Reprint: Whistling Dick, Hank "The Hammer" Paulson & Hillary Clinton - What Does GDP Tell us About Voters?

Because it is Labor Day - and because I had to work all weekend! - I am issuing a reprint of a blog post written on 16 SEP 2018.  (By the way I can't believe it was almost a year ago!)  The article was prompted by Hillary Clinton's claim she won the parts of the country that produced 2/3rds of GDP.  The article discusses how ludicrous this belief was, and is, and used the example of two people to do it; Henry Paulson and Richard "Whistling Dick" Wright. 

Hope everyone enjoyed their long weekend (at least it was a long weekend in the US!)

Peter

Reprint:
Hillary Clinton has advanced several arguments that claim she really won the 2016 election.  The argument she has advanced most often is she won the popular vote and that means she should be president.  Of course, this argument is not unlike Coach Mike Martz of the St. Louis Rams claiming the Rams won the 2002 Super Bowl because the Rams gained 427-yards on offense and the Patriots only gained 267.  It is completely unsurprising that a professional politician - and two-time loser in presidential politics to boot - would advance an argument that demonstrates such colossal ignorance of the Virginia Plan, the New Jersey Plan, the Connecticut Compromise and the development of the constitution.  More relevant to this website is a claim she made in March 2018.  While speaking to an audience in Mumbai, India, Hillary Clinton claimed she won the areas of the country that represent two-thirds of GDP.  (1)

Hillary Clinton won all the major metropolitan areas of the country and this is the basis for the two-thirds of GDP figure.  While all sorts of office buildings are in New York, LA and Chicago, and many of the country's richest people live there, does that really mean two-thirds of US economic activity takes place in cities like these?  After all, real wealth is not measured in statistics like GDP; real wealth is measured in physical production.  The dollars that comprise GDP statistics only have value when there are things to buy.  A brief examination of New York, LA and Chicago shows that there is very little way in the way of physical production in any of these cities.  The biggest industry in New York is Wall Street finance; in LA it is the film industry; in Chicago it would appear to be graft and corruption. 

Clearly, there is an enormous contrast between the wealth that lies in many cities and the dearth of productive activity in these same cities that creates all this wealth.  We can better see the contrast between the enormous wealth in the big cities of "Hillary's America," and where this wealth is actually created by examining the career of just two people - Hank "The Hammer" Paulson and Richard "Whistling Dick" Wright. 

Hank Paulson graduated from Dartmouth and Harvard.  After a brief stint in the Nixon White House, Paulson spent the rest of his working life at Goldman Sachs.  He took Goldman Sachs public, and over his Goldman career likely earned hundreds of millions of dollars.  His great rival at Goldman was Jon Corzine.  Some idea of just how untalented Paulson is can be gleaned by reviewing Corzine's career after he was forced out at Goldman. (2)  Paulson spearheaded the campaign to have the SEC relax its "net capital rule."  This allowed many of the largest Wall Street banks to take on far more leverage.  All informed people understand that this change was a major cause of the financial crisis.  (Merrill Lynch, Bear Stearns and Lehman Brothers were all done in - in part - by the changes to the net capital rule.)

As Treasury Secretary, Hank Paulson also featured prominently in the financial crisis.  In an atmosphere distinguished by enormous amounts of ignorance and stupidity, a strong case can be made that Henry Paulson was the most ignorant and the most stupid.  Here are some comments from "The Hammer" that demonstrate this ignorance and stupidity; (see the timeline for more details)

• "Problems in the sub-prime market are largely contained." (April 2007)
• "I've seen turbulence in the market a number of times and I can't think of any situation where the backdrop of the global economy is as healthy as it is today." (16 OCT 2007)
• "The long-term fundamentals of our economy are strong, but we believe the economy is going to grow slowly from here.  This is not an emergency."  (18 JAN 2008)
• "The worst is likely behind us."  (06 MAY 2008)

In contrast to Henry Paulson, "Whistling Dick" wasn't hired out of the White House, and didn't attend Dartmouth.  Instead, Whistling Dick was hired in one of the hardest drinking, hardest living towns in the old west - Mojave, California.  The year was 1909 and construction of the Los Angeles Aqueduct was in full swing. (3)  Among the most difficult tasks associated with the aqueduct was the construction of the Jawbone Siphon.  The siphon was an air-tight pipe that allowed water to pass up and over Jawbone Canyon without the benefit of pumps.  Because of the enormous forces involved, the pipe used to construct the siphon needed to be thick.  The siphon was 7.5-feet in diameter and built in 36-foot long sections.  Each of these sections weighed close to 26-tons. (4) While some gasoline-powered vehicles were used on the project, none of these were up to the herculean task of hauling these pipe sections up the canyon hills.  That task would be left to mule teams; not just any mule teams, but teams comprised of an unbelievable fifty-two animals. 

Mule-teams don't just drive themselves; they require a "mule-skinner" to drive them.  While there were plenty of very competent mule-skinners in the west, none were up to the task of handling a team of 52-mules.  At his wits end and not needing another reason to enjoy a cold beer, one of the aqueduct's chief engineers, Harvey Van Norman, went to a local Mojave bar for a drink.  While there, he heard an old-timer holding court on how many mules he could drive.  Van Norman heard all this and called out, "Oh yeah.  How many can you drive?"  The old-timer - who was Whistling Dick - glared at Van Norman, spit some tobacco on the barroom floor and said, "I can drive 'em as far as I can see 'em." (5)

Whistling Dick was hired on the spot, and proved as good as his word.  In large part due to his enormous skill - which didn't require an Ivy League degree to obtain - the Jawbone Siphon was completed.  Outside of some minor maintenance type repairs, the siphon still plays a major role in delivering water to Los Angeles today.  I don't know how much money Whistling Dick earned for his work on the LA Aqueduct.  However, I am fairly certain it wasn't anywhere close to the hundreds of millions that Paulson was paid for his work!

The enormous disparity between the contributions Whistling Dick made all those years ago with the "contributions" made by Henry Paulson today prove how ridiculous Hillary Clinton's argument concerning the GDP "earned" by her voters is.  Sure, by GDP standards, Hank Paulson - by himself - counts for more than all the Whistling Dick's that ever lived.  However, what kind of idiotic standard is GDP?  Whistling Dick did more to advance society than all the Hank Paulson's and all the Hank Paulson wanna-bees on Wall Street put together.  In fact the only thing that can rival the enormous disparity in contributions to society between Whistling Dick and Hank Paulson is the disparity in salary earned by these two men when they made these contributions!  The fact that Hillary Clinton's "GDP standard" would have us believe that a vote from Henry Paulson - and all those like him - is more valuable than the votes of people with more pedestrian salaries can be seen for what it is - completely out of touch with where the real value added economic activity in this country takes place. 

 

Peter Schmidt
September 16, 2018

ENDNOTES:
(1) GDP is gross domestic product.  It is routinely invoked as the widest measure of economic activity in a country.  like much of the voodoo that pervades modern economics, the concept of GDP is actually rife with all sorts of errors and contradictions.  (For example, one dollar of government spending is treated no differently than one dollar of investment.  There is also no consideration for the debt that is taken on to produce a particular GDP.)  The concept of GDP is actually a fairly recent concept in economics, and only started to be widely used in the US during the 1940s. 

(2) Corzine was CEO of MF Global when it went bankrupt in October 2011.  At the time, it was one of the ten largest bankruptcies in US history.  Corzine was credibly accused of using customer funds to meet margin calls.  However, after being elected governor and senator from New Jersey, and chairing the Democratic Senatorial Campaign Committee, there was no chance that Eric Holder's justice department would ever prosecute Corzine.  Corzine was given a lifetime ban by the CFTC however.  He still appears on CNBC.  See the Confederacy of Dunces list for more details.   

(3) Many people don't realize southern California is essentially a desert. Without importing water from other areas of the country, the population of Los Angeles wold likely be limited to a few hundred thousand people.  The Los Angeles Aqueduct was the first of several large waterworks projects which provide the water that allowed a small isolated outpost to grow into an enormous megalopolis of 15-million people. 

(4) Catherine Mulholland, William Mulholland and the Rise of Los Angeles, University of California Press, Berkeley, 2000, p. 175

(5) William Mulholland and the Rise of Los Angeles, p. 175