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Wednesday, June 01, 2005

Krugman-Okrent smack down! Who's Right?? A Dozen Krugmanisms ... You Decide!

The NY Times public editor in his recent public good-bye to the job made 13-brief points, one of which was a well- earned shot at the foibles of various op-ed writers (how did Bob ever escape?), part of which was the now infamous:
Op-Ed columnist Paul Krugman has the disturbing habit of shaping, slicing and selectively citing numbers in a fashion that pleases his acolytes but leaves him open to substantive assaults.
In response to which, Krugman -- surely the most thin-skinned as well as most partisan of pundits I have ever seen -- and the acolytes howl in protest: Examples! Examples! You have a duty to fill the column with a list of examples when you make such a low claim, or you are a pseudo-journalistic cur!

Personally, this seems to me a bit like outrage erupting over a statement that the Pope has a penchant for speaking Latin or German, followed by a righteous demand for a list of proofs ... but here we are.

Is Okrent right? Does the evidence support his statement??

Being an ever helpful sort of guy, I've quickly put together a quick package of a dozen "Krugmanisms" noted now and then over time -- far from exhaustive to be sure, but a sampling -- to let you, the reader, decide for yourself.

And just to show I'm not biased, I'll even suggest defenses for each that the acolytes can raise to beat back the charge of statistical manipulation.

Here goes...

Remember, the issue is not whether Krugman is actually wrong on any particular point ... but just whether he sometimes presents things in a manner that invites "substantive assaults".

OK. Krugman writes on....

1) A permanent capital gain tax cut: "Its most obvious effect would be to encourage people to sell stocks, driving markets down even further."

Suggested defense: There's no "selective citing of numbers" here, only the visible results of his education on display. At MIT they teach that increasing the after-tax return from an asset reduces demand for it, thus reducing its price. And that stock owners seek capital gain tax cuts to reduce the value of the stocks they own.

2) Internet sales taxes: Krugman lectures us that the Internet Tax Freedom Act (ITFA) of 1998 repealed sales taxes on Internet retailers such as Amazon.com, while leaving such taxes in place on store-based retail sales. And since this unequal treatment obviously is both unjust and economically inefficient, John McCain is either "confused" or "pandering" in sponsoring such right-wing Republican legislation.

Reality: The ITFA had nothing at all to do with sales taxes -- zip, nada, nil -- leaving Amazon's sales tax bill reduced by exactly $0.00 to this day. And it was so right-wing that it passed the Senate by a vote of 96-2 ... indicating it had the support of a whole lot of confused, pandering Democrats.

Defense: But again, there is no misrepresentation of numbers here at all! This is just a simple example of one having no idea of what one is talking about, supplemented by gratuitous name calling.

3) Alan Greenspan on Social Security: His testimony as reported by Krugman...

"On Wednesday Mr. Greenspan endorsed Social Security privatization ... he offered no justification at all ... Mr. Greenspan offered no excuse for supporting privatization"

And as reported by MSNBC...
"The normally placid Greenspan rose almost to the threshold of passion as he made a class-based argument by contending that private accounts would allow low-income people to become mini-capitalists in his view, a very good thing.

"'When you have assets which you own, which you can bequeath to your children, (assets) which have your name on them, I think it is highly desirable thing, because you give wealth to people in lower-and middle-income groups who have not had it before'..."

[This before AG goes onto his support of private accounts to increase national savings, secure promised benefits,
more.]
Defense: Yet again, this misrepresented no numbers at all! This was just a plain old-fashioned ... *cough*, ahem.

4) National fiscal solvency and Medicare: "The Bush tax cuts, not the retirement programs, are the main reason why our fiscal future suddenly looks so bleak .... the revenue that will be lost because of the Bush tax cuts ... would have been more than enough to 'top up' Social Security and Medicare, allowing them to operate without benefit cuts for the next 75 years."

Reality via GAO (.pdf): On year 2000, pre-Bush law, deficit projections reach 20% of GDP annually by around 2045 due to the Social Security and Medicare funding shortfalls -- which is where GAO cut its 75-year projection short because government then would be unsustainable. [Chart right]

Defense*: Um... Krugman was talking only of the trust fund portion of Medicare that is funded with payroll tax, part A .... No, he didn't say that ... but it should have been obvious to the average NY Times reader from the term "top off" ... And from the fact that after topping off part A's payroll tax funding with general revenue, then leaving part B's general revenue funding short by a 14-digit figure to cause the collapse of the entire government in 45 years is ... um ... entirely consistent with operating Medicare "without benefit cuts for the next 75 years".

But hey, you don't consider citing only numbers for part A, while ignoring both the 14-digit deficit for Part B and its effect on collapsing the government, without saying that you are doing so, to be "selective citing of numbers", do you? Aw, c'mon! [*Defense actually given in Andrew Samwick's comments.]

Krugman's own defense: Those who pointed out this discrepancy question my integrity and thus "owe me an abject apology".

6) The Nixon era of political good feeling: "Is this the same country that we had in 1970? I think we have a much more polarized political system, a much more polarized social climate ...we're probably not the country of Richard Nixon ..."

Yes, today there is no Spiro Agnew smoothing troubles waters, no SDS and Weather underground blowing up buildings as domestic terrorists, no regular summer race riots in the cities, no National Guardsmen shooting students dead on campus ...

Defense: Ha! Not only are there no numbers in that, it wasn't even in the Times! C'mon, how about some shaped and sliced numbers?

[You're right, sorry! We want shaped-and-sliced selective presentations of numbers, hmmm ... let's stay recent...]

7) Future likely stock and bond returns: the Dowding of Jeremy Siegel.

8) Employment market performance. Over and over, we get numbers from low points shortly after the recent recession trough compared to the historic high peak of the prior cycle, when employment was 2 million over trend. Regarding which there is interesting discussion here, scroll down through it.

9) Stagflation 2005: A three'fer! We get ...

(1) stagflation redefined to be 'whiffing about' with above-average growth and below-average inflation (!... Winston Smith, call your office)

(2) the ol' standard of comparing the employment market just after a trough to at the height of a boom ("Private-sector employment is still lower than it was before the 2001 recession" ... yup, still below the high of the last 30 years), and

(3) while Krugman claims today's numbers are worse than those of "the 1990s", when they are compared to those at the same time in the prior business cycle they in fact are nearly identical (or a little better today) -- and those were heading into an historic economic boom. But no mention of that.

My favorite sliced stat from this one:

Every other indicator shows a situation much less favorable to workers than that of the 1990s ... Above all, the weak job market leaves workers with no bargaining power, so they aren't getting ahead: wage increases have been minimal, and haven't kept up with inflation.
See that? How he compares one month's data, for March 2005, to that for an entire decade, "the 1990s"?

Instead, let's look at the data for the one month at the same point in the prior business cycle, July 1994, right in Clinton's first term:

Average hourly earnings, private industry: +2.6%
Inflation: +2.8%

Hey, wages didn't keep up with inflation then either! Which sure seems contrary to the impression given.

Can Krugman recall for us today why he wasn't making the same complaint then?

10) Likely investment fees for private accounts in Social Security: We get mentions of fees charged in places like Chile and Britain... but, for some reason, no mention of fees actually charged right now in the US, by multi-employer pension plans and others actually managing such investments. Which of course are much, much, lower than those Krugman does cite.

Now, his explanation as to why he assumes retirement plan fees in the US will be much higher than actual retirement plan fees in the US ... couldn't be fit into the 700 words, I guess.

11) Returns on investment in private accounts in Social Security: Krugman says these could be lower than expected ... "A reasonable prediction for the real rate of return on personal accounts in the U.S. is 4 percent or less" ... and people don't expect returns that low! Yet he doesn't compare these "low" returns to the actual negative returns that are guaranteed to come from Social Security -- do people expect those?

Hey, if possible returns of "only" 4% or 3% are a valid and damning argument against private accounts, then are guaranteed returns of -1% and -2% a valid argument against the status quo?

By castigating "low" returns in private accounts he is of course making a comparison to something -- but this is dropped from the column when it approaches the point where logic would have the comparison made. "Low"... compared to what?

12) The African-American experience with Social Security: We read that blacks don't get lower returns than others from Social Security because, while they do have lower life expectancy, this is due to their higher death rate before they start working, so they don't lose on payroll taxes. Which is not exactly true.

Bonus item!

13) On economic performance and Social Security: We read that if future economic performance is strong then the nation well be able to afford closing the funding gap for Social Security (so it can continue to pay the minimal-to-negative returns it promises to all), while if it is weak then investments in private accounts will perform more poorly than people expect.

But we don't read what follows with equal logic from the exact same numbers: that if future economic performance is strong then the nation can easily afford private accounts in Social Security that provide participants with healthy positive returns rather than negative ones, plus while if it is weak then the financing gap for Social Security is far larger than the official numbers today state -- and defenders of the status quo had better have some plan to deal with that! Which they don't. [Details]

Which for my money (and I mean that literally) puts private accounts in the dominant position in both eventualities.

Defense to items #7 through #13: Well ...

Forget it. Everyone can make up their own mind.

One could go on with many more items: the "$12 million gift to a sitting governor" that wasn't ... the proclamation that a government official was "evil ... evil" on the basis of an e-mail he had which it turned out he maybe didn't have ... the warning that there is a conspiracy operating out in the open! ... and a lot more.

But this is enough. It's time. Did Okrent have a fair point?

If you've read this far, you can decide for yourself.

Hey, did someone say "Fraga"? ... "Arrow"?

Update: The fun thing about Krugmanisms is that everybody can list their own favorites without there being any overlap. Like Tom Maguire, QandO, Lying in Ponds, Don Luskin (of course), Tim Worstall from over the water...