To Get Rich is Glorious

Tokyo dispatch

2012-02-24T05:45:00.003-05:00

Visited the Tsukiji fish market this morning. Witness this amazing bit of capitalism and the process of price discovery at work.

Tokyo

2012-02-19T06:15:00.000-05:00

In Tokyo for the week -- expect light to non-existent blogging. And no, a meeting with Eamonn Fingleton is not on the agenda.

Winship on income mobility and inequality

2012-02-17T16:14:00.001-05:00

The Brookings Institution's Scott Winship recently testified before the Senate Budget Committee on the subjects of income mobility and inequality. Some highlights:

My own estimates suggest that upward mobility from poverty to the middle class among today's late twentysomethings is about what it was for the previous generation. Roughly 50 to 55 percent of those who started out poor reached the middle class by age twenty-seven. The exception to this pattern of minimal change in mobility is that upward mobility in the absolute sense of being better off than one's parents has risen. For instance, I estimate that 47 percent of late twentysomethings today have already outpaced the incomes their parents had when the kids were 15 years old. In the previous generation, just 41 percent did. In short, if the benchmark against which we judge our mobility is past levels, we do not appear to have much of a problem.

...80 percent of forty-year-olds before the recession were better off than their parents were at the same age.

In other words, if we look at income mobility from an absolute perspective -- the only one that should matter -- rather than a relative one, there is really no problem. The vast majority of people are enjoying a standard of living higher than that of their parents.

...Unlike inequality within the 99 percent, inequality between the 99 percent and the top 1 percent has risen a lot (though not just in the United States). The top 1 percent received 24 percent of all income in 2007 compared with 10 percent in 1980. But there is very little evidence to suggest that the gains at the top have come at the expense of other Americans. Income concentration at the top fell quite a bit between 2007 and 2009, dropping down to 18 percent of all income received, but that hardly translated into gains for everyone else. Why should increases in income concentration necessarily translate into losses for everyone else? The size of the economic pie can grow in such a way that everyone gets a bigger slice despite the top getting a bigger share of the pie.

Consider that Mark Zuckerberg, founder of Facebook, stands to make five billion dollars cashing out stock options this year. How would the typical American end up better off if the Facebook IPO were to fall through so that Zuckerberg could not exercise his options? Or if the IPO does go through, will the typical worker be better off in 2013, because Zuckerberg will not realize the windfall he did in 2012?

American inequality levels are viscerally bracing, but one still has to make the case that they are undesirable. Consider two men, one of whom makes over 200 times the other. Should we be concerned about the poorer man? What if I told you that the two men in this example are Zuckerberg and poor Mitt Romney (who made just $22 million in 2010)? Romney made over 400 times the typical American household in 2010. Should we be concerned about that household?

Nailed it. If the high incomes of the rich was the result of money being confiscated from the rest of society then income inequality worrywarts might have a legitimate case. But it isn't, and they don't. No one is poor because Bill Gates or Warren Buffet are rich.

...The problem with most discussions of income mobility and inequality is that they do not distinguish between good and bad mobility or between good and bad inequality. A world of perfect mobility, as the researcher/writer Reihan Salam has noted, is "one in which no matter how hard you work to provide your children with every advantage in life, they're just as likely to sink to the bottom of the heap as to rise to the top." No one should find that ideal attractive; some immobility reflects behaviors we want to encourage or discourage. Similarly, in a world of perfect equality, there would be no rewards for hard work or risk. That would cripple economic growth and hurt everyone.

Another excellent point. There is absolutely zero nuance in the discussion over income inequality or mobility. A village where everyone doubles their income and thus produces no income mobility is not bad. A village where everyone lives in equally miserable squalor is not good. Further, to the extent that income is a problem -- think Brazil in the 1980s -- it's not the direct problem but rather the symptom of larger ones. A discussion over these other factors is the one we ought to be having, but then that's not very useful if one's primary objective is lay the intellectual groundwork for raising taxes on the rich or increasing the power of government.

Update: Russ Roberts makes some related points on median household income.

Update: Charles Blow is really upset with recent comments by Rick Santorum on income inequality:

“Santorum Praises Income Inequality.”

That was Fox News’s headline about Rick Santorum’s speech at the Detroit Economic Club on Thursday. Santorum said, “I’m not about equality of result when it comes to income inequality. There is income inequality in America. There always has been and, hopefully, and I do say that, there always will be.”

Unbelievable. Maybe not, but stunning all the same.

While this blog does not count itself as a fan of Rick Santorum, his statement is absolutely 100 percent correct. In a free society income inequality will always exist. Given people's varying levels of talent, ambition, goals and just plain luck, different levels of income is the only logical outcome. In fact, when this ceases to be the case and everyone has roughly the same income, it's a good bet that totalitarianism has taken hold.

The Europe Syndrome

2012-02-15T20:26:00.000-05:00

From Charles Murray's Coming Apart:

There's a lot to like about day-to-day life in the advanced welfare states of Europe. They are great places to visit. But the view of life that has taken root in those same countries is problematic. It seems to go something like this: The purpose of life is to while away the time between birth and death as pleasantly as possible, and the purpose of government is to make it as easy as possible to while away the time as pleasantly as possible -- the Europe Syndrome.

Europe's short workweeks and frequent vacations are one symptom of the syndrome. The idea of work as a means of self-actualization has faded. The view of work as a necessary evil, interfering with the higher good of leisure, dominates. To have to go out to look for a job or to have to risk being fired from a job are seen as terrible impositions.

Certainly dovetails with my own observations.

Another health care shortage

2012-02-13T18:38:00.001-05:00

The same day that The New York Times was running a story about a shortage of the cancer drug methotrexate, The Washington Post had an article highlighting the need for more primary care doctors. Thankfully the Obama administration is once again on the case:

Last summer the White House launched the Primary Care Residency Expansion at 82 hospitals across the country, with two strings attached: The programs must train residents dedicated to primary care, and the residents must work in underserved areas.

So why is the shortage of needed doctors occurring? If there are insufficient numbers of primary care doctors, shouldn't high demand bid their salaries upwards, thus attracting more people to the field? No silly, of course not. This isn't the free market, it's health care -- and health care means government:

As with speciality doctors, specialty residents bring a hospital more lucrative business. A radiologist will earn a hospital $193 in Medicare reimbursements every hour, a primary-care doctor brings in $101, according to an analysis done for a congressional watchdog agency.

“What hospitals build, in terms of their residency training, has a lot to do with what business they’ll bring in,” says Robert Phillips, director of the Robert Graham Center, which studies health-care workforce issues. “If they have a choice between funding a primary-care residency or one in cardiology, the cardiology residency will make them a lot more money. It’s a perfect storm that aligns the incentives against everything other than primary care.”

Price signals, in other words, are determined by government decree rather than market forces (recall that Medicare/aid spending accounts for about 30 cents of every health care dollar). It's almost as if central planning doesn't work very well or something.

Taking the bigger picture, government meddling has led to a shortage which in turn has produced yet further government intervention. And really, that's the story of the health care sector in a nutshell. No matter the health care problem, more government is always presented as the solution to cure the ills of our allegedly market-driven health care sector.

Drug shortages

2012-02-11T13:41:00.000-05:00

Today's New York Times has an article noting the shortage of methotrexate in the US, a drug used to treat a form of cancer known as acute lymphoblastic leukemia. The shortage is so severe that the newspaper says that "hospitals across the country may exhaust their stores within the next two weeks, leaving hundreds and perhaps thousands of children at risk of dying from a largely curable disease" according to federal officials and cancer doctors.

Drug shortages? In the United States? What on earth is going on? Here is the explanation offered up:

Ben Venue Laboratories was one of the nation’s largest suppliers of injectable preservative-free methotrexate, but the company voluntarily suspended operations at its plant in Bedford, Ohio, in November because of “significant manufacturing and quality concerns,” the company announced.

Since then, supplies of methotrexate have gradually dwindled to the point where oncologists now say they are fearful that shortfalls may occur at many hospitals within two weeks.

...There are four other manufacturers of methotrexate in the United States, and they are trying to increase production, [said Ms. Valerie Jensen, associate director of the Food and Drug Administration’s drug shortages program]. The F.D.A. is also seeking a foreign supplier to provide emergency imports until the approved domestic ones can meet demand, she said.

“We’re working on many fronts, and will keep this a priority,” Ms. Jensen said.

Likely reactions from the average reader:

The private sector is either criminally incompetent or evil. How can five manufacturers fail to produce a drug when there are literally children's lives on the line?

Thank goodness for the FDA, doing what it can to alleviate the shortage by reaching out to foreign producers.

But nothing about this makes any sense. Methotrexate is not a new drug, first coming into use during the 1950s. Given how long it has been around and that it no longer faces patent restrictions, production should be straightforward. Why has it suddenly become more difficult? Even more puzzling is the fact that the FDA is apparently trying to convince foreign producers to sell their product here in the US. Think about that for a second: how often does the government have to induce foreigners to export their product to the US to make money?

But here's the kicker:

So far this year, at least 180 drugs that are crucial for treating childhood leukemia, breast and colon cancer, infections and other diseases have been declared in short supply — a record number. Prices for some have risen as much as eightyfold. President Obama issued an executive order in October to help ease the problems.

Again, the reader is left with the impression that drug manufacturers are hugely incompetent, failing to produce the needed amount of drugs even in the face of rising prices. Thank goodness President Obama is on the case, issuing executive orders!

But the existence of any kind of shortage in a market-driven economy should make one's nose twinkle. One drug shortage might be some kind of freakish anomaly, but 180 crucial drug shortages? The usual suspect in these kind of situations is the dead hand of government, and according to bioethicist Ezekiel Emanuel, writing in last August's New York Times, that's exactly the case:

Only about 10 percent of the shortages can be attributed to a lack of raw materials and essential ingredients to manufacture the drugs. Most shortages appear instead to be the consequence of corporate decisions to cease production, or interruptions in production caused by money or quality problems, which manufacturers do not appear to be in a rush to fix.

If the laws of supply and demand were working properly, a drug shortage would cause a price rise that would induce other manufacturers to fill the gap. But such laws do not really apply to cancer drugs.

The underlying reason for this is that cancer patients do not buy chemotherapy drugs from their local pharmacies the way they buy asthma inhalers or insulin. Instead, it is their oncologists who buy the drugs, administer them and then bill Medicare and insurance companies for the costs.

Historically, this “buy and bill” system was quite lucrative; drug companies charged Medicare and insurance companies inflated, essentially made-up “average wholesale prices.” The Medicare Prescription Drug, Improvement and Modernization Act of 2003, signed by President George W. Bush, put an end to this arrangement. It required Medicare to pay the physicians who prescribed the drugs based on a drug’s actual average selling price, plus 6 percent for handling. And indirectly — because of the time it takes drug companies to compile actual sales data and the government to revise the average selling price — it restricted the price from increasing by more than 6 percent every six months.

The act had an unintended consequence. In the first two or three years after a cancer drug goes generic, its price can drop by as much as 90 percent as manufacturers compete for market share. But if a shortage develops, the drug’s price should be able to increase again to attract more manufacturers. Because the 2003 act effectively limits drug price increases, it prevents this from happening. The low profit margins mean that manufacturers face a hard choice: lose money producing a lifesaving drug or switch limited production capacity to a more lucrative drug.

The result is clear: in 2004 there were 58 new drug shortages, but by 2010 the number had steadily increased to 211. (These numbers include noncancer drugs as well.)

...You don’t have to be a cynical capitalist to see that the long-term solution is to make the production of generic cancer drugs more profitable. Most of Europe, where brand-name drugs are cheaper than in the United States, while generics are slightly more expensive, has no shortage of these cancer drugs.

...A more radical approach would be to take Medicare out of the generic cancer drug business entirely. Once a drug becomes generic, Medicare should stop paying, and it should be covered by a private pharmacy plan. That way prices can better reflect the market, and market incentives can work to prevent shortages.

In other words, government has distorted the market and removed incentives for the production of life-saving drugs. And the New York Times' readership, unless they somehow recall Emanuel's opinion piece, are left none the wiser.

Update: Well, it's an Instalanche -- thanks Professor Reynolds! Second time that's happened around these parts.

Update: The Heritage Foundation also explains how Medicare has contributed to the drug shortage.

The presidential megaphone

2012-02-08T13:04:00.002-05:00

The New York Times, in an editorial railing against the impact of SuperPACs and campaign spending, unintentionally makes a very good point:

Up to now, Republicans have been the main defenders of this corrupt system, and the main beneficiaries of it. Two of Karl Rove’s political groups raised $51 million last year to use against Mr. Obama and other Democrats, and the Republican presidential candidates’ PACs have raised $40 million.

Priorities USA Action and other Democratic groups have raised only $19 million. And, as Mr. Messina wrote on the Obama campaign’s blog, “with so much at stake” Democrats decided that they would not “unilaterally disarm.”

But if President Obama had refused to join in this downward spiral — and if he had proudly campaigned on that refusal — he and his campaign might have made up for that deficit in other ways: with more small contributions, and more support, from a public disgusted by the outsize influence of big money.

A president has a megaphone bigger even than Mr. Rove’s bloated bank account, and Mr. Obama could have impressed many wavering voters if he had chosen to use it against campaign corruption.

This is exactly right -- the president of the United States as the incumbent officeholder is granted a very large megaphone, beginning the campaign with a pronounced advantage over his political opponent(s). The president's access to media and ability to get his message out is almost, if not literally, unparalleled (and this doesn't even take into account the incumbent's ability to dole out political favors). Any challenger invariably begins with a much lower public profile.

More notable, The New York Times editorial board appears to believe that even if the eventual Republican challenger has access to tens of millions of dollars more than President Obama ("Rove's bloated bank account") that Obama still retains the advantage. Given that the editorial board doesn't exactly discount the ability of money to influence election outcomes, that's a stunning admission.

That campaign spending still pales next to the advantages of incumbency shouldn't be a surprise to anyone -- it helps explain why limits on campaign fundraising are popular among so many incumbent politicians. Recall that McCain-Feingold passed the House by a 51 vote margin and the Senate by 20 votes; does anyone really believe that a majority of the US Congress was willing to imperil their election prospects all for the sake of a purer democracy?

If the field is already tilted in the incumbent's favor, and limits can be placed on the opponent's ability to fundraise and thus get their message out (campaign spending, after all, is not used for bribing voters but rather acts of free speech such as TV ads, billboards, yard signs, etc.), then it's an obvious huge advantage for the incumbent. This is the context in which restrictions on campaign funding/spending must be understood.

Taking a bigger picture view, the Citizens United ruling has hardly marked the end of American democracy. Indeed, since the Supreme Court decision two years ago we have seen the following:

Massive turnover in Congress in the 2010 elections.
The abysmal performance of self-funded candidates in that election cycle.
A Republican nomination race that shows few signs of ending anytime soon.

The idea that money guarantees electoral success, meanwhile, took another beating last night with Mitt Romney's poor performance in three GOP primary/caucuses despite his superior financial strength. My father told me this morning that at his local precinct in Colorado that Rick Santorum defeated Romney by a 42-16 margin despite the fact that Romney both had a recent campaign stop in the area and significantly more advertising.

Our democracy may face threats, but the ability of candidates to spend increasing amounts of money on free speech isn't one of them.

Are the poor getting poorer?

2012-02-06T21:32:00.001-05:00

Election tribalism

2012-02-05T09:57:00.001-05:00

Mormons voted overwhelmingly in favor of Mitt Romney, a fellow Mormon, in yesterday's Nevada caucuses:

One in 4 voters Saturday was Mormon, Romney’s religion, and 9 in 10 of them backed him. They provided him with more than 4 in 10 of his votes on Saturday. Each of his rivals received 1 in 10 or less of their votes from Mormons.

This is particularly interesting because Mormons are traditionally one of the most conservative demographics in the country (McCain, despite being handily defeated in the 2008 election, beat Obama by a 28 point margin in heavily Mormon Utah), and yet they nonetheless preferred what is arguably the least conservative GOP candidate. There are really only two possible explanations here: that 90 percent of Mormons voting for Romney was simply coincidence, or Romney's shared religion was a big factor that swayed Mormons to his camp.The smart money is on the latter.

Of course, choosing a candidate based on some shared heritage isn't exactly a new dynamic in American politics. Let's recall that Barack Obama won 96 percent of the black vote in 2008 and, as of last October, enjoyed an 85 percent approval rating among blacks -- by far his highest among any demographic -- despite black unemployment of around 16 percent at the time. Now, it must be noted that blacks are the Democratic party's most reliable constituency and Democratic presidential candidates typically receive 85-90 percent of the black vote, but there can be little doubt that shared racial identity also plays a significant role in Obama's overperformance among this demographic.

None of this is meant to poke fun or disparage either Mormons or blacks, but merely to note the factors that determine voting behavior and the absurdities of government. Why should we subject ourselves to the vagaries of such a bizarre system any more than is absolutely necessary?

Taxes and fairness

2012-02-03T08:15:00.000-05:00

Will Wilkinson:

Suppose I'm a surgeon pulling down six figures. Perhaps doing my fair share is to pay 33% of my income in taxes. But, hey, wait! My sister, who could have been a surgeon, chose instead to make pottery in a little hippie arts colony. She makes only as much as she needs to get by, works relatively short hours, smokes a lot of weed with her artist friends, and pays no federal income tax at all! If paying 33% of the money I make saving lives is doing my fair share, then it's hard to see how my sister—who could have been a surgeon, or some kind of job- and/or welfare-creating entrepreneur—is doing hers. But if she is doing hers, just playing with clay out there in the woods, benefiting next to no one, paying no taxes, then clearly I'm doing way more than my fair share. Which seems, you know, unfair.

Good perspective. This blog raised a related point last year:

If [Steve] Jobs ever owed a debt to society, is is perfectly reasonable to think it has already been paid. The products he has helped introduce to society have served to boost productivity and enjoyment for literally millions of people. How many of us can say the same? This is not to suggest that Jobs has been engaging in charity, but let us also recognize how so many of us have benefited from his initiative and hard work. The Jobs story is not unique.

Let us remember that most wealth is acquired through the provision of some good or service that generates value to society (most common profession among the top 1 percent: doctor). It's an aspect of the tax/fairness debate that is often overlooked.

Chart of the day

2012-01-31T21:00:00.001-05:00

Source: TaxProf/Tax Foundation

Note that when the economy does well, income inequality worsens. Conversely, when the economy does poorly, income inequality becomes less pronounced. Thus, to truly solve this alleged problem, the economy needs to be placed in a sustained deep freeze. Suddenly, economic policy proposals favored by the left all make sense...

Have wages stagnated?

2012-01-31T20:18:00.001-05:00

Chart of the day

2012-01-30T10:01:00.003-05:00

Austerity?

Saving the rich through higher taxes

2012-01-29T18:27:00.000-05:00

Robert Frank, an economist this blog has encountered on numerous occasions, takes to today's New York Times to advance a novel argument: the rich would be better off with higher taxes. His argument rests on two foundations. First, that higher taxes woud result in improved government services:

...Higher spending on many forms of public consumption would produce clear gains in satisfaction for the wealthy. It’s reasonable to assume, for example, that driving on well-maintained roads is safer and less stressful than driving on pothole-ridden ones.

Of course, this assumes both that the tax increase would be used to fund useful projects rather than various boondoggles, and that increased government spending produces improved outcomes. But if this were true, government welfare and housing projects would not be synonymous with social dysfunction and the country's schools would be world class.

The heart of his argument, however, is that happiness/contentment is assessed by humans from a relative rather than an absolute perspective:

Beyond some point, there seems to be little gain in satisfaction from bolstering your private spending. When mansions grow to 15,000 square feet from 10,000, for instance, the primary effect is merely to raise the bar that defines an adequate home among the superwealthy.

...If you pay higher taxes, you obviously have less money to spend on what you want. So the prospect of a tax increase naturally inclines people to think that they’ll be less able to satisfy their desires.

But once incomes rise beyond a modest absolute threshold, many of the things that people want are what economists call positional goods. These may be things that are inherently in short supply, like gorgeous waterfront property; or things whose value depends heavily on context, like precious stones or sure-footed sports cars. Because positional goods are in short supply, they go to the highest bidders. The tendency to overlook that fact distorts how people think about the effects of higher taxes.

The cognitive illusion occurs because most financial setbacks that people experience in life stem from events that affect them alone. They may suffer health emergencies, for instance, or problems at work. Marriages may fail, jewelry may be stolen, and floods may damage homes. In each case, the effect is to limit the ability to bid for positional goods.

Because an overwhelming majority of financial setbacks occur for such idiosyncratic reasons, it’s natural to think that the income decline from higher taxes would have similar effects. But a tax increase is different. It affects all participants in the bidding for positional goods. And because it leaves everyone with less to spend, it has essentially no effect on the outcomes of those contests. The same paintings and the same marina slips end up in the same hands as before.

First off, most goods purchased by people are not positional goods. But let us say that provisional goods account for 75 percent of all purchases. Even then, the rich are made worse off; if a tax increase results in the status quo prevailing in terms of positional goods, they will still be made worse off with regard to the other 25 percent of purchases. With this alone Frank's argument begins to unravel.

But let us more closely examine the provisional goods cited by Frank, which he divides into two categories: those goods that are in limited supply (such as beachfront property or the works of a great painter) or those whose value depends on context (essentially being used as displays of conspicuous consumption to assert one's superior material standing).

With regard to the former, one can readily think of numerous goods and services requiring more than just a modest income whose value is intrinsic rather than simply due to context. Take Frank's sports car example. While the pleasure of owning a Ferrari may partly lie in the fact that few others can afford one, the car also brings value that is intrinsic (such as design or performance). Would the owner of a Ferrari be equally content being forced to downgrade to a Mercedes due to a tax increase if previous Mercedes owners then had to downgrade to a Toyota? Doubtful.

Other examples abound. Is the pleasure of a meal at a three star Michelin-rated restaurant derived solely from the knowledge that not everyone can afford such an experience? Is a vacation to Fiji only enjoyable because others must content themselves with a trip to the local water park? If not, then Frank is obviously wrong. While there may be numerous goods whose value is at least partly derived from the message it sends to others or the knowledge that the owner is part of an exclusive club, there are very, very few where the benefit is not at least partly intrinsic.

With regard to positional goods that are in limited supply, meanwhile, Frankly is flatly wrong when he asserts that a tax increase would result in the status quo prevailing: no it would not. When it comes to such positional goods, be it a slip at the marina in Cannes or a Rembrandt, it is absolutely not true that a tax increase would leave everyone with less to spend. Rather, a tax increase would only leave Americans with less to spend, while having no impact on foreigners.

Given that many (most? all?) positional goods, such as Miami real estate or the previously cited examples, have international competition for them this is no small consideration. One can't help but think that if Frank were not completely blinkered by his ideological blinders that he would have realized this.

Economists vs. Americans

2012-01-27T13:49:00.001-05:00

Fascinating stuff from the Wall Street Journal's Real Time Economics blog:

The Financial Trust Index has been tracking public sentiment toward the financial system for more than three years. And sentiment isn’t good...For its latest quarterly survey, the Financial Trust Index took its responses from average Americans to a series of economic assertions and put them up against the responses from an expert panel of economists. The results are striking:

Top marginal tax rate: On the factual assertion, “Permanently raising the federal tax rate by one percentage point for those in the top income tax bracket would increase federal tax revenue over the next 10 years.”

Economists: 100% agree with that statement (regardless of their political orientation)Americans overall: 66% agree (50% of Republicans; 80% of Democrats)

Eliminating tax deductions: “Eliminating tax deductions on mortgages would lead to better financing by individuals.”

Economists: 85% agree
Americans overall: 35% agree (41% of lower-income households agreed, but just 23% of higher-income households)

“Buy American” provisions: “Mandates that Federal government purchases should be ‘buy American’ have a significant positive impact on U.S. manufacturing employment.”

Economists: 10% agree
Americans overall: 75% agree

Readily apparent is that average Americans disagree with economists -- even wildly so -- on issues that economists don't find particularly controversial (or even thoroughly uncontroversial, as with the impact of a tax increase). While striking, this is in no way surprising given that most Americans are neither economists nor have studied the subject in any real depth. They are rationally ignorant.

By itself this is no big deal -- there are better ways to spend one's life than pouring over economics literature (or so it's been rumored) -- but then recall such ignorance also finds its way into the voting booth. This is another reason why limited government is so vital: to protect us from the ignorance of our fellow citizens and the pandering politicians they vote for.

SOTU reaction

2012-01-25T07:47:00.002-05:00

John Stossel has the State of the Union speech President Obama should have given.

And center-lefty blogger Ryan Avent reacts to the president's statement "Don’t let other countries win the race for the future":

The context, innocuously enough, was in calling for greater support for American research and development efforts. But the language of this statement is either daft or ghastly, depending on how charitably one is willing to read it. Is Mr Obama so dense as to miss that when America invents things other countries benefit, and vice versa? If a German discovers a cure for cancer, shouldn't we be ecstatic about that, rather than angry? Indeed, shouldn't we be quite happy and interested in ensuring that Germans and Britons and Indians have the capability and opportunity to develop fantastic new technologies?

In the more nefarious reading, Mr Obama seems to accept that only relative standing really matters. A sick, poor world in which America always triumphs is preferable in all cases to one in which America maybe doesn't "win" the race to discover every last little thing that's out there to be discovered. And hell, one has to ask again whether the easiest way to prevent other countries from winning the race for the future isn't simply to blow up their labs.

Very good commentary.

Update: More reaction:

Lefty Matt Yglesias also bashes Obama for his stance on trade.

Right-wing apostate Bruce Bartlett knocks Obama regarding the tax code.

Peter Suderman says that Obama railed against bailouts in a speech defending the auto bailout and also highlights a dog that didn't bark.

Warren Meyer points out that Obama took credit for things he had nothing to do with.

Yuval Levin's must-read: A State of Denial.

The New Deal revisited II

2012-01-22T22:16:00.002-05:00

More highlights from New Deal or Raw Deal:

Resettlement Administration

Established in April 1935, the Resettlement Administration (RA) was tasked with the relocation of struggling farmers into communities planned by the federal government. The head of the RA was Rexford Tugwell, a former professor of economics at Columbia. As Folsom states:

The visionary Tugwell was skeptical of capitalism and even the ownership of private property. "I personally have long been convinced that the outright ownership of farms ought to be greatly restricted," Tugwell explained. "My own view," Tugwell added, is "that under intelligent state control it should be possible to a planned flexibility into the congestion and rigidity of our outdated economic system." Tugwell was anxious to head the RA and begin his experiment in planned societies. With a staff of 13,000 and a massive $250 million to spend, Tugwell made plans for resettling thousands of tenants and marginal farmers into new model communities.

The result was a disaster. "It was all done awkwardly and wastefully," Tugwell later confessed about the work of the RA. Even Roosevelt himself conceded, "I don't think we have a leg to stand on," when confronted with the high cost of the model towns Tugwell was building. Drawing model communities on paper was one thing, but it was another thing to relocate tenant farmers into affordable houses far away in real towns with functioning services.

One of Tugwell's model communities was Arthurdale in West Virginia. A major problem there was that the ready-made houses could not fit their foundations. Once that problem was solved, the planner discovered that most residents, people from poor backgrounds, could not afford to live there. That protest became a common one in model communities all over the nation. Finding meaningful and profitable work for unskilled laborers was another recurring complaint.

What that meant was that sometimes the RA had communities built, but not residents either willing or able to move in. An example of this was Ak-Sar-Ben (Nebraska spelled backward), a "dream city" of thirty-eight green-shuttered houses, each on seven acres of land twenty miles west of Omaha on the Platte River. The problem was that no one wanted to move in. Nearby farmer Henry C. Glissmann observed this project and drew this conclusion: "I predict that in time these homes will all be abandoned and stand as a gruesome monument to government's inefficiency and folly in festering a movement that to a practical mind has the earmarks of failure from the start."

Glissmann is my great-grandmother's brother, so it seems that skepticism of government runs in the family.

Wikipedia, meanwhile, has the following to say about the RA:

Some of the RA's activities dealt with land conservation and rural aid, but the construction of new suburban satellite cities was the most prominent. In her book The Death and Life of Great American Cities, author Jane Jacobs critically quotes Tugswell on the program: "My idea is to go just outside centers of population, pick up cheap land, build a whole community and entice people into it. Then go back into the cities and tear down whole slums and make parks of them." Three "Greenbelt" towns were completed before the Supreme Court found the program unconstitutional in Franklin Township v. Tugwell.

Tugwell ended up resigning from his position in 1936 in the face of widespread criticism of his management of the agency.

Works Progress Administration

Established with the aim of providing jobs constructing public works for the unemployed, Folsom levels two main criticism against the WPA. First, from a theoretical perspective, it's difficult to assess whether the WPA actually created more jobs than would otherwise be the case had the money used to fund the program been left in the pockets of the taxpayers. Every dollar taxed away was one less dollar to be spent on products and services that provide employment and money for charitable relief.

The other main criticism was usage of the program as political patronage:

...The evidence indicates that politics often was the key variable in distributing WPA jobs. Gavin Wright, an economic historian, did a state-by-state analysis of New Deal spending. He noted that safe Democrat states, especially those in the South, received fewer WPA dollars than richer battleground states in the North and West. Since southern states had more poverty than northern states, that meant that WPA jobs often went to the states that needed them the least.

An example of this shift of WPA funds from poorer to richer states is in the wages paid from North to South. The WPA hourly pay scale for skilled workers ranged from 31 cents an hour in Alabama, Kentucky, Tennessee and Virginia, to $2.25 an hour in New Jersey. New Jersey, unlike those southern states, was a swing state, and Mayor Frank Hague of Jersey City had been the key for Roosevelt narrowly carrying the state in 1932. As president, therefore, Roosevelt allowed all WPA jobs in New Jersey to be cleared through Hague. According to Lyle Dorsett, who has studied the Hague machine in detail, "Concrete evidence shows that from the outset of the New Deal, Frank Hague was in complete control of all patronage in the state."

And Roosevelt poured patronage into New Jersey in the form of massive public works (Hague owned a construction company), which included almost 100,000 WPA jobs annually during the 1930s and the highest rate of pay in the nation for these skilled jobs. One minor drawback to the high pay was that WPA workers in New Jersey had to "tithe" 3 percent of their salaries to the Democrat Party at election time. One WPA director in New Jersey -- a corrupt but candid man -- answered his office phone, "Democratic headquarters!"

This and other criticisms of the WPA are noted by wikipedia.

Certainly seems to be plenty out there about the New Deal that differs from what many of us were taught in school!

To Get Rich is Glorious

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