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Ragout
A Spicy Stew of Economics, Politics, Data, Food, Carpentry, etc.
 
Wednesday, September 29, 2004

The Race is Still Kerry's to Lose


The latest Democracy Corps poll has Bush ahead 49-46 in a 3-way matchup. The survey is conducted by Democratic partisans James Carville and Stanley Greenberg, but it's pretty much in line with most other polls (except Gallup). The Democracy Corps survey also includes a generic question about Presidential preferences: "Now let me ask overall, do you think the country should continue in the direction Bush is headed or go in a significantly different direction?" Bush doesn't do as well on the generic question: the split is 47-51, against Bush's direction.

Since the same group of people were asked both questions, this means that 2% of voters are currently supporting Bush but think he needs to take the country in a different direction. And 5% of voters think we're heading in the wrong direction, but aren't supporting Kerry. So there's a majority that has doubts about Bush, but haven't been sold on Kerry yet. The debates will be Kerry's best opportunity to convince the swing voters that he's an acceptable alternative to Bush.
 

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Tuesday, September 28, 2004

"The Uninsured are Sicker and Die Sooner"


Many people believe that the uninsured are able to get access to health care: at the emergency room, at the county public hospital, surely somehow. A 1999 poll found that 57% of Americans believed that the uninsured are "able to get the care they need from doctors and hospitals." Although it's true that the uninsured get some care, they get a lot less than those with insurance, and suffer worse outcomes. In short, a lack of health insurance is deadly.

The Institute of Medicine has issued a series of reports about the health outcomes of the uninsured. The IOM is part of the National Academy of Sciences, so these are consensus reports of a committee of experts, and about as authoritative as it gets. The overall conclusion is:
• Uninsured adults have a 25 percent greater mortality risk than adults with coverage. About 18,000 excess deaths among people younger than 65 are attributed to lack of coverage every year.
Now, insurance coverage is obviously correlated with age, income, race, and other factors that affect health. The studies discussed by IOM did try to control for these factors, but probably didn't succeed perfectly. So I was most impressed by the findings that among people with the same illness, the uninsured got less care and were more likely to suffer bad outcomes. The IOM found this over and over: diabetes sufferers got less regular exams, AIDS patients got less effective drugs, even uninsured car crash victims receive less treatment:
To see how uninsured patients fare in a hospital setting, the committee focused on two conditions for which most people are treated regardless of whether they are insured: traumatic injuries and heart attacks. It found that uninsured persons with traumatic injuries are less likely to be admitted to the hospital, receive fewer services if they are, and are more likely to die than insured victims. One statewide study of car crash victims discovered that uninsured victims had a 37 percent higher mortality rate. Another statewide study found that although uninsured trauma patients were just as likely to be placed in intensive care, they were less likely to be operated on or to receive physical therapy.

 

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Where's the Chef?


I'm spending a week on the west coast, combining a vacation with a little work. I hope to make it home for the first debate on Thursday. I hadn't really planned to blog much this week, but I'm an addict.
 

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Monday, September 27, 2004

More Tolls, Less Gridlock


The gang at Angry Bear has invited me to co-blog on a regular basis with them, and I've gladly accepted. I'll be regularly posing there once a week on Sunday nights/Monday mornings. I've kicked off the new gig with a post about the wonder and glory of congestion pricing.
 

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Saturday, September 25, 2004

Has the Campaign Begun Yet?


Lots of people (including me) are pretty angst-ridden about the polls showing Bush 5 points ahead or so. But I think the truth is that the swing voters are just starting to pay attention. At this point, somewhere between 86 and 98% of voters are willing to say that they favor or lean towards one candidate or another. It depends a lot on the poll and how the question is asked: 2% undecided in Gallup (with leaners), 14% in Battleground (without leaners), and the rest in between, since mid-September.

But a lot of voters still say they might change their minds. In the Pew poll a few weeks ago, only 80% of voters say there's no chance they could switch. Specifically, 38% of non-Bush supporters say they're "definitely" not voting for Bush, and 42% of non-Kerry supporters say the same.

In the LA Times' 1996 exit poll, the last time we had an election with an incumbent, 29% of the voters said they made up their minds sometime after the debates.

LA Time 1996 Exit Poll
"How long ago did you finally decide how you would vote for president today?"

Percent Cumulative
Today 6 6
Yesterday 3 9
Over the weekend 2 11
During last week 4 15
After the presidential
debates 14 29
After the conventions 9 38
During the primaries 13 51
Before then 49 100


 

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Friday, September 24, 2004

One Reason Why Houses are So Expensive


I'm spending a few days in Canada and as usual, I'm hearing about the dispute over U.S. tariffs on Canadian softwood lumber imports. The issue doesn't get much coverage in the U.S.: a Google news search shows that U.S. papers just reprint the wire services story, if they run anything at all. But there's tons of coverage in Canada, where it wins us no friends.

The facts are pretty simple: the U.S. imports about a third of its lumber from Canada and imposes a 27% tariff, arguing that Canada subsidizes its lumber industry by selling trees from government owned land too cheaply. The tariffs were imposed by the Bush administration in 2001, hoping to win some votes from the lumberjacks and sawmill owners, I suppose. Before that, the Clinton administration imposed quotas on Canadian lumber. The US has lost a series of NAFTA and WTO cases, most recently last month, but continues to appeal, dragging out the issue and keeping the tariffs in place.

While this isn't the most important issue facing us, it's not trivial either. There's about $5000-7000 of lumber in a typical house, so homebuilding industry estimates that these tariffs increase the cost of a new house by $1000 seem pretty reasonable.


 

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Thursday, September 23, 2004

Bush Takes Cops Off the Beat


In the first issue of the Economists' Voice, Yale Crime expert John Donohue evaluates ex-President Clinton's claim to a share of the credit for the fall in crime during his adminstration. Donohue writes,
With an astonishing 40 percent drop in the murder rate and a 33 percent drop in the violent crime rate during his two terms in office, Clinton certainly had much to crow about. In sharp contrast, there has been virtually no drop in crime in the last four years.
Donohue gives Clinton credit for reducing violent crime by about 6 to 8 percent, mainly by providing federal funds to local authorities to hire police, which put about 80,000 new cops on the street. In contrast, Bush has pretty much eliminated this funding, perhaps because a lot of it went to big cities where he gets few votes. And local communities have been reducing the size of the police force, after having gone on a hiring spree during the Clinton years (see the graph below). John Kerry has promised to restore funding to hire 100,000 new police officers.

Even leaving aside the increased crime Bush's cuts have probably caused, this is also one way in which Bush's policies have raised state and local taxes. Local governments haven't laid off all 80,000 new cops. They've kept many of them on the beat, replacing the federal money with local money.

I'm pretty impressed by the first article I've read in this new web publication. Kudos to editors Stiglitz, DeLong, and Edlin.

Police per 100,000, from Donohue (Economists' Voice 2004)
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Tuesday, September 21, 2004

The Skies Look Good For Kerry?


A few weeks ago, I discussed the research of Princeton political Scientists Achen and Bartels, who found that voters often punish incumbents in November for bad weather from May to October. According to their data, bad weather cost Gore half a percentage point in 2000, compared to average weather, or 2.5 percentage points compared to perfect weather. The reasons for this are pretty mysterious: perhaps rain or drought puts the voters in a bad mood. My earlier posts speculate about the possible reasons why the weather should matter [post one, post two, older version of Achens & Bartels paper]

So, how's the weather been this year? I've updated Achens & Bartels' "weather index" using data from May through August of this year. It turns out that the weather's been a little worse than average, especially in swing states. The weather's been especially bad in Colorado, Nevada, and Arizona (drought) and also Ohio, Pennsylvania, West Virginia, and Wisconsin (rain and flooding). Florida has had good weather, according to the Achen & Bartels measure, but presumably the hurricanes have changed that.

The table below lists the swing states and their "weather index." Higher numbers mean more drought or more rain/flooding. A weather index higher than 1.8 is worse than average. The next column multiplies the weather index by the factor estimated by Achen & Bartels for the 2000 election. The factor translates the weather into the number of percentage points the weather costs the incumbent.

You can also see the National Climatic Data Center's discussion of the weather here, and a cool map here. The map shows areas with a long term moisture deficit or surplus, which is the measure Achens & Bartels used. Basically, white areas count as good weather, and anything colored counts as worse than average. An awful lot of the map is colored in, so things look pretty good for Kerry.

I also plotted the Bush's gains this year against the weather, to see if Achens & Bartels' measure could "predict out of sample." The vertical axis shows Bush's standing in the polls as of September 13, less his percentage in the same state in 2000. For example, Bush is polling 3 points ahead of his 2000 showing in Arizona, and about the same as 2000 in Florida. The horizontal axis shows the predicted points lost due to the weather (again, compared to perfect weather).

If you fit a line through the scatterplot, it's upward sloping and statistically significant. But that's the wrong slope! So far, Bush has been doing better (exceeding his 2000 results by more) in states with worse weather! Of course, the race could change a lot in the next six weeks and probably will, but so far the weather doesn't seem to be having the impact predicted by the political scientists.



Percentage Points Lost
Weather by Bush (compared
Index* to perfect weather)
------- ----------------------
Missouri 1.2 1.6
Arkansas 1.2 1.6
Florida 1.2 1.7
Maine 1.4 1.9
North Carolina 1.5 2.0
New Hampshire 1.6 2.1
Minnesota 1.6 2.3
20th Century Average 1.8 2.5
Iowa 1.9 2.6
Oregon 1.9 2.7
Washington 2.0 2.8
New Mexico 2.1 2.9
Tennessee 2.3 3.2
Michigan 2.4 3.3
Virginia 2.6 3.6
Wisconsin 3.0 4.1
Colorado 3.1 4.2
Nevada 3.2 4.4
Ohio 3.3 4.5
Pennsylvania 3.5 4.8
Arizona 3.8 5.3
West Virginia 4.2 5.8

Note: Weather Index calculated based on PHDI for May-August,
2004 as in Achen & Bartels (2004).

Source: Authors calculations, data from NOAA.




Posted by Hello
 

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Monday, September 20, 2004

Novak: We've Lost the War


Prince of Darkness Bob Novak announced in his column today (not yet posted on the web) that Bush plans to withdraw U.S. troops from Iraq, even if withdrawal will leave Iraq to civil war. Novak doesn't mention it, but a U.S. withdrawal would leave neighboring Iran in a strong position to dominate the country.

The military believes "there are insufficient U.S. forces in Iraq to wage effective war," writes the conservative columnist. According to Novak, whose administration contacts are stellar, "well-placed sources in the administration are confident Bush's decision will be to get out" after the U.S. elections. "

If Novak is right, it would be nice to see Bush facing reality for once. But Novak's other prediction is scary and all too plausible given Bush's steadfast refusal to fire anyone despite the most egregious failures. Novak says Paul Wolfowitz and Condoleezza Rice will be promoted as a reward for the Iraq disaster, becoming the Secretaries of Defense and State.

 

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Sunday, September 19, 2004

NBC's Helpful Advice to Kerry


Elizabeth Wilner, political director for NBC News, explains that "today's crop of Democrats are right to worry that they lack the laser focus and ruthless efficiency of the current GOP."

Her proof? The Bush Campaign's "hard-nosed," "ruthlessly efficient" response to the CBS memos about Bush's National Guard string-pulling:

"GOP partisans outside the Bush campaign quickly questioned the authenticity of the documents that CBS claimed to have unearthed, while the Bush campaign itself stayed out of the fray."
Compare that to the "sluggish" Kerry response to the Swift Boat lies:
"Kerry advisers insisted that taking the high road amid attacks on Kerry's Vietnam service by the Swift Boat Veterans for Truth was the way to go."
Now some might suggest that the key difference is that the Republicans have a media empire -- Fox News, Clear Channel, talk radio -- while the Democrats don't. The pro-Republican media was quite willing to relentlessly repeat the Swift Boat charges, despite the overwhelming evidence that they were lies.

But for NBC's political director, such a theory doesn't even warrant any consideration. To her, it was obviously foolish and incompetent for the Kerry camaign to take the "high road," but brilliant for the Bush campaign to stay "out of the fray."

 

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Saturday, September 18, 2004

Cell Phones Killing Polls?


Via electoral-vote.com, I learn that Jimmy Breslin, a great reporter and schmoozer, but not such a great statistician, has proclaimed the death of polls:

Anybody who believes these national political polls are giving you facts is a gullible fool.

Any editors of newspapers or television news shows who use poll results as a story are beyond gullible. On behalf of the public they profess to serve, they are indolent salesmen of falsehoods.

This is because these political polls are done by telephone. Land-line telephones, as your house phone is called.

The telephone polls do not include cellular phones. There are almost 169 million cell phones being used in America today... There is no way to poll cell phone users, so it isn't done.


He's wrong about the last point: the reason why pollsters don't call cell phones is because it's illegal, just as it's illegal for telemarketers to call cell phones.

Breslin is right that cell phones present a problem, but they don't present a very big problem, or even a very new problem. As of February of this year, about 6% of households have dropped land lines in favor of cell phones, according to the FCC [pdf; page 2, footnote 2]. That means they can't be reached by telephone polls. But this isn't anything new: 20 years ago 8% of households didn't have telephones at all. Even today, 6% still don't have either a land line or a wireless phone.*

More generally, cell phones are just a new reason for low response rates. In any poll, pollsters never contact most of the people they set out to, even though these people have land lines. People use caller ID or answering machines to screen their calls, they hang up on pollsters, or they're just never home when the pollsters call.

Response rates have been dropping over time. Today, most telephone polls have response rates of less than 30% [pdf]. Response rates of 10% [pdf] are common. This sounds like an awful problem, but there are numerous studies that show that response rates don't actually affect the results that much. Samples with low response rates remain pretty representative demographically (in terms of race, age, sex, and education) . (See this brief review of the literature by ABC's director of polling, and this brief review by two high-powered academics, presumably consulting for the British polling firm YouGov).

Even if, say, young people are less likely to be found by pollsters, because they only have cell phones or because they're always out partying, or whatever, that's not enough to conclude that the polls are biased. Weighting the poll data to compensate for any unrepresentive demographics can always adjust for it. To have problems, the young people with cell phones instead of land lines also have to have different voting patterns than other young people. This is possible, but I don't see any obvious reason why this should be true.

Casual evidence also suggests that low response rates don't matter much. Overnight polls get pretty much the same results as polls taken over longer periods (which get higher response rates because they call people back multiple times). And, as I pointed out in a post yesterday, election eve polls are typically spot on, at least within a couple percentage points of the final result.

So, adding cell phones to the mix could turn out to be the final burden that breaks the camel's back. But they're really just one of many things that make pollsters lives difficult, and all the other problems haven't caused polls to become worthless so far. It's definitely too early to throw out the polls and go with the Breslin plan of just making stuff up. "Common sense would say that the majority of the 18 to 25 who do vote would vote for the Democrat," he writes. Although common sense would certainly be a much cheaper way of gauging opinions, I'm pretty sure that polls remain a lot more reliable.



* FCC, [pdf] table 1, page 6. My guess is that some cell phone only households are answering the survey question wrong and the true percentage of households without any phones at all is about 5%.

Addendum: You can also read the response of pollster John Zogby, who Breslin misquoted, on Rox Populi.
 

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Friday, September 17, 2004

Which Pollster is the Best?


Answer: all the major firms did pretty well in 2000, except for Rasmussen and Battleground:

* Gore/Bush Tied: Harris phone, Harris interactive (email).

* Gore +1/+2: Zogby, CBS
* Bush +1/+2: Gallup/CNN/USA Today, Pew, IBD/CSM/TIPP, ICR

* Bush + 3: NBC/WSJ, ABC/WashPost

* Bush + 5: Battleground

* Gore + 9: Rassmussen

 

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Who Loses When Businesses Drop Health Insurance?


An anonymous commentator asks, "I don't quite understand the argument that workers will be left out in the cold [when business stop providing health insurance]. Isn't that equivalent to saying that they will experience a decrease in their effective wages, and wouldn't employers reduce wages now if they could?" That's a good question that I didn't really give much thought to in my previous post.

Kaiser estimates that 2.6 million workers will lose health insurance under the Bush plan. The idea is that at some firms, most workers would prefer to buy health insurance in the private market, garner Bush's new tax breaks, and get higher wages instead of employer-based health insurance.

The catch is that some workers get large benefits from employer-based health insurance -- the old and the sick, those with sick children or spouses. They won't be able to buy matching coverage in the private market except at a much higher price than their raises, if they can buy it at all.

By the same token, some workers don't get much benefit from health insurance -- the young and healthy. They may choose to save their money and forego health insurance. But some of them will inevitably become sick or injured, and become a burden on the taxpayers or their family.

On average, everybody loses, because private insurance has serious adverse selection problems. Private insurers charge a premium on the assumption that anyone who wants insurance must be sicker than average. So private insurance will allow for a lot less risk-sharing.

So, I rest my claim that some workers will lose out on the observed fact that some workers cost more to insure than others, but they don't seem to "pay" extra for their insurance (in the form of lower wages).

So I think it's true in practice, but big deal: is it true in theory? In a frictionless neoclassical world, I suppose that it might not make any difference whether the health insurance was employment-based or private. Employers would charge the sickly more for their health insurance, just as insurance companies do. Obviously, employers don't do this, presumably because it would be costly to screen new hires this way, not to mention probably being illegal. So these frictions are useful: they're what allow us to escape the usual adverse selection problems of insurance markets and pool risks among employees at a particular firm.

Also, I think many employers make an implicit bargain with their workers to cover the increased insurance costs if the worker develops a costly illness. So even if all workers are offered the same expected compensation when they're first hired, over time some will turn out to need more health care than others. If the employer decides to break the deal and drop health insurance, some workers are going to gain and some are going to lose big. It's really a mistake for the government to use tax breaks to encourage firms to break these implicit contract with their workers.
 

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Wednesday, September 15, 2004

Tomorrow's Front Page Today!


Ragout, 3 hours after Bush's speech at the Republican Convention: "Typical. Bush proposed about $3 trillion in additional spending and tax cuts in his convention speech, and then had the gall to criticize Kerry for proposing to spend $2 trillion."

Washington Post, 11 days after Bush's speech at the Republican Convention (Mike Allen): "The expansive agenda President Bush laid out at the Republican National Convention was missing a price tag, but administration figures show the total is likely to be well in excess of $3 trillion over a decade."

Not only was Ragout first, but our analysis came with a generous helping of sarcasm sorely lacking in the Post's article.

But never let it be said that the Washington Post wasted 10 days and 21 hours without adding any value to the story. Here at Ragout, we conservatively estimated the transition costs of partially privatizing Social Security as "at least $1 trillion." The Post reports that it's closer to $2 trillion. Ragout estimated the cost of Bush's tax cuts as $1.0 to 1.6 trillion, the Post puts them at closer to $2 trillion. So Bush's agenda of tax cuts for the rich and decreased security for seniors is going to cost about $4 trillion, without even considering smaller items like his new tax giveaways for the oil industry.

 

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AEI's "Independent" Analysis of Bush Health Plan


The American Enterprise Institute's Joseph Antos has come out with a new analysis comparing the Kerry and Bush Health plans. One claim that caught my eye was that the Bush plan would newly insure 6.7 million people at a 10-year cost of $39.4 billion. That's $5,881 per person over 10 years, meaning less than $588 in the first year, since costs presumably rise over time. That seems pretty implausible. It's also quite a bit different than the Kaiser foundation's estimate, prepared by MIT health economics guru Jonathan Gruber, that 1.3 million people will gain coverage under the Bush plan.

In other words, Gruber estimates that Bush's plan amounts to a drop in the bucket compared to the 45 million uninsured, and the AEI's estimate of 6.7 million isn't that big either. As even the AEI admits, Kerry would cover 27 million new people.

The authors of the AEI study don't offer any analysis justifying its (implausible) figure, but in an earlier study, Antos cites the Bush administration's Council of Economic Advisors as the source. The CEA's discussion pretty much amounts to: let's just assume 15% of the uninsured will gain coverage.
Several different studies have examined the likely effects of the health insurance credit on insurance purchases. Pauly, et al. (2001) find that a $1000 refundable tax credit would likely increase the participation rate among the uninsured by 21 to 85 percent. Gruber (2000) finds smaller effects, closer to 10 percent, but analyzes plans with premiums that are much more expensive than those described above. Other studies focus on average premiums, not the best offers available. Even with the most conservative assumptions, the health insurance credit would substantially increase participation in health insurance markets. If even 15 percent of those uninsured for a full year (or 10 percent of those uninsured for part of a year or more) take advantage of the health insurance credit, 6 million people would be newly covered.
That's the CEA's entire discussion of the calculations.

The difference between the CEA/AEI figures and the Kaiser/Gruber ones turns out to rest not so much on differing assumptions, as on the fact that the CEA/AEI calculations are incomplete. The CEA and AEI look only at the benefits of the Bush plan (uninsured people gaining insurance) and ignore the costs (employers dropping health insurance coverage).

[Click to Continue]

The Bush plan has two components. The first is aimed at low-income households: a tax credit of up to $1000 per person or $3000 per family, phased out as income rises. The second is mainly valuable to high-income people: making premiums for privately purchased health insurance tax deductible. The catch is that the private health insurance has to be a high deductible plan combined with a health savings account (HSA). An HSA is essentially a super-IRA, with still more tax breaks that are most valuable to the rich.

The CEA analysis addresses only the tax credit for low-income households. Gruber estimates that the credit will be used by 3.1 million previously uninsured people, but that this will be offset by 1.3 million people whose employers drop health coverage. The CEA acknowledges that Guber may be right, that some businesses might drop coverage:
Employers may choose not to offer health insurance at all if many of their employees can take advantage of the credit and purchase insurance individually, and receive taxable wages in lieu of employer health insurance contributions.
But the CEA argues that the credit only affects low-paid workers, many of whom don't have health coverage to begin with, adding, "Furthermore, employers make the decision to offer health insurance based on all of their employees, so they are unlikely to stop offering insurance simply because a minority of their employees become eligible for the health insurance credit."

So the CEA argues that no employers will drop coverage (that's what they assume in their calculations). But the CEA's argument only makes sense because they're limiting their analysis to the low-income tax credit! They ignore the other piece of Bush's plan, the tax deduction, which is aimed at highly-paid workers!

So employers can drop health coverage, offering their workers higher wages instead, knowing that the Bush plan will give tax breaks to both low and high paid workers. Some workers, those in the middle perhaps, will inevitably be left out in the cold when businesses stop offering insurance. Gruber looks at both pieces of the Bush proposal, not just the one benefiting low-income people. He finds that 3.9 million uninsured people will buy private coverage with the tax breaks, but 2.6 million will lose employer based coverage, for a net gain of 1.3 million newly insured.

If anything, my guess is that Gruber is overly optimistic (as I've argued before). That's wintry Mark Scmitt's guess too. Bush's plan radically changes a system that is currently strongly biased towards employer-based health coverage. It's radical enough that the effects are hard to predict and could be big; Bush's plan could totally disrupt the health insurance market. At the very least, It's pretty clear that the number of people losing insurance because of the Bush plan ain't going to be zero.

 

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Bush & Cheney: Don't Blame Us.


Cheney, 9/13/04: We lost about a million jobs within a matter of weeks after the attack of 9/11

Bush, 9/13/04: "We went through that terror attack. Some estimate that cost us three -- a million jobs in the three months after the attack."

The Bureau of Labor Statistics: Job losses in the 3 months after 9/11 were 905,000, compared to 523,000 in the prior three months. Job losses in the six months after 9/11 were 1,117,000, compared to 943,000 in the prior six months. [Total nonfarm employment, seasonally adjusted].

Note: The BLS collects data monthly, not weekly. Because of this, the BLS states that job losses in the month of September, 2001 cannot be attributed to 9/11, so I count them as having occured before 9/11.
 

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Monday, September 13, 2004

Banana Clip Ban Expires


An awful lot of the political debate nowadays is pretty vapid. To some extent the problem is Republican lies, and the press, which doesn't call them on their lies. No doubt the Democrats could do better too. But a lot of the problem is really that bad policy leads to a bad debate.

It's hard to have a worthwhile debate over the deficit when Bush puts out a phony budget that excludes many large expenses that he's endorsed. Critics have to spend all their time and effort pointing out that the budget is phony, rather than discussing the real issues. It's hard to have a worthwhile debate about terrorism, when Bush & Cheney's main response is invading Iraq to stop Saddam's nuclear program. You've got to talk about the Iraq war, rather than port and border security, intelligence gathering, resources for first responders, and lots of other things that are actually relevant to the fight.

Another case in point is the assault weapons ban, which expired yesterday. This law was mostly bad policy, mixed in with a little good policy. But discussion about the bad parts drove out discussion about the good ones, and made it hard to understand the real issues.

I wasn't going to shed any tears for the expiration of the "assault weapon" ban. Although at one time I supported it, I had learned from the pro-gun people that it was merely a ban on scary-looking guns, not a ban on automatic weapons or machine guns or military weapons. Indeed, many [sensible] [liberals], and even [strong supporters of gun control] were against the assault weapons ban. The relevant portion of the assault weapons ban defines an "assault weapon" as:
          (B) a semiautomatic rifle that has an ability to accept a  

detachable magazine and has at least 2 of--

(i) a folding or telescoping stock;

(ii) a pistol grip that protrudes conspicuously beneath the
action of the weapon;

(iii) a bayonet mount;

(iv) a flash suppressor or threaded barrel designed to
accommodate a flash suppressor; and

(v) a grenade launcher;

There are additional definitions for semiautomatic pistols and shotguns, and a list of banned weapons. So a semiautomatic gun with a pistol grip and a bayonet mount was illegal, which seems pretty absurd. Many manufacturers complied with the ban by making minor modifications, for example, requiring the buyers to add the pistol grip themselves. And I doubt that we're going to have a problem with bayonet-wielding criminals now that the ban has expired. At the same time, the ban didn't apply to existing weapons, so there was a large supply used assault rifles remained available.

So the assault weapons ban is almost insulting. It banned a class of weapons that look more scary than other semiautomatic rifles, but aren't any more deadly. And it didn't even ban them very effectively. If it was targeted at anyone, it was targeted at hobbyists who think it's fun to own a gun with a military look (see this picture of Senator Schumer firing an assault weapon and looking like he's have a good time) . These guns were much less popular with criminals, who prefer easily concealable pistols. It seems to have been designed to provide a talking point for liberal politicians, rather than to do anything to fight crime. In short, the goal was to trick people.

But as the ban was set to expire, I listened to a few minutes of utterly confusing debate on NPR that left me with no idea what the ban actually did, even though I thought I already understood the issue. So I looked up the law and learned that the assault weapon ban also banned large capacity ammunition clips holding more than 10 bullets. Of course old clips are grandfathered in too (clips are reusable: just add bullets), so the main effect seems to have been to raise the price of high-capacity magazines (see an article quoted on the Schumer page). Banning high-capacity magazines does seem like a worthwhile objective to me. The police worry about being outgunned by criminals, and big ammo clips do seem potentially worrisome. I'd been tricked by the pro-gun people too! They never seemed to mention this aspect of the law!

Well, actually, now that I understand the issue better I see that many of them did mention the banana clip ban. Of the three liberals I cited, Mark Kleiman mentions it briefly, and Eugene Volokh has mentioned it too. But this key point was lost on me amid all the charges and counter-charges about the ban on cosmetic features and the grandfathering in of all existing guns.

I don't think Kerry's done much to improve the quality of the debate either. He's been claiming that the ban has been effective, rather than window dressing. As usual, though, Kerry has taken a forthright stand (in favor of the ban) while Bush has tried to have it both ways. Bush has endorsed the ban, but taken no action to get it passed. Here's Bush's Press Secretary giving a typical performance, refusing to do anything but repeat his talking points:
Q Isn't it kind of disingenuous for the President to say that I'm for the assault weapons ban, but then not spend a nickel of his political capital to fight for it?

MR. McCLELLAN: I disagree. His position has always been well-known, and it's been clear going back to his first campaign for President.
That's the entirety of his answer.

Ultimately, though, I don't think the press or advocates or even Bush and Kerry are to blame for the worthlessness of the debate. The debate has been crappy because the law was so crappy. So bad debate about the cosmetic ban on cosmetic features guns drowned out discussion of the potentially worthwhile features of the law. We should have been discussing whether to ban banana clips, not pistol grips.


 

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Saturday, September 11, 2004

New Blogs


I've added a bunch of new blogs to the blogroll:

* The Sock Thief, "Where the Left and Darwin Meet," is by far the most idiosyncratic of the bunch. It's written by a New Zealand (PhD?) biologist who's as disgusted as I am with infantile leftists like Cockburn and Chomsky, but has remained as left-wing as I was before I became disgusted with infantile leftists like Cockburn and Chomsky. Here's a post that sums up the Sock Thief's lefty biologist voice, "Right out breeds Left"


* Cheese Monkey is a new blog by an economist with good graphic design skills. Its best feature is probably posts of recent editorial cartoons and such: here's one (I'm not clear if this is original or a repost, but it's funny).


* Palabris is another good looking blog, based in New York City, that focuses mainly on politics. For some reason I think it's run by CUNY humanities grad students who do some journalism for local free newspapers. (I thought I saw this on their blog at some point but I couldn't find it just now.) Their most interesting recent post is about Republican-friendly art.


* Newdonky.com is the new DLC centrist Democrat blog. You've probably heard of it, but I'm excited that I have a new blog to put in my "third way" category.


* MyDD is a pretty well known, sort of competitor to DailyKos.com: Politics from a nuts-and-bolts campaign perspective. I used to read it obsessively during the 2002 elections. They were consistently overly optimistic but consistently interesting.


 

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Juan Cole becomes Instapundit, Part 1


Instapundit is justly famous for his often misleading summaries of the articles he links to. Typically, he'll write one line touting, say, new proof that those darned liberals want to take away your guns and give them to terrorists. But if you follow his links, you often find that the article bears no relationship to his description. Deliberate deception? Perhaps, but more likely Insty hasn't bothered to do more than glance at the headline of the article he's linking to.

Here's Juan Cole's breathless "summary" of a recent media report about the AIPAC scandal.
The way in which the FBI investigation of the American Israel Public Affairs Committee and Israeli links to the pro-Likud clique in the Pentagon may be derailed through AIPAC's manipulation of Congress is laid out by Hans Nichols in The Hill.
If you follow Cole's link, to an article titled "Spy-scandal lobby blitz: AIPAC secures wide backing after secrets charges," it turns out that AIPAC's nefarious attempt to derail the FBI's investigation consists of -- imagine this -- soliciting statements of support from members of Congress. A typical statement obtained by AIPAC is "I know AIPAC. I know the AIPAC leadership. It is an outstanding organization."

Wow! AIPAC is able to elicit praise from a broad array of congressional leaders! Clearly, more shocking proof of what Cole calls AIPAC's "iron lock...on US congressional Middle East policy." How does AIPAC do it? How did they obtain such vast power? Those darned scheming Likudniks...

 

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Thursday, September 09, 2004

Bush Fires Up the Base


Why are the polls going crazy? First there was the Time magazine poll that showed Bush with a 9 point lead, then the Newsweek Poll that showed an 11 point lead. OK, maybe the samples were biased since they were taken during the Republican Convention. After, all the Newsweek poll showed a 7 point Republican lead in Party ID, which would be a big change from the usual Democratic lead. (Time didn't report a party ID breakdown at first).

There is the little matter that the Newsweek Poll was taken during the final night of the Convention and also the day after. But the day after was the Friday before Labor Day weekend, which is an unusual day. Maybe Democrats are more likely to be out of town. Could be.

Poll Watchers Ruy Teixeira and Chris Bowers reassured us that the polls could be ignored. "Bad weighting!" they cried. Too many Republicans! Look at the the Zogby and ARG polls, they said, which showed Bush with only a 1 or 2 point lead. But these polls were also taken during the convention, so it's not immediately obvious why these polls should have had a better mix of Republicans, Democrats and Independents. A mystery.

(I know I'm not being entirely fair to these guys. I do think they let their partisan inclinations override their better judgement sometimes, but they did mix in plenty of healthy wait-and-see with their interpretations.)

Since then, more polls have come out, showing Bush with leads ranging from 1 point (Economist magazine and Rasmussen) to 8 or 9 (ABC and CBS). What the hell is going on?

I'll tell you what's going on: the Republican Convention led a lot of independents to decide that they're really Republicans. That's what the Newsweek Poll that everybody wanted to dismiss found: a 7 point Republican lead in party ID, a big jump from a more normal 4 point Democratic lead. Time has since reported their internals: it shows a 4 point lead in party ID for the Republicans. Today, ABC came out with a new poll showing a 6 point Republican lead. The outlier is CBS, which shows a 1 point Democratic lead.

I'll tell you why Zogby, Rasmussen, and the Economist show a much tighter race than Time, Newsweek, ABC, CBS, and Gallup: it's because the first three weight by Party ID, and so don't allow the spike in Republican loyalty to affect their results. (I'm just guessing about the Economist, but it's an internet poll, so they've got to be weighting pretty aggressively). The others, as far as I can tell, don't weight by party ID. Fox is an outlier, showing a tight race, even though they "usually" don't weight at all. Table 1 sums up some recent poll results.

So it looks like Kerry is 7 or 8 points down, and Zogby and Rasmussen are missing it because they're adjusting away the upswing in Republican Party ID. Is there any hope? Well, beside the fact the the campaign traditionally only really begins around Labor Day, when the last 20% start paying attention, there's also the possibility that Bush is only firing up his base in the red states, and isn't gaining much ground in the swing states. A lot of Bush's surge in the polls might be wasted piling up huge majorities in places like Texas and Mississippi. (Again, in fairness, the critics like Teixeira who've been dismissing Time, Newsweek, etc. have also been emphasizing this point).

Table 2 shows figures from recent polls that reported results for independents and swing states. For these crucial groups the race is very tight -- pretty much a tie. So it looks like spending the Republican Convention tossing red meat to the base may not be playing that well with the swing voters.





Table 1: Recent Polls
Organization Dates of polling Bush Kerry RV/LV Weight by Party ID?
Rasmussen 9/7-9/04 48 47 RV? Yes
Zogby 8/30/04 - 9/2/04 46 44 LV Yes
The Economist 9/6-8/04 47 46 LV Yes?






ABC News/WaPo 9/6-8/04 52 43 LV No
FOX 9/7-8/04 47 45 LV No?
CBS 9/6-8/04 50 42 RV No?
Time 8/31/04 - 9/2/04 53 43 LV No
Gallup/CNN/USA Today 9/3-5/04 52 45 LV No?





Table 2: Recent Polls With Rep/Dem/Ind Breakdown

Independents Swing States

Bush Kerry
Bush Kerry
Fox 40 42
44 46
CBS 48 39
-- --
Gallup 46 49
45 50
Newsweek 45 40
51 42
ARG 43 46
-- --






Average 44 43
47 46


 

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Wednesday, September 08, 2004

Election 2004: Charley, Frances, and Ivan May Cast the Deciding Votes


Yesterday I discussed the finding of Princeton political scientists Achen & Bartels that the weather can shift a percentage point or so of the vote for president. They analyze 20th century presidential elections and show that votes for the incumbent fall in states where the weather is bad. They conclude, "we find that voters regularly punish incumbent governments for [natural disasters], as long as they can find some psychologically appealing connection--whether plausible or not--between the disaster and the government."

The don't really offer an explanation for this, only a lot of evidence that many people give very little thought to politics. But a number of explanations seem possible. The weather does directly affect some people's livelihoods (such as farmers, employees in the tourist industry, and construction workers). Psychologists tell us that the weather can affect mood. Bad weather may raise fears of global warming and increase the salience of environmental issues. The Bible teaches that God afflicts the unrighteous with bad weather:
And if you will obey [God's] commandments...he will give the rain for your land...that you may gather in your grain and your wine and your oil....Take heed lest your heart be deceived, and you turn aside and serve other gods and worship them, and the anger of the LORD be kindled against you, and he shut up the heavens, so that there be no rain, and the land yield no fruit, and you perish quickly off the good land which the LORD gives you. [Deuteronomy 11:13-17]
America is a religious country, and some see hurricanes and natural disasters as signs of God's wrath, or at least God's will, although others emphasize that the rain falls on both the just and the unjust. And of course many mainstream churches share environmentalists concerns about humanity's affect on the climate. So I think the Achen & Bartels results are plausible: there are plenty of "psychologically appealing connections" between the weather and the government.

But the real question is will the weather help Kerry or Bush? What do the skies foretell for this November?

First, consider Charley and Frances, the two devastating hurricanes that recently hit Florida. The conventional analysis says that George Bush benefits from a chance to dole out disaster-relief money, but is hurt because Floridians weren't paying much attention to the Republican convention. But if Achen and Bartels are right, it's much more important that Floridians, repairing trashed houses, waiting for power to be restored, and sweltering in 90-degree heat without air conditioning, are mighty unhappy. So chalk up Florida, and probably the election, for Kerry.

Tomorrow, I'll discuss the rest of the country.

UPDATE: See also first post and third post.
 

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Tuesday, September 07, 2004

Are the Voters Idiots?


In an interesting article in the New Yorker a few weeks ago, Louis Menand discussed political scientist's theories of voting behavior. Basically, Menand is asking if voters are idiots.
Findings about the influence of the weather on voter behavior are among the many surveys and studies that confirm [political scientist] Converse's sense of the inattention of the American electorate. In election years from 1952 to 2000, when people were asked whether they cared who won the Presidential election, between twenty-two and forty-four per cent answered "don't care" or "don't know." In 2000, eighteen per cent said that they decided which Presidential candidate to vote for only in the last two weeks of the campaign; five per cent, enough to swing most elections, decided the day they voted.
[....]
Princeton political scientists Christopher Achen and Larry Bartels estimate that 2.8 million people voted against Al Gore in 2000 because their states were too dry or too wet as a consequence of that year's weather patterns
Achen and Bartels 2.8 million estimate is calculated by comparing the actual weather, which was a little worse than average, to perfect weather (I've read their paper, although I don't think it's posted on the web). But even comparing actual to average weather suggests that Gore lost something like half a percentage point -- half a million votes -- because of the climate.

Bartels also says that shark attacks have been known to swing elections. Specifically, the 1916 Presidential election in New Jersey, when a series of shark attacks devastated the tourist industry on the Jersey shore, cause voters there to swing sharply against the incumbent.

Bartels is cagey about how exactly he thinks voters make up their minds. But his view seems to be that many voters respond to their immediate circumstances (their taxes, their job situation, the weather) and draw connections to policies and politics based on, at best, folk wisdom. Their evaluations of politicians have little to do with whether a candidate can or will do anything about the problems they face.

For example, Bartels says (and he has the regressions to prove it) that voters tend to support repealing the estate tax because they think their own taxes are too high. Repealing the estate tax is supported, by large majorities, even among those with below-median incomes, who support more government spending, want the government to fight rising income inequality, and think the rich don't pay their fair share of taxes.

And of course recent presidential campaigns have prominently featured issues where the federal role is fairly minimal: like crime (e.g., Willie Horton and the death penalty), and education (about 7% of funds spent on education come from the federal government).

In this light, things seems fairly good for Kerry. Gas prices are skyrocketing, as are health insurance costs, and swing-state Florida has been devasted by multiple hurricanes. Bush may have have done relatively little to cause these problems, but he may get the blame.

UPDATE: See also second post and third post.
 

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Juan Cole: Ban the NRA!


Juan Cole, criticizing the Pro-Israel group AIPAC for a "New York-based raid on an Alabama congressional race," writes, "It ought to be illegal for congressional contests to be interfered with to this extent by money from another state."

Cole says that this applies to "all single-issue lobbies," which is to say, he'd like to ban the DCCC, DSCC, NRCC, NRSC, DailyKos.com, Atrios, Club for Growth, NRA, NARAL, and the AFL-CIO from donating or raising more for congressional campaigns, just to name a few of hundreds of organizations. No doubt we can look forward to a future series of Cole missives blasting these groups too.

Cole really wants to make some big changes to our democracy. Sadly, Cole's dream of a Congress free of AIPAC "raids" is blocked by some silly techicalities.


 

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Monday, September 06, 2004

Shooting the Pollster


Every time a poll comes out with bad news for one side or another, partisans leap to denounce it. A few months ago Bush's pollster rushed to denounce a LA Times poll that showed a big Kerry lead. A few days ago, a Time magazine poll came out that showed Bush with a 9 point lead among registered voters. Many were quick to condemn it, including Atrios and numerous posters on DailyKos.com, who charged that the poll was "massaged." Atrios claimed that the poll was "biased in favor of getting a male respondent," because the poll first asked to speak with the youngest male in the household, and only asked to speak with the oldest female if no male was available.

Then the next day, a Newsweek poll came out that showed Bush with an even bigger lead, 11 points, leading to some embarrassment for the critics.

Now, I do think that the critics were right on the big point. The Time poll was taken during the Republican Convention, and the Newsweek poll during the final night of the convention and the following day. It seems quite possible that Republicans were more likely to home that day, and more interested in talking to pollsters. Newsweek released enough information about the poll's respondents to suggest that they did in fact skew Republican. Ruy Teixeira at Donkey Rising has a good discussion.

But criticizing the poll's methodology is just silly. Both polls actually seem better than average to me, because they release more information than usual about the composition of the sample: that's why the critics can criticize. As Teixeira says,
What I do favor is release and prominent display of sample compositions by party ID, as well as basic demographics, whenever a poll comes out. Consumers of poll data should not have to ferret out this information from obscure places--it should be given out-front by the polling organizations or sponsors themselves. Then people can use this information to make judgements about whether and to what extent they find the results of the poll plausible.
It's this bottom line that matters: whether or not the pollsters managed to draw a random sample.

Oh, and Atrios' complaint about a male-skewed sample? Although the pollster's methodology did sound odd to me too, it turns out to be perfectly standard. The Pew Research Center--who I think are particularly reliable, because they're non-partisan, quasi-academic, and release their data--use this same technique of asking first for a male. Women are more likely to be home, so pollsters try harder to get males, in order to produce a gender-balanced sample.

 

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Sunday, September 05, 2004

Definition of a Specialist


A specialist is someone who learns more and more about a narrower and narrower subject. In the limit, a specialist is someone who knows everything about nothing.

[hat tip: sans filtre]
 

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Friday, September 03, 2004

Bush's Costly Promises


Typical. Bush proposed about $3 trillion in additional spending and tax cuts in his convention speech, and then had the gall to criticize Kerry for proposing to spend $2 trillion. "That's a lot, even for a senator from Massachusetts," Bush sneered.

Not to mention that Bush is lying when he says Kerry has proposed $2 trillion in new spending. It's closer to $1 trillion in spending and $1 trillion in middle-income tax cuts. And unlike Bush, Kerry has proposed offsetting a lot of the $2 trillion with higher taxes on the rich and corporations.

------------------------------------------------------------------
Bush's $3 trillion in new spending and tax cuts:
* Partial privatization of Social Security: at least $1 trillion to pay the transition costs.

* Health tax credits: $120 billion

* Energy tax credits: $175 billion

* "Making tax relief permanent:" $1 trillion, or $1.6 trillion if this includes AMT relief and corporate tax breaks Bush has already endorsed.

* Education, job training, and enrolling more children in federal health programs: This is new, so I don't have a figure, but I'm betting somewhere around zero.
Note: All figures are over 10 years.
Source: Washington Post and discussion in Ragout.

 

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Thursday, September 02, 2004

Bush Makes Life Easy for the Fact Checkers


Well, that'll be a pretty easy speech to fact check. He didn't even bother to make up new lies. He just just repeated old ones that have been extensively debunked: Kerry says "the heart and soul of America is found in Hollywood." "More than 10 million [Afghani] citizens have registered to vote in the October presidential election -- a resounding endorsement of democracy." And on and on.

So let me fact check a minor point that probably hasn't been debunked yet:
In this time of change, most new jobs are filled by people with at least two years of college, yet only about one in four students gets there.
Actually, 37% of Americans obtain a 2 year degree or more by the time they've reached 25-29 years of age (source: Census Bureau, Table 1). Another 21% have attended college without receiving a degree, many of them surely meeting Bush's "at least two years of college" criterion. Don't bother to ask what a "new job" is; it's a poorly defined concept that could mean anything.

It's a small thing, but it really shows this administration's contempt for the facts that they don't even bother to get basic figures about educational attainment right.
 

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Wednesday, September 01, 2004

Juan Cole, Conspiracy Theorist


I've previously written that Prof. Juan Cole has a "blind spot about Israel." But apparently I was wrong: "goofy conspiracy theorist" would have been a more accurate label for Cole.

Cole today discusses approvingly a loopy article by conspiracy theorist Jim Lobe, which argues that the investigation of Pentagon official Lawrence Franklin for passing classified information to Israel is merely the tip of the iceberg. Cole cheers him on as Lobe recounts his belief that there is conspiracy among a half-dozen or so Jewish hawks to illegally provide intelligence and military technology to Israel, Iran, and China.

The article is mainly a laundry list of charges and facts, mostly decades old, with no apparent connection except that they all involve Jewish neoconservatives and Israel. Doug Feith is an "outspoken supporter" of Israel's Likud Party. Paul Wolfowitz once promoted Israel's export of missiles to China. Richard Perle once discussed classified information with an Israeli embassy official. Mark Zell moved to Israel. And on and on, with little apparent link between one paragraph and the next.

Lobe's article is incredibly thinly sourced, and it's amazing that anyone would take it seriously. Here is a complete list of the sources cited in the article:

"According to knowledgeable sources, who asked to not be identified"
"a lengthy investigative story by Stephen Green published by Counterpunch in February"
"these sources" [possibly a reference to sources interviewed by Green, but unclear]
"a number of published reports"
"a Washington Times story of June 2001"
"According to one source"
"according to Green's account"
"according to Green's account"
"one source with personal knowledge of Bryen's work"
"according to Green's account."
This list actually makes the article sound better than it is, since many of the allegations are entirely unsourced. It really doesn't speak well for your research when the most credible source you cite is an article in the Moonie Washington Times. The WT article is written by Jerry Seper no less, who for years was on the WT's "Clinton killed Vince Foster" beat.

Here's an excerpt from Lobe's article:
Of particular interest in that connection are derivatives of a powerful case-management software called PROMIS that was produced by INSLAW, Inc in the early 1980s and acquired by Israel's Mossad intelligence agency, which then sold its own versions to other foreign intelligence agencies in the Middle East, Asia and Eastern Europe.

PROMIS is database management software that was written for the Justice Department in 1983 by a company called Inslaw, and has since been the since been the subject of a long-running legal dispute over ownership. In the minds of conspiracy theorists such as Lobe, PROMIS has taken on a much more nefarious aspect:
But these versions were modified with a "trap door" that permitted the seller to spy on the buyers' own intelligence files, according to a number of published reports. A modified version of the software, which is used to monitor and track files on a multitude of databases, is believed to have been acquired by al-Qaeda on the black market in the late 1990s, possibly facilitating the group's global banking and money-laundering schemes, according to a Washington Times story of June 2001.
So the software Bin Laden uses to track his finances has a "trap door" accessible to the Israelis, at least according to always reliable "published reports." That's terrific! What a coup! Thanks Mossad, we owe you one!

But in the next sentence, Lobe tells us more about PROMIS's many features, as revealed to him by "one source." Apparently, the software not only manages databases, but is also a hacking tool. So we can't read Bin Laden's database, but he can read ours. Oh No!
According to one source, Pentagon investigators believe it possible that al-Qaeda used the software to spy on various U.S. agencies that could have detected or foiled the Sep. 11, 2001 attack.

If you look around on the web, you'll find lots of other bizarre theories, I mean "published reports," about the magical power of PROMIS. It allowed Bin Laden to make threatening phone calls to Bush aboard Air Force One on 9/11. It connects every database: taxes, water, phone records, credit, etc., and allows the government to make changes such as cancelling the credit cards of dissidents. PROMIS causes your computer to broadcast coded information. As Cole says, the scandal's "roots are deep."

To sum up, Cole praises a nutty article, published on a nutty web site*, and it's not the first time he's done either. It is simply bizarre that anyone, much less a professor at a prestigious university, could find this almost totally unsourced article credible.


Addendum
* Lobe's article appears on LewRockwell.com. Rockwell, according to former conservative allies, is a racist and an anti-semite. Conservative journalist David Frum lumps Rockwell in with a bunch of other "paleoconservatives" like Pat Buchanan, who he says are racist, anti-semitic conspiracy theorists (to varying degrees). Rockwell's site is perhaps best known for frequently publishing strident essays defending Confederate "States' Rights" during the Civil War, and attacking Abraham Lincoln as a "dictator." Here's Rockwell on the virtues of segregation (quoted in the Frum article):
[Clarence] Thomas calls the segregation of the Old South, where he grew up, 'totalitarian.' But that's liberal nonsense. Whatever its faults, and it certainly had them, that system was far more localized, decent, and humane than the really totalitarian social engineering now wrecking the country.
I don't mean to suggest that just because the article appears on a nutty web site that it's automatically nutty too. Rockwell does post some sane stuff as well. But I do mean to suggest that a careful scholar really ought to read stuff posted on Rockwell's site with a sceptical eye.
 

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Europe: the Girlie-Men Theory


Perhaps all my talk about competitiveness and monetary policy in the previous post was too complicated. There's always the Schwarzenegger theory, which says that America will always be richer than Germany, Japan, India, China, and everybody else, because of our superior willpower: our "faith in free enterprise, faith in the resourcefulness of the American people and faith in the U.S. economy." Maybe he's talking about low taxes and less regulation? Nope, it's the faith he's emphasizing, continuing, "And to those critics who are so pessimistic about our economy, I say: Don't be economic girlie-men."
 

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Europe: Lack of Competitiveness or High Interest Rates?


This article in the US business press discusses Europe's economic problems, and concludes that Europe needs to cut corporate taxes, reduce social benefits such as health, pensions, and unemployment insurance, and deregulate. The article is allegedly news, not opinion, although why standard boilerplate that you can read any day of the week in the business press is news is a mystery to me.

Europe is slipping further behind the U.S. in competitiveness as the leaders of Germany, France and Italy, weakened by election setbacks, fail to take advantage of the economic recovery to reduce taxes and over-regulation.
...
Germany, the continent's largest economy, abounds with reasons why Western Europe is losing the competition for investment and jobs to the U.S., China and India -- and the low-tax Eastern European countries that, after entering the European Union in May, are competing right on Germany's doorstep.

German labor costs are six times the Eastern European level, according to a report published on August 24 by the Cologne-based IW research institute. A corporate tax rate of 37 percent is almost twice that of neighboring Slovakia, which now makes more cars per person than any other Eastern country.
Now, the weird thing is that this nonsense is believed not only by corporate executives, for whom it's welcome propaganda against the welfare state, but also by anti-globalizers. The article says that increased trade leads to increased competitiveness which leads to falling living standards. The anti-globalizers draw the natural conclusion that increased trade is a bad thing.

I'll confine myself to pointing out one obvious problem with the argument: yes Slovakia's wages are lower than Germany's, but their productivity is lower too. Germany's wages aren't about to fall by a factor of six. Even if one can make a theoretical argument that this should happen (and you can't, because of the productivity differential) it never has happened in the history of the world.

But the real problem with the article is that it makes no mention of monetary policy, and the strains caused by the Euro. Overregulation of the labor market may plan some role in raising Europe's unemployment rates (or it may not, some European countries have "rigid" labor markets and low unemployment). But monetary policy is at least as likely a cause of slow growth and high unemployment as a lack of "competitiveness," whatever that is.

Here's an excerpt from an interesting article in the conservative UK Daily Telegraph, which discusses how monetary union is very bad for the low inflation coutries of Europe: they end up with high real interest rates, because of tight monetary policies aimed at fighting inflation elsewhere. The Telegraph actually tries to inform its readers about their economy, rather than writing propaganda. Perhaps this is because European readers want good analysis of their own countries, while American readers of the business section are happy to settle for comforting lies about faraway places.

France and Germany have the same nominal interest rate, set by the European Central Bank. It stands at 2 per cent, having been gradually reduced from 4.75 per cent since May 2001.

It is widely appreciated that rates haven't been cut far or fast enough for Germany. High inflation elsewhere in the euro zone has discouraged the ECB from taking more radical action.

What is less well understood is that economic divergence makes these pressures of policy mismatch much worse. Faster growth in France, for instance, brings higher French inflation - an average of 2.5 per cent this year, compared with 1.5 per cent in Germany.

So Germany's inflation-adjusted interest rate (its real interest rate) is actually above that of France. Perversely, then, struggling euro members are landed with interest rates that are not only too high for their own purposes (given that the ECB sets rates with reference to all members) but slow-growth economies end up with real costs of capital that are even higher than other members who are already growing quite well.



 

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