Monday, April 30, 2007

Luskin on Dobbs

The blogfather, Don Luskin, speaks at NRO, and does his usual excellent work at eviscerating the work of bad economists, this time CNN empty talking head Lou Dobbs.

"With his nightly harangues on CNN and through his books, Lou Dobbs has become the public face of today’s dangerous movement toward economic isolationism. That movement has become all the more dangerous since the Democratic party took control of Congress. Beholden to Big Labor, the Democrats have no choice but to cater to that powerful lobby’s fears of a dynamic globalized American economy.Last month, when Dobbs testified before Congress, it was not just a case of preaching to the choir, or even the blind leading the stupid. It was vivid proof of Goethe’s famous dictum, “Nothing is more terrible than ignorance in action.” "

Dobbs testified that 6 million US jobs had been lost due to outsourcing and free trade, but Don correctly points out that the unemployment rate is at a historically low 4.4%, with only 6.7 million people looking for work; so if we were to listen to Dobbs and enact protectionist trade policies, there would only be 700 k people out of work, and unemployment would be under .5 %, the lowest in recorded history? Don't think so, Lou. Strike one.

Dobbs went on to decry the trade deficit, stating is has doubled during the Bush adminstration, and that the deficit has been "a drag on growth in 18 of 24 quarters", yet he ignores that during the Clinton years, the deficit increased sevenfold, and it was "a drag on growth" in 25 of 32 quarters, if you can call US consumers buying German beer, Danish cheese, and Candian timber "a drag on growth". But if I'm forced to exclude these products from my purchases, would I necessarily buy substitute American products instead, buy something else, or stick it in the bank? Not terribly clear to me, Lou, strike two.

Lou goes on to make the common fallacy comparing salaries & wages from the long ago past with those of today - ignoring the benefit costs to current business like health care. Total compensation is the correct measure today, and is far higher than any year preceding 1967, and right around average for the years after that date. He also claimed corporate profits is a higher share of national income than ever, but Don relates to us it has actually been higher in 17 years since 1950. Dobbs also claims that we have experienced our first investment earnings deficit on record (he never explains why this is a bad thing) - and Don points out the US Commerce Department says not so fast, US firms earned $57 billion more than all foreign firms did in the US.

Strike three and you're out, Lou. How can this guy keep his job peddling such nonsense? Oh, wait, he works at CNN.

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