Tag: Paul Krugman

Will Immigrants Affect Economic Policy?

The New York Times has some wonderful Room for Debate pieces debating whether the American electorate is getting more liberal.  From Molly Worthen bemoaning the rise of secular libertarianism to Robert Reich repeating the mantra of the New Deal to Kay Hymowitz arguing that Millennials are not so liberal, all are worth reading. 

If the U.S. government does adopt more liberal economic policies over the next few decade, immigrants and their descendants will not be to blame.  There are four pieces of research that lend support to this view.

More on Krugman’s Missing Libertarians

I wrote last week about Paul Krugman’s claim that “there basically aren’t any libertarians” because “There ought in principle, you might think, be people who are pro-gay-marriage and civil rights in general, but opposed to government retirement and health care programs — that is, libertarians — but there are actually very few.” I offered some evidence from Gallup, Pew, and other polls that in fact there are substantial numbers of voters who hold libertarian-ish views on both economic and social issues.

Bryan Caplan runs some regressions to find that voters’ positions on a variety of issues don’t line up the way Krugman assumes they do. Ilya Somin explores various problems with Krugman’s claims, including this:

It’s also possible to try to justify Krugman’s claim by arguing that most of those people who hold seemingly libertarian views haven’t thought carefully about their implications and are not completely consistent in their beliefs. This is likely true. But it is also true of most conservatives and liberals. Political ignorance and irrationality are very common across the political spectrum and only a small minority of voters think carefully about their views and make a systematic attempt at consistency. Libertarian-leaning voters are not an exception to this trend. But it is worth noting that, controlling for other variables, increasing political knowledge tends to make people more libertarian in their views than they would be otherwise.

Nate Silver, Krugman’s erstwhile New York Times colleague who now runs the FiveThirtyEight website, writes, “There are few libertarians. But many Americans have libertarian views.” He notes:

If Krugman is right, you should see few Americans who are in favor of same-sex marriage but oppose government efforts to reduce income inequality, or vice versa.

As it turns out, however, there are quite a number of them; about 4 in 10 Americans have “inconsistent” views on these issues.

Not actually inconsistent, of course, just not consistently “liberal” or “conservative.” Those “inconsistent” Americans just might be consistently libertarian or anti-libertarian. Silver has a nice matrix, grounded in data from the General Social Survey unlike Krugman’s off-the-cuff matrix:

Nate Silver 2015 chart on libertarian voters

On those two issues, the largest group take liberal positions on both. Substitute different issues – cutting taxes, say, or internet censorship – and you’d get larger numbers of libertarians. But whatever set of issues you choose, you’re likely going to find significant numbers of voters taking positions that don’t fit into Krugman’s two boxes.

Silver speculates on why there seems to be so little political representation for these large groups of voters:

…the hard-core partisans who vote in presidential primaries are much more likely to take consistently liberal or conservative positions than the broader American population, as Krugman’s colleague Nate Cohn points out.

And the parties themselves — who have disproportionate influence in the primaries — have highly partisan views by definition. Almost all voting in the U.S. Congress, on social issues and economic issues alike, can be reduced to a single, left-right dimension.

Does this make any sense? Why should views on (for example) gay marriage, taxation, and U.S. policy toward Iran have much of anything to do with one another? The answer is that it suits the Democratic Party and Republican Party’s mutual best interest to articulate clear and opposing positions on these issues and to present their platforms as being intellectually coherent. The two-party system can come under threat (as it potentially now is in the United Kingdom) when views on important issues cut across party lines.

Maybe that’s why we have so much trouble convincing people that there are libertarian voters.

Nate Silver looked at growing libertarian sentiment back in 2011.

Paul Krugman Can’t Find Any Libertarians

Paul Krugman has a blog post at the New York Times that seems to be based on no research at all. But it has a snappy four-cell matrix so you’ll know it’s like real economics.

Krugman’s argument is that “there basically aren’t any libertarians.” And here’s the graph that proves it:

Krugman libertarians box

See how small the letters are in two of the boxes? That shows you that there aren’t any people in those boxes. “There ought in principle, you might think, be people who are pro-gay-marriage and civil rights in general, but opposed to government retirement and health care programs — that is, libertarians — but there are actually very few.” And there are also very few people who are “socially illiberal” and supportive of government social programs, he says.

But you know, there’s research on this. David Kirby and I have done some of it, in studies on “the libertarian vote.” But two political scientists examined a similar matrix back in 1984 and found roughly even numbers of people in each box.

Part of the trick here is that Krugman has used a vague term, “socially liberal,” for one of the dimensions of the matrix, and a radical policy position, “no social insurance,” for the other dimension. The logical way would be to use either common vague terms for both dimensions – say “socially liberal/conservative” and “fiscally liberal/conservative” – or specific and similarly radical terms for both dimensions, something like “no social insurance” and “repeal all drug laws.” Wonder how many people would be in the boxes then? 

“No social insurance” is a very radical position. Even many libertarians wouldn’t support it. Like Hayek. So to find the divisions in our society, we might choose a specific issue of personal freedom – gay marriage, say – along with an equally controversial economic policy such as school choice or a constitutional amendment to balance the budget.

Krugman’s ‘Gotcha’ Moment Leaves Something to Be Desired

I’ve had some fun over the years by pointing out that Paul Krugman has butchered numbers when writing about fiscal policy in nations such as FranceEstoniaGermany, and the United Kingdom.

So I shouldn’t be surprised that he wants to catch me making an error. But I’m not sure his “gotcha” moment is very persuasive. Here’s some of what he wrote for today’s New York Times.

Gov. Jerry Brown was able to push through a modestly liberal agenda of higher taxes, spending increases and a rise in the minimum wage. California also moved enthusiastically to implement Obamacare. …Needless to say, conservatives predicted doom. …Daniel J. Mitchell of the Cato Institute declared that by voting for Proposition 30, which authorized those tax increases, “the looters and moochers of the Golden State” (yes, they really do think they’re living in an Ayn Rand novel) were committing “economic suicide.”

Kudos to Krugman for having read Atlas Shrugged, or for at least knowing that Rand sometimes referred to “looters and moochers.” Though I have to subtract points because he thinks I’m a conservative rather than a libertarian.

But what about his characterization of my position? Well, he’s right, though I’m predicting slow-motion suicide. Voting for a tax hike isn’t akin to jumping off the Golden Gate bridge. Instead, by further penalizing success and expanding the burden of government, California is engaging in the economic equivalent of smoking four packs of cigarettes every day instead of three and one-half packs.

Piketty Problems: Top 1% Shares of Income and Wealth Are Nothing Like 1917- 28

Former Treasury Secretary Larry Summers’ review of Thomas Piketty’s Capital in The Twenty-First Century, claims that Mr. Piketty and Emmanuel Saez have documented, “absolutely conclusively, that the share of income and wealth going to those at the very top—the top 1 percent, .1 percent, and .01 percent of the population—has risen sharply over the last generation, marking a return to a pattern that prevailed before World War I.”  That statement is false.

Paul Krugman’s review “Why We’re in a New Gilded Age,”  claims that “since 1980 the one percent has seen its income share surge again—and in the United States it’s back to what it was a century ago.”  That statement is false.  

A Pew Research Center report on the same data was titled, “U.S. income inequality, on rise for decades, is now the highest since 1928.”  That too is false.

First of all, the Piketty and Saez estimates do not show top 1 percent income shares nearly as high as those of 1916 or 1928 once we use the same measure of total income for both prewar and postwar data.

Second, contrary to Summers, there is no data from Piketty, Saez or anyone else showing that the top 1 percent’s share of wealth “has risen sharply [if at all] over the last generation” – much less exhibited a “return to a pattern that prevailed before World War I.”

Dealing first with income, it is interesting that the first graph in Piketty’s book is about the top 10 percent – not the top 1 percent.  Saez likewise writes that “the top decile income share in 2012 is equal to 50.4%, the highest ever since 1917 when the series start.”  That is why President Obama said, “The top 10 percent no longer takes in one-third of our [sic] income – it now takes half.”  A two-earner New York City family of six with a pretax income of only $110,000 would be in this top 10 percent, and they are certainly not taking “our” income.  Regardless whether we examine the Top 10 percent or Top 1 percent, however, it is absolutely dishonest to compare the postwar estimates with prewar estimates. 

The Piketty and Saez prewar estimates express top incomes as a share of Personal Income, after subtracting 20% to account for tax avoidance.  Postwar estimates, by contrast, express top incomes as a share of only that fraction of income that happens to be reported on individual income tax returns – rather than being unreported, in tax-free savings or assets, or sheltered as retained corporate earnings.

 Transfer payments are not counted as income in either series (as though federal cash and benefits were worthless); this distinction is inconsequential for the prewar figures but increasingly important lately.  “Total income” as Piketty and Saez define it accounted for just 61.8 percent of personal income in 2012, down from 67 percent in 2000.

No, There Are NOT Three Job Seekers for Every Job Opening

Unemployment benefits could continue up to 73 weeks until this year, thanks to “emergency” federal grants, but only in states with unemployment rates above 9 percent.  That gave the long-term unemployed a perverse incentive to stay in high-unemployment states rather than move to places with more opportunities.   

Before leaving the White House recently, former Presidential adviser Gene Sperling had been pushing Congress to reenact “emergency” benefits for the long-term unemployed.  That was risky political advice for congressional Democrats, ironically, because it would significantly increase the unemployment rate before the November elections.  That may explain why congressional bills only restore extended benefits through May or June.

Sperling argued in January that, “Most of the people are desperately looking for jobs. You know, our economy still has three people looking for every job (opening).”  PolitiFact declared that statement true.  But it is not true. 

The “Job Openings and Labor Turnover Survey” (JOLTS) from the Bureau of Labor Statistics does not begin to measure “every job (opening).”  JOLTS asks 16,000 businesses how many new jobs they are actively advertising outside the firm.  That is comparable to the Conference Board’s index of help wanted advertising, which found almost 5.2 million jobs advertised online in February.  

With nearly 10.5 million unemployed, and 5.2 million jobs ads, one might conclude that our economy has two people looking for every job (opening)” rather than three.  But that would also be false, because no estimate of advertised jobs can possibly gauge all available jobs.

Consider this: The latest JOLTS survey says “there were 4.0 million job openings in January,” but “there were 4.5 million hires in January.”  If there were only 4.0 million job openings, how were 4.5 million hired?   Because the estimated measure of “job openings” was ridiculously low. It always is.

Paul Krugman’s Nostalgia for Teddy Roosevelt’s New Nationalism

Paul Krugman managed to discover “America’s Taxation Tradition” in an unlikely spot – a fiery old political speech by an unsuccessful presidential candidate who called for a “graduated inheritance tax on big fortunes.” Dripping with irony, Krugman asks “Who this left-winger? Theodore Roosevelt, in his famous 1910 New Nationalism Speech.”

Readers are supposed to assume that because Roosevelt had been a Republican, his New Nationalism speech could not possibly have been remotely left of center. Yet the phrase “new nationalism” and the advocacy of an inheritance tax were both borrowed from Herbert Croly’s highly influential 1909 manifesto of the Progressive Era, The Promise of American Life.

As Christopher Lasch noted, “Theodore Roosevelt read The Promise, found it highly flattering to himself, publicly praised it, and used it as an argument for his ‘new nationalism.’ Croly did not so much influence Roosevelt as read into his career an intellectual coherence which Roosevelt then adopted as his own view of things.” Croly, who later launched The New Republic magazine, supported Roosevelt in the 1912 Presidential race and Robert La Follette’s Progressive Party campaign in 1924, before becoming disenchanted and (as Lasch put it) “flirting with socialism.”

In his 1909 book, Croly said, “In economic warfare … it is the business of the state to see that its own friends are victorious. It holds … a hand in the game.” The state, said Croly, must look out for “the national interest,” and help those to win “who are most capable of using their winnings for the benefit of society.” To the properly cynical, that sounds like an open invitation to crony capitalism and corruption, if not kleptocracy.

In the New Nationalism speech Roosevelt said, “We should permit [a fortune] to be gained only so long as the gaining represents benefit to the community. This, I know, implies a policy of a far more active governmental interference with social and economic conditions in this country …  No man should receive a dollar unless that dollar has been fairly earned. Every dollar received should represent a dollar’s worth of service rendered — not gambling in stocks, but service rendered” (Roosevelt gambled-away his own inheritance on a ranching venture, not stocks).

Not quite socialist in 1909, Croly tolerated, “preservation of the institution of private property in some form, [but only with] the … radical transformation of its existing nature and influence.” Similarly, Roosevelt allowed that he would prefer to stop short of government ownership of business (socialism), if government control (fascism) would suffice. “I do not wish to see the nation forced into the ownership of the railways,” said Roosevelt, “if it can possibly be avoided.”

In short, the Roosevelt/Croly New Nationalism certainly did lean in a “leftist” (statist and collectivist) direction with respect to state supremacy over private property.

As afterword, here is something I wrote in a 1995 anthology revisiting Croly’s The Promise of American Life:

Herbert Croly’s quaint 1909 vision of the merits of increased centralization was founded on the notion that ‘American state governments have been corrupt and inefficient largely because they have been organized for the benefit of corrupt and inefficient men.’ The federal government, by contrast, was apparently organized for the benefit of saints and angels. Still, Croly’s idea of ‘big government’ in Washington looks like a bargain by today’s standards. He reasoned that a much stronger federal government could be financed out of a graduated inheritance tax: ‘The tax at its highest level,’ Croly wrote, ‘could be placed without danger of evasion at as much as 20 percent.’ Some recent estimates suggest that Croly may have been correct about how high the estate tax could be pushed without losing money. In any case, if a 20 percent inheritance tax were the only federal tax we had to worry about, as Croly proposed, the states would have little difficulty in raising money for the services that are still almost entirely a state or local responsibility, such as police protection, public schools, and roads. (The federal government, by contrast, is almost entirely involved in taking money from some people and giving it to others).

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