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Chronicle of the Conspiracy
Join us as we discover, document, expose and challenge the bad people, the bad institutions and the bad ideas that stand in the way of wealth creation -- and show you how to fight back!

Friday, July 09, 2004

JOKE OF THE DAY   

Posted by Donald L. Luskin at 8:19 AM | link   

RELIGIOUS RIGHT SHOOTS SELF IN FOOT    Religious-right moralizers who insist on imposing their views on everyone -- and at the same time clamor for smaller government -- should consider what's happened in the wake of their outrage following Janet Jackson Nipplegate scandal.
Since Janet Jackson exposed her nipple jewelry on national television, radio stations have been clamoring for technology that delays broadcast feeds for up to 40 seconds, giving hosts and producers a chance to bleep out naughty words...But the technology isn't cheap for small stations, which also face a risk of hefty fines just like their huge commercial counterparts in metropolises like New York City and Los Angeles.

The financial risk to the radio industry of even a single four-letter word is hardly trivial. The Senate recently passed a bill boosting the maximum fine per incident of obscenity to $275,000 from $27,500; the House went up to $500,000.

Radio has long been a stronghold for the kinds of values the religious right treasures -- looks like they've shot themselves in the foot.

Update...Reader Michael Pollard writes,

You criticize "Religious-right moralizers who insist on imposing their views on everyone ..." as though this were per se an offensive practice. But all laws involve the lawmaker's (or, by extension, voters') imposition of his views on everyone. That is what laws do. Btw, I'm a libertarian-leaning agnostic.
Michael, as libertarians, our first task is to understand the limits of the state, and that means drawing the distinction between laws that secure our liberty (e.g. laws against force and fraud) as opposed to laws that enforce arbitrary preferences of one citizen upon another (e.g. laws against so-called "obscenity"). In the libertarian universe, then, laws cannot "impose views" -- the protect you against that very thing.

Posted by Donald L. Luskin at 8:08 AM | link   

THE DEMOCRATS' MORAL IMPERATIVE    Reader Robb Tarr reacts to Paul Krugman's column today, calling for the rollback of Bush's tax cuts and the spending of the new revenues on health care:
One thing I don't understand, is that all those Democrats who call for higher taxes can immediately put their money where their mouths are. They should simply take whatever higher tax rate they advocate, calculate their own taxes as if that rate were in effect, and request from their employer that this higher amount be withheld from their pay. Come next April, when the IRS tries to refund them the difference, they can simply make a donation to the Federal Government.

They don't need to wait until a law is passed -- they can take matters into their own hands and act now for higher taxes! Why aren't they doing this already? Mr. Krugman? Could it be h-y-p-o-c-r-i-s-y? After all, if higher taxes truly are what's just and moral, aren't they being immoral by not voluntarily contributing the higher amounts right now?

Update 7/10/2004... Reader Robert Lawrence adds:
I always confront people who tell me we would roll back the tax cut. I reply that , as a CPA, I have the tax software going back over a decade and would be happy to do their return by based on any pre-tax cut year they want. No one ever takes me up. In 23 years of doing returns I have NEVER had someone tell me they wanted to pay more taxes! Just as there all no atheists in foxholes I can assure you there are no Liberals on April 15th.

Posted by Donald L. Luskin at 8:05 AM | link   


Thursday, July 08, 2004

HERE'S HOPING    We're quoted in a piece by Amey Stone in BusinessWeek Online today:"...with four months until Election Day, Bush has plenty of time to rally. In a July 7 commentary, Donald Luskin of research boutique Trend Macrolytics ventured, 'If we had to guess, it would be that Bush will be reelected and that his tax policies would survive to at least 2008," which "would bode well for a significant rally in the fourth quarter.'"

Posted by Donald L. Luskin at 9:31 PM | link   

TIMES HYPOCRISY ON WELFARE REFORM (REMEMBER THE NEEDIEST!)    Stuart Buck at the Buck Stops Here blog has a devastating then-and-now comparison of the New York Times' editorial position on welfare reform. Stuart points out that in an editorial yesterday, the Times said:
Much of the partisan angst and philosophical conflict that marked the original passage dissipated as the law sharply shrank welfare rolls by 60 percent and guided millions of recipients from the dole to low-income employment and career opportunities. In keeping with the law's emphasis, states and localities began exercising creative authority to tailor federal block grants to the particular child care, transportation and education needs of welfare recipients and the working poor. Renewal, with some moderate tinkering, seemed a no-brainer.
But Stuart notes,
Renewal of welfare reform is a no-brainer, huh?

But back in 1996, the welfare reform bill was a "draconian" means of "punishment" that would throw "a million children into poverty." Not only that, it was "atrocious," "harsh," "extreme," "devastating," "not humane," "punitive," "odious," "shocking," and "arrogan[t]." If that wasn't enough, it was not "acceptable."

Thanks to LEXIS, here's what the New York Times said then...

Read the whole sorry thing. It's stunning. Thanks to reader David Bakin for the link.

Posted by Donald L. Luskin at 12:45 PM | link   

JOKE OF THE DAY   

Posted by Donald L. Luskin at 11:38 AM | link   


Wednesday, July 07, 2004

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MORE ON THAT SKETCHY DELONG CV   
The other day I wondered whether Brad DeLong had published any papers in refereed scholarly economics journals since his disastrous 1991 and 1992  papers co-authored with Lawrence Summers. In 1993 it was revealed that the elimination of a single country from their data-set -- Botswana -- completely destroyed their entire hypothesis. John Seater, a professor of economics at North Carolina State University, took a look at DeLong's CV, which in the past has had a few accuracy problems. Seater writes:

"I looked at DeLong's vita. Reading it quickly leads to MEGO (My Eyes Glaze Over) because he lists everything he has ever published in one big category, making no distinctions between, at one extreme, a four-paragraph piece prepared for delivery on a TV program and, at the other extreme, original research in refereed journals. Ferreting out the scientific contributions consequently takes a bit of patience.

"DeLong published quite a bit up to 1993, when he got tenure. After that, his scientific contributions fell almost to zero, and overall the vita is embarrassingly weak for someone at a big time department like Berkeley. There are almost no papers in refereed journals over the past 10 years, and almost all of those are comments, surveys, introductions to conferences, or such; original research since 1994 is virtually non-existent. DeLong appears to have largely ceased doing serious work; perhaps he has taken Krugman as his model in that regard.

"There also is the 1992 scientific article listed twice, once in Italian and once in English. It caught my eye because I speak Italian. The Italian title translates to the English title, and the name of the journal and the publication date are the same for the two articles. Clearly, it is the same article. Listing it twice is simply lying."
 


Posted by Donald L. Luskin at 8:50 AM | link   

JOKE OF THE DAY   

Posted by Donald L. Luskin at 12:34 AM | link   

WELFARE REFORM AS STRUCTURAL CHANGE    Tim Worstall explains slow low-end wage growth as something other than a conspiracy by Halliburton:
For several decades it was a given that by the time we got down to 5.6 % unemployment we would expect to be seeing wage inflation. That's where we are now and as is rightly pointed out we don't have that inflation. So what happened, has there been some structural change in the economy since the last recession, something that would change the relationship between unemployment rates and income gains? Well, yes, there has been: welfare reform.

Posted by Donald L. Luskin at 12:27 AM | link   


Tuesday, July 06, 2004

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THE ITALIAN JOB   
Here's the jacket of the Italian edition of Paul Krugman's book, The Great Unraveling. It's not as scandalous as the UK edition that showed Bush with Frankenstein-like stitches and Cheney with a Hitler mustache. Looks more like a poster for the eco-disaster movie "The Day After Tomorrow". Actually, that's not a bad comparable.

Thanks to globe-traveling reader James Bennett for the link.

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

JOKE OF THE DAY    Sick, sick, sick!

Posted by Donald L. Luskin at 12:26 AM | link   

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IT'S A BOOM! NO, IT'S A BUST!   
Paul Krugman today:
"What about overall growth? ...In the first quarter of 2004, growth was down to 3.9 percent, only slightly above the Clinton-era average. Scattered signs of weakness — rising new claims for unemployment insurance, sales warnings at Target and Wal-Mart, falling numbers for new durable goods orders — have led many analysts to suspect that growth slowed further in the second quarter."
Paul Krugman three weeks ago:
"Over the last few months, the recovery has finally started to look like the real thing."

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


Monday, July 05, 2004

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KRUGMAN KEEPS NEPOTISM ALL IN THE FAMILY   
It's a week old now, but I've been on vacation, and I just can't resist commenting on Paul Krugman's absurd and nasty column from last Tuesday in which he imagines that assignments in Iraq are being handed out to neocons as some form of political patronage. Punishment is more like it. I say: let's send all the liberals there. I've seen some scathing defenses of Simone Ledeen, daughter of Michael Ledeen of the conservative think-tank American Enterprise Institute (and my colleague as a contributing editor at National Review Online). Here's a scorcher by Mona Charen (thanks to reader Martin Shimp for the link); a killer-bee by Dan Darling of the Winds of Change blog (thanks to reader Jaume Folch); a death-ray by Tom Maguire on his Just One Minute blog; and a bullshit-seeking missile by Roger Simon on his blog (thanks to Maguire for the link).

But for all that, Krugman knows whereof he speaks on this topic: he is an expert on nepotism. With all the economists in the world to choose from, whom to you think he selected to co-author his upcoming college textbook on principles of economics? It's his own wife, of course -- Robin Wells. She's on the research staff in the economics department at Princeton, but if she's ever written any other books before there's no mention of them by the publisher of the upcoming one with her hubby. All we know of her from Krugman's writings in the Times is that she has the unique psychic power to reveal to Krugman what all African-Americans think on given topics. Considering what Wells has to go through to get her second billing on Krugman's book, maybe going to Iraq isn't such a bad deal after all.

Posted by Donald L. Luskin at 9:23 PM | link   

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KRUGMAN'S SMOKING-GUN MEMO, PAGE TWO   
And speaking of that hilariously wrong September 1982 hawkish inflation forecast made by Paul Krugman and Lawrence Summers when they were both staff economists at the Council of Economic Advisers in the first Reagan administration, I have now liberated the second page of their two-page smoking-gun memo (here's the first page, and now here's the second). "Bobby" -- the keeper of the online Krugman shrine -- has been accusing me of holding back the second page in the belief that it will contain something that will make Krugman's "inflation time bomb" warning seem a little less absurd. Sorry, "Bobby" -- read it and weep: on page two Krugman only digs himself deeper. The best part is when Krugman ends with what he calls a "harrowing reminder" of how inflation played out in the mid-1970s recession (which is precisely how it didn't play out in the period Krugman was trying to predict).

But since "Bobby" will no doubt consider even this new embarrassment to Krugman another "wonderful piece of economic history," he will surely treasure another vintage bit of Krugman I've managed to liberate from deep cover: a page from a January, 1983 memo Krugman prepared for CEA chair Martin Feldstein, perhaps part of a draft for the Economic Report of the President. In the September 1982 "harrowing reminder" memo with Summers, Krugman had written:

"Much of the apparent progress against inflation has resulted from the temporary side effects of tight money and high real interest rates. ...a significant portion of the slowing of consumer price inflation since 1980 does not represent a reduction in the underlying rate."

Yet just four months later, in the new memo I've discovered, he completely contradicted himself, writing:

"While some of the improvement represented transitory factors such as the appreciation of the dollar and declining commodity prices, a major share probably represented a slowing of the underlying momentum of inflation."

Suddenly not so harrowing, eh? That's a "rowback," friends! Yes, as early as 1983 -- subsidized by tax dollars, yet -- Krugman was at work perfecting the art that would serve him so well at the New York Times: correcting a previous error by replacing it with a new version in a subsequent writing, without mentioning that there had ever been an error in the first place. It's just as Krugman has written of his brief tenure at CEA: he "discover[ed] a new talent: that of writing serious economics in seemingly plain English." So this, then, was the birth of his career as America's most dangerous liberal pundit -- the master of "seemingly plain English."  That expression, by the way, is seemingly plain English for "lying."

Posted by Donald L. Luskin at 7:14 PM | link   

WHAT'S IN A NAME?    A lot, if you are James Crystal. Check it out.

Posted by Donald L. Luskin at 7:12 PM | link   

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DELONG: A BAD OFFENSE IS A BAD DEFENSE   
I'm back from vacation, and what do I find waiting for me? A stink-bomb from Brad DeLong! Several readers kindly informed me that DeLong lifted his head from the public trough at the University of California at Berkeley long enough to respond to my challenge that he defend the hilariously wrong September 1982 hawkish inflation forecasts made by Paul Krugman and Lawrence Summers. Krugman and Summers issued a dire warning of an "Inflation Time Bomb," just as inflation had ceased to be a critical problem, in a memo written while they were both staff economists at the Council of Economic Advisers in the first Reagan administration. DeLong's defense of Krugman and Summers is no defense at all -- it doesn't even mention Krugman and Summers' stupendously wrong inflation forecast (heck, it doesn't even use the word "inflation"). It's simply an attack on me, a nasty nit-picking of an analytic detail that doesn't in the slightest make Krugman and Summers' inflation warning any less wrong.

I'll get to the substance of DeLong's attack in a moment, but first I must congratulate him for his courage in writing anything at all on this subject. You see, I thought DeLong wouldn't want to draw any attention to his own history as a co-author with Lawrence Summers -- it's even more embarrassing than Krugman's. DeLong and Summers co-authored "Equipment Spending and Economic Growth" in the Quarterly Journal of Economics in 1991, and "Equipment Spending and Economic Growth: How Strong is the Nexus?" in the Brookings Papers on Economic Activity in 1992. The papers were presentations of an empirical study showing higher social returns to capital equipment investment than would be predicted by the classic Solow growth model. But only a year later, "Reassessing the Social Returns to Equipment Investment," an NBER Working Paper by Alan J. Auerbach, Kevin A. Hassett, and Stephen D. Oliner, revealed that DeLong and Summers were just flat-out wrong, and for the most embarrassing of reasons: their results fell apart with the removal of Botswana from their data set:

"DeLong and Summers' own data fail to reject the Solow model for the OECD countries. The same is true even for their full sample of quite heterogeneous nations if we exclude just one country (Botswana). These results clearly refute DeLong and Summers' claim to have uncovered robust evidence of uniformly high social returns to equipment investment."

After this embarrassing debacle, Teflon-coated Summers managed to go on with his career, eventually becoming Treasury secretary under Bill Clinton, and then president of Harvard. But has Professor DeLong ever written another paper accepted by a refereed scholarly economics journal? He'll have to tell me if he has. I'd check his online CV, but it has not always proven to be entirely accurate.

Now, let me briefly address DeLong's nitpicking of my critique of the Krugman/Summer's inflation forecast. DeLong claims that I used the wrong data definition to fact-check Krugman and Summers' forecast that "As real interest rates decline and the economy recovers, we can expect the real exchange rate...to return to approximately their historical levels." Krugman and Summers defined "historical levels" by stating "The real exchange rate is now...23.7 percent above its average level during the period 1973:1981." DeLong defines the "real exchange rate" as "to divide a nominal exchange rate series by...the ratio of the home to the foreign price level." The problem is that when you use that definition, then Krugman and Summers' 23.7% "historical level" is wrong. Using the Federal Reserve's Price-adjusted Broad Dollar Index series constructed DeLong's way (endorsed as the correct series by no less an economic authority than "Bobby" -- the keeper of the online Krugman shrine -- in the process of crowing about DeLong's defense), we see that at the time Krugman and Summers' forecast was written, the real exchange rate was in fact only 18.2% above its "historical level." The series I used, which (in DeLong's words) was "to divide a nominal exchange rate series by the home country's price level," and to see it from the perspective of the foreign currency rather than the dollar -- came a little closer to Krugman and Summers' number, at 28.5%. Obviously I had no idea what series Krugman and Summers really meant, or from what perspective they intended it to be viewed -- and either does DeLong. So I picked the series and the perspective that made more sense in relation to Krugman and Summers' own numbers. Did I guess wrong? Did DeLong? Who knows. All I know is that DeLong counts my guessing differently from him as among my "sins." I thought economics was a science, not a religion -- but then perhaps this explains why DeLong always refers to Krugman as "Brother Paul."

Does using DeLong's series make Krugman and Summers right? Here's a revised version of the chart I first presented, using the Federal Reserve series. Krugman and Summers prediction about the real exchange rate (defined this way) proved right -- finally -- by the last year of the Reagan presidency. Before that, however, it spent three years moving strongly the opposite direction.

But none of this trivia has the slightest bit to do with Krugman and Summers' astronomically wrong inflation forecast. It's a side-show, a footnote (unlike the matter of allowing one's entire hypothesis to be blown out of the water by the elimination of Botswana from one's data-set). If anything, this makes Krugman and Summers' inflation forecast even more absurd -- if their exchange rate forecast was (finally, sort of) right, then how could their inflation forecast be so spectacularly wrong? I guess we must count among the "sins" of Krugman and Summers that they have no idea what causes inflation.

Posted by Donald L. Luskin at 6:26 PM | link   

JOKE OF THE DAY   

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


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