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Dismal Science, Abysmal Conclusions

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I’m no economist. Thank God. Which means that I haven’t had my veins pumped full of economism (a religion that is very much the opiate of the academies, and a much more effective soporific than Christianity, Islam, or Judaism).

“I never met a tax cut I didn’t like,” said the Nobel-winning Chile-miraclizing Milton Friedman. Yeah? Well I’ve met a few. For instance, every single one of George’s gifts to the ultra-wealthy. I know, I know: “a rising tide raises all boats.” Which is great if you own a yacht. If you don’t own even a dinghy, then a rising tide merely destroys your home and drowns your neighbors, as we’ve just witnessed in New Orleans. If those tax cuts (along with the Iraq war) hadn’t gutted FEMA’s budget, then perhaps we might have seen an adequate response.

Even Reagan met a few tax cuts he didn’t like, which is why he raised taxes during his administration. Not to mention George’s Dad, who read his own lips, carefully, and discovered that they in fact whispered: we need more revenue.

Nevertheless, mainstream economists (not those Krugman firebrands) will tell you that the economy cannot withstand a high tax rate. The economy. Not the wealthy — who cannot stand a high tax rate — but the nation’s economic health, and competitive edge, require taxes to be mean and lean. Since I never took ECON 101, let me detour around those damned statistics and turgid prose, to present an interesting little fact:

Finland has the world’s most competitive economy. Finland. Edging out even the United States. This from a survey of 11,000 business leaders, in the Global Competitiveness Report, released today by the World Economic Forum.

Augusto Lopez-Claros, chief economist and director of the Geneva-based institute’s global competitiveness program, “said the Nordic nations were disproving the common belief that high taxes hinder competitiveness:

“‘While the business communities in the Nordic countries point to high tax rates as a potential problem area, there is no evidence that these are adversely affecting the ability of these countries to compete effectively in world markets, or to provide to their respective populations some of the highest standards of living in the world,’ he said. ‘Indeed, the high levels of government tax revenue have delivered world-class educational establishments, an extensive safety net, and a highly motivated and skilled labor force.'”

Damn. And if I had a PhD from Chicago, I’d know that was false. I could marshal impressive models and statistics (and some truly bad writing — ever read Friedman?) to demonstrate the counterfactual nature of that, um, fact. I might even win a Nobel Prize for my tendentious special pleading.

I have a friend who did a PhD in subatomic physics, and worked on string theory with the great Witten at Princeton — who is, in short, rather good at the hard sciences — and he becomes apoplectic when you mention the Nobel Prize in economics. That Alfred Nobel instituted a prize for these “crystal ball gazers,” and not for mathematicians, drives my friend to Job-like cosmic rage. (The rumor is that Nobel’s wife was seduced by a mathematician, which is why he slighted the discipline.) Another friend, whose graduate work is in economics, insists that you can rig any economic model to demonstrate vastly differing conclusions, depending upon how you arbitrarily design the parameters. This hardly surprises me: the soft social sciences have been abusing statistics for years — why should economics not engage in analogous bafflement?

Let me say, before you pounce, that I am not in fact innumerate. I was first in calculus and physics in architecture school, and every standardized test I’ve ever taken has indicated that I should have been a mathematician, not a novelist. (Now there’s fuel for the literary critics.) So I did not avoid ECON 101 for reasons of math angst, but simply because My Eyes Glaze Over when you ask me to spend more than thirty seconds on figures relating to agricultural production in the Midwest. It’s abysmally dull stuff, the dismal science.

That said, I value what certain free-thinking non-aligned economists have to say. St. Paul, for instance, at the New York Times — the great Krug- (as opposed to Fried-) man; I take him pretty seriously. Why? Because I’m going to have to lean on authority, here, and simple psychology suggests to me that Krugman is trustworthy, since he is manifestly one of the few truly distinguished economists who does not have his lips glued to the butt of the plutocracy. His arguments do favor the free market, but only because he has demonstrated (in academic work that has short-listed him for the Nobel), that free trade benefits poor countries.

I sense the right wing despises Krugman for this as much as anything: the ideologues require his work on the fragmentation of markets to prove some of their own sacred theories. You’ll hear a lot of mumbling about how he is no longer taken seriously in the academy, etc., which is of course canard al’orange: Fareed Zakaria — hardly a Maoist — has championed Krugman; and Jeffrey D. Sachs — a liberal, but one whose academic credentials are pretty hard to smear — is also a fan. I suppose you could argue that the Nobel Prize for economics — and yes, Krugman is a front-running candidate — is only given to leftwing ideologues. You know: Friedman, Hayek and comrades.

Krugman tells us that you have to do the math in order to have a full, perspicuous understanding of economics, which is fine by me. That level of expertise is not something I intend to achieve — life is too short. (If I had three more lives, I’d devote them to theoretical physics, chess, and number theory, long before I’d wade into the swamps of Chicago.) I’ll simply take his word for it, read his layman’s version, and note the occasional indisputable fact:

Such as that embarrassing detail regarding Finland. The most competitive economy in the world. Oh, and Sweden, which is third after the US; Denmark, which is fourth; Iceland, which is seventh. The lowest ranked Scandinavian country is Norway, at ninth.

We’re talking stratospheric income tax here. To rival Finland, Bush’s friends would have to kick in money to fund FEMA, build a few roads, even help out the poor. Which is not to say that the Nordic countries endorse high levels of taxation across the board:

“The governments’ philosophy is to leave businesses alone, taxing them at some of the lowest levels in the world so they are competitive and efficient. They then levy the high taxes on personal incomes to pay for those social services that underwrite their labor force, according to Simeon Djankov ( who co-authored a 2004 World Bank study that — yes — also placed Finland at the head of the pack, with Sweden third, Denmark fifth, and Norway sixth).

“‘You have to look behind the numbers, ignore the Nordic reputation for tax burdens and you’ll see they have established a system that does not distort production, that gives people an incentive to invest in businesses and in stocks because the taxes are so low,’ he said.”

So we’re hardly talking about Stalinism here. In fact, we’re barely talking about socialism (in the way that the word is endowed with cellulite and fangs by Republicans — many of whom sport cellulite and fangs).

Did Bush permit the City of Voodoo to drown, so that embarrassing documents regarding voodoo economics would disappear in the flood? Okay, that’s a bit silly. But you can bet that he’d love to see a hurricane take out the World Economic Forum, and shred that incriminating survey.

Now, those 11,000 business leaders, you could argue, are biased. I mean, perhaps they’re anti-business. Or, unlike economists, they just don’t know real wealth when they’re looking at it. Or… anyway, choose your lie.

Let me end this by suggesting that you all hie yourself over to one of the more interesting documents of the last few years. It probably seemed dull at the time, but here’s the full text of Joe Albaugh’s testimony in front of the Senate Appropriations Committee. (Joe being, um, Michael Brown’s roommate in college.) A few words from this inspiring document have become famous in the wake of Katrina: Albaugh worried in 2002 that FEMA had become an “oversized entitlement program.” No matter how you dress that one up, you can’t take it out to dinner. (You especially can’t take it out to dinner at Antoines in New Orleans, which lost a wall when those underfunded levees broke.)

Some of Albaugh’s blather is prophetic blather: “Faith-based groups at the community level, like the Salvation Army and the Mennonite Disaster Service, play critical roles in disaster relief, as does the American Red Cross.” Well, yes they do, Joe — even more critical when they are required to replace incompetent, cash-strapped federal agencies.

My favorite paragraph in this rousing document: “President Bush’s compassionate conservatism is a hallmark of his core philosophy. The President is promoting faith-based organizations as a way to achieve compassionate conservatism. Not only does FEMA work with the faith-based organizations that I mentioned, but FEMA’s Emergency Food and Shelter Program is the original faith-based initiative and is a perfect fit with President Bush’s new approach to helping the poor, homeless and disadvantaged.”

Such compassion. Such faith. Indeed, our man Joe wasn’t lying when he said that FEMA was “a perfect fit with President Bush’s new approach to helping the poor, homeless and disadvantaged.”

So there we have it: the original faith-based initiative — operating on a wing and a prayer — turned out to be the single most incompetent program cooked up by an administration famed for its glorious incompetence. Take your angels’ wings and your mawkish prayers, George, and let’s have a fully funded initiative — one that may, yes, require you to raise your friends’ income taxes back to civilized levels. While we’re pushing aeronautical metaphors: call me reckless, but I’m willing to risk the possibility that repealing those tax cuts might send the economy into a tailspin.

Just like Finland’s.


(If this post reduced you to a sneering fit, feel free to visit Dysblog, which will make your face fall off.)

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About visigoth

  • WTF

    Yeah, right on, and too bad the most religious, kindest, most inept President of all cooked it up. Who? Jimmy Carter.

  • Actually, Carter did *not* cook it up as a “faith-based initiative” — he set up FEMA as a fully funded, independent federal agency. Under Clinton, it was an astonishingly competent entity. No, it became a faith- (as opposed to reality-) based initiative under George Tartuffe Bush. And fucked up monumentally.

  • The Searcher

    Are the United States and Finland equal in all other factors beside tax rate?

  • Well, no. Another conference, meeting yesterday in China, pointed out that Finland has the lowest rate of corruption in the world. No DeLays, no Savafians, no Roves. So yeah, that helps economically (not to mention morally).

  • The Searcher

    Interesting idea, and certainly makes for good rhetoric, which for most these days is usually enough to pass for fact anyway 🙂

  • WTF

    FEMA has never been a fully functional, competent anything. If your talking about Andrew, forget it, the national guard was hard at work, while FEMA was trying to figure out why communications were so screwed up. I was there. FEMA finally realized that all the money they invested in HF radio gear was only good for the long haul. To top that off, FEMA relied heavily on FAX based communications. Email happened in 1998 or 1999. Oh, and when Floyd hit, guess what FEMA couldn’t understand why they couldn’t broadcast emergencies on cell phones…. having given up on radio communications in favor of fax/email/cellular. FEMA is a bunch of dunderheads. FEMA has always been a delagating authority, they don’t coordinate, they don’t do anything except show up and show people how to fill out paperwork for Federal money to replace their uninsured coastal flood zone homes.

  • The Searcher

    Well, if you look at Mr. Cooper’s posting history on this site, it’s not difficult to tell what groove his record is spinning in.

  • Damn. Which groove would that be? I’m still trying to figure it out.

  • The Searcher

    Well, why don’t you reply with the titles of say, your last 10 posts and see what answers you get to that question 🙂

  • Ah, but if you read beyond the titles, things get murky.

  • Douglas,

    This was chosen as an Editor’s Pick this week by your humble Politics Editor Lisa McKay. Go HERE to find out why and grab a nifty graphic button to put on your own site.