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Saturday, May 08, 2004

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ANOTHER ERROR FROM THE TIMES' ANDREWS, AND ANOTHER COVER-UP   
Edmund Andrews has made another stupid error in reporting the economy for the New York Times. The last one was never corrected, despite my intensive efforts. Now this one has been corrected, but the correction just another error, and a self-serving cover-up.  In a story last Wednesday Andrews wrote,

If and when it [the Federal Reserve] raises rates, it would be the first time in four years and could lead to the first series of increases since 1994.

Andrews is overlooking the series of rate hikes in 1999 and 2000 -- the infamous series, I should say, since this was what "burst the bubble" of the late-1990s bull market and ushered in the last recession. Bloomberg's Caroline Baum brought Andrews' error to my attention, and I passed in on to Times "public editor" Dan Okrent. On Friday the following correction was run:

Because of an editing error, an article in Business Day on Wednesday about the Federal Reserve's decision to leave its benchmark interest rate unchanged referred incorrectly to the series of increases from February 1994 to February 1995, in which the federal funds rate rose to 6 percent from 3 percent. It was the last sustained rise, not the last one over all. (There was a rise of 1.75 percentage point from June 1999 to May 2000.)

In other words, Andrews wasn't wrong by leaving out the 1999/2000 series. Some editor just omitted the word "sustained" with reference to the 1994/1995 series. But Andrews is still wrong.

From the first rate hike on February 4, 1994 to the first rate cut that ended the "series" on July 16, 1995 was 517 days. In the earlier not-"sustained" series, from the first rate hike on June 30, 1999 to first cut on January 3, 2001 was 553 days. How about that. According to the New York Times, something that lasts 517 days is more "sustained" than something that lasts 553 days.

I know, I know... the Times isn't defining "sustained" from the first rate hike to the date of the last rate hike, without regard to how long the higher rates stay in effect. It's a series of Fed actions, not a series of effects of those actions. Fine. Defined that way, the first series lasted 362 days, and the second series lasted 321 days. So now we know what "sustained" means. It means a number of days greater than 321, and less than or equal to 362.

Readers can only wish that Andrews had spent as much time reporting this story correctly in the first place as he obviously did covering his ass with this ridiculous after-the-fact alibi.

Posted by Donald L. Luskin at 3:34 PM | link  


Friday, May 07, 2004

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SHOOTIN' AT SOME CRUDE   
Reader Andrew Morton sends in two links countering Pau Krugman's claim today that "Oil is a resource in finite supply; no major oil fields have been found since 1976, and experts suspect that there are no more to find." Ah, yes, those "experts" of his. Here are some other "experts". From Arab News:
    WASHINGTON, 29 April 2004 — Officials from Saudi Arabia’s oil industry and the international petroleum organizations shocked a gathering of foreign policy experts in Washington yesterday with an announcement that the Kingdom’s previous estimate of 261 billion barrels of recoverable petroleum has now more than tripled, to 1.2 trillion barrels.

    Additionally, Saudi Arabia’s key oil and finance ministers assured the audience — which included US Federal Reserve Chairman Alan Greenspan — that the Kingdom has the capability to quickly double its oil output and sustain such a production surge for as long as 50 years.

From Mosnews:
    Russia’s proven oil reserves may be much higher than was previously thought, reported British Financial Times newspaper in reference to several market analysts.

    In particular the newspaper pointed to the announcement of Yukos oil major which was made last month. On news of difficult political situation around the company and its imprisoned founder Mikhail Khodorkovsky, the announcement went virtually unnoticed, but was very important, because Yukos declared a considerable increase in proven reserves. Under the strict standards set by the U.S. Securities and Exchange Commission Yukos oil reserves increased from 11.2 billion barrels of oil equivalent at the end of 2002 to 13 billion barrels at the end of 2003.

    TNK-BP oil giant also announced that its current reserves of 6.1 billion barrels could rise to 9 billion barrels in the short term and up to 30 billion barrels in the longer term.


Posted by Donald L. Luskin at 9:15 AM | link  

DAVID BROCK, CONGENITAL LIAR    From the archives on David Brock, the latest hired gun in the "Bush lied" posse. Slate's Tim Noah is certainly an authority on liberal liars, based on vast personal experience -- he finds lies even in Brock's own book about Brock's own lies. Meeow! Christopher Hitchens notes that Brock, even in his confessions, "is incapable of recognizing the truth, let alone of telling it."

Posted by Donald L. Luskin at 8:25 AM | link  

MORE ON THE RECESSION DATE    Reader Richard Becker adds a smart comment on the controversy about whether the last recession began under Bush, or under Clinton:
    The liberal Democrat misperception that the last recession began with Bush rather than Clinton reflects the situation which occurred after Reagan was elected. In July of '81, after Reagan was inaugurated on January 20th to begin his first term, the news media and others created the phrase "Reaganomics" attributing the recession to his administration. In reality, it began during Carter's last fiscal year in office and Reagan had no control over the economic situation.

    Carter's last fiscal year in office was FY '81 which, by law had to be in place as of 1 October of 1980 and lasted until 30 September '81. Reagan was elected the following November and became President as of January 20 1981 for his first calendar year in office but with Carter's last fiscal year budget in place. FY'82 was Reagan's first FY in office, and the economy rebounded!


Posted by Donald L. Luskin at 8:03 AM | link  

KRUGMAN THE DOOMSAYING ECONOMIST    Now it's that we're running out of oil. Last year at this time it was SARS. Well, what else is there to say on a morning when it is announced that 288,000 new payroll jobs were created?

Posted by Donald L. Luskin at 8:00 AM | link  


Thursday, May 06, 2004

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OUTSOURCING: THREAT OR MENACE?   
Here's the transcript of a speech I gave last night in San Diego to the Corporate Finance Council.
It's great to be here tonight. But I want you to understand that it's a big sacrifice for me. I'm missing the season finale of "Friends."

Tonight I'm going to be talking about the controversy over "offshore outsourcing" in the context of a book I'm writing.

My book is about the intersection of the science of economics, the power of government, and the influence of the mass media. The book is called The Conspiracy to Keep You Poor and Stupid -- because that's what's happening when economics, government and media come together.

Here's an example of how the conspiracy to keep you poor and stupid works.

GDP growth has been running at a real annual rate of 4.9% over the last four quarters. That's the highest it's been in 20 years. Higher than any four quarter period during the great 1990s boom.

The unemployment rate is 5.7%. It has improved from 6.3% last June. 5.7% is statistically indistinguishable from 5.6%, which is precisely the average unemployment rate since 1948.

Over the last 12 months the stock market has gained $3 trillion in market value. Home ownership has moved to all-time highs. Overall household wealth has moved to new all-time highs.

And yet -- amazingly -- the latest CBS/New York Times poll shows that the number of Americans who approve of the way President Bush is handling the economy has gone down over the last year. A year ago 53% approved. Today 39% approve.

According to the same poll a month ago, the economy and jobs were the number one and number two most important issues for voters during the election. They were the only issues to rank in double digits. Together, they were counted as 8 times more important than terrorism.

I must point on that over the last month, with the horrific headlines from Iraq, war has displaced jobs as the number two issue.

How is it that America has become increasingly worried about the economy at the same time as the economy has so obviously and strongly recovered? It's an example of the conspiracy to keep you poor and stupid -- the power of politicians to use economics to manipulate your mind. How was this achieved? It's all about outsourcing.

Most of the negative movement on the economy in the polls happened during the first three months of this year, during the Democrats' presidential primary season. The Democratic candidates found, in outsourcing, an economic issue they could use to cast doubt on the booming economy.

The issue of outsourcing has some very special psychological properties that make it especially useful as propaganda -- perfect fodder for the conspiracy to keep you poor and stupid.

First, it is an amorphous fear about the unknowable future more than it is a realistic observation about the present. So the message is, "Yes, I know the economy is recovering and you have a good job. Today! But two years from now that job could go to China! If you don't vote for me, that is." You can't argue with that kind of non-logic. But it doesn't even have to be logical. It just has to be scary.

Second, the outsourcing issue cleverly links economic concerns to national security concerns. Of course in the wake of September 11, such concerns are never far below the surface, and they are very powerful. Especially when the story connects directly to the ability of grubby people in poor, third world countries to threaten the all-powerful United States.

The message is that our strength is actually a disadvantage. The fact that third world workers are willing to labor for a twentieth of US wages becomes a kind of economic suicide mission -- one that our own prosperity blocks us from having any effective response to. We are sitting ducks.

"Every time a new call center opens in Mumbai, American jobs go the third world. On 9/11 they stole our airplanes, and now they're stealing our jobs!"

And, of course, the message from the Democrats is they are going to "do something about it" -- while the Bush administration is said to stand by passively, or in fact even promote it.

Remember when Greg Mankiw, the head of the White House Council of Economic Advisors, published the Economic Report of the President this year? He noted in that report that outsourcing was nothing more than the latest instance of time-honored principles of economics. Mankiw, a Harvard professor and author of the most widely used college economics textbooks said,

"Outsourcing of professional services is a prominent example of a new type of trade ... When a good or service is produced at lower cost in another country, it makes sense to import it rather than to produce it domestically. This allows the United States to devote its resources to more productive purposes."

And Mankiw duly noted that in the short run there can be painful dislocations, and that people affected must be helped in various ways.

But poor Mankiw was pilloried in the media for it. The very next day the liberal Washington Post wrote that Mankiw had made "laudatory statements on the movement of U.S. jobs abroad." John Kerry said Bush wants "to export more of our jobs overseas ... What in the world are they thinking?" Tom Daschle said, "This is actually now the position of the White House that they support outsourcing of jobs, jobs going abroad, saying that that's good for our country." Pete Stark said, "Bush stands idly by as jobs continue to take flight from the U.S., and now we know why. It's part of his economic plan."

Needless to say, no one in the Bush administration or in the Republican congress had the guts to say a word in Mankiw's defense.

And since then the volume has only gone up on the issue, with John Kerry talking about "Benedict Arnold CEOs" betraying American workers. There are any number of bills in congress to slap various restrictions, prohibitions and penalties on US companies that use overseas labor.

And what's so remarkable about all this is that it's all about a crisis that may not even exist.
What, after all, do we really know about offshore outsourcing?

There's an amazing scarcity of hard evidence. All the sensational numbers that are thrown around all the time in the media are nothing more than forecasts by various consultants.
Here are the ones you seem to hear all the time in the media.

The McKinsey Global Institute estimates that the volume of offshore outsourcing will increase by 30 to 40 percent a year for the next five years. Forrester Research estimates that 3.3 million white-collar jobs will move overseas by 2015. Gartner estimates that by the end of this year, 1 out of every 10 IT jobs will be outsourced overseas. Deloitte Research estimates the outsourcing of 2 million financial-sector jobs by 2009.

These aren't even really "estimates." They're forecasts. No, they're S.W.A.G.'s -- stupid wild-ass guesses.

Remember, these consultants are the same geniuses who said, four years ago, right about the time when the NASDAQ was at 5000, that Internet traffic would grow at 90% a year forever, and that by 2002 every American citizen would have digital video-on-demand beamed via low earth orbit satellite to his cell phone. Hey, if that were true I could be watching "Friends" right now.

Let's get real. Suppose Forrester is right, that 3.3 million white-collar jobs will move overseas by 2015. That's eleven years, folks. That's 300,000 jobs a year, or 25,000 a month. Today there are 130 million jobs in the United States.

So the cost is 2/100 of 1% of jobs each month. Don't worry about it. On average the US economy generates job growth 10 times that much every month.

But it's not just that even the wild-ass guesses are actually quite small in the grand scheme of things. The worst part of it is that these forecasts inevitably just look at costs, and never benefits.

When Forrester says that 3.3 million white-collar jobs will move overseas by 2015, not a single thought is given to any possible offsetting benefit of that in the US. The implicit assumption is that 3.3 million people who would have otherwise have jobs will instead be on food stamps. But it's hardly that simple.

Remember, those jobs would not be established overseas if there were not some compelling advantage to do it, probably cost savings. That means the employing company is more profitable. It can pay out those profits in dividends, which then get reinvested in other opportunities that create US jobs -- opportunities that wouldn't have existed otherwise.

Or it can reinvest those profits themselves in new US employment, at things that US workers do better. For example, Delta Airlines outsourced 1,000 call-center jobs to India in 2003, but the $25 million in savings allowed the airline to add 1,200 positions at home.

And if cheaper foreign labor translates into lower prices of US consumer goods, then US consumers will have money left over to buy other goods and services that they weren't buying before. And that will create new jobs.

Other offsetting advantages of outsourcing are less obvious, but just as compelling. Last time I was in San Diego, I attended a meeting with Dick Heckman, the CEO of K2, the sporting goods conglomerate that is moving most of its manufacturing to China. Heckman says that he can lower his labor costs by a factor of more than 20, compared to the US.

Okay, that's a smart arbitrage. But there's more to it than that. He's found that when labor is that much cheaper, he finds new things to do with labor that he couldn't have afforded to do before. When K2's major league baseball batters helmets were made in Missouri, labor was so expensive that all he could afford to do was pull the helmet off the injection molder, throw it in a box, and ship it to Walmart. But in China, he can afford to pay laborers to hand polish the helmet first, removing all the little mold artifacts and making it look and feel great.

Cheaper labor, then, means not only lower consumer prices and higher corporate profits back in the US, but also higher quality.

Consider this. China is currently building a steel factory that will be the largest in the world. When it is complete in two years, it will be the largest steel factory in the world. This single facility will be able to produce all the steel currently used in the United States.

When most people hear that, they become afraid. But I just think of the opportunities. It reminds me of Moore's Law -- the fact that silicon semiconductors effectively drop in price by 50% every 18 months. What if steel gets on its own version of Moore's Law?

Look at the wealth, the progress, and the jobs that have been created by silicon transistors becoming effectively free. Look at all the stuff we do with transistors that we couldn't even conceive of doing 20 years ago, but we can do now that transistors are free.

What will the world look like in 20 years when steel is free? I have no idea, but I know it will be a better world full of marvels that we can't even conceive right now. It will be a world full of US jobs in goods and services that don't even have names today.

Let's go back to what Greg Mankiw was talking about, that he took so much heat for. He was talking about a basic principle of economics that has been understood for about 200 years -- the idea of "comparative advantage." It's classic stuff, but it pays to review it because it's so relevant today.

Let's say you have an economy consisting of two self-sufficient people, and in this economy it takes a minimum of 1 pound of cheese every day in order to survive. So you spend as much time as you have to making a pound of cheese. After that, you devote your leftover time to making wine, which is a luxury.

The first guy is very productive. It takes him only a quarter of his day to make his pound of cheese, and then in the remaining three quarters he can make 12 bottles of wine.

The second guy's not so good. In fact, he's totally unskilled. It takes him half a day to make his pound of cheese, and in the leftover half day he can only make 2 bottles of wine.

Right off you wouldn't think the first guy has any reason to trade with the second guy -- he's got him beat in every way. But that's not the right way to look at it.

Suppose the second guy stops making wine altogether, and devotes his whole day to making cheese. He'll able to make 2 pounds -- one to eat, and one leftover to trade. If he trades his extra pound of cheese to the first guy, that would free up a quarter of the first guy's working day. That means the first guy would be free to make another four bottles of wine.

He gives three of those four bottles to the second guy in exchange for the cheese. So now the second guy, who started off with a pound of cheese and 2 bottles of wine every day, now ends up with a pound of cheese and 3 bottles of wine.

The first guy, who originally had a pound of cheese and 12 bottles of wine, ends up with a bottle of cheese and 13 bottles of wine. The world has become richer, on net, by two bottles of wine.

Notice that this result occurred even though the first guy enjoyed an absolute advantage over the second guy in both wine and cheese. But absolute advantage isn't as important as comparative advantage. By going entirely out of the cheese business, the first guy was able to exploit his comparative advantage in wine.

Now how does this example apply to the real world?

Obviously, the first guy is the US and the second guy is -- China, India, you name it. Steel may be a necessity of our life -- like cheese in the example. But we're going out of the steel business, even though we are the best at making steel, or at least could be if we wanted to be. But we don't want to be. Because we're even better at designing fiber optic networks or figuring out financial derivatives or making blockbuster action-hero movies -- or something.

But of course it's not that simple. A nation is not a single individual who does two things -- and as soon as he stops doing one, he just does more of the other. A nation is many people who are specialized into different things. If a nation stops making cheese, its cheese makers can't just suddenly become winemakers. US steel workers can't just start designing fiber optic networks. So at least in the short term, there will be winners and losers

And any time there are losers, politics gets involved. The winners from the deal are busily reinvesting their gains -- but the losers run to their lobbyists. So we end up with things like the Bush administration's tariffs on foreign steel. Sure, it protects the domestic steel industry -- sort of. But any advantage conveyed to steel producers becomes a disadvantage to steel consumers. So this ends up being a problem from which you can run, but you can't hide.

Another consideration is that certain industries may be seen as necessary for national security, no matter how uneconomical they are for a nation to do. If cheese is strictly necessary for life, do you really dare let someone else make yours? Does America dare to not have a steel industry? What would happen if there were a major war and we needed lots of steel?

Well, what would we really do if we really believed that, anyhow? Would we have the Army operate our steel industry, just in case we ever needed one? Would we have to draft people who would otherwise be fiber optic network designers and force them to labor two years of their lives in our militarized steel industry -- all supported by tax dollars? That's where the logic takes you. Again, you can run but you can't hide.

So what can we do in terms of policy to address these issues?

You do the hardest thing of all. Nothing. And the more nothing the better.

That's because of all America's absolute and comparative advantages, the most important one we've got is freedom. And freedom consists mostly of having a government policy to do nothing. Let free individual economic actors figure it out for themselves by trial and error. Yes, it's painful. And it's hard to stand by and do nothing when a displaced steel worker goes on Lou Dobbs' show and complains about it (although I've found the answer for that -- just turn the TV off).

But it's only under a policy of do-nothing economic freedom that we can maximize our chances to find the thing we're good at doing instead of making cheese, steel, or even wine.

What if it turns out we're not good at anything? What if it turns out that China and India are better at everything? Well, if that's true, then there's no law we're going to pass that's going to save us. And we'd still be better off trading with them. If we're so bad at everything, we certainly don't want to try to make it on out own. Again, we can run, but we can't hide.

Just remember, there was a time in the 1970s when the US was afraid of competition from Europe. That's right, Europe. Can you imagine that now?

Then in the 1980s we were afraid of Japan. Can you imagine that now?

Then in the 1990s we were afraid of the giant sucking sound of NAFTA. Can you imagine that now?

What happened in all these cases was that America's politicians did pretty much nothing. We deregulated our economy, and let individual economic actors figure it out for themselves. Europe and Japan laid regulation on top of regulation on top of industrial policy on top of managed trade. We won, they lost.

We could have all won, by the way. I think that's generally how it's turned out with our NAFTA partners, so far. This isn't a zero-sum game, as the cheese-and-wine example shows.

So now we're back in the same place, déjà vu all over again. But this time it's China and India we're worried about. If it's not one thing it's another. But the answer is the same -- to do nothing.

The problem, of course, is that it's an election year -- a close one, and a nasty one. John Kerry has a presidency to win, and not all that many issues to win it with. Lou Dobbs has a show to do. Paul Krugman has columns to write. And none of those guys ever got anywhere by saying "do nothing." That has never been the agenda of the conspiracy to keep you poor and stupid.

And Bush has an election to win, too. He generally believes in free trade, but we face a very real risk that he will "do something" just to get in front of the issue. We've already seen him "do something" with steel tariffs, and that was a disaster. We've seen him try to "do something" by sending John Snow over to China to try to get them to revalue the yuan. There's six months to go till the election -- it could get worse.

The people who are supposed to "do something" are us. If that means outsourcing something your business does to China or India or anywhere else, I say go for it.

But be careful. For all the same reasons that the hype about outsourcing makes it a red-hot political issue, it's also potentially a dangerous fad. Remember, those consultants with all the big forecasts have consulting services to sell. They make money helping you do your outsourcing whether it ends up making money for you in the long run, or not.

And like all fads, the first ones in make all the money. Then it gets harder. Already wage rates in India for call center operators are rising at 20% a year. That sweet spot gets less sweet every day. But the consultants keep on consulting.

So it's a self-correcting process, like most economic processes, if we are just patient. So try to tune out the conspiracy to keep you poor and stupid. If you're a worker, don't feel afraid. If you're a manager, don't feel guilty.

That simple world of cheese and wine can be ours if we just stick patiently to the basic axioms developed by classical economics 200 years ago. If you have the courage to build a world based on trade, you'll get your daily cheese. Plus you'll get more wine.

In fact, that's what I'm going to do right now. Have some more wine.

Unless you have any questions or comments. Thank you very much.

Posted by Donald L. Luskin at 11:54 PM | link  

MORE SEPARATED AT BIRTH STUFF    Inspired, no doubt, by my evidence that George W. Bush ominously resembles Paul Lynde, reader Jameson Campaigne sends in this alarming evidence about Mr. Bush's rival.

Posted by Donald L. Luskin at 6:42 AM | link  

REPRESSING ISLAM IN SPAIN    The wonderful new leftist government in Spain that US liberals love so much is cracking down on free speech by Muslim clerics. Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 6:31 AM | link  

THOSE TEN MILLION NEW JOBS    Factcheck.org argues that Kerry, as president, really could create the 10 million new jobs he's touting. However, it says at the same time, so could Bush.

Posted by Donald L. Luskin at 6:29 AM | link  


Wednesday, May 05, 2004

WE AGREE    Google shouldn't go public!

Posted by Donald L. Luskin at 12:21 PM | link  

MORE ON NBER'S RECESSION START DATE    Jerry Bowyer points out that earlier this year NBER started considering whether to move its "official" start date for the last recession forward several months, which would put it squarely into the Clinton administration. According to the Washington Post ,
    NBER President Martin Feldstein said, "It is clear that the revised data have made our original March date for the start of the recession much too late," but he did not offer a different date. "We are still waiting for additional monthly data before making a final judgment," said Feldstein, a Harvard University economist. "Until we have the additional data, we cannot make a decision."
Media Matters chooses not to mention this fact in its story on recession dating. It mentions Martin Feldstein though -- quoting Larry Kudlow to establish that Feldstein is respected by conservatives and make it seem hypocritical for them to dispute the NBER's "official" recession start date.

Posted by Donald L. Luskin at 8:35 AM | link  

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BROCK'S BACK, WITH ECONOMIC LIES   
Media Matters for America is a new website "dedicated to comprehensively monitoring, analyzing, and correcting conservative misinformation." It's been developed with the zillions of tax-deductible dollars that George Soros and others contributed to the leftist Center for American Progress. It's run by a confessed liar, former conservative author David Brock, who has admitted that he knowingly lied in his book about Anita Hill, and has apologized for his reporting on Bill Clinton's sexual misadventures.

So far the work from Media Matters isn't very impressive. But what should we expect when a liar is put in charge of a quest for truth?

The first major article posted on the Media Matters website is an attempted exposé of the often-heard conservative claim that the last economic recession began during the Clinton administration, and was already underway before George W. Bush took office in 2001. The article painstakingly traces the history of this claim through numerous statements by Bush administration officials and conservative commentators, and presents it all as a "successful three-and-a-half year media campaign" that has led to polling results showing "62% of Americans think the recession began under Clinton."

The claim that the last recession started under Clinton is absolutely true. To deny that is not only to blame Bush for a problem that he didn't cause, but to deprive him of the credit for fixing it with effective policies -- which is exactly why the left is so eager to do it. Here are the facts:

The one and only piece of evidence to the contrary offered by Media Matters is that fact that the National Bureau of Economic Research set the beginning of the last recession at March 2001, two months into the Bush administration. Check that date on the chart above -- this well-respected economic research group set the beginning of the recession after GDP growth had already crashed from almost 5% to almost zero. But according to Media Matters, this single authority determines truth, and everyone else is a liar. The article declares, "...if NBER says the recession began in March 2001, the recession began in March 2001."

The reality is that NBER is just like any other group of economists, struggling with partial and imperfect information to characterize phenomena that don't have any hard-and-fast definitions. Since NBER set the March 2001 recession start date in November 2001, there have been important negative revisions to key data. Most important, back then third quarter 2000 GDP growth was reported at 1.3% -- but now it's been revised all the way down to a negative 0.5%. NBER had no way of knowing that then.

Liberals have never felt constrained by NBER's "official" dates. For example, last year in a New York Times Magazine article ultra-leftist economist Paul Krugman cited dates for the economic expansion during the Reagan administration that not only didn't correspond to NBER's dates, but didn't even correspond to Ronald Reagan's years in the White House! The only virtue of Krugman's unofficial dates is that they made Reagan's economic performance look worse (natch).

And, of course, liberals are not at all happy with NBER's judgment that the recession that began in March 2001 ended only eight months later, in November 2001. Krugman called it "a controversial decision," and has since stated that the economy is, in fact, "still depressed." And John Kerry can't bring himself to admit that the recession has ended, even though Media Matters might lecture him that "...if NBER says the recession ended in November 2001, the recession ended in November 2001." Instead, Kerry refers in speeches to November 2001 as the date when "the recession supposedly ended."

The great thing about economics, though, is that reality speaks louder than the left's words. 62% of the American public knows that the recession began under Clinton, because they were there and they experienced it. Now, with GDP growth running stronger than in any 12-month period under the Clinton administration, the American public knows that an expansion is well underway.

Against that, nothing that Media Matters says matters.

Posted by Donald L. Luskin at 5:10 AM | link  


Tuesday, May 04, 2004

LE CHURCH C'EST MOI    Once again, Andrew Sullivan interprets the political landscape through the lens of his own wishes. This time he blasts conservative Catholics like Bob Novak for insisting that John Kerry adhere to the policies of the church, rather than pick the ones he likes and discard the rest as Sullivan does. Hey, it's fine with me what people do behind closed doors (or even open ones). But don't call yourself a chess player if you intend to move your knight like a rook (I could have picked other chess pieces for my metaphor, I suppose, but I don't want to be incorrect about this). Why should Kerry (or Sullivan) get to make up their own privileged definitions of what it means to be a Catholic, or a war hero, or anything else?

Posted by Donald L. Luskin at 8:44 PM | link  

HASSETT ON KRUGMAN THE "SHOCK PUNDIT"    I love that expression!

Posted by Donald L. Luskin at 7:30 PM | link  

A BIG BUDGET SURPRISE   Unexpectedly large tax receipts may mean that the federal budget deficit will be as much as $100 billion less than the $521 billion White House forecast. You can almost feel the pain in every sentence of the story on it by the Washington Post's smug DC reporter Jonathan Weisman. Thanks to reader Mark LaRochelle for the link.

Posted by Donald L. Luskin at 7:26 PM | link  

QUATTRONE CAUGHT IN THE WEB    Reader Tom Scheeler reacts to my short post yesterday about the conviction of Frank Quattrone, with this apt quotation from Ayn Rand's Atlas Shrugged:

"Did you really think we want those laws observed?" said Dr. Ferris. "We want them to be broken. You'd better get it straight that it's not a bunch of boy scouts you're up against... We're after power and we mean it... There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Who wants a nation of law-abiding citizens? What's there in that for anyone? But just pass the kind of laws that can neither be observed nor enforced or objectively interpreted - and you create a nation of law-breakers - and then you cash in on guilt. Now that's the system, Mr. Reardon, that's the game, and once you understand it, you'll be much easier to deal with."


Posted by Donald L. Luskin at 8:17 AM | link  


Monday, May 03, 2004

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TAX CUTS TRIGGERED THE IRAQ INSURGENCY   
According to Paul Krugman in today's column, tax cuts are responsible for our difficulties in Iraq. And he's got a lie that proves it. Krugman writes,

"A number of people, including Jay Garner, the first U.S. administrator of Iraq, think that the Bush administration shunned early elections, which might have given legitimacy to a transitional government, so it could impose economic policies that no elected Iraqi government would have approved. Indeed, over the past year the Coalition Provisional Authority has slashed tariffs, flattened taxes and thrown Iraqi industry wide open to foreign investors — reinforcing the sense of many Iraqis that we came as occupiers, not liberators."

Who the "number of people" are -- and where General Jay Garner said that he "think[s] that the Bush administration shunned early elections, which might have given legitimacy to a transitional government, so it could impose economic policies that no elected Iraqi government would have approved" -- is unknown. But from what I can tell, it's another Krugman lie.

If the source is an interview with the BBC in March, then Garner never said it. Garner talked only about his doubts about plans to privatize Iraq's state-controlled oil industry. There's talk about how the Bush administration had "elaborate plan to redesign Iraq's economy on a radical free-market model" -- but all that's in the words of BBC interviewer Greg Palast: Garner simply says nothing of the sort. Palast, by the way, is a virulently anti-Bush columnist whose work appears not only on the BBC, but in Hustler.

Of course it's especially ironic to see Krugman, the great free-trade advocate, complaining about slashing tariffs and opening up to foreign investors. But it's worth it, because it's all part of this week's talking points. With the economy booming thanks to Bush's economic policies, what can Krugman do except to try to cast any doubt he can on those policies by spuriously linking them to difficulties in Iraq? Who knows... if these tax cuts go on, we could be facing guerilla insurgencies all over the United States.

Posted by Donald L. Luskin at 11:46 PM | link  

GEORGE BUSH TO BLOCK!    Have you ever noticed anything a little strange about the "head-cut" -- the engraving-style portrait -- of George W. Bush that's always used in Wall Street Journal stories? Something hauntingly familiar?

Posted by Donald L. Luskin at 10:13 PM | link  

FIRST MARTHA, AND NOW QUATTRONE    Another persecuted capitalist. Notice that these convictions are never about the crime that was being investigated? They're always about some minor slip-up that an innocent man or woman makes in the process of defending himself/herself.

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

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KERRY'S EXCELLENT COOKIE ADVENTURE A PHONY: WSJ   
The front page of the supposedly conservative Wall Street Journal runs a front page puffer on John Kerry's effort to portray himself as pro-business. Included is Kerry's often-repeated claim that "He helped found a Boston cookie company that still survives, and he invokes his background as an entrepreneur." In an accompanying interview available online, Kerry expands,
    I started my own small business once... A tiny little deal. (A cookie store in Boston's Fanueil Market.) It's still there. it's still there, exactly as I created it. I could have franchised it across the country... I had had this idea about combining it, taking it nationally, putting it into malls and supermarkets. I could have been Mr. Kerry instead of Mrs. Fields... It was great fun. I did everything. I did the layout. I did the purchasing and the equipment... I must have had, I don't know, 35 part-time employees. And I learned a lot about paperwork, about leasing, about the burden of the health inspections, and the laws you have to live up to, the withholding tax issues, just, you know, how difficult it is as a small business...
Yeah... yeah... you coulda been a contenda. But the truth turns out to be quite different. Sadly, you have to pay the Journal an extra fee to get it. In today's edition of "Political Diary," the subscription-only daily email service run by the Journal's op-ed star Holman Jenkins reveals that no only did Kerry steal the cookie business he supposedly founded, but then later tried to sell it back to the person he stole it from:
    It turns out that the founder of the David's Cookies chain says Mr. Kerry is a phony and ripped off every element of the store from his blueprints... last January, Sam Dealey reported in "The Hill" newspaper that Mr. Kerry had been bragging so frequently that David Liederman, founder of the David's Cookies chain, finally decided to call him on it. "The bottom line is he just stole it from me," Mr. Liederman, now a New York restaurant owner, told The Hill...

    Mr. Liederman says the Kerry version of reality is half-baked. "Some guy who called me up was John Kerry, in '79 or '80," he recalls. "He said he wanted to come down and talk to me about franchising. He came to the office and said he had an incredible space in Boston, which was Faneuil Hall. He said he needed some plans and some layouts and all sorts of things to get the approval of the landlord.

    "So I gave him the layout, the package, and he went back and I didn't hear from him for six or seven months." Then someone Mr. Liederman knew called to tell him that a David's Cookies store was operating in Faneuil Hall. "It was a direct, 100-percent knock-off of David's Cookies," he told The Hill, from the appliances to the shop's design to the cookies themselves. "If you had walked into a David's Cookie's store in Manhattan at the same time he opened 'John's Cookies' in Boston, you couldn't tell the difference."

    Mr. Liederman wrote in his 1989 autobiography that he once challenged Mr. Kerry on the Fanueil Hall store: "I told him he had stolen my idea, and he replied: 'You're absolutely right. I am a politician; I shouldn't be in the cookie business, so let me sell you my store."


Posted by Donald L. Luskin at 1:02 PM | link  

IDENTITY POLITICS, MADE IN AMERICA    "Even though they do have national rivalries, a Mexican is not the same as a Peruvian or a Cuban, there is an overarching cultural commonality. When they come here, that becomes stronger because none of these people are Hispanic until they come here." From an interview with immigration expert Mark Krikorian on the Right Wing News blog.

Posted by Donald L. Luskin at 7:52 AM | link  

ECONOMIC DISSONANCE, OR JUST PLAIN B.S.?    Bloomberg's Caroline Baum asks whether the words coming out of the FOMC meeting Tuesday will match the music of the April payroll jobs announcement on Friday -- will it be harmony or dissonance? Good question -- but the reality is that each, separately, is a broken process moving nearly at random, neither one having any important link to the real world. If they appear to be in synch, will it be any better than if they don't?

Posted by Donald L. Luskin at 7:49 AM | link  

SOCIAL SECURITY REFORM    Acutally, it's more than that. It's about creating an "all-investor nation."

Posted by Donald L. Luskin at 7:41 AM | link  

PENN & TELLER, FAITH AND REASON    The first season of Penn & Teller's show "Bullshit" is available now on DVD. In an online interview, Penn Jillette stresses the primacy of science and reason over faith as the theme of the show -- and throws out anti-faith zingers that seemed designed to stir backlash (and promote sales) such as "There is no difference between Mel Gibson’s faith and the terrorist’s faith."

I've only seen a couple episodes of the show, and it doesn't seem to me that it's about reason-versus-faith at all. It's actually about something far more interesting: it's about the way putatively "documentary" film can distort information for the sake of persuasion. In one episode I recall, the spokeswoman for an environmental group is made to look foolish by having embarrassing out-takes from her interview taken out of context -- the usual stuff that goes with any taped interview: false starts, long "uhhh" pauses, and so on. Jillette's narration -- with its embarrassing out-takes left discretely on the cutting room floor, natch -- accuses the spokeswoman of being confused and inarticulate. This doesn't come off as grossly unfair to the interviewee, because the trick is so painfully obvious -- and funny. It's not unlike the way Penn & Teller's magic performances often work by revealing the "trick" to an illusion. The "trick" revealed here is the same one that shows like "60 Minutes" use every week. Greedy corporate CEOs get unflattering close-ups as they react nervously to tough questions -- Bill and Hillary Clinton are posed nicely in the middle distance as they smile fetchingly to each other while they lie.

Posted by Donald L. Luskin at 7:39 AM | link