July 29, 2005,
Paul Krugman, America’s most dangerous liberal pundit, has his own little Rather-gate on his hands. In his New York Times column on Monday, Krugman wrote about Toyota’s decision to locate a new automobile plant in Ontario, Canada, rather than in Alabama. According to Krugman, workers in the South are too unskilled to build cars, because taxes aren’t high enough to throw more money at education. And according to Krugman, we need socialized health care like they have in Canada so that employers won’t have to bear those costs themselves.
Krugman never mentions the fact that there are other foreign auto manufacturers already operating successfully in Alabama (I just bought a new Mercedes Benz SUV made there, and I can tell you it’s a far finer car than the German-made lemon that it replaced). And Krugman never mentions the fact that Toyota itself is building a new plant in Texas.
What Krugman does mention, instead, is a hateful statement from Gerry Fedchun, president of the Automotive Parts Manufacturers’ Association in Toronto. Krugman writes that Feldchen
claimed that the educational level in the Southern United States was so low that trainers for Japanese plants in Alabama had to use “pictorials” to teach some illiterate workers how to use high-tech equipment.
But Fedchen never actually said those things, and Krugman should have known it. Fedchen denied that he made such statements, in the strongest possible terms, in a letter to the editor published in Alabama’s Birmingham News on July 15, ten days before Krugman’s column was published. Fedchen wrote,
I never used the word “illiterate,” nor would I. I have been in this industry a long time. The use of diagrams and illustrations is common. I was horrified that my remarks were reported as they were.
This is turning into a real embarrassment for the Times. On Thursday the Anniston Star, an Alabama newspaper that had reprinted Krugman’s column in syndication, ran an open letter to Krugman complaining, “you went out of your way to engage in a little Dixie bashing … it would have been nice if you had checked things more carefully.”
Krugman cites no source for Fedchen’s bogus remarks. But it’s virtually certain that his source was a June 30 story on the website of the government-sponsored Canadian Broadcasting Company, which used near-identical language to frame Fedchen’s claim that manufacturers “had to use ‘pictorials’ to teach some illiterate workers how to use high-tech equipment.” Perhaps, by Krugman’s having inserted the penultimate word “plant” in the Times version, charges of plagiarism can be avoided.
How did Krugman find the CBC story in the first place? Do you really need to ask? Most likely he found it the same way he gets so many of his story ideas by trawling the leftist hate-blogs. In this case, the CBC story was linked on July 8 on the Daily Kos, perhaps the foulest (and consequently most popular) of the ultraliberal blogs.
Krugman shot himself in the very same foot three years ago. In his September 17, 2002, Times column, he reported that a former Enron executive later a Bush administration official had sent an e-mail ordering the cover-up of financial misdealings. Krugman’s source was a story in the leftist web magazine Salon, which removed the story over concerns both for accuracy and potential plagiarism. When the official denied having written the e-mail, Krugman was forced by the Times to run a retraction in his October 4, 2002, column, in which he said, “I erred by citing it in my column.”
Setting aside Krugman’s use of fictitious statements to bolster his case, what about his substantive point?
First, he claims that the supposed failure of Alabama’s educational system is due to the state’s voters having rejected “an increase in the state’s rock-bottom taxes on the affluent.” Rock-bottom? Hardly. Alabama’s affluent are taxed at a 5 percent rate. There are seventeen states with the same or lower top rates, including blue states like Connecticut, Massachusetts, Washington, Pennsylvania, and Maryland. Krugman’s characterization is a flat-out lie.
Second, Krugman sings the praises of Canada’s socialized health care system as a lure for high-paying employers who don’t have to bear the costs of providing health insurance. Krugman overlooks the fact that Canada’s system is so bad that the nation’s supreme court recently overturned the government’s medical monopoly, noting that “patients die as a result of waiting lists for public health care.”
Third, if subsidizing big business is Krugman’s idea of the proper role of government, then he should have supported President Bush’s 2003 program that adds a prescription drug benefit to Medicare. According to a story this week in the New York Times, which ran the very same day as Krugman’s column, that program will “give companies $50 billion in tax benefits to help with prescription drug coverage.” If such subsidies are so great, how come Krugman called this Bush program part of “a golden age of pork”?
Fourth, Krugman completely ducks the question of why economic performance in Canada is so bad compared to that of the U.S. If everything Canada does is so wonderful for business, why is their unemployment rate 6.7 percent while ours is 5 percent? And according to Canada’s most recent Labour Force Survey, “the largest [employment] declines over the last 12 months have been in ... motor vehicle and parts manufacturing.” On that, Krugman punts: “I'll have to leave the issue of ... comparative economic performance for another day.”
The New York Times famously defended Dan Rather’s use of bogus documents about Bush’s military service on the grounds that the documents were “fake but accurate.” Is that the case here? Did Krugman use a bogus statement to make a valid case for higher taxes and socialized health care? Nope. Krugman’s statements are fake and wrong all the way.
Donald Luskin is chief investment officer of Trend Macrolytics LLC, an independent economics and investment-research firm. He welcomes your visit to his blog and your comments at email@example.com.