More Competition For The Worst Economics Writer In America

Regular reader Barry F, following up on Sunday's post here, sends in an additional nomination for the august title of Worst Economics Writer In America.  The nominee is Matthew Yglesias, head business and economics correspondent for the online magazine Slate.  To support the nomination, Barry links to Yglesias's April 1 post at Slate entitled "Print Money.  Mail Everybody a Check."

This is indeed a worthy nomination.  Yglesias, both at this post and throughout his writing, shows a spectacular lack of understanding of literally everything about what makes an economy work, and can be consistently counted on to advocate the most destructive possible policy in any given situation.  But Krugman is a very tough competitor.  No sooner had Barry made his nomination than Krugman put up his own April Fools Day lollapalooza, "Lessons From a Comeback," proving that this coveted crown cannot be so easily dislodged.

In his April 1 post, Yglesias picks up on Ben Bernanke's suggestion a few years ago that a central bank as a last resort could drop cash out of helicopters.  Instead, Yglesias says, the central bank should "mail checks" directly to American families.  And he then proceeds to list, with an apparent straight face, the many advantages of this proposal, such as:

​ it makes the budget deficit go down rather than up

​ Children in a Native American tribe that got revenue from a new casino had much better mental health than children whose families didn’t get the unexpected bonus

​It’s also really fast

And so forth.​  Might this kind of program undermine the structure of incentives that made the economy happen in the first place?  Not part of Mr. Yglesias's concerns.

I know what you are thinking:  this was an April Fools gag, not to be taken seriously.  Yes, this article is so stupid that that hypothesis must be considered.  However,​ Slate helpfully provides a listing of recent posts by Mr. Yglesias that firmly establishes his credentials among the very worst of economics writers, including, for example, a defense of new PM Shinzo Abe's plans for another round of "stimulus" in Japan (will they never notice that 25 years of "stimulus" in Japan has led to 25 years of stagnation?), the contention that a modest reduction in destructive poverty trap housing subsidies is "Sequestration's Unkindest Cut," endless advocacy of higher taxes, and on and on.  No, the April Fools joke theory will not fly.  This guy has fallen for every economics fallacy and then some.

But as I say, Krugman is one very tough competitor.  ​"Lessons From a Comeback" is about the supposed comeback of California from its recent financial crisis.  Mr. Krugman is prepared to declare that California is back, even before any results of its recent round of major tax increases have even been reported:

​Unemployment in California remains high, but it’s coming down — and there’s a projected budget surplus, in part because the implosion of the state’s Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.

OK, in Japan they've been "proclaiming" a comeback for 25 years.  You'd think these guys might have the prudence to wait for even one quarter's data to come in, but that's not their style.  But then we come to my favorite part:​

Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.

I don't know if I qualify as one of Mr. Krugman's "usual suspects," or what exactly he means by "doom."  But I know what I am predicting.  I am not predicting immediate default or that the whole population of California picks up and leaves tomorrow.  I am predicting long term gradual relative decline.  I am predicting the same thing for California that New York City experienced in the 1970s, when ​it allowed its combined state and city income tax rate to exceed 18% when New Jersey and Connecticut had no income tax.  During that decade the City lost 1 million of its population, the Bronx was burning, Stamford and Jersey City were booming, and a new corporation announced the departure of its headquarters on about a weekly basis.  California's taxes today aren't that wildly out of line, so it won't be that bad, but it will be a significant gradual relative decline.  Not unlike what New York is experiencing right now relative to Texas and Florida.  Sure, some new businesses open, new buildings go up, areas are gentrifying.  It's just that incomes and populations are going up far faster in Texas and Florida.

And what exactly are those "serious studies" Krugman refers to that find "very little evidence" that state taxes have any significant impact on growth.  Has New York's experience in the 70s just gone down the memory hole?  Can they look out the window and see what is happening to New York and Illinois versus Texas and Florida.  I say Krugman keeps his crown!​

Is Yale Going Back To Its Roots?

My friend from New Haven sends along an invitation to the Fourth Annual Conference of the Yale Climate & Energy Institute, to be held April 5.  The subject of this year's conference?   Water: The Looming Crisis.​  Here is a link to the program and list of speakers.

You may not have realized that there is a "looming crisis" of water.  Could this have anything to do with the collapse of the global warming scam?  At first it may seem a stretch, but, yes it does.

About half the program consists of panels, and the other half of speakers who get the podium all to themselves.  And who are these featured speakers?  They are leading lights of the global warming movement, including established frauds Gavin Schmidt and Peter Gleick.​

​I don't use the term "frauds" lightly.  Schmidt is the right-hand man of James Hansen at NASA/GISS in Manhattan, best known for its global and U.S. historical temperature series.  These are the people who have been caught red-handed "adjusting" the temperatures of the past downward in order to make it appear that temperatures have spiked upwards in the late twentieth and early twenty-first centuries.  Raw data showing that 1934 and 1921 were the warmest years in the United States have been removed from their website in favor of "adjusted" data showing the more recent years to be warmer, and to turn a downward trend into an upward trend.  See detailed data and graphs at links here and here.

Then there's Gleick.  He was caught in early 2012 forging a document to smear the small think tank known as the Heartland Institute that has incurred wrath by giving a platform to global warming skeptics.   See my previous post here and embedded links.​  After it became obvious to all that Gleick was the forger, he declined to answer questions on the subject, and was suspended from his jobs as President of the Pacific Institute and head of the Task Force on Scientific Ethics of the American Geophysical Union.  But somehow by mid-2012, without any kind of investigation or explanation,  he was back at the helm of the Pacific Institute, and by December 2012 he was back as a featured speaker at the AGU convention.  And now, featured speaker at the Yale conference!

​And how exactly do these global warming promoters find themselves at a conference about the supposed "looming crisis" of water?  Well, check out what they are speaking about.  Schmidt:  "Constrain[ing] Future Hydrologic Changes"; Gleick: "Peak Water Solutions in a Changing Climate."  It's all about finding the latest hook to scare the bejeezus out of the people over the punishment awaiting them for their sins of excessive materialism.  Do you no longer believe that temperatures are spiking and we are all going to fry?  Then we say that the water will come to punish you!

Well, this is more or less where Yale started out back in the eighteenth century.  ​Consider Jonathan Edwards.  An early Yale "tutor" in the 1720s, he has one of Yale's residential colleges named after him.  He also went on to an illustrious preaching career in the Great Awakening, and is most famous for his great 1741 sermon "Sinners in the Hands of an Angry God."  A few excerpts please:

​They deserve to be cast into hell; so that divine justice never stands in the way, it makes no objection against God's using his power at any moment to destroy them. Yea, on the contrary, justice calls aloud for an infinite punishment of their sins. . . .

They are already under a sentence of condemnation to hell. They do not only justly deserve to be cast down thither, but the sentence of the law of God, that eternal and immutable rule of righteousness that God has fixed between him and mankind, is gone out against them, and stands against them; so that they are bound over already to hell.​ . . .

They are now the objects of that very same anger and wrath of God, that is expressed in the torments of hell. And the reason why they do not go down to hell at each moment, is not because God, in whose power they are, is not then very angry with them; as he is with many miserable creatures now tormented in hell, who there feel and bear the fierceness of his wrath. Yea, God is a great deal more angry with great numbers that are now on earth: yea, doubtless, with many that are now in this congregation, who it may be are at ease, than he is with many of those who are now in the flames of hell. . . .

​I'll say this for Jonathan Edwards:  I have no doubt that he really believed it.  That puts him on a far higher plane than Schmidt and Gleick, who are just frauds and crooks preaching hellfire and brimstone under a fake banner of "science" to get themselves grants for their phony institutes.  Yale, what are you thinking?  That you are better than Columbia that hires convicted murderers?

Competition For The Worst Economics Writer In America

You probably think it is so obvious that Paul Krugman is the worst economics writer in America that the proposition is not even worth discussing.  But over at National Review Online, Kevin Williamson thinks he has a competitor for the prize:  Martin Crutsinger, Chief Economics Writer for the Associated Press.​

To his credit, Williamson nails the fundamental problem with the economics reporting by Crutsinger (and for that matter, the rest of the AP staff):​

You will be hard-pressed to find an Associated Press report acknowledging the fact that government spending is accounted for at cost when calculating GDP.​

It's not like Crutsinger ever makes a principled argument for why Fake Keynesianism is a good view of the economy.  It's just that he has so totally internalized the fallacy that it is everywhere in his reporting without his even seeing it.  So you get things like this whopper from his report of February 28:​

"the only impediment [to economic growth of around 2%] . . . may be the across-the-board government spending cuts that kick in Friday."​

Back to Williamson:​

The final product is an AP-distributed political worldview that government spending is always good for the economy, good for employment, good for construction, etc., with little or no contemplation of the possibility that government spending may be one of our more significant economic problems.​

OK, that's bad.  But could it really be worse than Krugman, who just takes everything about economics and turns it around a full 180 degrees?  Consider his recent column from March 28, entitled "Cheating the Children."  And how exactly are we cheating the children?  You might guess, by taking on huge amounts of debt that they will never be able to repay?  Wrong:​

Yet there is, as I said, a lot of truth to the charge that we’re cheating our children. How? By neglecting public investment and failing to provide jobs.

So in Krugman's view, we are cheating the children by not having enough government spending and not taking on enough debt.  Got that?​

​Sorry, Kevin, but Krugman has Crutsinger beat by a mile.

There Is Nothing Like Going On "Disability"

Back in December 2012 I wrote a post titled "Who Could Be Against Disability Pensions?" pointing out the sad truth that the New York disability pension programs are riddled with unbelievable levels of fraud:  for example, 75% of New York City firemen retiring with supposed "disabilities"; 97% of Long Island Rail Road workers retiring with supposed "disabilities."  It seems that the temptations of a free check every month for life without having to do anything are just too great for many people.  The post concluded, 

I wonder if it's actually possible to have a government-run program for disability payments without having it explode because of endemic fraud.

Now comes along Chana Joffe-Walt at NPR (of all places) to write what promises to be a four-part series on the Social Security disability program.  Here is the first part. ​

Please read the whole thing.  Literally every line is a warning of how badly wrong good intentions can go.  ​

The concept behind Social Security disability is that if you are sufficiently disabled that you are unable to do productive work of any sort, you are an appropriate candidate for the safety net, in the form of "disability" payments, to sustain you at a minimum level for the rest of your life.  At first consideration, almost no one would disagree with the concept.  But the designers of the program seem to have given almost no thought to the problems that perverse incentives can cause.   

The result is a program that sucks people in, and from which almost no one escapes.  The number of beneficiaries continues to explode in good times and bad.  Rolls have about doubled during the Obama administration, increasing by some 5.4 million people over the past 4 years according to Investors Business Daily.​

Let's consider a few examples of perverse incentives and how they play out.  It turns out that the costs of welfare (now known as TANF) are shared between state and Federal governments; but SSDI is all on the Federal dime.  So states can save a buck by transferring people from TANF to SSDI.  How does that play out?  From NPR:​

PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability. "What we're offering is to work to identify those folks who have the highest likelihood of meeting disability criteria," Pat Coakley, who runs PCG's Social Security Advocacy Management team, told me.  The company has an office in eastern Washington state that's basically a call center, full of headsetted women in cubicles who make calls all day long to potentially disabled Americans, trying to help them discover and document their disabilities:  "The high blood pressure, how long have you been taking medications for that?" one PCG employee asked over the phone the day I visited the company. "Can you think of anything else that's been bothering you and disabling you and preventing you from working?"

Of course, welfare/TANF has time limits, but disability is a lifetime entitlement where nobody so much as checks up on you once you qualify.  It's the ultimate poverty trap.​

Then there's the story of Charles Binder, SSDI attorney extraordinaire, whose firm in 2012 represented some 30,000 clients and earned some $68.7 million (!) in fees, in each case seeking SSDI benefits.  How much of an effort does the government put up to be sure that those seeking benefits are actually "disabled" in the sense commonly understood?  The answer is, when a claimant seeks a hearing to get benefits, the government does not even put on a defense, no matter how poor the claimant's case:​

Who is defending the government's decision to deny disability?  Nobody.  "You might imagine a courtroom where on one side there's the claimant and on the other side there's a government attorney who is saying, 'We need to protect the public interest and your client is not sufficiently deserving,'" the economist David Autor says. "Actually, it doesn't work like that. There is no government lawyer on the other side of the room."

So what are the things that qualify you as "disabled" and entitled to a monthly check for life?  Of course, they are largely subjective things that depend almost entirely on the claimant's word and cannot be objectively verified.  Number 1, at 33.8% of cases in 2011, is "back pain and other musculoskeletal problems."  Number 2 at 19.2% is "mental illness, developmental disability, etc."​

The incentives of this program are as thoroughly perverse as it is possible to imagine.  Absolutely no one involved with the system has any incentive to keep costs under control; rather, everyone has every incentive to milk the program for every cent possible.  Once on disability, virtually no one leaves -- the departure rate is barely 1%. Everyone involved -- the consultants like PCG, the lawyers like Binder, the states, the administrative law judges, and most of all the beneficiaries -- make lots of free Federal money.​  If you're curious, the annual cost of the program is currently running about $124 billion, according to Bloomberg here.  Real money.  Another 4 years of Obama are likely to add at least another 5 million to the rolls.

​The answer to my question, unfortunately, is that it is not possible to have a government-run disability program without having it explode with an epidemic of fraud.

​

Europe Bails Out Cyprus

The news on the Cyprus bank bail-out is that in its final iteration it is a lot closer to just letting the banks fail.  The question I have is, why didn't they go all the way?​

​The basic outlines of the deal, struck Sunday night, are here in the Guardian (and in many other sources):  Bank Laiki is being closed.  It's insured depositors will get their 100,000 euros, and above that depositors will lose much or all of their savings.  Bank of Cyprus will be "heavily restructured," so the details of who will end up where are much murkier.  Presumably, the 100,000 euro deposit guaranty will also be honored.  Oh, and the ECB coughs up 10 million euros.  Presumably the latter is "needed" because the tiny government of Cyprus does not have the money to pay off its 100,000 euro deposit guaranty.

This deal is much closer than the previous versions to what would have happened if the banks just failed under the existing rules and with no bailout.  In the "just fail" scenario, I would think that the under 100,000 euro depositors get paid until the government of Cyprus runs out of money.  Remaining unpaid depositors, both under and above 100,000 euros, become equity of the restructured bank.​  Non-depositor creditors and prior equity get wiped out.

There are lots of reasons why the "just fail" scenario is preferable.  ​In the "just fail" scenario, prior management has no right to continue, and the prior depositors, as new equity, can hire new people with a new approach.  In the "just fail" scenario, the cents on the dollar going to uninsured depositors turns on how under water the bank is, thus giving depositors the next time around an incentive to monitor the finances of the bank they invest in. 

So why not go that route?  It's the same story heard in the Greece/Spain crises over the past few months.  As articulated by Michalis Sarris, Cyprus' Finance Minister:​

It's not that we won a battle, but we really have avoided a disastrous exit from the eurozone.

​Good threat Mr. Sarris.  But why exactly would Cyprus exit the euro?  None of the U.S. states that defaulted in the 1840s tried to exit the dollar.  (And at the time many thought they had a right to exit if they wanted.)   Frankly, I don't believe for a minute that Cyprus would have done it.  The benefits of being in the euro are too great.  Yes, you have to roughly balance your budget and not take on obligations far in excess of your GDP to foreign bank depositors.  That's the regime under which the U.S. states operate, and it's the best thing that ever happened to them.  The Eurozone's problem is that other countries, mostly Germany, are so committed to the concept of maintaining the euro that they cave at these threats.  My bet is that even if Cyprus had tried an exit, it would quickly have come crawling back, an event that would have greatly strengthened the euro.

​Well, at least this one wasn't a blank check.  The question is whether there was sufficient requirement of risk bearing to avoid providing the incentives for a bigger crisis the next time. 

Just How Free Is That Free Stuff?

The president's big pitch to the young generation in the last election was accurately summarized as "free stuff."  Remember Sandra Fluke and her theme of how important free contraceptives are to young women?​  And then of course we had the explosion of the handout programs during Obama's first term -- 20 million additional food stamp recipients, 5 million additional on Social Security disability, 5 million additional "Obamaphones."  What could be wrong with free stuff?

​Only that when you take the free stuff, you cede to the do-gooders the authority to run your life.  Take the Supplemantal Nutrition Assistance Program, aka SNAP, aka food stamps, just exploded from 27 to 47 million recipients in four years of Obamaism.  A few days ago a group calling itself Physicians Committee for Responsible Medicine came out with a proposal to limit the program to what they call "healthy" foods -- grains, vegetables, beans, fruits, and basic multiple vitamins.  Yum!  Don't worry, they include a link to a bunch of recipes.  No fat or sugar allowed, of course.

So what's the reaction in the official precincts of the Left?  Charles Lane has a column in the Washington Post of March 18.   First this: ​

No doubt such limitations would entail a change in habits for many SNAP recipients — perhaps too much change. Fish and poultry, as well as lean red meat, should probably be included.

I love the casual assumption that of course these are appropriate decisions to be made by Washington bureaucrats, presumably sitting around some conference table at the appropriately acronymed DOA:  "Should we let them have red meat that's 7% fat, or should we cut it off at 6.874%"  Well, let's let Lane articulate the Stalinism a little more explicitly:​

Of course the federal government should be able to leverage its purchasing power for socially beneficial purposes. If you take Uncle Sam’s help, you play by his rules.

Have you thought that one through Charles?  At least food stamps you are still allowed to refuse.  But how about the big ones -- Social Security, Medicare and Obamacare?​  With them the whole idea is that you are not allowed to say no.  Young people, that is the Left's vision of your future:  If you take Uncle Sam's help, you play by his rules.​  Oh, and by the way, you must take his help, and you are not allowed to say no.​  ​Nothing like a little free stuff!