours,

"Stephen W. Shipman
"Taxpayer: Property taxes; Utility taxes; Sales taxes; Gasoline Taxes; Income taxes; Special District taxes galore"

Posted by Donald L. Luskin at 11:26 AM | link  

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Here's a source-linked version of my op-ed running in today's Wall Street Journal. [Here's a non-subscription link]

Hasta la Von Mises, baby! Gone are the hopes that Arnold Schwarzenegger would bring his own brand of free-market Austrian economics to California's troubled economy. The would-be tax terminator has chosen as his chief economics advisor a tax perpetuator -- Warren Buffett.

The choice of Mr. Buffett is a betrayal of the libertarian economic ideals that Mr. Schwarzenegger has lived by since he emigrated from Austria as a penniless 21-year old. In introducing the 1991 re-release of Milton Friedman's "Free To Choose" video series, Mr. Schwarzenegger said, "I come from Austria, a socialistic country... I felt I had to come to America, where government isn't always breathing down your neck or standing on your shoes."

At the 2002 shareholders meeting of Berkshire Hathaway, Mr. Buffett said "This has been a tremendous economic system. It's a system that showers rewards on my particular skill set... The tax system is the way to distribute the prosperity." Mr. Schwarzenegger parlayed his own particular skill set into a position at the very top of the pyramid -- but he did it Mr. Friedman's way, not Mr. Buffett's.

In a campaign so far lacking in policy proposals, Mr. Schwarzenegger has said that his approach to California's budget crisis will be to stimulate growth by making the state a friendlier place for business. That's just the ticket, but will Mr. Buffett advise him how to achieve that by using taxation to "distribute the prosperity"? Been there, done that. California is already taxed to death. And Mr. Buffett's well known opposition to every major tax cut proposed by the Bush administration suggests that Mr. Schwarzenegger will be advised to just keep on taxing.

Some have speculated that Mr. Buffett would bring Wall Street credibility to a Schwarzenegger administration that will have to peddle $10 billion in bonds. That's a fantasy. Wall Street won't mistakenly believe that Mr. Buffett knows anything about public finance, just because he's made some smart investments in razor blades. Mr. Buffett will be at a similar loss to advise Mr. Schwarzenegger on reinvigorating California's sputtering growth engine, its high tech sector. Berkshire's chief has famously said, "Technology is something we just don't understand."

Yet technology company leaders understand that Mr. Buffett has been vocally opposed to stock options, the quintessential form of compensation for employees at all levels of California's entrepreneurial tech culture. Mr. Buffett says options discourage managers from paying dividends. Yet he also opposed the elimination of dividend taxes, which do even more to discourage them. And Berkshire Hathaway -- which issues no options -- hasn't paid a dividend in years!

Mr. Buffett says that if companies must issue options, they should go only to top executives-not 21-year-old immigrants from Austria. And he believes adamantly that options should be expensed in financial statements. How's that going to go over with potential supporters like Cisco's Republican CEO John Chambers, who has lobbied aggressively against options expensing -- and has plenty of earnings challenges already?

Arnold has the Reaganesque optimism and free-market ideals that could make him a great governor. But first he'll have to get Warren Buffett to stop standing on his shoes.

Posted by Donald L. Luskin at 12:15 AM | link  

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Or at least so it would seem to casual readers of the New York Times. Paul Krugman's column today appears just to be his view of the economy, the kind of thing they probably thought they were hiring him to write back when he started at the Times in January 2000. That was weeks away from the all-time high in the stock market, and then-editorial page editor Howell Raines no doubt thought it would be smart to have an economist in his stable -- and what a coup to get the left-leaning Princeton professor who had written all those witty columns for Slate and Fortune. But then the bubble burst and people like Krugman had to re-invent themselves. Today politics is a lot more interesting than the economy, so even if an economist isn't really very good at writing about politics, that's what he does. And so, at the end of this pure-economics column, Krugman throws in this obligatory paragraph:

"All this is, of course, an indictment of our economic policy — a policy that has managed the remarkable trick of generating immense budget deficits without giving the economy much stimulus. But that's a subject for another day."

But for those who know how to read Krugman, politics suffuses the entire column as a subtext. Its part of a debate between Krugman and his critics, like me and Andrew Sullivan and Mickey Kaus and Robert Musil, who have nailed him for being a pessimist on the economy mostly out of political conviction. Hence the snotty, combative tone of saying that "some people still don't get it," and the condescending credentialism of this professor declaring the column to be not just his economic view but "a brief refresher course on twilight zone Economics 101."

Would the Times hire Krugman today, this economist who writes about nothing but politics now, and that so bombastically -- and increasingly, with so many credibility problems that have been so well documented? I think not. Consider what Times editorial page editor Gail Collins told the Chicago Tribune, describing the arrival of new op-ed columnist David Brooks:

"Brooks will 'bring all kinds of wonderful flavors' to the page... I was not looking for somebody who would be shrill or who would put people off. He's an inclusive writer.'"

She's not exactly talking about Krugman, is she. Soon enough she's going to have to come to terms with the reality that he's stinking up the joint.

Posted by Donald L. Luskin at 12:10 AM | link  

Thursday, August 14, 2003

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I got quite a few emails from readers responding to my comments Wednesday about the arrival in the New York Times' op-ed roster of  David Brooks, the Weekly Standard columnist and PBS "News Hour" talking head. They all said the same thing -- that Brooks is not aggressively partisan enough to hold his own in the Democratic bastion of the Times. That may be as much a reflection on the reputation for extreme liberalism of the Times as it is on the less-than-extreme conservatism of Brooks. But it's not inconsistent with how Brooks evaluates himself. He told me that he wasn't chosen by the Times because he's a conservative:

"They really don't see this as a liberal slot versus a conservative slot. They want it to be just interesting. One of things they've emphasized is that it's like a dinner table. They need different voices at the table or it gets boring. But I don't see myself as rebutting anybody."

When measured in a rigorous quantitative way, it turns out that Brooks will be the Times' second most partisan columnist (after Paul Krugman) so far in 2003 -- and the ninth most partisan among all the major columnists. The scores for the top ten appear in the table at left, with Republican partisanship indicated in red, and Democratic in blue. These measurements come from research by Ken Waight, who has spent the last two years tracking partisanship in every column of America's top pundits.

By day, Waight does computer modeling of the earth's weather. By night, he does modeling of the earth's pundits, and posts his results on his website called Lying in Ponds (visit the site, and you can find out where that name comes from). Waight's programs automatically read every new column every day, and tag any terms that seem to indicate references to political parties or individual politicians. Waight then scores each reference as either positive, negative or neutral -- and adds them up over time to gradually build up a picture of each columnist's partisanship.

I always call Krugman "America's most dangerous liberal pundit." But according to Waight, he's not America's most partisan pundit. He was last year, but now Krugman is only the third most partisan -- behind Ann Coulter in the number one position, and Robert Scheer in number two.

Note that partisanship as Waight measures it is not the same is ideology. Waight doesn't score words like "liberal" or "conservative." To Waight, there's nothing wrong with a pundit having an ideology -- what he objects to is the knee-jerk adherence to particular political parties. Waight thinks that compromises a columnist's independence -- and actually may interfere with the integrity of a consistent ideological position.

Coulter earned her number one position by being very unbiased in her partisan bias, if you will -- in other word, she both praised Republicans and trashed Democrats. Waight counted 235 negative Democratic references (and 15 positive ones), with 143 positive Republican references (and 14 negative ones). Waight told me that even though Coulter is all alone out front at number one, her partisanship score should really even be higher. She systematically uses the words Democrat and liberal as interchangeable synonyms -- and Waight's technique ignores the word liberal.

Krugman, on the other hand, earned his number three position (number one at the Times) by specializing in hating Republicans. Just this year alone, he made 461 negative references to Republicans (and 32 positive -- hmm, I don't remember those), while making only 41 positive references to Democrats (and 8 negative ones).

At number three overall, Krugman has slipped from the number one position last year. Waight says it's not that he's gotten any less partisan -- it's just that Waight only started measuring syndicated columnists like Coulter and Scheer this year. Indeed, Krugman has gotten worse over time. Says Waight,

"Over these two and a half years of columns, Paul Krugman's commentary has been one-sided to an extraordinary degree. It is simply astounding that not a single one of his 243 columns has been devoted mainly to criticism of Democrats or praise of Republicans. At first, Mr. Krugman wrote many witty, thought-provoking and completely apolitical columns about economics, but they have dwindled as the frequency of partisan screeds has increased. In 2000, 53 of his 98 columns contained no party references, but in 2002, only 8 of 99 did, and so far this year only one lonely column of 46 was non-political."

Compared to heavy hitters like Coulter, Scheer and Krugman, Brooks is indeed not very partisan. He may be ninth overall, but he's only slightly more than half as partisan as Coulter. But my readers will be relieved to know that he's almost three times as partisan as the Times' other conservative, William Safire. Waight says,

"Brooks' relatively high score is mostly due to extravagant praise of George W. Bush -- in fact his columns resemble Peggy Noonan's in that respect. He has made over 80 positive references but only a few negative references to the president. Although much of the praise is in the context of Brooks' strong support for the war in Iraq, his columns on other subjects -- -- Bill Frist, Michael Kelly, Arnold Beichman, welfare reform, and economics-- also stay safely within party lines."

When I told Brooks about Waight's evaluation, he said "It's a question of my temperament, and my temperament is not particularly partisan."

For Waight, the Times' reputation for partisanship is overblown -- but then again, he draws a sharp distinction between partisanship (which he is explicitly measuring) and ideology (which he is not). In his terms, the Wall Street Journal is much more partisan. When I asked him how a Times columnist like Maureen Dowd could possibly not make the top ten, he told me that Dowd is a perfect example of a very common illusion. "People tend to remember one column they really hated, so they think of the columnist as terribly biased. So you have to look at all their columns." Waight says the reality is that Dowd writes a fair number of non-political columns, and that she is surprisingly even handed: she has bashed Hillary Clinton, Al Gore and other Democrats about as much as she has bashed George Bush.

Bottom line -- to many of my readers, Brooks may seem like a lightweight compared to a fire-breather like Krugman. But if Waight is right, then once Brooks has had some time to settle into the context of the op-ed page of the Times, he may provide a lot more partisan balance than you'd think.

Posted by Donald L. Luskin at 11:16 PM | link  

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Phil Carter at Intel Dump responds to Paul Krugman's lame defense of his Tuesday New York Times column's claim that soldiers in Iraq are given only two 1.5 liter bottles of water daily, and are being exposed to heat casualties.

Krugman's source was a letter in Stars and Stripes -- but as Carter says, "Quotation does not necessarily equal fact-checking." But here's what happens when you don't do real fact-checking. Carter says,

"I don't dispute this fact -- I've seen it in Pentagon press briefings, and I've talked to Army logisticians who say this is true. But what he doesn't say is that his unit also has a supply of unbottled water -- 'tap' water if you will."

I talked to a Defense Department spokesman, Army Lieutenant Colonel James Cassella, who confirmed that bottled water is limited in Iraq, but that "There is no water shortage. That there is a logistical problem is just not true." Soldiers have access to a virtually unlimited supply of "purified water" available in tanks and water trailers from which they can fill their canteens and "camelbacks." Cassella added that not only is there no shortage of water, but that "Most units employ forced hydration."

Cassella says that soldiers prefer the bottled water "because it just tastes better." In other words, they prefer "privatized" water to the water produced for them by the military. At least on the water front, Krugman is wrong when he says "The Iraq war and its aftermath gave this privatized system its first major test in combat — and the system failed."

The Pentagon has no delusions about conditions in Iraq. Cassella told me, "I don't want to give the idea that it isn't hot an dirty over there." But Krugman's claim that there is a water shortage simply because he read a letter from a soldier griping about the lack of bottled water is, well... a lie. Or should I say, another lie.

Considering the worry that this lie might cause the families of the brave men and women serving their country in Iraq, shouldn't the Times run a prominent correction?

Yeah... right.

Posted by Donald L. Luskin at 10:00 AM | link  

Wednesday, August 13, 2003

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Turn on the lights in the kitchen in the middle of the night, and the cockroaches scurry around like crazy.

Some of them scurry more slowly than others, though. Why did it take the New York Times almost a month to finally publish a July 18 letter from General Wesley Clark, rebuking Paul Krugman for the way his July 15 column distorted Clark's remarks on NBC's "Meet The Press"?

Here's Clark's letter:

"I would like to correct any possible misunderstanding of my remarks on 'Meet the Press,' quoted in Paul Krugman's July 15 column, about 'people around the White House' seeking to link Sept. 11 to Saddam Hussein.

"I received a call from a Middle East think tank outside the country, asking me to link 9/11 to Saddam Hussein. No one from the White House asked me to link Saddam Hussein to Sept. 11. Subsequently, I learned that there was much discussion inside the administration in the days immediately after Sept. 11 trying to use 9/11 to go after Saddam Hussein.

"In other words, there were many people, inside and outside the government, who tried to link Saddam Hussein to Sept. 11.

"Little Rock, Ark., July 18, 2003"

Here's Krugman's version of reality:

"Literally before the dust had settled, Bush administration officials began trying to use 9/11 to justify an attack on Iraq. Gen. Wesley Clark says that he received calls on Sept. 11 from 'people around the White House' urging him to link the attack to Saddam Hussein."

Here's what Clark really said. It's a complicated thicket of words, but anyone who takes the time to really read it -- and wasn't just looking for a White House connection -- would have gotten it right.

"GEN. CLARK: 'Whether it was the need just to strike out or whether he was a linchpin in this, there was a concerted effort during the fall of 2001 starting immediately after 9/11 to pin 9/11 and the terrorism problem on Saddam Hussein.'

"RUSSERT: 'By who? Who did that?'

"CLARK: 'Well, it came from the White House, it came from people around the White House. It came from all over. I got a call on 9-11. I was on CNN, and I got a call at my home saying, "You got to say this is connected. This is state-sponsored terrorism. This has to be connected to Saddam Hussein." I said, "But--I'm willing to say it but what's your evidence?" And I never got any evidence. And these were people who had--Middle East think tanks and people like this and it was a lot of pressure to connect this and there were a lot of assumptions made.'"

Why did the Times sit on Clark's letter for almost a month? It only took 24 hours for the Times to run a couple of atta-boys on Krugman's war-themed column from just yesterday. Funny how they ran all three letters on the same day. Is this what "fair and balanced" is going to look like under Bill Keller?

Who knows... but Krugman's got to be feeling some pressure. The light is on in the kitchen! Last week the Times ran a bowdlerized but still stinging rebuke from a from a former Treasury Department official of Krugman's August 5 column. Krugman posted a hapless defense on his personal web site, which Robert Musil ably dissected. And I turned the heat up in my National Review Online column Monday demanding corrections from the Times for an invented quotation in that same August 5 column, and an egregious mathematical "error" and a related statistical misrepresentation in his August 1 column. Nothing yet from the Times, of course. But some cockroaches do run slowly...

But Krugman himself is running just as fast as he can! He has already posted a response on his website to my National Review Online column today, in which I cited multiple substantive inaccuracies and distortions in his August 12 column. He comes blasting back, intoning "Critics, do your homework!" And what exactly did I get wrong on my homework, professor? Oh, a most grievous error... I had said that Krugman's story about inadequate water rations in Iraq came from a letter from a soldier posted on Colonel David Hackworth's web site. Krugman marks my homework with an "F" because,

"Some people have asked me for the source of the letter about water shortages in Iraq. It's not Hackworth's site - I know he's often accused of self-promotion, though there's no reason to question the letters he passes on. But anyway, I took it from Stars and Stripes - lead letter, under the headline 'Heat casualties.'"

He goes on to reproduce the letter. But, uh, professor... in your own column you wrote,

"Other stories are far worse. Letters published in Stars and Stripes and e-mail published on the Web site of Col. David Hackworth (a decorated veteran and Pentagon critic) describe shortages of water. One writer reported that in his unit, 'each soldier is limited to two 1.5-liter bottles a day,' and that inadequate water rations were leading to 'heat casualties.'"

I can't see from that how anyone could tell that the letter was not published on Hackworth's site. That said, upon deeper review, I can see how it reveals that Colonel Hackworth was contacted by the Bush White House on 9/11 and ordered to say "Saddam did it!" How did I miss that the first time? And what about the real issue -- the silly claim about only two 1.5-liter bottles a day? Krugman accepts that uncritically -- as he apparently accepts pseudoscientific evidence of global warming -- yet even the most casual survey of the survival literature suggests that such a short ration would be "inadequate" to the point of extreme distress for any soldier subjected to it. The US Army Survival Manual suggests something more like 10 liters per day -- especially under the hardship conditions suggested in the letters that Krugman cites.

"Critics, do your homework" indeed! But that's nothing compared to what Krugman's websmurfs are doing to defend him against my onslaught. Can you imagine a less enviable job than to defend Paul Krugman? Well, maybe that's why they're saying the crazy things they are saying. According to the infinitely sycophantic "Bobby," shrine-keeper of the Unofficial Paul Krugman Archive, a blogger named Matthew Yglesias has called me "a ranting, inept, hack who has trouble grasping elementary math." Well, what can I say: "the cheaper the crook, the gaudier the patter." And who is it who can't tell the difference between 10% California state spending growth and 13.4%? Not me. And in the future, that's Mister inept hack, to you!

According Kevin Drum, who blogs as CalPundit, I'm right about the 13.4% -- but still, I'm really wrong because, when I accused Krugman of statistical sleight of hand for saying the 10% (er... the 13.4%) "was simply a matter of keeping up with the population and inflation" (while his numbers were already both real and per capita), I neglected so say that he was only talking about "most" of it. What a scandale! Drum accuses me of "Dowdification"! Maybe I need to be sent to a reeducation camp where I can be de-Dowdified! Yet whether Krugman had said "some," "most," "all" or "more" -- none of it matters. The whole point is that Krugman double-counted the inflation and population adjustments. For a more in-depth discussion of all that, including a little sympathy for the devil (which, so far, has been a good deed that has not gone unpunished by the websmurfs), see this earlier post.

'The Maltese Falcon' Click here now to order from Amazon.comBut here's the best part. This substanceless critique is posted on ultra-liberal economist Brad DeLong's website with this astonishing lead-in: "Kevin Drum's jaw drops in amazement that National Review can't find anyone smarter than Donald Luskin to write for it." DeLong is always introducing postings this way, as though by imbuing the author with high emotion, he can whip up a substanceless critique into a crushing indictment just by wishing it so. With DeLong it's never "Kevin Drum says" or "So-and-So notes" or even "Joe Dokes states confidently"... it's always "Peter Orzag bangs his head against the wall" or "Kevin Drum's jaw drops in amazement." Probably one of many reasons the New York Times dumped him as a columnist, though until I busted him he was still carrying that gig on his online CV. I wonder -- does DeLong's own jaw ever drop in amazement? Probably not very far.

Posted by Donald L. Luskin at 11:45 PM | link  

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I spoke yesterday to David Brooks -- the conservative columnist for the Weekly Standard and talking head on the PBS's "News Hour" who will become an op-ed columnist for the New York Times next month. I'll be writing more about Brooks over the next couple days, but for now I'll confine myself to two news flashes.

One, Brooks claims that no current Times op-ed columnist will leave the paper to make room for Brooks' new twice-a-week column. That shatters the hopes of those of us who had visions of Paul Krugman being invited to spend more time with his Princeton students.

And two, the conservative Brooks isn't coming into W. 43rd Street gunning for America's most dangerous liberal pundit, Krugman. Brooks told me, "I don't tend to hate people I disagree with. I tend to like them. Some of my best friends are people I don't get along with politically, like [liberal Washington Post columnist] E. J. Dionne Jr."

Why Brooks went so far as to heap praise upon Paul Krugman's New York Times column yesterday. Krugman blasted what he believes is the Bush administration's penny-pinching and corporate cronyism, which he claims is resulting in a logistical quagmire in Iraq. Brooks told me, "I disagree with Krugman on some things, but he actually wrote a column on the infrastructure of the military which I thought was a good column. He taught me something. He was probably correct."

Wow... what a nice guy Brooks is. I'd say too nice a guy. We'll see how long that lasts once he's been under the skirts of the Gray Lady for a while. In the meantime, if Krugman taught Brooks something about military infrastructure, lets' see if The Conspiracy to Keep You Poor and Stupid can teach Brooks something about Paul Krugman.

Krugman blames the Bush administration's alleged penny-pinching as the reason "why U.S. troops in Iraq are suffering such a high rate of noncombat deaths..." David Hogberg notes on Cornfield Commentary,

"First of all, let’s look at the numbers. There have been 256 military deaths in Iraq. Excluding helicopter crashes, which I consider to be death in action, there have been 67 noncombat deaths so far. That’s about 26% of the total deaths. I have no clue if that is high relative to other wars. I’ll bet Krugman has no clue either.

"Of those 67, more than half—36—were vehicle related accidents. At the website I visited, not all of the other 31 deaths had a specific explanation of the cause of death. Of the ones that did, 7 died from an accidental discharge of a weapon, 4 died from accidental explosions, 4 drowned, 1 fell off of a roof, and 1 was killed by a bullet fired by someone involved in a local Iraqi celebration."

Krugman quotes several soldiers stationed in Iraq complaining about hardships supposedly inflicted on them by the Bush administration's supposed incompetence. Krugman clams to have spoken to a soldier just back from Iraq (wait a second.... Krugman said just last week "we're stuck in Iraq indefinitely"... what's this guy doing back home hob-nobbing with economics professors...?). Supposedly this soldier hated the bad Army MRE's -- "meals ready to eat" -- and complained about how much better fed are the Italian soldiers in Iraq (wait a second... Krugman complained that the war on Iraq was unilateral... what are all these Italians with great food doing here in the desert...? And, uh, pass the linguini...).

According to Phil Carter on his military-focused Intel Dump,

"This should bring a smile to any veteran's face, because it's a time-honored tradition in the Army to gripe about food. In fact, they taught us as new lieutenants that your soldiers probably had a real problem if they weren't griping about their food, and that such gripes about Army chow were a sign of good morale. Frankly, I'm not a fan of eating MREs for 4 weeks straight, let alone 4 months. But I'm not too concerned when I see this gripe in the news... in the pantheon of Army b*tching, it's pretty low."

Krugman goes on to quote a soldier whose remarks he found on the website of Colonel David Hackworth -- a charismatic gung-ho type who talks like Oliver North yet looks like an aging hairdresser from the salon at Caesar's Palace, and whose love of the US military is only matched by his contempt for the US military. I cannot imagine a stranger bedfellow for Paul Krugman. Krugman says the soldier on Hackworth's site complained that "'each soldier is limited to two 1.5-liter bottles a day,' and that inadequate water rations were leading to 'heat casualties.'"

Carter rebuts,

"This is a flat-out false statement. The truth is, according to Sergeant Major of the Army Jack Tilley during a recent press conference in Iraq, that soldiers are being issued two 1.5 liter plastic bottles of water today in addition to their regular water supply, which is provided in 500-gallon 'water buffaloes' and other means. In fact, the planning factor for a soldier in a desert environment is something like 10 gallons of water per day... The physiology of this is obvious. If soldiers in Iraq were being forced to live on 3 liters/day, they would die."

The tone of Krugman's column makes it sound as though Iraq is an utter logistical failure -- yet the only examples he provides are that the food is bad (so what else is new) and that the water is short (no, it's actually not). On this weak evidence, Krugman condemns what he calls the Bush administration's "test" of "privatization" -- the outsourcing of various military-related support functions to private companies. Krugman writes,

"Military privatization, like military penny-pinching, is part of a pattern. Both for ideological reasons and, one suspects, because of the patronage involved, the people now running the country seem determined to have public services provided by private corporations, no matter what the circumstances."

Don't you just love that "one suspects" stuff? Who is the one he's talking about? Doesn't he really mean "I suspect" -- so then why can't he just say that? And, natch, he manages to work in the fact that Kellogg Brown and Root is among the contractors, and that it is a division of Halliburton (say no more... nudge nudge wink wink... you know, Halliburton -- the company in which Vice President Cheney has no financial interest other than some non-variable deferred comp, and whose stock has lost half its value since the Bush administration took office -- the one whose employee perished in Iraq in the line of privatized duty two weeks ago -- that Halliburton).

And as to the "ideological reasons," isn't it peculiar that an economist would as reflexively mistrust private economic action as Krugman does? It's rather like a veterinarian who doesn't much like puppies. But, of course, the "ideological reasons" here are Krugman's -- he doesn't like privatization simply because its George W. Bush who's doing the privatizing. What would he have said about privatization under the first President Bush, or under President Clinton? Phil Carter notes,

"First, Krugman's wrong that this is the first major performance by contractors in a battle zone. Civilian contractors played an enormous role in the first Gulf War, sparking a great deal of argument in the policy and academic sector over the wisdom of privatization. (Legal scholars also debated the Geneva Convention implications of this trend.) Second, contractors like Kellogg Brown & Root have followed the U.S. military for some time, such as to places like Bosnia and Kosovo. They've done a good job in those places..."

It's especially peculiar that Krugman would condemn  privatization considering that he himself has written about how over-stretched our military is and has called for a larger post-war commitment to stabilizing Iraq. By objecting to the privatization of support functions in Iraq, Robert Musil points out on Man Without Qualities

"...incredibly, Paul Krugman writes in today's column that in his opinion American military forces in Iraq aren't being given enough to do. It is not enough that soldiers do soldiering; Herr Doktorprofessor thinks they should be doing more reconstruction, rebuilding, engineering -- in short, more of all of the things that private American corporations are now doing."

So if there aren't enough soldiers, and if, as Krugman says, privatization has "failed," and if it's all payola, then what to do? Krugman says, "In Iraq, reports The Baltimore Sun, 'the Bush administration continues to use American corporations to perform work that United Nations agencies and nonprofit aid groups can do more cheaply.'"

But of course! The United Nations is to liberals what faith-based institutions are to conservatives -- the answer to all difficult problems. And besides, no one can question the Baltimore Sun's international reputation as an expert assessor of the cost-effectiveness of various military logistical options. So Musil checked out the Sun's story -- and wasn't entirely surprised to find that it wasn't quite what Krugman represented it to be. Here's what else the Sun said:

"The administration is paying hundreds of millions of dollars to U.S. corporations not only for major infrastructure projects such as roads and bridges, but also for harbor dredging, repairs to electrical systems and buildings, and health services. The smaller jobs are all tasks that the United Nations and nonprofit groups have broad experience performing in Iraq and other nations recovering from wars. In fact, they are performing some of them, funded by the international community, alongside U.S. contractors in Iraq.

"'The private sector will always be capable of responding more rapidly' and offers 'easier decision-making,' said [Frederick] Schieck, whose [U.S. Agency for International Development] has a leading role in rebuilding Iraq. The United Nations' bureaucracy is 'frequently slow to move,' he said."

So, David Brooks, what do you say now? Do you still think "he was probably correct"? All I can say is you've got your work cut out for you, my friend. Just watch your back. And if things don't work out on W. 43rd Street, we can always make room for you here at the counter-conspiracy.

Correction [8/13/2003]... As originally posted, I asserted that Vice President Cheney had no financial interest in Halliburton. Dave Nadig pointed out that Cheney does, in fact, receive deferred compensation from Halliburton through 2005. It is invariant with the success or failure of the company; in fact, it is privately insured so that it would be paid even in the company became insolvent.

Posted by Donald L. Luskin at 3:53 AM | link  

Monday, August 11, 2003

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Thanks to Glenn Reynolds at Instapundit for pointing out my National Review Online "Krugman Truth Squad" column yesterday, "Prove It or Correct It." Lots of good reader responses came in as a result, including these two.

One is from Ross McKitrick, Associate Professor, Department of Economics, University of Guelph in Canada, and one of the authors of Taken By Storm: The Troubled Science, Policy and Politics of Global Warming (click here to order it from, or click here to read more about it).

"Periodically Paul Krugman turns his attention to Kyoto and global warming, a perfect Trojan horse for the folks who'd like to expand the bureaucracy and raise taxation levels. In his August 8 New York Times column, he spins up a conspiracy theory based on some article that supposedly shows global warming is uniformly accepted by all scientists except those bought and paid for by the fossil and auto industries. Then he defends his conspiracy theory by insinuating that Senator James Inhofe is spinning his own conspiracy theories:

"'And before you accuse me of a conspiracy theory, listen to what the other side says. Here's Senator James Inhofe of Oklahoma: "Could it be that manmade global warming is the greatest hoax ever perpetrated on the American people? It sure sounds like it."'

"The Inhofe speech from which Krugman took a single line was about two hours long. It was a detailed, well-informed survey of the conflicting evidence on climate change and the clear evidence of the harm Kyoto would do to the US economy. There is no conspiracy theorizing in the speech, but there is an attempt at the end to account for the motivation of so many uninformed people to push the global warming concept. It ends as follows:

"'Finally I will return to the words of Dr. Frederick Seitz, a past president of the National Academy of Sciences, and a professor emeritus at Rockefeller University, who compiled the Oregon Petition: "There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gasses is causing or will, in the foreseeable future, cause catastrophic heating of the Earth's atmosphere and disruption of the Earth's climate. Moreover, there is substantial scientific evidence that increases in atmospheric carbon dioxide produce many beneficial effects upon the natural plant and animal environments of the Earth."

"'These are sobering words, which the extremists have chosen to ignore. So what could possibly be the motivation for global warming alarmism? Since I've become chairman of the EPW Committee, it's become pretty clear: fundraising. Environmental extremists rake in million of dollars, not to solve environmental problems, but to fuel their ever-growing fundraising machines, part of which are financed by federal taxpayers.

"'So what have we learned from the scientists and economists I’ve talked about today? 1) The claim that global warming is caused by man-made emissions is simply untrue and not based on sound science. 2) CO2 does not cause catastrophic disasters—actually it would be beneficial to our environment and our economy. 3) Kyoto would impose huge costs on Americans, especially the poor. 4) The motives for Kyoto are economic not environmental—that is, proponents favor handicapping the American economy through carbon taxes and more regulation. With all of the hysteria, all of the fear, all of the phony science, could it be that man-made global warming is the greatest hoax ever perpetrated on the American people? It sure sounds like it.'

"This is where Krugman got the quote."

And here's one from another economist -- he has asked for anonymity, so I'll only say that he is affiliated with one of the regional Federal Reserve Banks. Responding to my objection to the statement in Krugman's August 1 New York Times column in which he claimed that real per capita California state spending growth was explained by inflation and population growth, when those factors had already been included in the numbers he quoted. The economist responds,

"On the real per capita business (and I hate to admit it) I'm with Krugman. The raw number of the budget increase is huge -- something like 40%. The real per capita increase is 10% (or, more correctly, 13.4%). That implies that 'most of the spending growth was simply a matter of keeping up with the population and inflation' just as Krugman states. Krugman isn't stating that real per capita spending didn't increase, but only that real per-capita increases make up a minority of the raw increase. That is, 10% out of 40% (or, more correctly, 13.4% out of 40%) is less than half."

I responded,

"It doesn't surprise me that an economist would have no problem with Krugman's statement about real per capita spending. When I first read the statement it didn't bother me either, because I easily knew what Krugman meant -- he was implicitly saying that population growth and inflation reduced what would otherwise seem to be even greater spending growth to 'only 10%' (of course it's really 13.4% according to Krugman's own source, but that's another matter).

"But then I started getting emails from readers, who are not economists. They were confused and misled by the way Krugman chose to express himself. I went back and read it again, and could see what they meant. Considering that Krugman has been browbeating the Treasury Department for the way it speaks about tax distribution statistics, he should set a high standard and say exactly what he means. The evidence of the emails I got is that people were misled -- and it's no coincidence that they were misled in the direction that flattered Krugman's point. While that element of Krugman's statement may not deserve a 'correction' per se, he should certainly acknowledge its flaws (and hopefully not in his usual supercilious way of sighing, smiling ironically, and then going on about how he sometimes forgets that he's not writing for other trained economists, and space is so constrained, and so on and so on....)."

The economist shot back,

"We are basically in agreement then, probably more than you think. While the sentence does not fall into the category of 'factual error and thus needs correction by the newspaper' it does fall into the category 'not a very good argument and thus needs refuting.'

"That is, what fraction of a raw spending increase that is due to real per capita spending increases is irrelevant? What matters is the real per capita increase itself. If one focuses on the fraction, it's as if having a lot of inflation or population growth gives the state a license to increase real per capita spending.

"The higher the inflation and population growth, the higher real per capita spending growth can be and still allow the state to claim that the fraction of the increase due to real per capita growth is below some level, say 50%, and thus be able to argue that most of the increase is due to population growth and inflation. This is nonsense."

Well said!

Posted by Donald L. Luskin at 11:01 PM | link  

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I think I'm really onto something here. It just dawned on me... Paul Krugman is Mini-Me, the character from the Austin Powers movies. I mean, just think about it. You never see them together at the same time, do you? You're beginning to understand, aren't you...

As Dr. Evil himself said of Mini-Me in The Spy Who Shagged Me, "He's evil, he wants to take over the world, and he fits easily into most overhead storage bins." Well, we know Krugman is evil. We know he wants to take over the world. And we know he's small -- "gnomishly handsome," Newsweek once called him. He himself once said, "...perhaps I am just not imposing enough in person to be inspiring (if I were only a few inches taller ...)."

And both of them just love to put things in quotation marks. Remember how Dr. Evil and Mini-Me kept pantomiming quotation marks with their fingers around words like "laser" and "liquid hot magma"? Krugman does the same thing -- he makes things into quotations that aren't really quotations.

Remember last week when I pointed out the embarrassing quotation that Krugman attributed to the Bush administration's Treasury Department in his August 5 column, but which no one in the Bush administration or the Treasury Department ever actually said? Krugman was talking about how Treasury had provided NBC's Tim Russert with statistics on the effects on six example families of repealing the Bush tax cuts. Krugman mocked the Treasury for claiming an "example of a 'lower income' elderly household was one receiving $2,000 a year in dividend income." I have seen the documents that Treasury provided to Russert, and neither they nor similar documents published in January used the expression "lower income" in relation to this example household (nor to any other), and Russert never said it either.

Krugman repeated the invented quote Saturday in a posting on his personal web site. The posting was Krugman's response to a stinging rebuttal published in the Times letters section the same day, from Andrew B. Lyon, the former Treasury deputy assistant secretary for tax analysis, whose staff prepared the examples for Russert.

Robert Musil on his Man Without Qualities blog does an outstanding job of taking apart Krugman's rebuttal-of-the-rebuttal. I will add to it only the observation that the version of Lyon's letter reproduced on Krugman's website is different than the version published in the Times. Judging by the way it is formatted, the version on Krugman's website appears to have been cut and pasted from an email -- either from Lyons directly, or as a "heads-up" from the Times. Here it is, with strike-throughs indicating material omitted in the Times version, and underlines indicating material added.

"As the former Deputy Assistant Secretary responsible for tax analysis at the Treasury Department from April 2001 to July 2003, I must respond to Mr. Krugman’s Aug. 5 recent column (August 5, 2003) accusing it of political bias.  

"The Treasury does detailed analysis of tax legislation and has reported many of these analyses on its web site. The Treasury Department also frequently responds to requests by the media for analysis. Mr. Krugman objects to an analysis that showed the effects of the 2001 and 2003 tax cuts for six representative families. Among the six representative families, the analysis provided an example of , including a married couple, both spouses aged 65, with $40,000 in income, including $2,000 in dividend income. Mr. Krugman objects He says that such a family is not representative of elderly taxpayers.

"Obviously, no single example can be representative of all elderly taxpayers, but the example is useful precisely because it is unlikely to be misinterpreted - it applies to the couple described. Further, this couple has income quite close to the median for such filers their age, their $2,000 in and dividends is quite close to the average amount of dividends for elderly filers at their that income level, about half of which have whom receive dividends income. As a result, the elderly couple Mr. Krugman objects to is quite representative of such income tax filers. The example couple in the example would see has seen a decline in its income tax liability decline from $1,396 to $675 as a result of the 2001 and 2003 tax cuts.

"Mr. Krugman is certainly free to oppose the tax relief, provided to the taxpayers described in these examples but he should be more circumspect in asserting political bias in the underlying analyses."  

Note that the Times omitted three critical sentences. First, there are two omitted sentences in which Lyon had defended himself against Krugman's broad charge that the Treasury has been drawn into politics as evidenced by its having provided information for Russert (which was used in an interview with Howard Dean): "The Treasury does detailed analysis of tax legislation and has reported many of these analyses on its web site. The Treasury Department also frequently responds to requests by the media for analysis."

Second, there is one omitted sentence in which Lyon dealt with the broad issue of whether the Treasury's examples were "representative" or not: "...the example is useful precisely because it is unlikely to be misinterpreted - it applies to the couple described." In other words, it is a representative example of itself. Krugman had called all the examples "wildly unrepresentative" -- yet Lyon's letter itself, written in response to Krugman, is the first time anyone in the Bush administration has ever asserted that the examples are intended to be "representative" in any sense in the first place.

Without the elements contained in the omitted sentence, Lyon's letter ends up being nothing more than a quibble about statistics. Its last paragraph, in which he says Krugman "should be more circumspect in asserting political bias in the underlying analyses" is rendered a non sequitur.

Posted by Donald L. Luskin at 2:31 AM | link