Chronicle of the Conspiracy
Saturday, May 08, 2004
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:
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
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.
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:
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
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,
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.
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.
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.
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, 2004WE 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 ,
Posted by Donald L. Luskin at 8:35 AM | link
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, 2004LE 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:
Posted by Donald L. Luskin at 8:17 AM | link
Monday, May 03, 2004
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
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