Via Pandagon we find this wonderful article in the Wall Street Journal by George Newman. In the article, which is titled "The Markets are Weak Because the Candidates are Lousy," Newman throws the kitchen sink at his topic, bringing in a vast array of disparate arguments.
Unfortunately one thing Newman never gets around to is presenting even the tiniest shred of evidence that the article's titular contention, that the market is weak because the candidates are bad, is actually true.
Even so, the supporting points are ridiculous enough in their own right that I thought the article was in need of a thorough Fisking, so here goes. I'm going to paraphrase most of Newman's points because I want to be less likely to run afoul of fair use.
Investors have heard enough from both candidates in the last month or two to conclude that prospects for a flourishing, competitive, growing and reasonably free economy in a McCain administration are bad, and in an Obama administration far worse. (In fact, the market's bearish behavior over the last couple of months pretty closely tracks Barack Obama's gains.)
This is a good one. Newman doesn't present a graph or any actual data to support the idea that the market's bearish behavior closely tracks Obama's gains. I'm sure that a reasonable person could look at such a graph and conclude there was some relationship... but I have a feeling the graph would make pretty clear that the conventional wisdom, which holds that a tanking stock market tends to help the party not in control of the White House, is a lot more likely than Newman's apparent belief that the stock market is afraid of Barack Obama.
Anyway, that's as close as Newman ever gets to supporting his thesis that Obama's success is causing the market to tank. From here on, he figures we're all on board with this assumption and he begins to explain WHY the prospect of an Obama administration is causing your 401(k) to pull a Shrinky-Dink.
Claim #1: Obama will double the minimum wage and index it to inflation, causing inflation, unemployment, and loss of corporate profits.
Currently the federal minimum wage is $6.55 an hour. Due to legislation signed by President Bush, It's already scheduled to increase to $7.25 an hour in July of 2009. Obama's campaign has called for an increase to $9.50 an hour by 2011. For those without calculators, twice $6.55 (the minimum wage now) is $13.10. Twice $7.25 (what the minimum wage will be if Obama does nothing to raise the minimum wage) is $14.50.
Furthermore, as has been discussed on this blog several times, the idea that increasing the federal minimum wage would lead to big increases in unemployment is outdated. It is unlikely that increasing the minimum wage to $9.50 per hour would have any measurable, direct effect on the unemployment rate.
Claim #2: Obama will appoint a "militant labor boss" as head of the Dept of Labor, and outlaw a secret ballot in strike votes.
Status: Strangely, wildly and unnecessarily false
I searched around for a while to see if I could come up with someone who could plausibly be called a "militant labor boss" and who is also on the short list for Labor Secretary under Obama. My conclusion was that he must mean Richard Trumka, currently President of the AFL-CIO and Obama's presumptive Secretary of Labor. Trumka is a "militant labor boss" to whatever degree any union leader could be described that way - he made his name on the radical notion that a company that offered its employees pensions and health benefits as part of their compensation should have to pay its employees pensions and health benefits. So what Newman is really objecting to is that the Department of Labor would be headed by... a labor leader.
As for the "secret ballot" thing, I'm not sure why Newman characterized Obama's plans this way. No one wants to take away the secret ballot for strikes. There is a vibrant debate about whether it's desirable to switch away from the secret ballot method of actually organizing a union in the first place, but this controversy (known as 'card-check'" in shorthand) has nothing to do with strikes.
Claim #3: Obama will appoint George Soros to head the Treasury Department, and Soros will impose "double taxation" on multinational corporations that will cause them to flee the US.
Status: Unclear, and wildly unrealistic
How to set tax rules for corporations that operate in more than one country is an age-old problem, and new approaches are always being considered. In recent years the old conventional thinking that corporate income should not be taxed twice has come under some scrutiny, and there are other possible ways of calculating income for MNE's that would result in a higher effective tax rate. It's possible, though I'm not aware of it, that Soros has weighed in on some aspect of this question and `that's what Newman is referring to.`
The problem with all of this is that George Soros, a 78 year-old multibillionaire former hedge fund tycoon who spends almost all of his time overseas, has about as good a chance of becoming Obama's Treasury secretary as does George Newman.
Claim #4: Attorney General Charles Ogletree will spend a trillion dollars on slavery reparations.
Status: Ludicrously nonsensical
Of the claims we've reviewed so far, this one is, in a way, the closest to being true. It's at least remotely possible that Obama could appoint Charles Ogletree as Attorney General, and Ogletree has indeed opined in favor of slavery reparations.
Of course, as Attorney General, Ogletree's authority to "champion" budget outlays of any kind would be... none. So it's hard to see how his views on this topic are relevant, especially since, um, he hasn't been nominated to anything at all yet.
Claim #5: Obama will "virtual[ly] outlaw" arbitration, causing corporations to have to spend more money on legal bills and suffer the same terrible fate as the asbestos defendants.
Status: Mostly true
Hey, this one's pretty much correct! Newman is talking about something called "pre-dispute binding mandatory arbitration." If you look at your credit card application forms that you signed when you got your credit card, you will probably see a section dealing with PDBMA. What this section says is that if you have a dispute with the credit card company, you can't take them to court. Instead you enter a proceeding run by a company hired by the company you're in the dispute with, and you have to abide by their decision.
It's true that if this practice is outlawed, corporations will have to spend more in court fees.
None of this has anything do with asbestos.
Claim #6: Health and Human Services Secretary Hillary Clinton would, erm, wait a minute...
Hillary Clinton, currently a United States Senator and recent runner-up for the Democratic Party's presidential nomination, will not be your next Secretary of HHS. I will not debate this.
Claim #7: Obama will create a cabinet-level position devoted to requiring companies to pay women equal pay for equal work, causing corporations to be forced to pay their female employees more.
Status: Hopefully true?
I'm skeptical this will really happen, but hey, here's hoping this is the nut and Newman is the blind squirrel.
Claim #8: Obama will impose a "windfall profits" tax on oil companies, leading to catastrophic results for "exploration, supply and prices."
Status: Categorically, 100% false
We'll work backwards here. The impact of a windfall profits tax on American oil companies on the price of oil would be... none. The impact of a windfall profits tax on the overall supply of oil would be... none. The impact of a past windfall profits tax on future decisions of oil companies to explore for oil would be... none.
Thanks for playing.
Claim #9: The nationalization of health insurance would force insurance companies to cover medical expenses that they currently don't cover.
So, there's one terrible result Newman got right: Health insurance companies will lose profits because they will be forced to actually pay the claims that are submitted to them instead of rejecting them.
I'm suddenly rethinking my support of Obama.
Claim #10: Under Energy Czar Al Gore, five million high-paying union jobs will be created, thus destroying five million existing low-paying, nonunion jobs.
Status: Uh, what?
First of all, this is not how job creation works. Second of all, this is bad why? Oh, right, the deficit. Subsidizing those five million jobs will cost, like, tens of billions of dollars, according to these figures which I just made up.
Can't do that - we need that money to keep fighting in Iraq! My mistake.
Claim #11: There are many very serious people who believe the things that George Newman is saying.
Status: Sadly, no.
When you saw the name "George Newman" you probably thought, as any humble person would, "I don't know who that is because I don't keep up with economics closely enough to keep track of all the top minds in the field."
In fact, you have never heard of George Newman because no one has ever heard of George Newman. He's some guy with an MBA who used to be fairly big in the field of user satisfaction metrics, about 20 years ago.
I'd bet money that Newman didn't even write this; some right-wing think tank wrote it and shopped it around to all the academics they knew to see if they could get someone to put their name on it.
Apparently the biggest name they could get to attach his reputation to this nonsense was... George Newman. And maybe that's all you really needed to know.