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Media Infiltrations: Of Interventions and Conservative Principles  National Review Online September 23, 2008 Quit Doling Out That Bad-Economy Line The Washington Post September 14, 2008
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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!
Saturday, April 23, 2005
A FIG-LEAF'S VALEDICTION In what is probably the last column in Daniel Okrent's tiresome interlude as "public editor" of the New York Times, he plays his final card -- his last and lamest excuse for the way he has dodged coming to honest terms with every issue ever set before him during the last 18 months:"It's only a newspaper."
So who cares if it reports dishonestly and with partisan bias? Who cares that Daniel Okrent doesn't care? Nothing matters. Don't bother me. Later.
Posted by Donald L. Luskin at 5:48 PM | link
Friday, April 22, 2005
THE SPIN MAESTROS Noel Sheppard points out how Alan Greenspan's testimony yesterday has gotten spun by the leftist press. The Washington Post says in the lede of a story today that "Alan Greenspan said yesterday, for the first time explicitly, that he expects tax increases to be part of any eventual agreement to reduce the federal budget deficit." But then further down in the story, where Greenspan is actually quoted, the Post says he only implied it. The San Francisco Chronicle, not to be outdone, headlined "Fed chief acknowledges 2001 tax cuts encouraged deficit."Posted by Donald L. Luskin at 10:18 AM | link
SIGH... YET ANOTHER INEQUALITY ARGUMENT Martin Mayer, writing an op-ed for the New York Times today, makes a tortured new case that Social Security personal accounts could lead to -- are you sitting down? -- inequality of outcomes! His twisted new twist is that this inequality will be arbitrarily triggered by decisions of the Federal Reserve.
Mayer focuses on the feature of President Bush's current plan that would require that personal accounts be converted into annuities upon a worker's retirement. Mayer complains that the value of a worker's account at a retirement -- thus the value of the annuity payments it will produce -- will be a function of market performance over his working life, and the choices he made about allocating his portfolio. Well, yes -- and in some sense that's the whole point of personal accounts: to make the inequality of outcomes a matter of economic performance and personal choice, rather than what it is now: a matter of legislative whim and generational wealth transfer.
Mayer frets that personal accounts would turn brother against brother, giving the example of two brothers aged three years apart -- one with a big annuity because he cashed in his personal account at the market top in 2000, and another with a smaller one because he cashed it in at the market bottom in 2003. Well, if the two brothers had both chosen to be 100% invested in stocks right up until the moment of their retirement, then yes -- this would be true. Neal Phenes points out on the Et Tu Bloge blog that while the two brothers might have outcomes that differ from each other's, both are better than they would be under the current system.
But that said, Mayer chooses to ignore a feature of President Bush's proposal that would mitigate the risk of sudden swings in the stock market near retirement -- the use of "life cycle accounts" to automatically reduce a worker's exposure to equities in the years prior to retirement. Mayer begins his op-ed by saying, "So few specifics of President Bush's Social Security proposal have been made public that it is difficult to say which will make trouble." Yet he ignores the one "specific" that is particularly designed to counter his complaint.
But all that's been said before by the opponents of modernization. Mayer's unique gripe is that differences in interest rates over time will lead to unequal costs to buy an annuity, even if the value of personal accounts at retirement were equal. That's because, as Mayer puts it, "The higher the interest rate, the cheaper the price of an annuity that yields a certain income; the lower the interest rate, the more expensive the same annuity will have to be."
Mayer adds an attention-getting political dimension to this gripe: "what standard of living [retirees] may expect - will be determined largely by interest rates set by the Federal Reserve. That's a lot of power to concentrate in one conference room on Constitution Avenue."
Let's set aside the silly concentration of power argument -- the Fed's influence in economic matters should hardly come as a surprise to anyone, especially Meyer, who wrote a book called The Fed, which he subtitled "The World's Most Powerful Financial Institution." The real flaw in Mayer's argument is that the Fed doesn't have as much influence as he'd like to think over the rates that determine the price of annuities. The Fed sets overnight interest rates directly, but only has limited and approximate power to set the long-term interest rates that determine the price of annuities. Further, the annuities in question would be inflation protected (again, Mayer needs to read the Bush proposal, in order to grasp these "specifics"). Thus the interest rates that matter are not the nominal rates the Fed sets, but rather real rates -- the long term interest rate minus the expected rate of inflation.
But even granting Mayer's silly point, again "life cycle accounts" hold the answer. Anyone worried about the price of an annuity at retirement should just invest in long-term Treasury bonds. If rates fall (making annuities more expensive), then the value of the Treasury bonds will rise in perfect compensation. Mayer admits that the value of a personal account would be a matter of the "routine fluctuations in the value of the stocks and bonds." But he fails to connect the dots -- those "routine fluctuations" in bonds are the perfect hedge against the cost of an annuity.
Posted by Donald L. Luskin at 9:26 AM | link
Thursday, April 21, 2005
PREDICTION MARKETS BLOGROLL Check out Chris Masse's new listing of blogs that cover "prediction markets". Good stuff.Posted by Donald L. Luskin at 8:42 PM | link
JOKE OF THE DAY
Posted by Donald L. Luskin at 8:40 PM | link
KRUGFLATION A couple of late entries, responding to Paul Krugman's Monday Times column about "stagflation." Here's Econopundit Steve Antler's point by point refutation of Krugman's claims that the jobs market is in the dumps (thanks to reader Alex). And here's Jerry Bowyer's reminder that the whole notion of "stagflation" stands as an unanswered challenge to the foundations of Krugman's beloved Keynesianism. Good stuff.
Posted by Donald L. Luskin at 4:48 PM | link
TIMING IS EVERYTHING New York Times front page headline this morning:
Down Market Casts a Pall on Social Security Plan
And from the Times' web site in the afternoon:
Stocks Rally on Fed Survey, Earnings
NEW YORK (Reuters) - U.S. stocks surged on Thursday, with the Dow gaining more than 200 points...
Posted by Donald L. Luskin at 3:22 PM | link
Tuesday, April 19, 2005
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9. Key lyric of Norman Greenbaum's hippie-Christian anthem, Spirit in the Sky, changed from "I've got a friend named Jesus" to less-divisive "I've got a friend named Walter"
8. Good Friday officially renamed "Passable Friday;" Ash Wednesday officially renamed "the Day Before Thursday"
7. Placards displaying "John 3:16" outlawed at sporting events; spectators wishing to display their spiritual beliefs may substitute oversized foam-finger bearing the corporate slogan "Dude, You're Getting a Dell!"
6. The requirement that an actual belief in Christ is required to be a Christian is deemed discriminatory and judgmental; churches will offer alternative methods of qualification, such as "celebrating the magical joy of a baby's smile" or "just sitting in the park, thinkin' about Nature and shit"
5. Christ's words are modified to make them less "harsh" and "hostile" to non-believers; "I am the Way and the Light" changed to "I am the Way and the Light, if you believe in that kind of thing, and assuming that's your bag"
4. To be more "inclusive," Christian Heaven becomes history's first open-enrollment paradise; no particular belief system is required for entry, but applicants must have either a high-school diploma or eight weeks of N.E.A.-approved adult education (in cooking, basic automotive maintenance, or modern Spanish flamenco guitar)
3. Common name "Christopher" -- from the Latin for "Christ-Bearer" -- declared intolerant and offensive; by Papal Bull, all men named Christopher have their first names immediately changed to "Mitch" (also acceptable: Walter; see Number 9 above)
2. New Testament rewritten to delete references to Caiaphas and other Jewish priests; henceforth, Christ is accused of blasphemy by Hans Gruber and the German mercenaries from Die Hard
1. Christian Trinity officially changed from Father, Son, and Holy Spirit to Easter Bunny, Santie Clause, and the Ghost of Reverend Dr. Martin Luther King, Jr. (a.k.a., "The Spirit of Diversity")
List courtesy of our friend, the Ace of Spades (via reader Mike Daley).
Update... and speaking of Catholics, the Ace has Andrew Sullivan's number (it's in single digits), here.
Posted by Donald L. Luskin at 11:23 PM | link
DELONG BUYS THE TOP Brad DeLong has some nerve tweaking Kevin Hassett and James Glassman for suggesting that investors buy overvalued techstocks at the top in 2000. They didn't, as I reported below. But what's worse, DeLong did! From a column in the October 2, 2000 Fortune:
...new-economy technologies are immensely valuable as creators of wealth and utility. The companies that are smart enough to make large up-front investments in market share also will reap a large share of the wealth creation. The new-economy stocks of these firms are, if anything, still undervalued...The lessons for businesses are clear: Internet companies can generate high margins only if computing and communications enable the creation of economies of scale. The lessons for investors are also clear: Internet hype is justified if the value of a company's product increases as it is widely distributed.
Update... And so did Paul Krugman, on February 27, 2000:
I'm not sure that the current value of the Nasdaq is justified, but I'm not sure that it isn't.Update... DeLong will be glad to hear this! Thanks to reader Jill Olson for the link.
Posted by Donald L. Luskin at 2:38 PM | link
A KRUGMAN CHECK-UP Lifelike Pundits blog has a good debunking of Paul Krugman's column last week on socialized health care. For example:
Krugman hauls out the discredited statistics on life expectancy and infant mortality that are the staple of liberal arguments on this issue:Most Americans probably don't know that we have substantially lower life-expectancy and higher infant-mortality figures than other advanced countries.But this has been explained in the past.Different countries use different definitions of a "live birth." The United States uses the guidelines from WHO's International Classification of Diseases. Here, all infants evidencing any signs of life are considered live. There were 24,000 infants weighing less than 1 kilogram at birth in 1988. Such babies have poor survival rates.Switzerland, for example, defines infants as living only if they are at least 30 centimeters long at birth. It does not include 1 kilogram babies. Countries may also underreport infant deaths. According to Eberstadt, "In Australia, Canada, and the United States, more than a third of all infant deaths take place on the first day; in Sweden and Japan, where infant mortality rates are currently lowest, such deaths account for about a quarter of the total."
Medical care quality makes a big difference when it comes to survival rates of infants with low birthweights, and by birthweight, U.S. medical care shines. "By comparison with other Western societies enjoying especially low rates of infant mortality, U.S. babies at any given birthweight appear to have unusually good chances of surviving the perinatal period, regardless of race."
Posted by Donald L. Luskin at 1:44 PM | link
SMART STUDENTS A new poll from the Institute of Politics at Harvard's Kennedy School of Government finds that, when it comes to Social Security, college students aren't as knee-jerk liberal as their professors would probably like them to be. Some samples:
A year ago when we asked students to report the issue that concerned them most, Social Security did not even register. When we asked this year, Social Security jumped from obscurity to their second most important issue, right behind the war. A full 70 percent of students are worried that Social Security will not be able to provide benefits for them when they retire and 63 percent think that it will not be able to provide benefits for their parents. College students are seriously concerned about the future of Social Security and over half believe that the system needs reform.
Thanks to reader Jill Olson for the link.Undergraduates (52 percent) are significantly more likely than other Americans (40 percent - NBC/Wall Street Journal 2/05) to support creation of private investment accounts. Fifty-two percent support changing Social Security to allow private investment, while nearly 38 percent would rather stay in the current system and risk a payout shortfall.
Posted by Donald L. Luskin at 12:34 PM | link
DELONG'S OBSESSION Brad DeLong continues his campaign of lies and hate against Kevin Hassett. This time it's an op-ed in the Financial Times, claiming falsely that Hassett advised investors to buy the NASDAQ at the bubble top in 2000. To be sure, the timing of Hassett's book Dow 36,000 -- published in 1999 -- was ironic, to say the least. But nowhere in that book did Hassett and co-author James Glassman recommend buying bubblicious techstocks. Just the opposite -- they recommended buying the very opposite: the stodgy Dow. After all, the book was called Dow 36,000 -- not NASDAQ 36,000. As Glassman said in article for Kiplingers in December 2004,
"In the book, we cited 15 specific stocks as good investments...Our list includes such superb companies as Gillette, Johnson & Johnson, Tootsie Roll Industries, Wells Fargo and Cintas... Our preference was for businesses that had strong, defensible market niches and a history of generating a lot of cash. Kevin and I have monitored an imaginary, equally weighted portfolio of these 15 stocks over the past five years. From October 1999, when Dow 36,000 was published, through mid October 2004, the portfolio rose a total of 17%, compared with a loss of 7% for the S&P."DeLong owes Hassett an apology. But none will be forthcoming. DeLong is still pissed that Hassett exposed a boneheaded error in an infamous paper DeLong wrote with Larry Summers -- the one propounding a model of returns to capital investment that completely falls apart if you remove Botswana from the data. That was the last paper DeLong ever had published in a prestigious economic journal -- which is why he's had to found his own economic vanity press with a couple other ultraliberal economists -- The Economists Voice. How else can he get published at this point, if he doesn't publish himself? Even Wired magazine got tired of him... Hasn't the FT heard?
Posted by Donald L. Luskin at 12:07 PM | link
ET TU BLOGE Our friend Neal Phenes, who has contributed many wonderful links and letters to this site, has started his own blog -- and, of course, it's terrific. Check it out!
Posted by Donald L. Luskin at 11:33 AM | link
SCIENCE, RELIGION, OR JUST POLITICS? I'm glad that someone from the Von Mises Institute finally responded to Paul Krugman's crack about the Austrian school of economics in a Times column two weeks ago, basically dissing it as mere religion compared to the "science" of Keynesianism. William Anderson writes,
Ludwig von Mises well understood this narrow mindset. In Theory and History, he wrote:If you ask me, no school of economics deserves to wear the mantle of "science" -- and any school can be abused by adherents who treat it as a "religion," as the Austrians actually often do. The truth is that economics is neither science or religion -- it is politics. Krugman's sin -- to use a religious term -- is to cloud that inconvenient reality by offering the false dichotomy between science and religion, and the Austrians play right into it.The scope of the controversy changed when the new science of economics entered the scene. Political parties which passionately rejected all the practical conclusions to which the results of economic thought inevitably lead, but were unable to raise any tenable objections against their truth and correctness, shifted the argument to the fields of epistemology and methodology. They proclaimed the experimental methods of the natural sciences to be the only adequate mode of research, and induction from sensory experience the only legitimate mode of scientific reasoning. They behaved as if they had never heard about the logical problems involved in induction. Everything that was neither experimentation nor induction was in their eyes metaphysics, a term that they employed as synonymous with nonsense.Never mind that much of Keynesian economics has been thoroughly discredited, both through logical analysis and the real workings of history. Intellectually, there is no more devastating attack on Keynes' General Theory than Henry Hazlitt's The Failure of the New Economics. Alas, despite the logical rigor that Hazlitt applies to Keynes's work, Krugman would dismiss Hazlitt's work as "religious."
Thanks to reader John Patten for the link.
Posted by Donald L. Luskin at 11:09 AM | link
JOKE OF THE DAY
Posted by Donald L. Luskin at 9:23 AM | link
Monday, April 18, 2005
AT LEAST THEY'RE NOT SINGING SPIRITUALS There are some people who just live in the wrong era. The Washington Post "reporter" Jonathan Weisman really should have lived in the mid-19th century, so he could "report" on the abolitionist movement. I can see his story now.The abolitionists point to the cruelty of slavery, but Jane Doe, who serves on a plantation in Mississippi, says she likes things just the way they are.
"Why I wouldn't know what to do with my freedom if they gave it to me," the sturdy field worker said. "Let's hope and pray I never have to find out!"
Indeed, studies carried out by the non-partisan think-tank Americans Enslaved Together have found that many slaves, like Ms. Doe, prefer their chains. Most feel that freedom involves too many uncomfortable choices. For them, it may be freedom that is cruel.
Poor Mr. Weisman, doomed to live in the 21st century. He still manages to find the same story in the debate about Social Security personal accounts. From Monday's Post -- an interview with "working poor" woman Brenda Ellis, who has a small balance in a 401(k) account.
"I just know I have these three accounts, so I just say, 'Let's hope and pray. Let's hope and pray it's not going into Enron. Let's hope and pray it's not going into Tyco.' It's just hard to absorb all I'm supposed to absorb."...
In his push to add individual investment accounts to Social Security, President Bush maintains that people like Ellis have the most to gain -- the working poor, living from paycheck to paycheck...But between work, day care and the endless battle to lift themselves up, some members of the president's would-be ownership society say they would just as soon not have another thing to worry about....
"I like the old way," said Joan Singletary, 52, a custodian deployed to the Bureau of Printing and Engraving by Goodwill Industries. "I like receiving a check. That way, I wouldn't have to tamper with the money on my own."
And the inevitable,
Numerous studies of retirement savings programs such as 401(k) plans have found that choice may be the last thing people want.
Weisman's interviews among the "working poor" were unanimous in their reported contempt for personal accounts. But that's only fitting. It perfectly matches Weisman's -- and the liberal establishment's -- contempt for the "working poor," by portraying them as hapless fools incapable of handling their own money.
Posted by Donald L. Luskin at 11:36 PM | link
I GUESS IT WAS A BAD PUN The title of this posting on Perry Eidelbus' blog no longer states that Baghdad real estate is "booming." But Eidelbus takes careful note of an AP story that treats it as bad news that people find more value today in Baghdad than they used to:
A cheap house under a dictator's boot is still living under tyranny. Would you really prefer a country where you can buy a house for one-fourth the price, but Uday Hussein might rape and murder your 14-year-old daughter?
Posted by Donald L. Luskin at 1:29 PM | link
YOU MEAN THEY CAN'T AFFORD STARBUCKS? The thought police on West 43rd Street must have been taking the weekend off, because this fascinating fact-and-opinion piece questioning the welfare state paradise of Norway slipped into the Times on Sunday. Very well worth reading. Thanks to reader Jill Olson for the link.
Posted by Donald L. Luskin at 11:34 AM | link
ED TO KARL: ACCENTUATE THE POSITIVE Cato Institute's Ed Crane gives Karl Rove a little marketing advice from the op-ed page of the Wall Street Journal:
...this should be an emotional issue about liberty and opportunity, not solvency dates. The concept of an Ownership Society is brilliant. Unlike the New Deal, the New Frontier or the Great Society, Ownership Society actually means something integral to the essence of America. That essence is a respect for the dignity of the individual, which is axiomatically enhanced when one has more control over one's life. That is what personal accounts provide.
You want to get people excited about personal accounts? Tell them about the 1960 Supreme Court case, Flemming v. Nestor, which explicitly says Americans have no ownership rights to the money they pay into Social Security. It is, the Court ruled, a social program of Congress with absolutely no contractual obligations. What you get back at retirement is entirely up to the 535 members of Congress. Where's the dignity in that?
In addition to more control over your life through personal accounts, all the ancillary benefits of ownership should be enthusiastically played up: the pride one has in having provided for his or her own retirement, as opposed to being a supplicant of the state; the security of knowing the government can't take the money away (which they do whenever they raise the payroll tax or push back the retirement age); and most of all, knowledge that your loved ones may benefit from your labor. Inheritability is a hugely underexploited benefit of personal accounts. When you die, the money simply disappears. What's up with that? Which opponents of personal accounts want to debate that issue? If you want to energize the grass roots, challenge opponents of personal accounts on inheritability. Why should the money go to the government and not your loved ones?
I recently undertook the masochistic task of reading the last 10 apoplectic op-eds Paul Krugman has written on Social Security for the New York Times. Not once in his rants does he address the issues of ownership and inheritability. Indeed, opponents of personal accounts shy away from those issues like a vampire from the cross. I know you might counter by saying the president does mention ownership in virtually every speech. True, but mostly in passing. It's not the centerpiece of his sales pitch. In Orlando recently, he used the word "ownership" once, on page 18 of a 25-page speech. He never once mentioned inheritance, choice or personal control.
Posted by Donald L. Luskin at 9:21 AM | link
A "GLOBAL TEST" OF NO CONFIDENCE It's a "global test," all right. And Social Security and similar systems around the globe are failing. From the international polling organization Ipsos:
Large Majority Of Americans Have Written Off Public Pension Sources As Their Retirement Mainstay
...New York, NY – Most Americans have written off public pension sources as their retirement mainstay, but they're not alone in the world. This assessment is shared by large majorities in countries such as Australia, South Korea, and Mexico that have weathered a succession of shocks to their economies and currencies in recent years, according to new findings from Ipsos, the global survey-based marketing research firm and a leading provider of marketing research to financial services companies.
To find out what citizens around the world are thinking about how they'll fund their old age, Ipsos's global reporting service, World Monitor, surveyed adults in 11 countries—Australia, China, France, Germany, Italy, Japan, Mexico, Spain, South Korea, the United Kingdom, and the United States—late last year. Ipsos asked citizens to pick from a variety of sources they deemed most likely (first and then subsequent mentions) to finance their retirement years: a pension from the government, a private pension from company/employer, personal retirement savings, support from children or relatives, or ownership of a house, land, or real estate.
The Ipsos study found that Americans are the least likely to expect their public Social Security system to see them through retirement, and are among the most likely to expect to draw on their own savings. Meanwhile, although Europeans may be the most likely to count on having a government pension for their old age, this expectation is wearing thin among younger population cohorts.
"Where people are losing confidence in public and private pensions and resigning themselves to the likelihood that their savings are going to be the main funds for their retirement years—something that is clearly happening in America but also elsewhere..."
Posted by Donald L. Luskin at 9:09 AM | link