What Is The Economic Program Of Those Celebrating The Death Of Thatcher?

From England over the past couple of days come images of angry demonstrators celebrating the death of Lady Thatcher.  Here is an example:​

​I just don't understand the thinking.  Clearly, these people disagree with the Thatcher economic program.  But just what is the economic program that they advocate that will not lead to economic decline?

Let's have a review of the bidding.  For better or worse, I am old enough to remember the late 60s and 70s, and the situation in the UK at that time.  From 1964 to ​Thatcher's election in 1979, the UK was governed by a series of Labor/socialist governments, with the exception of a stretch of about four years from 1970 - 74 under Tory leader Edward Heath, who wasn't much different from Labor.  Much of Britain's economy at that time was nationalized -- the steel industry, the telecom industry, the defense industry, much of the auto industry.  Government spending increased dramatically as a percent of GDP.  Labor unions had favored status in the economy, and strikes were rampant.   The government repeatedly tried Keynesian so-called "stimulus" programs, only to see the economy stagnate.  Inflation took off, and the government, rather than recognizing it as a monetary phenomenon, attempted to control it with what was called an "incomes policy," otherwise known as price controls. 

And how did that all work out in economic performance?  According to a BBC summary of the period of the 60s and 70s, "Virtually all European countries, except for Britain, had so-called 'economic miracles.'  Britain was often described as the 'sick man of Europe.'" According to Wikipedia, the UK's economic growth for the period was about half that of Germany and France.  Wikipedia refers to the late 70s in the UK as a period of "extreme industrial strife along with rising inflation and unemployment." ​

​And then came Thatcher in 1979.  What were the new policies?  From the same Wikipedia summary, they included monetary policies to reduce inflation, cuts to government spending, extensive privatization of previously nationalized industry, and confrontation with the labor unions.  The immediate result was a sharp contraction from 1980 to 1982.  But then the economy started to grow strongly.  By the late 1980s the UK "saw [annual] growth of over 4%," leading to "contemporary claims of a British 'economic miracle.'"

I don't know of any way of looking at the UK's economic history for the period of the 60s through the 80s without recognizing that the policies of the governments preceding Thatcher had led to economic stagnation and decline, and then Thatcher's policies led to revival and growth.  ​ It's easy to learn from study of the UK during that period what works and does not work in economic policy.  Doesn't work:  high government spending, Keynesian "stimulus," price controls, nationalized industries, encouragement of labor unions.  Works: lower government spending, control of inflation through monetary policy, privatization, limits on labor union power.

So I return to my question:  What is the economic program advocated by these people celebrating the death of Thatcher?  Return to socialism and price controls?  And why the anger?  Perhaps because Lady Thatcher, by drawing such a clear distinction between her policies and those of her predecessors, and by getting such spectacular results so quickly, made it so abundantly clear what works and what does not.  But the problem here is that the results of that experiment are long in, and the demonstrators must know that the program of high government spending and unionism is one that leads to stagnant incomes, a particular problem for the struggling working class.  Why are they advocating for that result?  Or are they really totally ignorant of the economic history of such a recent period?

The Poverty Scam In Action

Yesterday the AP generated a particularly egregious piece of pseudo journalism promoting the poverty scam.  Versions of it ran at outlets including Yahoo, CBS News, and the Daily Mail.​

As readers of this blog know, what I call the poverty scam is this:  The Census Bureau defines "poverty" in a way that has nothing to do with physical deprivation, and only turns on "cash income."  That definition makes the "poverty rate" useless as a measure of physical deprivation, because it excludes all government in kind benefits and sweeps in all kinds of obviously non-poor categories like kids living on handouts from the well-off parents, Ph.D. students at Harvard, business owners having a losing year, asset millionaires taking a year off, and people getting in excess of $100,000 per year in in-kind government benefits.  But then journalists write stories about "poverty" that discuss the "poverty rate" and physical deprivation together as if they had something to do with each other.  Worse, journalists discuss the in-kind government programs as if they had some relationship to "poverty" or the cure of "poverty," when in fact they don't count at all in the measure of poverty.  Doubling the in-kind programs, or halving them, or eliminating them altogether, would have absolutely zero effect on so-called "poverty", because these programs are defined to not count in the measure.

With that background, let us consider this appalling AP story.  Here is the headline from the Daily Mail:​

U.S. sees highest poverty spike since the 1960s, leaving 50 million Americans poor as government cuts billions in spending... so does that mean there's no way out?

​Of course the "50 million [poor] Americans" refers to the Census Bureau definition that turns entirely on cash income.  But the "billions in spending" being cut refers to the "sequester," which cuts very little from "safety net" programs, and that part relates to in kind programs that have nothing to do with "poverty" as defined by the Census Bureau.  Let's see how AP deals with this issue:

As President Barack Obama began his second term in January, nearly 50 million Americans — one in six — were living below the income line that defines poverty, according to the bureau. A family of four that earns less than $23,021 a year is listed as living in poverty.

OK, that's clearly referring to the cash income definition.  ​Then this:

There is no question the national belt-tightening "will deepen and increase poverty," said McCarthy, citing the cuts in long-term care for poor seniors including assisted living and nursing care, and fewer low-income housing spaces, among other ripple effects.

Wait a minute, they're still using the word "poverty," but we just completely switched definitions.  Now we're talking about in kind government benefits that have nothing to do with the Census Bureau definition of poverty.

Under the spending cuts, Baltimore Housing Commissioner Paul T. Graziano said his agency faces a $25 million shortfall in funds to help poor people with housing.

More in kind benefits.  Then this from Stephanie Rawlings-Blake, the Mayor of Baltimore:​

The austerity cuts "to housing programs_as well as those to public safety, health, and education_will have an adverse effect on Baltimore and throughout the country," she said.

​None of this has anything to do with cash income or the alleviation of "poverty" as defined by the Census Bureau.

My innocent self would like to think that the AP writer ​(Steven Hurst) is just confused here and doesn't know much about his subject matter.  But I don't believe it.  I think this is a very intentional effort to use a definition of poverty to generate a very high number of people supposedly in poverty as a device to sell government spending that then has no effect whatsoever in reducing the poverty.

Here's the first comment to the story at the Daily Mail, from one mdinaz:​

How can this be? The Feds have spent trillions on the War on Poverty. And yet, poverty rates have not only NOT gone down over 40+ years, they're going up! Where's the money gone? (that's a rhetorical question - it's gone into liberal bureaucrat pockets).

Well, sir, you are getting your news from the AP instead of the Manhattan Contrarian.  The answer to your question is that this is a complete and utter scam.

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.

​