May 17, 2003

Thoughts on National Review

The Unofficial Paul Krugman Archive criticizes the National Review's Don Luskin for failing to realize that in the U.S. today fiscal policy affects employment only if (a) it takes effect immediately, inside the Federal Reserve's decision cycle, so that the Federal Reserve has no opportunity to neutralize it, or (b) it takes effect in those unusual times (which we may be approaching) of a "liquidity trap," in which the Federal Reserve finds itself temporarily powerless to move the economy.

Why does fiscal policy have effects only in these limited circumstances? Because the Federal Reserve has powerful views about what level of employment is consistent with stable prices, and has powerful levers it uses to try to push the economy to that level of employment. The Federal Reserve thinks (rightly) that its judgment on this is better than that of the Senate or of Karl Rove, and so takes active steps to neutralize whatever the effects of their policies would otherwise be.

But if the Unofficial Paul Krugman Archive wants to actually influence Don Luskin's thought, it has taken on an impossible task. Luskin, remember, is a guy who in his original attack on Paul Krugman took a February CEA report and substituted his own +1.5 million employment number for its -700,000 employment number for the period 2005-2007, and never seemed to realize what he had done. "Stupid or mendacious?" we wondered, before concluding that the answer had to be both: making the mistake was stupid, not acknowledging it was mendacious.

The National Review has a lot of people like this writing for it these days, trashing people with much better scholarly reputations than theirs. Think of Stephen Moore--he who can breathlessly write that "5000 Americans, or less than 0.1 percent of households, were millionaires in 1900.... Today there are almost 8 million millionaire households in the United States [or 7.7% of households]" while being either too stupid or too mendacious (or both) to tell his readers that a dollar back in 1900 had about 20 times the purchasing power of a dollar today--who tries to slime CEA Chair Greg Mankiw because Greg says that Ronald Reagan's views were powerfully influenced by charlatans and cranks who said that cutting tax rates would raise tax revenues. (And, of course, Greg is completely right.*)

Think of David Kopel, writing that the University of Chicago's Steve Levitt should not be on the NAS's panel on "Improving Research Information and Data on Firearms" because some "anonymous" source has described him as "rabidly antigun." (Never mind that Levitt has an oped--which a "rabidly antigun" person would not--headlined "Pools More Dangerous than Guns").

The most interesting thing about this general pattern is not that National Review slimes left-wing economists--Krugman may be a left-wing economist, but Levitt and Mankiw are certainly not. The common thread linking them is competence.

I do think that this is part of a broader pattern: National Review is scared that an honest, competent look will come out with conclusions that don't mesh with their editorial policy--with, say, the conclusion that the Bush administration's fiscal policy is ineffective and incompetent considered as a short-run jobs-creating stimulus package, destructive and counterproductive as a long-run economic growth package, and effective only as a tax cut for the rich.

I wonder why that might be?


* As Public Interest editor Irving Kristol wrote in 1995: "The task, as I saw it [in the late 1970s], was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority--so political effectiveness was the priority, not the accounting deficiencies of government." It was not that Kristol and the other neoconservatives interested in heating up the Cold War abroad and fighting Permissiveness at home believed in supply-side economics. Kristol writes of his faction's "...own rather cavalier attitude toward the budget deficit and other monetary or fiscal problems..." But they thought that pretending to believe in supply-side doctrines would allow them to claim that their candidates supported (a) big tax cuts and (b) balanced budgets--and thus win them political popularity. What this would mean for economic policy was left unanalyzed.

Posted by DeLong at May 17, 2003 08:15 AM | TrackBack

Comments

The Bottom Line?

If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists "a free hand"...


"...the Federal Reserve has powerful views about what level of employment is consistent with stable prices, and has powerful levers it uses to try to push the economy to that level of employment. The Federal Reserve thinks (rightly) that its judgment on this is better than that of the Senate..."--Brad DeLong


MINIMUM WAGE

Jared Bernstein

WASHINGTON, D.C. - Federal Reserve Chairman Alan Greenspan may be doing a fine job managing the macro-economy, but he's got it all wrong on the minimum wage.

In Congressional testimony over the past few weeks, the Fed Chairman has repeatedly voiced his opposition to the president's proposal to raise the minimum wage by one dollar, to $6.15, by September 2000.

The problem facing Greenspan and other opponents of the policy is that the last increase was such a resounding success. Thanks to both the tight labor market and the $0.90 increase in the minimum wage legislated in 1996, low-wage workers are finally gaining back some ground lost over the past two decades of real wage decline. Moreover, since the increase, unemployment fell to its lowest level in decades.

When confronted with this evidence, Greenspan has taken two tacks.

First, he argues that the reason we haven't seen any negative employment effects from the 1996 increase is that the minimum wage is "inoperative" in the current labor market. By this he means that, with wages rising for most workers due to the hot economy, nobody's affected by a federal minimum wage of $5.15.

Nonsense. We have solid evidence that a non-trivial share of workers, about 9 percent of the labor force (close to 10 million workers), got an average wage hike of around $0.40 per hour from the last increase.

So if the minimum wage is clearly operative on the wage side, why haven't we seen any negative effects on the employment side?

Here we have Greenspan's other response. Although he acknowledges that the increase in the minimum has not harmed the employment prospects of low-wage workers, he claims it's because the labor market is so strong right now. The unemployment rate for young workers (16-24 year olds), those most likely to be affected by a minimum wage increase, is at its lowest level since 1970.

That's pretty circular reasoning for a guy who's usually the picture of rationality.

Mr. Greenspan's opposition is predictable. He is consistently critical about most efforts of the government to occasionally guide the "free hand" of the marketplace...

http://www.ncpa.org/bothside/krt/krt042399a.html

Posted by: Mike on May 17, 2003 11:20 AM

I actually wanted National Review Online to print a retraction and apology to Paul Krugman (and wrote that to their letters dept the other day) rather than changing Luskin's mind. Don Luskin is a nut, and a mean-spirited one at that, and I'm dead sure that his mind hasn't changed (or developed) since 1980.

Posted by: Bobby on May 17, 2003 11:22 AM

The Bottom Line 2?

If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists--ESPECIALLY Wall Street-aholic Central Banker economists--"a free hand"...

INCOME AND WEALTH INEQUALITY IN THE UNITED STATES No. 304

Unfair inequality in the distribution of income and wealth and persistent poverty continue to jeopardize equal opportunity and democracy as the United States begins the 21st century. Extreme inequality of income and wealth gives huge economic and political power to big corporations and wealthy families and weakens the sense of community and common purpose essential to a democracy;

Income inequality is worse in the United States than in other major industrial countries. Austria, Canada, and 10 European countries have much more equal distribution of income;

WHEREAS, recent U.S. Census Bureau statistics show the rich are still getting m richer, middle income Americans are just barely raising their incomes; and the poor are falling still further behind on the income ladder. The gap between rich and poor is now bigger than it has been since the 1930s. An incredible 98% of the 1979-92 gain in total household income went to the top 20% of the wealthiest households. The remaining 2% gain in total household income was shared by the remaining 80% of households.

WHEREAS, the richest fifth of families receive 47.2% of total income and the poorest fifth receive 4.3% -- a record high ratio of 11 to 1. The richest 5% of families receive 20.3% of income -- equal to the income of the lower 50% of families;

WHEREAS, in 1995 the richest 10% of the population owned 70% of all the wealth -- up from 50% in 1976 and the richest 1% owned 35.1% of all wealth, while the bottom 80% owned 31.5%.

WHEREAS, 32.3 million Americans (11.8% in 1999) live in poverty. Two thirds of America's poor are white, but the poverty rate for African Americans and Hispanics is three times the rate for whites. Almost one out of five children, about 12 million children, live in poverty. Two out of every five Black and Hispanic children live in poverty and the average income for families in poverty is half the poverty threshold.

WHEREAS, average hourly wages for private, non-farm production and non-supervisory workers (about 80% of all workers in early 1998) were $12.77. By contrast, in the last years of the 1970s, the average hourly wage was $14.23 expressed in 1998 dollars to adjust for inflation. In other words there has been a drop of 10% in the buying power of wages in the past two decades. At the same time, as Business Week reported corporate profits in 1997 were "taking an ever-rising share of national income, the highest since 1968."

Whereas the Bush W. Bush tax legislation has sharply worsened the already existing inequitable distribution of income and wealth through the elimination of the estate tax, the disproportionate cuts in the income tax rates, and other provisions favoring most affluent families and powerful corporations.

THERE FORE BE IT RESOLVED THAT:

1. Deep cuts in programs designed to serve low-income families and individuals, including the working poor, the disabled, and the elderly, must be reversed. Needed funds can be gained through cuts in corporate welfare, further cuts in defense spending, and a reduction in tax cuts for the wealthiest. In addition, the George W. Bush budget proposal makes further unacceptable cuts to these programs, and should be revised radically.

2. The Federal Government must take a role in expanding job opportunities through such programs as public works and public service, and increasing access to year- round full-time jobs. In the spirit of President Franklin D. Roosevelt's Economic Bill of Rights, the Federal Government must create year-round full-time livingwage jobs when private industry does not provide enough of them for all who want to work. All new programs must include strong anti-displacement and wage protection language.

3. Laws must be passed to require equal benefits for those at the top and bottom of corporate America. Executives should not be permitted to increase their pension and health care packages at the same time that they are cutting those for lower-income workers. The Federal Government also should require employers to provide a minimum level of health, pension and other benefits, as it does with the minimum wage. Additionally, corporations must be required to offer paid maternity leave to all women so that women do not have to chose between their jobs and the best interests of their children.

4. The government should play a role in providing effective life-long training and education. Everyone who wants to go to college, trade school, or other job training should have the opportunity to do so. The Federal Pell grants program should be expanded, as should the student loan program. The Federal Government also must play a larger role in elementary and secondary education, and ensure equality of educational opportunities across all income levels.

5. The extremely regressive George W. Bush's tax cut, giving the top 1% of taxpayers close to 40% of the reduction will cost the Treasury at least $1.8 trillion over the next decade. That huge drain will more than absorb the anticipated gimmick filled surplus, and force sharp erosion of funds needed for vital, social and domestic programs, like health, welfare, education and environment. This impact reflects the Republican polices of curtailing federal programs for meeting citizens' needs.

6. The U.S. must move closer to a progressive system of taxation to mitigate inequality. Currently-pending tax cuts, with the greatest benefit going to the wealthiest Americans, must be rejected in favor of a fairer system.

7. International trade pacts should be designed to bring other workers up to U.S. standards rather than pulling down the wages of U.S. workers. The U.S. must require its trading partners to adhere to environmental, child labor and human rights standards at least equal to those of the U.S. Taxes on U.S. companies who manufacture goods outside the U.S. and import them into the U.S. should be treated in the same manner as U.S. companies who manufacture goods in the U.S. Subsidies to corporations that export jobs should be eliminated. This will discourage companies from moving jobs overseas to increase profits; any increase in revenue should be used to provide job training for displaced workers in the U.S. as well as to monitor conditions for workers in developing countries.

8. The Federal Reserve Board must focus on high employment/high growth instead of focusing on potential higher inflation and then mandating higher interest rates each time the economy begins to grow.

9. The Federal Government must take action to encourage the growth in unions as well as protecting the rights of unorganized workers. Unions can thrive only when the right to collective bargaining is guaranteed effectively and enforced by the government

Americans for Democratic Action
1625 K Street, N.W.
Suite 210
Washington, DC 20006
Adopted 1997
Amended 1998
Amended 1999
Amended 2001
Reaffirmed 2002
Number 304

http://www.adaction.org/pubs/304inequality.html


Wealth Inequality in the United States
Leads the World
And the Gap Here Is Widening

Has the United States gone from the land of opportunity to the land of inequality?

New data published in a Twentieth Century Fund Report suggests a disturbing answer. The sharp increase in inequality since the late 1970s has made the distribution of wealth in this country more unequal than in what used to be perceived as the class-ridden societies of northwest Europe. Today the United States is the most unequal of any industrialized country in terms of income and, more importantly, wealth. And the situation is worsening more rapidly here with each passing year.

Indeed, the only other period in this century when household wealth was so disproportionately held by a relative handful of the richest Americans came between 1922 and 1929. During that time, inequality was buoyed primarily by the excessive increase in stock values, which eventually crashed and led to the Great Depression of the 1930s.

The Twentieth Century Fund Report, Top Heavy: A Study of the Increasing Inequality of Wealth in America, is written by Edward N. Wolff, a professor of economics at New York University. Among its major findings is that the gap in wealth is even greater than the widely reported gap in income among Americans.

Wealth -- the net worth of a household -- is a better indicator than income of long-run economic security. Wealth may vary from year to year as asset prices fluctuate, but it remains the foundation for a family's long-term security. Without wealth, a family lives from hand to mouth, no matter how high its income. Wealth is calculated by adding together the current value of all assets a household owns -- financial wealth like bank accounts, stocks and bonds, life insurance savings, and mutual funds; houses and unincorporated businesses; cars and major appliances; and the value of pension rights -and subtracting from that - mortgage balances and other outstanding debt.

Wealth inequality in 1989 (the last year for which statistics are available) was at a sixty-year high. The top 1 percent of wealth holders controlled 39 percent of total household wealth.

The rise in wealth inequality from 1983 to 1989 is particularly striking. The share held by the top 1 percent rose by 5 percentage points, and at the same time the share held by the bottom 40 percent showed an absolute decline. All gains in wealth accrued to only the top 20 percent of wealth holders.

In the United Kingdom, formerly the country with the greatest wealth inequality, the richest 1 percent holds about 18 percent of the wealth, down from a figure in the early 1920s of 59 percent.

# # #

03/22/96

Posted by: Mike on May 17, 2003 11:50 AM

The Bottom Line 3?

If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists--ESPECIALLY a far-right Wall Street-aholic Central Banker economists--"a free hand"...

Bringing it on home...


Brad's apparently optimistic http://www.j-bradford-delong.net/movable_type/2003_archives/001490.html about a report in "The Economist" concerning recent progress in the business of cutting pensions for Brazilian workers...


Dropping Prices Raise Deflation Fears

By JEANNINE AVERSA, Associated Press Writer

WASHINGTON - For American consumers, the prospect of falling prices sure sounds like a good thing. But a prolonged and widespread decline, with everything from real-estate values to incomes collapsing, would spell disaster for the U.S. economy.

Concerns among private economists about a rare and dangerous episode of deflation were heightened by a pair of government reports showing a drop in consumer and wholesale prices in April and a Federal Reserve (news - web sites) warning last week about the possibility of a destabilizing fall in prices.

Consumer prices went down by 0.3 percent in April, the largest decrease in 18 months, the Labor Department reported Friday. The day before, a record 1.9 percent drop in wholesale prices was reported.

Although Fed Chairman Alan Greenspan and his colleagues indicated that the chance of deflation was remote, Fed policy-makers said it still represented a potential threat to the already weak economy, a concern that has thrust the matter into the national spotlight.

"Deflation is like quicksand. We want to be 10,000 miles away from it," said Sung Won Sohn, chief economist at Wells Fargo. "Once you get into deflation the consequences are so severe it is hard to get out," he added.

America's last serious case of deflation occurred during the Great Depression of the 1930s....

..."Now that the Fed has adopted the Wal-Mart motto of `watch out for falling prices,' every price measure takes on added importance," said Joel Naroff, president of Naroff Economic Advisors."
http://biz.yahoo.com/rf/030512/congress_deficits_1.html


U.S. Trade Deficit 2nd Highest on Record

By JEANNINE AVERSA, Associated Press Writer

WASHINGTON - A big jump in imported oil helped catapult the U.S. trade deficit in March to $43.5 billion, the second-highest level on record.

The Commerce Department reported Tuesday that the trade gap grew by 7.6 percent in March from February's deficit of $40.4 billion.

Although exports went up in March for the third month in a row, imports rose nearly five times faster, leading to a bloated trade deficit that was second only to the record deficit of $44.9 billion produced in December.

"Boy, does this country like to buy things," said Joel Naroff, president of Naroff Economic Advisors.

To combat the trade deficit, the Bush administration says the United States should seek to boost American exports by attacking foreign trade barriers, rather than raising barriers to imports coming into the country.

Trade critics, including labor unions, say the deficit is evidence that President Bush's free-trade policies are not working and are contributing to hefty job losses in manufacturing.

"The gap between this president's policies and the American workers who need jobs is widening by the day," said Rep. Sherrod Brown, D-Ohio..."
http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030513/ap_on_bi_go_ec_fi/economy_11


Add up our cumulative trade deficits for the last 20, 25, and/or 30 years (you pick):

http://www.bea.doc.gov/bea/international/bp_web/simple.cfm?anon=98&table_id=1&area_id=3

Then read this and weep, SUCKERS:

[It was "up-dated" in 2000, so don't forget to check out the current accounts deficit numbers for last two years at the link above, if you're not already familiar with them...]

Notes on the
U.S. Trade and Balance of Payments Deficits
Wynne Godley

Summary

The United States has a balance of payments deficit worth nearly 4 percent of GDP and negative net foreign assets (or foreign debt) worth nearly 20 percent of GDP. If U.S. growth is sustained in the medium term, it is quite likely that the balance of trade in goods and services will not improve. The United States is the only major country, or country "bloc," to have a substantial trade deficit and this is proving of great advantage to the rest of the world.

If the balance of trade does not improve, there is a danger that over a period of time the United States will find itself in a "debt trap," with an accelerating deterioration both in its net foreign asset position and in its overall current balance of payments (as net income paid abroad starts to explode). Such a trap would call imperatively for corrective action if it is not at some stage to unravel chaotically.

The emergence of a debt trap is put forward as a possibility that must be taken seriously rather than as a forecast of what is most likely to happen. Policymakers are advised to ensure that adequate instruments are available should things start getting out of hand.

Whether the outflow of property income starts to accelerate depends critically on the rate of return earned on internationally owned assets and liabilities. The well-known condition for exploding payments on debt is that the rate of interest exceeds the growth rate..."

http://www.levy.org/docs/stratan/stratan.html


Posted by: Mike on May 17, 2003 12:40 PM

Bobby -

The National Review still has not forgiven Martin Luther King for fostering civil rights in America. Know with whom you treat. These are not conservatives, they are true radicals who would have us return to the 1920's.

Posted by: arthur on May 17, 2003 01:45 PM

Brad,

"Think of Stephen Moore--he who can breathlessly write that "5000 Americans, or less than 0.1 percent of households, were millionaires in 1900.... Today there are almost 8 million millionaire households in the United States [or 7.7% of households]" while being either too stupid or too mendacious (or both) to tell his readers that a dollar back in 1900 had about 20 times the purchasing power of a dollar today"

Isn't it worse than that? America's population is three times that of 1900, so wouldn't you expect, if America had merely stood still, and prices hadn't risen, the number of millionaires to have tripled? In comparing America's supposedly wonderful GDP growth to that of other countries, people rarely acknowledge that America HAS to grow by 1.5% per annum, simply for living standards to remain constant, while most countries in Western Europe have static or declining populations. Once you strip that out, America's performance over the last decade declines from the wonderful to the average or slightly below average.

Posted by: PJ on May 17, 2003 01:54 PM

The Bottom Line 4?

If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists--ESPECIALLY far-right Wall Street-aholic transnational corporate fundamentalist Central Banker economists and/or their apologists--"a free hand"...

Down the memory hole....

Brad's not OVERLY concerned about the principle behind dickweed's most recent successful attempt to transfer even MORE HUNDREDS of billion$ from YOUR children and/or grandchildren to the TINY group of people who already own and/or control almost every(fungible)thing on the friggin' planet--

Senate approves 350 billion dollar tax cut bill

Fri May 16, 2003

WASHINGTON (AFP) - In a party line vote, the US Senate has passed a 350 billion dollar tax cut that would temporarily eliminate taxes on stock dividends -- the central tenet of a White House economic stimulus plan.

The tax cuts, passed by a Senate vote of 51 to 49, would be spread over the next decade.

US President George W. Bush had originally sought 726 billion dollars in tax cuts -- more than twice what the Senate ultimately approved.

Still, the vote ensures a massive tax cut for the White House just as the president begins revving up his 2004 presidential reelection campaign.

Three Democrats -- Senators Ben Nelson of Nebraska, Evan Bayh of Indiana and Zell Miller of Georgia -- voted with the Republican majority in supporting the tax cuts, offsetting the three Republicans -- John McCain of Arizona, Olympia Snowe of Maine and Lincoln Chafee of Rhode Island -- who opposed the bill...."
http://story.news.yahoo.com/news?tmpl=story&u=/afp/20030516/ts_alt_afp/us_politics_congress_030516140717


Brad (and Greenspan) both accept the premise that running up the public debt in order to transfer "real" dollars to SOMEBODY'S bank account is what politics 'OUGHT' to be about--both of them agree that's the 'right' way to 'grow' an economy too. Both of them cringe when they see the government spending tax dollars on anything other than interest on the debt and bombs, basically. Brad (and most other economists) just think dickweed's going about THEIR business in a fiscally "incompetent and ineffective" way, that's all.....

Mr. Voinovich's Bottom Line

IT SOUNDED so good. In the name of fiscal sanity -- though a $350 billion, 10-year tax cut in these budgetary circumstances doesn't merit the name -- Mr. Voinovich promised to resist any bigger tax cut. He would stand firm in the face of incensed colleagues, presidential visits to his home state, even attack ads comparing him to Jacques Chirac. Asked by NBC's Tim Russert if a $350 billion tax cut was his absolute bottom line, Mr. Voinovich replied, "You got it, and anybody that knows George Voinovich knows that when I say something, I mean it."

Well, maybe his fingers were crossed. Mr. Voinovich and Ben Nelson (D-Neb.), who hadn't previously committed himself one way or the other, yesterday provided the needed support to squeak the tax cut through the Senate. Mr. Voinovich argued that he had kept his word and limited the cost of the tax bill to $350 billion through 2013. But that number can't be taken seriously. It rests on a grab bag of flimsy accounting tricks designed to mask the real cost of the cut while wedging in some version of the dividend tax cut so avidly sought by the administration. The "compromise" concocted by Don Nickles (R-Okla.) makes the dividend cut look less expensive by phasing the cut in (only 50 percent of dividends will be tax-free this year), having the full exclusion take effect for three years, and then -- supposedly -- making it disappear in 2007. This cuts the supposed price tag to $124 billion, but if that artificial sunset were removed, the dividend cut would cost $380 billion through 2013 -- and the real price of the tax package would be $660 billion. Mr. Voinovich's colleague Olympia J. Snowe (R-Maine) had it right when she refused to go along with this "gimmick."

Supporters of dividend cuts have no intention of allowing the provision to expire. "My view, it doesn't solve the problem," House Speaker J. Dennis Hastert (R-Ill.) told reporters yesterday. "There needs to be a permanence." Moreover, even conservative economists who champion the cut, such as Kevin Hassett of the American Enterprise Institute, say that the phase-in and quick sunset would undo much of what they view as the benefit of eliminating the double taxation of dividends. Companies wouldn't be apt to behave much differently in 2003 -- meaning little if any immediate stimulus -- and the long-term uncertainty could undo much of the predicted "wealth effect" of rising stock prices.

So the deficit hawk of Ohio has clipped his wings for a plan that delivers the worst of all worlds: It costs more than he claimed was affordable and delivers less stimulus than he claims is needed. What is real is the burden that last night's Senate action will add to all those children and grandchildren he was so concerned about a couple of weeks back."

http://www.washingtonpost.com/wp-dyn/articles/A61999-2003May15.html

BTW, if big numbers scare you, don't look at this:

The [Public] Debt to the Penny and Who Holds It
http://www.publicdebt.treas.gov/opd/opdpdodt.htm

AND if you're STILL wondering where all (or anyway, MOST) of the borrowed dough I've been discussing here actually WENT--

Well, to borrow a line from a "bubble-headed" Monty Python skit:

Say no more. Say no more...

Dropping Prices Raise Deflation Fears

Fri May 16, 2003

By JEANNINE AVERSA, Associated Press Writer

"...Economists view deflation as a far more serious threat than inflation because the Fed's primary tool for boosting economic activity a reduction in interest rates might have only a limited impact on the psyche of consumers and businesses once a deflationary spiral takes hold.

Japan, for instance, has been unable to get rid of long-standing deflation problem and turn around its economy despite having driven interest rates down to zero.

A key short-term interest rate controlled by the Fed, the federal funds rate, is already at a 41-year low of 1.25 percent. Fed policy-makers last week signaled they are prepared to cut that rate to ward off even the threat of deflation. Economists said that raised the odds of a rate cut at the Fed's next meeting on June 24-25.

The Fed can't lower interest rates below zero, but policy-makers say they can do other things to pump more money into the economy to fight deflation.

Economists also pointed out that a weaker U.S. dollar can help.

Neither the Fed nor economists want to see the United States, struggling for three years to overcome the bursting of the U.S. stock market bubble, follow Japan into a falling price spiral. Japan, where real estate prices collapsed in the late 1980s, has been mired in more than a decade of weak growth, compounded now by prolonged deflation.

Treasury Secretary John Snow, in remarks last week, said he saw little threat of deflation developing in the United States. "I don't think the United States has any risk of being in a serious deflationary period," Snow said. "Any comparison to Japan would be inappropriate..."

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030516/ap_on_bi_ge/economy_deflation_7

Posted by: Mike on May 17, 2003 02:05 PM

Mike

There is NO need to monopolize a site that is not yours! You are still cluttering, not informing or arguing....

Posted by: bill on May 17, 2003 02:37 PM

I agree with Bobby that Luskin is a mean spirited nut and a real publication would never allow his writings. But I simply pointed out in an e-mail to NRO that Kudlow's Deficit Dance piece made huge and obvious errors. No reply, no correction, nothing. But at least Stephen Moore edited his piece where he claimed the dividend double tax amounted to 73% (albeit no acknowledgement that he earlier erred). One does have to wonder if NRO is evenly remotely interested in integrity.

Posted by: Hal McClure on May 17, 2003 04:31 PM

Kopel claims to have sent a correction to the NRO where he acknowledges that Levitt has denied the "rabidly antigun" charge. This correction has still not been made.

Posted by: Tim Lambert on May 17, 2003 05:33 PM

Bill,

Unless you have something relevant and/or germane to say about the thrust of my MAIN argument:

"If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists--ESPECIALLY far-right Wall Street-aholic transnational corporate fundamentalist Central Banker economists and/or their apologists--"a free hand"..."

and/or ANY of the MANY subarguments

and/or

any of the MANY exhibits I've provided to support my those arguments, the only rational response to YOUR decidedly NON-argument:

"There is NO need to monopolize a site that is not yours! You are still cluttering, not informing or arguing...."


is:


Cough up YOUR definitions of "monopolizing", "informing" and "arguing" Bill, and we'll go from there...

Posted by: Mike on May 17, 2003 05:51 PM

I'm not sure, Mike, exactly what you mean by a "free hand." Do you mean that they should not be allowed to rule policy exclusively? Do you mean that they should not be allowed to express their opinions?

Naturally, I agree that no one should be allowed to rule policy exclusively. If you are saying, on the other hand, that conservative economists should be forbidden from expressing their opinions, then I disagree.

Judging from your posts, which mostly don't seem to have anything to do with economists or generals having free hands, but with the condition of the U.S. economy, you're saying that conservative economists should be forbidden from expressing their opinions, since your main gripe with Greenspan appears to be that he voiced opposition the minimum wage, although he lacks any legislative power. I'm not sure what your view is on his monetary policy -- I've heard you criticize him for being associated with "growth at all costs" and being too contractionary in previous comments, so I'm not sure whether you wish he were more expansionary or more contractionary in his monetary policy -- but your main point seems to be that conservative economists shouldn't express their opinions on matters like the minimum wage.

In that, I disagree with you, and would say "If you love your children and/or grandchildren, for God's sake, give generals AND economists--INCLUDING far-right Wall Street-aholic transnational corporate fundamentalist Central Banker economists and/or their apologists--"a free hand."" I think the damage to democracy done by censorship would be worse for my (as of yet, nonexistent) children than the opinions of conservative economists being voiced.

Posted by: Julian Elson on May 17, 2003 07:45 PM

Brad DeLong is Fisking National Review for intellectual incompetence and bad manners towards one's betters. I'm with him to the extent that DeLong has identified poor arguments or the failure to provide any good arguments. But I'm against him if he thinks that Krugman or anyone else should be immune from intellectual scrutiny simply on the basis of "scholarly reputation". To begin with, the scholarly reputation of economics is itself deeply contested by folks with scholarly reputations as well earned as any DeLong and his associates can summon. And because the scientific status and reputation of economics itself is contested at the highest reaches and by the best minds among those thinking hard about what economics has or has not achieved -- so too must there be doubt about the credentials of those claiming authority under the banner of this not untroubled discipline. Economists seem to think they get a credentials pass because they play the "I'm smart" game so well when that game involves -- often rather empty -- math games. (Math games which professional mathematicians often view as 2nd or 3rd rate stuff on the "I'm smart" chart of academic mathematicians). What I say is that anyone with the goods when it comes to solid arguments should go right ahead happily "trashing people", as DeLong puts it, "with much better scholarly reputations than theirs" -- as long as their solids arguments give them the full right to the Fisking. (This is what DeLong in fact says the National Review folks are really lacking -- good arguments). As any good philosopher will tell you, it's the arguments which count -- and as long as folks are able to make and judge those, they shouldn't be relying upon "scholarly reputations" to carry the day for them when their own arguments won't. Especially when these (pop econ) arguments are only connected somewhat tenuously to the specialized publish-or-perish stuff that gave them their scholarly bonafidies.

Posted by: Greg Ransom on May 18, 2003 12:25 AM

Greg, I think DeLong is using reputation and credentials as proxies for having done careful and research that strives to get as close as possible to accuracy and is almost universally recognized as ingenious (and often quite relevant to policy) by liberal and conservative economists alike. This is not about academic snobbery. It's about quality control, which is VERY badly needed in the public's discourse on economics.

And it is incredible and infuriating that, just because they have more money and readership, these political hacks who write at National Review have the nerve to claim publicly that, after sitting at a word processor for a few hours, they have gained some previously undiscovered insight that the economist's somehow forgot. In general, anyone who thinks he can debunk years of painstaking empirical or theoretical economic research without substantial prior knowledge or training in the field almost invariably has no idea what he is talking about. And even then, NRO's writers can't get their numbers or grade-school arithmetic right.

DeLong puts the entire story in these two sentences:

"The most interesting thing about this general pattern is not that National Review slimes left-wing economists--Krugman may be a left-wing economist, but Levitt and Mankiw are certainly not. The common thread linking them is competence. I do think that this is part of a broader pattern: National Review is scared that an honest, competent look will come out with conclusions that don't mesh with their editorial policy."

Posted by: Bobby on May 18, 2003 01:23 AM

Julian,

My MAIN point, one which has NOTHING WHATSOEVER TO DO WITH ADVOCATING "CENSORSHIP", IS:

"If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists "a free hand"..."

NOW, since you say you're "not sure" about what I said, I'll summarize MY argument for you:

1.

BRAD said: "...the Federal Reserve has powerful views about what level of employment is consistent with stable prices, and has powerful levers it uses to try to push the economy to that level of employment."

THEN, he immediately went on to say: "The Federal Reserve thinks (rightly) that its judgment on this is better than that of the Senate..."

I offered up an (admittedly partial) rebuttal to BOTH of those arguments from ANOTHER economist (Jared Bernstein) in the form of a piece HE wrote concerning a recent "debate" about the

"Minimum Wage" http://www.ncpa.org/bothside/krt/krt042399a.html

which pointed out Greenspan's "predictabl[y]... circular reasoning...[and his "consistent" criticism of]...most efforts of the government to occasionally guide the "free hand" of the marketplace..."

2.

I expanded upon THAT criticism of Greenspan's [and Brad's] predisposition to oppose political "intervention" in the economy with a couple of items which highilght the disparity in income [and "wealth"] outcomes the Greenspan/DeLong brand of
"professional" prejudice has produced in our own society:

INCOME AND WEALTH INEQUALITY IN THE UNITED STATES No. 304

"...inequality in the distribution of income and wealth and persistent poverty continue to jeopardize equal opportunity and democracy as the United States begins the 21st century. Extreme inequality of income and wealth gives huge economic and political power to big corporations and wealthy families and weakens the sense of community and common purpose essential to a democracy..."

http://www.adaction.org/pubs/304inequality.html

AND

"Wealth Inequality in the United States Leads the World: And the Gap Here Is Widening

"...Today the United States is the most unequal of any industrialized country in terms of income and, more importantly, wealth. And the situation is worsening more rapidly here with each passing year.

Indeed, the only other period in this century when household wealth was so disproportionately held by a relative handful of the richest Americans came between 1922 and 1929....

...Wealth -- the net worth of a household -- is a better indicator than income of long-run economic security. Wealth may vary from year to year as asset prices fluctuate, but it remains the foundation for a family's long-term security. Without wealth, a family lives from hand to mouth, no matter how high its income. Wealth is calculated by adding together the current value of all assets a household owns -- financial wealth like bank accounts, stocks and bonds, life insurance savings, and mutual funds; houses and unincorporated businesses; cars and major appliances; and the value of pension rights -and subtracting from that - mortgage balances and other outstanding debt.

Wealth inequality in 1989 (the last year for which statistics are available) was at a sixty-year high. The top 1 percent of wealth holders controlled 39 percent of total household wealth.

The rise in wealth inequality from 1983 to 1989 is particularly striking. The share held by the top 1 percent rose by 5 percentage points, and at the same time the share held by the bottom 40 percent showed an absolute decline. All gains in wealth accrued to only the top 20 percent of wealth holders...."

http://www.tcf.org/Press_Releases/Wolff.html

What I meant by that Julian, is:

If you care anything at all about anything beyond the tip of your own nose--like for instance, your as yet inconceived progeny and/or OUR posterity--consider the implicit lie these items put to the Greenspan/DeLong school of political-economy AND avail yourself of the data, information AND the policy recomendations contained therein.

3.

The US economy doesn't exist in a vacuum of course, it's but a part of a larger "global" economy. This fact, one which the "really big" [non-governmental] players [TransNational Corporations] have been keenly aware of for more than a century now, goes a long way toward explaing the otherwise inexplicable popularity of the Greenspan/DeLong theory of everthing.

The fact that those gentlemen, their ideological kinsmen, AND their powerful political patrons have been in denial for DECADES about the shortcomings of their political-economic insights is amply (in MY view) illustrated by a couple of recent news reports concerning the business of international trade...

"Dropping Prices Raise Deflation Fears", By JEANNINE AVERSA

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030516/ap_on_bi_ge/economy_deflation_7

"U.S. Trade Deficit 2nd Highest on Record",By JEANNINE AVERSA

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030513/ap_on_bi_go_ec_fi/economy_11


....A quick review of the historical record on THAT score...

"U.S. International Transactions Accounts Data" [Bureau of Economic Analysis] http://www.bea.doc.gov/bea/international/bp_web/simple.cfm?anon=98&table_id=1&area_id=3

...AND a scholarly, reputable economic analysis of same by a bona fide economist:

"Notes on the U.S. Trade and Balance of Payments Deficits [by] Wynne Godley http://www.levy.org/docs/stratan/stratan.html

4.

But Julian, in spite of everything, it did occur to me that SOME people (especially SOME professional economists, for SOME reason) MIGHT not be entirely persuaded by the arguments (and criticisms) I've made thus far. THAT's why I saw fit to add a few insults the injuries I inflicted upon them, their theories, their performances,
AND their opinions of themselves and their "place" in the grand politicaleconomic scheme of things....

"Brad's not OVERLY concerned about the principle behind dickweed's most recent successful attempt to transfer even MORE HUNDREDS of billion$ from YOUR children and/or grandchildren to the TINY group of people who already own and/or control almost every(fungible)thing on the friggin' planet--

'Senate approves 350 billion dollar tax cut bill'
http://story.news.yahoo.com/news?tmpl=story&u=/afp/20030516/ts_alt_afp/us_politics_congress_030516140717

--Brad (and Greenspan) both accept the premise that running up the public debt in order to transfer "real" dollars to SOMEBODY'S bank account is what politics 'OUGHT' to be about--both of them agree that's the 'right' way to 'grow' an economy too. Both of them cringe when they see the government spending tax dollars on anything other than interest on the debt and bombs, basically. Brad (and most other economists) just think dickweed's going about THEIR business in a fiscally "incompetent and ineffective" way, that's all.....

'Mr. Voinovich's Bottom Line' http://www.washingtonpost.com/wp-dyn/articles/A61999-2003May15.html "

So Julian, just in case you're STILL not sure what I mean, I MEAN:

The bottom line on the DeLong/Greenspan school of politicaeconomics is nothing but bubbles--bubbles here, bubbles there, bubbles every damn where.

AND Julian, just so it's perfectly clear to you, this has NOTHING to do with censorship.


Posted by: Mike on May 18, 2003 04:19 AM

Mike

Your posts do monopolize, and are quite nutty. Carry on....

Posted by: arthur on May 18, 2003 06:14 AM

Arthur:

So's your Mama.

Bugger off.

Posted by: Mjke on May 18, 2003 06:49 AM

Don Luskin's 4/25/2003 NRO piece said it all. After some meanignless back and forths about what Krugman said - he got to the heart of the matter when he suggested that Krugman had some complicated theory about ... The theory was actually quite simple. Fiscal policy cannot increase production beyond full employment. If Luskin thinks that the law of scarcity is some obscure complicated theory, no wonder he is so confused about economic policy matters. But then Bush has the same problem.

Posted by: Hal McClure on May 18, 2003 06:56 AM

If the poor keep getting poorer, and this is such wretched land of inequality,why are so many people trying to immigrate here? They come in droves, they sue to get in, and sue to stay in. When they get deportation notices, they run. Why would a poor person immigrate here if all he had to look forward to was downward social mobility? Tell me which country has it right? And why?

Posted by: Michael Axelrod on May 18, 2003 11:19 AM

Michael you're getting poverty and inequality mixed up. We are talking about a static poor, somewhat growing middle, growing upper class, and exploding top parts of the top 1%.

Also in cannot be understated that poverty in this country is an excellent standard of living compared to what many have to live with in poor developing and non-developing countries.

Micharl Axelrod, just a guess, are you watching CNN right now?

Posted by: Bobby on May 18, 2003 11:24 AM

That is we are talking about relative incomes within this country. Static poor, exploding elite, etc. in terms of income (actually I think the income of the poor actually shrunk since 1973 but not sure, maybe that's hourly compensation or something). . . .

Posted by: Bobby on May 18, 2003 11:28 AM

Michael,

Not that your rant really has much of anything to do with the points I've been making, BUT I believe what attracts people to the United States has a whole lot more to do with our ideals--equality under the law, freedom of conscience and religious freedom, freedom of speech, etc.--AND the fact that one doesn't (officially) need to be born with any particular racial or ethnic characteristics to "join up" and "move up"--than it does with the actual sociopoliticoeconomic "facts on the ground."

(Since it really is a WHOLE 'nother subject, AND since, judging from the 'tone' of your remarks, you probably wouldn't be disposed to listen anyway, I won't formally address the question(s) of how our foreign, economic and military policies contribute to poverty and desperation in certain other countries, nor will I speak to the question of how we might make people in those certain other countries less desperate to leave them in the first place.)

Posted by: Mike on May 18, 2003 12:28 PM

Mike,

Get your own blog, and quit clogging up this message board with your massive cut & paste posts.

I don't even care what your argument is. The way you make it is obnoxious. Learn to edit and quote VERY selectively, or else put your screeds up on your own blog.

I may agree with you, or I may not, but I'll never know because I'll never bother to read your posts because they're so long.

Posted by: Jon H on May 18, 2003 09:19 PM

PK is a renown economist with impeccable credentials and a "Show me the money " mindset. Luskin is a hack with no credentials and a "Give me the money mindset"? Which wins in the realm of public opinion? 'Give me the money' works best on the feeble minded. They email their bank account numbers so Nigerians will deposit millions in their accounts. The "Show me the money" school doesn't support "Get rich quick theories.". Americans are easy marks.

Posted by: bakho on May 18, 2003 10:08 PM

Jon,

I wasn't talking to you.

And Jon, just so you know, you're not my boss. I don't care what you think of me, my messages OR my style. I don't care whether YOU read what I write or not either, Jon. And I damned sure don't care if YOU agree with me.

Was that succinct enough for you, Jon?

Do we understand each other now?

I sure hope so, Jon. Because writing crap like this for people like you is a real drag for me.

Posted by: Mike on May 18, 2003 11:06 PM

Whatever. When it comes to long tendentious posts I just invoke my brain's 'Ignore' feature and scroll on by. (Sometimes said feature is a bug when it comes to spousal communication, but that's a user problem, of course... ;-)

Posted by: David Wilford on May 19, 2003 06:34 AM

David:

Are you related to Jon ;?)

Posted by: Mike on May 19, 2003 07:00 AM

Really, though, is Luskin anywhere NEAR as influential as Paul Krugman as far as public opinion? The New York Times is far more widely read that the National Review. My impression is that Luskin is an even crankier version of James Galbraith on the right, causing much glee on the left and cringing on the right (correct me if I'm wrong; that was my assumption from the time I saw the aptly named "Poor and Stupid" blog, but I'm not sure).

And Mike, I know this seems really logical to you, but to me, I frankly don't understand where you're coming from! Leaving aside your assertion that DeLong and Greenspan have the same views on public spending (I don't know where you divined that), your posts talk about the current state of the U.S. economy, especially the balance of payments situation and wealth inequality (fine). Your posts also talk about the evils of economists (fine), and why we shouldn't give economists or generals a "free hand" (fine).

I can't find a logical connection among these, though. Maybe there's an implicit one that you need to make more explicit?

Is it that economists have been ruling the U.S. and have caused these bad things in the U.S. economy to happen?

Since part of your post is in favor of the minimum wage being increased, and explains that Alan Greenspan was opposed to it and made his opposition known (though he has no legislative power: his only power is over monetary policy, and I cannot tell what your view is on his monetary policy, if you have one), my initial interpretation was that you thought that conservative economists shouldn't express their opinions. This was evidently the wrong interpretation. So what's the right one, then? That conservative economists have caused every ill in the American economy?

Posted by: Julian Elson on May 19, 2003 07:27 AM

Oh yeah. I remember Mike. He and I had a colloquy last month on these boards, which can be found here. I think it's quite similar to what's going on here:

http://www.j-bradford-delong.net/movable_type/2003_archives/001343.html

Posted by: Bobby on May 19, 2003 07:43 AM

Mike writes, "Brad's not OVERLY concerned about the principle behind (President Bush's) most recent successful attempt to transfer even MORE HUNDREDS of billion$ from YOUR children and/or grandchildren to the TINY group of people who already own..."

...the money in question!

The money isn't being "transferred" to those rich people. The Republican proposal is for them to KEEP more of THEIR money.

It's Democrats who want to transfer the money. They want to take money from the rich, and give it to...well, sometimes the poor. Or at least the middle class. Or sometimes rich people...but rich people who vote Democratic, or at least do things Democrats like.

Posted by: Mark Bahner on May 19, 2003 09:15 AM

Mark it's not like most of this money is going into an abyss somewhere or even that the money is going into the politicians' or their cronies pockets (those much griped-about pork projects make up less than 1.5% of the federal budget). Most of it is going to programs that the middle class wants. People should grow up and realize that these have to be paid for with taxes.

Moreover, I dispute whether or not, from the perspective of taxation it really *is* their money. We live in a wonderful free market economy with ever-changing production technologies, which produces wonderful growth and huge amounts of goods and services in aggregate.

One price that we pay for that market is that is amoral: Someone who has a job today finds himself outmoded tomorrow, and the technological crap shoot will yield high relative wages for some jobs and low ones for some jobs even if the people in both are equally industrious and deserving of success. Therefore, it is fair that the winners compensate the losers somewhat, and that we provide social insurance (call it redistribution if you like). In fact if a market for, say, income inequality insurance existed, and it fails to do so due to various market failures, people would buy and this would imporve everyone's welfare. The govt should do *something* to simulate such an insurance system.

Second, think of the children. Children do not choose which family they are born into, whether rich or poor. Why should children be penalized for something that is not their fault. In fact *the children* would probably take out some form of insurance before they were born if such a thing were possible. So even if you don't think the govt has any obligation to adults, you must admit that the government should protect innocent children from the consequences of income inequality.

Third, income inequality undermines and could destroy the middle-class democratic society that we imagine ourselves to be. It also allows the super wealthy to have disproportionate influence over politicians and lessens the influence of the non-wealthy who don't have as much money.

Anyway, Krugman does a much better job than me, which can be found here:

http://www.pkarchive.org/economy/ForRicher.html

Posted by: Bobby on May 19, 2003 09:49 AM

Julian:

Nice smear of Galbraith--Maybe someday you'll explain why you put him in the same "class" as Luskin.

(Maybe THAT exercise will help you to understand MY more general criticism of economists of the "Greenspan school"--as well as their institutional, academic, AND political apologists. Maybe not.)

Bobby:

I remember you too. I'm still waiting for your promised e-mail on your FINAL choice for whose "business" monetary policy REALLY is.

(And don't you go asking Brad what you're supposed to "think" either. See Bobby, Brad's all for "representative democracy"--EVEN in Argentina...

"...Pickup assemblies that claim to represent "the people" are very vulnerable to takeover by disciplined vanguards with their own ideologies, hierarchical organizations, and ability to dispatch lots of people to outsit all others. This has been a common pattern since the days of the Jacobin Club. When legitimacy is conferred not by popular election but by the fact of spontaneous participation, those with the ideological and organizational tools organize the largest number of "spontaneous" participants take over. Thus it is indeed the case that what we find in the streets are vanguard parties, the dictatorships they bring, and politics understood not as collective self-government but as expressive theatrical performances."

http://www.j-bradford-delong.net/movable_type/2003_archives/001481.html


...Yep, Brad's all for "collective self-government" AND "representative democracy" , EXCEPT, that is, when it interferes with his and Prince Alan's bubblicious brand of fiscal and/or monetary policy....


"...Why does fiscal policy have effects only in these limited circumstances? Because the Federal Reserve has powerful views about what level of employment is consistent with stable prices, and has powerful levers it uses to try to push the economy to that level of employment. The Federal Reserve thinks (rightly) that its judgment on this is better than that of the Senate or of Karl Rove, and so takes active steps to neutralize whatever the effects of their policies would otherwise be...."

http://www.j-bradford-delong.net/movable_type/2003_archives/001491.html

Posted by: Mike on May 19, 2003 10:18 AM

I told you. I'll write to you in the fall once I've taken my international econ. Patience, Mike. Patience.

Posted by: Bobby on May 19, 2003 10:25 AM

Mark:

See, read AND check out the links in:

"The Bottom Line 3?--Bringing it on home."

AND

"The Bottom Line 4?--Down the memory hole."

Above. Then get back to me.

P.S. Mark:

Are you sitting down? This might come as a shock to you:

Business, economy, economics and politics too (in large part) is ALL about "transferring money"....

Posted by: Mike on May 19, 2003 10:42 AM

Bobby tells me to check in the mail--in the fall, after he does something else....

(I wonder if he got THAT line from perfessor DeLong too ;!)

Posted by: Mike on May 19, 2003 10:57 AM

I already answered your question about the fed. The answer is that the fed's job is to maintain somw mix of full employment and price stability. Unless it is somewhat independent of political authorities, and it will not do this and be likely be biased towards an inflationary monetary policy as, say, the economic history of Latin America shows.

The rest of your question was something about exchange rates. I can't provide an informed answer if I don't know anything about international monetary policy. And once I do, you will get a reply. I'm not sure whether the class occurs next fall or spring, so I could get back to you as late as a year from now.

Posted by: Bobby on May 19, 2003 11:17 AM

P.P.S. Mark:

Do you mind if I revise and extend my remarks--just a little?

Business, economy, economics, politics AND government too (in large part) are ALL about "transferring money"--

And ALL of those endeavors are ARTS, NOT (yet, anyway ;-) sciences....

Posted by: Mike on May 19, 2003 11:20 AM

I think that Donald Luskin is nowhere near as smart or erudite as James Galbraith, but I was more comparing their status than their abilities. My impression is that James Galbraith makes a good target for right-wingers, because his arguments are so frequently so bad (like, claiming that the idea that lower unemployment and faster growth would lead to higher inflation was false without even looking at the evidence provided by Okun's law that that is, in fact, the case), but is actually not an influential voice among the great majority of left-wingers. They aren't as bad as Luskin's by a long shot, IMHO, but my point is, I think that most leftists probably look at James Galbraith's articles and cringe, while most rightists probably are glad to see a confirmation of leftist idiocy.

This is similarly my impression of Luskin. We liberals enjoy seeing a right-wing nutcase like Luskin making an utter fool of himself in public, but I'm betting that most right-wingers or libertarians really cringe when they read a Luskin article, because they think "gee, more proof for liberals that we really ARE the morons they say we are!" (Abiola Lapite? Jim Glass? Mark Bahner? You guys care to confirm my suspicions about Luskin?)

Sooo.... I don't think that Galbraith is really in the same class as Luskin, though I'm no Galbraith fan as you've no doubt deduced, but I'm guessing that most conservatives view Luskin the way most liberals view Galbraith, so it isn't really fair to act as if Luskin were a mainstream, popular conservative voice on par with Paul Krugman.

Of course, I don't know if this is true: perhaps a fairly large number of conservatives DO think Luskin's brilliant, but that's not my impression.

Posted by: Julian Elson on May 19, 2003 12:02 PM

Julian:

It's not that I doubt YOUR 'status' or anything like that, Julian.

And it's not that I'm leery of YOUR "impression" of Galbraith's actual words.

And don't think even for a minute--nay, even for a second--that I might harbor ANY doubts about an economic verity like Okun's law.

But Julian, do you mind, you know--for the record--would you mind terribly:

Reference(s) to the paper, essay, website--anything, anything all--where I (or anyone) might actually examine the "argument" which offended you.

Please.

Posted by: Mike on May 19, 2003 01:08 PM

Twiddle, twiddle, twiddle....Tap, tap, tap....

If you, like me, are waiting for Julian to put up HIS "goods"...

["...Galbraith makes a good target for right-wingers, because his arguments are so frequently so bad (like, claiming that the idea that lower unemployment and faster growth would lead to higher inflation was false without even looking at the evidence provided by Okun's law that that is, in fact, the case)..."]

...on James Galbraith too.

AND

If you happen also to belong to the non-aligned, "uninfluential", "status"-free "school" of economics,

You MIGHT be interested in this:

"...We are ourselves skeptical that there exists a definitive notion of labor market tightness associated with above-trend (or above-potential) real GDP growth that is reliably related to price pressures...."--David Altig, Terry Fitzgerald, and Peter Rupert May 15, 1997

["David Altig is a vice president and economist, and Terry Fitzgerald and Peter Rupert are economists, at the Federal Reserve Bank of Cleveland."]

"Okun's Law Revisited: Should We Worry about Low Unemployment?" http://www.clev.frb.org/research/com97/0515.htm

Posted by: Mike on May 19, 2003 01:51 PM

Mike is creepy.

Posted by: Guyman on May 19, 2003 02:20 PM

Guyman:

Boo <:!)

Posted by: Mike on May 19, 2003 02:44 PM

First, I don't have a status, Mike. I'm not surprised you don't doubt it, because it doesn't exist to be doubted :^).

Also, I made a boneheaded mistake in that last post. I mixed up Okun's law and the idea that lower unemployment leads to a more quickly accelerating inflation (or, conversely, that higher unemployment leads to more quickly decelerating deflation). (Okun's law relates growth to change in unemployment; I meant the relationship between unemployment and change in inflation.).

Here is an archive of James Galbraith's articles.

http://www.prospect.org/authors/galbraith-j.html

And here's the article that I had in mind in particular:

http://www.prospect.org/print/V8/34/galbraith-j.html

My gripe is not that he didn't accept the concept of NAIRU blindly; it's that he simply declared there to be no evidence of it ex cathedra. Here's some data on inflation. You can graph it and see that, overall, inflation fell quickly when unemployment wise high in the early 1990s, and reached its nadir around 1998, and rose until the 2001 recession, when it again began to fall (to dangerously low levels, some might say) quickly. This seems to corellate quite well with unemployment rates. It's not exact, naturally, but I don't think that a pattern not being exact is an excuse for ignoring it. Perhaps James Galbraith has some great evidence showing that NAIRU *doesn't* exist, and if so, good for him, but his article simply ignored existing evidence, rather than bringing new evidence to the debate.

http://www.economagic.com/em-cgi/data.exe/blscu/CUSR0000SA0L1E

None of this is to say that James Galbraith is, by any means, as bad as Donald Luskin. Donald Luskin is a bitter jack*** who doesn't understand enough economics to know what theories he's trying to refute, or what evidence supports his claims, or even what his opponents mean. Galbraith, for all his faults, is not any of those things: he knows what he's arguing against, even if I find his arguments unconvincing. Okay, fine: I screwed up! Bad comparison! My original point, though, is that Luskin is probably a rather bad representative of the American right. I'm guessing -- and this is a guess, not a fact -- he's a nobody whose opinions most right-wingers don't care about. I don't know if that's true or not, really. If any local right-wingers want to confirm or deny this for me, go ahead.

Also, I can't "put up my goods" 24 hours a day: like you, posting on this blog isn't my full time occupation, so don't be too anxious to read my response to your latest comment if I'm away ;^).

Posted by: Julian Elson on May 19, 2003 04:53 PM

while everyone seems off topic i may as well add:

Property and wealth are concepts invented by society and without meaning if left unenforced. Money would be worthless if people refused to give you anything in exchange for it. Owning land would be without value if you couldn't exclude others. So, really, it is government enforcement of rights that creates private property. Of course this is a cartoon version of the argument.

Looking at things this way makes arguments over wealth redistrubution look like the work of Newton and his three laws next to Einstien's relativity.

The republicans (on the train) say "the land is moving." The democrates (on the gound) say "the train is moving."

oh yes and those National Review guys, man, whew, they are just too much, dontchathink?

Posted by: markmeyer on May 19, 2003 07:15 PM

I think the number one obstacle to decreasing income inequality is to convince the American public, especially the 40% in the center of the voting spectrum, why income inequality is a big problem.

Posted by: Bobby on May 19, 2003 09:51 PM

Julian:

Now that we've got THAT out of the way...

===========================================

"...My impression is that Luskin is an even crankier version of James Galbraith on the right, causing much glee on the left and cringing on the right (correct me if I'm wrong;..."

Posted by Julian Elson at May 19, 2003 07:27 AM

"Julian:

Nice smear of Galbraith--Maybe someday you'll explain why you put him in the same "class" as Luskin.

(Maybe THAT exercise will help you to understand MY more general criticism of economists of the "Greenspan school"--as well as their institutional, academic, AND political apologists. Maybe not...)"

Posted by Mike at May 19, 2003 10:18 AM


"...None of this is to say that James Galbraith is, by any means, as bad as Donald Luskin. Donald Luskin is a bitter jack*** who doesn't understand enough economics to know what theories he's trying to refute, or what evidence supports his claims, or even what his opponents mean. Galbraith...is not any of those things...I screwed up!..."

Posted by Julian Elson at May 19, 2003 04:53 PM

==============================================

...Let's return now, Julian, to this:

==============================================

"...frankly don't understand where you're coming from!....your posts talk about the current state of the U.S. economy, especially the balance of payments situation and wealth inequality (fine). Your posts also talk about the evils of economists (fine), and why we shouldn't give economists or generals a "free hand" (fine).

I can't find a logical connection among these, though...."

Posted by Julian Elson at May 19, 2003 07:27 AM

===============================================

It has been my experience Julian, that SOMETIMES, in cases like yours, REPETITION helps the process of "finding logical connections" along....

===============================================

"If you love your children and/or grandchildren, for God's sake, NEVER give generals OR economists "a free hand"..."

NOW, since you say you're "not sure" about what I said, I'll summarize MY argument for you:

1.

BRAD said: "...the Federal Reserve has powerful views about what level of employment is consistent with stable prices, and has powerful levers it uses to try to push the economy to that level of employment."

THEN, he immediately went on to say: "The Federal Reserve thinks (rightly) that its judgment on this is better than that of the Senate..."

I offered up an (admittedly partial) rebuttal to BOTH of those arguments from ANOTHER economist (Jared Bernstein) in the form of a piece HE wrote concerning a recent "debate" about the

"Minimum Wage" http://www.ncpa.org/bothside/krt/krt042399a.html

which pointed out Greenspan's "predictabl[y]... circular reasoning...[and his "consistent" criticism of]...most efforts of the government to occasionally guide the "free hand" of the marketplace..."

2.

I expanded upon THAT criticism of Greenspan's [and Brad's] predisposition to oppose political "intervention" in the economy with a couple of items which highilght the disparity in income [and "wealth"] outcomes the Greenspan/DeLong brand of
"professional" prejudice has produced in our own society:

INCOME AND WEALTH INEQUALITY IN THE UNITED STATES No. 304

"...inequality in the distribution of income and wealth and persistent poverty continue to jeopardize equal opportunity and democracy as the United States begins the 21st century. Extreme inequality of income and wealth gives huge economic and political power to big corporations and wealthy families and weakens the sense of community and common purpose essential to a democracy..."

http://www.adaction.org/pubs/304inequality.html

AND

"Wealth Inequality in the United States Leads the World: And the Gap Here Is Widening

"...Today the United States is the most unequal of any industrialized country in terms of income and, more importantly, wealth. And the situation is worsening more rapidly here with each passing year.

Indeed, the only other period in this century when household wealth was so disproportionately held by a relative handful of the richest Americans came between 1922 and 1929....

...Wealth -- the net worth of a household -- is a better indicator than income of long-run economic security. Wealth may vary from year to year as asset prices fluctuate, but it remains the foundation for a family's long-term security. Without wealth, a family lives from hand to mouth, no matter how high its income. Wealth is calculated by adding together the current value of all assets a household owns -- financial wealth like bank accounts, stocks and bonds, life insurance savings, and mutual funds; houses and unincorporated businesses; cars and major appliances; and the value of pension rights -and subtracting from that - mortgage balances and other outstanding debt.

Wealth inequality in 1989 (the last year for which statistics are available) was at a sixty-year high. The top 1 percent of wealth holders controlled 39 percent of total household wealth.

The rise in wealth inequality from 1983 to 1989 is particularly striking. The share held by the top 1 percent rose by 5 percentage points, and at the same time the share held by the bottom 40 percent showed an absolute decline. All gains in wealth accrued to only the top 20 percent of wealth holders...."

http://www.tcf.org/Press_Releases/Wolff.html

What I meant by that Julian, is:

If you care anything at all about anything beyond the tip of your own nose--like for instance, your as yet inconceived progeny and/or OUR posterity--consider the implicit lie these items put to the Greenspan/DeLong school of political-economy AND avail yourself of the data, information AND the policy recomendations contained therein.

3.

The US economy doesn't exist in a vacuum of course, it's but a part of a larger "global" economy. This fact, one which the "really big" [non-governmental] players [TransNational Corporations] have been keenly aware of for more than a century now, goes a long way toward explaing the otherwise inexplicable popularity of the Greenspan/DeLong theory of everthing.

The fact that those gentlemen, their ideological kinsmen, AND their powerful political patrons have been in denial for DECADES about the shortcomings of their political-economic insights is amply (in MY view) illustrated by a couple of recent news reports concerning the business of international trade...

"Dropping Prices Raise Deflation Fears", By JEANNINE AVERSA

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030516/ap_on_bi_ge/economy_deflation_7

"U.S. Trade Deficit 2nd Highest on Record",By JEANNINE AVERSA

http://story.news.yahoo.com/news?tmpl=story&u=/ap/20030513/ap_on_bi_go_ec_fi/economy_11


....A quick review of the historical record on THAT score...

"U.S. International Transactions Accounts Data" [Bureau of Economic Analysis] http://www.bea.doc.gov/bea/international/bp_web/simple.cfm?anon=98&table_id=1&area_id=3

...AND a scholarly, reputable economic analysis of same by a bona fide economist:

"Notes on the U.S. Trade and Balance of Payments Deficits [by] Wynne Godley http://www.levy.org/docs/stratan/stratan.html

4.

But Julian, in spite of everything, it did occur to me that SOME people (especially SOME professional economists, for SOME reason) MIGHT not be entirely persuaded by the arguments (and criticisms) I've made thus far. THAT's why I saw fit to add a few insults the injuries I inflicted upon them, their theories, their performances,
AND their opinions of themselves and their "place" in the grand politicaleconomic scheme of things....

"Brad's not OVERLY concerned about the principle behind dickweed's most recent successful attempt to transfer even MORE HUNDREDS of billion$ from YOUR children and/or grandchildren to the TINY group of people who already own and/or control almost every(fungible)thing on the friggin' planet--

'Senate approves 350 billion dollar tax cut bill'
http://story.news.yahoo.com/news?tmpl=story&u=/afp/20030516/ts_alt_afp/us_politics_congress_030516140717

--Brad (and Greenspan) both accept the premise that running up the public debt in order to transfer "real" dollars to SOMEBODY'S bank account is what politics 'OUGHT' to be about--both of them agree that's the 'right' way to 'grow' an economy too. Both of them cringe when they see the government spending tax dollars on anything other than interest on the debt and bombs, basically. Brad (and most other economists) just think dickweed's going about THEIR business in a fiscally "incompetent and ineffective" way, that's all.....

'Mr. Voinovich's Bottom Line' http://www.washingtonpost.com/wp-dyn/articles/A61999-2003May15.html "

So Julian, just in case you're STILL not sure what I mean, I MEAN:

The bottom line on the DeLong/Greenspan school of politicaeconomics is nothing but bubbles--bubbles here, bubbles there, bubbles every damn where..."

Posted by Mike at May 18, 2003 04:19 AM

================================================

....THINK now, Julian. Think about what you just read. Think real hard. And think big.

Oh, there's one other thing I want you to know too, Julian:

I'll be "anxiously" waiting to learn whether you have actually learned anything...

Posted by: Mike on May 20, 2003 02:02 AM

"I think the number one obstacle to decreasing income inequality is to convince the American public, especially the 40% in the center of the voting spectrum, why income inequality is a big problem."

Bobby:

Ask the professor what you're supposed to think about this:

=================================================

"Out of Energy

HAVING PROMISED "an energy bill by Memorial Day," the Senate, it seems, has suddenly run out of gas. Other issues have intervened, it is true, but the delay may also reflect some general ambivalence about this legislation on Capitol Hill. If so, the ambivalence is justified. Neither the House version of this bill, passed earlier in the year, nor the version approved more recently by the Senate Energy and Natural Resources Committee does what an energy bill, or, for that matter, an American energy policy, is meant to do. Neither promotes a viable, long-term vision of how the United States is to reduce its dependence on oil. Neither deals with the climate change and air quality issues that are intimately connected to carbon emissions, largely produced by burning fossil fuel.

Both versions propose to spend far more money on producer subsidies than on measures that would promote either greater energy efficiency or the use of renewable resources. Both include unwarranted subsidies for the nuclear energy industry. The final version may also include loan guarantees for companies that want to build a natural gas pipeline from Alaska, even though, as we have previously argued, such subsidies might not be necessary if the pipeline were to run through Canada instead of Alaska. The House version includes a provision to drill in the Arctic National Wildlife Refuge, despite repeated Senate defeats of this plan and the ample availability of oil elsewhere in Alaska. The only truly "renewable" form of energy aggressively promoted is ethanol, which, although made from corn, takes nearly as much oil to make as it ultimately replaces. Ethanol's real value is to the farmers who grow corn -- hence its popularity among senators who represent rural states.

At the same time, instead of promoting cars with better gas mileage and lower emissions, Congress, like the administration, has thrown all its eggs into one basket: Quite a lot of people in Washington have convinced themselves that hydrogen fuel cells will soon replace the internal combustion engine -- and so soon will this happen, they seem to believe, that no one need bother about conserving fuel or curbing carbon emissions in the meantime. Yet, although hydrogen fuel cell research is promising, it has no chance of becoming viable anytime soon. Instead of carrying out hydrogen research and fuel efficiency research at the same time, however, the administration and its Capitol Hill supporters appear to believe that the very word "hydrogen" is a magic charm, guaranteed to ward off any talk of fuel conservation in the present.

Both versions of the energy bill contain some positive measures. There are provisions that would make household appliances more energy-efficient, for example, and a final version could include sensible forms of tax relief for small oil producers, who are unusually vulnerable to price swings, as well as some needed reforms of the electricity grid. Nevertheless, passing this bill would do more harm than good, not least because Congress, having approved such a complex piece of legislation, would lack the stomach to return to energy policy -- and to the real problems -- for many years. Just as the Clinton administration's bungled attempt to pass universal health care legislation soured most politicians on the subject for years to come, a botched energy bill might prevent real debate about climate change and fuel efficiency from taking place anytime soon. That alone is reason enough to drop it.

http://www.washingtonpost.com/wp-dyn/articles/A8211-2003May18.html
=================================================

And this:

=================================================

"When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a "break" requires -- now or down the line -- that an equivalent burden be imposed on other parties. In other words, if I get a break, someone else pays. Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch."--Warren Buffett

http://www.washingtonpost.com/wp-dyn/articles/A13113-2003May19.html

=================================================

And this:

=================================================

"Libertarians believe that tax cuts are always better than government programs, that private striving and self-improvement are the central acts of American citizenship, and that where the government and the market are concerned, the government should almost always get out of the way. Communitarians also see the market as useful and private striving as essential. But they insist that preserving the individual freedom that makes both possible is a cooperative endeavor. Self-rule in a democracy demands not just private creativity but also public commitment. Government needs to assert itself when private markets fail, and when markets fail to serve the common good."--E. J. Dionne

http://www.washingtonpost.com/wp-dyn/articles/A13115-2003May19.html

Posted by: Mike on May 20, 2003 02:28 AM

Oh. And Bobby:

Ask the professor what he REALLY thinks about this:

=================================================

The Defense Budget Spills Forth

Mammoth defense spending bills bloated with both new military technology and obsolescent weaponry are being rushed to breakneck approval this week as the administration exploits Congress's weakness for leaving no defense contractor unrewarded. The costliest defense budget since the cold war more than $400 billion and counting is being gaveled through by the Republican leadership in a breathtaking few days of glancing debate. Good ideas for reforming the military are included. But so are outdated submarines and jet fighters designed for combat against the defunct Soviet threat.

There is a reasonable $1.7 billion for the next generation of unmanned aerial drones and an unreasonable $42 billion for anachronistic fighter planes. As social, education and health care programs are being squeezed, the Pentagon is asking for $9 billion to build a missile defense system that does not work yet.

The waste easily runs into the tens of billions of dollars, making Congress's haste this week all the more outrageous. The armed forces obviously deserve decent pay, better housing and the most effective new technologies and weapons. But these bills provide windfalls for the military, for defense contractors and, not incidentally, for lawmakers who need the hometown pork and fat-cat contributions being subsidized by the new double-dip military-industrial complex. For all his tough talk, Defense Secretary Donald Rumsfeld is not taking on the generals and Congress to challenge the voracious old ways of military budgeting.

http://www.nytimes.com/2003/05/20/opinion/20TUE2.html

=================================================

And this:

=================================================

Diplomatic Bonfires

This is not what the White House wanted as President Bush starts pointing toward next year's election campaign. Iraq is in a state of near anarchy. The conflict between Israel and the Palestinians is escalating again, and Islamic terrorists are on the attack in the Middle East. Just at the moment when Mr. Bush would like the nation to think of him as a statesman, everything seems to be going the wrong way in one of the world's most combustible regions. Mr. Bush has himself to blame in part.

Iraq is a mess because the Bush administration failed to plan adequately for the postwar period. The Pentagon has proved itself great at fighting wars but not very good at dealing with their aftermath. Defense Secretary Donald Rumsfeld and his aides seemed to think that Iraq would emerge from the war as a functioning country that could then be led toward democracy by American officials. Now, more than a month after the fighting subsided, Iraq remains a lawless land without basic services like electricity, fresh water and decent medical care. Instead of serving as a model for enlightened American rule, Iraq is turning into a symbol of American maladministration. It is not too late to turn Iraq around, but Mr. Bush will have to be prepared to throw far more resources into the situation, for a much longer time than he originally intended.

The Israeli-Palestinian conflict has its own destructive dynamic, which Washington is belatedly trying to break. If Mr. Bush had not neglected the Middle East crisis in his first year in office, he might not be facing such a seemingly intractable deadlock today. Suspending the cycle of violence may be impossible at this point, but the best chance depends on strong, sustained pressure from Washington.

Yesterday's suicide bombing at a shopping mall in northern Israel was the fifth Palestinian attack in less than 48 hours. All have been claimed by extremist Islamic groups, which are aiming not only at Israel but also at the new government of Mahmoud Abbas, the Palestinian prime minister. Mr. Abbas says he wants to confront such groups but cannot do so as long as Israel continues its tough military policies. Israelis say they are being blown up, so do not talk of easing conditions. Only a concerted American effort, led by Mr. Bush himself, can bring Mr. Abbas and Ariel Sharon, the Israeli prime minister, to take the steps that are needed to quell the violence and rekindle peace talks.

Most disturbing to many Americans may be the recent terrorist bombings in Saudi Arabia and Morocco, which have demonstrated that the war against terrorism is far from over. Much of Al Qaeda's leadership may by arrested or dead, as President Bush has asserted, but the organization and its affiliates are far from finished off.

The United States must pursue the international teamwork against terrorism that President Bush initiated after Sept. 11. Unfortunately, the American decision to go to war in Iraq decreased the desire of other nations to cooperate. Those damaged relations now urgently need to be rebuilt. Saluting cheering troops and campaigning for tax cuts may be good politics for Mr. Bush as he runs for a second term, but the president has a lot of work ahead in the Middle East before he can lay claim to the title of statesman.

http://www.nytimes.com/2003/05/20/opinion/20TUE1.html

Posted by: Mike on May 20, 2003 02:42 AM

Mike:
Seek help. Please

Posted by: Bobby on May 20, 2003 10:12 PM
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