Wednesday, September 07, 2005


Besides ripping away the roofs of New Orleans, Katrina ripped away the argument that we can cut taxes, properly educate our kids, compete with India and China, succeed in Iraq, keep improving the U.S. infrastructure, and take care of a catastrophic emergency - without putting ourselves totally into the debt of Beijing.

[...] So many of the things the Bush team has ignored or distorted under the guise of fighting Osama were exposed by Katrina: its refusal to impose a gasoline tax after 9/11, which would have begun to shift our economy much sooner to more fuel-efficient cars, helped raise money for a rainy day and eased our dependence on the world's worst regimes for energy; its refusal to develop some form of national health care to cover the 40 million uninsured; and its insistence on cutting more taxes, even when that has contributed to incomplete levees and too small an Army to deal with Katrina, Osama and Saddam at the same time.

These are stupid non-sequitors, which perpetuate a couple of falsehoods: that we have a "trade deficit" with China, one which makes us indebted to them and therefore makes us weak.

The first central flaw of Friedman's is that he hypostatizes a heurisitc device: the figure known as "trade deficit." This figure is derived by subtracting the goods we sell to a country from what we buy from them - AS IF THAT WAS REAL, AND AS IF IT WAS IMPORTANT. It is NEITHER. Here's why the concept "trade deficit" is PURE BUNK (HUGE hat tip Walt Williams):

(1) American companies buy things from China. They pay for them. With Letters of credit, mostly. Effectively: CASH. That's an even-steven/square deal. There is NO IMBALANCE. They get U.S. MONEY (as much as they wanted for the goods); the US company gets the GOODS (for EXACTLY what they were willing to pay for them).

We no more have a "trade deficit" with them (because we "BUY MORE FROM THEM" then we "SELL TO THEM" then you have a "trade deficit" with your grocer when you buy groceries! YUP: you buy stuff from your grocer; you don't sell him a dang thing! You do not have a deficit with him. He gets money; you have groceries. It's an even-steven square deal. You gave him assets, he gave you goods. There is NO DEFICIT.

(2) When the deal is done, China then has MONEY. They can do with it WHATEVER they want. Very VERY often they buy US T-Bills. Because, it s a good safe investment. When they buy T-BILLS, we GET THE MONEY BACK. They get another IOU, this time with a little interest.

(3) The fact that SO VERY MUCH of the dollars that China's get from selling us stuff ends up back here is GOOD for us. And it makes it LESS likely that China will ever do ANYTHING to upset our bilateral relationship.

So Friedman is WRONG. Again. Katrina and China and Osama are as related in REALITY as Moon-beams, salad dressing and firetrucks.

In the end, all Freidman was arguing for was... drumroll please: HIGHER TAXES. No surprise here: That's a liberal's answer for EVERYTHING. And Freidman is NOTHING if he is not a liberal. The "trade deficit" is most often used by isolationists; it's a staple of their demagogery to claim that "it will ruin our economy! And send jobs overseas"

Friedman, though, is pro-trade. So he uses the bogus figure called the "trade deficit" to argue for higher taxes on energy. It's a clever variation on an old favorite Left-wing theme. Which is why the Left loves him.

The second major flaw in Friedman's column is that he perpetuates the LIE that the Bush Administration budget cuts were somehow reposnible for some of the damage which Katrina wreaked on New Orleans. Chief of Engineers LTG Carl A. Strock of the Army Corps has flatly and repeatedly DENIED THIS on TV interviews MANY TIMES - including an appearance tonight on TV. First, the LEVEES DID NOT FAIL. A few canals failed. And the canal which failed MOST (the 17th Street Canal) was one which was COMPLETELY FUNDED AND JUST COMPLETED ACCORDING TO THE MOST RECENT DESIGN SPEC'S. Here's STOCK at a DoD briefing:

"The area where the levee leaks -- where the levee breaks occurred was at its final design configuration. So that was as good as it was going to get. And what does that mean? Actually we knew that it would protect from a Category 3 hurricane. In fact, it has been through a number of Category 3 hurricanes. The intensity of this storm simply exceeded the design capacity of this levee. And those two points-- and others were over top, but those are the two main points of trouble. But that is the basic problem here, is that this storm exceeded the design capacity. ... The other question is, in general is the civil works budget of the Army Corps of Engineers suffering because of the war in Iraq? Not in my opinion. And the reason I say that is that if you look at the funding levels of the corps from pre-war days of 2001 and 2002, it has been a fairly steady level. We are spending a lot of money and the Corps of Engineers is involved in the reconstruction of Iraq and Afghanistan, but we're able to balance that with our human resources and it is not directly affecting our budget. "

ALSO: Clinton cut the Army Gulf Coats budgets. And the NYTIMES caslled them BAD LEGISLATION. SO - if Freidman wanted to be fair in how he applied a lie to fabricate a smear - he would have also criticized Clinton and his OWN editorial board. He did not. He deliberately used discredited line-of-attack against Bush in spite of the fact that it is false, and that he applied it in a biased way. You CANNOT get much lower than that! Only Krugman can, I think. And Herbert. And Dowd. (HEY: That has a kind of catchy ring to it: "KRUGMAN AND HERBERT AND DOWD - OH MY!"

BY THE WAY: does Friedman REALLY think that ANYONE can get elected in this country by calling for HIGHER energy prices or HIGHER engery taxes!? So, he's not only wrong on his facts, and incorrectly applying his incorrect deduction (and idiotically connecting it to the war on terror); he's suggesting that his incorrect conclusions be used to pass bad legislation which would only raise the cost of gasoline, increase unemployment and decrease personal discretionary spending. ON TOP OF THAT (as if that wasn't IDIOTIC enough) campaigning on his suggestion would cost Democrats seats! (This is the only part of it I like! And I'm a Democrat - but a Zell Miller one, NOT a Pelosi-Reid-Dean one!)

His idea - raising the gas tax - would have, though, increased the money the feds could have to spend on whatever pork-barrel projects they like. And that's music to a liberal's ears.

[ASIDE: I suggest that if Friedman really wants high taxes and pretty flood photo opp's (standing in carefully scouted floodwaters - like so many overpaid TV newsanchors!) that he move to GERMANY! He can watch as floodwaters his socialist president (chancellor), wades into floodwaters, and he can have high taxes (on gas and everything else!) and the high unemployment which high taxes cause.]


Pastorius said...

According to the Pastorius Theory of Economics


All trade results in an expanding pie. Here's why:

We don't trade even-steven. We trade things away for things we value MORE than the things we trade away.

This happens on both sides of the equation.

Thus, each side ends up with things they value MORE than the things they traded away.

Thus, each side ends up with more value, and, as a result, more means to produce more of the goods which others will value.

Reliapundit said...

i like that concept very much.

Kyle said...

I'm not sure were Friedman was going with all that, In the past he is on record as supporting the war in Iraq and he has been critical of the high tax welfare states of western europe.
Maybe, I think he is just fed up with the fiscal irresposibilty of the administration, as am I. Even the most ardent Bush supporter has to admit, the current bunch of republicans (including many in congress) are not exactly small governmet types.

Reliapundit said...

kyle - i agree.

Bush NEVER reduced the size or role of govt.


nor has he addressed immigration properly.

and he has avoided confrontation on the courts/judges issues, too.

Bush is way too liberal - if you ask me.

alena said...

Cool Blog, I never really thought about it that way.

I have a Hurricane Katrina blog. It pretty much covers hurricane related stuff.

Thank you - and keep up the thoughts!