Archive for March, 2009

Measure of Conservative Success: Denial of the Left

Sunday, March 29th, 2009

One can always tell when a particular Conservative policy has met with success. On the part of Left, there is first denial, then when success becomes undeniable the argument shifts to “the success would have happened irrespective of Conservative polices.” This can be seen in the reaction to the the  “Surge” policy and now our memories of the Cold War.

Before “The Surge” in troops, the Senate Democratic Leader Harry Reid claimed that the Iraq War was “lost.” This looks foolish in retrospect, but public opinion at the time was ambivalent about who was winning. When the number of Americans casualties began to dramatically decrease, there was an unwillingness on the Left to seize these initial results optimistically. By and large, the Left was convinced that any success was momentary.

The plot above shows the Rasmussen Poll on the question who is winning the War on Terror. Although there is consensus now that we are on the road to success, the Left was slow in acknowledging it. They had too much emotionally invested in failure. In Slate in January 2008, Michael Kinsley, although acknowledging some positive trends in Iraq, would not accept the growing consensus that The Surge was working. Now that casualties have been dropping for almost two years, success can no longer be denied, but from the Left the Surge cannot be given credit. Some argue that the US improved its intelligence operations, others claim the the Iraqis would have rejected violence on their own. In short, the Left can not say they were wrong and President George W. Bush was right about the Surge strategy.As more and more time passes, people forget the arguments that were made originally, and this latter approach of denying the cause of the success is more effective. Hence, when the Left is giving alternative reasons for a success, we have a tacit admission of success.In yet another periodic re-incarnation of this sort of argument witness Tom Friedman. The argument he tries to make is that the United States loses and its enemies win when the price of oil increases. Likewise, when the price of oil falls, our enemies suffer. This is a reasonable argument. There are national security arguments to take steps to reduce US dependence upon oil.However, in his eagerness to buttress his argument he stretches the truth beyond all recognition. He now argues that Reagan’s policies did not win the Cold War. Rather,  according to Friedman, “… it was the collapse of global oil prices in the early 1990s that brought down the Soviet Union.”While the drop in oil prices hurt the Soviet Union, these prices dropped to levels that Soviets had lived with for generations. Indeed, Liberals at the time insisted that the Soviet Union would not collapse. Arthur Schlesinger, Jr., scholar of American Liberalism and one of its most articulate spokespersons  told us in 1986, after the collapse in oil prices, that “those in the United States who think the Soviet Union is on the verge of economic and social collapse, ready with one small push to over the brink are wishful thinkers who are only kidding themselves.”Friedman overlooks the support of rebels opposing the Soviets in Afghanistan, the support of Contras in Central America, the increase in the US defense budget, the Strategic Defense Initiative, the incredible recovery of the US economy, the deployment of Intermediate Nuclear Weapons in Europe. Friedman is too smart to be making such silly assertions about winning the Cold War, but it is too hard to admit that Reagan won the Cold War.

A Test of the President’s Education Priorities

Sunday, March 15th, 2009

At a recent gathering of state school officials, President Barack Obama and Education Secretary Arne Duncan were warmly received. Despite the fact that Obama suggested that perhaps teachers’ pay should in part be based on student performance and perhaps charter schools should be considered, he received enthusiastic plaudits. Was this because public school officials believed that Obama really believed in those policy prescriptions or because they  were convinced that the current education establishment would be further subsidized under Obama’s leadership?

We have a current chance to measure rhetoric against actions. Congress has previously subsidized the Opportunity Scholarship program, a voucher program that provides $7500 to about 1700 to low-income students. This value is some what less than the over $9000 the public schools in the District of Columbia spend per pupil. Student’s can apply this voucher to private schools to offset tuition.

The new spending bill includes a provision (added by Senator Dick Durbin, Obama’s former Senate colleague from Illinois) to remove these vouchers, a unbashful curtsy to teacher unions. The unions fear that their monopoly would be attenuated if students could use vouchers to choose to leave under-performing public schools.

The elimination of the program will have an ironic effect on two students Sarah and James Parker who attend Sidwell Friends, the same elite school attended by President Obama’s girls. Obama can financially afford to enroll his girls at Sidwell Friends as opposed the DC public schools. (President Jimmy Carter did send his children to public schools.) Unfortunately without the vouchers the Parker family cannot exercise the same option.

Obama has a choice to support the teachers unions or the Parkers. It is a test of rhetoric versus action.

Krugman Needs Reagan to Make His Growth Argument

Sunday, March 8th, 2009

Science can advance more quickly when there is the ability to construct controlled experiments within which variables and their effects can be isolated. Observational sciences like astronomy or archeology cannot construct direct experiments, but try to create explanations consistent with the more traditional sciences like physics and chemistry and ongoing observation. Economics falls in this latter category without the advantage of some reliance on other sciences. Given the unprecedented nature of today’s economic circumstances, prudence should restrain the certainty of any prediction.

Nonetheless, in terms of our future prospects, the importance of economic growth is conceded by all. If the extremely large spending increases of the Obama plan result in very significant economic growth say 4-5% per year range, growth will generate sufficient government revenue that service on the debt will not strain the economy. The question reduces to  what level of growth will result after the implementation of the Obama stimulus package.

Nobel-prize laureate Paul Krugman argues that historical evidence suggest periods of strong economic growth quickly follow high unemployment to support Obama assumptions about growth. There is some plausibility to this view. After unemployment peaks, putting labor back to work should increase output or gross national product. Indeed, Krugman suggests that when Harvard economist Greg Mankiw (who specializes in macro economics as opposed to Krugman’s international trade specialty) arguments otherwise are “evil” wonkishness. Mankiw responded that if Krugman is so sure that he is willing to risk the economy on his prediction, perhaps he might be willing to wagee a small fraction of his Nobel prize. Frankly, aw we shall see the data are so murky, that I would not wager much on either prediction.

Krugmam cites data to support his assumption of growth from Brad Delong.

The above graph shows the  unemployment rate on the horizontal axis and future economic growth 2 years later on the vertical axis. The association is not particularly strong, The points on the far right of the regression line seem to drive even the weak association in the graph. After Mankiw’s response to Krugman,  Delong went back and looked at the data. He found that those points on the end of the regression curve, as guessed by Mankiw, were associated with the Reagan recovery in the early 1980’s — a recovery dominated by large reductions in the highest marginal tax rates. Refer to the graph from Delong below.

The pink points are the ones associated with the Reagan recovery. Thus, Krugman is relying on the Reagan recovery to support his confident assertion strong growth inevitably follows high unemployment rates. Although the deficit rose during the Reagan years, at least at first, it was associated with increased defense spending coupled with reducing marginal income tax rates. Obama stimulus relies on high levels of spending and increased marginal tax rates. The past evidence does not allow us to predict with even modest assurance that high rates of growth are to be expected. For Krugman to make this argument confidently without caveat suggests at least at best some ignorance of the past.