Monthly Archives: August 2011
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.
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:
This single chart says a whole lot.
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”.
…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?
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?
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.
Paul Krugman was on CNN yesterday, as a guest on “Fareed Zakaria GPS”. I’m glad of it, because he provided us with this gem:
If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better–
I guess since the Nazis and Imperial Japan are no longer with us, an alien attack threat is all he’s got left. In one sense, he’s right. If aliens were coming to attack us, we’d do whatever we had to do, and damn the expense. Of course, the aliens, assuming they were really interested in killing us all off, would probably stop close to the asteroid belt and drop bolides on us until we said "uncle". Or were extinct. Which would solve our financial problems.
Here’s the thing about military spending. we consider a lot of military spending to be on durable goods. We count it that way as part of GDP. But these goods are NOT durable goods. They are consumables. We build them with the expectation that they will be quickly, and violently consumed in combat. And outside of combat, they generally have no useful role in society.
But let’s assume he’s right. We have a massive space armaments buildup, everyone goes back to work, and we borrow another $14 trillion to do it. Great. 18 months later, everybody is working in the armaments factories, thousands of "space fighters" and orbital x-ray lasers are buzzing around in near earth orbit, command bunkers are built deep in the earth’s crust…woo hoo! The economy is booming again.
Then we find the threat has been mistaken. There aren’t any aliens coming to attack us. Are we really better off? I mean, we’ve been better off for a couple of years, while we were preparing for the aliens, and everybody was working. But what happens now?
Now we have a huge stockpile of useless military equipment that we have to destroy, or borrow more money to maintain. Demand for plasma cannon and shield generators disappears. The armaments factories close down, and those jobs are gone forever. We have rung up a $30 trillion debt to purchase a massive amount of goods that have no constructive purpose, and generate no wealth. And what wealth we did have is now sunk into space weaponry we can’t use for…well…anything. What we can use, we have a glut of, and have to either destroy or surplus out.
So, where do all the jobs go now? How are we better off? All the alien-fighting military and civilian jobs evaporate, our national wealth has been sunk into useless alien-fighting equipment, and we’re now carrying a debt of 200% of GDP. It seems to me that we’re now worse off than we were before the alien scare.
This is Keynesianism taken to the furthest logical extreme: We’d be better off creating a massive buildup of useless and unusable military equipment, because it would stimulate the economy. The trouble is, how do we pay for it once we’ve done it?
Frankly, if the aliens do come, I’d prefer that we do nothing. If they can cross the vastness of interstellar space, their technology is so far ahead of ours that any attempt at defense would be futile. And, of course, I presume that any society so advanced would, if nothing else, deliver us from Prof. Krugman’s brand of irrational economics once and for all.
The article today in the New York Times where Warren Buffet laments that he just gets off so easily at tax times is one of those hinkey pieces that establishes two premises that are, in fact, nonsense.
Premise one is the rich are not paying their fair share. IRS statistics consistently tell us that it is the bottom 50% who aren’t paying any share and the so-called rich pay the lion’s share. Buffet at least tries to push it toward “super-rich”, whatever that means. However, it is just another version of the class warfare argument the left has been trying for years. Bill Clinton has stood up and said “why aren’t they taxing people like me more?” Barack Obama has done the same.
Here’s what Buffet is pitching:
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
Buffet first goes right to the class aspect of it in the most emotional manner possible. The implication, of course, is that the rich aren’t fighting … they don’t have too. Obviously then the “poor and middle class” must. They couldn’t do it for reasons other than they must, I guess.
And, of course, the other other narrative is that 15% is a “bargain” tax rate. He attempts to make the point that the super-rich don’t do much work to earn their money. Well here’s a clue for Mr. Buffet – the government doesn’t work at all for the 15% it takes.
Premise two is that if they’d just tax the rich more, all of our revenue problems would be over. The fact is that’s not even close and a money man like Buffet knows that. What it would do, though, is help dry up any revenue that is now being gotten from investments as the rich seek other ways to invest and protect their income. Again, this should be Econ 101 stuff for a guy like Buffet.
The government could tax the rich 100% next year and still have to borrow money. But we know, given human nature, that there’d be no 2nd year at 100% because those with that sort of money would have found ways to protect it by then. Meanwhile, the economy would be in reverse.
Finally, Buffet says:
I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.
Would someone who has Warren Buffet’s email please apprise him of the fact that a) he doesn’t speak for all the “rich” so he ought to confine his appeal to only himself and b) if he’s really serious about this, he doesn’t have to wait to have the government increase his taxes, he can voluntarily contribute any amount he wishes to the US Treasury to help pay down the debt or help their “fellow citizens” who are “truly suffering”.
Of course he do everyone a much greater favor if he’d take that money and instead invest in a business that’s got promise so they can expand and hire people. Dollar for dollar that would do everyone more good than appealing to government to raise tax rates on those who actually do have the option of what I described.
But, of course, that doesn’t fit the liberal narrative and the one thing those like Buffet and George Soros have reliably done for some time is push that narrative.
I‘ll be honest with you. I dunno if Rick Perry would be a good president or not. I don’t even know if he’s been a particularly good governor of Texas. But it’s becoming apparent he’s perceived as a pretty big threat to Barack Obama. The guy entered the race less than 48 hours ago, and we’re already being treated to things like this, this, and this, from the usual suspects on the left. It’s like the oppo research has already been done, and they were just waiting to go with it. As hard as that might be to believe.
In the next couple of weeks, we’re going to learn more about Rick Perry than we ever thought possible. Which kind of inclines me to think that anybody that has the Left jumping in to castigate them this quickly must have something going for him.
What’s especially interesting about this response is that we knew what Rick Perry’s college grades were before he even announced his candidacy, and 2.5 years into Obama’s presidency, we can merely state, with some degree of confidence, where he went to college.
At least we won’t have to worry about whether Rick Perry gets properly "vetted".
A federal judge has scrapped the Obama Administration’s rules for drilling. The new rule required oil and gas producers to do additional environmental studies for each new site (or if increased drilling was to be done at an existing site) even though such studies had been completed on the entire tract previously. Under the Bush-era ‘categorical exclusion’ rule, the existing studies and approval for the entire tract were sufficient and subsequent studies for new drilling on that tract were waived.
The Energy Policy Act of 2005 allows the BLM and Forest Service to invoke categorical exclusions and skip new environmental review for drilling permits under certain circumstances.
The circumstances include instances where companies plan to disturb relatively little ground and environmental review already has been done for that area. A categorical exclusion also can be invoked when additional drilling is planned at a well pad where drilling has occurred within the previous five years.
The Obama administration had issued new rules which revoked categorical exclusions (used extensively in the Western US until last year) and required new environmental studies for each new planned drilling or expansion of drilling, slowing the process to a crawl.
The plaintiff, Denver-based Western Energy Alliance, argued that the new rule had created delays that thereby added cost and materially hurt (and thereby created “recognizable injury”). The administration rejected the argument saying it was “speculative. However, the federal judge, U.S. District Judge Nancy Freudenthal , did not:
"Western Energy has demonstrated through its members recognizable injury," she said. "Those injuries are supported by the administrative record."
This, of course, is good news for the oil and gas industry, good news for job hungry Americans and, ironically, a ruling the “focused on jobs like a laser” administration is sure to appeal.