A Spicy Stew of Economics, Politics, Data, Food, Carpentry, etc.
Globalization Critic Greg Palast: Trustworthy?
Responding to my request for enlightenment about the crimes of the World Bank and IMF, commentator Sal Magallanez points me to the book "The Best Democracy Money Can Buy
" by BBC and Guardian reporter Greg Palast.
At first, this seemed like a good tip. Palast seems to be knowledgeable: before becoming a reporter he earned a University of Chicago MBA and worked in utility regulation. Further, my very own mother has praised his journalism (about Florida's purging of black voters from the rolls in the 2000 election). But I looked at Palast's journalism and concluded that his writings are nihilistic rants that can't be trusted.
I'll reserve elaboration on why I think Palast's writings are nihilistic rants for another time, except to note one of the few positive suggestions about globalization he has to offer: "the solution to world poverty and crisis
is simple: remove the bloodsuckers." "Bloodsuckers," needless to say, refers to the IMF. One could imagine that this is shorthand for some positive vision, perhaps for a world socialist revolution or something, but I couldn't find any sign of this vision in his writings. But let me say why I think his writings can't be trusted.
In an article in the Guardian, "Who Shot Argentina?" Palast describes an agreement between the IMF and Argentina, during the currency crisis of late 2001,
The IMF is never wrong without being cruel as well. And so we read, under the boldface heading, "improving the conditions of the poor," agreement to drop salaries under the government's emergency employment program by 20%, from $200 a month to $160.
Helpfully, Palast's web site provides a link to the IMF document
[1.3 meg pdf]. I ask you, is Palast accurately summarizing this passage?
In the social area, the government's efforts focus on improving the conditions of the unemployed and the poor. The government has increased budget allocations under the temporary employment programs, including the Trabajar program and the Emergency Employment Program (PEL). The government is also improving the allocation of the resources under these programs by making the selection of beneficiaries more transparent and by focusing on the head of household. To broaden the scope of the programs, entitlements under the Trabajar program have been lowered from Arg$200 to Arg$160 a month." [item 24, page 8 of the pdf]
Let's leave aside how much responsibility the IMF, as opposed to the Argentinean government, bears for this policy. Palast doesn't discuss this question at all, heaping all blame on the IMF.
Is it really "cruel" to expand an emergency workfare program to cover more people, even if the amount per worker is cut? And why doesn't Palast admit that the government "increased budget allocations?" Palast leaves out this crucial fact, that spending on employment programs went up, even though it appears in the very document that he claims to be discussing.
In fact, it turns out that the Argentina's emergency employment program was hugely expanded during the crisis. Expenditures increasing by about 500% in real terms. Almost 2 million more people enrolled. In fact, the Argentinean government "cruelly" expanded overall spending on the poor during the crisis. See this World Bank report
(pdf pages 39-42) [2.8 meg pdf].
I could go on. For example, compare the basically approving description of Steve Hanke that Palast presents in his article, to Paul Krugman's description
of this right-wing crank who tried to export Argentina's disastrous currency peg to Indonesia. Why does Palast like Hanke, despite Hanke's strong support of the currency peg that Palast hates? Because, as a libertarian, Hanke opposes the IMF.
So, why should I read any more? Palast says aid to the unemployed was cut, when it was actually greatly increased. Palast says Hanke opposed the currency peg, when he actually was an extremely prominent supporter.
Granted, I think the IMF policy in Argentina was terrible, and Palast make some valid criticisms too. But all his valid criticisms are borrowed from Stiglitz
, and I can trust Stiglitz not to distort the facts or tell me that black is white.
Number 2 with a Bullet!
It's been our best week so far here at the Ragout Kitchen: over 1,800 visitors. I started this blog a few months ago joking about seeking links from right-wing warbloggers
. But (at least this week) we've been even more successful than that. Why we've been linked by some of the top anti-war bloggers, and, better yet, some non-blog web sites. We've been linked by once-blind media commentator David Brock
, top campaign blogger MarKOS Zuniga
, longhaired economist Max Sawicky
, the Columbia Journalism Review
, and others
A few months ago, I was pleased to be number 6 in Ragout Economics
(out of 600 or so). But this week you're reading a blog that is not only number one in Ragout Economics, but is also the second most popular Ragout
website on Google (out of 295,000). My apologies to everyone who came here looking for recipes.
Anyway, besides wanting to boast about my first taste of blogging success, I have a couple tips for bloggers hoping to promote their blogs, and a few announcements.
The tips for blog promoters.
(1) You really can sleep your way to the top
! (2) The large majority of this week's hits have come from David Brock's non-blog, even with the link from top-5 blog dailykos.com. This leads me to speculate that there may be life outside of the blogosphere.
(1) I plan to start a regular Monday feature, "Economists Say," discussing New York Times sentences that begin with "economists say" and end with nonsense. I expect to have little trouble finding enough material for a weekly post. (2) I will be posting an official ragout recipe, just as soon as I develop one.
Kerry Heads to Green Bay: 1.5% Gain in WI Expected
According to a recent study
[400k pdf] by Harvard prof David King and Kerry/Gore campaign operative David Morehouse, local campaign stops are "very often a more effective way to move voters than blanketing an area with television advertisements." The study has attracted at least some press attention
King & Morehouse examine polls before and after local stops in the 2000 presidential campaign, finding a boost of 1.5% in statewide polls and 17% in local media markets. For example, Gore went from being 7 points behind Bush in La Crosse, WI a few weeks before visiting to 7 points ahead a few weeks afterwards, a gain of 14 points. La Crosse is a small place, but there were still about 180,000 households in the media market. Gore won Wisconsin by less than 6,000 votes.
As the campaigns target 18 or so "purple" swing states, saturating them with TV ads, they'll eventually reach the the point of diminishing returns; old-fashioned whistle-stop campaigning may gaining in importance. According to a Pew foundation poll
, local TV news is a more common source of political information than cable, newpapers, or network news (although the differences aren't huge). One big believer in this kind of "under the radar" campaign, according to the study, is Karl Rove.
A recent AP article gives a nice description of a Kerry tour of Ohio
Media coverage in several Ohio stops along Kerry's "Jobs First Express" bus tour last week and the response from some voters were a politician's dream.
Television stations aired Kerry's speeches live. Radio stations previewed his appearances and dissected his economic proposals. The front pages of newspapers carried above-the-fold, four-column photos of Kerry and wrote thousands of words about his policies.
Kerry visits Green Bay this Thursday and Friday. According to King & Morehouse, local coverage often starts a week in advance. All the the Green Bay TV web sites I looked at on Wednesday were announcing Kerry's anticipated visit. Should you want all the details, here's a page of links to Wisconsin media
. Here's my favorite story:
May 26 - Campaign workers handed out more than 800 free tickets to tomorrow's rally in Ashwaubenon for presidential candidate John Kerry.
George Twigg, Kerry's Wisconsin campaign director, says there has been a huge demand for tickets.
Kerry's two-day visit includes a public rally tomorrow night at ShopKo Hall in Ashwaubenon and an invitation-only meeting Friday morning with veterans at the National Railroad Museum, also in Ashwaubenon.
Retirees Bruce and Elaine Jensen drove from Algoma to the Green Bay campaign office to get tickets for tomorrow.
Bruce Jensen says he can't stand the thought of another four years of George Bush and Dick Cheney.
U.S. to World: Keep Out
An underappreciated way in which Bush is destroying our country is by driving foreigners away from our shores. This has received a fair amount of coverage in the British
press, but very little here at home. One exception
is this article from CBS, but like most U.S. press coverage I've seen it emphasizes the decline in foreign students rather than travel in general.
The British newspaper the Daily Telegraph
Strict new security and visa rules put in place since the September 11 attacks have triggered a 30 per cent drop in overseas visitors to the United States, the Bush administration has announced.
This has dealt a major blow to the tourist industry and US universities, among other sectors, said Colin Powell, the secretary of state.
Let's put aside the jobs and dollars that tourists bring in, which really aren't all that important. It doesn't take a genius to see that America's standing in the world greatly benefits when others travel here. Students study here, and some go home and lead their countries. People come here to to business and bring ideas and innovations. Scientists come here and share their knowledge. Tourists come and most probably go home with a better image of the U.S. So, this is one of Bush's disasters that really bums me out, and that I think could really do a lot of harm in the long run.
Now you can say that a lot of factors drive tourism, and that it's not all Bush's fault. And surely the fallout from 9/11 would have reduced travel no matter who was president. The world economy hasn't been that hot. But at the same time, some factors should have been increasing travel to the U.S., like the weak dollar. And there's the unprecedented size of the drop-off in visitors. Ultimately, I think a lot of fall-off is due to excessive visa requirements, excessive hassling at the border, excessive red tape and fingerprinting and photographing.
And then there's lawlessness of U.S. customs agents. Canada issued an advisory to their citizens of middle eastern descent a few years ago, advising them to avoid travel to the U.S. Why? Because of our record of deporting Canadian citizens to Syria to be tortured
. That can't be good for tourism.
Percentage Change in Travel to the U.S., 2000-2003
Middle East -36.3
Source: U.S. Department of Commerce
The Unprecedented Fall in Travel to the U.S.
The So-Called Liberal Media Investigates
According the the Indian press, the U.S. Republican Party has been outsourcing fundraising calls
Fortunately Paul Farhi, writing in the Washington Post sets us straight, writing, "Um, no, not exactly
" and calling the report a "myth." [scroll down to the bottom of the page]
How does Farhi know that the story's bunk? Because the Republican National Committee has denied it. Now there's skeptical investigative reporting for you!
Now That's Sprawl
Elizabeth Williamson, writing in The Washington Post
on Saturday, alerts us to the dangers of sprawl, writing, "Each day, 28 to 43 square miles of green space in the region are overtaken by the builder's bulldozer, say the authors of the study...The study ... used satellite imagery to map a 3,000-square-mile area." Which is to say, the entire Washington metropolitan region will be paved over in less than four months.
Maybe major newspapers should hire math & statistics editors? The M&S editor could check articles for glaring impossibilities like the above, help reporters to put budget numbers in perspective ("The President's new plan to fight crime called for spending $300 million over 10 years, or $3 per household"), make charts, and generally add some numeracy to the news.
Kerry's Health Plan
Two of the web's best economists
and public policy analysts
have praised Kerry's health care plan. But what is the plan? I find Kerry's nontechnical description of the plan
to be pretty impenetrable. Kerry wants people to pay less for health care, but how's he going to do it?
So here's my understanding, largely based on former Clinton health economist Ken Thorpe's
description. The main items (not counting prescription drugs) in the plan seem to be
(1) expanding federally-paid medical care for the poor (Medicaid and SCHIP) to cover people who aren't quite so poor (adults up to 200% of poverty and children up to 300%. ($518 billion over 10 years)
(2) A reinsurance program that would cover 75% of catastrophic costs over $50,000 for pretty much everyone with private health insurance. ($257 billion)
(3) Tax breaks to small business, the unemployed, and the near-elderly to buy health insurance, capped at 300% of poverty. ($177 billion)
The first two ideas make a lot of sense, since they expand the government's role as an insurer, something it does quite well, with much lower administrative overhead than the private sector. Also, since everybody (more or less) gets these benefits, there should be relatively little adverse selection (the bane of insurance: with sick people rushing to buy insurance, insurance companies do their best to cherry pick and keep them out).
I'm less sure that the various tax breaks are so terrific. Why not just cut taxes for lower-income people? Maybe the point is to reduce the number of people who drop private coverage and enroll in the federal program. But why bother? I don't see how spending a lot on tax breaks to keep people from accepting subsidized health insurance gains much of anything.
Light Blogging? Blame the Copy Editors
Sorry about the light blogging recently. I've been busy frantically churning out words that are actually going to see print and pdf. Now that I'm at the fighting-with-copy-editors stage, blogging will resume its normal pace.
Ever notice that copy editors have all learned two rules, rules that are mutually exclusive for those of us who write about data? First, they tells us to to eschew the passive voice. Second, they say not to use "I" and "we." How then to rephrase a sentence about data like, "The sample was restricted to those earning between $1 and $50 per hour?" "I restricted the sample ... " is out. "The Ragout organization restricted the sample ..." is allowed, but can I truly claim to speak for the entire organization? Perhaps the sample members can be the actors? "Only those earning between $1 and $50 an hour appear in the sample." But that's misleading, people earning 50 cents an hour appeared in the sample until I excluded them, they didn't exclude themselves.
Learn to love the passive voice. Some actions just aren't very active.
Why is Nader Running, Exactly?
Via William Raspberry in the Washington Post
, I learn that Ralph Nader has offered some unsolicited advice to John Kerry: a 10-point plan to win the election. "The Democrats have become too cautious," says Nader, "If Kerry takes these positions, the only thing he'll have to worry about is how big will be his landslide."
The funny thing is that Kerry has endorsed most of Nader's proposals. Nader thinks that his proposals would "attract a lot of conservatives to [Kerry's] cause." But that's only because a lot of Nader's proposals are "Mom & apple pie" issues: raising the minimum wage, ending corporate welfare, fighting corporate crime, fighting predatory lending. Republicans support these too, though with less vigor than Democrats. Conservatives who want the minimum wage raised can just vote for Bush. He supports it too
1. Nader wants to "end corporate welfare," (though I can't find much on his web site about this). Kerry wants to "implement the McCain-Kerry Commission on Corporate Welfare," which would recommend cuts that Congress would be required to vote on.
2. Nader says "workers need a living wage - not a minimum wage," which should be indexed to inflation. Kerry "supports increasing the minimum wage and indexing it to inflation."
3. Nader says he wants to "convict the corporate executive crooks." Kerry says he wants to "restore investor confidence with strong enforcement by the securities and exchange commission." Kerry says the government "should not give lucrative contracts to companies that have a record of accounting fraud - like WorldCom - or are moving offshore." Kerry actually has quite a lot of this kind of stuff in his economic plan.
4. Nader wants to repeal to Bush's tax cuts for the wealthy and spend it all on infrastructure (according to Raspberry but not Nader's web site). Kerry also wants to "repeal Bush's special tax breaks for Americans who make more than $200,000," although I think he mostly wants to spend it on health care and deficit reduction.
5. Nader wants to protect the poor from check-cashing businesses, tax-refund loans, rent-to-own schemes, bank red-lining, and predatory lending. Kerry want to "crack down on financial predators," and will appoint a "Director of Family Economic Security who will be charged with a top to bottom review of fair lending and fair housing laws," so that they can be updated.
6. Nader wants to "demand reform of a tax code that taxes work more than it taxes wealth." Kerry says "many corporations are bending the rules and shirking their fair share of the burden," and wants to crack down on companies that set up "virtual headquarters in foreign countries...to avoid paying U.S. taxes."
7. Nader wants to "promote reduced reliance on fossil and nuclear energy." Kerry wants to "reduce oil dependence by two million barrels of oil a day," by increasing mileage standards and various other means. He doesn't criticize nuclear energy.
8. Nader wants to reverse policies that "make it almost impossible to form a union in the private sector anymore." Kerry says that the "card check and neutrality system is the most fair and equitable way" to organize a union, which I think is a strong pro-labor position.
But then there's:
9. Nader wants to "Set a date for withdrawal of American troops and
companies" from Iraq." Here Kerry and Nader actually differ, and this is way Nader is polling at 5% or so: he has the support of a hard core of anti-war voters.
What happened to number 10? Well, Raspberry seems to have missed one. Perhaps it's the Industrial Hemp
plan Nader announced last week.
All Nader quotations are from Raspberry's article
or Nader's Issues Page
. All Kerry quotations are from Kerry's August 2003 Economic Plan
, his Energy Plan
, his "Plan to End the Era of Special Interests
," or his Workers Issues
Changing Course in Iraq
The Washington Post today has two interesting proposals for changing course in Iraq, and bringing our troops home quickly.
John Brady Kiesling
, a former U.S. diplomat, suggests that we choose some Iraqi leader that we like and encourage him to drive us out. "The struggle against foreign occupation can generate the legitimacy needed to hold Iraq together. A leader who drives the Americans out can claim the loyalty of enough of the Iraqi people to govern Iraq by methods more acceptable than Saddam Hussein's."
The Green Berets think we should drastically reduce the number of troops in Iraq, according to a Post news analysis.
Like many in the Special Forces, defense consultant Michael Vickers advocates radically trimming the U.S. presence in Iraq, making it much more like the one in Afghanistan, where there are 20,000 troops and almost none in the capital, Kabul. The U.S. military has a small presence in the daily life of Afghans. Basically, it ignores them and focuses its attention on fighting pockets of Taliban and al Qaeda holdouts. Nor has it tried to disarm the militias that control much of the country.
Who'd of thought a year ago that, as a model for occupying a country, Afghanistan would look so good?
All India, All the Time
Labor Blogger Nathan Newman, who's gotten me off on an all India, all the time kick, has responded on his blog
. He posts a very interesting article from Economist article saying basically that one of the poorest Indian states (Bihar) has a corrupt government. Newman highlights a section of the article claiming that wages are falling for migrant agricultural workers in a few states, due to mechanization
. Presumably, Newman isn't really opposed to the mechanization of agriculture, so I remain puzzled as to what any of this has to do with globalization.
In his comments section, Newman more or less backs off from his earlier claims about "global pressure to lower wages," or at least doesn't defend it. He writes, "I agree that average wages can rise, yet many workers still see their wages fall. It's the unevenness of growth that is the issue." The Economist article suggests that the obvious response to uneven growth in India is to increase public investment and to fight corruption in India's poorer states. This makes sense to me, while blaming globalization for the mechanization of agriculture makes no sense at all.
Since one of the self-imposed mandates of this blog is to talk about data, I should mention that the Economist's evidence that wages are falling for agricultural workers in Punjab is anecdotal: a few migrant workers say so. As I've noted, the evidence on the other side consists of careful surveys that show rapidly falling poverty in Punjab
, and India as a whole. Why shouldn't we trust the migrant workers? One obvious reason is that their experience might not be typical. Another is that there's no time period attached to their reports. It may well be that agricultural wages are down this year, after having risen rapidly for decades. And the agricultural workers may well respond by moving into higher-wage sectors next year, perhaps into construction.
Overall, the real issue is Newman's repeated claims that rising average wages rising in India mask ominous trends for many workers. But the fact is that poverty
is falling rapidly in India. And this is poverty by India's definition, which means roughly a dollar a day. Specifically, India defines poverty
as a level of expenditure "sufficient to provide an average daily intake of 2,400 calories per person in rural areas and 2,100 calories per person in urban areas, plus a small allocation for basic nonfood items." So this is really a big deal, and spouting boilerplate denouncements of "globalization" in response to India's tremendous success is, at best, just plain ignorant.
The Real Culprit: Globalization, the IMF, or Neither?
A reader says that it wasn't globalization that cost the government street sweeper his job in India, but maybe it was the IMF and the World Bank, which like to push privatization and budget-cutting on poor countries (or at least that's how I interpret the comment).
Personally, my impression is that when the IMF steps in to bail out countries undergoing a financial crisis, their stabilization programs cause a lot of unnecessary suffering. I remember, for example, the IMF insisting that South Korea weaken laws making it hard for employers to fire their workers, which seemed to have pretty much nothing to do with the currency crisis that the IMF was ostensibly fighting. On the other hand, I think the World Bank is mostly a force for good.
In the end though, I'm not really informed enough to have strong views about the IMF and the World Bank, and I'm ready to be enlightened.
Not Wrong, Just Snide.
Several readers take me to task for comparing India's unemployment rate to the U.S rate. But did I really do that? Well, yes I did, but it was only in response to a NY Times writer who made the same comparison, using a measure less conceptually comparable to U.S. definitions. In other words, I was just being snide, and isn't that what blogging is all about?
I still think my claim that using U.S. definitions of unemployment, India's rate is about 4.4%. is a correct one, as is my claim that unemployment wasn't rising in India during the 1990s. But I don't deny a reader's point that in the U.S., job losers look for new work while collecting unemployment insurance, while in India, which presumably has a weaker safety net, many job losers probably stay off the unemployment rolls by selling apples at a streetcorner while looking for better work. So a 4.4% unemployment rate could mean something much worse in India than the same rate means here.
Angus Deaton on Poverty in India
A reader points me to research by crackerjack development economist Angus Deaton
, that provides "less sanguine estimates of poverty in India." While it is true that Deaton's tone is less sanguine than mine, the difference is mainly one of nuance. Deaton's revised figures confirm that poverty has fallen dramatically in India in the 1990s, which was my claim.
Deaton seems to have two main points. One point is that conditions for India's poor were getting better just as quickly in the 1980s as in the 1990s, so we shouldn't jump to conclude that the economic policies of the 1990s were better. I quote his conclusions at the end of this post. The other point is that inequality has been increasing in India in the 1990s. Presumably, the poor were getting richer, but the rich were getting richer faster. So Deaton has found some dark wisps in what is mostly a brilliantly bright cloud.
I wouldn't deign to contradict Deaton on the first point: although India's progress has been stellar, I don't really know what has caused it (though I doubt that globalization has hurt).
On the second point, though, I think any angst about inequality in India is misplaced. In wealthy countries like the U.S., I think increased inequality is an important cause of unhappiness, and I'm in favor of decreasing the absolute level of living standards overall, and even of the poor too, if that's what it takes to reduce inequality (at least up to a certain point). But in India, increased living standards for the poor means that fewer children are dying, that fewer children are going hungry. We should be cheering, not carping that the richer are getting richer faster.
Deaton's conclusions (with my paraphrase in brackets):
First, there is consistent evidence of continuing poverty decline in the nineties.
[2. The decline in poverty is confirmed by another measure.]
Third, growth patterns in the nineties are characterised by major regional imbalances [across states].
Fourth, the intensification of regional disparities is only one aspect of a broader pattern of increasing economic inequality in the nineties.
Fifth, we have argued for assessing changes in living standards in a broader perspective, going beyond the standard focus on expenditure-based indicators. In that broader perspective, a more diverse picture emerges, with areas of accelerated progress in the nineties as well as slow-down in other fields. For instance, there is much evidence of rapid progress in the field of elementary education, but the rate of decline of infant mortality has slowed down.
[6. Too subtle for me to quote.]
Finally, we have argued against reading these trends simply as evidence of the impact (positive or negative) of 'liberalisation'.
Trickle-down or Triumph in India?
Amy Waldman, in a NY Times Article titled "Low-Tech or High, Jobs Are Scarce in India's Boom
," reports some disturbing news,
India's economy is spawning a growing middle class, a host of international companies, a booming stock market and a new image for this nation of more than one billion people.
But those very reforms and conditions are also reducing the prospects of some of its citizens. India may be "shining," in the description of a controversial and expensive government publicity campaign, but it is also struggling to generate jobs
For many Indians, then, the dismantling of a quasi-socialist economy that began in 1991, and the growing globalization of the past five years, have meant only the trickle-down of raised expectations and lowered opportunity.
Labor blogger Nathan Newman
, apparently much disturbed, comments,
Many free traders tell a story that it's sad that some Americans are losing jobs to "free trade", but we should not be greedy, since it benefits workers in developing nations.
But the current regime of outsourcing, privatization and the race to the bottom is hurting workers throughout the world, with corporate profits the only beneficiary.
What evidence does the Times article provide for all this angst? Two anecdotes about workers losing jobs: a government street sweeper who's had his job privatized, and some concrete mixers replaced by ready-mix concrete. Also, the article says public sector employment has fallen and unemployment is 8% (although this last figure is at best highly misleading
But what, I ask you, does any of this have to do with globalization and free trade? Was the street sweeper replaced by teleoperated robots controlled from London? Perhaps the ready-mix concrete was imported (although the article doesn't say that), but surely Newman and Waldman don't mean to call for a ban on ready-mix concrete? In any economy that's not totally moribund, large numbers of jobs are created and destroyed every year, so you can always find a few anecdotes about people losing their jobs.
The real story in India is tremendous progress. India's success has been pretty much the most hopeful news in the world in the last decade, since it means a billion mostly very poor people are becoming less poor. Although Waldman and Newman would have you believe that the rich in India are gaining at the expense of the poor, it just ain't so. The truth is, since India began opening up its economy, not only has the economy boomed (GDP growth rates of about 6% for the last few decades), but the poor have benefited tremendously.
Poverty has fallen
(35% to 26% from 1994 to 2000), wages are up
, fewer children are malnourished
(53 to 47% from 1994 to 1999), more kids are in school
(51 to 77% over the same 5 years), and unemployment is about the same
Economists Say...whatever the NY Times wants them to say
praises a NY Times article
that manages to include two of the things that most irritate me about that newspaper's economics coverage. And combines them in the same sentence, no less!
According to Amy Waldman, the article's author, "as both economic and population growth outpace employment growth, economists say, [India's] official unemployment figure of about 8 percent masks a far higher real rate." As I've blogged before
, whenever the NY Times has a sentence with "economists say," the rest of the sentence is almost surely nonsense that no economist would ever dream of uttering (with some exception for direct statements of bald facts).
This sentence is no exception. Now, one could reasonably say something like, "as population growth outpaces employment growth, the unemployment rate will rise." But that is not what the "economists" say.
Instead, the economists allegedly point out that economic growth exceeds employment growth in India. While I'm sure this is true, all it means is that productivity is growing rather than falling, which is very very common, and hardly worrisome. Productivity does sometimes fall during recessions, but this is the opposite of what the "economists" are supposed to be saying.
And the "economists" don't say that unemployment is rising, they say that "true" unemployment is higher than the official rate, which is a complete non sequitur. Perhaps we're supposed to assume that an 8% unemployment rate is pretty high, and so unemployment must have been rising.
But that brings up the second thing that irritates me about the Times' economic coverage, which is that they constantly cite unemployment rates that just aren't believable. Usually, I don't believe them because the Times cites unemployment rates for countries that are probably too small and poor to collect them, at least on anything like a timely basis. Admittedly, I've never taken the time to check. Now, India is poor, but it's a big country, and so it's believable that they do run a large nationwide survey to collect the unemployment rate. But I spent some time looking up India's unemployment rate, and it turns out that the Times' figure is both misleading and wrong.
The figure is misleading, because India measures unemployment only once a year, and reports it only with a lag of several years. So the 8% figure is probably for June 2000, which are the most recent available data.
Nowhere does the article say this, although every other figure seems to have a date attached to it, like India's 10.4% GDP growth rate in the last quarter.
Worse, it turns out that India reports several different unemployment rates, and Waldman's 8% is the wrong one. She's chosen a figure that counts part time workers as partly unemployed, and that is the highest rate India reports, but she hasn't chosen a figure that's comparable to U.S. rates. Instead, the unemployment rate in India [big document]
(in June 2000) is 4.4%, when you choose the figure most like U.S. definitions. Since the current U.S. unemployment rate is 5.7%, India's performance doesn't seem bad at all.
Is Kerry too moderate?
When I first read the section of Monday's Wall Street Journal interview quoted below, my first reaction was that Kerry sounds dangerously moderate. Re-reading it today, I can't find that much to criticize. I think the case for a more balanced budget has become stronger over time, because of the retirement of the baby boomers and the coming shortfall in Medicare, and also because of the unsustainable trade deficit
($542 billion in 2003). So, I guess I can't complain that Kerry emphasizes balancing the budget.
I suppose Kerry is also right that the lesson of the 1993 Clinton health fiasco is that the best way to increase health coverage is by expanding current programs (Medicare and Medicaid/SCHIP) to cover more people, rather than a radical revamping of the whole system. At least that's what I assume Kerry is getting at (I'm going to look more closely at his health care plan
and independent analyses
But I still do have some complaints. The whole point of balancing the budget is to increase national savings, in order to spur investment in new factories and offices, new equipment like computers and telecommunications, more R&D, and so on. So there's no point in balancing the budget at the expense of government investment in infrastructure, scientific research, and education. Unlike Clinton, who was at pains to make this argument in 1992, Kerry seems to be running away from any talk of "investments."
THE WALL STREET JOURNAL: ...How do you locate yourself and what your party did wrong on economic policy in the past, what it has done right, what you would do differently?
SEN. JOHN KERRY: .... I have historically always been what I would call a responsible, thoughtful Democrat who respects the laws of economics, and how money works, the psychology of the marketplace, the importance of confidence and fiscal responsibility. And from the moment I arrived in the Senate in 1985, I was one of the first three Democrats in the first days, with (Senators) Fritz Hollings, and David Boren, Warren Rudman, Phil Gramm, to be an original author and sponsor of Gramm-Rudman-Hollings (bill to curb government spending). It wasn't enforced. It didn't do the job. So in '93, when Clinton came along, I was one of those who pushed hard for the deficit reduction act. And in '97 I pushed hard for the compromise (on a balanced-budget agreement).
.... So I put myself in the responsible, open up markets, continue trade, trade responsibly, but be fiscally
responsible. I think you've got to send Wall Street the right signals about your fiscal policy. I think the
marketplace needs to have confidence that you're not going down some hole that increases our reliance on foreign debt...
WSJ: When Clinton ran in '92... he gets to office and says the deficit's worse than I realized. He ends up paring back his investments, sticking with his deficit-reduction goals.... When you envision what the first year or two of a Kerry presidency would be like, who's going to be more disappointed, (former Treasury secretary) Bob Rubin or (AFL-CIO president) John Sweeney?
KERRY: I've already been pretty realistic and pared back some of my proposals. I think that's a strong indicator of what I'm going to do. I mean I've imposed self-discipline in a campaign. When have you ever heard a presidential candidate say "I'm going to impose pay-as-you-go and we're going to live by pretty strict set of fiscal rules?" Now I've even shown how I'd pay for it....
Now I don't want the Canadian health-care system. I have a free-market choice-oriented system based on market principles. But it's got very powerful incentives in it. For people to behave a certain way, and differently. I would think American business would jump up and down and welcome what I'm offering. It's an enormous reduction in the cost of doing business. It will significantly make our companies more competitive. It significantly leaves total choice to people. It's not a government mandate.
I mean, I've learned the lessons of '93. I didn't even sign on to the Clinton (health plan) in '93. I looked at it and said "Whoa. Too many boxes. Too bureaucratic. Too much government." And I worked very hard with a moderate group of people. (Senators) Bill Bradley. John Chaffee. Bob Dole.... We worked hard to come up with an alternative proposal. Had Clinton been willing to accept it, we would have had 97% of America covered last year... I don't know how much you've read of my plan... But I've tried to make it market-based and thoughtful. I haven't met a company that hasn't said "Wow, you'll take 75% of the cost of my catastrophic cases off my back, and all I have to do is pass the savings on..." I personally talk to executives everywhere I go, in New York or elsewhere. They say, "spectacular."
Going Positive: Admirable Qualities of John Kerry (Part 4)
I especially liked a couple of the answers Kerry gave during an interview on economic policy with the Wall Street Journal on Monday. First, on Social Security, Kerry correctly points out that the system is in pretty good shape
. Although he doesn't mention it, Social Security is currently solvent through 2041. After that, it can continue paying about 70% of promised benefits, more or less forever, with no changes at all. In 20 or 30 years, we might need to raise payroll taxes. Unless of course, the amazing productivity growth that began during the Clinton administration holds up...
WSJ: What does it mean to be a fiscally responsible Democrat over the next 10 years and also deal with Social Security and Medicare?... In the case of Social Security, if you reject privatization, as you do, isn't it pretty obvious there are limited amounts of choices? We know what needs to be done. The question is how can we do them when you've taken things like raising the retirement age off the table?
KERRY: Because I don't believe that that is a necessary response or action to any of the things. I just don't believe it is. First of all, right now, the reason Social Security is challenged is because George Bush has an unaffordable tax-cut plan in place, an irresponsible, unaffordable tax plan. And that's why we're losing 10 years of Medicare. We were in a good position to be responsible about Social Security. We put ourselves there. And that's what I intend to try to get back to. And it begins with a strong economy. It also extends to being willing to be bipartisan, and trying to pull people together and find out what we need to do. I've heard the Cassandras of these programs for the 20 years I've been in the Senate, an each time we've been able to respond without doing the draconian things everybody suggests.
I also liked Kerry's answer to a question about whether to eliminate subsidies to Fannie Mae and Freddie Mac, the government sponsored companies that provide a secondary market in mortgages. Kerry says "I don't know." I give him a lot of credit for that and I think it's a sign of (admirable) self-assurance that he can admit that he doesn't have an answer. I can just imagine Bush trying to answer a question like that, and rambling on about the wonders of homeownership, the American dream, and probably free enterprise too.
WSJ: Do you think there's an argument for removing the federal subsidy from Fannie Mae and Freddie Mac?
KERRY: I don't know the answer to that. I have not examined that. They are enormously successful, enormously powerful entities with a huge share of the market. They've done a lot though for housing and to provide for the economic growth of the country. On the other hand they're pretty big. You know, I just haven't made any decision on that. I really would want to have a review and have some smart people weigh in and see what the implications are.
The Horse Race
Judging from Bush's approval ratings, which many political scientists believe are the best measure of his chance of re-election, Bush is in Gerald Ford territory. Ford, you may recall, narrowly lost. Bush is doing better than the two recent presidents who were decisively defeated for re-election (Bush I and Carter) but worse than the five since Eisenhower that were re-elected in landslides. Personally, I remain mystified why Bush has this much support.
Here's the figures, based on Gallup poll answers to the question "Do you approve or disapprove of the way George W. Bush is handling his job as president?" as reported in a recent L.A. Times article
Year Disapproval/ Election
(poll date) Don't Know Margin outcome
----------- ----------- ------ --------
Eisenhower 1956 (5/10) 69-17-14 +52 Won
Johnson 1964 (5/6) 75-10-15 +65 Won
Nixon 1972 (4/28) 54-37-9 +17 Won
Ford 1976 (4/9) 48-41-11 +7 Lost
Carter 1980 (5/2) 43-47-10 -4 Lost
Reagan 1984 (5/3) 52-37-11 +13 Won
H.W. Bush 1992 (5/7) 40-53-7 -13 Lost
Clinton 1996 (5/12) 55-39-6 +16 Won
Bush 2004 (4/18) 52-45-3 +7 ?
I've added "don't know" to the table. Does the extraordinarily low "don't know" figure for Bush mean that the electorate is especially polarized (the conventional wisdom)? Or does it just mean that with more exposure to polls, people are becoming more willing to answer a pollster's questions?