Paul Krugman, Demagogue

Yesterday Paul Krugman wrote a piece for the New York Times in which he recounts the events at a recent town hall meeting on government health care.

http://www.nytimes.com/2009/08/07/opinion/07krugman.html?_r=2&ref=opinion


"There was a telling incident at a town hall held by Representative Gene Green, D-Tex. An activist turned to his fellow attendees and asked if they “oppose any form of socialized or government-run health care.” Nearly all did. Then Representative Green asked how many of those present were on Medicare. Almost half raised their hands."

"Now, people who don’t know that Medicare is a government program probably aren’t reacting to what President Obama is actually proposing... But they’re probably reacting less to what Mr. Obama is doing, or even to what they’ve heard about what he’s doing, than to who he is..."

"Does this sound familiar? It should: it’s a strategy that has played a central role in American politics ever since Richard Nixon realized that he could advance Republican fortunes by appealing to the racial fears of working-class whites. Many people hoped that last year’s election would mark the end of the “angry white voter” era in America."

So, according to Mr. Krugman, these people are clearly ignorant and racist. Apparently it never occurs to Mr. Krugman that these "people who don't know that Medicare is a government program" may be smart enough to realize when something isn't working and that he is, pardon my French, full of shit.

Medicare IS NOT OPTIONAL. These people participated in Medicare because the government put a gun to their head and forced them to do it. Granted, a few may have bought the lies and thought it a great idea at the time but it seems they have changed their minds and the rest had no choice. Perhaps it is the fact that Medicare is facing unfunded liabilities of around $40 trillion that will be paid by the children, grandchildren, great-grandchildren, etc., of the folks in that meeting that indicate it isn't what was promised and adding to it is a bad idea. Perhaps those people realize that the government is full of liars and theives and they want no part of any more such programs. Perhaps these people realize that the only possible hope of getting back any of the tens of thousands of dollars that were taken from them is to participate in the current program.

Is it possible that some of the people to whom he refers are racist and would oppose anything Obama offered? Sadly, yes, it is. Is it irresponsible of an intellectual to resort to this sort of rhetoric. Certainly. What is beyond question is that Mr. Krugman either lacks the mental capacity to analyze the situation beyond his own preconceived notions or he is a race-baiting demagogue with an agenda. Given that he is a Keynes-loving economics professor at Princeton with a Nobel prize, I'm guessing its the latter.

Foresight?

"It would be a serious blunder to neglect the fact that inflation also generates forces which tend toward capital consumption. One of its consequences is that is falsifies economic calculation and accounting. It produces the phenomenon of imaginary or apparent profits... If the rise in the prices of stocks and real estate is considered as gain, the illusion is...manifest. What makes people believe that inflation results in general prosperity is precisely such illusory gains. They feel lucky and become openhanded in spending and enjoying life. They embellish their homes, they build new mansions and patronize the entertainment business. In spending apparent gains, the fanciful result of false reckoning, they are consuming capital. It does not matter who these spenders are."

Wow, that pretty well sums it up, huh? A nice recap of what we are living through. Except its not a recap. It is the writing of Ludwig von Mises. The genesis of his line of thought can be traced to a treatise he published in 1912. Yes, 1912. Almost twenty years before the same series of events led to the Great Depression. It was included as part of a greatly expanded theory and published again in 1940, before finally being published in English in 1949 as part of his magnum opus Human Action.

F. A. Hayek, winner of the Nobel Prize in Economics and Presidential Medal of Freedom, was a student of Mises and a contemporary of John Maynard Keynes. Through the work of Hayek (and others) the theories of Mises and the other "Austrian School" economists were spread around the world. Over the years Hayek and Keynes engaged in several battles of wits and intellectual arguments, yet, Hayek never wrote a review of Keynes' General Theory of Employment, Interest, and Money. Why? The short answer is, in my opinion, that he felt it so poorly reasoned that Keynes would quickly abandon this line of thinking as he had done on a previously published work. "Hayek later regretted that he had not responded after the General Theory was published, but explained (somewhat lamely) that after Keynes had quickly disavowed his Treatise on Money in the face of criticism, he assumed that Keynes would change his views yet again, so why bother?"(1)

So, if there are theories that have historical accuracy, appear to be excellent predictors of future events, and are widely known, why is it that politicians and their intellectual supporters continue to worship at the feet of Keynes and his General Theory of Employment, Interest, and Money when it has proven, time and again, to be horribly wrong?

Guess which one advocates ever increasing command and control by politicians.

(1) http://hayekcenter.org/?p=335

Cash for Clunkers - Brilliant!

Yesterday, for the first time in months, we spent the day doing nothing. I spent a good part of the day sitting in front of the television and saw countless ads touting the new Cash for Clunkers rebate program. Ignoring the fact that the entire program has been on the verge of collapse (when they could actually get it to work), I read a piece this morning that, if correct, points out precisely how ridiculous this type of "stimulus" really is. The article can be found here -

http://seekingalpha.com/article/152909-cash-for-clunkers-may-cost-up-to-45-354-per-vehicle

- but I'm going to break it down into what I hope is a more digestable presentation.

According to the article there would normally be about 200,000 clunkers traded-in every three months. Under the new program they are projecting about 222,000 trade-ins. 222,000 - 200,000 = 22,000. Think about that for just a minute. The "stimulus" is generating about 22,000 more trade-ins than would have occurred otherwise. The bulk of the money is being used to subsidize purchases that would have happened anyway! Or, put another way, the federal government program has spent $1.2 billion (the program has a budget of $1 billion but that money had to be borrowed, so I'm including interest at 3% for 10 years) to stimulate the purchase of 22,000 additional cars - $1,200,000,000 / 22,000 = $54,545 per car. The NADA estimates that the average price of a new car bought in the US is $28,400.

(Sigh)