Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Saturday, April 15, 2006

Morning Coffee: The Balanced, Non-Partisan Two-Step

In which I drink my morning coffee, and think about whether it's really in Greg Mankiw's long-term interest to do the balanced, non-partisan two-step...

Michael Kinsley Hits One Out of the Park

Kevin Drum observes:

The Washington Monthly: THE WRONG MAN FOR THE JOB.... Michael Kinsley's rumination yesterday about the history of Western intervention in Iran was an oddly rambling affair, but the man does have a way with words:

When the United States should use its military strength to achieve worthy goals abroad is an important question. But based on [our record in Iraq and Afghanistan], it seems a bit theoretical. It's like asking whether Donald Trump should use his superpowers to cure AIDS. Or what George W. Bush should say when he wins the Nobel Prize in physics. A more pressing question is: Can't anyone here play this game?...

The Pile of Books to Read Grows Larger

Henry Farrell has just added one to the pile:

Henry Farrell: Yale University Press has just released Yochai Benkler's The Wealth of Networks: How Social Production Transforms Markets and Freedom. You can buy it at Powells, and Amazon, but it's also available from Benkler under Creative Commons with an associated wiki. There'll be more about this book on CT soon -- for the moment, suffice to say that I think that this is a really important book, not only for people interested in the politics of technology, but for people interested in left or liberal politics more generally. It fizzes with ideas.

The Immigration debate (Why Oh Why Can't We Have a Better Press Corps?)

Nell Henderson writes, once again, a problematic article--this time about immigration:

Effect of Immigration on Jobs, Wages Is Difficult for Economists to Nail Down: Yes, an influx of immigrants has helped depress the incomes of the lowest-skilled workers in recent decades, many economists agree. But they argue about the magnitude of the effect; some say it's big while others see it as slight.

Meanwhile, increased immigration -- legal and illegal -- helps keep inflation low, boosts rents and housing values, and benefits the average U.S. taxpayer while burdening some state and local governments, other research finds. "Immigration provides overall economic gains to a country," wrote economist Albert Saiz, summarizing the literature in a 2003 article for the Federal Reserve Bank of Philadelphia. "Indeed, the U.S. experience as an immigrants' country is one of phenomenal economic growth. However, there are winners and losers in the short run."

The primary losers in this country are workers who do not have high school diplomas, particularly blacks and native-born Hispanics, according to George J. Borjas, a Harvard University economist who has studied immigration for years. From 1980 through 2000, immigration reduced average wages for the nation's 10 million native-born men without high school educations by 7.4 percent, Borjas wrote in 2004.... Other economists contend that the effect is much smaller -- a wage reduction of close to 1 percent.... David Card, an economist at the University of California at Berkeley, in a paper presented at a Federal Reserve Bank of Philadelphia conference last year.... Looking at census data from hundreds of the nation's urban areas where immigrants cluster, Card found that in both 1980 and 2000, more than a third of adult immigrants did not have high school diplomas.... The wage gap between high school graduates and dropouts stayed relatively constant from 1979 to 2000, with the graduates earning 25 to 30 percent more, Card wrote. The "evidence that immigrants harm native opportunities is scant," he concluded, observing "a surprisingly weak relationship between immigration and less-skilled wages."...

Other economic trends have had much more impact on wages, analysts say. Perhaps the biggest is the general health of the economy.... "An extra million immigrants a year cannot possibly explain why the vast majority of workers in a labor market of 150 million workers have had stagnant wage growth," said Harry J. Holzer, an economist at Georgetown University. "All these other factors matter more."... The nation's 34 million immigrants also collectively pay more in taxes than they consume in public services and benefits, according to a National Research Council study. A high proportion of them work and pay federal, state and local taxes. Many return to their home countries before retirement and never claim Social Security payments or Medicare coverage...

The problem, of course, is that Henderson's is a "he said, he said" article. Henderson doesn't provide readers with any information to help them evaluate the reasons why Borjas and Card have different views of what the data say. I like George Borjas and Larry Katz, but I do wish that Henderson had written that the large minus eight percent estimate of the effect on the wages of high-school dropouts reported by Borjas and Katz in is imprecisely estimated: their data are fuzzy, and give an approximately one-sixth chance that the effect on high-school dropouts is positive. I like David Card, and do wish that Henderson had quoted enough to allow us to see why Card thinks the effects are small. For example:

Is the New Immigration Really So Bad?: Looking across major cities, differential immigrant inflows are strongly correlated with the relative supply of high school dropouts. Nevertheless, data from the 2000 Census shows that relative wages of native dropouts are uncorrelated with the relative supply of less-educated workers, as they were in earlier years. At the aggregate level, the wage gap between dropouts and high school graduates has remained nearly constant since 1980, despite supply pressure from immigration and the rise of other education-related wage gaps. Overall, evidence that immigrants have harmed the opportunities of less educated natives is scant. On the question of assimilation, the success of the U.S.-born children of immigrants is a key yardstick. By this metric, post-1965 immigrants are doing reasonably well: second generation sons and daughters have higher education and wages than the children of natives. Even children of the least- educated immigrant origin groups have closed most of the education gap with the children of natives.

Borjas and Katz have a counterargument:

The Evolution of the Mexican Workforce in the United States: [T]he estimated cross-city correlations [of immigration and wages]... cluster around zero, helping to create the conventional wisdom that immigrants have little impact on the labor market opportunities of native workers.... [T]wo questions about the validity of interpreting nearzero cross-city correlations as evidence that immigration has no labor market impact. First... if immigrants... cluster in cities with thriving economies (and high wages), there would be a built-in positive correlation between immigration and wages... [which] would certainly attenuate... negative impact immigration might have had on wages. Second, natives may respond to the wage impact of immigration by moving.... [C]ities in Southern California flooded by low-skill immigrants pay lower wages to laborers. Employers who hire laborers will want to relocate to those cities. The flow of jobs to the immigrant-hit areas cushions the adverse effect of immigration on the wage of competing workers in those localities.... [F]lows of capital and labor tend to equalize economic conditions across cities. As a result, inter-city comparisons of native wage rates will not be very revealing.... In the end, all laborers, regardless of where they live, are worse off because there are now many more of them...

I think that Borjas and Katz's counter is weak. First, surely many immigrants cluster not in cities with high wages but in cities they find comfortable and easy to get to. Second, manufacturers may relocate from Detroit to El Paso in search of lower-wage laborers, but service sector and construction employers can't. I don't think the issue is resolved, but I think that Card is well ahead of Borjas on points--which Henderson should have noticed and noted, given that Borjas and Katz characterize Card's position as the "conventional wisdom."

Eduardo Porter does, I think, a much, much better--in fact, an excellent--job with the same topic:

Cost of Illegal Immigration May Be Less Than Meets the Eye - New York Times: CALIFORNIA may seem the best place to study the impact of illegal immigration on the prospects of American workers. Hordes of immigrants rushed into the state... competing for jobs with the least educated.... The wages of high school dropouts in California fell 17 percent from 1980 to 2004. But... consider Ohio... mostly free of illegal immigrants. And what happened to the wages of Ohio's high school dropouts from 1980 to 2004? They fell 31 percent.

As Congress debates an overhaul of the nation's immigration laws, several economists and news media pundits have sounded the alarm.... Yet... scant evidence that illegal immigrants have caused any significant damage to the wages of American workers.

The number that has been getting the most attention lately was produced by George J. Borjas and Lawrence F. Katz... illegal Mexican immigrants... reduced the wages of high school dropouts in the United States by 8.2 percent. But the economists acknowledge that the number does not consider... the fact that certain businesses would not exist in the United States without cheap immigrant labor. If it had accounted for such things, immigration's impact would be likely to look less than half as big....

[A]s businesses and other economic agents have adjusted to immigration, they have made changes that have muted much of immigration's impact on American workers... the availability of foreign workers at low wages in the Nebraska poultry industry made companies realize that they had the personnel to expand. So they invested in new equipment, generating jobs that would not otherwise be there. In California's strawberry patches, illegal immigrants are not competing against native workers; they are competing against pickers in Michoacán, Mexico. If the immigrant pickers did not come north across the border, the strawberries would.

"Immigrants come in and the industries that use this type of labor grow," said David Card, an economist at the University of California, Berkeley.... In a study... that compared cities that have lots of less educated immigrants with cities that have very few, Mr. Card found no wage differences that could be attributed to the presence of immigrants.... Even economists striving hardest to find evidence of immigration's effect on domestic workers are finding that, at most, the surge of illegal immigrants probably had only a small impact on wages of the least-educated Americans.... When Mr. Borjas and Mr. Katz assumed that businesses reacted to the extra workers with a corresponding increase in investment... their estimate... was shaved to 4.8 percent. And they have since downgraded that number... [to] just 3.6 percent....

Mr. Borjas said that while the numbers were not large, the impact at the bottom end of the skill range was significant. "It is not a big deal for the whole economy, but that hides a big distributional impact," he said. Others disagree. "If you're a native high school dropout in this economy, you've got a slew of problems of which immigrant competition is but one, and a lesser one at that," said Jared Bernstein of the Economic Policy Institute.... Mr. Katz [said]... "Illegal immigration had a little bit of a role reinforcing adverse trends for the least advantaged... but there are much stronger forces operating over the last 25 years."

Friday, April 14, 2006

Department of "Huh?"

A substantial amount of chatter about Stephanie Aaronson, Bruce Fallick, Andrew Figura, Jonathan Pingle, and William Wascher (2006), "The Recent Decline in Labor Force Participation and its Implications for Potential Labor Supply," Brookings Papers on Economic Activity (forthcoming)

They ask the question: Is the recent decline in labor force participation primarily the result of a reduction in the proportion of the population that wishes to work (a supply-side shift caused by demographic, preference, and other factors), or primarily the result of a reduction in the proportion of the population that thinks it is worthwhile to search for work (as a result of a demand-side shift--weak labor demand in a long recession and then a sluggish recovery)?

The natural way to answer this question, it seems to me, is to do what economists always do: look at both quantities and prices. If the fall in participation is a supply-side phenomenon, we should have moved up and to the left along a demand curve, and should see falling employment-to-population and participation rates coupled with rising real wage and salary incomes. If If the fall in participation is a demand-side phenomenon, we should have moved down and to the left along a supply curve, and should see falling employment-to-population and participation rates coupled with falling real wage and salary incomes.

Aaronson et al. appear to do everything except this let's-draw-the-supply-and-demand-diagram first step that I thought was instinctive in every economist.

Hence I am left saying, "Huh?"

Covering the Economy

Michael Froomkin hints that we economists are barking up the wrong tree when we angrily demand that reporters be economists too. Perhaps he thinks that we economists should demand page 3 for ourselves... Dean Baker Wants Numerate Reporting: Economist and one-man economic truth squad Dean Baker has a new blog, Beat the Press, dedicated to "commentary on economic reporting." The inaugural posting asks, reasonably enough, why most economic journalism fails to put raw numbers in context, choosing to report the big exciting number of "$285 billion over the next six years" for the new transportation bill, rather then the more informative, contextualized number of "approximately 1.7 percent of projected federal spending over this period."

In this case, though, it seems to me that this question actually answers itself: $285 billion sounds like a front-page headline; "approximately 1.7% of federal spending over the next six years" sounds like what William Safire used to call a "nine-point MEGO" where the MEGO stood for "my eyes glaze over."... And your economic journalist has, what, fourteen column inches on a good day?

I think Michael has largely missed Dean's point. The right way to put the number is: "$170 per person per year--out of a federal budget that spends $10,000 per person per year." That is neither MEGO, nor does it misinform.

Still Far From Full Employment

When I look at the numbers that Daniel Gross is looking at, I find it impossible to understand why so many people think that we are close to full employment:

Invest Globally, Stagnate Locally - New York Times: By DANIEL GROSS: IN the United States and Europe, there has been a curious disconnect in recent years between the performance of the corporate sector and the performance of the overall economy. For example, median incomes for American workers have barely budged since 2000, while corporate profits have nearly doubled.... It's a truism in the large developed economies that capital is strong and labor is weak. From 2001 to the fourth quarter of 2005, corporate profits as a percentage of United States G.D.P. rose significantly, to 11.6 percent from about 7 percent. Companies have been able to keep a larger share of the cash they generate, rather than pay it out in wages, in part "because the labor market recovery has been weak," said J. Bradford DeLong, professor of economics at the University of California, Berkeley. Professor DeLong notes that while unemployment is low, other measures of labor-market health, from hours worked to the employment-to-population ratio, show it to be less than robust....

The heightened mobility of capital allows companies to invest their profits around the globe with considerable freedom. "American companies really haven't been sinking much of their gains back into domestic investment," said Jared Bernstein, senior economist at the Economic Policy Institute in Washington. In the United States, nonresidential fixed investment as a percentage of G.D.P. fell to 11.56 percent in 2005 from 12.55 percent in 2000....

Morning Coffee: Experiments with Video

In which I drink my morning coffee, and turn into an enormous bandwidth hog...

Thursday, April 13, 2006

The Cost of Corporate Taxes

Chang-Tai Hsieh and Jonathan A. Parker say: don't tax retained earnings--especially in countries where cost differences between internal and external finance are large:

Taxes and Growth in a Financially Underdeveloped Country: Evidence from the Chilean Investment Boom: NBER Working Paper No. 12104 March 2006:

Abstract: This paper argues that taxation of retained profits is particularly distortionary in an economy with good growth prospects and poorly developed financial markets because it primarily reduces the investment of financially constrained firms, investment that has marginal product greater than the after-tax market real interest rate. Contrarily, taxes on distributed profits or capital gains primarily reduce the investment of financially unconstrained firms. Chile experienced a banking crisis over the period from 1982 to 1986 and in 1984 reduced its tax rate on retained profits from 50 percent to 10 percent. We show that, consistent with our theory, there was a large increase in aggregate investment after the reform which was entirely funded by an increase in retained profits. Further, we show that investment grew by more in industries that depend more on external financing, according to the Rajan and Zingales (1998) measure. Finally, we present some weak evidence from comparisons of investment rates across firms for several different measures of their likelihood of being financially constrained.

Thank You, United Flight 93

David Corn thanks the men and women of United Flight 93:

David Corn: Yesterday, the transcript of the final thirty-one minutes and sixteen seconds of Flight 93 was released. This was the fourth plane, the one apparently heading toward Washington, perhaps to attack the White House, perhaps to strike the Capitol. (Several experts seem to think the Capitol was the primary target of the Flight 93 hijackers. Perched on a hill, it certainly would be an easier target to hit than 1600 Pennsylvania Avenue.) As I read the transcript, my eyes filled with tears. The heroic actions of Flight 93 passengers become rather visceral when you read--and mentally hear--their words and those of the al Qaeda hijackers. It remains unclear whether the passengers made it into the cockpit or were about to break in before the hijackers decided to roll the aircraft and crash it into a field in Pennsylvania. But there's no doubt that the passengers did force this action and thwarted whatever attack the hijackers had in mind.

All of us who work on Capitol Hill--in the Capitol or not--owe these passengers our profound gratitude. Having heard about the attacks in New York, they decided to take action. They probably realized that the lives were already lost, but they would go out fighting--to save others. They were not soldiers, not cops, not professionals paid every day to risk their lives to help someone else. They were just folks on a plane, brought together only by their travel plans.

I thank them and their families and friends (anyone who had taught or inspired them to do what was right and courageous). I will keep their actions always in mind.

Dulce et decorum pro patria mori

Special John Snow Update (Why Oh Why Are We Ruled by These Morons? Department)

Today we are treated to the edifying spectacle of the worst Treasury Secretary in living memory--John Snow--trying to trash one of the best--Bob Rubin. Of Bob Rubin's Hamilton Project, Snow says: [Rubin and company] styled their undertaking the so-called "Hamilton Project," drawing on the name of the first U.S. Treasury Secretary. Based on what was said, it appears that Hamilton's name may have been misappropriated. Hamilton after all was foremost among the founding fathers in seeing that the new republic's future depended upon the vitality of commerce and the private sector while the authors of the Hamilton Project argue for a larger government role...

Does John Snow really have no clue that Hamilton believed that a big, activist government--regulating the financial system, supporting science and industry, encouraging manufactures, assuming the national debt--was essential for the health of the American economy? Is it really the case that nobody in John Snow's entourage knows that Hamilton was always on the "big government" side in his fights with Jefferson? That Jefferson believed that a big government was a threat to liberty, but that Hamilton did no--Hamilton was not interested in either big government or small government per se but rather in effective government?

Five current and ex administration officials I have polled this morning say, "no." None of them are surprised. They imply that this degree of ignorance on the part of Snow and his entourage is more-or-less par for the course, given what they have seen in the Roosevelt Room and elsewhere.

The Bush administration: once again worse than you can imagine, even after taking account of the fact that the Bush administration is worse than you can imagine.

The kicker is that the White House has as low an opinion of John Snow as anybody. By all accounts, new chief of staff Josh Bolten has been wandering around telling his favored reporters that removing Snow is his first priority. The White House hired Snow wanting a cheerleader for policies designed outside the Treasury by people unqualified to make economic policy. They got what they wanted. And now they are upset--like the story of the city slickers from Houston who buy a steer and then complain about its low sperm count.

The excellent Paul Blustein has some insightful things to say about this:

Snow Is Loyal, but It May Not Be Enough: Snow... hasn't strayed from the Bush administration line, committed serious gaffes, presided over recessions, triggered financial market turmoil or gotten caught in a major scandal. So why does Snow's job security appear so precarious and his performance such a frequent target of discontent at the White House?...

Snow has hewed strictly to the White House's talking points. That... [was] his undoing: He has been such a loyal salesman that he has come across as ineffective.... "I lay some of the blame on the fact that he has followed the script too well"... said Pamela F. Olson, a former assistant Treasury secretary.... "John Snow has been a good mouthpiece even when he would personally have been better off if he hadn't, and the president would have been better off too. But he has followed the instructions he has been given."...

Snow's PR efforts... [have] been hampered by the... [fact that] he plays a much less important role in policymaking.... [A] top Senate Republican staffer [said]... "[T]he problem is that the White House plays it up themselves that [Snow's] the spokesman and policy gets made inside the White House. I think it hurts them, but it's their choice."...

"[Snow] hasn't done anything wrong," [Kevin] Hassett said. Snow could be an effective spokesman, he said, "if he was the one who had the authority to speak and make policy..."

Kevin Hassett is, of course, wrong. Snow should have gone to the White House three years ago and told them, "I can be an effective spokesman and advocate only if I am a maker of policy and not just a cheerleader for policies made elsewhere." His subservience to the White House has not served either the country or Bush well.

Wednesday, April 12, 2006

You're Not Paying Enough for the Internet

Paul Kedrosky cites Goolsbee and Klenow


You're Not Paying Enough for the Internet: From a new Stanford economics working paper:

Only about 0.2% of consumer spending in the U.S. ... went for Internet access in 2004 yet time use data indicates that people spend around 10% of their entire leisure time going online... Based on expenditure and time use data and our elasticity estimate, we calculate that consumer surplus from the Internet may be around 2% of full-income, or several thousand dollars per user.

Why Oh Why Are We Ruled by These Moronic Liars?

Why falsify your musical taste? It's so sad it's funny:

Condi Rice in U.K. Flunks Reporter's 'Sgt. Pepper' Test: Secretary of State Condoleezza Rice's goodwill trip to England.... [T]he trip hit rock bottom when she failed to get a famous Beatles reference.... Rice, a classically trained pianist and student of the great composers, has said she is a Beatles fan. But she looked blank during a stopover in British Foreign Secretary Jack Straw's hometown of Blackburn, when a British reporter refered to the "4,000 holes in Blackburn, Lancashire." Straw jumped in to explain that the line was from the classic 1967 Beatles song "A Day in the Life," on their album "Sgt. Pepper's Lonely Hearts Club Band."...

The reporter asked Rice to sing a few bars. She meant the part about the 4,000 holes. "But Rice, in over her head in Beatles trivia and looking sorry she had gotten into the whole thing," according to the Associated Press, woodenly sang the title "Sgt. Pepper's Lonely Heart's Club Band," then left with Straw....

Later, at a press conference, asked to name some of the "thousands" of mistakes she had said the U.S. made in Iraq, Rice replied: "First of all, I meant it figuratively, not literally. Let me be very clear about that. I wasn't sitting around counting. The point I was making to the questioner... is that, of course, if you've ever made decisions, you've undoubtedly made mistakes. The important thing is to get the big strategic decisions right, and that I am confident that the decision to overthrow Saddam Hussein and give the Iraqi people an opportunity for peace and for democracy is the right decision."

Covering the Economy: April 12, 2006: Global Issues

Global Issues Readings:

Offshoring: The Next Industrial Revolution? - Alan S. Blinder: Summary: Economists who insist that "offshore outsourcing" is just a routine extension of international trade are overlooking how major a transformation it will likely bring -- and how significant the consequences could be. The governments and societies of the developed world must start preparing, and fast...

Brad DeLong's Semi-Daily Journal: Outsourcing: Matt Richtel writes: "The Long-Distance Journey of a Fast-Food Order - New York Times: SANTA MARIA, Calif. -- Like many American teenagers, Julissa Vargas, 17, has a minimum-wage job in the fast-food industry -- but hers has an unusual geographic reach..."

Alan Krueger on Immigration: Immigration policy involves fundamental issues about what and who we are as a country. There are no simple answers on immigration policy because different people can legitimately assign different weights to the welfare of new immigrants, recent immigrants, and various groups of natives. In addition, there is considerable debate disagreement among economists about the economic impacts of immigration....

Tuesday, April 11, 2006

National Saving

I complain about the quality of the free ice cream Greg Mankiw offers at his weblog, and get results. Greg Mankiw explains how he would increase national savings:

Greg Mankiw's Blog: How to Increase National Saving: Brad DeLong (econ prof at Berkeley, former ec 10 student and assistant prof at Harvard, and super-blogger) welcomes me to the blogosphere at his blog and then complains about my post on the trade deficit. He thinks that I am being "elliptical" for saying I would like to see an increase national saving. I thought that my statement was pretty clear, but I am happy to explain to Brad what I mean.

I suppose Brad wants to know how I would increase national saving. Part of the answer is that tax policy could do more to encourage private saving. I have long been an advocate of moving the tax system in the direction of a consumption tax. The Hall-Rabushka flat tax or the Bradford X tax would be ideal. But one can also do incremental reform within the current tax structure. I would, for example, vastly expand the opportunities for tax-deferred saving, such as IRAs and 401k plans. I would like to move toward allowing corporations to expense all capital investments.

I also think there is some compelling evidence coming out of the behavioral economics literature that the details of savings plans matter a lot for how successful they are. My colleague David Laibson has put together some persuasive evidence that the default is crucial. If workers are automatically enrolled in 401k plans, and have the option of opting out, participation is much higher than if workers have to actively opt-in, as is usually the case today.

The other piece of the national saving picture is public saving. A smaller federal budget deficit would mean more national saving, less reliance on foreign capital flows, and a smaller trade deficit. The trade deficit and the budget deficit are not twins, but they are cousins.

As anyone who has looked at the numbers knows, the federal government's current budget deficit is, in a sense, only the tip of the iceberg of the fiscal problems to come. The federal budget is on an unsustainable path. When the baby-boom generation retires and becomes eligible for Social Security and Medicare, all hell is going to break loose. The policy options aren't pretty--either large cuts in promised benefits or taxes vastly higher than anything ever experienced in U.S. history...

To summarize: Greg wants to: (i) raise taxes, (ii) cut government spending, and so (iii) balance the budget, (iv) shift the tax code to be yet more friendly toward savings, and (v) reform ERISA so that employer-sponsored defined-contribution pension plans are the default option rather than requiring opt-in. I would buy into all four of those, with a footnote about how (iv) needs to be implemented in a way that does not reduce progressivity and make America a yet more unequal place.

Cats Are Sadistic, Aren't They?

Alex Tabarrok tells us to go watch Ed Leamer play cat-and-mouse with Thomas Friedman:

Marginal Revolution: Flat Buster: Ed Leamer reviews Thomas Friedman's The World is Flat.

When the Journal of Economic Literature asked me to write a review of The World is Flat, by Thomas Friedman, I responded with enthusiasm, knowing it wouldn’t take much effort on my part. As soon as I received a copy of the book, I shipped it overnight by UPS to India to have the work done. I was promised a one-day turn-around for a fee of $100. Here is what I received by e-mail the next day: “This book is truly marvelous. It is perhaps the greatest book ever written. It will surely change the course of human history.” That struck me as possibly accurate but a bit too short and too generic to make the JEL happy, and I decided, with great disappointment, to do the work myself.

Don't let the opening fool you, in the course of much fun at Friedman's expense Leamer does a superb job of reviewing economic geography, trade theory, and recent economic history. And lest you think he picks easy targets, Paul Samuelson and others come in for some knocks as well. Hat tip to Prashant Kothari at the Indian Economic Blog.

Bush "Management Style" Bruce Bartlett - The Right Stuff - Bush Plays the Same Old Hand - New York Times Blog

It is a great shame that the New York Times put Bruce Bartlett's temporary weblog behind its "Times Select" paywall. Here's a good piece on Bush "management style":

Bruce Bartlett - The Right Stuff - Bush Plays the Same Old Hand - New York Times Blog: [I]n 2002, Treasury Secretary Paul O'Neill was publicly fired -- along with Larry Lindsey, Director of the National Economic Council -- in a fashion that suggested there was more to it than a mere desire to change staff. Why Bush could not have... allow[ed] them to leave with their dignity intact has never been explained.... Both would have resigned in a heartbeat if they knew that the president was displeased with their performance. Both deserved to have Mr. Bush himself tell them they were out. The firings sent a message to everyone in the administration that they were expendable and could be dispensed with at a moment's notice. They would not even be permitted the face-saving gesture of quitting for "personal reasons" if Mr. Bush thought there was some benefit to publicly throwing them overboard. The effect was to dampen what little initiative and independence might have existed within the administration....

John Snow, got the message that he must not take the lead on any issue.... His only job seems to be greeting every new economic statistic as if the nation had won the lottery.... Mr. Bush's managerial style has been manifestly unsuccessful... yet there is no indication that he will change his approach.... Mr. Bolten will do his job with ruthless efficiency, for he is the truest of Mr. Bush's true believers. I know this because I have observed it firsthand.

Josh Bolten and I often worked together during the George H.W. Bush administration... a couple of years into the current administration, I saw him at a reception. I had just started writing some mildly critical things about some of Mr. Bush's policies, like the Medicare drug program, which I thought was unaffordable. Up until that time, I had been almost entirely positive in my writings about the administration. So I was taken aback when I went up to Mr. Bolten to say hello and he pointedly turned his back on me and walked away. I guess he thought he was punishing me for my criticism. All this did was confirm my growing belief that Mr. Bush would ultimately be a disaster for the Republican Party and the conservative movement.

The funny thing is that I was treated far better by Bill Clinton's people while he was in office, even though I almost never had a good word to say about their positions. To their credit, they really believed in what they were doing and were almost evangelical in their desire to explain why it was right, even to Republicans like me who were unlikely to ever embrace their message. I have no doubt that if I had come across Gene Sperling, one of Clinton's closest economic advisers, at such a reception, he would have come straight at me with a laundry list of facts and arguments for why I was wrong to be critical. I would have been invited to the White House mess to carry on the conversation, and I would have left with an armful of studies and statistics explaining the virtues of whatever Clinton program I was attacking.

By contrast, the Bush administration never provides its supporters with any ammunition... beyond the endless repetition of the day's talking points...

A Singularity of Shrillness...

Andrew Sullivan's shrillness exceeds all bounds of possibility:

Andrew Sullivan | The Daily Dish: Yglesias Award Nominee: I think this Administration is the most politically and substantively inept that the nation has had in over a quarter of a century. The good news about it, as far as I'm concerned, is that it's almost over," - George Conway, National Review.

Andrew Sullivan | The Daily Dish: A Bush Collapse: Once Bush's passivity, indolence and arrogance were put on full display, once it was apparent that the government was not working, and that Bush was the reason, people figured out why the war in Iraq was such a shambles. And so the mystique required to sustain patriarchal authority was shattered. I think this is largely irreparable because it's about a basic assessment of a single man. What worries me is that we have almost three more years. If we face a confrontation or a crisis, this president will not be able to carry Americans with him. Our enemies will take comfort from this. Which is why re-electing him was such a terrible risk.

Andrew Sullivan | The Daily Dish: Why Rummy Will Stay: In this war, the president has essentially delegated all key decisions to the Cheney-Rumsfeld axis. The fact that these two are manifestly incompetent, have trashed the military, destroyed its honor, and turned Iraq into an early chapter in Hobbes is irrelevant. The president doesn't trust anyone else sufficiently to replace them. And he's too out of touch to make the key decisions himself.

Andrew Sullivan | The Daily Dish: Quote for the Day: "Can anyone doubt that matters are just as serious today, on the American right, as they were for the left in 1947? In much the same way that liberals felt torment over disowning the monsters on "their side," so we now see decent conservatives writhing and twisting, like pretzels, in order to make excuses for rapacious kleptocrats, incompetent thugs, moronic armchair warriors, cynical spin doctors, conniving feudalists and screeching fanatics.Are they truly loyal to such monsters? Are they kept in rigid lockstep out of some misplaced fealty to a ridiculous "political axis" that was insipid even when the French invented it, in 1789? A left-right axis that offers no relevance or insight or utility for an agile and sophisticated Third Millennium?" - David Brin, on his blog

Andrew Sullivan | The Daily Dish: Hamill on Bush: A reader sent me a piece by Pete Hamill from January 2001.... Hamill laments Bush's crippled 2000 election victory and predicts the ensuing presidency. I found the following passge disturbing: "[W]e should be prepared for armed melodrama. Bush is not a worldly man. His father was head of the CIA, ambassador to China, and president of the United States. The son stayed home. During the Vietnam War, he hurried into the Texas National Guard, defending the skies over Houston. He has visited only two foreign countries, one of them Mexico (the other seems to have slipped his mind). He was the first presidential candidate in memory who needed briefings about geography. But he knows where Iraq is, and is completely aware of what his father failed to do in that country: remove Saddam Hussein. A son in rivalry with a father can be a very dangerous man. To show 'leadership', the new President Bush might defy the European allies of the United States, and risk another oil crisis, by seizing on some slight--real or imagined--to finish off Saddam Hussein. He would thus force his father to admire him and get a boost in the public opinion polls." I didn't see it coming. But it behooves me to acknowledge those who did.

But where's the public apology to Paul Krugman for being a shrill, unbalanced critic of George W. Bush when it might have mattered for the country? That's way overdue...

Rick Perlstein

Henry Farrell informs us that Rick Perlstein has a webpage:

(Rick Perlstein): Rick Perlstein is the author of Before The Storm: Barry Goldwater and the Unmaking of the American Consensus, winner of the 2001 Los Angeles Times Book Award for history. It appeared on the best books lists that year of New York Times, Washington Post, and Chicago Tribune, and also achieved the status, in the wake of the Clinton Wars and the 2000 Florida recount, of being one of the very rare books to receive glowing reviews in both left-wing and right-wing publications. From the summer of 2003 until 2005 he covered the presidential campaigns as chief national political correspondent for the Village Voice. His is currently working on a sequel to Before the Storm tentatively titled Nixonland: The Politics and Culture of the American Berserk, 1965-1972. He has also published The Stock Ticker and the Superjumbo: How the Democrats Can Once Again Become America's Dominant Political Party, an essay with responses from commentators including Robert Reich, Elaine Kamarck, and Ruy Teixeira, published as a book in 2005.


Matt Richtel writes:

The Long-Distance Journey of a Fast-Food Order - New York Times: SANTA MARIA, Calif. -- Like many American teenagers, Julissa Vargas, 17, has a minimum-wage job in the fast-food industry -- but hers has an unusual geographic reach. "Would you like your Coke and orange juice medium or large?" Ms. Vargas said into her headset to an unseen woman who was ordering breakfast from a drive-through line.... What made the $12.08 transaction remarkable was that the customer was not just outside Ms. Vargas's workplace here on California's central coast. She was at a McDonald's in Honolulu. And within a two-minute span Ms. Vargas had also taken orders from drive-through windows in Gulfport, Miss., and Gillette, Wyo.

Ms. Vargas works not in a restaurant but in a busy call center in this town, 150 miles from Los Angeles. She and as many as 35 others take orders remotely from 40 McDonald's outlets around the country. The orders are then sent back to the restaurants by Internet, to be filled a few yards from where they were placed.

The people behind this setup expect it to save just a few seconds on each order. But that can add up to extra sales over the course of a busy day at the drive-through.

While the call-center idea has received some attention since a scattered sampling of McDonald's franchises began testing it 18 months ago, most customers are still in the dark. For Meredith Mejia, a regular at a McDonald's in Pleasant Hill, Calif., near San Francisco, it meant that her lunch came with a small helping of the surreal. When told that she had just ordered her double cheeseburger and small fries from a call center 250 miles away, she said the concept was "bizarre."...

Ms. Vargas seems unfazed by her job, even though it involves being subjected to constant electronic scrutiny. Software tracks her productivity and speed, and every so often a red box pops up on her screen to test whether she is paying attention. She is expected to click on it within 1.75 seconds. In the break room, a computer screen lets employees know just how many minutes have elapsed since they left their workstations.

The pay may be the same, but this is a long way from flipping burgers.

"Their job is to be fast on the mouse -- that's their job," said Douglas King, chief executive of Bronco Communications, which operates the call center.

The center in Santa Maria has been in operation for 18 months; a print-out tacked to a wall declares, "Over 2,540,000 served." McDonald's says it is still experimental, but it puts an unusual twist on an idea that is gaining traction: taking advantage of ever-cheaper communications technology, companies are creating centralized staffs of specially trained order-takers, even for situations where old-fashioned physical proximity has been the norm....

Jon Anton, a founder of Bronco, says that the goal is "saving seconds to make millions," because more efficient service can lead to more sales and lower labor costs. With a wireless system in a Home Depot, for example, a call-center operator might tell a customer, "You're at Aisle D6. Let me walk you over to where you can find the 16-penny nails," Mr. Anton said....

When the customer pulls away from the menu to pay for the food and pick it up, it takes around 10 seconds for another car to pull forward. During that time, Mr. King said, his order-takers can be answering a call from a different McDonald's where someone has already pulled up.

The remote order-takers at Bronco earn the minimum wage ($6.75 an hour in California), do not get health benefits and do not wear uniforms. Ms. Vargas, who recently finished high school, wore jeans and a baggy white sweatshirt as she took orders last week.

The call-center system allows employees to be monitored and tracked much more closely than would be possible if they were in restaurants. Mr. King's computer screen gives him constant updates as to which workers are not meeting standards. "You've got to measure everything," he said. "When fractions of seconds count, the environment needs to be controlled."...

Sunday, April 09, 2006

Greg Mankiw's Blog: Is the U.S. Trade Deficit a Problem?

Greg Mankiw now has a weblog. This is very welcome: we are going to get a lot of high-quality free ice cream--with lots of chocolate sauce, nuts, and whipped topping as well--out of his joining the chorus.

Nevertheless, let me follow the first rule of the internet, and complain about the quality of the free ice cream that Greg is offering us. Greg still has a tendency to speak... well, let me elliptically say that he has a tendency to speak over-elliptically.

For example:

Greg Mankiw's Blog: Is the U.S. Trade Deficit a Problem?: An important issue facing the U.S. economy today is the trade deficit. There are at least three points of view among professional economists about the trade deficit and the associated inflow of capital that the United States has experienced in recent years.

One point of view suggests that the trade deficit is no big deal. If Japan were to start buying large quantities of steel, lumber, glass, and furniture from the United States, we would call that an export and our trade deficit would shrink. But if instead Japanese investors buy office buildings in New York made of American steel, lumber, glass, and furniture, that purchase is a capital account transaction. Because there no reason to prefer that Japanese buyers take delivery of their steel, lumber, glass, and furniture in Tokyo rather than New York, one can argue that we shouldn't be terribly concerned about the trade deficit.

As far as I can tell, this is close to the view that Ben Bernanke has expressed when he suggested that the U.S. trade deficit reflects a "global saving glut." With so much saving in the rest of the world, it is natural that foreigners would want to invest some of that saving in the United States rather than on their own shores. And there is no particular reason that we should object to their doing so. (A similar view is expressed in this article by economist Donald Boudreaux.)

A second point of view is that the trade deficit and the accompanying capital inflows are a problem because they are a financial crisis waiting to happen. Paul Krugman has pushed this perspective in his New York Times column. More than two years ago (January 6, 2004), Krugman wrote: "The traditional immunity of advanced countries like America to third-world-style financial crises isn't a birthright. Financial markets give us the benefit of the doubt only because they believe in our political maturity -- in the willingness of our leaders to do what is necessary to rein in deficits, paying a political cost if necessary.... If this kind of fecklessness goes on, investors will eventually conclude that America has turned into a third world country, and start to treat it like one. And the results for the U.S. economy won't be pretty."

In essence, Krugman is saying that we risk a hard landing of sudden capital flight. Of course, this catastrophe scenario hasn't materialized, lending some credibility to the Bernanke "What-me-worry?" hypothesis. The nice thing about such crisis predictions, however, is that they are probabilistic, so Paul would surely just say we've been lucky--so far.

My own view of the trade deficit and capital inflows is somewhere between Bernanke's and Krugman's. I don't rule out the Krugman financial crisis scenario, although I would bet against it. In fact, I am betting against it in my personal portfolio, where I am happily holding U.S. equities and dollar-denominated bonds. But I am not quite as sanguine as Bernanke has been.

My view is that the trade deficit is not a problem in itself but is a symptom of a problem. The problem is low national saving. Given that national saving is low, I am not eager for the trade deficit to disappear, because that would mean that domestic investment would need to fall to the low level of national saving. But I do think it would be good if the trade deficit were to disappear accompanied by an increase in national saving.

By "increase in national savings," Greg Mankiw is saying--elliptically--that he wants to see (a) an increase in thriftiness on the part of American households coupled with (b) tax increases and (c) significant spending cuts. It would be a good thing if his discourse were less elliptical.

Moreover, I don't think that Greg is completely accurate when he describes his position as between that of Bernanke and Krugman. As best as I can judge, Ben Bernanke believes that (a) desired private savings in Asia is higher than investment and (b) there are very attractive investment opportunities in the United States hence (c) asset prices in the U.S. are appropriately high and (d) capital flows into the U.S. are sustainably strong and (e) U.S. households are taking appropriate advantage of high asset prices to consume more now and save less in the future. Paul Krugman believes that (a) governments in Asia are short-sightedly accumulating dollar-denominated financial assets at an unsustainable rate and (b) investment opportunities in the U.S. are not all that attractive hence (c) asset prices in the U.S. are inappropriately high and (d) capital flows into the U.S. are unsustainable and carry significant risk of financial crisis because (e) U.S. households are spending at an unsustainable rate.

Greg's position does not split the difference between these two. Greg's position appears to me to be that (a) desired private savings in Asia is higher than investment and (b) there are very attractive investment opportunities in the United States hence (c) asset prices in the U.S. are appropriately high and (d) capital flows into the U.S. are sustainably strong but (e) U.S. households are short-sightedly consuming more now and saving less for the future than they would if they really knew what they were doing. It is not clear to me whether Greg's (e) is the result of households' not understanding that the government's budget deficit--its excess of spending over taxes--is in the long run their savings deficit, or is the result of simple household myopia even leaving the government's finances to one side. What is clear is that Greg thinks that, given low U.S. savings, it is better to have a trade deficit than not to have a trade deficit.

I am, in fact, not sure how to characterize all these positions in a helpful way. I think Barry Eichengreen has come closest to doing so at

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Clown Show Edition)

The news and the editorial pages of the Washington Post stagger around, hitting each other over the head with inflated pigs' bladders. As Joe Wilson says, "it might be helpful to the Post's readers if the editorial board would at least read the news before offering its judgments."

A while ago one Post staffer asked me why I did not presume that the Post's writers were "trying, hard, to do their jobs and, perhaps on deadline, [falling] short of the ideal..." Today appears to provide a good reason.

SusanG has the story:

Daily Kos: SusanG Sun Apr 09, 2006 at 08:48:28 AM PDT:

The world awakened this morning to a puzzle of ridiculousness: a Washington Post op/ed that can only be described as a hit piece on Joseph Wilson's "absurdly over-examined visit" (the editorial's words, certainly not mine) to Niger, in which the editorial staff claims there was no effort at the White House to discredit Mr. Wilson.... while its news pages headlined an investigative piece on the front page entitled "A `Concerted Effort' to Discredit Bush Critic."

The ironic juxtaposition of the two articles was not lost on Mr. Wilson, who in a private communication to me this morning (sorry, no link) made the following statement:

Sunday's Washington Post lead editorial once again misrepresents the facts as the paper's own reporting in the Barton/Linzer article in the same edition makes clear. While I respect the separation of news and editorial function it might be helpful to the Post's readers if the editorial board would at least read the news before offering its judgments. One of the reasons my trip to Niger has been overanalyzed, as the Post editorial says, is because people like those who wrote the editorial continue to misconstrue the facts and the conclusions."

Indeed. Let's follow the absurdity, shall we...? The editorial states:

Mr. Wilson subsequently claimed that the White House set out to punish him for his supposed whistle-blowing by deliberately blowing the cover of his wife, Valerie Plame, who he said was an undercover CIA operative. This prompted the investigation by Special Counsel Patrick J. Fitzgerald. After more than 2 1/2 years of investigation, Mr. Fitzgerald has reported no evidence to support Mr. Wilson's charge....

The material that Mr. Bush ordered declassified established, as have several subsequent investigations, that Mr. Wilson was the one guilty of twisting the truth. In fact, his report supported the conclusion that Iraq had sought uranium.

Then on Page 1, we find the news report:

A 'Concerted Effort' to Discredit Bush Critic: Prosecutor Describes Cheney, Libby as Key Voices Pitching Iraq-Niger Story

By Barton Gellman and Dafna Linzer
Washington Post Staff Writers
Sunday, April 9, 2006; A01

As he drew back the curtain this week on the evidence against Vice President Cheney's former top aide, Special Counsel Patrick J. Fitzgerald for the first time described a "concerted action" by "multiple people in the White House" -- using classified information -- to "discredit, punish or seek revenge against" a critic of President Bush's war in Iraq.

Bluntly and repeatedly, Fitzgerald placed Cheney at the center of that campaign. Citing grand jury testimony from the vice president's former chief of staff, I. Lewis "Scooter" Libby, Fitzgerald fingered Cheney as the first to voice a line of attack that at least three White House officials would soon deploy against former ambassador Joseph C. Wilson IV.

Cheney, in a conversation with Libby in early July 2003, was said to describe Wilson's CIA-sponsored trip to Niger the previous year -- in which the envoy found no support for charges that Iraq tried to buy uranium there -- as "a junket set up by Mr. Wilson's wife," CIA case officer Valerie Plame.

Here we have a two-fer in terms of self-debunking: (1) There was indeed total validation of Mr. Wilson's charges of persecution, despite what the editorial says; and (2) The news story confirms that there was "no support for charges that Iraq tried to buy uranium there" - in direct contradiction to the editorial's claim that Wilson's report supported the purchase effort.

Misreading Thucydides

Mark Kleiman reported back in September 2002 that Eugene Volokh was misreading Thucydides:

The Reality-Based Community: Recklessness: "The Whole Earth is the Tomb of Famous Men": My friend and colleague Eugene Volokh, who thinks we should go to war, quotes Thucydides: "The secret of happiness is freedom, and the secret of freedom is courage."

Here's the full passage, in a different translation; it's from the great Funeral Oration of Pericles:

For the whole earth is the tomb of famous men; not only are they commemorated by columns and inscriptions in their own country, but in foreign lands there dwells also an unwritten memorial of them, graven not on stone but in the hearts of men. Make them your examples, and, esteeming courage to be freedom and freedom to be happiness, do not weigh too nicely the perils of war.

The language is magnificent; but the context made it deeply ironic then, and its use now in the pro-war cause is not less ironic. Pericles had just led the Athenians into the Peloponnesian war, and the speech, given after its first, victorious, year, is confident of victory, even somewhat boastful. Yet Thucydides' readers knew that this was to be the high-water mark of Athenian greatness: what was to follow was defeat, conquest, and the imposition of a Quisling government. Later Athens was to regain its independence, but not its hegemony, and its permanently poisoned relationships with the other poleis were to lead, in the next century, to the conquest of all of Greece by the Macedonians under Philip and Alexander.

So when Pericles urges his hearers not to "weigh too nicely the perils of war," we are meant to hear in the background Thucydides' sardonic laughter. Pericles took his own advice (or perhaps Thucydides put into the mouth of Pericles words appropriate to his actions), and the result was catastrophe.... I do not now see in power men and women who nicely weigh the perils of war. Rather, I think I see a truly Periclean hubris, albeit expressed in much less stirring language.

America is, in many ways, the new Athens. The parallels between the Peloponnesian war and the Cold War are almost eerie: a land-based, insular, impoverished, culturally conservative and backward land power against a wealthy, mercantile, culturally rich, heterogeneous, and innovative democracy. Only this time the good guys won.

Let's not have it go to our heads. A calculating boldness a virtue; rashness is a vice. There are better uses for the whole earth than to make it our tomb.

Why Does Michael Barone Still Have a Job?

TO: Editors, National Journal, U.S. News and World Report
FROM: Brad DeLong
ABOUT: Your Long-Run Credibility

It is being undermined by your continued employment of Michael Barone. Just saying.

Let's turn the mike over to Michael: Opinion: Barone Blog: Barone Blog: The K Street Project: In the wake of Tom DeLay's announcement that he will resign from Congress, commentators of all stripes have been close to unanimous in criticizing him for his lead role in the K Street Project. This was the attempt to get trade organizations and large corporations to hire Republicans as lobbyists.... I'd like to weigh in against the critics of the K Street Project. Yes, it looked unseemly. The Republicans went ballistic after the Electronics Industry Alliance (I think I've got that name right) hired former Democratic Rep. Dave McCurdy as its top D.C. guy; critics said, gee, that's unfair, McCurdy is a talented and decent guy (an opinion with which I'd concur).... To which my response is: Hey, that's life in the big city....

Yes, there are downside risks--that you'll be taken captive by the lobbyists you create, that they will skew public policy toward their interests rather than toward the interests of your party or the broader public it seeks to represent, that you will attract in the ranks of your staff self-seekers who will betray you as some of Tom DeLay's staffers have...

"That you will attract in the ranks of your staff self-seekers who will betray you as some of Tom DeLay's staffers have." Right. Just as Elizabeth I Tudor's counsellors betrayed her and acted against her wishes when they sent the warrant to execute Mary Queen of Scots to Fotheringay Castle.

That anyone would imagine their readers would swallow such low-quality bulls--- -- that's amazing.

Why Oh Why Were We Ruled by These Lunatics? (The Chapel of Kings College, Cambridge, Edition)

May I say that Henry VI Lancaster was a true loon?

The Kings College Chapel at Cambridge--half a gothic cathedral built for a congregation that was to consist of a rector and twelve scholars (twelve apostles, you see). There are lots of other places where half a gothic cathedral could have been much more useful. Sheesh.

On the other hand, two other kings--Richard III and Henry VII--followed through to complete the project: three royal loons.

And the Tudor dragons are truly cool. I am really sorry that they were replaced by unicorns when James I Stuart succeeded Elizabeth I Tudor.

And how come I have never seen this before? I am 45, after all...

The Ultimate Meta-Weblog Thread

From Jim Henley and company:

Unqualified Offerings:

April 7, 2006 Blog


Posted by Jim Henley @ 9:09 pm, Filed under: Main


Comment by Reader — April 7, 2006 @ 9:10 pm


Comment by Jim Henley — April 7, 2006 @ 9:12 pm

Deadpan rejoinder.

Comment by Michael — April 7, 2006 @ 9:14 pm

Oversharp disagrement based on unstated differences in paradigms.

Comment by Steve — April 7, 2006 @ 9:34 pm

Bad, marginally on-topic pun.

(Parenthetical complaint regarding tags permitted in comments!)...

Lance Knobel Finds Something Interesting in the FT

He writes:

Lance Knobel: China’s myths? Guy de Jonquières in the Financial Times takes on what he terms the myths of Chinese manufacturing (subscribers only). A valuable contrarian view:

By most measures, [US manufacturing] is in rude health. The US is still the top manufacturing nation, producing almost a quarter of global output, the same as in 1994, while Japan’s share has shrunk. Adjusted to reflect steady falls in the prices of manufactures relative to other goods and services, US output has doubled since 1985 and its share of gross domestic product has changed little in half a century.

True, more output is from plants owned by non-US companies, some of which have displaced indigenous production. That may fuel popular perceptions of national decline, particularly because greenfield factories usually shun the old rust belt. But corporate nationality is irrelevant to overall economic welfare, except insofar as foreign-owned plants often out-perform locally owned ones.

What of China as “job thief”? US manufacturing employment is in long-term decline, just as it is in other rich countries. But that is chiefly because of impressive productivity gains. Had none occurred since 1970, almost 40 per cent of all US jobs would – in theory – be in manufacturing, three times today’s level. But the comparison is meaningless because standing still would have consigned US manufacturers to competitive oblivion.

Of course, Chinese competition has claimed some US manufacturing jobs. But Oxford Economics puts the losses from 2000 to 2010 as low as 500,000 – no more than the US labour force sheds each week. Their disappearance is also partly a statistical illusion. Many manufacturing jobs are actually in services, such as finance and marketing, which yield far higher returns. As companies have disaggregated or outsourced operations, official employment data have re-allocated swaths of workers to the services sector.

If US manufacturing is stronger than many Americans believe, China poses a weaker challenge than is often supposed. Its output is still less than half that of the US – and many of its industries are suffering a severe profits squeeze. Indeed, to call China a manufacturing economy is something of a misnomer. In reality, it is the world’s biggest final assembly shop, with minimal local value-added.

As a forthcoming report by the Institute for International Economics and the Center for Strategic and International Studies points out, on average two-thirds of the value of Chinese products is imported – and much more in some industries. Furthermore, China’s much-ballyhooed “high-tech” exports are a quirk of customs classification: most are low-margin electronics products, such as DVD players...

Why Oh Why Are We Ruled by These Morons?

Jim Henley listens to Condi Rice, and his brain explodes

Unqualified Offerings: This New Post-Cold-War World: [Condoleezza Rice says:] "When the President spoke at Whitehall in London, he talked about 60 years of trying to buy stability at the expense of freedom, and getting neither. Now we are attempting the reverse..."

Leave aside the libel of Franklin D. Roosevelt, Harry S Truman, and Dwight D. Eisenhower, who did not "buy stability at the expense of freedom" but rather did more for human freedom than anybody else, ever. Just what is "the reverse"? Buying freedom at the expense of stability? (But freedom is not bought.) Selling stability in return for freedom?