Free Markets, Free People

Daily Archives: August 16, 2011

The economic miracle of food stamps

Secretary of Agriculture Tom Vilsack is excited. He’s bullish on jobs. The reason is because the Administration has a fantastic job creation program already in place: Food Stamps. You see, 1 in 7 Americans are now on food stamps. And this triumph of the  American economy means more jobs for everyone. Having 14% of Americans receiving food stamps, you see, is an Administration economic success story!

Well, obviously, it’s putting people to work. Which is why we’re going to have some interesting things in the course of the forum this morning. Later this morning, we’re going have a press conference with Secretary Mavis and Secretary Chu to announce something that’s never happened in this country — something that we think is exciting in terms of job growth. I should point out, when you talk about the SNAP program or the foot stamp program, you have to recognize that it’s also an economic stimulus. Every dollar of SNAP benefits generates $1.84 in the economy in terms of economic activity. If people are able to buy a little more in the grocery store, someone has to stock it, package it, shelve it, process it, ship it. All of those are jobs. It’s the most direct stimulus you can get in the economy during these tough times.

Here’s the video of Sec. Vilsack’s exciting statement:

Why, I now wish I was on food stamps. Then every dollar I spent would add $1.84 to the economy. Unlike now.

I mean, sure if I was some sort of racist doubter, I might wonder why, as food stamp use has increased over the past couple of years, GDP growth has declined or been very anemic. I might wonder why, if I was cynical and racist, huge increases in unemployment and millions added to the food stamp rolls were formerly a sign of economic failure, not a jobs program to be touted.

But I’ve learned so much in the past day! I’ve learned that increasingly large rolls of unemployment recipients, and an increasingly large population of food stamp recipients grow the economy and create jobs. I’ve learned that these are signs of success rather than failure. I’ve learned that if every American was on Food Stamps, we’d grow the economy by 84%. I’ve learned we have always been at war with Eastasia.

Learning is fun.

I now hate all of you who use your un-American paychecks to by food with your un-American earnings, instead of helping the economy out by getting food stamps. Now I know you hate America. And freedom.

By the way, I’ve started picking up these odd radio signals  from somewhere in the vicinity of Fomalhaut B. I just thought somebody should know about that…Maybe give Krugman a call.

Dale Franks
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More on those Texas jobs

In addition to what Bruce wrote below, I’d like to point you to Political Math’s analysis of Texas’ job performance. In this analysis, he takes the criticisms we’ve been hearing for the last two days and refutes them, point by point, using actual BLS statistical data. It’s a great job of analysis, with, like, charts, and stuff. They key takeaway:

My advice to anti-Perry advocates is this: Give up talking about Texas jobs. Texas is an incredible outlier among the states when it comes to jobs. Not only are they creating them, they’re creating ones with higher wages.

And he has the actual statistical work to back that claim up. For instance, here are two of the charts he presents, that I have superimposed to create a single chart showing the employment level in the US, compared to Texas. It’s most instructive:

TX vs US Unemployment

This single chart says a whole lot.

Dale Franks
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Jobs? What jobs in Texas … the attacks begin

And, of course, leading the parade is none other than liberal economist and New York Times hack, Paul Krugman.  His thesis?  Well, it’s the state of McJobs, of course.  And the reason for all this misunderstanding about the “Texas miracle”.  People don’t understand the impact of population growth.  Paul Krugman stands ready to explain why Texas’ growth is just no big deal and certainly nothing we want to emulate .  Let’s let him explain:

For this much is true about Texas: It has, for many decades, had much faster population growth than the rest of America — about twice as fast since 1990. Several factors underlie this rapid population growth: a high birth rate, immigration from Mexico, and inward migration of Americans from other states, who are attracted to Texas by its warm weather and low cost of living, low housing costs in particular.

And just to be clear, there’s nothing wrong with a low cost of living. In particular, there’s a good case to be made that zoning policies in many states unnecessarily restrict the supply of housing, and that this is one area where Texas does in fact do something right.

But what does population growth have to do with job growth? Well, the high rate of population growth translates into above-average job growth through a couple of channels. Many of the people moving to Texas — retirees in search of warm winters, middle-class Mexicans in search of a safer life — bring purchasing power that leads to greater local employment. At the same time, the rapid growth in the Texas work force keeps wages low — almost 10 percent of Texan workers earn the minimum wage or less, well above the national average — and these low wages give corporations an incentive to move production to the Lone Star State.

So Texas tends, in good years and bad, to have higher job growth than the rest of America. But it needs lots of new jobs just to keep up with its rising population — and as those unemployment comparisons show, recent employment growth has fallen well short of what’s needed.

If this picture doesn’t look very much like the glowing portrait Texas boosters like to paint, there’s a reason: the glowing portrait is false.

Why is it “false”?  Here’s Krugman’s explanation:

What Texas shows is that a state offering cheap labor and, less important, weak regulation can attract jobs from other states. I believe that the appropriate response to this insight is “Well, duh.” The point is that arguing from this experience that depressing wages and dismantling regulation in America as a whole would create more jobs — which is, whatever Mr. Perry may say, what Perrynomics amounts to in practice — involves a fallacy of composition: every state can’t lure jobs away from every other state.

In fact, at a national level lower wages would almost certainly lead to fewer jobs — because they would leave working Americans even less able to cope with the overhang of debt left behind by the housing bubble, an overhang that is at the heart of our economic problem.

While I’d love to take the time to research and tackle the nonsense in Krugman’s column, I don’t have too.  Kevin Williamson at NRO has done so and done so brilliantly.  He does so by comparison … something Krugman intentionally avoids.  For instance:

What, indeed, does population growth have to do with job growth? Professor Krugman is half correct here — but intentionally only half correct: A booming population leads to growth in jobs. But there is another half to that equation: A booming economy, and the jobs that go with it, leads to population growth. Texas has added millions of people and millions of jobs in the past decade; New York, and many other struggling states, added virtually none of either. And it is not about the weather or other non-economic factors: People are not leaving California for Texas because Houston has a more pleasant climate (try it in August), or leaving New York because of the superior cultural amenities to be found in Nacogdoches and Lubbock. People are moving from the collapsing states into the expanding states because there is work to be had, and opportunity.

Think again of the Krugman statement “every state can’t lure jobs away from every other state”.   Then kick it up a level.  “Every nation can’t lure jobs away from every other nation”.  Really?   Isn’t that what we’ve been complaining about for years when the word “outsourcing” is used.  Of course “every state can lure jobs from every other state” … just look at the rust belt and try to say that again with a straight face.   People go where there is economic opportunity and jobs.  That will stabilize when and if other states treat the issue the way Texas is.  That’s why legislators from all over the country are traveling to Texas to learn how they’ve accomplished what they have, despite the unfounded caterwauling of the Krugmans of the world,

Point two from Williamson  about “McJobs”.  Again, the devil is in the details, facts in which Krugman seems to have no interest:

Krugman points out that New York and Massachusetts both have lower unemployment rates than does Texas, and he goes on to parrot the “McJobs” myth: Sure, Texas has lots of jobs, but they’re crappy jobs at low wages. (My summary.) Or, as Professor Krugman puts it, “low wages give corporations an incentive to move production to the Lone Star State.” Are wages low in Texas? There is one question one must always ask when dealing with Paul Krugman’s statements of fact, at least when he’s writing in the New York Times: Is this true? Since he cites New York and Massachusetts, let’s do some comparison shopping between relevant U.S. metros: Harris County (that’s Houston and environs to you), Kings County (Brooklyn), and Suffolk County (Boston).

Houston, like Brooklyn and Boston, is a mixed bag: wealthy enclaves, immigrant communities rich and poor, students, government workers — your usual big urban confluence. In Harris County, the median household income is $50,577. In Brooklyn, it is $42,932, and in Suffolk County (which includes Boston and some nearby communities) it was $53,751. So, Boston has a median household income about 6 percent higher than Houston’s, while Brooklyn’s is about 15 percent lower than Houston’s.

Brooklyn is not the poorest part of New York, by a long shot (the Bronx is), and, looking at those income numbers above, you may think of something Professor Krugman mentions but does not really take properly into account: New York and Boston have a significantly higher cost of living than does Houston, or the rest of Texas. Even though Houston has a higher median income than does Brooklyn, and nearly equals that of Boston, comparing money wages does not tell us anything like the whole story: $50,000 a year in Houston is a very different thing from $50,000 a year in Boston or Brooklyn.

So obviously purchasing power, not wages, is the key.  If you make less money than someone in NY but can buy twice the stuff with what you earn, who has the low paying job in terms of purchasing power?  Which would you rather have?

Case in point:

In spite of the fact that Texas did not have a housing crash like the rest of the country, housing remains quite inexpensive there. The typical owner-occupied home in Brooklyn costs well over a half-million dollars. In Suffolk County it’s nearly $400,000. In Houston? A whopping $130,100. Put another way: In Houston, the median household income is 39 percent of the cost of a typical house. In Brooklyn, the median household income is 8 percent of the cost of the median home, and in Boston it’s only 14 percent. When it comes to homeownership, $1 in earnings in Houston is worth a lot more than $1 in Brooklyn or Boston. But even that doesn’t really tell the story, because the typical house in Houston doesn’t look much like the typical house in Brooklyn: Some 64 percent of the homes in Houston are single-family units, i.e., houses. In Brooklyn, 85 percent are multi-family units, i.e. apartments and condos.

Tell me again whose getting the best bang for their buck?

Williamson covers much more in his fisking of the Krugman claims and it is worth reading it all.  What becomes evident in the Williamson piece is how thoroughly Paul Krugman has sold out.  The word has gone out that the Texas success story must be destroyed.  And naturally the lead attack dog responds to the bell in Pavlovian fashion in a fact free mélange of disinformation.  Williamson draws the correct conclusion from the Krugman piece:

All of this is too obvious for Paul Krugman to have overlooked it. And I expect he didn’t. I believe that he is presenting willfully incomplete and misleading information to the public, and using his academic credentials to prop up his shoddy journalism.

Or, you’re supposed to take his word for it, not fact check him. 

As insty would say: “Indeed”.


Twitter: @McQandO

California’s Amazon tax has been successful…

…In encouraging Internet entrepreneurs to leave California. Who saw that coming? Besides, you know, everyone outside of Sacramento.

Last month, news broke of one California-based online entrepreneur who had decided to ditch California and move to Nevada in the aftermath of Gov. Jerry Brown signing the law.  ”I always figured that in California, home to Silicon Valley and a million tech startups, they’d never pass a law like this,” said Nick Loper, who formerly operated ShoesRUs and has now opened a new venture, ShoeSniper.

Per the piece in which Loper is quoted, more than 70 affiliates had at that stage already left California, according to online businesses.

Then, last Thursday, another online entrepreneur, Erica Douglass, posted a mock “It’s Over” letter to California on her blog. Douglass, who sold an internet company she had built for $1.1 million in 2007 when she was just 26, cited multiple reasons for moving to Austin.  Among them were unnecessary paperwork requirements mandated by the state, and high taxes as well as business fees.  However, the straw that broke the camel’s back, was according to Portfolio, Brown signing the Amazon Tax into law.

Apparently, the thinking was that Amazon would never halt its California affiliate program—though they’ve done so in every state that’s passed a similar law—and, Lord, the money, it would start rolling in! And even if Amazon did close down the California affiliate programs, why, the affiliates would simply switch to other affiliate programs, and the state would still get it’s money. It was a win-win for everyone.

Well, Sacramento was right about one thing: The affiliates are switching. To other states.

To be fair, it was slightly more realistic than Sacramento’s other plan, which was that flying unicorns would swoop in to sprinkle magic pixie dust on the state’s economy. Sadly, that plan was tabled in the Assembly’s budget committee. At least if they’d gone with that, I’d still be able to make a little spending money off Amazon.

Is it just me, or is the Tree of Liberty looking a little…parched?

Dale Franks
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And after that, let’s raise the minimum wage to $100/hr

It’s true that to be a progressive, one has to have the ability to believe nine impossible things before breakfast. But, surely even progressives have some limits to credulity. I’d like to think so, but then I see something like this, that even the barely literate should recognize as foolishness.

President Obama has lately been pushing a number of policies that he says will create jobs, including extending unemployment benefits. This is puzzling, since new benefits obviously will not create jobs for unemployed people, who after all are the ones who need work. But White House Press Secretary Jay Carney explained Thursday that paying out unemployment checks “is one of the most direct ways to infuse money directly into the economy because people who are unemployed and obviously aren’t running a paycheck are going to spend the money that they get. They’re not going to save it, they’re going to spend it.” True, they probably will spend the money, on their mortgages, on food, and other necessary expenses. But Mr. Carney attributed miraculous qualities to these government handouts, saying “every place that, that money is spent has added business and that creates growth and income for businesses that leads them to decisions about jobs, more hiring.”

Of course, unemployment benefits do none of those things.

Quite apart from anything else, unemployment benefits are usually far less than than, say, an actual paycheck from an actual job. The very best that might be said about unemployment benefits is that they cause job losses overall to be slightly less severe than they might otherwise be, as the distribution of said benefits ameliorates the chain reaction of job losses as unemployed workers receive some money, rather than no money at all. And, of course, it prevents the jobless from going completely under financially.

But to believe Mr. Carney, one must believe that larger numbers of people receiving and spending substantially less money creates more economic growth. This is magical thinking. If it were true, the obvious solution would be to completely shut down the productive economy, and provide every inhabitant with a government dole check. No doubt economic growth would explode if Mr. Carney were correct, although who would then be available to fill the millions of new jobs is quite beyond me.

Further, it could be argued that for low-skilled—hence, low-income—workers, extended unemployment benefits are a positive disincentive to get a job at all. After all, why work 30 hours a week delivering pizzas, if, in return for an abundance of leisure time, you can simply cash a government check every week? And, perhaps, do a little work under the table to help get by.

It also ignores the reality of where the money for these government benefits is actually coming from. It either has to be extracted from the productive economy in the form of taxes or it has to be borrowed. If it’s the former, it means less money is available in the private sector to, say, invest and create jobs. If the latter, then it adds more debt to the economy, which may not be the most practical solution if the problem is too much government debt in the first place, crowding out private investment and hindering growth.

Seriously, at what point does even the sheep-like herd of White House correspondents rise from their supine positions and tell Mr. Carney that some arguments are too stupid to be presented to their readers with a straight face?

Dale Franks
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Obama on economy — not my fault, just bad luck

If unsupported claims were currency, Barack Obama would be a rich man.  Let’s take apart a recent Obama bus tour statement:

"We had reversed the recession, avoided a depression, gotten the economy moving again," Obama told a crowd in Decorah, Iowa.  "But over the last six months we’ve had a run of bad luck."  Obama listed three events overseas — the Arab Spring uprisings, the tsunami in Japan, and the European debt crises — which set the economy back.

"All those things have been headwinds for our economy," Obama said.  "Now, those are things that we can’t completely control.  The question is, how do we manage these challenging times and do the right things when it comes to those things that we can control?"

"The problem," Obama continued, "is that we’ve got the kind of partisan brinksmanship that is willing to put party ahead of country, that is more interested in seeing their political opponents lose than seeing the country win.  Nowhere was that more evident than in this recent debt ceiling debacle."

Actually the record doesn’t show anything of the sort.  Officially, the recession was pretty much over when he took office.   He’s added almost 4 trillion to the debt anyway with no discernable effect except to see unemployment – the one thing he promised would stay below 8% if he was allowed to spend – rocket to a high of 10%.

As usual, Obama tries to lay off the poor economic performance on other events.  For instance the Arab spring.  As it turns out it had very little effect on oil prices or supplies.  Even though the administration tried to make something out of it (remember the desire to release oil from the National Petroleum Reserve?), it was, in reality, a non-factor.  And for the most part, at least in terms of the performance of the US economy, so were the other two problems he’s listed.

The not-so hidden premise, of course, is had those things not happened, the economy would be humming like a fine tuned engine.  In fact, nothing could be further from the truth.  And it hasn’t been “partisan brinkmanship” that has brought us to the economic precipice.  It has been a result uncontrolled spending.  That drag has translated into a necessity for the economy to produce more growth in GDP just to see the what we considered average growth in previous decades.   The new 3% is no probably 4% growth.  And this economy, at least now, is just not in the shape to do that.

So in reality, Mr. Obama is spinning like a top when he says things like he says above.  What we’ve suffered here is a result of out-of-control spending and excruciatingly poor economic policy.  And Obama has been at the forefront of both the spending and the policy decisions.  Don’t let him fool you with his usual attempts to blame shift.  This mess is all his.


Twitter: @McQandO