Friday, June 27, 2003
AFFIRMATIVE ACTION: HIT THE RESET BUTTON
Leave it to the Des Moines Register to refer to the SCOTUS decision on affirmative action as “clarity”:
The U.S. Supreme Court handed down a pair of rulings Monday that might finally give lower courts and public institutions a clear idea of what is - and is not - allowed to achieve racial diversity.
The court seemed to contradict itself in upholding the University of Michigan Law School's admissions policy in one case while striking down Michigan's undergraduate policy in another. Yet, the two rulings taken together give reasonable guidance to universities and perhaps other groups.
Giving advantage to a member of a minority group does not necessarily violate the Constitution's equal-protection clause, the court said, provided the policy is scrupulously designed to look at individuals and not just racial classes to achieve a goal of racial diversity. And diversity, the court said explicitly, is a legitimate goal.
This is a victory for the principle that institutions of higher education ought to reflect the society that their graduates will one day enter.
Actually, it’s a victory for the forces of reverse discrimination. The two decisions do nothing to clarify the situation: they merely say colleges and universities can use race in their admission’s decisions, they just can’t use them too much. All it really does is hit the reset button on affirmative action.
Let me “clarify.”
The Sandra Day O’Connor split-the-baby decision said “quotas” are a no-no, but it is okay for institutions to set racial-composition “goals.” Universities and colleges—most of them, anyway—would prefer to use race to their hearts’ content in admission practices. The O’Connor opinion gives them cover to find more ingenious methods to do so. So universities and colleges around the nation will junk their quota systems and their University of Michigan-like point systems, and start over. Frankly, I don’t have an inkling of what they will come up with. But, rest assured, the racial bean-counters that inhabit university admissions offices are already hard at work figuring out ways to create de facto “quotas” that have the innocuous appearance of “goals.”
It will probably take another 25 years before another case challenging the new affirmative action systems wends its way to SCOTUS. Perhaps, at that time, a different Court will finally put a stop to such nonsense. Yet that is what affirmative-action opponents—excuse me—proponents of racial equality were hoping for this time.
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SOCCER STADIUMS = ECONOMIC DEVELOPMENT
I know this because the Des Moines Register editorial page said so:
Picture a green soccer field in a colorful bowl setting, with 6,000-plus seats and 31 suites on the home side. It would bring the prospect of local, national, even international matches, along with other sporting events, festivals and concerts. A community recreation center next door is a possibility, too.
That's what West Des Moines - and metro Des Moines - could have if it follows through on the pitch for Liberty Bank Stadium made by Kyle Krause, majority owner of the Des Moines Menace soccer club.
West Des Moines should go for it.
Sure, city finances are tight right now, but think long-term. West Des Moines is affluent, and the soccer-specific stadium - there are only a handful of such facilities in the country, according to Krause - would be a huge asset for the entire metro area. Its presence would advertise that this is a great place for young singles and families to live.
If you read the editorial carefully you’ll notice that they never say that the stadium itself will bring lots of new jobs to West Des Moines. Rather, they rely on the “it’ll make it a great place to live” argument, as if young professionals’ primary concern when contemplating employment options is how close they’ll be to a soccer field.
I’m betting that they don’t make the former argument because they are aware that the research on the economic benefit of sports stadiums can be best described as a mixed bag heavily trending toward the side of zero to negative impact. (This paper has a pretty good literature review and some interesting findings of its own.) Parks, community theatres, bike trails, now soccer stadiums. I wonder what the Register will think of next? Any suggestions—the more ludicrous, the better—should be left in the comments section.
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YEPSEN IS WIN-WIN
If you haven’t read David Yepsen’s column from Sunday, do so. There is only one thing I disagree with:
[Vilsack] took a lot of heat from Democratic constituency groups for dancing with Republicans on these issues. None of the party's spending groups liked the idea of an income-tax cut because they all understand it will mean less tax money in the trough. And his old buddies the trial lawyers didn't like the restrictions on lawsuits because it will crimp their incomes - and the donations they make to Democrats. For Vilsack, who may have his eyes on larger prizes than the Iowa governorship, that internal heat got to be too much. It's a little hard to be a national Democratic leader when all the party's constituency groups back home are sore. So, he tried to make them happy by item vetoing the stuff they hated.
Trouble is, if Vilsack loses the coming lawsuits, the laws will go into effect. That is guaranteed to irritate his old friends in the party who were urging him to just strike down the whole package. If he wins the suit, Republican lawmakers will be even angrier.
I have some doubt that Vilsack's action will irritate "old friends." By item vetoing the tax cuts and deregulation, Vilsack get himslef a pass among Democrats: Vilsack can blame the tax cuts and deregulation on the State Supreme Court should it overturn his item vetoes.
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KRUGMAN, DEFENDER OF DEMOCRACY
In my last Krugman takedown—graciously posted by Don Luskin on his website since I couldn’t post via Blogger—I remarked that “Doubting the authenticity of American democracy is the last refuge of a lame argument.” This was in response to the following line in Krugman’s last column: “Yet if we can't find people willing to take the risk — to face the truth and act on it — what will happen to our democracy?” I also noted that this was not the first time such sentiment had appeared in a Krugman rant. On April 29 he wrote: “And we are a democracy — aren’t we?”
Apparently the answer to that question is “not much longer.” Krugman starts today's rantby looking at the one-party state that dominated Mexico in the 20th Century and then asks the rhetorical question “But can it happen to the United States as a whole?” The indications of the coming one-party state include “the drive to privatize Medicare, to the pro-tax-cut fliers General Motors and Verizon recently included with the dividend checks mailed to shareholders, to the pro-war rallies organized by Clear Channel radio stations.”
Okay, let’s get some obvious stuff out of the way right now. Republicans only have a 1 seat advantage in the Senate, and a 10 seat advantage in the House—hardly the sort of margins that make it impossible for the Democrats to gain control. In fact, the Democrats gained governorships in the last election, a little fact that Krugman overlooks (surprise, surprise).
Second, I sincerely doubt that the actions of General Motors and Verizon are unprecedented—surely other companies have sent out fliers to their shareholders encouraging them to support certain legislation. And for Kurgman to repeat the unsubstantiated smear about Clear Channel shows that there are a lot of things that have yet to change at the New York Times.
As for the drive to privatize Medicare, Bush’s plan to require seniors who choose the prescription-drug benefit to enroll in a private insurance company isn’t faring too well on Capitol Hill. Seniors will still have the option to enroll in a private insurance program, but it will not be mandatory. Looks like the AARP still has some influence on Capitol Hill. Guess Delay hasn’t installed one of his stooges there yet.
Then there is this bit of sleight-of-hand:
And corporations themselves are also increasingly part of the party machine. They are rewarded with policies that increase their profits: deregulation, privatization of government services, elimination of environmental rules. In return, like G.M. and Verizon, they use their influence to support the ruling party's agenda.
The implication here is that Republicans support such policies because of their quid-pro-quo value. What explains Republican support for tax cuts and deregulation when Democrats controlled Congress and the White House during the last 20-plus years? What explains GOP support for those policies when Democrats had the money advantage? A more likely explanation for Republicans’ support of such policies is that they believe they are good policies.
Then there is this bit about how the new “party machine” will function:
As a result, campaign finance is only the tip of the iceberg. Next year, George W. Bush will spend two or three times as much money as his opponent; but he will also benefit hugely from the indirect support that corporate interests — very much including media companies — will provide for his political message.
And Democrats will benefit hugely from direct support from labor unions. Nor is corporate America this homogenous behemoth that supports conservatives—witness Warren Buffet, Martha Stewart, John Corzine, Herb Kohl, etc. Furthermore, does Krugman really believe that the media is going to lay out rose petals on Bush’s path to four more years? Presumably he thinks Clear Channel and FoxNews are powerful enough to cheerlead us into the Bush Era. CBS, NBC, ABC, MSNBC, CNN, the New York Times, Washington Post, Los Angeles Times, USA Today—all small potatoes.
Krugman also seems genuinely perplexed as to the media acquiescence in the Republican scheme: “Why isn't the ongoing transformation of U.S. politics — which may well put an end to serious two-party competition — getting more attention?’ Um, because it’s a paranoid fantasy? I’ll just repeat what I wrote in my last takedown, since it bears repeating here:
Krugman, it seems, is fast approaching Chomsky-land. He believes tenuous arguments are set-in-stone truth. He makes statements that aren’t supported by even the slightest bit of research—sometimes even contradicted by other remarks in the same column. And when events don’t happen as he thinks they should, he doubts that we really live in a democratic society.
I also wrote:
Considering the New York Times current credibility problems, I have to wonder how much longer the powers-that-be at the Grey Lady will permit Krugman’s drivel to appear on the op-ed page. Since I’m a gambling man, I’d like to extend Don Luskin a little wager. I’ll bet $100 that Krugman will be gone in a year’s time.
So far, Don hasn’t taken me up on my bet. Can’t imagine why.
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Thursday, June 26, 2003
NEW DIGS
Yes, this is the new haunt for Cornfield Commetary. I haven't fully left Blogger: they still have the publishing mechanism. But hosting is now done by HostRocket. I'm hoping that will resolve most of the problems I've had, off and on, for a year. Keep your fingers crossed.
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SOME CHANGES
Obviously you've noticed there are some changes to this blog. There will soon be a URL change, probably late this week.
Sorry for the non-existant posting this week. I had some trouble as Blogger switched over to its new system (which is one reason there will be a new URL soon.) Anyway, regular blogging duties now resume.
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DRUGS AND DEFICITS
Budget concerns are no where to be found in the discussion of the prescription drug benefit.
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THOUGHTS ON TAX CUTS, THE ECONOMY, ETC.
There were some interesting comments on my last post on Paul Krugman. I've reprinted them here with my thoughts in tow.
sblafren asks “Tax cuts for the rich help the economy? How?” He then states:
Jim works at Walmart and he skips breakfast and eats at McDonalds for lunch. At dinner his wife warms up last night's caserole.
Harry is an investment banker at M, M, and Sons. He has his breakfast served to him at his desk; at lunch he takes out a client to a 12 martini lunch, bills the company, and writes it off on tax day; in the evening he has his secretary place a reservation at whatever nightspot is hot and takes whatever girl in the office is hot out for the night; and on the week ends he takes his wife out to the club for dinner and (ballroom) dancing.
I wonder, does Harry like to kick puppies too? This is a typical liberal stereotype of the “rich.” As I did in the comments section, I refer you too the book “The Millionaire Next Door.” In that book the researchers found that millionaires live well below their means, use money efficiently, in ways conducive to building wealth, don’t worry much about social status, and are proficient at targeting market opportunities. The researchers didn’t explore the extent to which millionaires bang women other then their wives, but, given human nature, I’d bet that it’s a multi-class phenomenon.
Next, he states:
Who do you give the tax cut to as a means of stimulating the economy?
If you give it to Harry he will say thank you and have his accountant move it to his tax free account in the Caymans. He will not go out to dinner any more than he already does because he is already eating his fill and the most expensive watering holes out there, he simply cannot manage to spend more with out passing out. He will not invest in the stock market as it has tanked and has yet to re-instill confidence in this smart chap. He certainly isn’t going to invest in any start up companies just yet. And he isn’t going to open any factories or shops just yet. What is holding him back? No demand in the marketplace. No one is buying and so he has zero reason to invest in production. He will put his money on the sidelines, out reach of Uncle Sam, until better times.
If you give Jim the tax cut he might have three square meals a day, he might buy his wife something shinny, or his kids new shoes, he might even buy a truck. All of which would spur demand at the factory level and give Harry some reason to invest at home.
As for Harry, you’re completely overlooking the incentives to invest. After the tax cut he now has extra money to risk on investing, plus his after-tax return will be greater should his investments work.
Now let’s look at our beleaguered Jim. (We’ll assume for the moment that we can just consume our way out of a recession.) Let’s say that Jim decides to eat breakfast at McDonald’s with his tax cut. We’ll even assume that the capitalist pigs are really sticking it to Jim and he has to work 6 days a week, and has no vacation—i.e., works 52 weeks a year—so he eats breakfast at McDonald’s 312 days a year. If we assume that his average McDonald’s breakfast is $4 (a bit high for McDonald’s, but I’ll go on the high side to make my point) then Jim spends $1248 per year. One last assumption: there are 10 million “Jims” out there. That comes to about $12.48 billion in economic stimulus—not a lot in a $10 trillion economy.
But the main problem with all of this is the assumption that we can somehow consume our way out of a recession. If we just demand more—buy an extra pair of shoes, get a second haircut, finance a new car earlier than anticipated—then our worries will be over. You can’t consume what you haven’t produced. Consumption is a reward for production. Without increased production, you won’t see an increase in jobs.
sblafren also writes:
The data on this graph doesn’t explain how you get to a Depression... all the numbers run between a stable bracket with little major change. But it does reflect the depression and the recovery in general numbers.
You will find a massive drop in private investment at the end of a depression cycle as factories lay off workers and shut their doors.
You will also find a massive drop in exports as the rest of the world reflects a weak global economy with low demand.
You will also find a massive rise in government spending as workers turn to unemployment benefits, abuse drugs, increase crime, etc.
As soon as the recovery hits you will see a momentary boom of private investment as factories retool and rehire.
You will find a massive drop of government spending as people get off aide programs and go back to work.
And exports rise as the world recovery kicks in.
These are all descriptive data, not prescriptive. You cannot look at these numbers and say "you get out of a recession by cutting government spending and increasing private investment" because you see such AFTER a recovery.
Sorry, but a recession occurs when you have at least two consecutive quarters of decline in real gross domestic product. That recession occurred in the first three quarters of 2001. That coincides with the decline in gross domestic private investment. It also coincides with the beginning of the rise in the unemployment rate. Sorry, but decline in investment and rising unemployment are seen at the start of a recession.
On government spending, it rises irrespective of recession/recovery/boom. The current spending glut began in 1998, well before the current recession. And no, you do not see investment spending after a recovery—it coincides with it. Take a look at GDP numbers and unemployment numbers—go back to 1981. In the 1982 and 1990-91 recessions, the unemployment rate didn’t begin to drop until investment reached each pre-recession peak (4th quarter of 1983 and 4th quarter of 1992, respectively.) Regarding the most recent recession, we’re still $180 billion off of the 2000 peak.
Michael Fujimoka wrote:
First when I say transfer, I most nearly mean transfer of welfare. The mechanism that this occurs through is the cutting of government services as a result of a lack of tax revenue. Although we can argue the ins and outs and inefficiencies of government spending, I think that most people would agree that welfare programs of all types tend to benefit the poorer classes of America more so than the wealthier. With this in mind, a cut in these programs, which I perceive to be an imminent eventuality based upon the federal budget deficits, hurt the poor much more than the rich. If the cause of the budget deficits is, as it is, a large tax cut that favors those with higher incomes, it becomes somewhat clear that higher income groups benefit as they generally are not affected by a cut in government welfare services, but are beneficially affected by tax cuts.
As a side note, a tax cut that targets wealthier tax payers most likely has less of a stimulating effect on the economy than one that evenly targets all brackets. This prediction is somewhat a result of Franco Modigliani and Milton Friedman's lifetime cycle theories for which they both eventually won the Nobel prize.
And as a final note. It can be argued vigorously that despite lower GDP/capita than America, citizens of many European nations have a higher welfare level than Americans despite government spending as a percentage in those nations in excess of America's. When considering economics, I always try to remember that GDP is just a number; what really matters is welfare.
First, the Modigliani and Friedman theories only work if you assume consumption is the driver of recessions and recoveries. But, as I hinted above, people need only so many haircuts, breakfasts, cars, etc. They will buy new products not yet on the market or improvements in existing products—yet that will only happen if someone produces them first. Also, it’s a bit slippery to cite Friedman, since he’s spent most of his professional life trying to get economics away from Keynesianism.
Next, GDP is more than just a number. It’s an indication of welfare—welfare being used in the broad sense of economic well-being. Europe surely spends more on welfare programs than we do. However, I doubt that such spending is conducive to welfare in the broader sense. The question is: What's better for the poor, being on the government dole, or becoming self-sufficient? And if the answer is the latter, what's more conducive to that, an expanding economy, or one bogged down with lots of government weight?
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