Stick to the Basics

Teaching "Economics I" to hundreds of freshmen, it's dismaying to see the usual election-year distortion and hyperbole morph into outright economic illiteracy. From convenient economic-historical amnesia, to refusal to acknowledge facts, to suspension of basic economic principles, what we're hearing from the Kerry campaign trail is truly remarkable.

Let's start with the Kerry claim that this is the "worst economy since Hoover." Hoover was in office in October 1929, when the stock market crashed and the Great Depression began. The unemployment rate, at a time when very few families had two earners and there was a much smaller safety net, reached almost 25% by 1933; indeed, it was still 15% under FDR in 1939. The current unemployment rate is 5.4%, less than the average for the last 30 years, and about what it was when President Clinton ran for re-election in 1996, though certainly above the 4.2% when President Bush assumed office.

That low unemployment rate was the result of a mini-bubble in the labor market accompanying the maxi-bubble in the stock market. Few economists believe we can push unemployment permanently back down to 4.2% without accelerating inflation and risking much worse economic harm. By President Clinton's last year in office, inflation had doubled to 3.4%, the Fed was raising interest rates, the bubble had burst, and the economy was sliding toward recession.

While there certainly are pockets of hardship (if you're unemployed, you're 100% unemployed, not 5.4% unemployed), the Hoover comparison is bizarre. In 1980, President Carter's last year, the unemployment rate was well over 7% while the contemporaneous inflation rate was over 12%, a misery index -- the sum of the two -- of 20%, or two-and-a-half times the current misery index of 7.9%! In fact, the misery index has been lower only five times in the last 35 years.

The Kerry campaign claims the Bush tax cuts did economic harm. This is exactly backwards. While in the long run, deficits -- as well as the level and structure of spending and taxes -- do matter, war and recession are times when deficits naturally occur and can be downright desirable. This was one of the most efficacious uses of fiscal policy ever. Only a couple of years ago, there was serious concern about outright deflation, falling prices and a Japanese-style lost decade. It would have been better to have had all the rate cuts in 2001, rather than phased in slowly. Better still to have combined the tax cuts with effective control of future spending as the economy returned to full employment. But it's no coincidence that a moribund economy mired in an uneven, uncertain recovery took off exactly when the 2003 tax cuts were passed.

John Kerry wants to repeal the reduction in the top two tax rates, and the dividend and capital gains relief. He says it would have been better temporarily to provide larger rebates for lower- and middle-income people. First, the evidence is that temporary tax rebates have very little stimulative effect. Second, the lower rates and dividend and capital gains relief moved us closer to an economically desirable tax base by significantly reducing the double taxation of saving and investment. Indeed, if the concern is the potential long-run harm of deficits crowding out private capital formation, it's strange to propose raising taxes on private capital formation.

To be sure, the deficits (and lower tax rates) have longer-run consequences. CBO projections of the budget over the next decade shows a debt-GDP ratio rising slightly to peak just above 40% in two or three years. This is hardly a debt spiraling out of control, leading to inflation fears fueling economic calamity. It would be better to eventually reduce the debt-GDP ratio over the next 10 years, preferably by controlling spending still further and stronger economic growth. And, of course, the Bush tax cuts and the Kerry spending (about three times his tax hikes) have ramifications beyond 10 years, when the financial problems in Social Security and Medicare become progressively more severe. The Bush proposal for personal accounts in Social Security does have short-run costs and should be combined with other reforms. Mr. Kerry has explicitly ruled out all reforms in benefits and that only leaves large tax increases or bigger deficits. As to Medicare, Mr. Bush's prescription drug program has some good reform elements, but was not financed; Mr. Kerry complains it wasn't large enough, again leaving only even larger tax increases or even larger deficits.

The Kerry campaign is no better at micro than macro economics: Suggesting it's the government's role to prevent any price from rising (tuition, pharmaceuticals) is reminiscent of the former Soviet Union, where prices never went up but there were never any goods available. In fact, overall inflation has been quite low and some other prices are falling (computers, cell phones). President Bush is no more to blame for the decreases than the increases.

Economic policy should be aimed primarily at maximizing non-inflationary economic growth. That would require the lowest possible tax rates, continuously rigorous spending control, gradual Social Security and Medicare reform, regulatory and litigation reform, trade liberalization and sound monetary policy. That's the recipe most likely to lead to rising living standards, low unemployment, better-paying jobs and upward mobility for those who've not yet made it on the economic ladder. It would also keep the debt-GDP ratio well under control.

President Bush promises a more modest role of government, trade liberalization, reigning in litigation, slower growth of government spending and lower taxes; in short, about the right mix, although one can argue with the details. To be sure, the first term was far from perfect (too much spending, steel tariffs). But Mr. Kerry is proposing quite a bit more spending, higher taxes, especially on capital formation, greater government regulation and restrictions on global trade. That plan would be a sizeable step toward a European-style social welfare state, with its concomitant double-digit unemployment and economic stagnation. So which candidate is out of touch with economic reality?

Mr. Boskin, professor of economics at Stanford and a senior fellow at the Hoover Institution, was chairman of the President's Council of Economic Advisers under George H.W. Bush.

There was a guy walking down the street and he bumped into an old buddy, Steve. Mark (the first guy) and Steve get talking and Mark asks Steve what he's been up to.

"I'm going to university," says Steve.

"Oh, really. What are you taking?" asks Mark.

"Philosophy," he says.

"What kind of philosophy?"

"Logic, actually," says Steve.

"What's logic?" asks Mark.

"Well, it's kind of like this -- have you got a fishbowl, Mark?"

"Yeah, I do as a matter of fact."

"Well, if you've got a fish bowl, you probably like fish, don't you."

"Yeah, I do."

"And if you like fish, chances are you probably like animals, right?"

"Yeah, I love animals."

"Well, if you love animals, I'd say there was a probability that you

like people as well."

"Yeah, I do. I like people."

"And if you like people, I'll bet you like women."

"That's for sure!"

"And, Mark, if you like women I'd be willing to bet that you like sex."

"Geez, Steve, I love sex."

"Well that's the way it works, Mark -- that's logic."

"Wow, that's great," says Mark.

At the end of their conversation, Steve had to run and Mark continued on his way down Richmond Street, only to bump into another friend, Paul.


They get talking and Mark tells Paul he ran into Steve only minutes earlier.

"Oh, really. What's he up to these days?" asks Paul.

"He's at university," says Mark.

"What's he taking?" asks Paul.

"Logic," says Mark.

"What's logic?" asks Paul.

"Well, let me see -- it's sort of like this, Paul: Have you got a fish bowl?"

"No, I haven't, Mark."

"What are you, some kind of fag?" says Mark indignantly.

http://www.truthinfitness.org/pressArticles/article_deseretnews_2004_5_10.html

these stupid "documentaries" kill me (fahrenheight 9/11, supersize me, etc). they aren't documentaries, they're quasi-truths whose obvious-yet-subtle purpose is to "inform" the public, ie, to create a film (and much like movie films, editing and story line supercede factual evidence) that is centered around a strawman argument. in the first case, bush. in the second one, mcdonalds. they are portrayed as to what is convenient to suit the director's purpose, then continually bashed throughout the "documentary's" entirety.

it does not need to be stated how people will insist that these movies (because that is in fact what they are) are necessary, such that they introduce a central point that has its worthy merits BLAH BLAH BLAH

but, like as to how many people treat other things and other people,

these movies are unbalanced, and lack a humane sense of dignity

RIP Ronald Reagan

the greatest recent champion of democracy, however unbeknownst to liberals and other assorted ideological ingrates, whose vocal professions of a malicious self-righteous nature can only substantiate their lack of appreciation for the red, white, and blue

there is nothing more saddening than the passing of a hero, whose tragic ending can only bring to light the unending sacrifice he made to ensure the safety of the free world

there will always be doubters, for everything it seems. there will always be people who dislike another for his demeanor, his ideals, his actions, along with many more unenviable, tangible, and (significantly) trivial things. these reasons may or may not be justified. but even the strictest christian, the strongest liberal, or the unwavering apathetic can agree that nobody will agree with him all the time. we are all different, and his unwavering optimism, at its very root, is something that should (hopefully) be respected

he was a good President, a definite contributor to liberty, a great person, and at the very least, one whose assured and confident attitude towards life and service is something we can all look up to

Oh! I have slipped the surly bonds of Earth
And danced the skies on laughter-silvered wings;
Sunward I've climbed and joined the tumbling mirth of sun-split clouds,--and done a hundred things
You have not dreamed of wheeled and soared and swung
High in the sunlit silence. Hov'ring there,
I've chased the shouting wind along, and flung
My eager craft through footless falls of air...
Up, up the long, delirious, burning blue
I've topped the wind-swept heights with easy grace
Where never lark, nor eer eagle flew--
And, while with silent lifting mind I've trod
The high, untrespassed sanctity of space,
Put out my hand and touched the face of God.