So Much for Bipartisanship

Well the stimulus bill passed today, without a single Republican voting for it. I am not sure what is scarier, a $350 billion TARP package in the hands of a man who can't figure out how to use Turbotax properly, or $900 billion in the hands of Democrats eager to buy off votes.

Well for a refreshing breath of reality, the National Review has an excellent article on the failed history of Keynesian stimulus. I actually have a copy of the awkwardly named The General Theory of Employment, Interest and Money, sitting on my shelf, that I have been meaning to read. I will have to move it up in priority, so I know what woes are in store.

Using quaint Keynesian arguments to rationalize heavy spending is nothing new. But its resurgent popularity is somewhat surprising. Democrats and their favorite economists spent the past 25 years bemoaning the “twin deficits” of the 1980s and then claimed that the strong economy of the late 1990s was the result of President Clinton’s fiscal restraint — the precise opposite of “fiscal stimulus.” Also working in the anti-Keynesian mode, former treasury secretary Robert Rubin co-authored a 2004 paper with forecaster Allen Sinai and Peter Orzsag of the Brookings Institution, who now has been tapped by Obama to lead the Office of Management and Budget. They argued that “budget deficits decrease national saving, which reduces domestic investment and increases borrowing abroad.” Big budget deficits, warned Rubin, Orzsag, and Sinai, would “reduce future national income” and risk a “decline in confidence [which] can reduce stock prices.”

Joe the Dumber Speaks, Again

I had thought, well, I had hoped that Obama still had him locked in a closet somewhere, but apparently they still let him speak occasionally. Economist Gregory Mankiw, or as I call him, the anti-Krugman, takes him to task for his recent statement on the stimulus bill:

In a TV interview last month, Vice President Joe Biden said the following:

Every economist, as I've said, from conservative to liberal, acknowledges that direct government spending on a direct program now is the best way to infuse economic growth and create jobs.

That statement is clearly false. As I have documented on this blog in recent weeks, skeptics about a spending stimulus include quite a few well-known economists, such as (in alphabetical order) Alberto Alesina, Robert Barro, Gary Becker, John Cochrane, Eugene Fama, Robert Lucas, Greg Mankiw, Kevin Murphy, Thomas Sargent, Harald Uhlig, and Luigi Zingales--and I am sure there many others as well. Regardless of whether one agrees with them on the merits of the case, it is hard to dispute that this list is pretty impressive, as judged by the standard objective criteria by which economists evaluate one another. If any university managed to hire all of them, it would immediately have a top ranked economics department.

Ouch. It well worth reading the rest. I didn't realize that Mankiw had a blog. It is not on my to read list.

Kristof Copies Krugman

A couple of years ago I posted a link to Paul Krugman's excellent essay on sweatshops in the third world (this was back when Krugman was an actual economist).

For many years a huge Manila garbage dump known as Smokey Mountain was a favorite media symbol of Third World poverty. Several thousand men, women, and children lived on that dump--enduring the stench, the flies, and the toxic waste in order to make a living combing the garbage for scrap metal and other recyclables. And they lived there voluntarily, because the $10 or so a squatter family could clear in a day was better than the alternatives.

So I was a bit surprised to read this editorial recently by Nicolas Kristof in the New York Times:

Before Barack Obama and his team act on their talk about “labor standards,” I’d like to offer them a tour of the vast garbage dump here in Phnom Penh. This is a Dante-like vision of hell. It’s a mountain of festering refuse, a half-hour hike across, emitting clouds of smoke from subterranean fires.

The miasma of toxic stink leaves you gasping, breezes batter you with filth, and even the rats look forlorn. Then the smoke parts and you come across a child ambling barefoot, searching for old plastic cups that recyclers will buy for five cents a pound. Many families actually live in shacks on this smoking garbage.

Now I think both editorials are good mind you, and the wording is different enough that it is not plagiarism, but Kristof is hardly being original.

CSPAN Porn

I was amused by this passage:

WASHINGTON - Barack Obama’s $825 billion plan to boost the recession-bound U.S. economy has some elements that, well, aren’t the sort of stimulus that House Minority Leader John Boehner says he can believe in.

“I’m concerned about the size of the package, and I’m concerned about some of the spending that’s in there,” Boehner complained Friday after a meeting at White House.

“How can you spend hundreds of millions of dollars on contraceptives? How does that stimulate the economy?”

OK, maybe I have a dirty mind, but when talking about contraceptives you should be careful discussing "stimulate" and the "size of packages".

Obama Does Have Superpowers!

Faster than a speeding bullet, stronger than a locomotive... able to time travel. From the new White House website.

President Obama swiftly responded to Hurricane Katrina.

Yeah, OK, buddy.

Michael Shermer on the Bailouts

Ever since I have taken up following conspiracy theorists I have been reading a lot of Michael Shermer, he is founder of the the Skeptic Society after all. He recently wrote a pretty decent book on economics, which I got an autographed copy of (and actually made a YouTube video of when the troofers interrupted it). He continues this theme with a editorial in the City Journal.

Though the financial crisis is complex and has many explanations, one of its primary causes involves Fannie Mae and Freddie Mac, the nation’s largest guarantors of home mortgages. Recall that Fannie and Freddie are government-run organizations that do not make loans directly to customers; rather, they buy loans from the banks that make those loans directly. In spring 1999, Fannie and Freddie—under pressure from the Clinton administration—increased their portfolio of loans to lower- and moderate-income borrowers from 44 percent to 50 percent by 2001. That meant granting loans to higher-risk customers.

Now, there’s nothing wrong with corporations’ and institutions’ taking higher risks, so long as they adjust for it by charging more. The higher price acts as a risk signal to both buyers and sellers, thereby dialing up their emotion of risk aversion. That’s what Fannie Mae was already doing, in fact: when it purchased loans that banks made to high-risk customers, it bought only those that charged 3 to 4 percentage points higher than conventional loans. But under the new program, Fannie would buy high-risk mortgages that were only 1 point above a conventional 30-year fixed-rate mortgage (and that added point would be dropped after two years of steady payments). In other words, the normal risk signal sent to high-risk customers—you can have the loan, but it’s going to cost you a lot more—was removed.

Atlas Still Shrugs

One of the greatest books ever, but one I hoped wouldn't come true.

Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit.

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most
influential book in their lives, behind only the Bible.

Only in Seattle: Part II

Well they at least figured out that it isn't really that big of a deal to put salt in the ocean, but geez, they have to hire a consultant. Doesn't anyone on the city council have a cousin in Spokane or something?

The Seattle City Council will consider hiring an outside consultant to look at the city's response to December's historic snowstorms.

City departments will give the mayor a report Jan. 30, but Councilmember Tom Rasmussen said this morning that an outside party could help city officials figure out what went wrong.

The storms stranded bus riders and left ice and compact snow on many streets for nearly two weeks.