Saturday, November 15, 2003
ALL FOR NOW… SORT OF
I have a very busy few weeks ahead of me. In early December I’m traveling to Washington, D.C. for a State Policy Network meeting, and the week after that I travel to Phoenix for a meeting of the American Legislative Exchange Council. (Yes, I know, I know: rough life.)
Today I go to Des Moines to cover the Jefferson Jackson Dinner for the American Spectator. Monday I head to St. Louis to see Jose Pinera speak about Social Security reform.
Then on Wednesday—drum roll please—I DEFEND MY DISSERTATION! Yes, finally, it may soon be over! As long as my dissertation committee agrees that my dissertation is in passable form, I will officially be:
David Hogberg, Ph.D.
So, my blogging will be almost non-existent next week, except for links to any Spectator article, and a short post on Wednesday letting you know how I did (well, if I don’t pass, I may not let you know—we’ll see.)
After that, blogging will be intermittent until the beginning of next year. It’s a good time for a rest.
As always, thanks to all my loyal readers. You make this all worthwhile.
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QUESTIONS FOR KRUGMAN
Yesterday Paul Krugman claimed that the Republican Congress is pulling a bait-and-switch in its attempt to add a prescription drug benefit to Medicare. Here’s some questions that I’d really like to ask Krugman about this issue:
The prescription drug benefit will go to all seniors. As a group, seniors are the most affluent people in this nation. Yet the drug benefit will be paid for by the payroll taxes of all workers, including poor ones. Krugman always denounces tax cuts that he claims favor the wealthy. Does Krugman think it fair that workers are paying for the drugs of the affluent?
In his column he says, “The ostensible rationale for this change [in Medicare] is the claim that private insurers can provide better, cheaper medical care.” As an economist, does Krugman really believe that the government can provide health care better and cheaper than the private sector?
Also, if people perceive they are getting something for free, they demand more and more of it, thereby driving up the cost. Wouldn’t requiring people to pay more in Medicare premiums help hold down the program’s costs?
Now, Krugman might respond that the program should take care of the elderly who are indigent and that, maybe, more affluent seniors should pay more of their own medical costs. That sounds like means testing. Fine with me. But why hasn’t Krugman written a column about that?
Alas, I doubt he would even both answering my questions, as he apparently considers me one of those “sleazy” people. Something which I gladly wear as a badge of honor.
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Friday, November 14, 2003
OPERATION AC
If you have some money to spare, please donate.
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ON GOVERNMENT WORKERS
I spotted this letter to the editor in the New York Times yesterday:
Three cheers for David Brooks ("Cynics Without a Cause," column, Nov. 11)! We finally have a conservative who knows that the government is not made up of corrupt, ignorant and inefficient workers.
Maybe Mr. Brooks will realize that much of the cynicism about government comes from more than 20 years of demonization from conservatives intent on getting rid of the government at all costs.
JAMES UMBANHOWAR
Toronto, Nov. 11, 2003
Okay, no cheap jokes about his being Canadian. Now, there are plenty of letters to the editor that are very ill-informed about conservative politics. For some reason this one stuck out—perhaps because it deals with an issue that I haven’t seen in a while.
The most obvious misunderstanding (and I hope that’s what it is, and not intentional) is that conservatives want to get rid of all government. Not true: we want to limit government. Government should be restricted to a few functions, primarily those that provide a “public good,” something that can’t be provided by the private sector: defense, police, fire protection.
Second, government is not fully made up of “corrupt, ignorant and inefficient” employees but it probably has more than its fair share since it is rather difficult, in most cases, to fire a government worker. Not only that, unlike the private sector, there is little punishment for failure. You fail in the private sector, the money stops coming in, and you go out of business. You fail in government, well, not the biggest deal because the tax revenue that funds you will be there next year. In short, the incentive structure to be competent and efficient is lacking.
Since government is also very bureaucratic and, thus, employees usually have to follow a defined set of rules, it becomes rigid, often to the point of sclerotic. This makes it hard for government employees to adapt to changing circumstances. (It’s also why big corporations, with their bureaucratic structures, often find small businesses running rings around them.) Inability to adapt is not a recipe for efficiency.
Of course Mr. Umbanhowar will probably never see my post, and I suppose it is presumptuous for me to assume that it might change his mind if he did. So what’s the point of this post? Therapy, my friends, therapy.
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Thursday, November 13, 2003
IN LOVE WITH GEPHARDT
The Des Moines Register fawned all over Dick Gephardt in an editorial the other day. It was the sort of cloying thing that makes one inclined to reach for the airsick bag.
Gephardt looks trim and fit. At 62, he doesn't appear much heavier than in a 30-year-old photo of him in an Air National Guard uniform. In person, his sandy hair and ruddy complexion have more color than is noticeable in the TV clips. And his conversation has more nuance than in the sound bites.
First off, who cares? Why does the Register waste our time with such trivial details? Furthermore, President Bush is trim and fit and was also a member of the Air National Guard. Think the Register will ever give him praise for those things? Ha! The only time they’ll bring up Bush’s fitness is to point out that he’s spending too much time in the weight room; the only time they’ll bring up his service is the Guard is to accuse him of dodging the draft.
But don’t worry. Here comes the hard analysis:
In quick caricature, Gephardt would come across as a trade protectionist, as a politician who's in the hip pocket of organized labor, as a strongly partisan Democrat. In extended conversation, each of these images softens and grows more complex.
Methinks the Register editorialists are going to get lockjaw from sucking up so hard. For future reference, if a liberal editorial claims that a Democrat’s image is “more complex,” it’s code for “he’s pretty well ensconced on the left, and we’re trying to fool you into thinking that he isn’t.” But let’s take a look at that more complex image:
On trade, for instance, he's a celebrated opponent of the North American Free Trade Agreement, but he expressed little sympathy for the anti-globalization movement, noting he voted for the World Trade Organization. "Anybody who is not for globalization is not in touch with reality," he said. "We are in a globalized economy."
Rather than restrict trade, Gephardt said he wants the rules of international trade rewritten to force underdeveloped countries to raise their wages and labor standards.
He’s opposed to NAFTA and supports a worldwide minimum wage. Sounds like a protectionist who is in the pocket of big labor to me. If it walks like a duck…
My favorite line is the one that begins “Rather than restrict trade.” How does one force third-world nations to “raise wages and labor standards” without restrictions? If, as Gephardt wants, we pass laws saying we won’t trade with or will impose tariffs on countries if they don’t meet our minimum standards, that’s a “restriction.” And if you argue that a restriction isn’t really a restriction, and especially if you do it in the same sentence, that’s “doublethink.”
Here’s a free trade primer: If Country A does a better job of producing computers than cars, and Country B does a better job of producing cars than computers, then it is in the interest of both counties to trade. Trade will compel both countries to devote more resources toward what they do best and away from what they do not do well. When a country devotes more resources to activities that are more productive, it creates more wealth, and when it creates more wealth, it creates more jobs.
If NAFTA was really so bad, then why were the 1990s so good economically for the U.S.? NAFTA was big economic success for the U.S. You can look it up.
But then perhaps the Register editorialists could find some way to convince themselves that economic success isn’t really economic success.
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ROYCE ON REKHA
Iowa Libertarian takes down not one, but two absurd (are there any other kind?) Rekha Basu columns. Here and here.
And Jeff at Tusk and Talon has a little bit too.
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LIBERAL BIAS?
What liberal bias?
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Wednesday, November 12, 2003
AVERAGES THAT DON’T TELL US MUCH
In last Friday’s column, Paul Krugman wrote the following the line:
According to Citizens for Tax Justice estimates, the typical New Jersey family got a $409 tax cut. In Mississippi, the number was only $165.
The problem with averages based on tax data is that by their nature they can be very misleading. A recent paper by the Joint Economic Committee of Congress examined tax data from 1999. JEC broke the data down into five income quintiles. They then broke each quintile into three categories: (1) the number of tax returns that fell within plus or minus 25% of the average, (2) the returns that fell above the 25% range, and (3) those that fell below the 25% range. The average tax liability of the first and second quintiles were -$240, and –$110, meaning that they paid no income tax and actually received money back from the Earned Income Tax Credit.
What’s fascinating is that in the first quintile more than 78% of the returns fell above the 25% range, and in the second quintile over 71% did. Thus, an overwhelming amount of the cases fall far above the average. The reason is that an average “can be highly influenced by extreme values.” Apparently in both quintiles a substantial number of the taxpayers that fall below the 25% range get back a few thousand dollars from the federal government.
A similar phenomenon happens in the fifth quintile. The average tax liability for that quintile is $27,310. Yet over 75% of tax returns fell below the 25% range in the fifth quintile. What this means is that a few taxpayers have huge liabilities that skew the average upward. The JEC report concludes that “In the context of tax distribution analysis the average is actually the least representative measure.”
But here’s the real kicker: Krugman didn’t actually use the averages that the Citizens for Tax Justice listed in their analysis. The average tax cut for Mississippi is $555; the amount Krugman uses, $165, is the one listed for the middle quintile. So why use that one? Maybe it’s easier to make it look like the average Mississippian is getting the shaft? Nah, must have been just an honest mistake.
For more, here is an analysis showing that Mississipians get more benefit from the tax cut than New Jersians do.
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Tuesday, November 11, 2003
TO ALL VETERANS
Happy Veteran’s Day. Thank you for your service and sacrifice. Without it, America is not a great nation.
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WHO’S BAD ON CIVIL LIBERTIES?
Jay Caruso notes that Al Gore is casting big stones while living in a glass house.
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HISTORY’S MOST INTERESTING DINNER COMPANIONS
John Hawkins has a new poll, and, yes, I participated in it.
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HE SHOULDN'T DO POLITICS
Here is an immutable law of Krugman: “The more he tries to explain politics, the bigger the disaster.” Last Friday’s column was a catastrophe.
Howard Dean's remarks about the need to appeal to white Southerners could certainly have been better phrased. But his rivals for the Democratic nomination should be ashamed of their reaction. They know what he was trying to say — and it wasn't that his party should go soft on racism. By playing gotcha, by seizing on the chance to take the front-runner down a peg, they damaged the cause they claim to serve — and missed a chance to confront the real issue he raised.
Welcome to the Democratic Party, Paul! These folks never hesitate to play the race card when given a chance, no matter how important the “bigger message.” I hope you’re not naïve enough to believe that one of the non-Dean candidates would say something like, “Dean’s choice of words was very poor, but the larger point he was trying to make is a sound.” If you do, well, have fun voting for them next year.
A three-sentence description of the arc of American politics over the past 70 years would run like this: First, Democrats and moderate Republicans created institutions — above all, Social Security and Medicare — that provided a measure of financial security to ordinary working Americans. The biggest beneficiaries of these institutions were African-Americans and working-class Southern whites, and both were part of the moderate-to-liberal coalition that dominated American politics until the 1960's.
Uh, we need to add a fourth sentence to that: Southern Democrats used the race issue to garner votes from the late 1800s until the 1960s. By excluding that, it makes it easier for Krugman to make race-politics seems like an exclusively GOP phenomenon:
But the right opened an increasingly effective counterattack, with a strategy that included using racially charged symbolism to get Southern whites to vote against their own economic interests. All Mr. Dean was saying was that Democrats need to understand and counter this strategy.
I know these are fighting words. But the reliance of modern Republican political strategy on coded appeals to racism is no secret. Controversies over efforts to remove the Stars and Bars from the top of the South Carolina Statehouse, and to reduce its size on the Georgia flag, played a significant role in Republican victories in 2002. And the evidence that race is still a crucial factor is as fresh as Tuesday's election.
The big story in that election was the victory of Republicans in Mississippi and Kentucky. The secondary story, however, was a string of victories by Democrats in affluent suburban areas in the Northeast. In my state, New Jersey, Democrats took firm control of the state's Legislature.
Liberal New Jersey, which hasn’t voted for the GOP candidate for President since 1988, elects a Democratic legislature and that’s a big story? Proof once again that Krugman need to stick to economics, not politics.
Next, which issues are “coded appeals to racism”? Affirmative action? Maybe, but that issue is unpopular even in liberal states like California and Washington. Welfare? Again, maybe, but that is still an issue that’s unpopular in plenty places that are not exactly the South. Nor is it clear whether people dislike welfare because they associate it with racial minorities or dependency. Beyond that, it is pretty slim. Taxes, abortion, or national security? Surely those issues have appeal in the South—and have been used with success by Republicans—but are they appeals to racism? If you argue that, you are effectively arguing that any issue that favors Republicans is a “coded appeal” to racism.
Second, I’ve know a few Southerners in my day, some of who display the Confederate flag in their homes. I’ve never known any of them to disparage blacks—or any other minority—or suggest that the flag represented to them a desire to return to the days of separate drinking fountains. For them it is a represents their pride in being Southerners. To suggest that the Confederate Flag is little more than coded racism for white Southerners is something that someone from the Northeast who has probably had very little exposure to the South would say.
But according to Krugman, such coded racism is the only way the GOP can win in the South. They surely can’t do it by appealing to their economic interests:
So did Mississippi voters support the Republicans, even though they get very little direct benefit from Bush-style tax cuts, because they — unlike New Jersey's voters — understand the magic of supply-side economics? If you believe that, I've got an overpass on the Garden State Parkway you may be interested in buying.
Now maybe New Jersey voted Democratic because of irrational Bush hatred. But I think it's a lot more likely that white Mississippi voters, unlike their counterparts up north, are still responding to Republican flag-waving — and it's not just the American flag that's being waved.
Yet the fact is that Mississippi, being relatively poor, will lose disproportionately if the right wins on its full agenda, which involves a big rollback of New Deal and Great Society programs. (I'll explain in a future column how Republicans are using the prescription drug bill to lay the groundwork for later Medicare cuts.)
Mr. Dean wasn't suggesting that his party adopt the G.O.P. strategy of coded racial signals, and by and large African-Americans — my wife included — understand that. What he meant by his flag remark was that Democrats must make the case to working Americans of all colors that the right's elitist agenda isn't in their interest. And he's right.
Is he? If what Krugman says is true, that much of the South were the biggest beneficiaries of the New Deal style transfer payments, then why is the South still so relatively poor? One might argue that transfer payments exacerbate poverty in that they create dependency. In fact, Krugman, at one time at least, would have argued exactly that:
Others date the [economic] problem to Germany's reunification after the fall of the Berlin Wall. Certainly the unintended effect of that reunification was to turn Germany into Italy without the dolce vita. Just as Italy is divided into a prosperous, productive north and a backward south, Germany is now divided between a productive west and a dependent east; and in both cases the aid provided to the backward region strains not only the budget but the society, creating in the recipients a sort of culture of dependency. (Italics mine.)
So why would government aid create dependency in East Germans, but not Americans in the South? Perhaps East Germans gave up their old flag. Anyway, let me suggest an alternative theory as to why so many Southerners are voting Republican. After years of receiving lots of government aid and seeing little economic benefit, they are distrustful of the ability of government to achieve economic prosperity. That would appear to be the lesson of the recent attempt by “Reagan Republican” Governor Bob Riley of Alabama. Krugman appears to forget (“conveniently overlooks” is probably more accurate) that Riley proposed a ballot initiative that promised to raise taxes on the rich and business by about $1.2 billion; that money would be redistributed to the poor especially in the form of education spending. It was a disaster, resulting in an absolute el-spanko defeat of about 68%-32% on election day. Indeed, the less affluent areas of Alabama, in general, were more likely to vote against the measure. If a Republican governor cannot convince Southerners to vote in a way that Krugman would recommend that they do, what chance does a Northeastern liberal like Howard Dean have?
Indeed, the tone of Krugman’s column reflects why liberals are have lost appeal to so many voters. It comes off as snobbish elitism: enlightened, wealthy Northeasterners are smart enough to vote against their crass self-interest, while poor Southerners are just too dumb to know what is good for them. I hope this doesn’t come as too much of a shock to those in the ivory tower at Princeton, but that’s not a winning election strategy.
Tomorrow: why the tax-cut “averages” Krugman refers to are misleading.
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