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Saturday, July 30, 2005

SO THERE!   What started as a gag on the Web gets real:
If the Libertarian Party of New Hampshire and its allies have their way, someday two stone monuments will stand on U.S. Supreme Court Justice Stephen G. Breyer's Plainfield property.

Short of that, the Libertarians hope to cause Breyer some discomfort for his vote last month on a controversial court decision freeing cities and towns to take land and turn it over to private developers. They are planning a petition drive asking Plainfield voters to take Breyer's 167-acre vacation retreat by eminent domain at their 2006 Town Meeting. After ousting the Breyers, the Libertarians would create "Constitution Park," to include one monument commemorating the U.S. Constitution and another for the New Hampshire Constitution.

"The point is: What goes around, comes around," said Mike Lorrey, the Libertarian Party's vice chairman in New Hampshire's Second Congressional District. "This is a way of saying, 'You're going to be held to your own standard.'"

Thanks to reader Jill Olson for the link.

Posted by Donald L. Luskin at 11:05 PM | link  

CATS AND DOGS HATE BUSH   ...according to the New York Times. But then again (according to the Times), cats are like bloggers:
...sitting at home staring into their computer screens and watching other bloggers blog other bloggers. Cats, who live indoors and love to prowl, are the soul of the blogosphere. Dogs would never blog.
But on the other hand (according to the Times),
take a look at, where a live camera is trained on the litter boxes of two cats, Grey and Black. Every 60 seconds the image is refreshed. Counting down to zero and waiting for the cats to come into the frame is strangely and annoyingly suspenseful.
Strangely indeed. And don't forget (according to the Times),
Last month a woman let her dog relieve itself on the subway in Seoul. She was caught, by a cellphone camera, doing nothing about it. Within days, her picture, her identity, her family's identity and her past were revealed to the world on the Web. She quit her university in shame.

Interesting, yes...

Uh, no, actually.

Thanks to reader Josh Hendrickson for the link.

Posted by Donald L. Luskin at 2:04 PM | link  

Friday, July 29, 2005

JUST BEING CONTRARY   Carl Futia is a Yale and Berkeley economics grad who runs a website where he publishes his market forecasts, based in part on "the theory of contrary opinion." He writes,

I happen to think that the New York Times is essential reading for any investor.  I systematically do the opposite of whatever the Times is encouraging its readers to do, and this investment strategy has been very successful.  

Here is some of his posts in which he uses the Times as a contrary investment tool:  

Posted by Donald L. Luskin at 5:54 PM | link  

'BAMAGATE MAILBAG   I've had an avalanche of mail on my National Review Online piece fisking Paul Krugman's column on how workers in Alabama are too stupid to build cars. Here's a sampler.

Maybe Mr. Krugman is still upset about the New York Times' last experience with the Alabama labor force. Does the name Howell Raines ring a bell?

Jonathan B. Minchin

I live in Alabama and hadnít heard a word on it. Of course our local paper, the Tuscaloosa News is owned by the New York Times Company and run like a plantationóthey extract all the profits to New York and leave minimal resources behind to do state or community journalism.

For the record, Toyota already has a plant in Alabama; they opened up the factory that makes the V-8 engines for Tundra trucks and Lexis sedans in Huntsville about two or three years ago. Mercedes is just finishing up a doubling of their factory floor space and is gearing up to double the number of cars they make here. ZF and Johnson Controls (among others) have build plants here to feed Mercedes. Honda has a full car assembly plant in Lincoln, and Hyundai is clearing ground for an auto plant just outside of Montgomery.

Tell Krugman heís welcome to come down here and, if he dares, actually talk to the people he writes about. I know thatís a rare thing to do now in journalism, but it might be worth a try. Tell him to be careful during hunting season though. The woods are full of Germans and Japanese businessmen in orange caps and they havenít got a clue as to what theyíre doing.

Tom Jackson

Alabama's education problems that do exist are twofold.

First, education dollars are earmarked by the state constitution, meaning that education is not really accountable to the legislature via the budget process. After all, if you get the same money year after year no matter your performance, what incentive is there to be great?

Second, this earmarking (combined with the "merit" system) gives rise to a monstrously powerful state teachers union. The head of this union can never lose due to the above, so he is always reaching for the sky. Alabama didn't get around to testing teachers or doing their background checks until just the last couple years due to the AEA and specious civil rights lawsuits from minority teachers.

John Hay

Having been stationed in Alabama with the military, I can say they are hard working and industrious folk who are as educated as the populace in the backwater of northern New York where I currently live. So a hearty thank you for defending Alabamians! I guess Krugman ignored wholly the fact that Hyundai closed its doors on a plant in Canada due to various difficulties, and opened a state of the art plant in Montgomery. Now why would they do that if Canada is such a utopia of social health and education? Wouldn't they simply reopen the closed plant?

Chris Henderson

I read the same article published with pride here in the Detroit Free Press. How about the fact that, despite Governor Jennifer Granholmís overtures, Toyota refuses to put their plant in Michigan, also despite Detroit being the motor capital of the world (country?)? Maybe itís because of Michiganís self-detrimental high cost of doing business here, including high taxes and exorbitantly high health benefits demands (thanks the the UAW). Heck, sounds like Canada to me.

Tom Nixon

It may be worth noting that one of the reasons that Mercedes (and Honda) built sizable manufacturing plants in Alabama is that wages and cost of living are lower here in the Southeast. That, coupled with skilled non-union labor (idled, in part, by textile manufacturing losses) in abundance, makes the Southeast more attractive to manufacturers than the ridiculously high cost Northeast.

Another relevant reason (as is always the case in determining where to manufacture) is good quality of life overall. Auto execs want their folks to have decent schools, hospitals, low crime....and a nice golf course nearby.

I know these things because I was in college in Alabama when Mercedes and Honda announced their construction plans. I work in the textile business now, and just 10 miles down I-85 from my office, BMW manufactures the X5 SUV, and Z4 convertible in Greer, SC (where I grew up). When BMW announced their plans to build their massive plant in Greer, SC, the retort from the snobbish elite was "Bubba's makin' wheels". Well, they were right. Bubba's makin' money, too.

Lindsay Osbon

Posted by Donald L. Luskin at 5:36 PM | link  

BLOOD IN THE WATERS ON W. 43RD STREET   An appellate court ruled yesterday that a libel suit against the New York Times by a former Army bioterrorism expert could proceed.  According to the Times,

"The suit, filed two years ago by the bioterrorism expert, Steven J. Hatfill, accused Nicholas D. Kristof, a Times Op-Ed columnist, of implicating Dr. Hatfill in the unsolved anthrax attacks in October 2001."

The appeals court noted in a 2-to-1 ruling, that

"a 'reasonable reader' of Mr. Kristof's columns would have concluded that Dr. Hatfill was responsible for the anthrax attacks and that the columns intentionally inflicted emotional distress on him."

Did you catch that word "intentionally"? Not only did the Times column inflict emotional distress on Hatfill -- it did so on purpose.

There's blood in the water, friends. With this in addition to Judith Miller sitting in jail -- and looking more and more like the one who outed Valerie Plame -- the Times could be in more trouble today than it was when all it had to worry about were the trivial escapades of Jayson Blair.

Thanks to reader Jill Olson for the link.

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

A FRENCHMAN ON KRUGMAN ON FRANCE   Got some good comments on Paul Krugman's column today from Chris F. Masse, the expert in "prediction markets" whom we often quote here. Masse is a Frenchman, and he has a few points of difference with Krugman on just how wonderful everything is in France. Below, Krugman is in italics, and Masse's responses are in regular type.

"Yet according to the Organization for Economic Cooperation and Development, productivity in France - G.D.P. per hour worked - is actually a bit higher than in the United States."

One of the reason is the 35-hour-a-week law and the heavy taxes on employers that deter them from hiring more than just the minima. French executives (who want the job to be done) press workers for more productivity. Which leads to a stressful working environment.

"France's unemployment rate, which tends to run about four percentage points higher than the U.S. rate, is a real problem."

Unemployment is assessed thru BOTH the unemployment rate AND the average unemployment period. Both numbers are two times higher in France than in the USA or U.K. So, in fact, France's unemployment is FOUR TIMES higher than in America or Great Britain.

"Another is that many French citizens retire early."

Paul Krugman makes it like my fellow citizens CHOOSE to retire early. In fact, in France, a recently fired worker over 50 has a very low probability of getting re-hired somewhere. Economic prospects are that bleak in France nowadays.

"The French family, without question, has lower disposable income. This translates into lower personal consumption: a smaller car, a smaller house, less eating out."

Also true for the corporations. Lower profits. Less money spent in R&D (i.e., less investments in the future). Paris is a living museum, not a vibrant place like London ---whom would you give the 2012 Olympics to?

"So which society has made the better choice?"

Let's ask that question to the hundreds of thousands French professionals, technologists, scientists and entrepreneurs who have fled France and chose to live and work in Tony Blair's country or in the Silicon Valley.

"And they even offer some statistical evidence that working fewer hours makes Europeans happier, despite the loss of potential income."

This French sentiment has been entertained by a powerful socialist propaganda -- and by the weak French Republicans actually in power. This has lead to the decline of France in the GDP race -- the U.K. is now up the ladder. France is on its way to become like Greece -- historically interesting, but not relevant.

Update [7/31/2005]... An anonymous notes an error in Chris's text, complaining that the judgment that "France's unemployment is FOUR TIMES higher than in America" is based on double counting. Here's how I see it:

While waiting longer to get a job makes the situation worse for a French worker, I don't see how you can multiply the difference in unemployment rates by the difference in waiting periods to get a simple factor representing the difference in total unworked hours, which seems to be Chris's definition of total unemployment.

There may be a special case in which the US labor pool grows so quickly that new jobs arise without any new people becoming unemployed in order to employ the previously unemployed. But that's not the real world. Also, when standard work-weeks are different between two nations, you would have to adjust for that in order to get to unworked hours anyway.

So I agree that the waiting time makes the French situation worse. But I don't see why it's four times worse, or any particular number. If the length of the waiting period has very high emotional impact, perhaps the situation is ten times worse, subjectively. Or if it has little impact, maybe it's only three times worse -- again, subjectively.

Chris is entitled to his subjective opinion that it's "four." But I do think it's a little spurious to present "four" as the result of an objective calculation -- in this case two times two -- and make it sound as though this is a precise measurement of any actual statistic.

Posted by Donald L. Luskin at 8:47 AM | link  

SILENCE OF THE SHAMS   From Tigerhawk:
On April 16, during what proved to be an extremely ephemeral downdraft in the U.S. stock markets, the NYT ran a front page headline that blared "Stocks Plunge to Lowest Point Since Election." It was not clear at the time what the relationship was between the low level of the stock market in April and the election (since the market had bottomed some days before the election), but the Times purported to see one worthy of a front page headline.

Yesterday, the S&P and the Nasdaq hit their highest levels in the four years since the carefree days between the Clinton Administration and the onset of war on September 11. Imagine my surprise that this morning's New York Times not only does not mention this fact on the front page, but it is nowhere to be seen in all of Section A! It is almost as if the short-term performance of the financial markets has nothing to do with the Bush Administration.

Posted by Donald L. Luskin at 8:18 AM | link  

'BAMAGATE   Here's my NRO column for today.
Paul Krugman -- America's most dangerous liberal pundit -- has his own little Rather-gate on his hands.

In his New York Times column on Monday, Krugman wrote about Toyota's decision to locate a new automobile plant in Ontario, Canada rather than in Alabama. According to Krugman, workers in the South are too unskilled to build cars, because taxes aren't high enough to throw more money at education. And according to Krugman, we need socialized health care like they have in Canada so that employers won't have to bear those costs themselves.

Krugman never mentions the fact that there are other foreign auto manufacturers already operating successfully in Alabama (I just bought a new Mercedes Benz SUV made there, and I can tell you it's a far finer car than the German-made lemon that it replaced). And Krugman never mentions the fact that Toyota itself is building a new plant in Texas.

What Krugman does mention, instead, is a hateful statement from Gerry Fedchun, president of the Automotive Parts Manufacturers' Association in Toronto. Krugman writes that Feldchen

"...claimed that the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use 'pictorials' to teach some illiterate workers how to use high-tech equipment."

But Fedchen never actually said those things. And what's worse, Krugman should have known it -- because Fedchen denied that he said those things, in the strongest possible terms, in a letter to the editor published in Alabama's Birmingham News on July 15, ten days before Krugman's column was published. Fedchen wrote,

"I never used the word 'illiterate,' nor would I. I have been in this industry a long time. The use of diagrams and illustrations is common. I was horrified that my remarks were reported as they were."

This is turning into a real embarrassment for the Times. Yesterday morning the Anniston Star, an Alabama newspaper that had reprinted Krugman's column in syndication, ran an open letter to Krugman complaining, "you went out of your way to engage in a little Dixie bashing... it would have been nice if you had checked things more carefully."

Krugman cites no source for Fedchen's bogus remarks. But it's virtually certain that his source was a June 30 story on the website of the government-sponsored Canadian Broadcasting Company, which used near-identical language to frame Fedchen's claim that manufacturers "had to use 'pictorials' to teach some illiterate workers how to use high-tech equipment." Perhaps, by Krugman's having inserted the penultimate word "plant" in the Times version, charges of plagiarism can be avoided.

How did Krugman find the CBC story in the first place? Do you really need to ask? Most likely he found it the same way he has gotten so many of his story ideas -- by trawling the Leftist hate-blogs. In this case, the CBC story was linked on July 8 on the Daily Kos, perhaps the foulest (and consequently most popular) of the ultraliberal blogs.

Krugman shot himself in the very same foot three years ago. In his September 17, 2002 Times column, he reported that a former Enron executive -- later a Bush administration official -- had sent an email ordering the cover-up of financial misdealings. Krugman's source was a story in the Leftist web magazine Salon -- whose story about it was removed from their site over concerns both for its accuracy and potential plagiarism. When the official denied having written the email, Krugman was forced by the Times to run a retraction with his October 4, 2002 column, in which he said "I erred by citing it in my column."

Setting aside Krugman's use of fictitious statements to bolster his case, what about his substantive point?

First, he claims that the supposed failure of Alabama's educational system is due to the state's voters having rejected "an increase in the state's rock-bottom taxes on the affluent." Rock-bottom? Hardly. Alabama's affluent are taxed at a 5% rate. There are seventeen states with the same or lower top rates -- including Blue States Connecticut, Massachusetts, Washington, Pennsylvania and Maryland. Krugman's characterization is a flat-out lie.

Second, Krugman sings the praises of Canada's socialized health care system as a lure for high-paying employers, who don't have to bear the costs of providing health insurance. Krugman overlooks the fact that Canada's system is so bad that the nation's Supreme Court recently overturned the government's medical monopoly, noting that "patients die as a result of waiting lists for public health care."

Third, if subsidizing big business is Krugman's idea of the proper role of government, then he should have supported President Bush's 2003 program that adds a prescription drug benefit to Medicare. According to a story this week in the New York Times that ran the very same day as Krugman's column, that program will "give companies $50 billion in tax benefits to help with prescription drug coverage." If such subsidies are so great, how come when Bush was promoting this program  Krugman called it part of "a golden age of pork"?

Fourth, Krugman completely ducks the question of why, if everything Canada does is so wonderful for business, is its economic performance so bad compared to that of the US? Their unemployment rate is 6.7% -- ours is 5%. And according to Canada's most recent Labour Force Survey, "... the largest [employment] declines over the last 12 months have been in...motor vehicle and parts manufacturing." On that, Krugman punts: "I'll have to leave the issue of...comparative economic performance for another day."

The New York Times famously defended Dan Rather's use of bogus documents about Bush's military service on the grounds that they were "fake but accurate." Is that the case here? Did Krugman use a bogus statement to make a valid case for higher taxes and socialized health care? Nope. This one's fake and wrong -- all the way.

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

Of course, if we have the time, there is no harm in cross-checking the pronouncements of the US government with well-known dissenting American intellectuals like the Noam Chomsky or Paul Krugman.
Of course!

Posted by Donald L. Luskin at 3:32 AM | link  

Thursday, July 28, 2005

JOKE OF THE DAY   Update... reader Jeffrey Zuckerman tells me this is an old Twilight Zone episode!

Posted by Donald L. Luskin at 11:37 PM | link  

HARRY REID, THEN AND NOW   You know the stuff our erstwhile Senate minority leader is saying now. But I'll bet you didn't know what he was saying then!

Look what Harry Reid was saying about the Social Security Trust Fund in 1991. Who knew?!

April 25, 1991, Thursday

HEADLINE: Nevada Senators Join Failed Bid To Cut Social Security Tax

BYLINE: By Kelly Richmond, States News Service


Nevada's senators, who say the current system deceives taxpayers, joined an unsuccessful attempt Wednesday to slash Social Security payroll taxes.

The measure, sponsored by Sen. Daniel Patrick Moynihan, D-N.Y., was tabled on a 60-38 vote, effectively killing it at least for this year.

"The present system is one of hypocrisy," said Democratic Sen. Richard Bryan.

The government leads taxpayers to believe social security payments are being invested for future retirement payments, when it fact much of the Social Security tax is used each year for general government spending, Bryan said.

"That money is used to finance the deficit and it is a charade that I frankly did not want to be a part of," he said. "We should be honest and tell (taxpayers) that we'll guarantee their security, that we won't collect money from them for one purpose and then use it for another."

Opponents of the plan argued that cutting the tax without corresponding program reductions would be financially unsound, a point rejected by Sen. Harry Reid, also a Democrat.

"Says who? Why don't we pay for things like everyone else?" he said. "The federal government should not have an unlimited credit card."

"I think we have to stop spending social security monies on foreign aid and other wasteful programs and that in effect is what's being done," he added. "Those monies are a trust."

Despite the defeat, both Nevada senators remain convinced they were on the right side of the issue.

"When we go to the vault to get that money it's going to have been used for other purposes," Reid said. "That vote was for middle class America and for senior citizens."

"What those of us who supported the Moynihan amendment did was vote for honesty in the budget process," Bryan said.

Posted by Donald L. Luskin at 3:02 PM | link  

JOKE OF THE DAY   It's a blonde joke. OK, I lied.

Posted by Donald L. Luskin at 2:13 PM | link  

SHORT AND SWEET   There's a fun little interview with me on today's Blogometer at National Journal's site. You have to scroll down a bit.

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

ALABAMA PILES ON   The Anniston Star -- an Alabama paper that picks up Paul Krugman's columns in syndication, runs a lead editorial today raking Krugman and the New York Times over the coals for repeating the lie that a Canadian auto manufacturing spokesman called Alabama's workers "illiterate." I've written Barney Calame, the Times' new "public editor" about this already, and I haven't heard back yet (and if I do, I expect it will just be another cover-up) -- but maybe now that a Times syndication partner is griping, rather than a mere reader, the "readers' representative" will lift a finger to deal with this outrage.

Posted by Donald L. Luskin at 7:07 AM | link  

Wednesday, July 27, 2005

THINK OF THE CHILDREN!    The Radio Equalizer blog reports:
...only because of a New York Daily News tidbit do we know that Bronx-based Gloria Wise Boys and Girls Club nearly shut down major programs recently, because almost $500,000 in governmental grant money was instead diverted to Air America's liberal radio network.

It's taken a mad scramble by area politicians, including Rep. Joe Crowley (D-Bronx) to find a way to keep several programs for disadvantaged children and seniors from disappearing.

Thanks to reader Jill Olson for the link -- and welcome back!

Posted by Donald L. Luskin at 11:50 PM | link  

PUBLICEDITORMYASS.COM   Yep... that's the name of the website of Bennett Haselton, a former Microsoft employee whom the New York Times claims was fired (but who, in fact, resigned voluntarily). The erroneous statement appeared on the Times' website back in the days when it was picking up stories from -- apparently without checking their veracity any more than it does the crap from liberal hate-blogs that regularly makes it into the "newspaper of record" today. "Public editor" Dan Okrent wouldn't deal with the issue because he claimed it wasn't really published in the Times -- yeah right: just the website that bears the Times brand and confers its credibility.

Posted by Donald L. Luskin at 11:15 PM | link  

QUITE A SCORE   Jim Glass is back with another drop-dead Paul Krugman gotcha. Remember in Krugman's column ten days ago when he wrote,

"...Berkeley's J. Bradford DeLong writes on his influential economics blog, 'We have four of five indicators telling us that the state of the job market is not that good and only one - the unemployment rate - reading green.'"

Well, Glass went to the source, and checked it out on Jabba The Economist's own site. Here's the whole context:

Four Out of Five Indicators Say the Job Market Really Is Weak

It's not just employment-to-population ratios. It's real wage growth. It's the relative amount of long-term unemployment. It's payroll employment. We have four of five indicators telling us that the state of the job market is not that good and only one -- the unemployment rate -- reading green.

Then Glass takes that apart point by point:

OK, here are the numbers for the five indicators cited by Brad DeLong, for both this recovery (as of June 2005 or latest available) and the prior recovery at the same length of time into it:

Unemployment rate
Prior recovery: 5.8%
This recovery: 5.0%

Score 1-0 for this recovery.

Long term unemployment rate (15+ weeks)
prior: 2.25%, which is 40% more than
this: 1.58%

Long-term unemployment at this point in the prior recovery was higher even in absolute terms, 2.96 million versus 2.35 million, in spite of the work force being 17 million larger today. So the current recovery is much better on this point.

Score 2-0 for this recovery.

average real weekly earnings from pre-recession high
prior: -1.9%
this: +0.25%

In fact, during the prior recovery real average weekly wages would stay below their 1990 pre-recession high for seven years, until well into Clinton's second term.

So a small gain today is decried as weakness -- while a real decline that lasted more than seven years was the happy course to the "miracle economy".

Now maybe we get an idea about why the bad news bears always present their numbers without any context, without the perspective of any comparison to the prior business cycle. In making such a comparison using DeLong's five indicators the current recovery is up 3 to 0 right now -- already we have a winner!...

labor force participation, age 20+
prior: 67.8% (unemployment rate 5.0%)
this: 67.8% (unemployment rate 4.5%)

Whoa! Surely when the bears talk of millions of people abandoning the search for work they give the impression that they are talking of adults supporting themselves and their families. But it's not so.

The entire drop in the labor force participation rate has been among teenagers -- something I've never seen any bear note even once.

Using the adult rate we have an exact tie between the two recoveries, making the "DeLong Indicators" score 3.5 to 0.5.

But let's make the bears happy by doing what they want -- computing a "real" unemployment rate for today by adding all those who have left the workforce to the number of "unemployed", as dubious an idea as this may be.

total labor force participation rate
prior: 66.7%
this: 66.0%

That's a 1% difference -- and under the bears' methodology it moves the unemployment rate for today from 5% up to a "real" 6%.

Comparing this 6% rate to the 5.8% of the prior recovery, and noting the 0.3% margin of error in the unemployment rate, we find the two rates are statistically the same. So doing their worst the bears do no more than wind up with the same unemployment rate for the same time in the two recoveries. A push...

Ooops, with the contest settled I almost forgot the fifth indicator cited by Prof. Delong, payroll employment. This can be quickly ceded even by fans of the current recovery -- payroll indeed grew faster during the prior one.

The significance of this, however, is dubious. It ignores the unique nature of the 2001 recession, which involved the bust of an employment bubble as much as of a stock market bubble -- with payroll employment entering 2001 about two million over the long-term trend line. To say that employment should have continued upward at the "normal" rate after the end date of the recession is little different than saying the stock market should have continued upward at the "normal" rate of 7% per year after the trough of the recession, and so should today be 30% or so higher than at the end of 2001 -- in spite of the stock bubble.

Even Prof. Delong himself has stated this elsewhere...

Asking that Bush leave "the job market no worse than he found it" is setting the bar too high by perhaps 2 million jobs or so. It would have been very elsewherehard for any set of economic policies to have sustainably kept the economy at the high-pressure state it was in in 2000

... and keeping that fair caveat in mind he can collect the full point for the payroll employment indicator, for all it's worth.

So our final tally is 3.5 to 1.5 in favor of the labor market of today over that at the same point in the prior "Clinton recovery", which was on track to the miracle economy and full-fledged boom. That is context and perspective.

Posted by Donald L. Luskin at 11:12 PM | link  

ANOTHER ASTONISHING KRUGMAN F**K-UP   In his column Monday, Paul Krugman wrote about Toyota's decision to locate a new plant in Ontario, Canada, rather than in Alabama:
Maybe we should discount remarks from the president of the Toronto-based Automotive Parts Manufacturers' Association, who claimed that the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use "pictorials" to teach some illiterate workers how to use high-tech equipment.
Maybe it's Krugman who should do the discounting. Ten days before his column saw print, Gerry Fedchun president of the Automotive Parts Manufacturers' Association in Toronto denied he'd ever said such things. From his letter to the Birmingham News:
I never used the word "illiterate," nor would I. I have been in this industry a long time. The use of diagrams and illustrations is common. I was horrified that my remarks were reported as they were.
Imagine his horror seeing those words repeated in the "newspaper of record."

Thanks reader Carolyn Jett for the link.

Posted by Donald L. Luskin at 5:36 PM | link  

FOR THOSE BUSY BUSH-BASHERS   So many talking points, so little time. Subscribe to Capitol Reader -- a weekly Cliffs Notes service of the latest and greatest in political diatribe books.

Posted by Donald L. Luskin at 5:04 PM | link  

WHAT? NEW HIGH TECH JOBS IN AMERICA?   No way. Way! Intel is creating 1,000 jobs in Arizona -- but BizzyBlog points out that the media could barely bring themselves to report the good news.

Posted by Donald L. Luskin at 5:00 PM | link  

THAT WOULD BE A FIRST   Noel Sheppard watched Alan Greenspan's congressional testimony, and wonders whether the congressmen who questioned him have risen to their "level of incompetence" according to The Peter Principle. No way. These guys have no principles at all.

Posted by Donald L. Luskin at 3:24 PM | link  

YUAN A LAUGH?   My NRO column today:
China's announcement last week that it was abandoning its decade-old fixed exchange rate between the Chinese yuan and the US dollar was world-shaking economic news. But for Paul Krugman -- America's most dangerous liberal pundit -- it's only an occasion for more of his usual left-wing economic doomsaying, leavened with crude humor based on ethnic stereotypes.

Krugman began his New York Times column Friday saying,

"Thursday's statement from the People's Bank of China, announcing that the yuan is no longer pegged to the dollar, was terse and uninformative -- you might say inscrutable."

One assumes that if the nation in question had been an African one, the guardians of politically correct speech at the Times would have been more alert. Surely they would never have allowed Krugman to say the announcement had, "you might say, natural rhythm"?

Krugman stoops to cheap attempts at humor because he has no grasp of what's really going on with China's currency. His characterization of China's currency policies is simply:

"To keep China's currency from rising, the Chinese government has been buying up huge quantities of dollars and investing the proceeds in U.S. bonds."

Krugman offers no explanation for why China's currency should rise in the absence of their preventing it from doing so -- he treats it as a foregone conclusion. And what he calls China's "buying up" dollars is exactly the opposite of what's been happening for the last decade -- dollars have been raining in on China from foreign investors eager to set up business there and needing yuan to do it.

China has simply accepted those dollars and issued yuan in exchange for them -- at a constant rate of exchange designed not to "keep China's currency from rising" but rather to guarantee its value. For a decade, China has pegged the yuan to the dollar at an official exchange rate of about 8.28 yuan per dollar. Pegging the currency to the dollar has set an objective standard of value for it -- just as a peg to gold once set such a standard for the dollar itself.

And about "investing the proceeds in U.S. bonds"? No explanation. For Krugman, that's the "inscrutable" Chinese acting "strangely":

"China, which is still a poor country, is devoting a lot of resources to the accumulation of a basically useless pile of dollars instead of to higher living standards."

A "useless pile of dollars"? Hardly. The reserves of China's central bank are acting as collateral against all the yuan that the bank has issued to fund China's development. If the government had just spent the money on vast public works or social welfare programs of the kind Krugman favors, foreign investors would not have been so eager to invest in an immature and risky economy. It's those foreign investments that have led to China's "higher living standards" -- and it's that "useless pile of dollars" that have made those investments possible.

Krugman's left-wing catastrophist narrative is that China's holding of U.S. bonds proves that "America is a superpower living on credit." Krugman wonders, portentously, "What will happen to our stature if and when China takes away our credit card?"

What Krugman won't see is that China has chosen to hold U. S. bonds as collateral because they are the highest quality and lowest risk securities in the world. That's why they make such excellent collateral. The fact that China chooses to hold our bonds is proof of our strength and their need to hang on to a piece of it -- yet Krugman acts as though its evidence of our weakness and dependency.

It's hard to believe that the American Economic Association awarded Krugman its prestigious John Bates Clark Medal in 1991 for his path-breaking  work on international trade and currency relationships. Now, with this column on China, Krugman Truth Squad member Roland Patrick was moved to ask, on his Let's Fly Under the Bridge blog, "just how many elementary errors in economics does it take to have a John Bates Clark Medal revoked?"

One needn't go halfway around the world to see Krugman's economic blunders on display. In another Times column last week, Krugman promoted his doomsaying economic narrative in the face of a drop in the unemployment rate to 5% by claiming, "adjusted for inflation, average weekly earnings have been flat for the past five years." But just visit the website of the Department of Labor, the official source of such statistics, and you'll see that, in fact, they are up half a percent -- not "flat." Or visit the website of the Department of Commerce, which shows that their comparable figures -- per capita disposable income -- is up 9.6%, again not "flat."

It's all just another case of what former New York Times "public editor" Dan Okrent called "disturbing habit of shaping, slicing and selectively citing numbers." I wrote to Byron Calame -- the new "public editor" -- to demand a correction of Krugman's error about "flat" wages. His associate Joe Plambeck told me that Krugman was not "factually incorrect. Had he said 'remained the same,' he would have been in error."

Later, Plambeck told me that Krugman's boss -- editorial page editor Gail Collins -- agreed with him that "no correction is necessary" because "you and Mr. Krugman are emphasizing different things."

I suppose that's right. I was emphasizing accurate reporting of economic news. Krugman was emphasizing left-wing spin designed to trash-talk a booming economy. Those are different things.

Posted by Donald L. Luskin at 3:22 PM | link  


Posted by Donald L. Luskin at 2:18 AM | link  

Tuesday, July 26, 2005

AT LAST! A DEMOCRATIC ALTERNATIVE TO SOCIAL SECURITY REFORM   It's called AmeriSave -- and it consists mostly of incentives for lower-earning Americans to save money they don't have, because Social Security has already sucked it out of their paycheck. The only thing that keeps this turkey from being a budget-buster is the fact that no one will be able to afford to participate in it. Put in another quarter and try again...

Posted by Donald L. Luskin at 7:32 PM | link  

I GUESS WE'RE "EMPHASIZING DIFFERENT THINGS"   Paul Krugman wrote yesterday that "in the auto industry, at least, the good jobs are heading north." Odd, then, that Canada's most recent Labour Force Survey would have reported that "... the largest [employment] declines over the last 12 months have been in...motor vehicle and parts manufacturing.">

Update... reader Brian McGroarty points to this posting on the von Mises Blog, ably deconstructing Krugman's Canada column.

Posted by Donald L. Luskin at 12:33 PM | link  

Monday, July 25, 2005

LONGING FOR HER SALAD DAYS?   From the Associated Press:
SANTA FE, N.M. - Actress and activist Jane Fonda says she intends to take a cross-country bus tour to call for an end to U.S. military operations in Iraq.

"I canít go into any detail except to say that itís going to be pretty exciting," she said.

Fonda said her anti-war tour in March will use a bus that runs on "vegetable oil."

Thanks to reader Martin Shimp for the link.

Update... Even liberals like Oliver Willis can't take it any more: "...I sort of throw up in my mouth a little. Some of these celebrities need to shut up." Thanks to Perry Eidelbus for the link.

Posted by Donald L. Luskin at 12:36 PM | link  

ANOTHER CAMPAIGN PROMISE   Paul Krugman's column today extols the economic virtue of Canada's heavy-handed government -- and at the end he writes,
I'm sure that some readers will respond to everything I've just said by asking why, if the Canadians are so smart, they aren't richer. But I'll have to leave the issue of America's comparative economic performance for another day.
Yeah, right. We'll get that answer shortly after we hear about what he promised in January:
In the next few weeks, I'll explain why privatization will fatally undermine Social Security, and suggest steps to strengthen the program.
Still waiting for those "steps," Paul. But while we wait for "another day," your acolytes can cling to the faith that you have secret answers to the drop-dead arguments of your opponents, but just aren't telling them yet.

Update... reader James Greiff wonders, since Canada is supposedly such an ideal locale for auto manufacturing, according to Krugman, why Toyota has just announced it is building a new plant in Texas?

Posted by Donald L. Luskin at 9:58 AM | link  

CAPITALISM 1, PEOPLE'S REVOLUTION 0   From the Associated Press:
OAKLAND, Calif. -- Former Black Panthers are hoping the phrase "Burn Baby Burn" will ignite taste buds rather than racial tensions.

They want to trademark the phrase that was born during the 1965 Watts riots in Los Angeles for a new line of hot sauce.

It would be called "Burn Baby Burn: A Taste of the Sixties Revolutionary Hot Sauce."

David Hilliard, an original member of the militant group, says it's an effort to raise money and bring attention to the Huey Newton Foundation, which works with at-risk youth.

The foundation also plans to produce its own salsa as well as a clothing line.

Hilliard says they hope to start selling the hot sauce later this year to commemorate the 40th anniversary of the founding of the Black Panther Party.

Hat tip: Reason Hit & Run, via reader David Duval

Posted by Donald L. Luskin at 9:06 AM | link  

Sunday, July 24, 2005

DR. SEUSS MEETS AYN RAND   Check it out:
...the story of a right friendly land, Where people were quick to lend a free hand. With the best of intentions they passed many laws, To fix what they felt were quite fixable flaws. But the fixes, they found, were too much in the end, For the bureaus and programs and taxes they penned. Once the lessons were learned, here's what they knew: The contentment of many can't come from the few.

Posted by Donald L. Luskin at 2:38 PM | link  

TIMES READERS LET CALAME HAVE IT!   When "public editor" Barney Calame wrote about the way the New York Times editorial page editors had tampered with an Army reservist's op-ed manuscript, it was a classic Dan Okrent-style whitewash in which readers were blamed for "mistaken perceptions." Now in Calame's column today there are six scathing, uncompromising, in-your-face letters from readers blasting the Times for its biased tampering, and Calame's lame response to it. Good reading -- and bravo to Calame for publishing these letters, even if he didn't have the courage to take such views himself.

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