The Electric Commentary

Friday, February 04, 2005

Krugman, Kling, Krauthammer

It's Friday! Time for our weekly triple dose of politically balanced commentary from the New York Times, Washington Post, and Tech Central Station.

I'll give you three guesses as to the topic of Pauly K's column this Friday. Social Security? Correct! How did you ever guess? He states that the President's plan is functionally equivalent to having people borrow in order to buy stocks. Of course he never makes the point that the current plan has people borrowing to buy government bonds (if we use proper accounting practices and actually account for promised future benefits for people like me, anyways). But that is what I am here. Next, can you find the inconsistency in the following paragraphs?

The only way to get ahead would be to invest in risky assets like stocks, and hope for higher yields. But if the investment went wrong and you earned less than 3 percent after inflation, your benefit cuts would leave you poorer than if you had never opened that private account.
So people are expected to take a loan from the government and use it to buy stocks, and if that turns out to have been a mistake - well, too bad.

Experts usually tell people to plan for their retirement by investing in a mix of stocks and bonds. They disapprove strongly of speculation on margin: borrowing to buy stocks. Yet Mr. Bush wants tens of millions of Americans to do exactly that.

Did Pauly just state that the way in which Social Security is currently funded is stupid? I think he did. He sets up a strawman who will only purchase stocks for his retirement (from scarecrowing) and criticizes him based on "the experts." But those same experts must be critical of the current system as well if they support a diverse investment portfolio. And, of course, the only way that one can invest in a diversified portfolio is if they have control over the account. Oh well, on to Arnold.

Can we boycott Saudi Oil as a political tool? Will it do any good? That is the topic of Arnold Kling's TCS article today:

Energy conservation sounds like a painless way to lower the Saudis' income. Who could be against conservation?

The point to keep in mind is that any oil conservation program will do two things. First, it will reduce our ratio of oil consumption to Gross Domestic Product (GDP, the total value of goods and services produced each year). Second, oil conservation will reduce GDP. The reason it will reduce GDP is that we will have to substitute other factors of production, including labor, capital, and more costly forms of energy, in order to conserve on oil.

I have received emails suggesting that the United States should aim for a 10 percent reduction in its energy consumption, because this would cause a significant drop in the price of oil. But how much would this reduce our GDP? Perhaps by as much as 10 percent. Even if it only were to reduce our GDP by 5 percent, that would be $500 billion. If your goal is to change the foreign policy of Saudi Arabia, my guess is that there are ways of doing so that would cost less than $500 billion.

The reality is that energy conservation is a feeble tool for foreign policy. Significant conservation could be very costly to our own country. It might have only a small effect on Saudi oil revenue. It is not at all clear that a drop in Saudi oil revenue would bring about favorable changes in their policies toward terrorism.

I agree that it's generally a good idea to separate trade/economic policy from politics. I'm against almost all trade restrictions for exactly the reasons Arnold states, "it hurts me more than is hurts you."

I'll leave you with Charles Krauthammer:

Why weren't Iraqis dancing in the streets on the day Saddam Hussein fell, critics have asked sneeringly. Some Iraqis, the young and more reckless, did dance. Others, I suspect, were too scared, waiting to see how things turned out. Would the United States leave them hanging as in 1991? Would it leave behind a "moderate" Baathist thug in its place?

Nearly 22 months later, Iraqis seemed convinced that there would indeed be a new day. And that is when the dancing started -- voters dancing and singing and celebrating, thrusting into the air their ink-stained fingers, symbol of their initiation into democracy. It was an undeniable, if delayed, feeling of liberation. Said one prominent Shiite spokesman: "We are celebrating the end of tyranny."


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