Chronicle of the Conspiracy
Saturday, April 21, 2007THOSE GREEN DEMOCRATS Our DC lawyer/lobbyist friend points out some inconvenient truths in today's WaPo:
When House Speaker Nancy Pelosi held a pre-Earth Day news conference this week to promote her plans to "Green the Capitol," she promised a number of steps to make the congressional campus a model of environmentalism.
Posted by Donald L. Luskin at 11:37 AM | link
Friday, April 20, 2007IS THAT REALLY THE NEW YORK TIMES HE'S CARRYING? Bears do read the New York Times, that's true. But the answer to the question is "no." That's not really the New York Times, because this bear is already carrying toilet paper.
Thanks to reader Patrick Ranaudo.
Posted by Donald L. Luskin at 2:45 PM | link
PEGGY NOONAN ON THE VIRGINA TECH BLAME GAME From Opinion Journal:
The school officials I saw, especially the head of the campus psychological services, seemed to me endearing losers. But endearing is too strong. I mean "not obviously and vividly offensive." The school officials who gave all the highly competent, almost smooth and practiced news conferences seemed to me like white, bearded people who were educated in softness. Cho was "troubled"; he clearly had "issues"; it would have been good if someone had "reached out"; it's too bad America doesn't have better "support services." They don't use direct, clear words, because if they're blunt, they're implicated.
Posted by Donald L. Luskin at 9:06 AM | link
Thursday, April 19, 2007OH, THE GOOD OLD DAYS (OF POVERTY) George Reisman uncovers a shocking bit of socialist propaganda. Can the New York Times not know that's what this is?
From the movie review “Casualties of China’s Transformed Economy” by Jeannette Catsoulis, in today’s Times:Reisman has more...Bracketed by stunning long shots taken from the front of a moving freight train, Wang Bing’s epic, three-part documentary, “Tie Xi Qu: West of Tracks,” is an astonishingly intimate record of China’s painful transition from state-run industry to a free market. Filming between 1999 and 2001, Mr. Wang and his sound engineer, Lin Xudong, painstakingly document the death throes of the Tie Xi industrial district in the city of Shenyang, in northeast China, a once-vibrant symbol of a thriving socialist economy.How foolish of China to abandon its “thriving socialist economy” of perpetual mass starvation for a rapidly progressing market economy of soaring skyscrapers and rising living standards for hundreds of millions.
Update... Friend David Duval adds,
Digging deeper into the movie review that George Reisman so aptly tears apart, "astonishing" fails to capture the oxymoronic nature of what Jeannette Catsoulis wrote quite clearly in her review of "Tie Xi Qu: West Of Tracks."
Posted by Donald L. Luskin at 9:46 PM | link
AT LEAST HE'S CONSISTENT A reader lobs this one in over the transom:
If you take a look at Barry Ritholtz's site, you will find that he has listed a number of his "Favorite Posts" on the righthand side.Hilarious. Anyone who has let his "shorts ride" on Barry's advice has gotten a serious wedgie. I suppose you have to give Ritholtz some credit for being honest enough to keep this loser posted among his favorites. On the other hand...
Posted by Donald L. Luskin at 6:40 PM | link
TRADE TIRADE Reader E. M. Schultze points to this article attacking trade by William Grieder in The Nation. I'll be writing much more about this. But just to start, I want to comment on the rhetorical style and logical framework being applied here. From the opening paragraphs:
Ralph Gomory...is a gentle-spoken technologist, trained as a mathematician and largely apolitical. He does not set out to overthrow the establishment but to correct its deeper fallacies... Now president of the Alfred P. Sloan Foundation, he knew something was missing in the "pure trade theory" taught by economists. If free trade is a win-win proposition, Gomory asked himself, then why did America keep losing?Within the first few paragraphs, this story marks itself as intended for those who are largely political -- those who already believe that there is something wrong with trade. Note the premise set out as the platform for all the argument to come: "then why did America keep losing?" Just how has America "lost"? What proof is there that with American industrial production, employment, home ownership, household net worth and the stock market at all-time highs we have "lost" in any sense whatsoever? What requires explanation? What requires reform?
Update... Reader Andrew Terhune notes,
And you don't even get into his coercive prescriptions. Trade would be balanced by fiat - nothing comes in unless something goes out. To say nothing about the infringement of our liberties, specifically the liberty to spend our money as we choose regardless of the origin of the product of service.Update 2... More from reader Gabriel De Repentigny:
William Greider begins his article "The Establishment Rethinks Globalization" with mention of a certain new "revised understanding" of global trade that promises to do to economics what Luther did to the Roman Catholic Church. Naturally, I was intrigued, and I read on with great anticipation. Below I present the crux of Greider's description of this (ahem) newly discovered problem with unrestricted global trade:
Posted by Donald L. Luskin at 8:56 AM | link
Wednesday, April 18, 2007WHAT EXACTLY WAS BEAR-Y TALKING ABOUT? Reader Frederick Hawkins wonders what "external event" Barry Ritholtz had in mind when he predicted Dow 6800 in 2006?
"The move from Dow 8800 to 6800 won't be a rational, calmly contemplated affair. No one will be quietly wondering about option-expensing or multiple compression. Instead, it will be a severe overreaction to some external event."...like the election of a president who has Barry Ritholtz as an economic advisor.
Posted by Donald L. Luskin at 10:08 AM | link
JOKE OF THE DAY
Posted by Donald L. Luskin at 10:00 AM | link
MORE ON "FAIR" Reader Pat Duggan has a simple thought experiment on so-called "progressive" tax rates that complements my "taxi driver" analogy:
Suppose one guy makes nothing in his first year because he is building a business and then the hard work pays off and in year 2 he makes $200,000. The second guy isn't much of a risk taker and he makes $100,000 both years. The entrepreneur will have his 200K taxed at a higher rate. Talk about unfair!Update [4/19/2007]... Reader Dale Madren sez,
Guy A, the entrepreneur, only pays more in taxes if Guy B is not self-employed, and even then there is a "but".Update 2... Reader Chris Janutol adds,
I think the part that Mr. Madren ignores is that Guy A has paid those taxes in ONE YEAR, while Guy B pays over TWO YEARS.
Posted by Donald L. Luskin at 9:40 AM | link
A CASE OF RESTED DEVELOPMENT From George Reisman's blog, a visit to Montevideo, Uraguay, after half a century of welfare state policies:
Graffiti filled walls within a hundred yards of the seat of the country’s Congress. The city’s public parks, presented as an attraction to tourists, were overgrown with weeds; the wrought-iron fences they contained were in a state of collapse. Building after building, in neighborhood after neighborhood, was in a state disrepair. Often, only a burnt-out concrete shell was left. Hardly anything, anywhere, looked new. Much of the city was reminiscent of the South Bronx, an area devastated by more than two generations of rent controls. Only one, small area of the city, near the River Plate, appeared to be at all prosperous.
Posted by Donald L. Luskin at 1:44 AM | link
Tuesday, April 17, 2007A TAX PARABLE From reader "Z":
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
Posted by Donald L. Luskin at 9:56 PM | link
"YOU TALKING TO ME?"
From CNBC's "Kudlow & Company" last night, a transcript courtesy of Larry's excellent blog. But I like this picture better.
KUDLOW: All right. Don Luskin, let me go to you. I'm looking at some of the distributional aspects of our current tax code. The top 1 percent now pays 37 percent of income taxes. Back in 1980, they only paid 19 percent. The top 5 percent pays 57 percent. That's up from--that's up from 37 percent back in 1980. And if you make over a million bucks, 181,000 people, they pay 19 percent of the income tax. Your thoughts, Don Luskin.Update... Economist John Seater responds,
You know what's really unfair about the mindless fairness debate? Nobody ever defines the term "fair."
Posted by Donald L. Luskin at 12:11 PM | link
"I LOVE LOUSY, TOO" Reader Tim Daniel captures the essence of the opportunities in a dynamic economy:
As the USA Today article pointed out, small business is the unseen engine that drives America's economy ahead of the world. As CFO of a small contracting S corp. here in San Diego CA, (and an avid fan of your blog, Ayn Rand, Miton Friedman and Ronald Reagan), I can relate to the frustrations that you and many of your readers have about the propaganda, mistruths, and outright lies that are told on a daily basis about this economy. Since 2003 I have increased our revenues for our small family-owned business from roughly $300,000 to a forecasted gross in 2007 of $600,000. I have done this, from real estate boom to the now much-touted bust by switching from residential type contracts to more upper-end residential and commercial contracts. If I had taken the initiative of the Barry Ritholtz's of the world, I would have tucked my tail between my legs in late 2005 when it seemed that residential construction was peaking, and then given up and clamoured for a Democratic candidate to make it all right. Keep up the Lord's Work on the blog and your media presence.
Posted by Donald L. Luskin at 8:02 AM | link
KUDLOW REPLAY, PART 3 Here's the YouTube video of the third part of my appearance on Kudlow yesterday, in which I confront Barry Ritholtz with the inconvenient truth that his bearish economic analysis has produced horribly wrong market predictions, including last year's call for Dow 6800.
In response, Barry makes a classic mistake -- he really should go back to media training 101. Instead of just manfully saying, "Yeah, I was really wrong about that one," he tries to weave a preposterous story about how he really said the market would go higher. He did indeed say the market would go higher during the early part of 2006, but that doesn't change the fact that Dow 6800 was his ultimate target for 2006. He explicitly wrote about it in TheStreet.com, and he supplied that forecast to BusinessWeek as part of its survey of economists. From the TSC article:
I'll detail how to get to my 2006 target of Dow 6800 -- the lowest (by far) in the Business Week survey -- and lay out a scenario for how the S&P 500 could take a 30% haircut this year.So yesterday Ritholtz went on national television and claimed that that column was about how the market would go up in 2006. And he dared to call me "disingenuous."
Posted by Donald L. Luskin at 7:35 AM | link
KUDLOW REPLAY, PART 2 Here's the YouTube video of the second part of my appearance on Kudlow yesterday, in which I hammer leftist tool Jared Bernstein until he actually admits that, fundamentally, progressive taxation is unfair.
Posted by Donald L. Luskin at 7:33 AM | link
KUDLOW REPLAY, PART 1 Here's the first of three YouTube videos of my appearance on CNBC's "Kudlow & Company" yesterday, in which I advise against playing the blame game with the tragic Virginia Tech shootings.
Posted by Donald L. Luskin at 7:25 AM | link
Monday, April 16, 2007JOHN KERRY, OR JOHN BARRY? Today on CNBC's "Kudlow & Company" (YouTube replay coming later) Barry Ritholz explained how he voted for Dow 6800 before he voted against it. Since he invited viewers to read his January 2006 TheStreet.com column and judge for themselves, let me help by providing the link. This is just too delicious.
Update... A reader sends in this perspective:
Don, your "debate" with Ritholtz struck a nerve. He is starting to rival Fleckenstein in the bad call permabear camp. These calls have become a pattern, starting with his March 2005 intermediate top call. The call was made on 3/28/05; by 8/1 the market was up 5% and rallied nearly 8% more into May 06. The market now is up ~24% since his "intermediate top".
Posted by Donald L. Luskin at 5:02 PM | link
SMALL IS BEAUTIFUL USA Today:
Small businesses are the little economic engine that can, a new report out today says. The USA's more than 20 million small companies produced 50% of the USA's private, nonfarm gross domestic product, says a study released by the U.S. Small Business Administration. The study covers 1998-2004, and confirms findings of previous research, the SBA says.This is our great bulwark against unionization, and it's a precious thing. No wonder unions are frantically lobbying to get government to impose on small business the same kind of strictures unions themselves have imposed on big business -- safety regs, health care mandates, and so on.
Posted by Donald L. Luskin at 2:37 PM | link
Sunday, April 15, 2007IS THERE ANYTHING THAT THEY WON'T BLAME ON INEQUALITY? Apparently not. In the Washington Post:
Essentially, said Kim Bloomquist, a senior economist at the IRS in Washington, the more people you have at the upper and lower ends of the income spectrum -- at the ends of the U -- the more tax evasion you are likely to see. A central cause of cheating, in other words, might be inequality.
Posted by Donald L. Luskin at 10:32 PM | link
NEW HOPE FOR THE FED Our monetary policy correspondent "Irrational Exuberance" is always on the lookout for signs of intelligent life at the Fed. From the history books, here's former Dallas Fed President Bob McTeer at a July 1997 Fed meeting:
"The government issues something that we call a dollar, and it is our responsibility to take care of that dollar. People are using those dollars as a store of value, and I think we have something of a moral obligation to protect the value of that dollar regardless of statistical studies about whether 1 percent or 2 percent or 3 percent inflation might maximize real growth."And here's a gem from a recent Wall Street Journal op-ed:
"...faster output growth dampens inflationary pressures ... A new formula emerges from an economic model being developed by the Federal Reserve Bank of Dallas. It reveals something the traditional doctrine misses: Inflation varies inversely with growth not only in the domestic economy but also with growth in other countries...
Posted by Donald L. Luskin at 8:57 PM | link
A BREAKTHROUGH ON TAX RESEARCH, AND A BREAKDOWN Economists David and Christina Romer's new paper:
...tax changes have very large effects on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent.Via Greg Mankiw's blog, thanks to reader Ben Cunningham.
I also note that Mankiw has posted a stinging response to an asinine New York Times op-ed last week by Robert Frank, in which Frank attacks so-called "trickle-down economics" in the service of recommending a vastly expanded role of government in our lives, funded by higher taxes on the rich.
...Frank says there is little point to cutting marginal tax rates of high-income individuals:Trickle-down theorists are quick to object that higher taxes would cause top earners to work less and take fewer risks, thereby stifling economic growth. In their familiar rhetorical flourish, they insist that a more progressive tax system would kill the geese that lay the golden eggs. On close examination, however, this claim is supported neither by economic theory nor by empirical evidence.Apparently, Bob has not read this survey by Stiglitz and come to grips with this theoretical conclusion (from page 35 of the working paper):Pareto efficient taxation requires that the marginal tax rate on the most able individual should be negative.The reason for this conclusion is that a negative marginal tax rate on the most skilled worker induces him to work more, and if skilled and unskilled labor are complementary inputs, the wage for unskilled labor rises in general equilibrium.
Posted by Donald L. Luskin at 8:38 PM | link
SIGH... I reluctantly agreed when Jim Pethokoukis asked me to participate in a bull/bear debate on his Capital Commerce blog at the US News and World Report site. I told him that I had no intention of getting into a name-calling contest with some unprincipled economy-basher, where I'd be constrained to the facts while my opponent could just make up stuff, drag in irrelevancies, and inevitably turn nasty. Jim nominated Barry Ritholtz as my opponent, and I accepted, characterizing Ritholtz as "borderline" in relation to my concerns. Sadly, Ritholtz went over the border.
Barry got so flummoxed by my challenges to his bearish arguments -- actually, I shouldn't say "his," because I've heard them all a thousand times before, usually in "reports" from liberal lobbyist groups and in op-eds in the New York Times -- that he descended into name-calling. In the debate he called me "disingenuous," "intellectually dishonest," and "frighteningly misinformed" -- and on his own blog, "slippery." At least he didn't accuse me of stalking him, but that's probably next.
I suppose it's fine in the grand scheme of things if Barry wants to declare defeat by flailing in that particular way. After all, a winner would have refuted my facts instead of defaming me. But be that as it may, I don't intend to make this mistake again, lowering myself by being paired with someone who debates like this. At this point I've agreed to appear opposite Ritholtz on CNBC's "Kudlow & Company" on Monday afternoon, but I have agreed to that entirely just to be accommodating to Larry and his producers. But that's it. No more easy wins. From here on, I'm only debating serious thinkers.
Posted by Donald L. Luskin at 9:25 AM | link