Friday, August 01, 2003
MEET KRUGMAN”S NEW PROBLEM, SAME AS THE OLD PROBLEM
Before I begin this Krugman endeavor, let me concede a point. Krugman is largely right when he says that:
Thanks to the end of the tech boom and the bursting of the tech bubble — with an assist from energy price gouging — California's budget has plunged into deficit.
I’d quibble with the energy price gouging bit. For this Krugman relied on a report the gist of which was that the price gouging was enabled by California’s screwball electricity regulation. Other than that, though, he’s right.
The problem comes when Krugman tries to justify tax increases as a solution by claiming spending isn’t the problem:
You often hear claims that excessive spending is responsible for California's budget woes. True, budgets grew rapidly after the mid-1990's. But California began the 1990's by slashing outlays in response to a fiscal crisis, and most of the subsequent growth was simply a return to pre-crisis levels. As analysts at the nonpartisan California Budget Project point out, real state spending per capita was only 10 percent higher in 2002-03 than it was in 1989-90 — that is, most of the spending growth was simply a matter of keeping up with the population and inflation.
Okay, let’s get the small stuff out of the way first. Describing the California Budget Project (CBP) as “nonpartisan” is choice, isn’t it? Paul, let’s call a spade a spade. It’s the “liberal” California Budget Project, as a quick visit to the website shows. Stop trying to confuse your readers into believing this or the Center for Budget and Policy Priorities is a “moderate” think-tank, as the term “nonpartisan” implies.
Now for the bigger stuff. According to the press release at the CBP,
General Fund spending [in California] per resident increased by an annual average of 1.0 percent between 1989-90 and 2002-03, after adjusting for inflation (Figure 1). Per capita spending was $2,211 in 2002-03, as compared to $1,950 in 1989-90 (in 2002-03 dollars). State spending peaked in 1989-90, corresponding to the last economic peak prior to 2001, before falling during the recession of the early 1990s. Spending reached its next peak of $2,425 in 2000-01, before falling in both 2001-02 and 2002-03.
Apparently Krugman is having his math problems again. If spending increases an average of 1% during a 13 year span, then the increase is 13% over that period, not the 10% that Krugman claims. Indeed, if you do the math (( 2211 - 1950) / 1950 ) you come up with about 13.4%. On his website, Krugman claims he knows “how to use numbers”. Maybe so, but can he do simple addition?
The next problem is the time period examined by the CBP. The CBP asks “Did California Spend its Way into the Current Fiscal Crisis?” but then includes two years of the current crisis in its statistical analysis. It admits as much when it notes that General Fund spending fell “in both 2001-02 and 2002-03.” In other words, they include two years when General Fund spending declined to make the spending look smaller. But the crisis began in mid 2001, not, as the CBP implies, in 2003. Thus, an accurate analysis would look at spending before the crisis occurred, i.e., the period of 1989-90 to 2000-01. As the CBP notes, per capita spending reached a peak of $2,425 in 2000-01. In 2001 dollars, per capita spending for 1989-90 was about $1,880. Doing the math, that’s more than a 2.6% spending increase per year above what inflation and population growth would warrant. That may not seem like a huge difference, but keep in mind that that’s the average accrual over 11 years to what was a $40 billion General Fund budget.
Using some California Anuual Financial Reports, it is instructive to look at where the California budget would have been in 2001 if increases in state spending had been held to increases for inflation and population growth. In 1991 (sorry, 1990 budget data wasn’t available) the California General Fund spent $41.6 billion. Increasing it for inflation and population growth through 2001, the General Fund would have spent $63 billion. That’s $15 billion less than the $78.1 billion the General Fund actually did spend. $15 billion is not an insignificant portion of the $38 billion gap the Golden State now faces.
However, even this understates the problem as it focuses on the General Fund portion of the California Budget, and not the total budget. All states spend money outside of their General Funds, and California is no exception. In 1991, total spending was $49.8 billion. By 2001, it was $92 billion. Again, had total spending from 1991 increased only for inflation and population growth, California would have spent only $75 billion. That’s a difference of $17 billion.
It’s proof that California has a spending problem. And proof that Krugman has a math problem.
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If you haven't visited Greg Blankenship’s blog, A New Can Of Worms, do so. Blankenship is the head of the Illinois Policy Institute, a free market think tank. In particular, check out this post on the Illinois Supreme Court.
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Catching up on some of my reading, I came across E.J. Dionne’s recent column on the D.C. schools. It’s a last ditch attempt to convince himself that vouchers won’t have much impact on student performance, and that the answer lies in more money:
What's required would make both liberals and conservatives uncomfortable. We need to spend money to upgrade the quality of teaching in our poorest schools and to demand accountability from teachers to make sure the money produces results. If conservatives were willing to invest seriously in our inner-city public schools in exchange for a comprehensive test of vouchers, I'd take the deal. I'm not holding my breath.
I’d bet dollars to donuts that the quality of teaching has a huge amount to do with how well students perform. The question, which Dionne doesn’t really address, is how to attract quality teachers? I’d also bet dollars to donuts that the best way to do that is with good salaries. Quality pay isn’t the only thing, of course, that attracts quality employees, but it is a very big part of it.
Dionne would suggest that we need to spend more money to attract such teachers. So let’s see how much D.C. currently spends. According to the Wall St. Journal (you may need to be a subscriber to see the editorial) D.C. spends $15,000 per pupil. Now let’s assume that, on average, 15% of that, or $2250, went to pay teacher salaries. If we can also assume that teachers have an average class size of 30 pupils, that means the average teacher should be earning $67,500. That’s pretty darn good pay—certainly enough to attract quality teachers.
Now, I don’t know what the average D.C. teacher makes, but I’ll again bet dollars to donuts it’s not even close to $67,500. If that could be the average teacher salary in D.C. by spending only 15% of what is already spent, then the proper question is: WHERE IN THE HELL IS ALL THAT MONEY GOING?
Once that question is addressed, we could then figure out what the solution might be. It may be that we need to allocate the money more efficiently by changing the regulatory structure of the school system. Chances are, though, that the problem is that the system is a government-run system, and government is not as good as the market at allocating resources. Thus, the solution might entail a market-based reform, like vouchers.
For liberals like Dionne, however, it seems the answer will always be mo’ money, mo’ money, mo’ money.
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You might think that in any reasonable discussion of the drug re-importation bill currently before Congress, one would not be able to ignore the fact that most foreign nations impose price controls on prescription drugs. But the Des Moines Register editorial page manages to do exactly that! Their analysis of the problem?
Even though this bill has passed a hurdle in the House, it faces a fight in the Senate and would likely not be signed by the president. Still, it has value in simply telling pharmaceutical companies that Americans are tired of being gouged. That is a message worth sending and sets a progressive tone in Washington.
Yes, that’s right, pharmaceutical companies are gouging you and me! The fact is that pharmaceutical companies have very expensive R&D costs. To cover those, they charge Americans higher prices. Only then can they make a profit in foreign countries, where they are forced to charge lower prices.
For a better explanation of the problem, see this great column by Walter Williams.
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Thursday, July 31, 2003
WHAT I DID ON VACATION
My new column at the American Prowler.
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BASU: BOYCOTT THEM TO SHUT THEM UP
Rekha Basu is having another one of her hissy fits over Jan Mickelson. He’s a “hatemonger” who engages in “diatribes.”
And guess what? She’s praising the efforts of one Heidi Bagg who is
organizing a boycott of sponsors of his WHO radio show, beginning next month. She's meeting with different groups of sympathizers. It's in keeping with what she counsels her students at school, says Bagg: "I talk to kids about standing up to bullies.
She doesn't see it as a violation of anyone's free speech, but as consumer choice. No one has an automatic right to time on commercial airwaves. Radio stations have a choice of shows and hosts, and the public has no obligation to support them all.."
Now wait a minute. Wasn’t this exactly the sort of thing that had Hollywood and other lefties screeching like banshies when members of the political right called for the same thing when Natalie Maines of the Dixie Chicks shot her mouth off? Why yes it was! Tim Robbins warned of “censorship” and Madonna griped that we “aren’t celebrating democracy” in the U.S. Even the seer of rationality and objectivity, Paul Krugman, likened it to the Nazi era.
But now, in Basu, we have a lefty who says:
Boycotts are as American a tradition as free speech. Consumers vote with their dollars, by putting pressure where it hurts - on shareholders' and sponsors' profits. "The bottom line," Bagg says, "is money."
Americans have boycotted lettuce and grapes to protest the treatment of farm workers, South Africa to stop apartheid and Nike shoes to challenge child-labor practices. Even when the boycotts don't bring the economic engine to a halt, they call attention to an issue. Bagg says she wants to start that long-overdue conversation.
And you know what? I agree with Basu in principle. In America, consumers have the freedom to buy or not buy anything they want for any reason. If the decide to do so in a collective fashion, such as a boycott, well they should be—and are—free to do that too.
I just wish lefties would remember that the next time conservatives decide to boycott another stupid Hollywood activist who shoots off his or her mouth.
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WHILE I’M ON THE SUBJECT OF BASU
The funniest part of her column was
Personally, I'd settle for some balance in local talk radio. Between Mickelson, Rush Limbaugh, Michael Reagan, Bill Salier, Sean Hannity, Mancow, Michael Medved, Dr. Laura - several of those on WHO - the ideological diversity Des Moines listeners get ranges from conservative to Christian ultra-right. But Iowans are more varied, now more than ever.
This for a woman who writes for the Des Moines Register editorial page! The regular writers range from the moderate David Yepsen to the leftist Basu.
While I’m on the subject, you might have noticed Howard Kurtz’s column the other day summarizing a report from the Council for Excellence in Government on media coverage. The report examined coverage in both TV and newsprint; the newsprint coverage included both national and regional newspapers, including the Des Moines Register. It compared, among other things, the tone of the coverage of the the first year in office for Ronald Reagan, Bill Clinton, and George W. Bush. Here is what the report had to say about the Register (pages 128-129):
Finally, the most dramatic difference in the two parties’ treatment appeared in the Des Moines Register. The Clinton administration attracted a striking 59 percent positive evaluations in the Register. This was the first time in the study that we recorded a majority of favorable comments toward either the executive or legislative branches. (Similarly, Bill Clinton’s personal coverage was 60 percent positive, the best press for any president at any outlet.) That figure was over twice as high as the Reagan administration’s 28 percent positive evaluations and just under a two-to-one margin over the Bush administration’s 31 percent. By contrast, the Democrats’ lead over the Republicans in Congress was only five percentage points - 36 to 31 percent positive judgments…the greatest partisan tilt in the study was the two to one margin of positive evaluations for the Clinton administration over those of Reagan and Bush at the Des Moines Register, which also gave a slight edge to Democrats in Congress. (Italics mine.)
Now we have proof the Des Moines Register has a liberal bias. As though you hadn’t figured it out on your own.
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Wednesday, July 30, 2003
GOVERNMENT SPENDING, NOT TAX CUTS, GROWS THE ECONOMY
I know that because Gilbert Cranberg said so on the Des Moines Register editorial page. A week ago Tuesday, Gilbert Cranberg trotted out the typical, liberal “government is what grows the economy” in a bit praising our illustrious Governor. He began:
Gov. Tom Vilsack's veto of the Legislature's approval for still more revenue cuts is one of the best things to have happened in Iowa in years.
Consider that for a second. Vilsack’s item veto was likely unconstitutional. It has done enormous damage (likely irreparable) to whatever trust he had with Republicans in the state legislature. His ability to work with them in the next three years is in serious doubt. But, in a liberal’s world, the consequences don’t really matter. As long as you get the right policy, it’s “one of the best things to have happened.”
Once cut, taxes are almost never restored.
Uh, yes, that’s the purpose of cutting taxes. Although, with the added economic growth that results, some of the revenue does come back.
The loss of revenue piles up year after year.
How in the hell does a “loss” pile up? If something is lost, it’s not there anymore. How can something that is not there anymore “pile up”?
Add up the individual cuts for the fiscal years 1996 through 2002 (at the time they were enacted) and they come to $804,932,345; the cumulative total for the period is a staggering $3,722,749,362. The latest cut, the $310 million voted by the recent special session and vetoed by Vilsack, would have brought the loss for public purposes to more than $4 billion. And counting.
I don’t know exactly where these estimates come from, but I’m betting that they come from the Department of Management. They are almost surely overstated, because they likely ignore the simple principle that if you tax something more, you get less of it; you tax something less, you get more of it. In other words, they assume that you get the same amount of economic activity regardless of taxation. That assumption is shakier than a staircase made out of saltine crackers.
With less revenue, there's less to share.
Yes, that’s the purpose of government: To Share! Hold hands and sing Kumbaya!
Cities and counties all over Iowa are laying off employees. There's been scarcely a state or local program that hasn't felt the double-whammy of revenue lost from an economic slump and from state tax cuts.
Which tax cuts are those? You mean the 1997 10% income tax cut? And what other tax cuts?
Iowa cannot control the revenue downturn caused by the national economy, but it can stem the loss of revenue from state tax policy. It's bizarre that, confronted with a drastic revenue shortfall, legislators responded by voting to make matters worse.
That’s only if you assume that cutting taxes has no effect on economic growth.
Vilsack had it exactly right when he said in his veto message, "The cuts in personal income taxes are really nothing more than cuts in service to all Iowans."
Sigh. What that means is that government programs won’t receive as much money as the Governor thinks they should. It’s the standard liberal rhetorical trick. If Program A is slated to received a $20 million increase next year, but a tax cut would reduce it to $10 million, liberals count that as a $10 million cut. It’s not a cut, since the program will still have more money next year. But in the bizarre world inhabited by the likes of Cranberg…
And, of course, there is loads unbiased research to show that taxes have little to no effect on economic growth, while government spending has a lot:
The revenue loss might be justified if there was evidence it would boost Iowa's economy. The evidence for that is flimsy to nonexistent, as economist Peter S. Fisher and researcher Elaine Ditsler point out in a recent report for the Iowa Policy Project:
"The state of Iowa, unlike the federal government, must balance its budget. Tax cuts will be accompanied by spending cuts, so that the effects of additional disposable income in the hands of taxpayers due to the tax cuts will be canceled out by reduced government payroll and reduced government purchases of goods and services from the private sector."
The authors likewise debunk the influence of income-tax policy on businesses" relocation decisions, and they cite studies showing that tax cuts, "accompanied by reductions in public services, cause job loss and economic decline." Conversely, they note, "a majority of the studies found . . . higher levels of service produce higher rates of growth."
Fisher and Ditsler’s study was a response to a study I did with Public Interest Institute colleague Amy K. Frantz, arguing in favor of tax cuts. We have since released a follow up responding to Fisher and Ditsler. I won’t rehash the entire thing (you can read it here and here), but suffice to say Fisher and Ditsler focused on research showing small tax effects and overlooked research showing larger ones. They also spent zero time examining the size of the effect of government spending on the economy. (Here’s a hint: it isn’t that large and is usually dwarfed by tax effects.) Other academic literature shows that some government services, like welfare, usually have a negative impact on economic growth. Still other academic literature shows that if government grows too large, it will eventually have a negative impact on economic growth. Thus, “higher levels of service” do not always “produce higher rates of growth.”
The latest round of revenue cuts was part of a legislative package that included $503 million for the Iowa Values Fund to encourage business growth in Iowa. The objective: to create 50,000 quality jobs in the next four years. The tax cut Vilsack is attempting to reverse tugs in exactly the opposite direction.
Think about that for a second. A business will find one-time money from a government slush fund to be attractive enough to move here, but increasing its after-tax return ad infinitum will have no effect. Oh, and one other thing: I looked at the academic literature on economic development programs like Vilsack’s boondoggle. Most studies showed no economic impact. Guess that research didn't make it into Cranberg's little rant.
Smart business people desire for their own families and for their employees good schools, safe streets, clean air and water, recreation and all the other services that make for livable communities. That's why laid-off librarians and dimmed streetlights are terrible ads for Iowa.
Yep, Mr. Cranberg has read one study from a left-leaning think tank, and now he’s an expert on what businesses want.
At the end of the editorial there is this tag line: “Gilbert Cranberg is former editor of the Register's editorial pages.”
I never would have guessed.
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Tuesday, July 29, 2003
FINDING PREJUDICE IN EVERY NOOK AND CRANNY
The Des Moines Register is still upset over Iowa’s English Only Law. In a way, the opening sentence is priceless:
No matter how much the Legislature wants to turn back native Spanish speakers at Iowa's borders - at least those lawmakers who voted for the English-only bill - the rest of the state is passing them by.
Yep, that’s the intention of an English only-law: So we can grab a nice big stick and drive Juan, Miguel, and Jose back across the border! What a bunch of claptrap! This is little more than the editorialists’ chance to feel morally superior. And if it does make the feel that way, well bully for them.
Of course, like most liberals, what matters to them is not the substance but the symbolism, because, well, the law has no substance:
The English-only law applies to little that matters in practical terms. It proclaims English the official language of Iowa, but exempts a long list of activities, documents and policies. In fact, it specifically allows legislators to communicate in a language other than English while performing official business.
Then why does the Register care?
It makes Iowa seem xenophobic, nothing like the generous state that under Gov. Bob Ray opened its arms to Southeast Asian refugees.
Yep, that’s the problem. It makes Iowa seem racist. Not that Iowa actually is. But appearance is everything when you have people outside of flyover country to impress.
Finally, the Register continually stumbles over the reason why an English Only Law might be a good idea:
In terms of the kind of state Iowa wants to be, however, the law is deeply troubling. You're not wanted, it tells immigrants struggling to master English, who know better than anyone how necessary that is.
Undoubtedly there are many other examples of Iowans understanding it is important to make newcomers feel welcome. Understanding that they need to know what is going on, so that they can participate in the life of the community and meet the requirements of the law.
Maybe the best way to help immigrants “know what is going on” is to learn English. And perhaps that is the message the law sends: English is the dominant language in the U.S., and to become a full participant in this society you must learn it. After all, an immigrant is not going to get ahead in America unless he or she learns the language.
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KRUGMAN’S BIG FANTASY
Today Paul Krugman reveals what must give him unbounded bouts of rapture:
What must worry the Bush administration, however, is a third possibility: that the American people gave Mr. Bush their trust because in the aftermath of Sept. 11, they desperately wanted to believe the best about their president. If that's all it was, Mr. Bush will eventually face a terrible reckoning.
He’s referring to the domestic troubles now facing Tony Blair in the U.K. Krugman, the committed Bush hater that he is, hopes that a similar fate will befall Bush.
Krugman spends a lot of the column on Dr. David Kelly and the B.B.C. I don’t know enough about that matter to discuss it, so I’ll focus on Krugman’s comments on the U.S. Here’s one instance in which Krugman tries to pull a fast one:
Now the Bush administration was at least as guilty of hyping the case for war. It was a campaign not so much of outright falsehoods — though there were some of those — as of exaggeration and insinuation. Here's what the public thought it heard: Last month, 71 percent of those polled thought the administration had implied that Saddam Hussein had been involved in the Sept. 11 attacks.
In other words, because the public thought it heard it, Bush must have said it. That’s a nifty sleight of hand. While the Administration was talking about this as late as August of last year, Bush didn’t mention it in the address to the U.N. about a month later. Furthermore, Bush didn’t link Iraq to 9/11 in the State of the Union speech that Krugman has been hyperventilating over recently. Just because the American public has a misperception doesn’t mean that Bush is responsible for it.
Next, Krugman tries this canard:
But while Mr. Bush's poll numbers have fallen back to prewar levels, he hasn't suffered a Blair-like collapse. Why?
One answer, surely, is the kid-gloves treatment Mr. Bush has always received from the news media, a treatment that became downright fawning after Sept. 11. There was a reason Mr. Blair's people made such a furious attack on the ever-skeptical BBC.
Where has Krugman been lately? (Oh yeah, France.) Has he missed all media feeding frenzy over Uranium-Gate? (Not to mention all of the attention on the new deficit numbers.) Of course he hasn’t. Perhaps American media treatment of Bush seems fawning compared to the B.B.C. or what passes for a media in France. But that’s a bit like saying that since a Great White Shark has a bigger jaw than a Mako Shark, a bite from a Mako is really a French Kiss. (Sorry, couldn’t resist.)
Last, here’s why I’m confident that Krugman much hoped for day of reckoning will never come:
Another answer may be that in modern America, style trumps substance. Here's what Tom DeLay, the House majority leader, said in a speech last week: "To gauge just how out of touch the Democrat leadership is on the war on terror, just close your eyes and try to imagine Ted Kennedy landing that Navy jet on the deck of that aircraft carrier." To say the obvious, that remark reveals a powerful contempt for the public: Mr. DeLay apparently believes that the nation will trust a man, independent of the facts, because he looks good dressed up as a pilot. But it's possible that he's right.
And to think that Krugman branded the tax cuts “elitist”! According to Krugman, the American public is too stupid and easily fooled to know better. We need a benevolent intelligentsia to set us straight. It’s that sort of attitude—displayed not just by Krugman but by many on the left, including, among others, Howard Dean—which will ensure Bush will be in office to January 2009.
I could suggest to the likes of Krugman that a posture of contempt is not a effective method for winning over the American public and, hence, winning elections. But it wouldn’t do any good. They are far too absorbed in thinking how much smarter they are than the rest of us.
UPDATE: I thought the stuff about David Kelly and the B.B.C. was suspect. See Andrew Sullivan.
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ON THE PASSION
Jay Caruso manages to defend Mel Gibson while taking issue with both the New Republic and Andrew Sullivan. Go now.
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WHY I LOVE CAMPAIGN FINANCE REFORM!
Yes, McCain-Feingold goes against every limited government impulse of mine, but I have definitely found the silver lining in the campaign finance cloud, as exmplified in this line from an editorial in yesterday's New York Times:
The law banned the abuse of unlimited "soft money" donations from unions, corporations and fat cats, and Bush Republicans have taken a sizable lead in raising the alternative "hard money" donations.
I gloat not just because Democrats are having major fudraising problems, but also because this is one of those rare instances in which liberals suffer directly the unintended consequences of the policies they support. Heh.
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AIDS ON THE RISE?
From the Washington Post:
U.S. Aids Cases Appear to Increase
Anyone wanna bet that the Democrats find some way to blame it on President Bush?
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