When Is a Tax Cut Not a Tax Cut?

When spending doesn’t go down to match. Seen in that light, President Obama’s tax cut… isn’t. George Mason professor Russ Roberts just nails it over at Cafe Hayek:

an increase in spending coupled with lower tax collections is an INCREASE in taxes. AN INCREASE in taxes. NOT A TAX CUT. If I spend more money and collect less, the government is promising to collect more taxes in the future. It is not a tax cut.

Is that really so hard to understand? Judging by both parties’ reactions, apparently it is. Welcome to Washington.

Stimulus Package: Maybe It’ll Work This Time?

The Hill says to expect an economic stimulus package after the inauguration.

Two quick thoughts. One: it won’t work. Any money the government injects into the economy must first be taken out of it. Congress can’t “stimulate” anything, no matter how hard they try. They simply can’t create new wealth. All they can do is redistribute wealth that already exists.

Two: media coverage. When President Bush tried a Keynesian stimulus package, it was widely panned. Left and Right came together to say that Bush was wrong. And he was.

Today, a different man wants to do the same thing. He is just as wrong now as Bush was then. But unlike last time, the media isn’t calling out Obama’s mistake. They’re cheering for him. It seems the only people expressing skepticism are economists and right-wing partisans.

The partisans can — and should — be dismissed. But I’m beginning to think some of them may have a point when they grumble about the media’s kid-glove treatment of President Obama. Politicians are to be treated with skepticism; President Bush’s approval ratings are a good thing.

The country will eventually find out that President Obama is a politician like any other. My fear is that we will learn the hard way. Here’s to hoping the Obama honeymoon is a short one.

Appreciating the Magnitude of the Problem

Incoming HHS secretary Tom Daschle hosted a town meeting in Dublin, Indiana to build support for the new administration’s health care policies. It is worth taking him seriously for a moment — he is going to head HHS, after all.

He said that “When we combine the stories of Dublin and multiply that times 300 million people, we begin to appreciate the magnitude of the problem.”

I went ahead and multiplied Dublin’s 697 people by 300 million. That yields a little over 209 billion people, or thirty times the earth’s population.

Yes, this is being too literalist. All the same, politicians are not to be taken at their word.

Recession: A Bit of Context

The Bureau of Economic Analysis recently revised its third quarter growth estimate to -0.5%. They will release the fourth quarter figures on January 30. If they are negative, as is widely expected, GDP growth for the whole year may well go negative, too.

By my calculations from BEA data, all it will take (for real GDP, not nominal) is -0.79% growth. Well within the realm of possibility.

What would this mean? Even in these hard times, the American economy will still record the second-highest real GDP in human history. For any country. In any time period. Ever. And this in a recession! Remarkable.

Times are tough, to be sure. But they’re not nearly as bad as most people believe.

Democracy in Action

The still-undecided Minnesota senate race has already gone through several recounts. This seems to happen every time the race is closer than the margin of litigation.

First, Al Franken insisted on a recount because he didn’t win. He still wasn’t ahead after that, so he pushed for another, and another. Now he is ahead by 46 votes or so.

Now his opponent, Norm Coleman, wants more recounting because he isn’t winning.

Note the “because he isn’t winning.” That’s the important part. If Franken had initially won, he would not have asked for a recount. Coleman never favored a recount while he was ahead.

To the partisan mind, it doesn’t matter if every vote is counted, or even if the election is honest. Nor does it matter that both sides are being hypocritical. What matters is that your team wins.

If at first your team loses, then change the rules of the game so that you do win. This is one thing if you’re playing a game against a small child. It is another when the game involves grown men and control over trillions of dollars of government spending.

Politicians — and their supporters — are strange, fascinating creatures.

Buying Local

While I was away in Wisconsin, The American Spectator Online ran a column I wrote about buying local. The astute reader will hear echoes of I, Pencil.

Light Blogging This Week

For the next week, I will be in the frozen moonscape of my native Wisconsin. Instead of blogging, I will be delighting in the company of family and friends, neither of whom I get to see nearly enough.

Back in action next week.

-Mgmt.

Political Science

Over at the New York Times, John Tierney has some excellent analysis of Obama’s choice of John Holdren to be his science advisor.

The Bush administration was often criticized — rightly, I think — for pursuing faith-based science policies. With Holdren as science advisor, it appears this will not change in the new administration. This is to be expected. President Bush is a thoroughly political creature. So is President Obama; you don’t get to be president if you aren’t.

The most important part of the scientific method is its humility. At its very heart is the ability to admit that maybe, just possibly, you could be wrong. If that’s what the evidence shows, then it’s ok to admit it. If you (gasp) don’t know something, that’s ok, too. Instead of just making up an answer, you try to find it out.

The new political science is very different. It replaces humility with Certainty. A large part of the politicized scientist’s job is simply to disagree with the other party. It’s an effective way to raise funding. At least, it is when funding is allocated by political means.

Holdren displays all the hallmarks of The Certainty. For one, he accuses people who disagree with him as being operatives of the other party. Of course they’re wrong, just look at how they vote!

This is not a strong argument. Neither is his primary defense for his party’s preferred global warming policies – the argument from authority. Scientific consensus is on his side. Of course, there once was a time when scientific consensus said that the earth was flat, and the center of the universe. The world as it actually is matters more than merely what people think about it. Millions of people can be wrong, and often are.

But Holdren is Certain. He knows he is right. Scientific consensus is on his side. Just as it was when he and Paul Ehrlich lost that famous bet with Julian Simon. Just as it was when he and others attacked Bjorn Lomborg — who is no Republican — for the crime of dissenting. Tierney notes that Holdren and his co-writers actually “made more mistakes in 11 pages than they were able to find in [Lomborg’s] 540-page book.”

This is faith, not science. President Obama ran on a platform of change. I have no doubt that he will change some things for the better. But his science policies will probably just as faith-based, and just as Certain in the face of contrary evidence, as his predecessor’s.

So it goes.

Three Million Jobs?

President-elect Obama is now promising to create three million jobs. He had earlier promised 2.5 million.

If successful, Obama would become the first president in U.S. history to create even a single job.

He forgets that his plan has opportunity costs. It can redirect wealth. But it won’t be creating wealth. Every worker screwing in energy-efficient light bulbs is a worker that can’t be doing something else. The money used to pay these workers’ salaries must be taken out of the economy before it can be put back into it.

These jobs will be touted in press releases and the evening news, of course. But don’t expect very many people to point out that they will not actually be new jobs. Just different jobs.

Much of the necessary spending will be financed by debt. Every dollar lent by investors to the government is a dollar that now cannot be used for private investment. Obama’s program cannot create new opportunities on net. It will crowd out other opportunities.

There is plenty that Obama can do to make it easier for others to create jobs. Regulatory compliance costs are now higher than Canada’s entire 2004 GDP, for example. Identifying regulations that hurt more than they help — and repealing them — could do a world of good. But no president can create a job. By the very nature of government, the president must taketh away before he can giveth.

Land Wars in Asia

Looks like the U.S. is set to double its military presence in Afghanistan.

A free and democratic Afghanistan would be a noble achievement. But a foreign army cannot affect those changes. It doesn’t matter how powerful that army is. It doesn’t matter that the army’s motives are pure. The cultural sea change we’re talking about can only come from within.

President-elect Obama seems to understand this when it comes to the Iraq war. But he doesn’t seem to realize that the same lesson applies to Afghanistan. It is time to consider taking troops out of Afghanistan, not putting more in.