Archive for August, 2010
Media Feeds America’s Skepticism about Trade
As usual, Dan Griswold does an excellent job today correcting fallacies about trade and the trade deficit that continue to be perpetuated in the mainstream media (particularly at the Washington Post).
I just want to add my two cents without belaboring any of Dan’s succinctly-made points. (Besides, I’ve harped on and on and on and on and on about the problem of trade reporting this year.) It’s a shame that so much time and energy has to be diverted to cleaning up messes left by reporters and editors, who should know better by now.
The bottom line is that neither imports nor trade deficits cause U.S. job loss or slower economic growth. If anything, the charts below (all compiled from BEA and BLS data) support the conclusion that imports and the trade deficit rise when the economy is growing and creating jobs, and they both fall when the economy is contracting and shedding jobs.
Parents, Mark Your Calendars: September 14th Is Obama Day At School!
Yesterday, White House sources confirmed that President Obama will deliver another back-to-school address aimed at all of the nation’s children. That’s right, the president will make September 14 the second-annual Obama Day at your local school!
You might recall last year’s Obama Day, for which the U.S. Department of Education put out teaching guides that gave parents across the country reasonable cause to fear a day of liberal politics and celebrating President Obama. You might also remember the divisive national uproar that precipitated, which ultimately culminated in a relatively staid — but nonetheless campaign-esque — speech, not to mention a fair amount of after-the-fact sneering at people who either didn’t want public-school kids exposed to left-wing politicking or just wanted their kids, you know, left alone by the president. Finally, you might recall the May Parade magazine graduation “address” the president wrote that offered just the kind of profit-denigrating, “service” extolling rhetoric that people feared eight months earlier:
Of course, each of you has the right to take your diploma and seek the quickest path to the biggest paycheck or the highest title possible. But remember: You can choose to broaden your concerns to include your fellow citizens and country instead. By tying your ambitions to America’s, you’ll hitch your wagon to a cause larger than yourself. You can choose a career in public service or the nonprofit sector, or teach in an underserved school. If you have medical training, you can work in an understaffed clinic. Love science? You can discover new sources of clean energy or launch a business that makes the most efficient and affordable solar panels or wind turbines.
So will this year’s Obama Day be as controversial as the last installment? Probably not.
For one thing, unless the White House is not just wearing blinders, but living in a full-on isolation tank, it won’t authorize the release of any lesson plans to go with the talk. And if it does, it will scrutinize them, put them before focus groups, and torture them until they give up any and all material that could be even minutely controversial.
Second, while there is plenty of anger to go around right now, there’s been no burning summer of discontent like last year’s spree of town-hall conflagrations. It seems the growing ranks of fuming Americans are now more focused on ballot boxes than soap boxes.
Finally, last year there was a sense that President Obama — who’d led the “stimulus” charge, driven the takeover of GM and Chrysler, was championing huge and incomprehensible health-care legislation, and had repeatedly been in Americans’ faces — was simply too much in our lives. Directing his near-ubiquity toward peoples’ kids only made matters worse. Oh, and some of the rather off-putting stuff from the “Cult of Obama,” as Gene Healy dubbed it, probably didn’t help.
This year, while certainly still a presence, it seems the president has made himself more scarce.
So the coming address is not likely to launch nearly the same seismic outrage as last year’s. But there’s still good reason to object to it.
Is the Trade Gap to Blame for Slowing GDP Growth?
What had been a recurring story line buried in the business pages has now burst onto the front page: “Economic growth slowed by trade gap,” the Washington Post reports this morning in an above-the-fold headline.
The lead sets the stage for a story long on generalizations: “A widening U.S. trade deficit has become a substantial drag on economic growth as the country’s exports struggle to keep pace with the swelling sums that Americans are again spending on imported goods.”
The half truth in the story line is that exports fell by $2 billion in June compared to the month before, and that this has a negative effect on overall GDP growth. In our more globalized world, the rising wealth of our trading partners translates into more production in our own economy, and vice versa.
The fatal flaw of the story line (as I tackled recently here and at greater length here) is that it assumes that rising imports slow economic growth. That assumption, in turn, rests on a simplistic Keynesian view that if a portion of domestic demand is satisfied by spending on imports, that means less demand for domestically produced goods, thus less output and lower employment.
That view neglects the supply-side role of imports. More than half of what we import consists of goods consumed by producers—capital machinery, raw materials, parts and other intermediate inputs. Those imports help us produce more, not less. The Keynesian view also confuses cause and effect: Imports usually grow in response to RISING domestic demand. Consumers more eager to spend “swelling sums” on imports typically buy more domestically produced goods as well.
The bean counters at the Commerce Department “subtract” imports from GDP, not because those imports are a drag on growth, but to avoid double counting. If we want to count the number of widgets and other goods added to the economy in a quarter, we would obviously not count those that have been imported. But this does not mean the economy would have been that much larger if the widgets had not been imported.
What Everyone Missed in the Revised GDP Data
Quoting from the revised GDP report: “Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 4.9 percent in the second quarter, compared with an increase of 3.9 percent in the first.”
Although 4.9 percent is clearly faster than 3.9 percent, every leading newspaper will surely report that the GDP report proves the economy is “losing momentum,” and (absurdly) that slower GDP growth in one quarter is evidence of a double-dip recession.
After accounting for slower growth of inventories, “final sales to domestic purchasers” increased 4.4 percent in the second quarter, compared with 1.3 percent in the first quarter. Losing momentum?
Real disposable personal income also increased 4.4 percent, compared with 1.7 percent in the first quarter. Losing momentum?
Business fixed investment increased 17.6 percent, compared with 7.8% in the first quarter. Losing momentum?
Fiscal or (more likely) monetary “stimulus” only claims to speed up “domestic demand” (spending). It turns out that much of that spending went to imports in the second quarter. But that certainly does not mean, as the demand-side fetishists would have you believe, that households and firms were not spending.
Bingaman Gets Paid to Flout Disclosure Rules
Judging by his earmark disclosures, Senator Jeff Bingaman (D-NM) seems to have said “To hell with you!” to the Senate Appropriations Committee and its earmarking rules. But the committee is doling out money to him anyway. It seems rules were made to be broken.
In March, the committee issued a press release reiterating its rules about earmarks—funding requests for special projects that go into Congress’ annual spending bills. Among other things, the rules say:
The Appropriations Committee will consider no request for spending on congressionally directed items … unless a description of the items proposed—including their purpose, location, the recipient of the funds, and an explanation of why the spending is in the interest of the taxpayers—is made publicly available on the Senator’s office website…
Take a look at Senator Bingaman’s earmark requests [ugly PDF image] for the Energy & Water appropriations bill. It’s a day-late, dollar-short disaster! (Bingaman’s disclosures for other approps bills are collected here.)
Take one funding request, identified only as “Central NM 593.”
The location of the project is “Bernalillo, Valencia, and SandovaNM1 [sic] Counties.”
Its purpose and benefit to taxpayers? Just two words: “Water Supply.”
Nowhere does Senator Bingaman say who will receive the money. It’s something taxpayers might like to know, and the Senate Appropriations Committee requires its disclosure.
Is National Journal Giving ObamaCare a Big, Wet Smooch?
Come September, National Journal will host a policy summit titled “Prescription For Growth,” funded by Eli Lilly, that will probe “the potential impact of recently passed health care reform as an economic engine” and ask whether “health care reform [will] serve as a jobs creator and accelerate growth in health-related industries?”
Oy, where to begin?
I suppose I could start with how a news organization that bills itself as “the leading source of nonpartisan reporting” could lend ObamaCare a positive gloss by calling it “reform” — a term that even NPR declines to ascribe to actual legislation (for that reason).
Next, there’s this inane question of whether ObamaCare will spur job growth in the health care sector. With two new health care entitlements and maybe a trillion dollars of new health spending…gosh, d’ya think?
But then there’s the presumption that creating new health care jobs is a good thing. You’d think it would be. After all, unemployment is near 10 percent. But one of our biggest health care problems is that there are too many health care jobs. The Dartmouth Institute’s Elliot Fisher has quipped, “In theory, we could send a third of the U.S. health care workforce to Africa and improve the health of both continents.” ObamaCare will just make this country’s health care sector even more bloated and inefficient.
Wrap your head around all that this summit aims to accomplish. It could give a boost to an unpopular and embattled law by taking one of the law’s biggest liabilities and dressing it up as an asset. It could create a meme that helps turn around President Obama’s low approval rating on the economy — never mind that ObamaCare is stifling the right kind of job creation.
Of course, I may have this summit all wrong. It may give all these issues a fair hearing.
Did I mention the summit’s sponsor is one of the biggest special-interest beneficiaries of ObamaCare? (Tim Carney, call your office.)
Let’s Regulate Barney Frank’s Pay
“Rep. Barney Frank, chairman of the House Financial Services Committee, said Tuesday that he will hold a hearing this fall to examine whether regulators are being tough enough in curbing pay practices at Wall Street firms that can lead to excessively risky practices,” writes Zachary Goldfarb in the Washington Post.
Hmmm. “Pay practices that can lead to excessively risky practices.” Since Barney Frank entered Congress, federal spending has risen from $590 billion in 1980 to $3.7 trillion this year. (U.S. Budget, Historical Tables, Table 1.1) The annual deficit has risen from $74 billion to $1.5 trillion. Gross federal debt rose from $909 billion to $13.8 trillion — and to over $15 trillion next year. (Table 7.1) And all this without a major war or depression during those 30 years.
Maybe we should adjust pay practices for members of Congress to give them an incentive to avoid risky, unaffordable, out-of-control borrowing and spending.
How (Not) to Do Scholarly Research
Nuno Monteiro, now an assistant professor at Yale but once my preceptor at the University of Chicago, has an interesting note on two aphorisms of the French poet Paul Valéry and how they apply to scholarly research. My favorite is the second:
“A work is never achieved — meaningless word — but abandoned.” (“Un ouvrage n’est jamais achevé — mot qui n’a aucun sens, — mais abandonné;” sometimes also liberally translated as “A poem is never finished, merely abandoned,” or some such variation.)
Nuno Monteiro
Nuno goes on to apply this thought to his experience advising students (and I–perhaps as liberally as the errant translators above–read myself into this passage):
I have witnessed a great deal of unnecessary, counterproductive agonizing by students and other authors attempting to perfect their argument beyond what is feasible or useful. Like the poet, the researcher must know when to drop the project, call it done, and move on to the next question. One of the few certainties I have about research is that one will never feel one did a perfect job; that the project is finished, or achieved. The trick is to learn when to drop it; to learn to identify the point beyond which the marginal utility of additional effort becomes negative. Then it’s time to call it a day.
That’s perhaps a perfect note on which to pass along the paper I’ll be presenting at this year’s American Political Science Association annual meeting, available for download at SSRN. Should you happen to be attending APSA, please drop by the panel where it will be presented, or the panel I am chairing, which features a paper coauthored by another of my U of C advisers, John Schuessler, who’s now at the U.S. Air War College.
In other news, I will be doing a bit of live-blogging (well, sort of live), reporting on sessions I’ve attended during the APSA annual meeting over at the Cato defense and foreign policy team’s new blog at the National Interest magazine. Keep an eye out for APSA-related posts starting next Thursday.
PDK: Charter Schools Finally As Popular as Education Tax Credits Have Been Since Before Clinton’s Impeachment
The new PDK/Gallup education poll for 2010 is out, with the standard problems we can expect from this pro-government school/anti-choice outfit. Randi Weingarten even gets some column space! Oh Randi, you proud yet humble teacher. The “Commentary” sidebars in general were cringe-inducingly hackish and treacly.
It is interesting that there was a big spike in the percentage of people saying the biggest problem schools must deal with is a lack of funds. They’ve done a great job convincing folks there’s no money.
Of course, the way the question is worded, it encourages respondents to think about the difficulties schools are facing, which despite their flush accounts probably is dealing with funding issues. I’d like to see the answers to “What do you think are the biggest problems preventing the public schools of your community from increasing student achievement?” or some such question. And they certainly should ask how much people think is being spent. “The Research Organization formerly known as Friedman Foundation,” or TROFKAFF, has some great state polls showing how horribly misinformed most people are about the spending issue.
PDK is still boycotting the voucher question for a few years running.
But what is really indefensible is that they haven’t asked about education tax credits since 1999, just when the policy took off. There are now 12 credit programs in 9 states. Maybe support was far too high for their taste? In 1999 support was in the high 60′s, even after a battery of questions about vouchers and pitting public reform against private choice.
Good news for charter schools, which have finally pulled ahead of the support credits enjoyed during the Clinton administration, thanks no doubt to an increase in support among Dems/liberals courtesy of Obama lip-service. PDK; update please.
Obama on Human Rights in America
I’ve just sent a short post to ”The Corner” at NRO on the Obama State Department’s new report to the U.N. Human Rights Council on human rights conditions in the U.S. In a word, we’ve got problems, especially concerning women, minorities, etc., but we’re trying to live up to the expectations of other human rights exemplars on the council — Russia, China, Saudi Arabia, Cuba.
Read and weep.
Spending and Deficits
E. J. Dionne writes in the Washington Post today that many Republicans think the George W. Bush administration was “too ready to run up the deficit.” But, he says,
That the deficit increased primarily because of two tax cuts and two wars was not part of most conservatives’ calculation because acknowledging this was ideologically inconvenient.
That’s one explanation. Of course, spending did rise by more than a trillion dollars during Bush’s eight years, and it wasn’t all military spending.
And as Michael Tanner writes today, “The Deficit Is a Symptom, Spending Is the Disease.”
Traditionally, federal spending has run around 21 percent of GDP. But George W. Bush and (even more dramatically) Barack Obama have now driven federal spending to more than 25 percent of GDP. And as the old joke goes, that’s the good news. As the full force of entitlement programs kicks in, the federal government will consume more than 40 percent of GDP by the middle of the century.
The real objection of libertarians and many conservatives to Bush is the massive increase in federal spending. As Tanner says, the deficit is just the symptom of an out-of-control, overspending federal government.
Mr. President, Tear Down That Andy Griffith Ad
The Obama administration spent your tax dollars on a pro-ObamaCare ad, featuring Andy Griffith, that FactCheck.org found uses “weasel words” to “mislead” seniors about how that law would affect them. (As I blogged previously, FactCheck.org understated the case.) Nonetheless, over at Medicare.gov, the administration is still running that dishonest ad.
They should take the ad down.
Filed under: Cato Publications; General; Government and Politics; Health Care
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