Is It Possible To Read Anything About Economic Policy That Is Not A Fallacy?

As described in Friday's post, that day's Wall Street Journal had several articles filled with economic nonsense coming out of the mouths of Europe's incompetent leaders.  On Saturday, the New York Times one-upped them with far more of same.  On page 1 we have Andrew Higgins with an article headlined "Europe Pressed To Reconsider Cuts as a Cure," and then on page B-1 Catherine Rampell writing "Federal Cuts Are Concern In Modest U.S. Growth."​  The fundamental proposition of both articles is that increasing government spending grows the economy while decreasing government shrinks the economy.  

Let me pick just a few choice quotes.  From Ms. Rampell:​

The so-called sequester is scheduled to strip $85 billion out of federal spending before Oct. 1, cuts that will have secondary effects throughout the private sector. Furloughed federal workers, for example, will spend less money at local businesses.  While lower government borrowing and spending can help free resources for business when the economy is operating closer to its capacity, that is not the case today.

Ms. Rampell even goes out to find some so-called economists to support the fallacious theory.  For example:​

“With fiscal tightening weighing on the spring and summer quarters, we expect weaker growth ahead,” Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisers, said in a note to clients.

And yet another from a professor at the University of Michigan:​

Justin Wolfers, an economics professor at the University of Michigan, said the government’s fiscal policy was a drag on the economy. . . .   “The bigger picture is that we have a fledgling recovery which needs help but isn’t getting it,” he said.

These people seem to have no idea that year in and year out the economies that are the most successful are the ones with the lowest government spending and the lowest taxes.  The Heritage Foundation compiles the data.   Examples:   ​

Hong Kong.  Government spending as a percent of GDP, 19%.  Top income tax rate 15%.  Five year compound economic growth rate 3.6%.  Unemployment rate 3.4%.​

Singapore.  Government spending as a percent of GDP, 17%.  Top income tax rate 20%.  Five year compound economic growth rate 5.7%.  Unemployment rate 2%.​

Do you know that both Hong Kong and Singapore have surpassed the U.S. in per capita GDP?​

Or how about Switzerland?  Government spending as a percent of GDP is 34.7%, far below any of the major European economies (Germany, France, Spain, Italy, U.K.).  Top income tax rate is 41.5%, but only 11.5% of that is Federal, and the rest varies by canton.  Compound five year economic growth rate is 1.7%.  (That compares to 0.5% in the U.S., 0.5% in France -- home of 56% of GDP government spending, and 1.1% in Germany where government spending is 45% of GDP.)  Unemployment rate is 4.2%. ​

Really, this isn't all that complicated.  And imagine how much more dramatic these differences would be if they stopped wrongly counting government spending at 100 cents on the dollar in GDP!  ​

Europe In The Grip Of Fallacy Economics

Today's Wall Street Journal contains multiple articles on the continuing sluggishness and/or decline of some of Europe's major economies, and the "remedies" proposed by their incompetent government-aggrandizing politicians.  The unquestioning acceptance of the usual fallacies is literally beyond belief -- and not just among the politicians, but also by the WSJ writers.  Help!

​Since the articles are behind pay walls, I will include quotes of the key parts.

The front page headline is about Spain:  "Still Sputtering, Spain Turns Away From Cuts."  Seems that the latest figures from Spain show that the unemployment rate has gone up to an astounding 27.2%  What's the proposed solution?  Better go easy on the "austerity"!  There's that deceptive word again, invoking the usual confused melange of tax increases and spending cuts to keep anyone from trying to shrink the government.   ​

On Friday, the government is expected to announce new, less-stringent deficit targets, which means it won't have to take significant new austerity measures.

​How did Spain get in this mess?  You won't find any information on that in these articles or in the quotes from various government officials.  But perhaps try the Heritage Foundation page on Spain here.  Deficits averaging near 10% of gdp since 2009.  Top income tax rate of 56%, higher than even California and New York City.  Uncompetitive corporate income tax rate of 30%.  Wild spending on ridiculous renewable energy boondoggles.  Government spending as a percent of gdp not as out of line as many others in Europe at 44%, but still way too high.   Do they really expect anyone to keep investing in their bonds if they keep running deficits of 10% of gdp indefinitely?  So they force the banks to buy the debt, and the banks are then insolvent, cutting off business lending in the private economy.   Since taxes are already uncompetitively high, Spain has only one way out of its mess, which is big shrinkage of the government.  They invoke the deceptive "austerity" bugaboo to ward that off.  You'd think at least the Wall Street Journal would be alert enough to call them out.

In another article on page A-16 ("Europe's Unemployment Problems Worsen") we branch out into other European economies like France and Portugal.​  "In France, the number of registered job seekers who are fully unemployed rose to more than 3.2 million, topping a previous record set in 1997."  What does the economic genius Francois Hollande have to say about that?

In, France, President Francois Hollande has championed the charge for greater emphasis on growth, arguing that more austerity at this point is a risk, not a remedy to Europe's crisis. . . .  With no economic growth expected this year, Mr. Hollande is pinning his hopes on state-sponsored incentives for employers to make good on his pledge to start bringing unemployment down by the end of the year. 

This would be the France where government spending already is an astounding 56% of gdp, the corporate income tax rate is 34.4%, and they're trying to implement a top personal income tax rate of 75%.​  The private sector has become a small and shrinking part of the economy, shoved off into some little corner.  Of course the economy is dying, and of course Hollande is recommending "growth" through yet more government spending.  If government spending at 56% of gdp brings sluggishness and decline, does anyone really believe that 60% will bring growth?  How about 80%?  Anybody with a brain knows that this is the route to North Korea.  But there is barely a single politician in Europe with a brain.  (That would be Vaclav Klaus.  Try to name another one!)  

Perhaps you think the Germans are a little smarter?​

But Jorg Asmussen, German Chancellor Angela Merkel's appointee to the European Central Bank's executive board, spoke out in defense of austerity, calling it the only way for countries to secure long-term stability.​

The Germans then are equally incapable of distinguishing spending cuts (government shrinkage) from tax increases (government growth) as elements of economic policy.  Pathetic.​

As to Portugal and Spain:​

Portugal this week presented an ambitious stimulus program aimed at growth, and the Spanish government is expected to outline a similar shift on Friday.​

Japan has had well over 20 years of "stimulus" and stagnation.  The U.S. blew through almost a trillion dollars on "stimulus," raised government spending by about 4% of gdp and has had a stagnation ever since.  France has government spending at 56% of gdp and stagnation.  What's the solution?  More government spending!​

We can confidently predict that the sequence of debt crises in Europe and the economic stagnation are not going to end any time soon.​

The Welfare State Aggressively Advertises To Expand Itself

The phrase often used to describe the welfare state is the "safety net," ​a term with connotations of small numbers of people otherwise in grave danger of harm.  Then we find out that the number of people on food stamps (aka SNAP) has close to doubled over the last four years and now is around 48 million, costing close to $80 billion per year.  How did it get so big so fast, and is the term "safety net" really a fair description of its current status?

Over at the Washington Post a guy named Eli Saslow appears to be undertaking a project to report on the implications of the food stamp explosion in the real world.  On March 16 he had a big report on food stamps in Woonsocket, Rhode Island; and on April  23 another big report from Florida.

Saslow clearly comes at this with a view that all ​food stamps are good and more food stamps are better.  Still, there's a lot to be learned from reading his articles.

First, I found them by a Google search of "food stamps Washington Post."  ​ I guess that determines what ads you get.  At the top of my version of the Rhode Island article we have:

Government Assisted Phone

Get a Free Phone & Monthly Plan.  See if You Qualify for One Today!​

www.assurancewireless.com​

And then down at the bottom of page 1:​

Apply For SSI/Disability

Get SSI & Social Security Benefits Free Consults & Help With Your App

Apply.SSDisabilityApplication.com​

Click that last link and you go not to a government site, but rather to ​the site of a firm called Myler Disability, "Social Security Disability Advocates."

Also, many more such ads scattered through these multi-page articles.​

But let's look at the articles themselves.​  In Florida we follow around a woman named Dillie Nerios, employed by "a local food bank that is funded in part by the state" of Florida.  Her job: to recruit "at least" 150 seniors each month onto the food stamp rolls.  Is it working?  "Nowhere had the SNAP program grown as it has in Florida, where enrollment had risen from 1.45 million people in 2008 to 3.35 million last year."

To help enroll more seniors, the government has published an outreach guide that blends compassion with sales techniques, generating some protests in Congress. The guide teaches recruiters how to “overcome the word ‘no,’ ” suggesting answers for likely hesitations.

Nerios spends a lot of time with a couple named Lonnie, 60, and wife Celeste, who seem to have lost most of their savings in a failed business venture a couple of years ago.  They are eligible for food stamps, but clearly reluctant to take them.  Dillie tries everything to get them signed up.  Saslow meanwhile tries everything to get your sympathy for the effort, including describing the small mobile home where L&C live, and Lonnie's lack of success in getting jobs in the last few years.  Then, even as he's trying to pull on your heartstrings, Saslow basically gives away the game:

They decorated the walls of the mobile home with memories of a different life: photos of Lonnie in his old New Jersey police officer uniform, or in Germany for a manufacturing job that paid $25 an hour, or on vacation in their old pop-up camper.

An "old New Jersey police officer uniform"?  You mean this poor, poor guy has one of those New Jersey police pensions?​  For anybody who follows any news at all, New Jersey police pensions have to be one of the biggest scandals out there.  In this article we never learn how big Lonnie's pension is, or whether he is one of the notorious New Jersey "double dippers."  But hey Eli, an article trying to drum up sympathy for the poor condition of a retired New Jersey policeman who must be entitled to a pension, and doesn't even mention the pension or how big it is?  This is really preposterous!  By the way, Lonnie and Celeste also have five grown working kids.  Any chance that one of them could pitch in before the parents become wards of the taxpayers?

You are probably asking, how can Lonnie and Celeste even be eligible for food stamps if he has one of those New Jersey police pensions?  The answer is that most pensions are not counted for food stamp eligibility.​  Again, we can't know the details if Eli won't ask the most basic questions here.  Oh, and by the way, equity value of home (unlimited in amount) is also not counted in food stamp eligibility, and same for value of a first car (this one varies some state by state).  Don't let being a millionaire slow you down!

​The articles are also completely permeated with the economic fallacy that passing around free money is a good thing for the economy.   As in, for example, "food-stamp enrollment has become a means of economic growth, bringing almost $6 billion each year into the state.  The money helps to sustain communities, grocery stores and food producers."  So I guess the government should just pay everyone to sit around and do nothing -- that will make us all rich! 

​I appreciate the Washington Post at least shining something of a light on what is going on out there.  But really, in its worldview and total acceptance of the most ridiculous economic fallacies, this series is an embarrassment.

UPDATE:  Thinking about this post since I wrote it yesterday, my question is, is it possible that Lonnie came away from his tour as a NJ policeman with no pension?  I don't think so.  Saslow is trying to pull on our heartstrings.  If Lonnie had no pension, there is no way that he would have omitted that fact.  And there is much in the article to indicate that Lonnie must have some source of income, since he clearly spends money (fixing up his mobile home, for example) and Saslow emphasizes repeatedly that all jobs have fallen through.  No, Lonnie has a pension -- and NJ police pensions are known to be some of the most lucrative -- and Saslow is intentionally omitting that fact to deceive the readers.  Not good.​

The Mayoral Candidates Compete On Ways To Impoverish The City

Time to check in on the race for mayor again.  Last night there was a forum for the mayoral candidates at Cooper Union, sponsored by the League of Conservation Voters.  Subject: environmental sustainability.  ​

Could there be a more perfect topic to bring forth the New York conventional ignorance?  Of course the audience consisted mainly of environmental activists, all the more to encourage ridiculous statements from ​politicians striving to say what the listeners want to hear.

I have come across two reports on the forum, one from the New York Times City Room blog here, and the other from ​The Atlantic Cities here.  According to Sarah Goodyear of Atlantic Cities, the candidates "confidently advanced a series of proposals that would have seemed overly ambitious or even silly just a few years back."  Believe me, the proposals are just as silly today.

Let's start with the frontrunner, ​City Council Speaker Christine Quinn.  She started by agreeing that "reducing the city's carbon emission 80% by 2050 is 'where we have to go.'"  That's rather dramatic!  By the time we're done heating our houses, will we still be allowed to have electricity?  You're probably thinking, she must be in favor of nuclear power, because that's the only possible place that we can get all that power without carbon emissions?  Nope.  From the Times: "One candidate, Christine C. Quinn . . . was the only contender to express support for closing the Indian Point nuclear power plant, which supplies much of New York City's electricity."  ("Much of" our electricity would be up to 30% according to Wikipedia.)

We want to be moving toward cleaner, safer energy, she said to cheers from those in attendance at the forum, which was sponsored by Cooper Union and the New York League of Conservation Voters. Ms. Quinn suggested pursuing geothermal energy alternatives, like heat pumps that harness the Earth’s natural energy, to compensate for the loss of the plant.

​So now you must be asking, is it really possible that a credible candidate for mayor of our largest city can be proposing to eliminate essentially all of our sources of electricity for this huge and complex economy and replace them with a source that is a multiple as expensive and hasn't been proven workable at all on this kind of scale?  Yes, she is the frontrunner.

Let's get a smattering of proposals from the other guys.  There's this from our Public Advocate:​

Public advocate Bill DeBlasio called for aggressive financing structures to retrofit aging buildings to make them more energy-efficient.

I strongly suspect that de Blasio doesn't even know what "aggressive financing structures" he is talking about.  Does he really propose to exhaust New York City's borrowing capacity in giveaways to private landlords, leaving nothing for the water system, sewers, streets, subways, etc.?  Well, how about this from former Bronx Borough President Adolfo Carrion, ​running for the Independence Party

Former Bronx borough president Adolfo Carrión, running as an independent [sic - he's running for the Independence Party, not the same thing] said New York should be exploring vertical farming.

You know, Adolfo, there's a reason why farmers grow food out in the country where land is cheap instead of in the most expensive possible place, on the roofs of buildings.​

Overall, you just can't help getting the impression that these people think that energy comes from the tooth fairy and all efforts to wipe out cheap and workable energy and replace it with expensive and unworkable energy are completely cost free.​

Are the Republicans any better?  ​Not really.

Both Mr. Lhota and Mr. Catsimatidis sought to distance themselves from the national Republican Party, saying they believed that making alternative energy a priority would create jobs.

Yikes.  Using public money to subsidize high cost production of a good and to drive away low cost production that the market would provide without subsidy?  That's called "wealth destruction."  But here in New York City even Republicans are not allowed to say that.​

And finally, the moderator (Jim Lehrer) asked all nine candidates at the forum if they "believe" that global warming is man-made.  Eight of nine hands went up.  Congratulations to John Catsimatidis on being willing to buck the conventional ignorance on at least this one point.

Global Warming Update

I love the global warming issue because even as the cause becomes more and more ridiculous, the advocates just double down again and again.  When you think they should be looking to climb down gracefully and hope nobody would remember to associate their names with this scam, instead they become ever louder and more extreme and more shrill in their demands.  The end game is going to take a long time, and be a lot of fun.

​On March 8 one Shaun Marcott, a new Ph.D. at Oregon State University, and other authors, published in Science a new reconstruction of temperatures over the last 11,300 years.  The reconstruction was based largely on cores from undersea sediments, and showed a strong 20th century uptick, thus appearing to vindicate, at least in part, the famous and discredited "Hockey Stick" graph of Michael Mann et al.  The article promptly got a lot of publicity.

It took Steve McIntyre of climateaudit.org just over a week to completely demolish the article, in a series of posts from March 13 to March 19.  By March 31 Marcott et al. had posted a "FAQ" about their article at realclimate.org, admitting that the 20th century portion of their reconstruction "is not statistically robust [and] cannot be considered representative of global temperature changes."

Meanwhile, the real news in the field of climate is the refusal, now for over 15 years, of global temperatures to increase, even as atmospheric CO2 continues to soar.​  The data are easily available, for example here from the UAH satellite temperature series.  Sooner or later somebody has to notice.  Well, for example, the Economist magazine, long a group thinker of global warming alarmism, is starting to notice, and published  a long article in the March 30 edition beginning the attempt at graceful climb down.

[A]s an increasing body of research is suggesting, it may be that the climate is responding to higher concentrations of carbon dioxide in ways that had not been properly understood before.

​And at the Financial Post in Canada, long skeptical environmental columnist Lawrence Solomon writes on April 13 to welcome to the ranks of the skeptics, along with the Economist,  Die Zeit of Germany and its top (and very green) columnist Harald Martenstein.

But in a world badly in need of the humor coming from people making fools of themselves, the super-environmentalist Bill McKibben of Middlebury College in Vermont and of the web site 350.org obliges by choosing this time to launch a massive campaign to get university endowments to divest from investment in fossil fuel companies.​  McKibben is the non-scientist former writer for the New Yorker who chooses to make a career lecturing everybody else on how they are destroying the planet by using fossil fuels.  He doesn't know a thing about the subject matter, but he must have some personal charisma or something, because it is remarkable how many in the environmental movement are completely willing to follow him over the cliff of the global warming scam and take the whole movement with them. 

According to the Yale Daily News here, McKibben's divestment campaign "has spread to 252 college campuses, including most of the Ivy League" as of February 8.  Vassar is one of the colleges most deeply in the grip of the hysteria, and you really need to read some of the stuff to understand the powerful religious fervor of these people.  From the February 27 Vassar Miscellany News, by Gabe Dunsmith and Erin Boss: 

​Divestment from fossil fuels promises to bring about a people-powered transition to a sustainable world.  Though the atrocities of fossil fuel may seem far from our campus, Vassar's endowment, like that of so many other institutions, is invested in corporate conglomerates like BP, Exxon, and Halliburton. . . .  Perhaps most importantly, divestment is a fight for justice. It brings Vassar students one step closer to the communities that the fossil fuel industry decimates. . . .  After all, the brunt of the climate crisis will be felt in communities that are already silenced and oppressed.

You mean you didn't know that the landowners of northern Pennsylvania were "silenced and oppressed" by the fracking boom?  Of course, the kids who write this stuff have never gone more than a day or two in their lives without electricity, they fly and drive wherever they want, they have plenty of heat in the winter and air conditioning in the summer, and computers and smartphones and everything else you can think of.  I wonder how many of them are prepared to give all that up.  My bet is zero.  You may think you have to be smart to get into these fancy schools, but not really very smart.

Could Anthony Weiner Really Be A Credible Candidate For Mayor Of New York?

Do you remember Anthony Weiner?  For New Yorkers, he's hard to forget.  He was the high-flying recently-married Congressman from a Brooklyn/Queens district who self-destructed ​spectacularly in the Spring of 2011 when he accidentally posted on a site accessible to his social media "followers" a picture of his crotch intended only to be tweeted to a young unmarried female college student from Seattle.  After initially digging his hole deeper for a few days by denying he was the tweeter, he ended up resigning about a month after the initial revelation.  Now, you would think, there is a guy who is never coming back in politics.

Not so fast!  Last week via an article in the New York Times Magazine, Weiner floated his name as a potential candidate for Mayor, in an election coming up this November.  According to this morning's New York Post, an initial poll shows him running a relatively strong second in a field of five.​  Could this guy possibly be a credible candidate?

To answer that question, you need first a recognition of the importance of the Democratic party nomination, and second an understanding of the various buffoons who are the other candidates for that nomination.​  Given that the Republican candidate has defeated the Democrat for mayor in all of the last five elections spanning 20 years, you would think that the Democratic nomination cannot be all that important.  But you would be wrong.  The Democratic nominee will undoubtedly be the strong favorite, no matter how loony.   Democrats have a voter registration advantage over Republicans of about 6 to 1.  Mike Bloomberg has managed to hang on for three terms under the Republican banner, but by spending vast sums of personal money and with increasingly narrow margins of victory.  No Republican candidate will come remotely close to raising the sums that Bloomberg has spent of his own money to get elected.  And on top of that, he's not a real Republican in his policies.  So at best any Republican candidate will start out as a serious underdog.

Now let's consider briefly the Democratic alternatives.  I wrote about current city Comptroller John Liu a few days ago here.  ​Although as Comptroller he is in charge of the pension plans for the city workforce, from all indications he has no clue that there are multi billions of annual dollars of increase in required pension contributions baked into the current system and ready to explode upon us.  Instead of telling us his solution to that problem, he proposes a collection of new non-starter spending programs, all to be financed with tax increases on a handful of "the rich" who just got hit with big increases at both the Federal and State levels.  No amount of arithmetic can make his numbers add up, but hey, he's only the Comptroller, so what can you expect him to know about numbers?  Also, he's the darling of the city worker unions, although he hasn't yet been endorsed in this cycle by their political arm, the Working Families Party.  Oh, and did I mention that his former campaign treasurer is about to start a Federal trial for corruption?

​Well, how about Christine Quinn, Speaker of the City Council and representative from the trendy precincts of Greenwich Village -- my own councilwoman!  She's the current frontrunner in the polls, and thought to be allied with Bloomberg.  Many think she is at least somewhat saner than the typical Democratic NYC pol, who believes that more government spending is the answer to absolutely every problem.  Well, but her signature issue is vast expansion of "permanently affordable housing," otherwise known as lifetime subsidies to non-poor people and the least cost-effective expenditure of public funds ever devised.  No mention from her campaign that I can find of recognition of the pension problem or any proposed solution.  Since she is a Manhattanite, we think we can expect her to be not quite so overtly on the take as her colleagues from the outer boroughs.  Oh but wait, let's check out this from yesterday's Wall Street Journal.  It seems that as Speaker of the City Council Quinn has total personal discretion over some $17 million of funds known as "member items," and that she has requested in each of the past three years that $100,000 of such funds be directed to an outfit called the Association for Neighborhood and Housing Development specifically to "advocate" for Quinn's signature issue, permanently affordable housing.   Directing public funds to lobbyists to lobby for your pet campaign issues -- that takes a little chutzpah!  In her favor, I guess we have to admit that she didn't just pocket the money personally (well, maybe we shouldn't be too quick to jump to that conclusion). 

Deeper down in the polls we have Bill de Blasio, current Public Advocate (citywide elected office with no responsibilities that anyone can name).  This fellow is a true member of the Loony Left, desperately trying to run to the left of everyone else on every issue, and to get the endorsements of the city worker unions.  ​He has never seen a tax increase or a spending program that he would not support.

Are you starting to see why Weiner might actually be preferable to the alternatives?​  Spending most of his career in Washington (he was an aide to Schumer before running for Congress), there is every reason to think that he is far less in debt to the city worker unions than the other candidates. 

And did I mention that every one of the labor contracts for the city workers has expired.  Some blame Bloomberg for not negotiating new contracts, but I don't -- there is no way the unions will do a deal with Bloomberg, when the alternative is to wait until after an election where it is entirely likely that their support will have put the winner in office.​

Yikes, Weiner may be our best hope.  Amazing but true.​