Candidates Mislead on Economics

In an earlier post today, I noted how important it is to check facts and assumptions anytime economic issues are involved, not only by the media but also from politicians. Now I read this from James Pethokoukis and his blog Capital Commerce, "Democratic Debate Spawns Weird Economics":

The Democratic presidential contenders went at it again last night in a debate (or "forum" if you prefer) sponsored by the AFL-CIO. For once, economic issues—especially trade—shared equal importance with the war in Iraq. Here are a few statements from the various candidates —including front-runners Hillary Clinton and Barack Obama—that struck me as kind of strange:

1) "You know, six and a half years ago, we had a balanced budget and a surplus; now we are in deep debt with a rising deficit, and it is absolutely true that George Bush has put it on the credit card, expecting our children and grandchildren to pay for it." -- Sen. Hillary Clinton. Hey, the last time I checked, the budget deficit for this year was forecast to be $207 billion, half of what it was in 2004. (The budget might actually be back in the black when the next president takes office.) And while Bush did inherit a balanced budget and surplus from Team Clinton, neither administration successfully fixed the $100 trillion unfunded liability problem with Social Security and Medicare.

2 ) "For every $1 billion we spend [on infrastructure], 40,000 jobs can be created in the United States of America." -- Sen. Christopher Dodd. I have no doubt that jobs can be created through government spending. But those billions must be taken from the private sector. Will those billions be used more wisely and efficiently and productively by federal bureaucrats than by private managers? If so, maybe the feds should guarantee a job for everyone who wants one. Using the Dodd formula, it would cost a mere $175 billion a year to employ all 7 million unemployed Americans.

3) "Well, look, people don't want a cheaper T-shirt if they're losing a job [from free trade] in the process." -- Sen. Barack Obama. Inexpensive T-shirts vs. outsourced jobs isn' t really the debate. According to research from the International Institute for Economics, Americans are $7,000 to $13,000 richer because of trade, and removing all trade barriers would permanently increase our wealth by $4,000 to $13,000 per household. And since the North American Free Trade Agreement took effect in 1994, America has added nearly 30 million net new jobs.

4) "What we need to do is say that from now on, America will adhere to all international labor standards in any trade agreement—no child labor, no slave labor, freedom of association, collective bargaining—that is critically important—making sure that no wage disparity exists." -- Gov. Bill Richardson. If what Richardson was saying is that American trade negotiators should demand foreign workers make the same as American workers or no trade deals, then what he is saying is no trade with India or China. Incomes in those countries are rising thanks to globalization, but there is a long way to go.

5)"It means that we are also not running up deficits and asking China to bail us out and finance them, because it's pretty hard to have a tough negotiation when the Chinese are our banker." -- Sen. Barack Obama. This is the myth that "China holds all the cards." Look, the Chinese government needs fast growth to hold down social unrest and justify the continued dominance of the Communist Party there. And the most likely cause of a slowdown there would be a slowdown here first. The last thing China wants to do is start dumping U.S. bonds and cause a recession here.

Perhaps I have been assigning too much blame to the media and not enough to pandering politicians. I am sure many of the Republician candidates will be as bad and when I get those misleading remarks I will pass those on as well. It is not by any means a one party problem.

Maybe Sen. Clinton doesn't know the deficit is very low at present, or Sen. Obama doesn't know know that counties buy our treasury bonds because of the strength of our economy not our weakness, or that Sen. Dodd's doesn't remember that government spending originates from the taxes paid by citizens not thin air? Or that Gov. Richardson thinks all wage disparities can be eliminated if the US says so, or Sen. Obama (again) sees no benefit in trade to the US consumer?

Is it possible that people can reach a point of being a US Senator or a state governor, let alone running for president, and either know almost nothing about basic economics or not telling the truth due to an obsessive desire to win elections?

Big Labor & Presidential Politics

As individuals most union members are great people while unions as organizations, to speak politely, are not great. I say this not lightly and with feeling. From my Labor Economics professor in undergraduate school who was an avowed socialist who never appeared in public without his peace symbol button firmly affixed to his tie, to my first lead role as a management negotiator versus the Teamsters ( the only time I have, coincidentally of course, been shot at - twice), and now seeing how the automotive unions have decimated the American automobile manufacturers, worked to kill Social Security reform, oppose free trade and every other sensible economic reform that is good for this country and the world, to teacher's unions opposing student measurements and school choice, and on and on -- I do not like unions.

So I give you this New York Times 'editorial', "Democrats' Field Creates Pleasant Predicament for Unions":

Union leaders say they are so happy with the Democratic presidential aspirants, though unsure of whom to support, that they are unlikely to endorse any of them before the primaries next year....

“There’s a pretty strong sentiment across the labor movement for Edwards,” Steve Rosenthal, a former political director of the A.F.L.-C.I.O., said. “But I think some unions are a little leery of endorsing him without more evidence that he can win.”

Another reason many unions are hesitating to endorse a candidate is their overall happiness with the eight hopefuls. Several back universal health coverage, a major union goal. All have endorsed labor’s main legislative priority, a bill that would make it easier to unionize workers.

“This is a pro-worker field of dreams,” said Bruce Raynor, president of Unite Here, which represents hotel, restaurant and apparel workers. “The field is much better from a worker’s standpoint than it was four years ago.” [Note: You should recall Mr. Raynor driving the textile industry out of North Carolina and much of the South and the jobs that went with the firms.]

Mrs. Clinton and Mr. Obama are wooing unions partly to prevent Mr. Edwards’s securing the A.F.L.-C.I.O. endorsement and partly to pick up individual union endorsements for themselves. Mr. Obama has repeatedly campaigned on behalf of a unionization drive at Resurrection Health Care’s nine facilities around Chicago.

The A.F.L.-C.I.O. endorsement is prized because it opens the door to major union contributions and to support from the federation’s political program, which contacted 13 million members of unions and union households in the 2006 campaign.

The political director of the federation, Karen Ackerman, said that thanks largely to the A.F.L.-C.I.O. efforts, 74 percent of union members voted for union-backed candidates in the Congressional elections last year.

Mr. Edwards has been by far the most aggressive in wooing labor. He spent a day in April working alongside a nursing home worker at the behest of the Service Employees International Union, and he has marched alongside striking Goodyear workers.

“If our board voted today, it would be leaning toward Edwards,” Leo Gerard, president of the United Steelworkers, said. “He showed up at a Goodyear picket line. He just called and said, ‘I’ll be there.’ That kind of stuff really rings home with our members.”

Mr. Gerard said his union would respect the A.F.L.-C.I.O. policy that its 55 member unions not endorse anyone until the federation decided whether it would make an overall endorsement. The Democratic candidates are scheduled to participate in an A.F.L.-C.I.O.-sponsored debate on Aug. 7 in Chicago. The federation said it was expecting 15,000 union members to attend the debate, at Soldier Field.

The president of the federation, John J. Sweeney, said the earliest it would endorse anyone would be late October. Mr. Sweeney said he doubted that any candidate could muster the requisite two-thirds support.

He cautioned against any rush, saying many unions acted too hastily in endorsing Howard Dean and Richard A. Gephardt in 2004, only to see those candidacies flounder early in the primaries. “There’s merit to delaying, because there are so many good candidates,” Mr. Sweeney said. “We’re seeing a very different attitude this time around. We learned from the last time that we had better be sure that when we endorse we’re supporting the candidate our members want to support. And there’s also an interest in backing a candidate who can win.”

Gerry McEntee, president of the American Federation of State, County and Municipal Employees, acknowledges having learned a lesson in endorsing Mr. Dean.

“We made a big error,” Mr. McEntee said. “The error was that to a large extent it was a leadership decision made without a deep enough effort to see how our members really felt.” Mr. Edwards and the other candidates are also seeking the endorsement of Change to Win, a rival federation made up of the service employees, the Teamsters and five other unions that left the A.F.L.-C.I.O.

The president of Change to Win, Anna Burger, said her group would probably not make a pre-primary endorsement. Ms. Burger also counseled against any rush to endorse a particular candidate, saying it might discourage other candidates from speaking out on workers’ issues. “We should give them space” she said.

Andrew L. Stern, the service employees’ president, also suggested that his group was in no hurry to endorse.

“This time, Edwards has done the most to win our support, but Senators Clinton and Obama, they’re not going to let Edwards sneak by them,” Mr. Stern said. “It’s like Roller Derby. We’re waiting for someone to break from the pack. We’re getting closer, but there’s no particular clarity.”

If neither labor federation endorses, that would open the door to individual unions’ endorsements. Union leaders said that the American Federation of Teachers and the Office and Professional Employees International Union were leaning toward Mrs. Clinton and that Unite Here, the Teamsters and the steelworkers were leaning toward Mr. Edwards. A Unite Here endorsement would be a boon in Nevada, because its Las Vegas local has 40,000 members and could dominate that state’s Democratic caucuses.

Two big unions, the service employees and the state, county and municipal employees, might be too torn to endorse anyone. Their locals in Illinois are enthusiastic about Mr. Obama. Several of their locals in New York favor Mrs. Clinton.

“There’s a certain amount of rooting for the home team,” Ms. Burger said.

Just a couple of footnotes here:
Can you draw any obvious correlation between the fact that education and our government is widely perceived to be dysfunctional despite the amount of money devoted to those undertakings and the fact that those employees are almost completely unionized and have almost zero turnover? Dysfunctional and employed for life does not a good combination for performance make.

And right or wrong, when President Reagan broke the air traffic controller's union did not the Republican Party cement and make unmistakable its honest opinion of unions, not union workers as individuals but union tactics?

And see my post "Labor's Impact on Free Trade: Bad Economics, Bad Foreign Policy, Bad for America" here.

Labor's Impact on Free Trade: Bad Economics, Bad Foreign Policy, Bad for America

It seems that only a few strong sources report on the trade shenanigans of the US Congress. Bob Novak is one of the most clear which he continues in "How Labor Rules." Read it all to belueve it. This is bad economics, bad foreign policy, very bad for all Americans including, I believe, big labor, and bad for America.

Ignoring pleas from outraged South American governments, Democratic leadership of the House this week was adamant about Congress going into its August recess without taking action on free trade agreements with Peru and Panama as promised....

Why did House Speaker Nancy Pelosi renege on her previous commitment? She dances to the tune of AFL-CIO President John Sweeney, who preaches outright protectionism. Hostility toward not only the Peru and Panama pacts but also a vital agreement with Colombia can be traced to influence on U.S. unions by South America's leftist labor leaders, originating in Hugo Chavez's Venezuela.

Beyond U.S. unpopularity in the Western Hemisphere, this exposes deeper problems for the new Democratic majority in Congress. While the AFL-CIO's authority is diminished in the labor movement and among the nation's workers, its chief rules in Congress. Democrats bowed to Sweeney's wishes in voting to end secret ballots in union recognition elections, but the more audacious demonstration of labor's influence on Capitol Hill was getting the House leadership to renege on a bipartisan deal affecting world trade.

Democratic leaders are impervious to the reality that Colombia, Peru and Panama now enjoy one-way trade access to the United States, whereas the agreements would open their markets to U.S. goods. Nor do the Democrats show concern about alienating Uribe and Garcia as Hugo Chavez's menace spreads through the hemisphere.

Sweeney's marching orders are not limited to Latin America. He dismisses the negotiated agreement that finally would open South Korea to U.S. autos as "a losing, one-sided agreement." Obediently, House Democratic leaders declared the Korean pact dead on arrival.