Archive for January, 2010
Don’t Trust Economists
Sometimes a picture really does tell a thousand words. Here’s a chart, based on data from the Philadelphia Fed, showing actual economic results compared to the predictions of professional economists. As you can see, my profession does a wretched job. Comparisons based on predictions from the IMF, OECD, CBO, and OMB doubtlessly would generate equally embarrassing results. This does not mean economists are idiots (insert obvious joke here), but it is an additional reason why Keynesianism is misguided. If economists are unable to predict what’s going to happen with the economy in the near future, why should we expect anything positive when politicians tinker with short-run economic performance? That’s especially the case when they pass so-called stimulus legislation that increases the burden of government spending.
This doesn’t mean that economists – and others – are never accurate with predictions. But I am quite confident that we will never see an economic model that successfully predicts future economic fluctuations.
h/t: James Montier, via Paul Kedrosky, via Andrew Sullivan
Another Hero(ine) of Freedom Dies
Freya von Moltke, the last of the leading plotters against Hitler, has died.
“He put the question to me explicitly — ‘The time is coming when something must be done,’ ” Freya von Moltke said. “ ‘I would like to have a hand in it, but I can only do so if you join in too,’ and I said, ‘Yes, it’s worth it.’ ”
So, with a wife’s assent, began a famous challenge to Hitler. At the height of the Nazi victories, Count Helmuth James von Moltke invited about two dozen foes of Nazism, many of them aristocrats like himself, to imagine a new, better postwar Germany.
For him, his wife’s participation was essential, as she remembered the conversation in “Courageous Hearts: Women and the Anti-Hitler Plot of 1944,” a 1997 book by Dorothee von Meding.
The dissidents met at the count’s ancestral estate, Kreisau, which Bismarck had given his legendary great-great-uncle, Field Marshal Helmuth von Moltke the Elder, for his victories over Austria and France.
It was a perilous act of resistance. As many as half of the dissidents were later executed, some for actively plotting to kill Hitler, others for thinking the unthinkable: they had marshaled logical, moral and religious arguments to question the legitimacy of the Third Reich. Their high-minded planning for a future without Nazis angered a regime that expected to endure 1,000 years.
Mrs. Moltke, who disdained the title of countess, was the last living active participant in the group. She died of a viral infection on Jan. 1 at her home in Norwich, Vt., her son Helmuth said. She was 98.
In his book “The Rise and Fall of the Third Reich” (1960), William L. Shirer said the Kreisau circle had provided “the intellectual, spiritual, ethical, philosophical and, to some extent, political ideas of the resistance to Hitler.”
It is easy to become frustrated with politics today, and grow weary of fighting for liberty. But some people risk death when they take up the banner of freedom. So it was with Freya von Moltke, whose husband, Count Helmuth James von Moltke, was executed by the Nazis, along with so many others.
Now, as then, “something must be done,” in Helmuth von Moltke’s words. But we have a far easier task than did those opposing Hitler, many of whom paid with their lives. We have no excuse for not carrying on.
Where Are the Jobs?
The Washington Post‘s “Mega-Jobs” section, ballyhooed all week in radio ads and placards, turns out to be a pathetic six pages of classifieds. Not a great indication of recovery. At his December jobs summit, the president said, “I want to hear from CEOs about what’s holding back our business investment and how we can increase confidence and spur hiring.” Since then, and most recently in his Saturday radio address, he has promised to focus relentlessly on jobs.
But he refuses to take a serious look at the burdens he and his administration are placing on job creation. American businesses already face the highest corporate tax rate in the OECD. Labor Secretary Hilda Solis says her agency will seek to enact 90 rules and regulations this year to give more power to unions, and President Obama is appointing NLRB members who have said that that the NLRB could enact “card check” without congressional authorization. If Congress resists expensive “cap and trade” regulation, the EPA has announced that it can impose even costlier regulations on its own. The media blitz about state and local fiscal crises has employers worried that states will raise taxes and/or that the federal government will spend more to bail them out. The “health insurance excise tax” looks like a tax on hiring, especially for the biggest companies. Beyond any of these specific concerns is the general impact of uncertainty — employers and investors don’t know what might be coming down the pike, but none of the prospects look like making it cheaper or more profitable to hire new workers.
And in response to all this, the only idea President Obama and congressional Democrats put forward is to spend more money. There may be arguments for Keynesian stimulus. But it’s hard to imagine that the economy will benefit from a deficit larger than the currently projected $1.5 trillion, which is already a trillion dollars more than any previous deficit except for 2009. If $3 trillion in deficits in two years hasn’t stimulated the economy, it might be time to think about different strategies — like lifting the burdens on entrepreneurship, investment, and job creation.
Cross-posted at Politico Arena.
No, the ‘Real’ Unemployment Rate Isn’t 17.3%
Nearly every economic commentator from Fox News (on the fair and balanced side) to Paul Krugman (on the unfair and unbalanced side) is eager to tell you that the “real” unemployment rate is not 10% but 17.3%. The latter figure is the largest of six offered by the Bureau of Labor Statistics. But that does not make it more meaningful.
Many people believe (incorrectly) that unemployment is a measure of how many jobs were lost. But people can also be unemployed because they quit their job, or because they never worked before, or haven’t worked in a long time. Job losers accounted for 63.7% of the unemployed in December, down from 66.1% in September. If we counted only those who were unemployed because they lost their jobs, that measure of unemployment was 6.3% in December — down from 6.7% in October.
The 17.3% figure, by contrast, starts with those looking for jobs during the past month and adds “all marginally attached workers, plus total employed part time for economic reasons.” That phrase “marginally attached” means people who looked for work at some point during the past year, but not lately. Contrary to press reports, relatively few of the “marginally attached” are those discouraged about job prospects. Adding discouraged workers would only push the unemployment rate up by half a percentage point, to 10.5%. And even that small number of discouraged workers is not simply those who could not find work, but those who simply “think” no work is available, or think they are too young, too old, or that they lack the necessary schooling or training.
The rest of the “marginally attached” don’t even think they can’t find work. Instead, they are not looking for work “for such reasons as school or family responsibilities, ill health, and transportation problems.” To describe such people who are not available for work as “underemployed” (much less unemployed) is an abuse of the language.
As for those “working part-time for economic reasons,” only a fourth say they could only find part-time work. Those who normally work a 9-to-5 schedule (35 hours a week) are counted as working part-time for economic reasons if they miss even one hour “for reasons such as holidays, illness and bad weather.” That isn’t really underemployment, much less “real” unemployment.
What is unique about last year’s unemployment was its typical duration — doubling the number of weeks people remain on the dole. Because those who have been unemployed 12–18 months do not leave the ranks of the unemployed until their benefits are about to run out (after an unprecedented 79 weeks or more), it doesn’t take many newly unemployed to push the rate above 10%. Congress tripled the number of weeks people collect unemployment benefits (describing that and other transfer payments as a “stimulus”) and now wonders why so many people take so long to accept a suitable job offer. If you subsidize something, you get more of it — and that applies to unemployment too. Many of those same clueless legislators may be equally surprised to find themselves out of a job next November.
The Department of Sneak-a-Peek
The Drudge Report’s provocative banner this afternoon combines with other news to suggest a homeland security trend: sneakin’ a peek.
The other story is the question whether the nominee to head the Transportation Security Admnistration violated federal privacy laws as an FBI agent, then omitted key information in reporting it to Congress. Robert O’Harrow of the Washington Post (returning to the privacy beat!) reports that Erroll Southers, a former FBI agent, made inconsistent statements to Congress about wrongly accessing confidential criminal records about his estranged wife’s new boyfriend. (More here.)
That was 20 years ago. Being fully transparent about it today would almost certainly have prevented it from being disqualifying. But over the last 20 years, data collection has grown massively, and federal access to personal data has grown — including access by the TSA. Data about the appearance of your naked body may be on the very near horizon.
Southers’ problem with sneaking a peek at confidential records — and whatever cover-up or oversight in his reporting of it to Congress — signal precisely the wrong thing at a time when people rightly want their security not to be the undoing of privacy.
Obama Has Declared Open Season on Golden Geese. Good Idea or Not?
Chris Edwards and I wrote a nice book on this topic, but maybe this video gets the point across without having to turn a page.
Here’s another video, hopefully more substantive, on the issue of tax competition. And here’s one on the perils of class warfare.
Retiring Sen. Dorgan Was Mad about Trade
When Sen. Byron Dorgan, D-ND, announced this week that he would not be running for re-election in November, he explained that he wanted to pursue other interests such as teaching and writing more books.
As a senator, Dorgan opposed almost all efforts to liberalize trade unless it involved Cuba or the re-importation of price-controlled drugs. He holds the distinction of being the second most frequently mentioned politician (behind only Barack Obama) in my Cato book, Mad about Trade, something that I’m sure the senator would consider a badge of honor.
Here is my critical but eminently fair review of his 2006 book, Take This Job and Ship It: How Corporate Greed and Brain-Dead Politics Are Selling Out America.
George Clooney’s Docile Body
Running the airport maze to board my flight from Madrid back to the U.S. last week, I found myself thinking, with no small measure of envy, about Ryan Bingham, George Clooney’s character from Up in the Air. The ultimate frequent flier, Bingham slides shoes and belt off, flips laptop from case, and aligns them neatly on the x-ray conveyor in a seamless, fluid display of security Tai Chi. He navigates from curb to gate and back with crisp efficiency, every motion practiced and automatic.
My envy was tempered somewhat as I reread Discipline and Punish on the trip back. Bingham’s military precision, it struck me, was the product of a form of training implicit in the security process. As a corrective brace “teaches” the proper posture just by making it the only comfortable one, the screening procedures embed a set of tacit instructions, consisting of the optimal set of motions required to pass through smoothly. And of course, it teaches more than bodily motions: Bigham knows you don’t stand behind the Arabs in the screening line!
That’s not to say airport security is some kind of insidious brainwashing program, but there’s a dimension of privacy here that it seems to me we don’t talk about nearly enough. Our paradigms of privacy harms are invasion (the jackboot at the door, in the extreme case) and exposure (the intimate detail revealed). We generally think of these as exceptions — as what happens when surveillance goes wrong, either because it gets the wrong target or, when the surveillance is universal by design, because information that’s supposed to remain protected falls into the wrong hands or is otherwise misused. Invasion and exposure may be serious problems, but they are fundamentally mistakes — hiccups in the system we can seek to fix.
Discipline, by contrast, is what inevitably happens when the system functions as intended, at least to the extent people are conscious of being (actual or potential) targets of surveillance. It is probably not as serious a harm as invasion or exposure most of the time, but it’s also by far the most pervasive and ineradicable effect of surveillance. It would be nice if our debates about surveillance included not just the question “What will be exposed?” but also “How — and for what — are we training ourselves?”
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- Central Michigan defeated Troy in the “Bailout Bowl,” but taxpayers are the biggest losers.
- The 2010 census will pave the way for subsidies to state and local governments.
- Secure property rights and government support help make U.S. farmland a good investment. But what about the property rights of taxpayers?
- The federal government’s IT budget increases by $5 billion while Uncle Sam’s private sector counterparts make do with less.
- New York’s fraud-ridden Medicaid program is a prime example why government involvement in healthcare is part of the problem, not the solution.
Weekend Links
- Prepare for a national debate over devoting more federal aid to Yemen.
- Reason Magazine: Why is Washington spending so much on the military?
- An update on the ongoing tension between mainland China and Taiwan.
- Top experts will meet at Cato next week to discuss the Obama administration’s counterrorism record after one year in office.
- Podcast: “Indefinitely Confining the ‘Sexually Dangerous‘” featuring Ilya Shapiro.
On C-SPAN: What’s a Little Promise Among Friends?
My, oh my. Transparency is getting defined down to excuse a breaking campaign promise.
At the Center for American Progress’ “Think Progress Wonk Room” blog (or whatever it’s called), Igor Volsky makes the case against allowing C-SPAN cameras into negotiations about the health care bill. Recall that President Obama promised on the campaign trail to have health care negotiations broadcast on C-SPAN.
“But if one actually considers the tone and tenor of the televised health care debate of 2009,” says Volsky, “filming the conference negotiations seems counterproductive.”
He does have a point. Television causes politicians to grandstand and doesn’t necessarily improve the legislative process.
But President Obama knew that when he made the promise, and he made the promise all the same. The credibility of the legislative process suffers from its overall opacity, and Candidate Obama promised different, starting with health care legislation — to progressives’ cheers as much as any other group.
Yet he appears to be walking away from that promise. And Volsky wants to abet him with a transparency caveat — only if it “improve[s] the underlying bill.”
Improvement is in the eye of the beholder, of course. This is not a welcome gloss. It’s bait and switch. “[T]he reality of politics doesn’t square with the promises of the campaign trail,” says Volsky.
Libertarian Surge
David Paul Kuhn at RealClearPolitics sees a surge of libertarianism in the current political scene:
The philosophical casualty of the Great Recession was supposed to be libertarianism. But signs to the contrary are thriving.
Americans are increasingly opposed to activist government programs. The most significant social movement of 2009, the Tea Party protests, grew out of that opposition. Libertarian heroine Ayn Rand is as popular today as ever. Rand’s brilliant and radical laissez faire novel “Atlas Shrugged,” sold roughly 300,000 copies last year, according to BookScan, twice its sales in 2008 and roughly triple annual sales in recent decades.
We are witnessing a conservative libertarian comeback. It’s an oppositional advance, a response to all manners of active-state liberalism since the financial crisis. It’s a pervasive feeling of invasiveness. The factional bastions of traditional libertarianism, like Washington think tank Cato, now have an intangible and awkward alliance with a broad swath of the American electorate….
This limited libertarian resurgence has haunted Obama’s domestic agenda. The fundamental mistake of the Obama administration in 2009 was underestimating the American public’s ongoing tension with active-state liberalism, a fact visible from the outset and one only belatedly confronted by Obama….
Today’s limited libertarian revival is a response to a sense of overreaching elite technocrats as well as fear of an intrusive bureaucracy. Responsiveness is the core impulse. Rand’s radical libertarianism, where man is an ends in himself and the welfare state is fundamentally immoral, was a response to the radically invasive Soviet state that weaned her as a girl. On a drastically less extreme scale, one side of this American debate could not exist without the other. The Obama administration brought with it ambitions of a resurgence of FDR and LBJ’s active-state liberalism. And with it, Obama has revived the enduring American challenge to the state.
I’ve been struck by the fact that two recent profiles in the New York Times magazine — one on Dick Armey and one on the rise of Marco Rubio in Florida — have identified Tea Party protesters as libertarians, which I think is largely right but not generally noticed by pundits who can only hold two concepts (red and blue, conservative and liberal) in their minds at once. It’s not that the Tea Partiers are carrying pro-choice or anti–drug war signs, it’s just that their focus and their energy are, as the Armey profile put it, “libertarian, anti-Washington, old-fashioned get-out-of-my-way-and-I’ll-make-it-on-my-own American self-sufficiency.” They’re up in arms about spending, deficits, bailouts, government handouts, and a government takeover of health care. That’s a populist libertarian spirit.
Kuhn describes the current mood as “conservative libertarianism,” which he contrasts to “traditional libertarianism” that embraces a laissez-faire approach to both economics and personal freedom. He may be right that a lot of the Tea Partiers are not as comprehensively pro-freedom or “anti-government” (really, pro-limited government) as I’d like. But I see some evidence of a social libertarian surge as well, as I wrote back in May. Polls are finding growing support for marijuana legalization and for marriage equality, especially among young people. As young people and independents also become increasingly disillusioned with President Obama’s big-government agenda, this may be a real shift in a libertarian direction. And don’t forget, at 90 days into the Obama administration, Americans preferred smaller government to “more active government” by 66 to 25 percent.
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