This quote from the New York Times article on the president’s speech, highlights everything wrong with macroeconomics as practiced in the public domain:
Preliminary analyses of the White House plan estimate that the tax cuts could create more than 50,000 jobs a month, a significant boost considering that employment climbed by 35,000 jobs, on average, in each of the last three months.
Yes it would be a significant boost. If it happened. Of course, 100,000 jobs a month would be even better. But I guess the preliminary analyses didn’t show that. But how did they get the 50,000 number? A preliminary analysis. By whom? When? Using what assumptions? And where did the Times get that estimate? From the White House press team?
But the number 50,000 is treated as something like a fact. One reason it’s not close to a fact is that there’s no way of verifying whether this “estimate” is accurate after the fact. So what’s the meaning of this estimate? None. It’s a meaningless statement. But the media treats it like it’s science. It’s not science. It’s fake science. It’s scientism.
As some of us keep trying to point out, the United States is in a liquidity trap: private spending is inadequate to achieve full employment, and with short-term interest rates close to zero, conventional monetary policy is exhausted.
This puts us in a world of topsy-turvy, in which many of the usual rules of economics cease to hold. Thrift leads to lower investment; wage cuts reduce employment; even higher productivity can be a bad thing. And the broken windows fallacy ceases to be a fallacy: something that forces firms to replace capital, even if that something seemingly makes them poorer, can stimulate spending and raise employment.
Let’s accept here, for argument’s sake, Krugman’s insistence that a large-enough quantity of idle resources nullifies, or even reverses, “many of the usual rules of economics.” (Unlike Krugman, I don’t believe that even significant unemployment of labor and resources in fact renders scarcity such a minor fact of reality that the laws of economics – nearly all of which are based on the prevalence of scarcity – are rendered null. But I here grant him that assumption.)
My question here is this one: Is an unemployment rate of 9.1 percent – heck, let’s call it an unemployment rate of 15 percent – so large, especially compared with a natural rate of unemployment of, say 4.5 percent – to truly suspend the laws of economics to the degree that Krugman suggests these laws are suspended? Does a (say) 10.5 percentage-point increase in the unemployment rate – as in, from 4.5% to 15% – work to make our world “topsy-turvy”?
Asked differently, at what rate of unemployment above the natural rate does the broken-window fallacy (start to) stop being fallacious?
I am not here attempting to be provacative so much as I’m seeking to understand how Keynesians evaluate the ‘conditional-ness’ of the laws of economics. IfKrugman’s general point is correct, how high must the unemployment rate rise above the natural rate in order to justify policies that make sense only in a world of widespread super-abundance of resources?
It’s certainly not clear that even a 10 or 12 percentage-point increase in the unemployment rate above the natural rate justifies the assumption of sufficiently widespread topsy-turviness – sufficient idleness of potentially productive resources – that policies meant to work only in a world of super-abundant resources are justified.
… is from page 249 of Vol. 9 of Hayek’s Collected Works; here – in an essay written in 1983 and originally published in The Economist – Hayek is discussing J.M. Keynes:
In these theoretical efforts he [Keynes] was guided by one central idea – which in conversation he once described to me as an “axiom which only half-wits could question” – namely, that general employment was always positively correlated with the aggregate demand for consumer goods. This made him feel that there was more truth in that underconsumption theory preached by a long row of radicals and cranks for generations but by relatively few academic economists. It was his revival of this underconsumption approach which made his theories so attractive to the Left.
Neal Phenes sent me this item from The Daily Ticker.
Mr. Task and his interviewees should check the data before concluding that the problem with today’s economy is inadequate demand – that is, before concluding that what today’s economy needs above all is “demand stimulation.”
Inflation-adjusted personal consumption expenditures in the U.S. today are higherthan they were in the third quarter of 2007 (the quarter before the recession began). True, these expenditures are only about one-percent above their pre-recession level, but higher they nevertheless are – a fact that requires some twisting of Keynesian dogma in order to continue making a case for more government ‘stimulus’ spending.
The problem isn’t that consumers aren’t spending; it’s that businesses aren’t investing. And businesses aren’t investing because Congress and, especially, the administration exhibit a ceaseless fetish for top-down, command-and-control, debt-financed ‘governance’ of the economy – an enterprise-quashing recipe made only more poisonous by Mr. Obama’s soak-the-rich speechifying.
Relatedly, see Michael Boskin’s fine essay in today’s Wall Street Journal.
UPDATE: I’ve updated the title of the post to better reflect my intended meaning – which was never that aggregate demand is today at its full-employment level. Rather, my meaning was, and is, that the originating problem – the cause of our woes – isn’t inadequate aggregate demand but, rather, whatever is causing business investment (and, hence, aggregate demand) to be too low. Failure of households today to spend seems an unlikely candidate.
Here’s a letter to the Washington Post:
George Will eloquently summarizes the lesson of my GMU colleague David Bernstein’s powerful book Rehabilitating Lochner (“Lochner and Liberty,” Sept. 8). David’s book centers on the 1905 U.S. Supreme Court decision that properly affirmed, in accord with the Ninth amendment, what Mr. Will accurately describes as “an unenumerated right of individuals, the liberty of contract.”
For this reason, Lochner has indeed been “the liberals’ least favorite decision.”
But many conservatives – including Chief Justice Roberts and Justice Scalia – routinely join “Progressives” in bashing Lochner. No less a conservative icon than Robert Bork derides Lochner as being “the symbol, indeed the quintessence, of judicial usurpation of power.”*
This overreaction by conservatives to Warren Court hyperactivity injudiciously expels the Ninth and Tenth amendments from the Constitution and, consequently, elevates majoritarian politics to a role in Americans’ lives that would appall the very framers whose constitutional design conservatives claim to champion.
Donald J. Boudreaux
* Robert Bork, The Tempting of America (New York: Free Press, 1991), p. 44.
Andrew Bolt – Friday, September 09, 11 (05:18 pm)
On The Bolt Report on Channel 10 on Sunday: Peter Costello, Michael Costa, Dr Andrew Phillips and, joining me in the studio to talk about September 11 and more, the Opposition’s foreign affairs spokesman, Julie Bishop. Plus: has the ABC given Julia Gillard a secret weapon?
Sunday, at 10am and 4.30pm.
Andrew Bolt – Friday, September 09, 11 (04:43 pm)
Here we go - and a little thank-you to the High Court for making this possible:
Andrew Bolt – Friday, September 09, 11 (04:39 pm)
My word, this needs investigation - and it’s surprising that the union hasn’t done so already:
THE Coalition has referred fresh allegations against scandal-hit Labor MP Craig Thomson to NSW Police commissioner Andrew Scipione, urging an official investigation.
Opposition legal affairs spokesman George Brandis said today he had written to Mr Scipione over alleged secret commissions from a major Health Services Union supplier during Mr Thomson’s time as the union’s national secretary.
Mr Thomson and the union’s president Michael Williamson, who is on the ALP national executive, allegedly received American Express cards from John Gilleland, who runs a graphic design business that printed the HSU newsletter, Fairfax reports today.
Andrew Bolt – Friday, September 09, 11 (11:18 am)
Marking the anniversary:
Federal authorities are warning local law enforcement agencies of a potential terrorist threat involving car bombs that could coincide with the 10th anniversary of the Sept. 11 attacks, several sources told Fox News on Thursday.
The Department of Homeland Security confirmed that it had information about a “specific, credible but unconfirmed threat,” and the White House said President Obama was briefed Thursday morning and has been updated throughout the day.
Andrew Bolt – Friday, September 09, 11 (10:36 am)
Basically, I just type stuff at a keyboard in my study with an imprudent lack of concern for the consequences - and I keep typing to avoid having to think of some more meaningful way to fill in the hours between now and the grave.
But apparently this makes me someone to be feared. Who knew?
Must think of getting a proper job soon.
Andrew Bolt – Friday, September 09, 11 (10:12 am)
Reader Paul McSweeney is astonished that the Gillard Government is claiming the High Court decision against its Malaysian people swap means Tony Abbott’s Nauru solution is dead, too:
In its desperation to avoid admitting that the Howard Government got it right, the Gillard Government has been dissembling on a number of fronts about the effect of the recent High Court decision and aspects of the Pacific Islands and Malaysian “solutions”. ... Foremost in this web of deceit is the claim that the High Court would have regarded the Nauruan solution as being as illegal as the Malaysian one.
There is express contradiction of this claim by the High Court itself in the following 2 paragraphs of the joint judgment (Gummow, Hayne, Crennan and Bell JJ):127: The Minister and the Commonwealth also submitted that the circumstances in which s 198A was enacted pointed against the adoption of this construction of the section. They submitted that s 198A was enacted with a view to declaring that Nauru is a country specified for the purposes of s 198A and that it was known, before the enactment of s 198A, that Nauru was not a signatory to the Refugees Convention or the Refugees Protocol.
128: Two points may be made about this submission. First, it is by no means clear what use the Minister and the Commonwealth sought to make in the proper construction of the provision of what they asserted to be facts known to those who promoted the legislation. The facts asserted do not identify any mischief to which the provision was directed. Rather, it seemed that the facts were put forward as indicating what those who promoted the legislation hoped or intended might be achieved by it. But those hopes or intentions do not bear upon the curial determination of the question of construction of the legislative text. Second, even assuming them to be in some way relevant, the arrangements made with Nauru were very different from those that are now in issue. Not least is that so because Australia, not Nauru as the receiving country, was to provide or secure the provision of the assessment and other steps that had to be taken, as well as the maintenance in the meantime of those who claimed to be seeking protection. Thus it was Australia, not the receiving country, that was to provide the access and protections in question. Further, although the arrangement between Australia and Nauru was recorded in a very short document, the better view of that document may be that it created obligations between the signatory states. But whether or not the arrangements with Nauru had the various features that have been identified, the question of statutory construction should be resolved in the manner indicated.
Heydon J in his dissenting judgment went even further and accepted that s.198A was introduced for the purpose of implementing Nauru and he impliedly accepted in his judgement that Nauru would not have been a problem (paragraph 169).
The other judgments (French CJ and Kiefel J) either did not refer to Nauru in argument (French) or said it was not relevant for this case (Kiifel).
In summary, one judge of the High Court impliedly had no problem with using s. 198A in the context of Nauru. Two judges said nothing at all about the legality of using s. 198A in the context of Nauru. Four judges of the High Court said that Nauru was a completely different kettle of fish to Malaysia and left open the distinct probability that it would have been legal to use s. 198A in the context of Nauru.
Andrew Bolt – Friday, September 09, 11 (09:39 am)
I think the judge has got this exactly the wrong way around:
Sgt Wolsey had been asked by a supervisor to arrest the man, wanted over terrorism-related offences. ..
Sgt Wolsey stated he and Sgt Bates spoke to the man who spun around, pulled a Browning pistol out of his pants and fired.
Judge Flannery accepted one of the three shots fired by the man struck Sgt Wolsey in the hand. ..
The man maintained he did not fire at police but at the horizon in what was intended to be a warning shot so he could flee…
Judge Flannery accepted it was a reasonable possibility he may have focused on Sgt Bates during the arrest, not noticed Sgt Wolsey, and fired a “warning shot in panic”.
“I am not satisfied that he put the Browning in his pants because he was planning to shoot his arresting officers, rather he did so because he was concerned for his safety, and the state he was in brought about his illness, his concern that he was going to be arrested, and the climate of anti-Muslim feeling in the community at the time, he believed that he might be harmed by the police.”
On the face of it, this strikes me as utterly bizarre.
(Thanks to reader Beryl and others.)
Andrew Bolt – Friday, September 09, 11 (09:25 am)
What a surprise. A religion which urges people to be more loving, responsible and generous tends to produce better citizens:
The results are in: religious people are nicer. Or so says Robert Putnam, professor of public policy at Harvard.
Described by London’s Sunday Times as the most influential academic in the world today, Putnam is not a religious believer. Best known for Bowling Alone, the book that made ‘’social capital’’ a key indicator of a healthy society, Putnam, with his co-author David Campbell (a Mormon), has waded into the debate about religion in the public square with his latest offering, American Grace: How Religion Unites and Divides Us. The book emerges out of two massive and comprehensive surveys into religion and public life in America.
Their most conspicuously controversial finding is that religious people make better citizens and neighbours. Putnam and Campbell write that ‘’for the most part, the evidence we review suggests that religiously observant Americans are more civic, and in some respects simply ‘nicer’ ‘’.
On every measurable scale, religious Americans are more generous, more altruistic and more involved in civic life than their secular counterparts. They are more likely to give blood, money to a homeless person, financial aid to family or friends, a seat to a stranger and to spend time with someone who is ‘’a bit down’’.
Another reason to marvel at the suicidal drive by many of the intelligentsia to destroy Christianity, one of the few remaining civilising influences.
By the way, where are the hospitals, schools, ambulance services and old folks homes set up by the Greens?
Andrew Bolt – Friday, September 09, 11 (07:40 am)
I was a bit sad about this report in The Age, to be honest:
FORMER Liberal senator Julian McGauran is a politician of the old school, who has just begun his post-Canberra career at a new school - as a trainee secondary teacher at Genazzano Girls College in Kew.
Yet even ex-politicians find it hard to stop talking, so yesterday the school was putting this tendency to good use, with him instructing a year 11 English class on the finer points of public speaking…
One of the questions was his thoughts on Herald Sun columnist Andrew Bolt.
The former senator answered this with a straight bat, describing Bolt as ‘’very popular’’. ‘’Very prejudiced,’’ responded the girl questioner.
But even sadder about this report is the girl who was allegedly quoted. She writes:
I refer to the article on page 3 of The Age of 8 September 2011 by Mr Geoff Strong entitled ‘Ex-pollie takes a crack at being a class act’.
I am the ‘girl questioner’ referred to in the article and I am concerned that I have been seriously misquoted in describing Mr Bolt (quite wrongly in my view) as ‘prejudiced’.
What in fact happened is that during Mr McGauran’s presentation to the class on public speaking focusing at that point on ‘influential speakers’, I asked Mr McGauran what he thought of Mr Andrew Bolt. After Mr McGauran answered, he asked me what I thought. I replied along the lines of, ‘He is an influential commentator. Some people think he’s a bit biased, but I don’t.’
I never used the word ‘prejudiced’ to describe either my or anyone else’s impression of Mr Bolt.
Mr Strong should take more care in correctly reporting the comments of others. Otherwise, he could easily stand accused of expressing the very prejudice that he sought to ascribe to Mr Bolt or my comment about Mr Bolt.
The student, already given one lesson about biased reporting, now awaits her next: will a newspaper caught out on an error correct the record?
(No link to the email.)
Andrew Bolt – Friday, September 09, 11 (06:30 am)
A new study reaches an astonishing conclusion about men:
Andrew Bolt – Friday, September 09, 11 (05:49 am)
Several journalists yesterday bought the spin that Craig Thomson had somehow been exonerated by NSW police, and the Liberals had some sorries to say:
The Opposition says it does not owe Labor backbencher Craig Thomson an apology, despite police deciding not to formally investigate allegations of fraud made by shadow attorney-general George Brandis…
Asked if he owed an apology to Mr Thomson, Senator Brandis said: “Not at all. What I and others have brought to light shows a course of conduct by him, over years, in which he used members’ money as if it were his own.”
Government ministers acted as if Thomson was an innocent man wronged:
CRAIG EMERSON: Well this is obviously a bitter disappointment to Tony Abbott and George Brandis who thought this was going to be their cheap, easy way to the Lodge. Now they are actually going to have to do some policy work to put in front of the Australian people instead of sleazing their way, trying to get into the Lodge the easy, cheap way… And for Mr Brandis to seek to mislead people by saying there was insufficient evidence when the police statement says there is no evidence is a very bad reflection upon him indeed and he should apologise to Mr Thomson for this muckraking.
Treasurer Wayne Swan was no better:
FRAN Kelly: NSW Police this morning have said they will not be investigating Craig Thomson.
The Prime Minister remained staunch:
JULIA GILLARD, PRIME MINISTER: I’ve consistently expressed my confidence in the Member for Dobell. He is there working for his local community. .
But the truth is that Craig Thomson’s defence - that some other unidentified union official had used Thomson’s personal union credit card to pay for prostitutes - has just been blown sky-high:
LABOR MP Craig Thomson is expected to rely on the disappearance of financial records and slack union rules when he makes a “comprehensive statement” to defend allegations he misused his union credit card in a $100,000 splurge on prostitutes, cash withdrawals and air tickets.
But he faces a dilemma over his claim that another person forged his signature on the card dockets for a brothel, after NSW police determined they were genuine.
”We are satisfied that the person who used the card was the person whose name was on the card,” a senior police officer told The Australian.
“It would have been deception if someone else used it; that would have been a crime.”
I give the Government a little tip: it’s actually a very sleazy look to celebrate a finding that spending union members’ money on prostitutes is legal.
And is this kind of stuff legal, too?
THE Labor MP Craig Thomson and the union leader Michael Williamson, who is on the ALP national executive, allegedly received secret commissions from a major supplier to their union.
The two men, both senior figures in the Health Services Union at the time, were provided with American Express cards by John Gilleland, who runs a graphic design business, a Herald investigation has found....
At an HSU function this year Mr Gilleland’s wife, Carron, privately complained to senior union officials that Mr Williamson had ‘’run amok’’ with the credit card. According to one official, Mrs Gilleland said, ‘’He even paid his private school fees on it’’ and ‘’this was not part of the deal’’....
According to the HSU’s accounts for 2009-10, Mr Gilleland, 64, and Mrs Gilleland, 51, receive about $680,000 a year to produce 10 issues of the union’s newsletter, Health Standard.
These production figures were up to 10 times the amount other unions paid for similar things, industry sources said....
Mr Williamson, through the public relations firm Hawker Britton, denied the allegations. He said the suggestion he had been provided with a credit card by the Gillelands was ‘’complete nonsense’’.
Mr Thomson did not return the Herald’s calls....
Mr Williamson, 58, has been general secretary of the NSW branch of the HSU for the past 14 years. A former national ALP president, he is vice-president of the NSW Labor Party ... His daughter, Alex, is a media officer for Julia Gillard…
Mr Williamson is also a director of United Edge, an IT company that provides computer and mobile systems to Mr Williamson’s union.
United Edge is listed at the same address as the HSU’s state headquarters in Pitt Street. The company pays no rent, and it won the IT contract without going to tender.
Williamson helped to negotiate the payment of between $90,000 and $150,000 of NSW Labor money to Thomson, allegedly to keep him from going bankrupt and losing his seat.
Meanwhile, let’s not mention another case involving a union official ripping off his members:
BROADCASTER Michael Smith must make an undertaking not to broadcast material from an interview with Bob Kernohan, former president of the Australian Workers Union, before he returns to air on Sydney’s 2UE.
Smith was suspended on Tuesday as Fairfax Media and 2UE management investigated material to be aired in Smith’s interview with Mr Kernohan, including allegations of misappropriated union funds.
Yesterday, 2UE management issued Smith with a document requiring his undertaking not to broadcast material from the interview unless the station has evidence to support any claims that will be made.
“If he signs the document, he’ll be back on air tomorrow (Friday),” said Fairfax’s head of radio, Graham Mott… Fairfax Media chief executive Greg Hywood had no qualms over the suspension. “That was Graham Mott’s decision, which I fully support.”
The afternoon host remains indignant about the neutering of his questioning of alleged misallocation of union funds by Bruce Wilson, with whom Julia Gillard had a personal relationship before she entered politics.
To be clear, Kernohan is the accuser, not the accused, and Gillard had not only a personal but professional relationship with Wilson - and was not aware of his misallocation of funds.
(No more comments, for legal reasons.)
Andrew Bolt – Friday, September 09, 11 (05:13 am)
An attack from the Greens should normally be good news for Labor. But Bob Brown this time has a point about the Immigration Department bureaucrats who briefed the media on why the Liberals should back the Malaysian people swap:
The bureaucrats also warned that a return to onshore processing would overwhelm the nation’s processing facilities and lead to asylum-seekers being released into the community, where they could cause social tension similar to that in England and France…
Earlier, Senator Brown vowed to fight any reintroduction of offshore processing. “We Greens won’t have it,” Senator Brown said. “I won’t have it. The Prime Minister is wrong. She is letting down this country on immigration and the decency that Australians want to see towards asylum-seekers.
“As far as the bureaucrats, these turkeys out of the bureaucracy in Canberra who are prognosticating about Australia somehow or other becoming a Paris or London burning, they should be out on their ears.”
The curious thing is that the bureaucrats made this alarmist claim when briefing reporters, but didn’t think it worth mentioning later when briefing the Opposition:
On Wednesday, Tony Abbott and several of his frontbenchers received a government-approved briefing from Immigration Department head Andrew Metcalfe, outlining the implications of the recent High Court ruling on Australia’s offshore processing regime.
The number of 600 appears to have been provided to journalists who, according to The Daily Telegraph, were also briefed by officials in Canberra a few hours before the Coalition…
The opposition’s immigration spokesman, Scott Morrison, confirmed that the figure of 600 was never mentioned and ... said Mr Metcalfe did not warn the Coalition of the risk of social disorder if offshore processing were not pursued.
And he said suggestions Australia was headed down the European path, where high immigrant numbers have been a major and chronic source of social instability, were irresponsible.
Michelle Grattan names the man responsible:
The comments, by Immigration Department head Andrew Metcalfe, were likened to the defence of the White Australia policy, with critics calling them inflammatory and devastating.
Labor defends him:
Immigration Minister Chris Bowen hit back at the critics and their ‘’simplistic characterisation’’ of Mr Metcalfe’s comments. ‘’The allegations of xenophobia against respected senior departmental officials … is highly offensive,’’ he said. Ms Gillard also defended the officials. ‘’They are giving the best of their advice and experience,’’ she said.
So now it could be war - with the Greens hinting at blocking a tax the Government badly needs, and which was one of Gillard’s first promises in taking over from Kevin Rudd:
In an apparent attempt to pressure Labor, Senator Brown also dumped his pledge not to block its planned mineral resources rent tax, demanding it be reviewed.
His shift came as Tasmanian independent Andrew Wilkie added to the uncertainty by describing the tax as unfair.
No wonder there’s a crisis meeting:
Ms Gillard left this week’s meeting of the Pacific Islands Forum in Auckland ahead of schedule last night, as colleagues drew up plans for a tactical summit today designed to wrest back the political initiative lost when the High Court ruled that offshore processing of asylum-seekers was illegal.
Ms Gillard and her ministers will consider the handling of legislation to deliver the planned carbon tax and minerals tax, as well as how to turn the political pressure back on to the opposition on issues including the economy and jobs.
Meanwhile, John Howard pours it on:
THE Gillard government is in a policy wilderness, with neither ideals nor ideas, according to former prime minister John Howard.
He said the government was incompetent, had bungled its asylum-seeker policy more comprehensively than any issue he could recall, the Prime Minister lacked authority and Labor suffered from “an identity problem” after chaining itself to the Greens.