Krugman vs. Estonia
From the Scrapbook
Jun 18, 2012, Vol. 17, No. 38 • By THE SCRAPBOOK
John Maynard Keynes famously summarized his recipe for spurring growth as having the government pay people to “dig holes in the ground and then fill them up.” It’s only fitting that Keynes’s most famous contemporary disciple, the New York Times’s Paul Krugman, is adept at digging holes. Krugman has never met a criticism of Keynesian stimulus spending that he didn’t try to shout down, even at the price of torturing data.
Last week, Krugman was in rare form. With most of Europe on the edge of a fiscal cliff, a recent article in the Global Post pointed out that one country in the eurozone, Estonia, has a “fiscal surplus, low debt, and soaring growth.” Not only that, Estonia’s success might be because “the country, led by President Toomas Hendrik Ilves, has cut government budgets, slashed civil servants’ salaries, and raised the pension age.” This not only flies in the face of Keynesian economics, but jars every liberal bone in Krugman’s body. So the Princeton professor produced a chart on his New York Times blog showing that since 2007 Estonia has endured “a terrible—Depression-level—slump, followed by a significant but still incomplete recovery.” Speaking of incomplete, if you look at Estonia’s economic performance over the last decade, GDP has tripled. And it had nearly quadrupled at the peak of the bubble in 2007, a suspiciously convenient point in time for Krugman to begin evaluating the country’s economy. Estonia’s economic growth is still moving at a healthy clip if you look at any trend line longer than the five years chosen by Krugman.
One person who helpfully pointed this out was Estonia’s American-educated president, Toomas Hendrik Ilves, who took to Twitter and began rather amusingly lambasting Krugman: “Let’s write about something we know nothing about & be smug, overbearing & patronizing. . . . Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a ‘wasteland.’ ” Krugman responded on his blog, “I’m hearing from various sources that my rather mild-mannered post on Estonia has generated a vitriolic response from the nation’s president. I’m not going to try to track the thing down.”
That last line is a hoot. A New York Times columnist has no shortage of paid help to track down a few tweets. And tellingly, Krugman pretends the dispute is about manners (not that he’s a winner on that score, either) rather than about his own tendentious use of the data. What’s more, this is not some random critic he brushes off but a man who might know a bit more about Estonia’s economy than Krugman does.
David Case of the Global Post—who’s no conservative, by the way—followed up on the Twitter dustup, asking “why did Professor Krugman peg his chart to the peak of Estonia’s bubble? Doesn’t that simply demonstrate that Estonia has yet to re-capture the frothy, debt-driven bubble of 2007?” Case noted that since Estonia is a small country with no debt, it may not be a model for handling fiscal crises in Greece or Spain. Nonetheless, “its recovery, after implementing austerity, is intriguing. . . . Lord knows, Europe could benefit from any insights.”
Indeed, European leaders need all the insight they can get. The Scrapbook’s advice to them: Don’t try to track it down in Krugman’s column.
The Obama Vogue
The moment last week at which The Scrapbook felt a twinge, just a twinge but a piercing twinge, of mortification on behalf of President Obama was not the crushing defeat at the polls of public employee unions—and in Wisconsin, of all places, where they were born. No, it came as we watched a video of Vogue editor Anna Wintour as she advertised a raffle to attend an Obama fundraiser in New York City.
Readers are probably aware of the gory details. The villainess of The Devil Wears Prada, wearing her signature severe pageboy hairdo and sitting in her Mussolini-style office, invites the great unwashed to enter a lottery to win two seats (“the two best seats in the house”) at a $40,000-per-person Obama fundraiser at the fabulous New York home of Sex and the City star Sarah Jessica Parker.
Everything imaginable designed not to appeal to the average American voter is in evidence: The chic Manhattan venue, Wintour’s plummy British accent (“Mee-chelle Obama”) and condescending manner, the noblesse oblige of a place at the table for two people who can’t afford one. Indeed, it is difficult to decide which is worse: the spectacle of rich Democrats dining with two doyennes of High Fashion on behalf of the 99 percent, or the calculated insult to the poor slobs who would demean themselves for a seat at their table. (“After dinner, you and your guest are invited to join us at a private concert with Mariah Carey,” reads an email from the first lady.)
The Scrapbook can put this down to a certain tone deafness on the part of the notoriously imperious Anna Wintour—who, we assume, is now an American citizen and welcome to participate in the politics of her host country. But was it only four years ago that candidate Barack Obama was the quintessence of cool, attracting the allegiance of just about every celebrity known to the pages of US Weekly? There was will.i.am’s “Yes We Can” video, Little Stevie Wonder’s “Barack Obama” anthem, Oprah (“He is The One”) Winfrey, Madonna, General Colin (“He is a Transformational Figure”) Powell, Julia Roberts. It was as if a member of the Rat Pack had flown down from Vegas in his private jet to run for president.
And now this: a frankly frightening fashionista from Swinging London extending the hand of charity to some humble Democrat, a lottery for the privilege of watching her pick at her food. The Scrapbook seldom extrapolates big conclusions from little specimens, but if the Obama campaign thinks the Anna Wintour Lottery Video paves the road to victory, it’s in worse peril than we suspect.
California Taxpayers Revolt Again
Lost in the hubbub surrounding the war for Wisconsin was the news that San Diego and San Jose—the second and third largest cities in California, respectively—both voted in major public employee pension reforms last Tuesday. And even though the cities are Democratic bastions, the referenda passed with overwhelming majorities.
In sunny San Diego, where the city government is suffering from a $2.2 billion pension shortfall, 66 percent of voters approved a plan to replace guaranteed pensions for new hires with 401(k) plans (i.e., the standard retirement plan these days for private sector workers). The shift should save $950 million over the next 30 years.
In Silicon Valley’s San Jose, voters approved an even more drastic reform—and with even greater support. Seventy-one percent of voters came out in favor of a plan to move new hires to 401(k) plans, and to require current workers “to pay up to 16 percent of their salaries to keep their retirement plan or accept more modest benefits,” in the words of the Associated Press. The city will also now be able to temporarily suspend cost-of-living pension increases in the event of dire fiscal conditions.
“This is really important to our taxpayers,” said San Jose mayor Chuck Reed, a Democrat (a Democrat!), who backed the initiative. He’s not kidding. The San Jose Mercury News notes that the city expects a shortfall of more than $20 million in 2013 and that “a key deficit driver has been the yearly pension bill that has more than tripled from $73 million to $245 million in a decade, far outpacing the 20 percent revenue growth and gobbling more than a fifth of the city’s general fund.”
The results in mostly blue Wisconsin and on the Left Coast show that even Democrats are waking up to the urgent need to curb public sector benefits. San Diego County voted 54 percent for Obama in 2008; Santa Clara County, home to San Jose, went 70 percent for the president. Yet voters in both liberal redoubts have now overwhelmingly approved significant structural changes to public sector benefits.
Has California suddenly turned right? That’s doubtful, alas. But perhaps the left now realizes that doing something to rein in public sector benefits is essential if we are to maintain even rudimentary public services. Oh, and Golden State voters rejected a $1-per-pack tax hike on cigarettes. On, California!
Ray Bradbury, who died last week at 91, was “the writer most responsible for bringing modern science fiction into the literary mainstream,” in the words of the New York Times. Which is certainly true: When he began writing stories in the late 1930s, Bradbury’s fiction appeared in pulp magazines, very much at the periphery of polite literary society. Just a week before his death he published an essay about his writing life in the New Yorker. Bradbury’s fanciful stories and novels—about the world beyond our world, the shape of things to come—struck a resonant, and enduring, chord with readers.
The Scrapbook’s appreciation of Ray Bradbury takes a different form, however. Coming of age during the Depression, the young, bookish Brad-bury couldn’t afford to attend college. Instead, he wrote later, “libraries raised me.” In the public libraries of Los Angeles, he immersed himself in the works of Edgar Allan Poe and H. G. Wells and Jules Verne. And at UCLA’s Powell Library, where students could rent typewriters for $.20 per hour, Bradbury spent $9.80 to pound out a story about the systematic destruction of books in a dystopian future, which was later expanded into his best-known novel, Fahrenheit 451.
He never forgot, and never stopped extolling, the value of libraries in a free society. For Ray Bradbury, books and reading and libraries were intrinsic to life itself, nurturing a talent that enthralled the world.
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