Chronicle of the Conspiracy
Saturday, April 07, 2007"ECONOMISTS WERE SURPRISED" (AND THE TIMES WAS PISSED) Our monetary policy correspondent "Irrational Exuberance" points to a blog posting at FelixSalmon.com criticizing the New York Times for having come up with a graphic that manages to make Friday's big upside surprise in payroll jobs creation into a negative.
The NYT has an interesting chart accompanying its payrolls story today. While the text is as upbeat as you'd expect given the excellent figures...someone on 43rd Street seems to have decided to run a graphic showing payrolls going down.Reader Jerome Schmitt wonders why economists were so surprised by the surge in jobs:
Another media cliche -- "economists were surprised..." After 20 straight quarters of being “surprised” by strong economic growth and job growth, when are they no longer allowed to call themselve economists?Update... Economist John Seater writes,
Contrary to what FelixSimon says, the NYT graph does *not* show payroll employment going down. It shows them going up. The graph shows the one-year *change* in payroll employment. The change is positive, so employment went up. What went down was the rate of change.John, I think the point was that the Times had massaged the numbers until they found something about the time series that was falling.
Update 2 [4/8/2007]... Reader Jerome Schmitt responds to Seater:
I didn’t say ALL economists were surprised – I said it was a cliche. Ever since President Bush’s tax-cuts, if I’ve hear the word “surprise” once connected with reports of good economic news, I’ve heard it a thousand times. In fact, I don’t read the NYT; my comment was a reaction to Friday’s NPR report. It’s the media who should fire their consistently “surprised” economists (Paul Krugman comes to mind of course) and hire ones who know what is happening. Economists should demand this as a matter of professonal pride – otherwise the public gets the wrong impression.Update 3... Reader Keith Morton wonders how much "surprise" is really involved:
The expected number of jobs created for March was 160,000. The actual was 180,000. The jobless rate was expected to go from 4.5% to 4.6%. It went to 4.4%, a five year low. Average wage climbed significantly. Wow, that's good news! So the Chicago Tribune headline was "Job growth fans fear of inflation". If the numbers had come in worse, would the Trib have said "Inflation fears calm.."? I doubt it. Then you would have annouced the negative numbers. This happens frequently. If news is bad the Trib portrays it as such. If news is good, the Trib finds something wrong with it. Do you have an agenda?Update 4... Reader Dan Noble weighs in on the Times' graphic:
Maybe I am not getting this but it looks to me that the nonfarm payroll graphic is a rate of change in job creation. So non farm payrolls are still going up but not as fast as they were in the beginning of 2006 but faster than in 2004.
Posted by Donald L. Luskin at 12:17 PM | link
LIMBAUGH REPLAY Reader Jameson Campaigne was kind enough to come up with this link to a RealAudio file of my appearance on Rush Limbaugh Friday. I don't have the Real Player software installed, so I'm going on faith here...
Posted by Donald L. Luskin at 12:14 PM | link
Friday, April 06, 2007FREE TRADE? Joseph Tutton heard me today on Rush Limbaugh, and emailed me with a couple famiiar questions about free trade:
I am not a "free trade denier". China uses slave labor. There will not be unions there, not because they are "barnacles" (which I agree they have become in the US), but because China is a Communist dictatorship that jails union organizers.Here's my reply.
You are making two entirely separate arguments. One is an ethical argument about whether we ought to be doing business with countries that have poor labor conditions. I take the point; I suppose there would be some extreme, such as literal slavery, where I would draw the line. But in the case of China it is far from literal slavery. The people working in modern factories there are the lucky ones. They have come from farms where their lives were utterly hellish. At least now they have a chance for a reasonably healthy working environment, some wages (high by their standards), and the creation of skills that will serve them will in the future.Update... Perry Eidelbus responds,
I thought you let him off pretty easy, especially on his strawman of child labor. He and other liberals like to believe there's an evil capitalist hiding in every shadow, forcing us into slavery-like conditions, but the fact remains that child labor stems from necessity, not industrialization's maliciousness. It's merely part of the nature of an impoverished existence. You and I, being smart capitalists who know how the world really works, understand that when a man and woman do not produce enough by themselves, their children have to help. Decades ago, American factories, coal mines, etc., needed all available workers, young and old, simply because of technology. Any individual worker produced just a fraction of what one today can, so like on a farm, a son would work with his father -- except industrial jobs guaranteed having enough to eat. Even the most idyllic agrarian life required the children to work (and hence give up schooling), and no matter how much everyone worked, there was a very real chance of not having enough to eat, if not starvation.
Posted by Donald L. Luskin at 1:34 PM | link
THERE'S NEVER A FINANCIAL MEDIA AROUND WHEN YOU NEED ONE Holman Jenkins, the columnist for the Wall Street Journal, just published a fascinating explanation of the extraordinarily favorable terms of Sam Zell's proposed purchase of the Tribune Company. But he didn't publish it in the Journal, and indeed the Journal hasn't covered this at all. Jenkins published it in WSJ's email service "Opinion Journal Political Diary." Note the rebuke highlighted at the bottom -- nominally aimed at CNBC, but surely really aimed at the Journal.
Here's how it works. Trib employees buy 100% of the company's stock with borrowed money, then turn around and sell 40% (a stake worth $3.1 billion at today's share price) to Mr. Zell for $590 million (a figure that represents the $90 million he'll pay for the option and $500 million he'll pay to exercise the option).
Posted by Donald L. Luskin at 1:28 PM | link
KENNEDY THE SUPPLY-SIDER No, not Teddy, of course. But Jack. Here's a YouTube video of a remarkable August 1962 speech in which he proposes a massive tax cut, "...a creative tax cut, creating more jobs and income, and eventually more revenue."
Here's the whole transcript. Thanks to Andy Roth at the Club for Growth for the pointer.
Posted by Donald L. Luskin at 8:44 AM | link
Thursday, April 05, 2007KAUS RESPONDS TO DELONG Which saves me some bother. I just hope DeLong's readers follow all the embedded links in his attack on me and Mickey Kaus. I actually don't know why Jabba the Economist includes those links, since anyone who follows them will easily see how bogus and out-of-context his critiques are. I'll just confine my further response to two words: "Botswana" and "fake."
Posted by Donald L. Luskin at 10:52 AM | link
THE MYSTERIOUS EAST Who says the yuan is undervalued? No, in China it's fish that are overvalued.
A Chinese restaurant has paid $75,000 for a giant golden-colored tiger fish, a symbol of wealth and good fortune, state media said Tuesday...
Posted by Donald L. Luskin at 1:25 AM | link
Wednesday, April 04, 2007BIGGS APPOINTED! Great news. Today President Bush appointed Andrew Biggs to be deputy commissioner of the Social Security Administration, using the power of recess appointment. The recess appointment was necessary because Democrat Max Baucus, chair of the Senate Finance Committee, had said that he wouldn’t even give the Biggs appointment consideration. Baucus's only reason for refusing to act was Biggs' policy views. In February Baucus said, "Mr. Biggs has championed Social Security privatization in the past, and he continues to think it’s a good idea today. It’s a bad idea to give the number-two position at the Social Security Administration to someone who still supports that failed proposal..."
In other words, Baucus didn't like the idea that Biggs held policy views that agree with those of President Bush.
When Bill Clinton was president, however, policy wasn't a litmus test. Clinton’s SSA Commissioner Ken Apfel was not only not disqualified based on policy views held before assuming the SSA post -- but after assuming it, he was given a lead role in policy advocacy. He was easily confirmed by the full Senate on 9/19/97, and was widely regarded as a perfectly appropriate and capable SSA Commissioner.
Here are some soundbites of the Apfel. First, "...Apfel faces the daunting task of being the president's right-hand man on Social Security reform." Which, in fact, he was. He played a key role in the Clinton Administration’s 1998 year of discussion. Second,in Sept 2000, obviously a very politically sensitive time, he spoke out as to why then-candidate Bush’s personal accounts proposal was a bad idea:
The nation's top Social Security administrator has "serious reservations" about creating individual savings accounts using portions of payroll tax revenues, an idea favored by Republican presidential candidate George W. Bush. Social Security Commissioner Kenneth S. Apfel said "carving out" money from the 12.4 percent payroll tax and using it for savings accounts would make less money available to current recipients.Third, here he is selling the Clinton plan:
Apfel's appearance was part of a nationwide educational campaign to drum up support for President Clinton's plan to use federal budget surpluses to pay down the national debt and devote the resulting interest savings to extending the trust fund's solvency until 2054.And if Biggs is disqualified, then what about Peter Orszag, the liberal ideologue who has been installed by the Democrats at the helm of the Congressional Budget Office? CBO is as obligated to neutrality as SSA, strictly a scoring agency, and often involved in evaluating Social Security issues. Orzag is the proud author of a Social Security reform plan based almost entirely on tax increases. CBO itself did an evaluation of the Orszag proposal, and found that it would retard economic growth. Now Peter heads the agency that issued that analysis. Why isn't that a conflict of interest?
Posted by Donald L. Luskin at 4:06 PM | link
HE'S RUNNING A BUSINESS, NOT A UNIVERSITY Here's an element of the story about the new "countervaling duties" on imports of coated paper from China just imposed by the Bush administration. The US paper company that brought the complaint to the Commerce Department in the first place, NewPage, is owned by the private equity firm Cerberus, whose CEO is former Bush Treasury secretary John Snow. Pretty sad that Snow, who studied economics at the University of Virginia under James Buchanan, should betray the "settled science" of the virtues of free trade.
Posted by Donald L. Luskin at 8:36 AM | link
Tuesday, April 03, 2007KUDLOW REPLAY Here's the YouTube version of yesterday's hit, in which I am forced to thump the Bible to fend of financial armageddon. Betcha didn't know that the Book Of Revelation was all about investing! In that case, let me do some highlighting for you. Here's 13:16 and 13:17:
And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads; that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name....See? It's financial regulation! It's talking about marking your bond position! If you don't mark your bond position, you can't buy or sell!Now on to 13:18:
Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.There's the famous 666 thing. As I told Larry, yesterday gold traded at $666 and oil traded at $66.6! And now, here's 3:18:
I counsel thee to buy of me gold...Aha! See? Investment advice! And not bad, either... buy gold!
Posted by Donald L. Luskin at 12:09 AM | link
Monday, April 02, 2007"STUPID, EVEN FOR THE NEW YORK TIMES" That's what reader John Tomasso says about an editorial in today's New York Times claiming that people who run so-called "private equity" funds ought to be taxed more.
The deeper question in all this is whether capital gains — which are currently taxed at less than half the top rate of ordinary income — should continue to be so lavishly advantaged. The answer there is no. Today’s preferential rate for capital gains is excessive, with no mechanism in the tax code to ensure that it is not overused. Excessively favoring one form of income over another encourages wasteful gamesmanship, creates inequity and crowds out other ways to foster risk-taking. Tackling the too-easy tax terms for private equity is a good way for Congress to begin addressing that bigger issue.Reader Sam Steinman adds,
Follow their line of thought: favoring one form of income over another crowds out risk-taking, therefore we need to raise the tax on capital gains to eliminate the favoritism. So in order to foster risk-taking, we need to raise taxes on the byproduct of taking risk, i.e. capital gains. Brilliant!Update [4/3/2007]... Reader Rich Sinda writes,
So, favoring one form of income over another affects risk taking, I wonder if other forms of favoritism in the tax code could cause problems in the economy. I wonder if welfare payments create a disincentive to work. It could be possible that the government sends out confusing economic messages all the time. We should look closer into these ideas and create a school of economic thought that revolves around them. Ohhh wait, thats what liberal (in the classical sense of the word) economics has been teaching for 200+ years.
Posted by Donald L. Luskin at 11:19 AM | link
GIVE ME LIBERTARIANISM
The New York Times Sunday Book Review ran a review yesterday of Radicals for Capitalism by Brian Doherty, a history of the libertarian movement. David Boaz at Cato has the story:
It might have made sense to get a libertarian, or someone familiar with the libertarian movement, or a political historian to write the review. Instead, the Times turned to someone [columnist David Leonhardt] who knows something about economics...
Posted by Donald L. Luskin at 9:04 AM | link
THIS IS GETTING JUST PLAIN SILLY Krugman this morning:
I have a theory about the Bush administration abuses of power that are now, finally, coming to light. Ultimately, I believe, they were driven by rising income inequality.Ah, give us this day our daily Bush-bashing. The Bush administration is corrupt. Income inequality is rising. Must be these two Leftist cliches are connected somehow. Let's see if we can write a column about how one cause the other. Next week let's reverse the lines of causation. Russell Roberts at Cafe Hayek has a great counterblast.
Posted by Donald L. Luskin at 8:51 AM | link