"I am Still Not Sure Whether the Column was Meant as a Joke"

Others have noted that Donald Luskin, an "adviser to John McCain's campaign", published op-eds in both the Wall Street Journal and Washington Post arguing that the economy is doing just fine, and contesting the well-known result that the economy does best when Democrats are in power. Here's an example of the response to Luskin:

Dean Baker: Like most newspapers, the Washington Post likes to run opinion pieces that present a different take on the news. But most newspapers prefer that this different take is grounded in reality, not the Post.

Today the Post featured a piece by Donald Luskin, an advisor to John McCain, saying that the economy is just fine. ...

While Luskin argues that people were led to believe that the economy is bad because of the media’s negativism, it is also possible that they are responding to the weakest labor market since the early nineties. They may also be responding to the fact that wages fell behind inflation by close to 2 percentage points last year as people’s paychecks did not keep pace with the price of food and the price of gas.

In fact, the typical worker has seen no benefit for the last seven years of economic growth. Workers probably know that they are not getting ahead, even without the media pointing it out.

The rest of the piece is a range of confused and misleading statistics. ...

Luskin also doesn't see anything unusual in the pattern of failing financial institutions. Yeah, Fannie and Freddie go down every week, not to mention Bear Stearns, Lehman Brothers, Indymac. These are not neighborhood banks going down the tubes.

Even the "record" homeownership rate touted in the price is nonsense. The rate has fallen sharply in the last two years. In age-adjusted terms (people are more likely to own homes in their 40s than their 20s) we're not far above where we were a quarter of a century ago.

This column has no place in a serious newspaper (unless its intention was to embarrass McCain). ...

John McCain must be listening to Luskin and his other nothing but a bunch of whiners advisors, because today he proclaimed:

"The fundamentals of our economy are strong..."

Yep, just like Dean Baker just explained, the fundamentals are great. In fact, one of the most important fundamentals - income for the typical household as measured by median income - didn't grow at all during the recent expansion phase of the economy, though income growth was "strong" if you live in McCain's area of the income distribution.

So we should believe what McCain said last December:

McCain: "Economics is Something That I've Really Never Understood": ... "The issue of economics is something that I've really never understood as well as I should....,'' ... "...I would like to have someone I'm close to that really is a good strong economist. As long as Alan Greenspan is around I would certainly use him for advice and counsel." ...

"I've never been involved in Wall Street, I've never been involved in the financial stuff, the financial workings of the country, so I'd like to have somebody intimately familiar with it," he said of a potential vice president.

I don't think his vice-presidential choice has much to offer on "financial stuff".  So let's go back to McCain's advisor, Donald Luskin, and see what we can learn about the kind of advice and analysis the McCain camp is getting. Here's Jeff Frankel:

What Does It Take to Define Away the Statistics Showing Superior Economic Performance Under Democratic Presidents than Under Republicans?, by Jeff Frankel: A panel on Supply Side Economics in Washington, September 12, included statistics on the superior performance of the American economy under President Clinton compared to his Republican successor. ... Former Treasury Secretary Larry Summers gave some statistics that included Democratic versus Republican presidents throughout the postwar period. ...

By coincidence, in a column in that day’s Wall Street Journal, Donald Luskins sought to “get something settled once and for all. Have the stock markets and the economy historically done better under Democrats or Republicans?”

Here is what he wanted to straighten us out on: “Superficially at least, the Democratic claims are true: Since 1948, the Standard & Poor’s 500 total return (capital gains plus dividends) has averaged 15.6% when a Democrat was in the White House and only 11.1% when a Republican was in the White House. You get a similar result if you look at growth in real gross domestic product. Under Democratic presidents, the average since 1948 has been 4.2%. Under Republican presidents it has been only 2.8%.”  But then he goes on to argue that Kennedy should really be classified as a Republican (he cut taxes), Nixon as a Democrat (wage-price controls), George H.W. Bush as a Democrat (he raised taxes), and Bill Clinton as a Republican (free trade; and he might have added eliminating the budget deficit, supporting the Fed, reforming welfare, other policies that would normally be thought of as conservative). He argues that if you make these switches in party assignments, then the US stock market and economy has performed better under “Republican” presidents (which, remember, now includes Kennedy and Clinton) than under “Democrats” (which now includes Nixon and the first Bush).

I am still not sure whether the column was meant as a joke.  At the risk of finding out that I have been taken in by a prank, I will assume that the author is serious. Brad DeLong  picked this one up right away, and thinks the author is serious. ... But Brad didn’t offer any sort of detailed rebuttal.  I suppose one could argue “live by ad hominem, die by ad hominem.”   But I think blogosphere courtesy, such as it is, calls for a substantive reply. 

My first response is to point out that the Nixon, Bush and Clinton policies he cites are not isolated cases, but appear on a longer list of examples I like to give showing how for the last 40 years, rhetoric notwithstanding, Republican presidents have pursued policies that are surprisingly farther removed from the ideal of good neoclassical economics than have Democratic presidents.   This is especially true if one defines neoclassical economics as the textbook version, which allows government intervention for externalities, monopolies, etc..  But I would argue that it applies even to the “conservative economics” version that puts priority simply on small government.

The criteria underlying this generalization about Republican presidents are:
(1) Growth in the size of the government, as measured by employment and spending.
(2) Lack of fiscal discipline, as measured by budget deficits.
(3) Lack of commitment to price stability, as measured by pressure on the Fed for easier monetary policy when politically advantageous.
(4) Departures from free trade.
(5) Use of government powers to protect and subsidize favored special interests (such as agriculture and the oil and gas sector, among others).   

I have documented in writings listed elsewhere that Republican presidents have since 1971 indulged in these five departures from “conservatism” to a greater extent than Democratic presidents. The name I would give to this set of departures, as well as to the parallel abuses of executive power in the areas of foreign policy (intervening in Iraq) and domestic policy (intervening in people’s bedrooms), is neither “liberal” nor “conservative” but, rather, “illiberal.”

My second response is to point out that the author is re-defining “Republican” and “Democrat” tautologically to be “good” or “bad.” A definition that departs so far from actual party affiliation does unacceptable linguistic violence.    And of course it is circular logic to then find that the economy does better under “Republican” presidents than “Democratic.”

An analogy.   Marx and Engels of course professed to have the welfare of the common man as their goal. The Soviet Constitution asserted that the USSR expressed “… the will and interests of the workers, peasants, and intelligentsia.”  It claimed to embody democracy, the rights of freedom of speech, freedom of the press, freedom of assembly, freedom of religion, inviolability of the person and home, and the right to privacy.    Needless to say, this was all pure rhetoric, which was continuously and comprehensively violated by the actual operations of the Soviet state.   But by Luskins’ logic, the western democratic system, which did put these ideals into practice should be re-classified as communist, and the superior performance of the western system should be chalked up as going to the credit of communism!   It makes no more sense to credit the achievements of Bill Clinton to the Republicans than it would to credit the achievements of western democracy to the Communists.

Comments

[Bruce Wilder]

Policy matters!??

Politics is about governance!??

Politics is a dispute over income distribution and the use of power?!

The political parties are loose, but opposing coalitions, not indistinguishable tweedle-dee and tweedle-dum?!

Republicans are lying, when they say they want "small government"!?

All of this, in an election year! I grow faint. But, don't worry. On CNN and MSNBC, it is still all about lipstick on pigs and bulldogs.

[Julio]

http://www.poestories.com/text.php?file=masque

The Masque of the Red Death
by Edgar Allan Poe
(published 1850)

The "Red Death" had long devastated the country. No pestilence had ever been so fatal, or so hideous. Blood was its Avator and its seal — the redness and the horror of blood. There were sharp pains, and sudden dizziness, and then profuse bleeding at the pores, with dissolution. The scarlet stains upon the body and especially upon the face of the victim, were the pest ban which shut him out from the aid and from the sympathy of his fellow-men. And the whole seizure, progress and termination of the disease, were the incidents of half an hour.

But the Prince Prospero was happy and dauntless and sagacious. When his dominions were half depopulated, he summoned to his presence a thousand hale and light-hearted friends from among the knights and dames of his court, and with these retired to the deep seclusion of one of his castellated abbeys. This was an extensive and magnificent structure, the creation of the prince's own eccentric yet august taste. A strong and lofty wall girdled it in. This wall had gates of iron. The courtiers, having entered, brought furnaces and massy hammers and welded the bolts. They resolved to leave means neither of ingress or egress to the sudden impulses of despair or of frenzy from within. The abbey was amply provisioned. With such precautions the courtiers might bid defiance to contagion. The external world could take care of itself. In the meantime it was folly to grieve, or to think. The prince had provided all the appliances of pleasure. There were buffoons, there were improvisatori, there were ballet-dancers, there were musicians, there was Beauty, there was wine. All these and security were within. Without was the "Red Death."

It was toward the close of the fifth or sixth month of his seclusion, and while the pestilence raged most furiously abroad, that the Prince Prospero entertained his thousand friends at a masked ball of the most unusual magnificence

[The Utah Windowz]

That's a great poem, Julio. Well if you ever do find out if the column was meant as a joke or not let me know, because I'm quite curious myself.

[hari]

Mark - if it's a joke - it's joke of Slavic cultural inheritance - as the name *Luskin(ovich) might suggest.
Be that as it may...you've taken it too far...to claim that he meant current day *democracy* was a product of *communism*.

That's heretical thinking, per se.

If power and influence is the dna of politics, then it's readily claimed that *Republican-style Democracy* is more in tune with non-direct form of governance in which class conflicts and orientation are central to the function of state power and its influence.

Democrats have a totally different genetic code to their understanding of governance - different schools of thoughts are allowed and even preferred in order to give vent to the divergence and contradictions in society. Dems like to crystallize or perculate ideas thru a prism which Republicans would find not only obnoxious but down right deleterious to the function of power and influence.

If you want to lead, you must claim to know *how* with no deviation from the so-called truth. [Sounds familar to a centralized democracratic tradition of a Politburo!]

This is the dichotomy of American democracy...with its inherent distortions and contradictions based on simply two party system. As soon as one introduces a third party, the game gets more interesting....

[pgl]

The true definition of redundant - anything written by Luskin and a Joke.

[RW]

The timing of the column's release coincides quite well with the increasing emphasis on the economy by Obama and Biden, and rather clearly, provides support for some of the specific McCain and Palin talking points attempting to counter or devalue that emphasis last week and, presumably, this week too.

Except the timing appears to have been a trifle, um ...off.

[RW]

PS: I sent a note to the WaPo editor pointing out they really should offer the Obama campaign equal time for rebuttal since the column's partisan function was rather obvious and the writer had declared himself a McCain advisor (anyone want to bet that association is disavowed by the McCain campaign within the next 24 hours).

[Francois]

The joke is that anyone should spend more that a nanosecond talking about this waste of newspaper real estate spewed by a dangerously dimwitted political hack disguised as financial dude.

[Bruce Wilder]

hari: "As soon as one introduces a third party, the game gets more interesting...."

In a Parliamentary democracy, it gets "more interesting", because it lets the two dominant Parties become more policy-coherent. In a Presidential system, it tends to be just perverse. France was forced to choose between two more extreme candidates, even though the third, middle-man was the best fit.

In the U.S. system, third Parties usually prove to be self-defeating, in the sense that they tend to contribute to the election of the two-party candidate they like least. Teddy Roosevelt, in 1912, managed to both elect Woodrow Wilson, whom he despised, and to give over control of the Republican Party to the Taft wing, which quickly became arch-conservative and anti-progressive. The Taft folks were a great boon to FDR and the New Deal, with their adamant failure to adapt.

Perot, bless his heart, stepped in, to give us Clinton. He'll always be a hero in my book, for that.

I would love to have seen a third Party form in the U.S. this year, and to see it gain strength from the decaying Republican corpse -- maybe, they could keep the zombie Republican Party from rising from the dead. That didn't happen, and it may be a cliffhanger election campaign as a result, though I still don't expect a cliffhanger election.

Bloomberg was the only serious third party contender, and I don't think he thought he could help the Democrats -- he would not have diverted or suppressed the zombie Republican vote at all.

Bob Barr isn't doing any good, either, though I give him credit for trying.

Third Parties are a peculiar sort of self-sacrifice in American politics.

[Patricia Shannon]

hari says...

Mark - if it's a joke - it's joke of Slavic cultural inheritance - as the name *Luskin(ovich) might suggest.
Be that as it may...you've taken it too far...to claim that he meant current day *democracy* was a product of *communism*.

That's heretical thinking, per se.

It seemed obvious to me that this was an example of a logical extension of that type of thinking, not at all that Mark was suggesting that it would be a proper definition.

[Patricia Shannon]

That is, Mark was pointing out the logical absurdity of the the definitions by Donald Luskins

[hari]

Look now *the economy stupid* will get center-piece attention which shld give BO a leg up, I'd think.

The other day Bill Clinton said he expected BO to win with a high margin....

The problem with managing a guy like BO is not easy given that even his jokes about *lipstick* get misunderstood. The public can't absorb a lot of policy discussions.

So what's the alternative?

Me thinks you've to let that *thoroughbred* Biden loose and let him do the dirty job of throwing mud on McBush and whatnot.

At any rate, I've good feeling that white surburbans will stick to McBush and not allow the black guy a chance. That's American politics and we've to understand its raison detre.

My guess is still that BO will get better than 50% and make history...to the great euphoric support from Europe. However he must avoid stupid jokes that don't fit his academic style of speech.

[hari]

Patricia - may be I misunderstood Mark. If so, my apologies to MT.

[im1dc]

Giving Luskin ink, even virtual ink, is more than he deserves.

Put him on ignore.

[im1dc]

Dr Stiglitz was just interviewed on CNBC by Maria Bartriomo.

He said something I have not heard spoken aloud before.

He said that the FedGovt has made investing in US Markets risky b/c some companies they bailout and others they don't. There does not appear to be rhyme or reason to those outside looking on. So why should overseas investors invest here?

If he's right that can't be a good thing going forward.

[Bruce Wilder]

Gee, and I thought the U.S. government had made investing in the U.S. risky by corrupting corporate governance and abandoning the "quality control" of detailed financial markets and banking regulation.

Oh, that was the day before yesterday. My bad.

[donna]

The joke is Luskin, Gramm and McCain being taken seriously at all in light of the disaster today.

[Julio]

Bruce W.,

"In the U.S. system, third Parties usually prove to be self-defeating, in the sense that they tend to contribute to the election of the two-party candidate they like least."

Would this still be true if we used "instant runoff" aka "ranked choice" voting?

[bakho]

Luskin is a DISTRACTION. If you are losing the argument then add in a lot of misinformation and distractions to confuse the public. Distraction is a favorite tactic of the right wing. They have well funded distractors in economics, global warming, creationism, sex education, environmental and pollution. Distractors like Luskin are paid to throw roadblocks into the path of progress. It does not matter if their distractions are true or a joke or not very effective. Even an empty box on the freeway that could be safely run over is a distraction that will slow traffic. Distractions are only successful if they can get the attention of enough people which is why they need to be ignored and dismissed out of hand.

[VidCrayzee]

The current President, George Bush has something humorous to say about Lehman’s woes. Check out the video here, http://beema.wordpress.com/2008/09/16/beema-news-2/. If you can’t laugh you will most definitely cry about all of this.