Believe Me, You Don't Have To Worry About China Seizing "Climate Leadership"

My last post on this subject was dated April 1, but it was not an April Fool's joke -- at least not on my part.  The New York Times had just reported (on March 29) that China was "poised" to seize the "climate leadership" from the United States should the U.S. make the horrific error of exiting from the Paris climate agreement.  Pravda quoted the Chinese state-run Global Times newspaper chastising the United States for preparing to exit Paris (“[The U.S.] is undermining the great cause of mankind trying to protect the earth, and the move is indeed irresponsible and very disappointing.”).  Meanwhile, of course Pravda failed to note that China already had about triple the coal-fired electricity-generation capacity of the U.S., had made no commitments under Paris to reduce the amount, and in fact had another 1.5 times total U.S. capacity either planned or under construction -- even as the U.S. has been reducing coal-fired electricity-generation capacity for years.  Great "climate leadership," China!

They just have to find something to try to frighten you, no matter how absurd it may be.  On Tuesday's front page, they're back on this "climate leadership" thing with a big article headlined "China Turns Economic Engine Toward Clean Energy Leadership."   The theme this time is that China now has this gigantic economic engine, and they are going to use the genius of their state-directed capital model to go all in for renewable energy, thereby crushing the foolish purist capitalist laggards like the U.S.  Scary!

Our fearless reporter (Keith Bradsher) takes us to Liulong, China, where China is building the "world's largest floating solar project."  It will provide "light and air conditioning" to "much of" a nearby city.  (Do they actually think that a solar project can provide "light" when it is needed -- at night?  If so, they don't offer any explanation in this article of how that might work.) 

The project reflects China’s effort to reshape the world order in renewable energy as the United States retreats. Such technological expertise will form the infrastructure backbone needed for countries to meet their climate goals, making China the energy partner of choice for many nations. . . .  China has already started an expensive campaign at home and abroad to solidify its considerable hold on solar, wind and other energy-saving businesses. If successful, China would win the economic and diplomatic spoils that the United States and some European countries have long enjoyed from dominating businesses like software, computer chips and airplanes.

Better get on board with the brave new world, United States, before China passes you by and leaves you in the dust!

Are you worrying about China cornering all those "economic and diplomatic spoils" that are sure to come pouring forth from its dominance of the global wind and solar businesses?  Don't.  Here's all you need to know:  Private capital is not stupid.  State-directed capital is stupid.  Private capital only finances projects expected to repay the investment (plus something).  Thus wealth is created.  Private capital does not undertake wind or solar energy projects without massive government subsidies and tax credits.  That tells you that wind and solar energy projects destroy rather than create wealth.

State-directed (stupid) capital gets invested for lots of reasons other than making money.  For example, state-directed capital might finance a project in order to convey perceived recognition or prestige upon the leader who directs the money.  Or state-directed capital might be used in pursuit of economic fallacy.  Do you think that's not too likely?  You would be wrong.  The main such fallacy is that the project in question will "create jobs."  (Exhibit A:  So-called "infrastructure" spending.)  Both of these reasons apply in spades to China's renewable energy projects.  The praise and honors that China is winning from the world community for its Potemkin village climate charade illustrate the first reason.  As to the "creates jobs" fallacy, try this from the New York Times article:

The solar industry employs more than one million workers in everything from making panels for export to installing them domestically, though solar accounts for only 2 percent of its electricity needs. By contrast, China has four million coal miners to supply the power plants that generate 70 percent of the country’s electricity.   

In other words, solar projects only produce about one-ninth the energy per worker employed.  In the eyes of the New York Times -- and, apparently, of Chinese officials -- this is a good thing about solar energy.

And, about that supposedly gigantic "economic engine" that China has put together.  China's GDP is now reported as being up to over $11 trillion (per Trading Economics here) -- if you believe their numbers.  That would make their economy about 60% the size of the U.S. economy; but remember, they have about 4 times as many people.  So their per capita GDP is only about 15% that of the U.S.  That puts them down around number 80 on the world list of countries by per capita GDP, behind just about any country you have heard of (e.g., Argentina, Mexico, Dominican Republic) and some others you may not have heard of (e.g., Gabon, Botswana).  And again, that is if you believe their numbers.  

And there is a huge problem with their numbers.  They have vast overcapacity in the seeming "prestige" industries, the big stuff like steel, aluminum, coal (!), ghost cities and the like.  It's the old "heavy industry" fallacy that Stalin fell for and that ultimately brought down the Soviet Union.  In the U.S., when the steel industry finds itself with vast overcapacity, economic forces bring on a shake out, and the industry right sizes.  In China, state banks and state subsidies keep the wasteful production going indefinitely.  Government statisticians count it all like it's real and needed.  China's GDP numbers could easily be overstated by 30 or even 50%.  There's no way to tell.

So, guys, go ahead and knock yourselves out building up capacity to make solar panels and windmills.  Ten years from now, you'll just be further behind.

UPDATE, June 9:  In case you harbor any crazy thoughts that the Chinese know what they are doing in energy policy, check out this Wall Street Journal blog entry from back in February, headlined "China Generates Record Wind Power, Then Throws It Away."  As pointed out here many times, wind energy -- with its wild swings back and forth between full capacity and nothing -- is not so easy to integrate into a grid that need steady, reliable power.  So in China, they generate vast amounts of power from wind, and then can't use it, and throw it away.  For 2016:

Wind power generated in 2016 rose an impressive 30% to 241 billion kilowatt-hours, according to figures reported Tuesday. But the amount of unused wind power rose much faster. Wastage rose nearly 50% to 50 billion-kilowatt hours: about as much as Greece or Bulgaria use in total electricity each year.

Blue States On The Path To Economic Suicide

Who says that political polarization is a bad thing -- at least in a federal republic like ours?  In the old days of much less political polarization -- say 10 or 20 or 30 years ago -- there was more bipartisan governance out in the states than there is today.  The Dems would regularly control one or both legislative chambers and/or the governorship in Republican-leaning states, and vice versa.  That does still occur (for example, Illinois and Massachusetts have Republican governors), but it diminishes with every passing year.

In the federal arena, government closely divided between people of highly polarized political visions leads to ever-escalating anger and to gridlock, as we all can see on a daily basis.  Out among the states, it means something very different:  red states increasingly come under the full control of ideological Republicans, while blue states increasingly come under the control of highly ideological Democrats.  Each group then has the opportunity to enact a more pure version of its side's governing vision.  On the Republican side (at least in the economic policy sphere), that means keeping government spending and taxes relatively low.  For example, Florida, with a population now larger than that of New York, has a state budget only about 60% as large.

But for today, let's focus on what is going on over on the blue state side of the divide.  As the progressive wing of the Democratic Party gains power, there is less and less resistance to the imperative to solve all of the people's problems right now with a big blowout of spending and coercion.  Does anybody here recognize that resources are not infinite?  If anybody does, they just get shouted down.  Let's consider a few examples of recent developments:

• Single payer health care.  As I reported here just two weeks ago, four states (Vermont, Colorado, New York and California) have had so-called "single payer" (fully socialized) health care proposals advance far enough in their state law-making process to have fairly concrete cost numbers attached to them.  In all of the four cases, the incremental costs of the new program -- above and beyond all existing state government health care expenditures including things like Medicaid -- came in at more than the revenue raised from all existing state taxes.  So, enacting the program would have required more than doubling of existing state taxes.  

Do you think that the quantification of the enormous costs of moving to a single payer system would lead the progressive movement to back off, or maybe slow down, on efforts to enact the system?  According to the New York Times over the weekend, it's the opposite.  The headline of the big front-page article on Sunday is "The Single-Payer Party? Democrats Shift Left on Health Care."  Excerpt:

[A]s Democrats regroup from their 2016 defeat, leaders say the party has plainly shifted well to the left on the issue, setting the stage for a larger battle over the health care system in next year’s congressional elections and the 2020 presidential race. Their liberal base, emboldened by Senator Bernie Sanders’s forceful advocacy of government-backed health care last year, is increasingly unsatisfied with the Affordable Care Act and is demanding more drastic changes to the private health insurance system. . . .  Party strategists say they expect that the 2020 presidential nominee will embrace a broader version of public health coverage than any Democratic standard-bearer has in decades.

The article notes that in polls some 60% of Americans respond that they support some form of "universal" health care.  It does not mention that when Coloradans became aware of the costs, a single payer proposal that previously seemed to be leading suddenly lost in a referendum by an astounding margin of about 80-20.  But isn't there infinite free government money?  In California they think there is, and the "single payer" proposal out there continues to advance.

Hey, California, go ahead and give it a try!  Your citizens are so rich that nobody will even notice when the 13% top marginal income tax rate goes to 26%!

• Paris Climate Agreement.  With President Trump's announcement that he is exiting the Paris climate agreement, it's dead, right?  Not so fast!  Last Thursday, Governor Jay Inslee of Washington put out an announcement that he is joining with the governors of New York and California to form something called the United States Climate Alliance to harness efforts at the state level to combat "climate change."  It seems that these states think they can meet on their own the proposed 26-28% reduction in "greenhouse gas" emissions by 2025:

New York, California and Washington, representing over one-fifth of U.S. Gross Domestic Product, are committed to achieving the U.S. goal of reducing emissions 26-28 percent from 2005 levels and meeting or exceeding the targets of the federal Clean Power Plan.

Do they know that Germany has succeeded in getting electricity production from renewables all the way up to 30% of the total -- but in the process they have also succeeded in roughly tripling residential electricity rates?  When asked about its progress on energy transition to renewables, Germany likes to point out that its greenhouse gas emissions are down some 40% since 1990 -- conveniently omitting that almost all of this reduction represents gains from closing down the inefficient East German industrial sector in the 90s.  In recent years, Germany has hit a wall in reducing GHG emissions.  Here is a chart of its year-by-year emissions changes 1990 to 2016:

Looks like they haven't gained any net ground at all since 2010.  So, Washington, California and New York, how do you plan to avoid Germany's "renewable energy paradox":  covering the countryside with windmills, and then watching electricity bills triple while GHG emissions stay steady or decline hardly at all?  Believe me, Inslee, Cuomo and Brown don't have a clue about what technology is supposedly going to make this happen.  They will just order it to happen, and of course it will then happen!  Good luck, guys!  And don't worry -- tripling the electricity bills will not at all affect the capacity of the people to pay for, as an example, single payer health care.  After all, taxpayer money is infinite.

• Government employee pensions.   If you are a blue state, you believe that government employee unions are a good thing.  And the number one priority of government employee unions is generous defined benefit pensions.  The problem of massive underfunding of government employee pensions is very largely, although not quite entirely, a problem of the blue states.

My favorite measure of the employee pension underfunding issue is dollars of underfunding per household in the state.  Here is a state-by-state chart from ZeroHedge as of December 2016:

Not meaning to excuse red Alaska, but they are a very small state and a special case.  After them, it's a who's who of deep blue:  California, Illinois, Connecticut, Hawaii, Massachusetts, New Jersey, New Mexico, Oregon.  At some $92,000 per household, California all by itself is well over $1 trillion in the hole.  The ZeroHedge article at the link points out that CalPers has been under pressure to lower its interest rate assumption from 7.5% to 6% -- which would have the effect of raising that $92,000 to more like $150,000 per household, and the $1+ trillion to well over $1.5 trillion.  No problem, California.  Might as well go for single payer health care while you are at it.

The process of economic self-destruction is not a fast one.  It took Venezuela 19 years from the election of Hugo Chavez in 1998 to get where it is today.  None of the blue states is engaged in anything nearly so extreme as the Venezuela program.  On the other hand, Connecticut has definitely hit a wall of declining population and declining tax revenue.  See Friday's Wall Street Journal editorial here (behind pay wall).  California has great weather and many great industries.  But if they try hard enough, they can definitely set their economy into decline.  Lots more states are lined up to follow.  

Paris: Donald Trump Demonstrates That He Has The Basic Competence To Be President

Among my New York friends, one of the most frequent criticisms that I hear of Donald Trump is that he just doesn't have the basic competence to be President.  He is ignorant of fundamental issues of public policy; he arrogantly thinks he knows everything, while in fact he knows little or nothing; his attention span is about 6 seconds, and he refuses to learn.  I mean, how can such a person possibly carry out in an appropriate way the awesome responsibilities of the presidency?

For myself, I've been withholding judgment.  After all, a President doesn't really need to know all that much.  He has endless expert advisors, indeed far more advisors than any human being could have time to listen to.  Far and away the most important thing he needs to do is avoid making major blunders that can do great harm to the American economy and the American people.

In the decision regarding the Paris climate accord, Donald Trump has just been tested on this fundamental criterion of basic competence, and has passed.  Barack Obama was tested on the same criterion, and totally failed.

It is impossible to look at the Paris climate accord with any degree of scrutiny and conclude that a remotely competent American president could have anything to do with it.  This conclusion applies irrespective of whatever you might think about whether "greenhouse gas" emissions are causing a problem or even a crisis for world climate.  Even if you think that the climatic effect of human GHG emissions is an existential crisis facing the planet, it would still be completely incompetent for an American president to sign on to this particular agreement.  

This conclusion follows from the most basic cost/benefit analysis.  The Paris accord imposes huge and uncapped costs on the American people and economy, for little to no climate benefit -- and that is even if you completely accept the U.N.'s phony climate models that have been ginned up without empirical verification to scare the bejeezus out of you.  Just look at the structure of the Paris accord.  The United States commits to reduce "greenhouse gas" emissions by 26-28% below 2005 levels by 2025 -- only 8 years away.  China, with 1.3 billion people and emissions already about double those of the U.S., agrees to no reductions whatsoever, and only to try to reach "peak" emissions by 2030 -- by which time its emissions could be 50% or even 100% higher than today.  India, with well over 1 billion people -- a good half of whom don't yet have electricity and somehow think they are entitled to get it -- commits to nothing whatsoever.  Africa, with another about 1 billion people, very few of whom currently have electricity, commits to nothing whatsoever.  In my view these billions of people are entitled to electricity and transportation and heat and cooling just like we have, and they are going to get those things by use of the cheapest and most reliable energy available, namely fossil fuels.  But even if you believe that all the Africans and Indians and Chinese must be kept in perpetual poverty in order to avoid a hypothetical degree or two of atmospheric warming, the Paris agreement does not contain any commitment by them to go along with that.

And how about that 26-28% emissions reduction by the U.S. by 2025?  According to this EPA report, U.S. GHG emissions have already decreased about 7% from the 2005 benchmark (largely due to the fracking revolution and increased use of natural gas versus coal).  But the next 20% will not come nearly so easily.  The main proposal of the prior administration and of environmentalists to achieve that next 20% was the EPA's Clean Power Plan -- that is, shutter cheap coal power plants, and cover the landscape with wind and solar farms.  A version of that same strategy has led Germany to residential electricity prices about triple the U.S. average, and even so they seem to have hit a ceiling at getting about 30% of their power from wind and solar.  To get any higher they now need some combination of even more redundant fossil fuel back up generation plus some kind of massive storage capacity, the technology for which doesn't even exist.  Or, maybe the U.S. could revert to Obama's previous plan of a cap-and-trade system, otherwise known as intentionally driving up the cost of electricity and gasoline -- making their price "skyrocket," in Obama's immortal locution -- until the people can't afford them anymore.

Trump had his people make some estimates of what would happen to selected industries if the U.S. followed one of these intentional-energy-poverty scenarios.  Here's what they came up with (as of 2040, as reported by James Delingpole at Breitbart):

Paper down 12 percent.  Cement down 23 percent.  Iron and steel down 38 per cent.  Coal down 86 percent.

OK, maybe they are exaggerating.  But they are clearly not entirely wrong, because the whole idea of the program of fossil fuel restriction is to force down the use of fossil fuels, which inherently means that the heaviest users of the fossil fuels will be driven out of business.  

Now perhaps you believe the warnings of the climate alarm movement, and you think that all of this is necessary to avert all-but-certain climate catastrophe.  The problem is that the Paris accord will not avert the climate catastrophe, or even change anything measurably -- even if you accept the alarmist models at face value.  If you take the U.N.'s models of the relationship between GHGs and temperature, and factor in full implementation of the Paris accords, including all U.S. and European GHG reductions but also increases from the third world, you find reductions in projected temperature increases out to the year 2100 that are so small as to be at the very margin of measurability.  The following chart illustrating the point is from Bjorn Lomborg, via WattsUpWithThat:

In other words, President Barack Obama signed up for the intentional energy impoverishment of the American people on a massive scale to achieve absolutely nothing with respect to the climate.  It is hard to think of anything more incompetent.  With a principal job of avoiding major costly blunders for the American people and the American economy, Obama committed an obvious error likely of multi-trillion dollar magnitude.  Trump has identified the issue and has reversed the error.  This is just simple, basic competence.

While we are talking about competence, let us also examine the reaction of the titans of American business to President Trump's announcement.  The Washington Post has a roundup, headlined "'Climate change is real': CEOs share their disappointment over Trump's Paris accord exit."  

In response [to President Trump's announcement], one corporate titan after another tweeted their disappointment at the announcement, companies issued statements committing to action on climate change and two high-profile members of Trump's business advisory council said they would leave the forum in response.

Yeah, well who?  The Post's Exhibit A is Elon Musk:

Tesla and SpaceX CEO Elon Musk tweeted Thursday afternoon that he was "departing presidential councils. Climate change is real. Leaving Paris is not good for America or the world."  

Hey, Post -- is Musk the head of any other company?  Hint: that would be SolarCity, a manufacturer and installer of solar panels that is on the brink of financial disaster and totally dependent on government "renewable energy" handouts and tax credits to survive.  Trump's new policies could likely spell the end of SolarCity, and could even take Tesla down along with it (the two Musk-controlled entities merged a few months ago).  Funny, isn't it, that the Post wouldn't mention that?

Let's move on to the Post's Exhibit B.  That would be Jeffrey Immelt, CEO of General Electric:

General Electric CEO Jeff Immelt, who had said during a speech to students at Georgetown University in May that the business community "has kind of moved on in this debate," tweeted a similar refrain, calling upon business to lead the way on global climate standards. "Disappointed with today’s decision on the Paris Agreement," he wrote in a tweet. "Climate change is real. Industry must now lead and not depend on government."   

So, Post, might GE have any interest in multi-billion dollar government giveaways for wind and solar energy?  Nothing that you can find in this article.  If you are interested, try here as to wind, and here as to solar.  GE is in up to its neck in government subsidy farming.

Keep going through the Post's list of CEOs, and you'll find it's a combination of subsidy farmers like Musk and Immelt, and others who think that their businesses are immune to intentional energy-impoverishment policies (e.g., Tim Cook of Apple).  Could Tim Cook take ten minutes to evaluate the actual Paris accord critically to see if is actually a remotely reasonable deal for the United States?  I guess not.  He's too busy running Apple!  And is there anything in the Post of the reaction of people in businesses like -- to take a few random examples -- paper, cement, iron and steel, or coal?  Of course not.  Those people are expendable!

The Weird Obsession With Russia: People Are Starting To Catch On

In my post last Friday I called it "How To Spin The Most Extreme Corruption To Make It Seem OK."  Yesterday, John Hideraker at PowerLine calls it "The Scandal Hiding In Plain Sight."   Glenn Harlan Reynolds of Instapundit asks yesterday in USA Today whether Obama's illegal spying was "worse than Watergate"?

Hinderaker:

[W]e now know for certain that the Obama administration weaponized the intelligence agencies in order to use them against political opponents, in a manner that is unprecedented, highly dangerous to our democracy, and criminal.

 And yet somehow I just keep reading the New York Times story of the day on the supposed "Trump/Russia" scandal and marveling at the fact that they don't have a clue -- or pretend not to have a clue -- as to what the real scandal is.  Here is yesterday's lead article, "Investigation Turns to Kushner’s Motives in Meeting With a Putin Ally."  And by "lead article," I mean that it occupied the top right-hand spot on page A1 of the print edition.  

The article is about a meeting between Jared Kushner -- Trump son-in-law and close advisor -- and one Sergey N. Gorkov -- a Russian banker allegedly "close" to Putin -- that took place in "mid-December."  Mid-December is well after the election, when Donald Trump was the duly-elected President-Elect of the United States and had every business and right and indeed duty to have his close advisors reaching out to representatives of the major countries in the world in order to get up to speed to implement foreign policy promptly on January 20.

What is important in this story, according to Pravda, is Kushner's "motive" in reaching out to Russia, or perhaps his "motive" in trying to establish some kind of "back channel" to communicate through pathways outside the control of the U.S. diplomatic and intelligence establishment:  

The reasons the parties wanted a communications channel, and for how long they sought it, are also unclear. Several people with knowledge of the meeting with Mr. Kislyak, and who defended it, have said it was primarily to discuss how the United States and Russia could cooperate to end the civil war in Syria and on other policy issues. They also said the secure channel, in part, sought to connect Michael T. Flynn, a campaign adviser who became Mr. Trump’s first national security adviser, and military officials in Moscow.

Scary!  Actually, the reasons why Kushner and Russian contacts might want a "back channel" are painfully obvious.  It's because the existing Obama administration diplomats and intelligence officers were clearly intent on destroying Trump by any means at their disposal, and everything that went through channels to which they had access would promptly be leaked.  It would have been completely incompetent for Trump and Kushner not to seek to get around this criminal conduct of the prior administration that was still fully in place.

Then, you need to read on carefully, and in part between the lines, to discover this:

Yet one current and one former American official with knowledge of the continuing congressional and F.B.I. investigations said they were examining whether the channel was meant to remain open, and if there were other items on the meeting’s agenda, including lifting sanctions that the Obama administration had imposed on Russia in response to Moscow’s annexation of Crimea and its aggression in Ukraine. 

OK, a congressional investigation is one thing -- they can investigate whatever they want.  But what in the hell is the FBI doing "investigating" the conduct of the foreign policy of the United States by the duly elected President?  What possible business of the FBI are the items that may be on the "agenda" for a meeting between representatives of Russia and of the incoming administration?

• The FBI's mission is to investigate crime.  There isn't the remotest suggestion of any crime being committed by a representative of the President-Elect meeting with a representative of Russia.  And it literally doesn't matter what their "motives" were.
• The FBI's mission is domestic and not foreign.  The FBI has no role and no say as to what the foreign policy of the United States ought to be or how it ought to be implemented.

So, New York Times, how is it not a scandal -- a gigantic scandal -- that the FBI (not to mention other intelligence agencies) got involved in "investigating" how an incoming administration was engaging in foreign policy?  And then, of course, leaked everything about the "investigation" to the New York Times.

Boy, did that Comey guy need to be fired.  My question is, how many more FBI partisans-in-the-guise-of-criminal-investigators need to be fired along with him.  Why is it taking so long?

I certainly have not pulled my punches in my own criticisms of Trump.  But this is ridiculous.  Keep this up, and I'll become his biggest defender.

New Samuelson Biography: The Usual Progressive Self-Delusion

The "Review" section of the Wall Street Journal last weekend had a review (by a guy named Eric Maskin) of a new biography of Paul Samuelson (behind pay wall).  The title of the book is "Founder of Modern Economics: Paul A. Samuelson," and the author is Roger E. Backhouse.  Backhouse is an economic historian who teaches at the University of Birmingham in England.  Actually, the book that has come out is only Volume 1 (subtitle: "Becoming Samuelson") of what looks to be at least a three-volume magnum opus, and covers only the first 34 years of Samuelson's life, to 1948.  If you are into economics, you may recognize 1948 as the year that Samuelson first issued the basic economics textbook that millions of students have been assigned to read ever since, thus arguably launching his career into a new phase.  Although it only covers the formative years of Samuelson's career, this book is some 736 pages long, so it is nothing if not comprehensive.  That is, except for anything that might actually be important.

You can get a good idea of the gist of the book from the title ("The Founder of Modern Economics").  Backhouse clearly has a deep, deep admiration for his subject.  A particular focus of the book is Samuelson's introduction into economics, in many dozens of published papers, of complicated and sophisticated mathematical techniques.  Samuelson, according to Backhouse, is the guy, more than any other, who took economics from a field that had little use for mathematics to a field where advanced math skills were an absolute requirement to get that Ph.D.  The book goes in detail into many of Samuelson's early "insights" and "discoveries," including many of the equations, formulas and theorems now associated with the Samuelson name.  If you know anything about Samuelson, you will be aware that his pieces, generally after a tour through some math that few can understand, always seem to lead to the conclusion that more government spending and bigger government are a good thing.  

When I read Maskin's review, the thing that immediately struck me was that Maskin did not mention how this new biography deals with the one subject about Samuelson that has long seemed to me to be the most important thing in his career.  That subject, of course, is that in the middle of World War II Samuelson made what is without doubt the single most disastrously wrong economic prediction of all time -- the prediction that, if the federal government greatly reduced spending when it demobilized the military after winning the war, that that would lead to "the greatest period of unemployment and industrial dislocation which any economy has ever faced."  This prediction appeared in a chapter written by Samuelson, titled "Full Employment After The War," that appeared in a 1943 book edited by S.E. Harris titled "Postwar Economic Problems."  Here is a longer quote from Samuelson's chapter to give some context:

"When this war comes to an end, more than one out of every two workers will depend directly or indirectly upon military orders. We shall have some 10 million service men to throw on the labor market.  We shall have to face a difficult reconversion period during which current goods cannot be produced and layoffs may be great. Nor will the technical necessity for reconversion necessarily generate much investment outlay in the critical period under discussion whatever its later potentialities. The final conclusion to be drawn from our experience at the end of the last war is inescapable--were the war to end suddenly within the next 6 months, were we again planning to wind up our war effort in the greatest haste, to demobilize our armed forces, to liquidate price controls, to shift from astronomical deficits to even the large deficits of the thirties--then there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced." [italics in original]        

Hat tip David Henderson at Econlog.  Note that I have departed from my usual style of putting the whole quote in italics in order to show you that this disastrously wrong prediction was thought by Samuelson to be so important that he put it in italics in his original.  And how did the prediction work out?  As Henderson points out, "pretty much everything . . . that [Samuelson] speculated about policywise happened: the huge drop in the deficit, the end of price controls, and the demobilization."  Government spending fell 61% from FY 1945 to FY 1947, and went from 41.9% to 14.7% of GDP.  And the economy took off, ushering in a great post-war boom that we still look back on with nostalgia.

When Maskin's review of Backhouse's book omitted any discussion of this subject, I decided that I would just have to go out and get the book to see how Backhouse dealt with it.  I mean, it would not really be possible to write 736 pages about Samuelson's early career, going into excruciating detail on literally every paper the guy wrote, and somehow just not mention this topic?  But yes, that is what I found.

Actually, it's even worse than that.  Backhouse's book does not omit discussion of Samuelson's "Full Employment After The War" piece, and actually has a long discussion of it, going on for several pages.  But if you read Backhouse's treatment, you will never find out about the disastrous prediction, and instead you will be told that the important thing about Samuelson's piece was its insights into economic theory, and most particularly the "discovery" of something called the "full employment multiplier" -- one of Samuelson's many thinly-veiled rationalizations for more and yet more government spending.  

Backhouse's treatment is found in Chapter 20 of his book, beginning at page 414.  The chapter is titled "Developing the New Economics, II: Policy, 1942-1943."  Here is the beginning:

At some point between March and June 1942, Samuelson wrote a chapter, "Full Employment After the War," for a volume that Seymour Harris was editing on Postwar Economic Problems.  Whereas elsewhere Samuelson's concern was the need to take action, in this chapter he focused on economic theory.  Sensitive to the political implications, Samuelson emphasized repeatedly that he was talking about a technique of analysis that was "neutral on policy questions" . . . .    

Sure, Roger.  Like the New York Times is "neutral on policy questions."  Back to Backhouse's discussion of Samuelson's piece:

Reviewing the "offsets" to saving that might contribute to full employment, Samuelson covered various possibilities, including business investment, government spending to redistribute income, foreign investment, the development of new wants to stimulate consumption, deficit-financed government spending, and "government spending matched by equivalent taxes."  The last was a recent discovery . . . [that] came to be known as the "balanced-budget multiplier," the idea that an increase in government spending matched by an equivalent rise in taxation is expansionary.  The political significance of this is hard to exaggerate . . . . 

You have to love the use of the word "discovery" as the label for Samuelson's assertion that "an increase in government spending matched by an equivalent rise in taxation is expansionary."  Hey, we know that more government spending and bigger government is always a good thing because it's backed up by a bunch of exceedingly opaque mathematical mumbo jumbo that nobody can understand!  It must be right!  But what about the empirical proof -- or in this case, the dramatic empirical disproof that followed within a few years?  Well, we'll just omit any discussion of the empirical prediction or of its disastrous failure.  And we'll attach the word "discovery" to the disproved hypothesis in the hope that no one will call us on our failure.

In short, Backhouse's treatment of Samuelson's 1943 piece and its disastrous prediction can only be characterized as deceptive.  After coming to this conclusion, you will not be surprised to find that I declined to read the rest of the book.  I did skim enough to realize that the gist of most of the rest is "Oh, wow, this guy is really, really smart" -- again in complex mathematically-dense pieces the bottom line of which always seems to be that the government should spend more money.

Unproven hypotheses rationalize massive increase in size and power of government.  Purveyor of the hypotheses becomes hero of the left and of academia.  Hypotheses disastrously fail empirical testing.  Left proceeds as if nothing has gone wrong.  If you notice any parallels to the global warming scam, it's not my fault.

President Trump Has A Great Opportunity To Cut The "Poverty" Rate

On Tuesday the first detailed version of the federal budget for the next fiscal year (beginning October 1) came out.  It was about 3 nanoseconds before the usual voices of the progressive media resorted to the usual ignorant talking points.  

Apparently, there is a style manual somewhere that requires the use of the word "cruel" in all discussions of a budget proposal from a Republican.  Out of all the subjects covered in the massive budget proposal, the one giving the most opportunity for use of the official word "cruel" was the proposal dealing with the food stamp ("SNAP") program, so most mainstream press outlets gave particular focus to that subject.  For example, we have Chauncey Devega in Salon ("Trump’s proposed budget is a wish list of wanton cruelty. . . ."); Derek Thompson in the Atlantic ("Trump's budget is a cruel con . . . ."); Abigail Tracy in Vanity Fair ("Trump's big, cruel budget proposal would decimate the safety net . . . ."); Michael Cohen in the Boston Globe ("Cruel fictions of the Trump budget. . . .").

For a slight variation on the theme, there was the speech given by Hillary in New York on Wednesday (is she still running for President?), in which she upped the ante by saying that the budget embodied "an unimaginable level of cruelty."  Really?  Current level of food stamp usage is about 44 million recipients.  Trump proposes to cut that -- maybe if he's lucky -- back into the 30s of millions.  Now, quick pop quiz:  How much did Bill Clinton cut food stamp usage during his presidency, and to what number of recipients?  The answer is that food stamp usage was at about 27 million users when Clinton took office in 1993, and declined to about 17 million by the time he left at the end of 2000, a drop of close to 40%.  The 17 million recipients in 2000 were well less than half the number today, and well less than half the percentage of the population as well.  So, Hillary, if Trump's proposal that might get back to around 30 million recipients is "unimaginably" cruel, what's your adjective for someone who would take the number back to 17 million?

Here is a chart of food stamp recipients by year:

The New York Times helpfully piles on in today's lead editorial, titled "The Problem Isn't Food Stamps, It's Poverty."  Excerpt:

Food stamps work. Each month they help feed 43 million poor and low-income Americans, most in families with children and working parents. Food stamps, officially the Supplemental Nutrition Assistance Program, keep millions of people from falling into poverty each year and prevent millions of poor people, many disabled or elderly, from falling deeper into poverty.

Do you think that these people must know what they are talking about to put such a seemingly definitive statement in the first sentences of a lead editorial?  The opposite.  It is almost impossible to comprehend the level of ignorance and stupidity embodied in the quoted statement.

The New York Times is completely unaware -- or, at least they pretend to be completely unaware -- that food stamps are not counted in the federal government's measure of poverty in any way.  For that reason, providing food stamps to additional recipients does not keep one single person -- let alone the "millions of people" claimed by the Times -- from "falling into poverty."

Next question:  Would reducing the number of food stamp recipients raise or lower the measured level of poverty in the United States?  For anybody who understands this subject at all, the answer is obvious:  reducing the number of food stamp recipients would lower the measured level of poverty.  This will be particularly true if, as Trump proposes, a work requirement is imposed as a condition for able-bodied adults to receive food stamps.

Does that seem counter-intuitive?  Once you understand that food stamps are not included in any way in the measure of poverty, it is not counter-intuitive at all.  "Poverty," as measured by the government, is a question only of what is called "cash income."  Take a person with no cash income and give him food stamps, and he still has no cash income, so he remains in "poverty."  He also has a strong incentive not to get a job (or at least, not to get a job with income reported to the government) in order to keep and maximize the food stamps.  However, take a person with no cash income and require him to take a job as a condition of maintaining some level of food stamps, and now he has cash income.  Even minimum wage jobs pay plenty to remove from poverty almost everybody who works full time or near full time.  (The only exceptions are large families with only one earner.)  Imposing a reportable job requirement also has the effect of bringing into the open substantial amounts of income that previously existed, but was off the books or under the table.

So in fact the changes that Trump is proposing in the food stamp program, and in other handout programs, have the potential to cause a substantial reduction in "poverty" as measured in government statistics.  This is no different from the dramatic declines in the poverty rate that occurred in the mid 90s, during the Clinton presidency, following the 1996 "welfare reform."  If Trump and the Congress have the stomach to proceed in the face of the outrageous charges of "cruelty" currently being hurled at them, they will have the benefit of dramatically improved "poverty" statistics to use in the next election.