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Friday, September 19, 2003

LIVE FROM NEW YORK!    I'm blogging here from the set of "Market Call" on CNNfn where I'm co-anchoring all this week -- and who do you think shows up as a guest? None other than Megan McArdle, my fellow blogger known better as Asymmetrical Information's Jane Galt. Tune in quick and heat us go at it.

Posted by Donald L. Luskin at 8:33 AM | link  

MUSTY READ    I suppose we bloggers in our quest for legitimacy can be forgiven for a little bit of self-congratulatory atta-boyism. But beyond that, I can't see why blogger Daniel Drezner speaks so glowingly of blogger Kevin Drum's "must-read interview" with Paul Krugman. It's only "must-read" if you haven't already read or heard any one of the seeming infinitude of interviews Krugman has given over the last few weeks as he relentlessly promotes his book, The Great Unraveling. In each one he repeats the same talking points with merciless precision -- same  key messages, same metaphors, same lame attempts at humor, same twitching, stammering Woody Allen-esque delivery. Other than mentioning to Drum which blogs he reads (Drum's blog, it turns out, "occasionally"), there's not a whit of a new idea in this interview. Here's Drezner's idea of a "choice quote":

  • "Krugman on the book: 'The central theme is, we're being lied to by our leaders, and I just felt I really needed to put that very strongly in context.'"

Thanks for bringing out that valuable new insight, Kevin -- and thanks to you, Daniel, for making sure we didn't miss it. "Must-read"!

Drum seems not to have mentioned to Krugman the fact that he agreed with me that Krugman had made a sloppy error in his August 1 New York Times column about the growth rate of California's real per capita spending from 1989 to 2002. Krugman claimed spending growth was only 10%, while his own cited source says it was 34% higher -- at 13.4% (as David Hogberg originally pointed out). That would have elicited a "choice quote." Who knows, maybe he did mention it and then edited it out, along with all the trademark Krugman stammers. Or, more likely, it's just that fans don't do that to celebrities when they've breathlessly waited in line for 45 minutes at a book-signing at some miserable little local bookstore, eagerly clutching their book to be signed in one sweaty hand and their little junior-reporter cassette recorder in the other.


>>Update... lots of good Krugman comments from our readers, on the letters page.

Posted by Donald L. Luskin at 1:17 AM | link  


Thursday, September 18, 2003

WHY NOT JUST RAISE TAXES?    Vikingpundit notes the New York Times' plan to deal with its business slowdown is to have "lowered its capital spending level and cut expenses." He wonders, "Wait...the Times was facing economic problems, so it cut spending? Why not just hike the price of the paper and raise more revenue? Cut expenses? - that's crazy talk!"

Posted by Donald L. Luskin at 11:27 AM | link  


Wednesday, September 17, 2003

THE LEFT PRAISES BROOKS    Our friend Bruce Bartlett points to this American Prospect article heaping praise on New York Times's new "conservative" op-ed columnist. Need we say more?

Posted by Donald L. Luskin at 8:38 AM | link  

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NEW YORK TIMES COMPANY LOWERS EARNINGS FORECAST   
The New York Times Company is guiding down earnings expectations for Q3, seeing EPS of $0.30-0.32, vs the Reuters Research consensus of $0.39, based on a weak ad environment. The company also believes that Y03 GAAP EPS could be slightly below the $1.97 reported for Y02, vs previous guidance of "low- to mid-single digits" and the consensus of $2.03. Weak ad environment? Could it be that the Times's ordinary readers want real news they can trust? Could it be that upscale readers what something other than eat-the-rich liberal screeds tucked in between the ads for Tiffany and Versace?

Posted by Donald L. Luskin at 7:17 AM | link  


Tuesday, September 16, 2003

"REVOLUTIONARY POWER" TO THE PEOPLE IN ACTION IN ALABAMA    Here's an outstanding letter from a reader, an anti-tax libertarian activist, in response to "Krugman's Criminal Masterminds" (National Review Online, 9/16/2003):

"As one of the leading opponents of Governor Riley's tax plan in Alabama, I can say that you are correct in your assessment of the situation down here. The people of Alabama strongly rejected the socialist notion by a score of 68-32. I have not yet read Paul Krugman's New York Times Magazine article in which he discusses it ('The Tax-Cut Con' 9/14/03), but if it is similar to everything else printed in the national press about our recent issue, it is merely another case of revisionist recent history by the self-appointed enlightened ones.

"One thing the national press has totally omitted is that the referendum package had a series of new or increased taxes in it, most of which would directly hurt the poor. The most egregious of this was a new tax on services, which would charge for the work of mechanics and plumbers at the same rate as our sales tax (which also was increased).

"Once we got that word to the voters, we had momentum on our side for the rest of the debate. Had the election taken place two weeks later, we might have won 75-25.

"The battle down here still goes on. Alabama seems to be following the Tennessee pattern, taking its cues from the Sundquist playbook. After a six-day breather from campaigning against the tax hike, I am now spending my days observing our legislature, which is now in special session -- and will probably try to enact more tax increases against the will of the people.

"Stephen P. Gordon
"Legislative Director, Libertarian Party of Alabama"

No doubt Krugman would characterize Gordon as an agent of the "revolutionary power" seeking to "destroy America as I know it."

Posted by Donald L. Luskin at 11:54 PM | link  

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THE GANG THAT COULDN'T QUOTE STRAIGHT   
Why can't Paul Krugman or anyone who publishes Paul Krugman quote people accurately? Believe it or not, on the press release that comes folded inside promotional copies of Krugman's new book, The Great Unraveling, I -- that's right, I of all people -- am misquoted. Yep, right there after drooling praise from James Carville and Nicholas Confessore, there I am:

"The most dangerous liberal in the country." -- Donald Luskin, National Review Online

Hey, I don't mind being quoted. It's fun and ironic. But the idiots got the quote wrong! In every single National Review Online "Krugman Truth Squad" column I call Krugman "America's most dangerous liberal pundit," not the far broader estimate of his influence that would rank him "the most dangerous liberal in the country" in any category. Is this supposed to add to the irony or something? Or is it just another example of Krugman's sloppy disdain for accuracy, in quotations and economics?

Perhaps this explains why the publisher W. W. Norton ignored my two written requests for a review copy (I finally got my review copy today, after placing an angry phone call last week). I saw this press release before, tucked into the review copy of a booker at CNNfn, where I'm co-hosting "Market Call" every morning this week, and where Krugman was a no-show last week.

By the way, liberal economics commentator and Krugman rival Robert Kuttner was supposed to do the show yesterday and bailed when he found out I was there. Smart move.

Posted by Donald L. Luskin at 11:07 PM | link  

BROOKS' THIRD PITCH    David Brooks has now done three op-eds at the New York Times. Conservatives aren't thrilled.

Posted by Donald L. Luskin at 8:13 AM | link  

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KRUGMAN'S "TAX-CUT CON" CON   
Paul Krugman's article "The Tax-Cut Con" in Sunday's New York Times Magazine is the centerpiece of an all-Krugman-all-the-time blitzkrieg media tour to promote his new book, The Great Unraveling. The article offers Krugman's revisionist history of 25 years of "a crusade against taxes" -- which he argues has "more or less deliberately, set the United States up for a fiscal crisis." The goal of this deliberate crisis, according to Krugman, is to allow "conservatives" to,

"...in the name of fiscal necessity... dismantle immensely popular government programs that would otherwise have been untouchable. ...America a couple of decades from now will be a place in which elderly people make up a disproportionate share of the poor, as they did before Social Security. It will also be a country in which even middle-class elderly Americans are, in many cases, unable to afford expensive medical procedures or prescription drugs and in which poor Americans generally go without even basic health care. And it may well be a place in which only those who can afford expensive private schools can give their children a decent education."

Think it's more than a bit of a reach to claim that the real objectives of conservatives and their tax-cuts are poverty, illness and ignorance? That's nothing compared to what Krugman says in his new book. There he states that the Bush administration is part of the rise of a "revolutionary power" comparable to rise of "totalitarian regimes in the 1930's" [page 5]. To the objectives of poverty, illness and injury Krugman adds, "a country ...possibly -- in which elections are only a formality" [page 8].

Whew! Pretty strong words from someone who has often complained that the Bush administration attacks its critics for being unpatriotic. But believe it or not, Krugman took it even further in his interview last week with Terry Gross on NPR's "Fresh Air" (see "Lying About Lying" National Review Online, September 15, 2003). There he updated the book's old-fashioned Nazi metaphor with the post-9/11 version of same vicious cliché:

"The real threat isn't some terrorists who can kill a few people now and then but are not fundamentally a threat to the continuation of America as I know it, but the internal challenge from very powerful domestic political forces who want to do away with America as I know it."

Krugman told Gross that President Bush is only one of the "front men" for this "revolutionary power." According to Krugman, the criminal mastermind behind these "powerful domestic political forces" is Grover Norquist. He's the worse-than-a-terrorist who, Krugman told Gross, sits at the "center of the web." In Sunday's Times Magazine Krugman describes the coming America of poverty, illness and ignorance as "Norquist's vision."

You'd think if I wanted to talk to Norquist I'd have to track him down in a cave in Pakistan. But, in fact, I was able to reach him easily on Sunday in the Washington offices of Americans for Tax Reform -- the tax-relief lobbying group of which he is president -- while the ink of Krugman's Times Magazine article was still fresh on his fingers. If he was peeved at that the terrible things Krugman's been saying about him, he didn't show it -- if anything, he was amused by how weak Krugman's arguments against him are.

Norquist is not ashamed to have a vision that is different from "America as I know it" according to Paul Krugman. He told me, "Over 25 years I'd like to see the size of government shrink by half -- in terms of federal, state and local taxes and spending as a percentage of GDP, the value of government-owned assets, and the number of government employees. This can be done in an orderly way that doesn't hurt anyone."

But what about the poverty, illness and ignorance that Krugman says are the "revolutionary power's" goals? Norquist says,

"A make-believe argument -- if we aren't for the government program, we are against everything. The idea that we are for providing the same things with more efficient and effective alternatives, he leaves that out of the argument -- which is kind of disingenuous.

"All old people will be poor? Only rich kids will have an education? Those are two of the weakest arguments. Not only does the private sector have a proven track record of providing these services at a higher quality level at half the cost. And the voters understand that, so it’s a losing political argument. He points to the programs that are the easiest to privatize, and where we enjoy 70% public support.

"Half of American adults and 70% of voters own shares of stock either directly, in 401(k) plans, or in mutual funds. Every time an American gets a portable pension, it makes him not susceptible to Krugman's rhetoric.

"And telling Black Americans that the public school system is the best they're going to get, and they'd better appreciate it, is a losing argument. All we need is school choice in one state, and they'll see how well it works. It gives you some idea of how despicable the other team is. They know choice would be better, and they don’t want it."

This, then, is Krugman's heart of darkness. Trapped in the unenviable position of advocating statist solutions that are becoming increasingly less tenable, he has no choice but to try to convince his readers that superior private solutions do not exist, and therefore, that anyone who argues against the statist status quo is necessarily arguing for anarchy (and hey, why not throw in totalitarianism and terrorism for good measure). "Disingenuous"? Yes. "Despicable"? Yes.

Of course, what makes Paul Krugman America's most dangerous liberal pundit is that this disingenuous and despicable political agenda is wrapped up in 7,145 words of a Times Magazine article that seems, to the casual reader, to be an authoritative economic analysis of the history of tax-cutting. But in fact it's all aimed at eliminating any possible arguments in favor of tax-cuts, so that all is left is the objective to "do away with America as I know it." And as usual, it's all built on lies, errors and distortions.

Are taxes too high to begin with? Krugman says that "In the United States, all taxes -- federal, state and local -- reached a peak of 29.6 percent of G.D.P. in 2000." But in an October, 1999 article for Fortune reproduced in his new book, Krugman cited "America's comparatively trivial tax burden -- a mere 34% of GDP." How could Krugman have made such an obvious error?

Last week he told the liberal website Buzzflash, "It's not quantum mechanics; it's not hard stuff, but it does take some attention. The truth is, when I started doing this column, I wasn't a U.S. budget expert at all, and I had to put in a lot of work learning how to read those numbers. And you don't expect the guy in the street to understand that."

Perhaps not, but as Bruce Bartlett asks, "How can any professional economist admit such ignorance?"

29.6%... 34%... who knows? All Krugman needs to know is that, either way, "This is a low number compared with almost every other advanced country. In 1999, Canada collected 38.2 percent of G.D.P. in taxes, France collected 45.8 percent and Sweden, 52.2 percent." Wow... just think: if we raise taxes, the US economy can be as "advanced" as that of Canada, France and Sweden.

Or Alabama? Krugman begins and ends the Times Magazine with the story of the epiphany of courageous and noble Alabama governor Bob Riley -- a Republican no less -- who decided he had to raise taxes on the rich and reduce them for the poor. "You might call it a New Deal for Alabama." Tom Maguire points out on his Just One Minute blog that Krugman somehow neglects to mention that the voters of Alabama rejected the noble plan.

Do tax-cuts stimulate economic growth? Examining Ronald Reagan's famous supply-side tax-cuts, Krugman says

"...between 1979, when the big slump began, and 1989, when the economy finally achieved more or less full employment again, the growth rate was 3 percent, the same as the growth rate between the two previous business cycle peaks in 1973 and 1979. ...Nothing in the data suggests a supply-side revolution."

First, in picking 1979 and 1989 as his endpoints, Krugman is making up business cycles as he goes along. According to the official National Bureau of Economic Research business cycle dating, neither of Krugman's two years included a business cycle peak! What's worse, as reader Chris Huskins noted in an email to me, Krugman has included two years before Reagan was even president -- and his tax cuts didn't start taking effect until 1982.

A fairer test would be to look at the first whole official business cycle after Reagan started cutting taxes. That would be from the trough in November 1982 to the subsequent trough in March 1991. And what do you know -- that cycle's average GDP growth rate was 3.7% -- sharply higher than the 3% Krugman got with his invented business cycle.

He pulls a similar trick to laud President Clinton's tax increases:

"...here was a president who sharply raised the marginal tax rate on high-income taxpayers, the very rate that the tax-cut movement cares most about. And instead of presiding over an economic disaster, he presided over an economic miracle."

Apparently Krugman, holding himself out as an historian of the tax-cutting crusade, didn't hear about that cut in the capital gains tax rate from 28% to 20% that a Republican congress forced down President Clinton's throat in 1997. That's an even bigger cut in the capital gains tax rate than the one Bush put in place this year -- and it triggered the best growth years for the economy under Clinton. GDP growth from Clinton's tax-hikes to the capital gains tax-cut averaged 3.4%, below the growth rate of the Reagan years (and those were a full business cycle, including a recession). From the capital gains tax-cut to the end of Clinton's presidency, growth was 3.7% -- which happens to be exactly back to the higher levels of the Reagan years (thanks to a Republican tax-cut).

And one more thing about that capital gains tax cut. Its passage in mid-1997 coincided perfectly with the inflection point in the stock prices that launched the great bull market of the late 1990's. And that Republican tax-cut-driven bull market was what made possible the budget surpluses that Krugman ascribes to the wisdom and prudence of Bill Clinton. As Krugman told Tim Russert in a CNBC interview two weeks ago (see "The Man Behind the Curtain," National Review Online, September 8, 2003),

"...we actually had a substantial surplus. And we ask where did -- where did that go? And the answer is, well, a lot of that was the stock market bubble."

Now fast-forward to the present, for Krugman's lies about President Bush's tax cuts. He can't wait decades to be able to look back and falsify the improvement in GDP growth that I am confident will be triggered by the latest round tax-cuts: so he resorts to falsifying prospective estimates of it. He writes,

"...the Congressional Budget Office tried to evaluate the growth effects of the Bush administration's proposed tax cuts. The budget office's new head, Douglas Holtz-Eakin, is a conservative economist who was handpicked for his job by the administration. But his conclusion was that unless the revenue losses from the proposed tax cuts were offset by spending cuts, the resulting deficits would be a drag on growth, quite likely to outweigh any supply-side effects."

A highly placed official of the Congressional Budget Office, speaking on condition of anonymity, told me that Krugman's claim is flatly untrue. The official told me that the CBO's Analysis of the President's Budgetary Proposals for Fiscal Year 2004, the report to which Krugman is referring, simply never "tried to evaluate the growth effects of the Bush administration's proposed tax cuts." Rather, it evaluated various scenarios for the entire budget -- tax cuts and spending increases (including $400 billion for a Medicare prescription benefit) at the same time. And the "spending cuts" Krugman says the CBO called for were, in fact, merely less spending increases. This isn't the first time I've seen a tax-and-spend liberal palm that card.

Also, the official told me that the CBO employed a panoply of various econometric models in the analysis, resulting in a spectrum of different scenarios based on different assumptions. Some showed positive growth effects, some show negative ones. It's a misrepresentation of the analysis to consider only the more pessimistic scenarios and conclude, therefore, that "deficits would be a drag on growth, quite likely to outweigh any supply-side effects."

I'll give the last word to Grover Norquist. His take on whether or not tax-cuts can create economic growth step refreshingly outside the entire analytical framework usually imposed on that question by economists, and cuts to the heart of what separates his libertarian view of the world from that of statists like Krugman. He told me,

"It is important to cut tax rates in order to reduce the damage that the tax structure does to the economy, and thus remove a disincentive to economic growth. Oh, you've given people an incentive? What's the incentive? That you're not sitting on them so hard any more. Great."

Now that's "Norquist's vision." I like it a lot better than Krugman's.

Posted by Donald L. Luskin at 4:03 AM | link  


Monday, September 15, 2003

KRUGMAN'S MEDIA BLITZ CONTINUES    Don't worry, I'm not letting Paul Krugman off the hook for his anti-tax-cutting manifesto in the New York Times Sunday Magazine yesterday. My full report will include an interview I did yesterday with Grover Norquist, who, according to Krugman, is the evil spider sitting at the center of the web of tax-cutting evil.

In the meantime here's a link to Tom Maguire's analysis on his newly spiffed-out Just One Minute blog -- this is really excellent work from Tom.

Oh -- and how many of you caught Krugman Friday night on "Real Time" with Bill Maher? Quite a scene, with Maher starting with a little stand-up, then doing an interview with a ghostly image of Terry McAuliffe hovering over a live audience that was filled entirely with hopped-up Democrats who appeared to have recently attained drinking age. Then Krugman came out for 15 minutes of panel discussion. Krugman seemed somewhat intimidated by his fellow panelists, the man-mountain former Minnesota governor Jesse Ventura, and the 5'7"-without-the-high-heels conservative columnist and former Republican babe of the week Betsy Hart. The panel format is horrible -- the panelists are encouraged to interrupt each other, and when they don't, Maher interrupts them with lame humor. This is simply the worst political talk show imaginable --  I would never ever go on it, and I'm surprised that Krugman did.

Posted by Donald L. Luskin at 12:14 AM | link