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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!
Friday, March 30, 2007
MY NRO COLUMN THIS MORNINGA Convenient (and Excellent)
Truth
The benefits of free trade are
settled science. (Although that won’t stop the deniers.)
By Donald Luskin
If
you question whether global warming is happening, or whether
human activity is causing it, or whether it’s worth doing
anything about it, then you must be a crack-pot. You are
standing athwart the “consensus of scientists.” You are
disputing “settled science.” You are a “global warming
denier,” the moral equivalent of an apologist for the Nazi
holocaust.
But no such accusations are made against the protectionists
who question the benefits of free trade among nations. Such
people are in fact standing athwart 250 years of economics,
and an overwhelming consensus of living economists. These
protectionists are denying the enormous gains in standards
of living and human freedom that are the direct result of
free global trade.
Make no mistake about it. The benefits of free trade are
settled science. It goes all the way back to the 18th
century, beginning with the path-breaking work of Adam Smith
and David Ricardo. From then till now, the science of
economics has deepened its virtually unanimous embrace of
free trade. Today’s best-selling college economics textbook,
Macroeconomics by Harvard’s N. Gregory Mankiw,
enshrines among the “ten principles of economics” the axiom
that “Trade Can Make Everyone Better Off.”
Indeed it can, and indeed it has. During the last several
decades of unprecedented global economic growth we have
witnessed increasing global trade and falling trade
barriers. For all the worry about “outsourcing American
jobs,” the U.S. unemployment rate stands today at a low 4.5
percent. On the other hand, the Great Depression of the
1930s involved a collapse of global trade, triggered by the
Smoot-Hawley Tariff Act. Back then there was no outsourcing.
But the unemployment rate exceeded 20 percent.
Economic theory aside, and real-world results aside, there’s
another fundamental argument for free trade. Simply, free
trade is a human right. People have an unalienable right to
trade with each other as they choose, be they next-door
neighbors or half a world apart.
So why is it that when people question the free-trade
consensus — when they deny the manifest evidence of its
success or challenge its status as a human right — they are
not treated like those who question global warming? Question
the global warming consensus and you’re something between a
fool and a Nazi. But question free trade? Ah … that’s
different. That’s politically correct.
Consider the
front page article in Wednesday’s Wall Street
Journal. It celebrated the courage of a handful of
economists — all of whom happen to be politically active —
who are “rethinking” and “critiquing” free trade (not
“denying,” mind you). Princeton’s Alan Blinder, for example,
is saying that, thanks to the new technologies of global
trade, “40 million American jobs [are] at risk of being
shipped out of the country in the next decade or two.”
Of course, the story’s author doesn’t wonder how
this brave rethinker and critiquer can predict the number of
job losses 20 years into the future, or why he is silent on
the number of new jobs that will be created over the same
period. We learn only that “Mr. Blinder’s job-loss estimates
… are electrifying Democratic candidates,” and that he is
advising the campaigns of both Hillary Clinton and Barack
Obama on the issue.
Would Clinton and Obama have been “electrified” if Blinder
had estimated that global warming will go away over the next
decade or two? It’s doubtful.
A case in point: Last October, liberal senators Jay
Rockefeller and Olympia Snowe sent
a
letter to the CEO of Exxon Mobil urging him — one might
say bullying him — to cut off his company’s funding of a
“small cadre of global climate change skeptics,” to cease
its “dangerous support of the ‘deniers.’” But when it comes
to free trade, the liberals now in control of Congress are
only too happy to support the deniers, whether or not they
have Alan Blinder’s credentials.
The hypocrisy is undeniable.
To wit, when best-selling author Michael Crichton — who, as
a trained doctor, at least has a background in science —
questioned global warming
while testifying before a Republican-chaired Senate
committee,
leftist bloggers dismissed him as an “egomaniacal
‘novelist.’” But in
testimony before the House Foreign Affairs Subcommittee
on Terrorism, Nonproliferation, and Trade this week,
the star witness was CNN’s Lou Dobbs. His qualifications
to stand against a 250-year scientific consensus on free
trade are … well … come to think of it, he doesn’t have any.
He’s just a well-known TV talking head who most nights can
be seen ranting against the evils of trade and extolling the
virtues of protectionism.
Global warming “deniers” are attacked, not because they
stand against a scientific consensus, but because they stand
against a powerful liberal special interest group: the
environmental lobby. The global-warming threat must be
maximized so that environmentalists can keep raising more
money and getting more political influence.
Meanwhile, free-trade “deniers” are lionized, despite the
fact that they stand against a scientific consensus and
because they stand with a powerful liberal
special-interest group: unions. Free trade must be opposed,
because it means the transformation of traditional union
jobs into non-union jobs that are better suited for a
dynamic global economy.
So none of this has anything to do with science or
scientific consensus after all. And it’s certainly not a
matter of promoting prosperity or preserving human rights.
It’s just liberal politics. And nowadays, that’s something
nobody dares deny.
Posted by Donald L. Luskin at 8:13 AM | link
OH, PLEASE... In this morning's Wall Street Journal, a howler in a commentary by Kim Strassel on the pro-growth credentials of leading candidates. Concerning the McCain campaign,
"There are also smart, free-market gurus in residence, including former FTC head Tim Muris..."Sorry, Kim. You don't get much for pro-regulation than Tim Muris.We once quoted our antitrust guru Skip Oliva thus on Muris:
Outgoing Federal Trade Commission Chairman Tim Muris issued a statement yesterday defending his agency from congressional critics (like Senator Ron Wyden) who say the FTC hasn't intervened enough in the oil market. Muris laundry-listed every half-assed FTC attempt to regulate oil. The telling sentence: "In an effort to accommodate the wishes of those who desire to close quickly, while protecting the public interest in competitive markets, the FTC has consistently required that merging parties bear the risk that relief might be over-inclusive, rather than imposing on the public the risk that relief might be under-inclusive." In other words, the U.S. government will always infringe upon individual rights to placate excitable politicians.
Posted by Donald L. Luskin at 7:38 AM | link
Thursday, March 29, 2007
FREE TRADE AND CLIMATE CHANGE -- "SETTLED SCIENCE"? Reader Andrew Weiss has a great comment on my posting yesterday about the politically driven economists who are questioning basic theoretical tenets of free trade:Now, let me get this straight.When we are talking about climate change, "consensus" is invoked as the ultimate argument that this is, after all "settled science." Breaking with that consensus gets one labeled anti-intellectual, anti-science. One is a "denier," with its interwoven echoes of holocaust deniers and "being in denial" in the pop-psychological sense. It is prima facie evidence of being stupid or in the pay of big energy.
On the other hand, when we are talking about free trade, the argument that "99% of economists since the days of Adam Smith" are free traders, which might be taken to be "consensus," appears to be unpersuasive. Those who take other views on free trade are presented as brave, free thinkers. They are (at least in the case of Mr. Blinder) "electrifying Democratic candidates " who according to Gene Sperling "had come to feel anecdotally that — the anxiety over outsourcing and offshoring was a far larger phenomenon than traditional economic analysis was showing."
I don't mean to suggest that those who have doubts about free trade should be referred to as "free-trade deniers" who are anti-intellectual, anti-rationalist boobs in the pay of big labor and the Democratic party establishment. Not that they aren't, but that's politics and political economy.
On the other hand, the next time someone starts talking about the need to do something about global climate change, it might be worth pointing out the inconsistency.
After all, the test of free trade isn't that there's a consensus among economists, or the elegant theories, simulations or econometric models. The test is economic growth, freedom and quality of life. The reason that "99% of economists" generally agree that free trade is good is that 250 years of experience shows that when ever trade is constrained, individuals live less well and societies are less prosperous. Consensus and Policy are both consequences of compelling evidence and experience. Policy is not derived from the consensus.
If the proponents of climate change could put that sort of evidence on the table, we'd have a real consensus and a basis for policy. In the absence of such evidence, consensus its just another way to package the Kool Aid.
Posted by Donald L. Luskin at 8:54 AM | link
JOHNSTON IS AT IT AGAIN David Cay Johnston, the New York Times' tireless class warrior, produces this morning another in his long series of slanted stories about how seemingly objective tax data show American civilization falling into the clutches of an ever-narrower population of "the rich." This morning's instalment is typical. Starts with pure statistics that are presumably true, but narrowly selected to make his point. Then quickly pivoting to "expert" quotations that quickly exploit whatever credibility was gained with the statistics to drive home sheer opinion.
Prof. Emmanuel Saez, the University of California, Berkeley, economist who analyzed the Internal Revenue Service data with Prof. Thomas Piketty of the Paris School of Economics, said such growing disparities were significant in terms of social and political stability.No surprise how this Berkeley/Paris joint venture feels about the data they've processed -- but when it comes to political or moral judgments of that type, is Saez any kind of expert? Seems to me his sense of fairness is no more highly developed than mine -- and Johnston never asked me for a quote.“If the economy is growing but only a few are enjoying the benefits, it goes to our sense of fairness,” Professor Saez said. “It can have important political consequences.”
And then there's the quote from a liberal labor-funded think tank, of course (having quickly run out of socialist professors to ping):
Robert Greenstein, executive director of the Center on Budget and Policy Priorities, an advocacy group for the poor, said that the data understates the widening disparity between the top 1 percent and the rest of the country.Johnston can't allow him to miss any opportunity to shave points. He calls CBPP "an advocacy group for the poor" -- which exaggerates and glamorizes the think tank's own avowed mission, to work on "policy and public programs that affect low- and moderate-income families and individuals." Both Johnston's and the group's descriptions deceive by leaving out the political orientation. CBPP is quoted constantly in the Times, almost invariably with the warning label "liberal". But not for Johnston, who is beyond the need for such disclosures, he being on such a high-minded and data-driven mission.
The contrary view? Actually, none is represented in Johnston's story. Treasury secretary Paulson is quoted as agreeing that income disparites are growing, and offering a benign explanation for it. Another Treasury official is quoted as neither denying or affirming Johnston's point, but merely noting that the top rungs of the income ladder are currently bearing an increased share of the tax burden. How's that for objectivity?
Thanks to reader Jameson Campaigne for the link.
Update... Johnston responds,
Since you think that the administration was inadequate as a source, I would appreciate your suggestions about economists to consult on future stories about incomes and similar data.Did I say the administration was "inadequate" as a source? Hardly. I said that Johnston didn't use that source to honestly get a view contrary to his thesis.
Posted by Donald L. Luskin at 8:05 AM | link
Wednesday, March 28, 2007
ECONOMISTS BETRAY TRADE A front-page story in today's Wall Street Journal captures the profound personal debasement of Left-leaning economists who have to find some way to go along with the labor-backed Democratic majority in opposing free trade.For decades, Alan S. Blinder -- Princeton University economist, former Federal Reserve Board vice chairman and perennial adviser to Democratic presidential candidates -- argued, along with most economists, that free trade enriches the U.S. and its trading partners, despite the harm it does to some workers. "Like 99% of economists since the days of Adam Smith, I am a free trader down to my toes," he wrote back in 2001...So let me get this straight.But now he is saying loudly that a new industrial revolution -- communication technology that allows services to be delivered electronically from afar -- will put as many as 40 million American jobs at risk of being shipped out of the country in the next decade or two. That's more than double the total of workers employed in manufacturing today...
Mr. Blinder's job-loss estimates in particular are electrifying Democratic candidates searching for ways to address angst about trade. "Alan, because of his stature, provided a degree of legitimacy to what many of us had come to feel anecdotally -- that the anxiety over outsourcing and offshoring was a far larger phenomenon than traditional economic analysis was showing," says Gene Sperling, an adviser to President Clinton and, now, to Hillary Clinton. Her rival, Barack Obama, spent an hour with Mr. Blinder earlier in this year.
...he says the harm done when some lose jobs and others get them will be far more painful and disruptive than trade advocates acknowledge. He wants government to do far more for displaced workers than the few months of retraining it offers today. He thinks the U.S. education system must be revamped so it prepares workers for jobs that can't easily go overseas, and is contemplating changes to the tax code that would reward companies that produce jobs that stay in the U.S.
First, nobody is debating this in terms of morality -- the right of every individual to trade freely with any other of his choosing. That right ought to exist independent of whether its exercise maximizes anyone's or everyone's welfare.
Instead we have consequentialist arguments, as though the debate were about what produces the most jobs or the most wealth or the most growth, or whatever. That's disturbing -- what if someone argued persuasively that, say, genocide produced the most jobs or the most wealth or the most growth, or whatever? Does that mean we should engage in genocide? Surely not -- but once we put ends in the driver's seat, what constraints are thee on our choice of means? Apparently using the tax code to seize the wealth of importers to subsidize exporters is okay. He thinks using public eduction to predict which jobs will be most secure in the future and train for them, at taxpayer expense, is okay.
In other words, he thinks that taking all the gains earned by the winners from trade and giving them to the losers is okay. Which means he thinks taking away the motivation to trade is okay. Which means he thinks that destroying trade is okay.
Tell me... is there any difference at all between an Ivy League economist and Lou Dobbs?
Posted by Donald L. Luskin at 8:04 AM | link
Tuesday, March 27, 2007
THE WORK OF WASHINGTON IS NEVER DONE On the House Energy Independence and Global Warming Select Committee:Your anonymous lawyer-lobbyist friend in Washington is here to report that the spirit of non-binding resolutions lives on in the United State House of Representatives and today tackles GLOBAL CLIMATE CHANGE, a cloud of doom which can only be controlled by the Mighty Mighty Bosstones. No, actually by Congressmen, who first must travel and confab so that they can gather enough material in order to write a report which will be non-binding! And not just non-binding on the planet but also non-binding on Congress!That’s what a top priority this issue is! Good enough for Oscar!
The Committee has a catchy name, the HEIGWSC, which I believe in German means “pissing down the back leg.” Excerpts from National Journal’s Congress Daily AM:
Congressman Jay Inslee is positively giddy that he’s co-writing* a book! And the cool part is that the Feds will pay for his travel and help introduce him to even cooler people who might know things he can co-put in the co-book!
* “Co-writing a book” means “sharing the royalties without doing the work” especially when one of the co-writers is a Congressman. Co-cool!
Posted by Donald L. Luskin at 10:48 AM | link
TORT COSTS? WHAT ABOUT TORT BENEFITS? When the Left cites some "study" that purports to "show" some particular policy outcome pointing in a direction it already endorses -- always with dollar values attached that are both enormous and seemingly precise -- I'm skeptical. So to be fair, I'll be skeptical of this new "study" that purports to "show" something on a subject I endorse -- tort reform. No mention here of possible benefits of litigation (think of it as libertaran extra-governmental law enforcement), but lots and lots of costs. Lawrence J. McQuillan and Hovannes Abramyn of the Pacific Research Instute, writing in this morning's Journal:
Based on our estimates, and applying the best available scholarly research, we believe America's tort system imposes a total cost on the U.S. economy of $865 billion per year. This constitutes an annual "tort tax" of $9,827 on a family of four. It is equivalent to the total annual output of all six New England states, or the yearly sales of the entire U.S. restaurant industry.How does the legal system extract such an astounding amount from our economy? We applied the rent-seeking theory of transfers from economic science to pick up where past studies -- including the highly regarded Tillinghast-Towers Perrin study -- leave off. We began by examining the static costs of litigation -- including annual damage awards, plaintiff attorneys' fees, defense costs, administrative costs and deadweight costs from torts such as product liability cases, medical malpractice litigation and class action lawsuits.
Posted by Donald L. Luskin at 8:01 AM | link
Monday, March 26, 2007
SECURITIES IN EVERYTHING According to Bloomberg:Tussauds Group, owner of London's Madame Tussauds waxworks museum, may sell bonds backed by the income generated by dummies of George W. Bush, Kate Moss and other famous figures....Thanks to our market completeness correspondent, "Irrational Exuberance."Bankers have used assets as diverse as tickets to soccer matches, diamonds, lottery tickets and champagne stocks to back debt. Since singer David Bowie sold $55 million of bonds in 1997, entertainers including James Brown, known as the ``Godfather of Soul,'' have sold notes backed by music royalties.
Posted by Donald L. Luskin at 7:57 AM | link
IF THEY CAN DO IT IN MEXICO... ...then we can do it here! From this morning's Journal:
...grim outlook for Mexico's Institute of Social Security for Government Employees (known by its Spanish initials as Issste and pronounced ee-stay), which manages the pension accounts and health benefits of some 2.8 million active and retired federal employees. These include bureaucrats, doctors, nurses, health-care workers and teachers, but not the employees of the state-owned oil company Pemex.Issste's pension arm currently provides retirement benefits to 580,000 individuals and like so many pay-as-you-go systems, the agency is operating in the red. With an average retirement age of 56 and retirees living longer, Issste has obligations that far outstrip its income and every year the deficit grows. In 2000, Issste's pension deficit was 10 billion pesos ($909 million). This year the government has set aside 42 billion pesos to fill the gap. By 2012 the shortfall is forecast to hit 77 billion pesos. According to the Finance Ministry, Issste's actuarial deficit in pensions is equal to over 50% of Mexican gross domestic product. Issste is a ticking time bomb...
The centerpiece of the reform, which passed the lower house last week and is expected to pass the Senate this week, is the establishment of worker-owned, individual accounts to replace the communal pool at Issste. There are no changes for those already retired. Current workers will have the choice of staying with the government's defined-benefit plan and accepting gradual increases in the retirement age, or migrating to the new individual account, defined-contribution system.
Posted by Donald L. Luskin at 7:50 AM | link