Answer

I accidentally deleted an email asking for clarification of this assertion: "If the US, EU, and Japan gave up all their farm subsidies, as LDC's agriculture commercialized there would be more, not less population flow from third world countryside to city. And, by Friedman's neo-Marxist analysis, this would cause more terrorism." What I had in mind was that further commercialization of LDC agriculture would reinforce trends already established by the ongoing green revolution, which has substantially raised productivity in LDC agriculture and, therefore, already caused lots of rural-to-urban population relocation. For details see Bjorn Lomborg's Skeptical Environmentalist. To whomever asked the question, I hope this helps, and I'm sorry I lost your name.

Link posted by Steve Antler : 10:34 AM

O, my prophetic soul (Part II)

The Chicago PMI was just announced at 51.2 -- also just as I predicted several hours ago. Hey, when you're good, you're good, no? Reuters, ever watchful for anything bad that can be said about the US, reports as if this were another 9/11; Midwest Business Expansion Brakes Sharply: "'The Chicago Purchasing Managers' (index) fell off a cliff, It is an ugly report,' said Cary Leahey, economist at Deutsche Bank Securities."

Link posted by Steve Antler : 10:10 AM

O, my prophetic soul !

I am afraid it is just as we have been predicting. Today's announcement on consumer confidence: The Consumer Confidence Index fell to 76.8, down nearly five points from the revised 81.7 registered in August, the New York-based Conference Board said Tuesday...The decrease was steeper than the reading of 80.5 that analysts had anticipated.

Link posted by Steve Antler : 10:04 AM

Chicago Purchasing Managers' Index

Briefing.com is expecting a 55.5 announcement for the Chicago PMI: "The manufacturing sector moves in sharper cycles than the overall economy and the regional measures move in even shorter, more volatile cycles. The long wait for a sustained upturn in the manufacturing sector appears to have arrived. " I've seen nothing but consumer caution for three weeks, but we're only one small company. Still, on the basis of our experience I'd predict, say, a 53-51 announcement.

Link posted by Steve Antler : 7:00 AM

Monday, September 29, 2003

Maybe it wasn't me?

Was I the first to mention maybe Joseph Wilson's wife might not actually have been a secret CIA operative? Was it Luskin? Anyway, James Taranto has a good summary today that raises this as well as many, many additional interesting questions soon to be answered. Postscript: As I look through the archives I see many graphics still aren't restored. Will get to work on it starting Wednesday. UPDATE: Luskin's got it sorted out: So this answers my question about why the CIA talked to Novak in the first place -- because Plame was a nobody. And it sure sounds like I was right all along about Paul Krugman's too-hasty characterization of Plame as a 'covert operative,' based on nothing more than some baseless speculations he read on David Corn's website -- speculations that he elevated to the pages of America's newspaper of record, and reported there as fact...

Link posted by Steve Antler : 2:20 PM

Calendar and Prediction

Here's the Monday economic calendar. I think personal spending will be below expectations, and tomorrow's announcement on consumer confidence will be shocking. I am not a happy camper this morning, but if our retail phones start ringing you'll be the first to know.

Link posted by Steve Antler : 6:44 AM

Friday, September 26, 2003

Who pays?

Check out Feeney and Moore on Iraq reconstruction: According to [Alexander Sack in 1927]: 'When a despotic regime contracts a debt, not for the needs or in the interests of the state, but rather to strengthen itself, to suppress a popular insurrection, etc, this debt is odious for the people of the entire state. This debt does not bind the nation; it is a debt of the regime, a personal debt contracted by the ruler, and consequently it falls with the demise of the regime.' Beginning to enforce this principle of odious debt would very rapidly defund and thus help topple other oppressive and dangerous tyrants around the globe. If France and Germany want to be repaid, they should start hunting down Saddam and his henchmen. Americans put their lives at risk freeing Iraq. The French, Germans, and Russians not only sat on the sidelines but, inadvertently propped up Saddam by financing his purchases of arms, palaces, and oil infrastructure. It makes no sense to argue that they should get a claim on the new Iraq's assets before we do. For once in our history, Americans should not be forced to foot the bill for the war and the peace -- especially since the means to pay for both is right beneath the Iraqis feet.

Link posted by Steve Antler : 12:44 PM

Coming into its own?

Many (e.g. Instapundit) have argued judicial activism and tort reform are losing campaign issues. Too many people, goes the argument, know and have been helped by lawyers in their day to day life to be swayed by arguments painting them as the problem. But doesn't this finally drive home the issue of judicial activism about as effectively as possible?: A fight between Congress and the courts over a national 'do-not-call' list is mired in legal limbo, with consumers wondering whether promised relief from telemarketers will happen...Supporters of the free government service had barely begun to celebrate an overwhelming vote Thursday in Congress to counter a federal court ruling when they learned that another judge had blocked the list from taking effect next week.

Link posted by Steve Antler : 9:21 AM

Thursday, September 25, 2003

A quick impression...

Family dinner, nephew from out of town, holiday preparations, only caught part of the WSJ DemCandidate Debate. I'm now sitting down to watch the taped WSJ discussion, but a brief thought before I do. Those most loudly demanding restoration of pre-tax-cut rates for "the richest among us" were asked for the specific cut-off point. Who's rich, in other words, and who's merely middle class? They gave long-winded answers with no specifics. This was clearly a question they were absolutely unwilling to answer. I know most of this is rhetoric, not meant to be taken seriously, etc., but I wonder whether a bit of reality has finally caught up with these guys? Do they finally realize they can't raise any significant tax revenue without cutting into the tax cut enjoyed by their two-income-family constituents?

Link posted by Steve Antler : 9:21 PM

This one will be much harder to answer...

For a small manufacturer like me, this story means a substantial hit out of profits: Vienna -- The Organization of Petroleum Exporting Countries unexpectedly agreed Wednesday to cut oil production on Nov. 1, just as most of the developed world will be heading toward winter and demand for heating oil is likely to be rising.... The Bush administration, fearing the economic damage of higher oil prices, had successfully lobbied OPEC heavily before and during the war to keep supplies ample and prices in check. Low prices would still help to spur the economy, but they also limit the amount of money Iraq can raise to pay for its own reconstruction. President Bush has asked Congress for $87 billion to pay for military and reconstruction operations in Iraq next year, a sum that is much higher than expected... And now the Democrats will rightly ask why we should spend $87 billion just to strengthen OPEC? I'm waiting for a good answer. UPDATE: Okay, here's Benjamin Zycher bringing a little sanity to the discussion: The degree to which we are dependent upon foreign oil, however unstable, is irrelevant because the world oil market can have only one price, which all nations must face. Therefore, an oil-supply disruption raises prices equally for all, whether they import none, some, or all of their oil. Nations that import substantial amounts thus are no more 'vulnerable' to the effects of disruptions than those that import little; and subsidies for expensive domestic sources in place of cheaper imports represent, almost literally, money poured down a hole. However, he fails to address the question of cartel-price setting (however ineffective) and appropriate response.

Link posted by Steve Antler : 8:35 AM

Primitive accumulation causes terrorism?

Tom Friedman's knowledge of real-world development economics seems less than his foggy memory of college Marxism: Sure, poverty doesn't cause terrorism...But poverty is great for the terrorism business because poverty creates humiliation and stifled aspirations and forces many people to leave their traditional farms to join the alienated urban poor in the cities -- all conditions that spawn terrorists. Okay, lemme see if I understand. Sure, poverty doesn't cause terrorism, but actually it really does? Anyway, somebody should bring him up to date about third world development and agricultural economics. If the US, EU, and Japan gave up all their farm subsidies, as LDC's agriculture commercialized there would be more, not less population flow from third world countryside to city. And, by Friedman's neo-Marxist analysis, this would cause more terrorism.

Link posted by Steve Antler : 6:56 AM

Trial Lawyers Inc.

First read today's Bartlett: Unfortunately, the tobacco companies seem to have learned nothing from their experience with anti-smoking zealots and are actually opening the door to lawsuits against their food divisions. They don't seem to understand that their enemies are not driven by genuine concerns about health or even by greed, but by ideology. They bring a religious fervor to their efforts that combine a Marxist hatred of capitalism with extraordinary naivete about human nature, mixed together with a tort liability system that is eager to award large damages based on the flimsiest of evidence. Then go here for PDF of Trial Lawyers Inc.: Out of total U.S. tort costs of over $200 billion -- more than 2% of GDP -- Trial Lawyers, Inc. grosses $40 billion per year in revenues, or 50% more than Microsoft or Intel and twice those of Coca-Cola.

Link posted by Steve Antler : 6:36 AM

Wednesday, September 24, 2003

Our Answer to the Brazeau Blogonaut Challenge

"Two common arguments against raising the minimum wage are possible inflationary effects and job loss. Why aren't these issues raised in relation to executive compensation?" [In what follows we assume by "inflationary effects" Brazeau means "price impact" rather than chronic inflation.] First, white collar offshore outsourcing job loss is (rightly or wrongly) coming to be the hot topic in some circles. This is almost certainly related to outlandish executive compensation at the highest levels. The employment impact of any wage adjustment is always felt not only at-level but at near-levels. Just as raising minumum wage affects jobs and wages at minimum level and also for those immediately above this level, so high executive compensation squeezes the upper management budget, possibly leading to white collar outsourcing. Because of basic arithmetic, price impact is another matter. In an industry employing minimum wage workers, the wage bill is a large fraction of total cost. An outlandish CEO salary, by contrast, is almost certainly a tiny fraction of total cost. Raise the minimum wage and you have a substantial cost increase to shift forward to your customers (if you can). Cut out the highly-paid CEO, however, and it's a different story. Even if upper and middle management feel the difference, it is doubtful you'll make any real price difference to your customers. But look, these are "gotcha" answers to what is, after all, a "gotcha" question. The real spirit of the question is this: how can we face our very real discomfort at the apparently growing CEO salaries and stagnating minimum wage rates? First, we've got to remember income mobility exists. People move up the income ladder over time. Few minimum wage workers stay at minimum level all their lives. Second, we should simply ask: what do the workers think? We have a much clearer answer than is generally acknowledged. The Mexifornia phenomenon, it seems to me, can easily close the discussion with few questions asked. This, one of the largest migrations in known history, is best described as a mass movement, a population larger than some European countries, voting with their feet in favor of the minimum wage. And another way to close the discussion is to ask what native born American workers think of the matter. Since the middle of the nineteenth century there's never been a shortage of politicians preaching the evils and inequities of capitalism. This notwithstanding, the doctrine has never caught on with the working class itself. Think of it. That's 150 years of failure. Even though many annointed intellectuals might wish it otherwise, the American working class has never abandoned the ideology of the American Dream to embrace, instead, European-style class politics.

Link posted by Steve Antler : 9:28 AM

New Batch of Iraqi Editorials in Translation from MEMRI

And by the way, electricity's been restored: ...an editorial titled 'A Lit Spot Electricity is Restoring its Health,' appeared in Al-Watan (Iraqi National Movement) and underscores the improvements in electricity: 'Quietly, and without introductions or declarations, electricity has returned to [an] almost normal situation. No one has asked himself or others: How was electricity restored to this level? Was it the work of a magician or a holy warrior who specializes in these matters? The important thing is that electricity is no longer an exception but a normal thing. We hope that it would continue to be a dear guest in our homes, businesses, offices and streets, God willing [thanks to] the efforts of those [who are] loyal.'...

Link posted by Steve Antler : 5:53 AM

Arnold

I've stayed away until now, but this, whose last paragraph follows, is too good to miss: "Our state will prosper again when we commit ourselves in California to [Milton Friedman-style] 'Free to Choose' economics. This means removing, one by one, the innumerable impediments to growth--excessive taxes, regulations, and deficit-spending. If we do this we will bring California back as the untarnished Golden State."

Link posted by Steve Antler : 5:34 AM

Today is the Deadline for the Brazeau Blogonaut Challenge

Watch this space! Later, right here, we answer the following: "The minimum wage expressed in 2000 dollars had a value of $7.80 in 1968, $6.80 in 1979 and $4.75 today. During the period 1990-1999, corporate profits rose 117.4 percent, the S&P 500 rose 297 percent, and CEO pay rose 535 percent. During the same period, average worker pay rose 32 percent; According to Fortune magazine, median compensation for chief executives at 100 of the largest companies rose 14 percent -- to $13.2 million -- in 2002. The average chief executive is now paid 282 times what the average worker is paid, up from a 42 to 1 ratio in 1982. Still, that multiple is down from the peak of 531 to 1 in 2000. "If the minimum wage, which stood at $3.80 an hour in 1990, had grown at the same rate as CEO pay, it would have been $21.41 an hour in 2001, rather than the current $5.15 an hour,'' the (Merill Lynch) report said. Two common arguments against raising the minimum wage are possible inflationary effects and job loss. Why aren't these issues raised in relation to executive compensation?"

Link posted by Steve Antler : 5:09 AM

Tuesday, September 23, 2003

How low, how fast?

Some comments on G7 in Dubai are dramatic: I think we changed policy over the weekend,' said Bob Priore, foreign exchange desk manager at Carr Futures in Chicago. 'They probably didn't say that they're reversing the strong dollar policy. But it's pretty clear to me that they did. As important was the mysterious statement "oil prices are expected to remain stable," which may reflect current realities or even foreshadow future US Iraq policy.

Link posted by Steve Antler : 6:03 AM

Monday, September 22, 2003

The usual Monday stuff...

Here's the economic calendar, don't foget to check the blogroll as well.

Link posted by Steve Antler : 8:30 AM

Sunday, September 21, 2003

In Memoriam Punditwatch

Left of center politicians seem increasingly uncomfortable and dysfunctional outside their own nurturing and unchallenging home environment. On Fox News Sunday this morning, Joe Biden resorted to taunts (rich taxpayers and Tony Snow are "greedy") and loud, disruptive, derisive, and quite fake laughter when challenged by Snow to explain and defend his new soak the rich scheme. Madeleine Albright on Meet the Press: "We are losing people every day. I cringe every time I get up in the morning and I hear that another American has been shot..." Cringe? Cringe? So the real problem is this all so terribly embarrassing?

Link posted by Steve Antler : 9:53 AM

Two great collections of links on income inequality

and lots of good discussion can be found at Drezner and Asymmetrical.

Link posted by Steve Antler : 8:02 AM

Deregulation gains a foothold in the Middle East...

Privatization of everything except natural resources comes to be the new economic reality: DUBAI (Reuters) - U.S.-controlled Iraq Sunday unveiled sweeping reforms allowing foreign investors into all sectors except oil, ending 30 years of state economic control...Iraqi Finance Minister Kamel al-Keylani said Sunday the reforms would 'significantly advance efforts to build a free and open market economy in Iraq,' spur economic growth and speed Iraq's re-entry into the international community...The list of reforms for liberalizing foreign investment, the banking sector and taxes and tariffs read like a recipe devised by Washington for a capitalist Iraq...'Iraq needs jobs, it needs to have growth,' a senior U.S. official involved in Iraq's reconstruction said... The surprisingly broad measures, which end an era of economic domination under Saddam Hussein and the socialist Baath Party, were aimed at improving global opinion before a donors' conference in Madrid next month... "The fact that they ban investment in oil resources is good because it sends the message that America was not only after Iraq's oil," an Arab finance minister who declined to be identified said of the steps.

Link posted by Steve Antler : 7:34 AM

Saturday, September 20, 2003

A Tribute

I love bragging to the kids (anyone 42 and younger) how I saw the dawn of the desktop computer age -- the caveman era of Apple IIe, CP-M, PC-DOS I, and Creative Computing Magazine. Hey, I'm a real hi-tech kinda guy! And still -- there are those rare moments when I feel like an idotic drooling old fart who can't figure out why the TV remote doesn't work the way it should. I must admit I had lots of those during the process of moving EconoPundit to a new web host. By long distance Don Luskin just nursed me through one of the worst of the bad spells, patiently taking me step-by-step through the recovery of EconoPundit's graphics. He is the man -- the hi-tech guy who can not only dissect Krugman's latest nonsense, but also switch a blogger's web host during commercials from the CNN anchor's terminal, say exactly what you're seeing when Frontpage (not Blogger) opens the site, or explain why you should write to index.asp rather than index.htm. Whatta Guy! EconoPundit to Don: thanks!

Link posted by Steve Antler : 2:21 PM

We're Baaaack...

Well, sort of anyway. Many thanks to Don Luskin for helping us in the daunting task of changing web hosts. Graphics are missing but we hope to restore them soon. Update: Most graphics restored, rest will be uploaded Monday when we get back to the office.

Link posted by Steve Antler : 9:07 AM

Thursday, September 18, 2003

An appropriate invitation

Some of the facts emerging in the Grasso resignation are worth pondering: Mr. Grasso had a remarkable rise at the exchange, from a clerk earning $82.50 a week in 1968 to its top executive in 1995. When it was announced last month that he would receive $139.5 million in deferred pay and retirement benefits, a furor erupted as critics noted that he was not just a market leader but a regulator whose pay was set by some of the people he oversaw. His 1968 weekly translates to less than $5000/year, or $2.06/hour, about forty cents above minimum wage. Interestingly and appropriately, we've been invited to participate in this challenge: Dear Steve I am writing to invite you to participate in the Blogonaut weekly question for the Blogosphere. I ask a question of a number of bloggers. The next week I publish the question and their answers. This week I am asking Economics Bloggers: The minimum wage expressed in 2000 dollars had a value of $7.80 in 1968, $6.80 in 1979 and $4.75 today. During the period 1990-1999, corporate profits rose 117.4 percent, the S&P 500 rose 297 percent, and CEO pay rose 535 percent. During the same period, average worker pay rose 32 percent; According to Fortune magazine, median compensation for chief executives at 100 of the largest companies rose 14 percent -- to $13.2 million -- in 2002. The average chief executive is now paid 282 times what the average worker is paid, up from a 42 to 1 ratio in 1982. Still, that multiple is down from the peak of 531 to 1 in 2000. "If the minimum wage, which stood at $3.80 an hour in 1990, had grown at the same rate as CEO pay, it would have been $21.41 an hour in 2001, rather than the current $5.15 an hour,'' the (Merill Lynch) report said. Two common arguments against raising the minimum wage are possible inflationary effects and job loss. Why aren't these issues raised in relation to executive compensation? I would appreciate if you would RSVP whether you plan to participate or politely decline. If you are going to contribute, please respond by Wednesday September 24. If you choose to post your response on your site please forward a link. Please keep responses brief as there will be up to six other responses. Thanks for your hard work. Marc Brazeau Blogonaut I've thanked Marc for the invitation and told him EconoPundit will be most happy to particpate.

Link posted by Steve Antler : 11:33 AM

Wednesday, September 17, 2003

California Recall & Ninth U.S. Circuit Court -- Margin of Error for Alternate Voting Technologies

This evening, Fox News reported the following error rates for alternate polling methods: Punch Cards: 2.5% Optical Scanners: 2.3% Touch Screens: 3.0% Data Vote/Punch: 3.2% I am surprised at how low some of these are. I'd thought no polling method had a margin of error less than 3.25%. UPDATE: Here's a link to the story thanks to SadlyNo.

Link posted by Steve Antler : 6:31 PM

California Recall & Ninth U.S. Circuit Court

Here's a link to the Rasmussen Reports poll. Notice how "weakly supportive" are the supporters as compared with how strongly opposed are the opponents: Republicans and Democrats have wildly different perspectives on the court ruling. Republicans oppose the ruling by an 85% to 13% margin. Democrats favor the court-ordered delay 56% to 33%. Among those unaffiliated with either party, 29% agree with the court and 62% disagree.

Link posted by Steve Antler : 2:27 PM

Tuesday, September 16, 2003

Iraq Reconstruction and the US Economy

AP: "[The] assessment of private economists [is] the surging federal deficits, while helping to boost a lagging economic recovery this year and next, will mean trouble down the road in the form of rising interest rates and higher inflation." NYT: "Mr. Bush's request for the next year would bring American spending on Iraq to some $150 billion...For now, Washington will have to pay most of the bills, and those sums cannot simply be added on to a deficit already nearing a half-trillion dollars. The $87 billion Mr. Bush seeks is equal to a fifth of next year's civilian discretionary spending at home -- more than the combined total for education, job training, and employment and social services." Are these and similar alarms warranted? In the presence of tax cuts, will a surging deficit created by new Iraq spending raise interest rates and inflation? I've found answers using Yale University's Fairmodel to simulate the economic impact of the Iraq Reconstruction Program so feared by the New York Times and others. I will publish results of the simulation here over the next several days, adding results and comments as I go. I. The Problem Put simply, we're looking to find the likely impact of an increase in federal spending of approximately $150 billion -- just a bit under double President Bush's requested $87 billion. The New York Times offhandedly suggests this could be spent in two years. Accordingly I spread the hypothetical new spending over eight quarters, adding $7 billion to 2003:4's projected spending, $17 to 2004:1, $18 for each quarter between 2004:2 and 2005:1, and wound down with $17 and $7 for the last two quarters. When graphed, the new spending looks like this: Interesting, no? On the one hand, the blue line is the classic pig-in-a-python, a huge lump of potentially indigestible (and perhaps inflationary) public spending. On the other hand, the new reconstruction spending completes the trend, seemingly averting a potentially disastrous falloff in federal outlays. But there's no point in interpreting this diagram. It is what it is. The question is: what are its implications for the rest of the economy? (Technote, just for techies: the new spending has been adjusted to $92 to meet Fairmodel's data input requirements.) II. Burgeoning Public Debt Have you ever noticed that nothing but deficits and the public debt ever seems to burgeon? Couldn't we maybe find other ways to use this word? Anyway, the costs of Iraq reconstruction exert an impact on the level of indebtedness of the federal government, although it is pretty clear they don't cause the public debt to burgeon, since it was already in the process of burgeoning, owing to the recession and partly (we can sort this out another time) the tax cut: APPROXIMATE FED INDEBTEDNESS $b =====WITH RECONSTR.===BASELINE 2004:4===-3979.478====-3925.593 2005:4===-4321.646====-4240.703 2006:4===-4692.041====-4603.844 Interestingly, the total reconstruction impact on the public debt -- an increase of $88 billion -- is less than the new spending of $150 billion. Some of the spending pays for itself "on the way" through the operation of the multiplier effect (techie note: we're talking dynamic multiplier here), who's numerical value is about 1.27. Because of the multiplier, the extra spending generates extra tax revenue which partly pays for the new spending. Okay this may all be well and good, but even if part of the burgeon is eliminated by these new tax revenues, aren't we still passing on a huge burden to our kids by running up this huge debt? Frankly, I sometimes worry my daughter is going to sue me over all this! Actually, in court I'll probably produce the following diagram: That's right, whenever someone tries to scare you with some kind of economic number, you've got to find some historical values to see if your interlocutor has a point. In this case, the answer is "there's nothing to be afraid of." The indebtedness numbers are going off the chart, true, but so are the GDP numbers. As a fraction of GDP, federal debt is well within boundaries of normal historical values -- with or without Iraq reconstruction costs. (Your monitor may have enough resolution to show a teeny-weeny bit of "blue" at the very end of the plot. That teeny-weeny bit of blue is the impact of Iraq reconstruction. Not too dramatic, to say the least.) III. Inflation Iraq reconstruction costs exert a clear inflationary impact on the US economy, there's no doubt of that. Here, along with recent historical values, is the picture: The effect, once again, is measurable but trivial. A few tenths of a percent in annual inflation of consumer prices is all the difference the Iraq reconstruction makes. At the end of all horror movies, after the monster is killed he always springs back to life again for one final shock. Can that happen in economics? Even though we've covered inflation, we have to ask -- what about interest rates? Can they rise, choke off investment, and -- wait, what's that over there? Why it looks like ... AAAAAGGGHGD !!!!!!! IV. Interest Rate Effects Okay, everyone settle down. Let's get serious. There are many ways a major program of deficit spending can affect interest rates. The textbooks tell us of the crowding-out effect -- as the new federal spending increases aggregate income, households shift cash balances from speculative to transactions balances, raising interest rates and choking off a certain amount of investment. Inflationary expectations may also raise interest rates, and there are many other possibilities as well. Detailed examination of the results can identify which individual or combination of explanations bring about this result, but for now let's just state the conclusion: the costs of Iraq reconstruction will exert an impact on all interest rates, the more dramatic on short- rather than long-term ones. But once again the words "measurable but trivial" spring to mind. How much private sector investment will be crowded out by these interest rate effects? With an Iraq Reconstruction Program (IRP) total real 2004-2006 investment sums to $3.45 trillion. Without the IRP, the sum is $3.40. There is no interest crowding, in other words. Investment depends not only on interest rates but also on income, and in this case income expansion seems to be outweighing the interest rate effects. Here's a picture of investment with and without the IRP. As you can see, the disaster predictions of interest rate crowding just aren't warranted. No breakdown of society, no cats and dogs living together -- just moderately increased investment activity. And this of course leads us to ask...does this, uh, change the jobs picture at all? And what about that all-important economic statistic, economic growth? V. EMPLOYMENT AND GROWTH A spectre haunting this web log is the US unemployment rate -- how it is calculated, how its ups-and-downs can portray good news as well as bad in either direction, and how its reductionist concentration of data can so easily and opportunistically be misused by politicians, journalists, and (yes) sometimes even by economists. If (as I doubt) the purpose of the IRP is to lower the unemployment rate before the 2004 elections, the IRP will be only slightly successful, causing a slight decline from 5.5% to 5.3% more-or-less in time for the election, and a slight rise somewhat later. The impact on this blog's celebrated "jobs dubya" is a little more dramatic: More employment, and sooner, is what we can expect. Once again, good news for anyone wishing George W. Bush a second term in office. Keep in mind three things. First, none of this proves the IRP is political in nature. (Charging this is all political is a foolish as claiming the Democrats would genuinely like to see the economy in a shambles because it would guarantee them the election.) Second, the effects of IRP are extremely minor. This $150 billion reconstruction package is far from the jobs-creating, prosperity-inducing New Deal style program advocated by, for example, Dennis Kucinich. Indeed, the numbers show just how hard it is for government to, as they say, "create jobs." Finally, and most important, what the simulation seems to be telling us is the increased IRP spending temporally re-arranges what the economy "planned" for us all along without really changing anything substantive. You can't work with a big model without being bullied into the realization the US economy is more like an oil tanker than a sailboat. Politicians of all parties perpetually inflate their importance by acting as if the economy is just a big, polished, sleek yacht, responsive to the slightest touch of the captain's finger on the wheel. The all-knowing, ever-wise pipe smoking captain -- the informed policy-wonk president, senator, whatever -- stands at the helm, steering throughout the night allowing us to sleep knowing we're being taken care of. But in reality the economy is a massive oil tanker, unimaginably heavy, with so much mass and momentum the captain must plan even the smallest deviation in course days in advance. Nothing shows this better than the growth picture, with and without the IRP: It is as if someone took a straight-line curve and "pushed" it inward, causing it to bundle up on itself. First, a growth spurt, up to almost 6%. Then decline to two quarters of near-zero growth. And then recovery -- back to where we would have been in the absence of the IRP. VI. BOTTOM LINE The big surprise appears to be how little of an impact a $150 billion IRP will actually exert on the US economy. The public debt will increase slightly, but by less than $150 billion. A slight inflationary uptick (followed by a downtick) will be produced. All interest rates will be increased, but only very slightly, and despite these increases investment will go up rather than down. The unemployment rate will drop to 5.3% instead of 5.5%. The Republicans, by election time, will be able to boast of having created 4.5 rather than 3.4 million new jobs. And we will have a growth spurt, followed by a short, swift downturn which brings us back to the long term equilibrium path from which the IRP temporarily shocked us away. Comments and suggestions on this work are strongly encouraged, especially from those opposed to the war. I will continue this investigation to find what I may be missing. For now, however, the best available evidence says we can easily afford to rebuild Iraq.

Link posted by Steve Antler : 9:12 AM

Thursday, September 11, 2003

I feel Katz's pain...

We wouldn't want this to get around, but EconoPundit's secret identity is small manufacturer. Saying more would give away the secret, but we can say in this case we fully empathize: It costs Paul Katz's company, Triplex Manufacturing, about $18 to make a taillight for a Ford pickup, which the Chicago manufacturer then sells to the auto parts aftermarket for $27. With annual revenue of $12 million, Triplex, which Katz's father founded in 1949 and Katz has run since 1975, has had a pretty good run. But over the past decade, several Chinese firms have begun making the same part, selling it for $19 and sometimes even less. Their secret? A Shanghai factory worker earns $207 a month, while most Triplex employees make that in two days or less. 'You just can't compete with that,' says Katz, who laid off 12 workers last month. UPDATE: Brad DeLong says: Unfortunately, the Bush Administration focused on passing tax cuts that will do much more to cut taxes late in the decade than they do to boost employment now. And what's the Bush Administration's response to bad unemployment news? To blame China. Hey, who knows? But Brad, consider this: I used to buy from a small Chicago manufacturer who suddenly found himself competing with a from-China import price less than his materials cost. Trust me, you'd think different kinds of thoughts if you met a payroll every week.

Link posted by Steve Antler : 8:22 AM

Paying the Bills for Iraq

Paying the Bills for Iraq: "Mr. Bush's request for the next year would bring American spending on Iraq to some $150 billion. The most costly element is military operations[, but long]-term military costs are unknowable because they depend on how many troops will be needed, and for how long...Reconstruction costs are more predictable. A further $50 billion to $80 billion will be needed over the next few years -- more if continued sabotage delays the rebuilding of electricity grids and oil pipelines...For now, Washington will have to pay most of the bills, and those sums cannot simply be added on to a deficit already nearing a half-trillion dollars. The $87 billion Mr. Bush seeks is equal to a fifth of next year's civilian discretionary spending at home -- more than the combined total for education, job training, and employment and social services.

Link posted by Steve Antler : 8:09 AM

These stories will persist until...

Journalists will keep writing these until enough people explain to them in short sentences how nobody but Greenpeace believes international trade is exploitative any more: ...a widespread and fashionable view is that the United States is a classically imperialist power bent on controlling global oil supplies and on military domination. That mood has been expressed in different ways by different people, from the hockey fans in Montreal who boo the American national anthem to the high school students in Switzerland who do not want to go to the United States as exchange students because America is not 'in.' Even among young people, it is not difficult to hear strong denunciations of American policy and sharp questioning of American motives...'America has taken power over the world,' said Dmitri Ostalsky, 25, a literary crtic [sic] and writer in Moscow. 'It's a wonderful country, but it seized power. It's ruling the world.

Link posted by Steve Antler : 7:35 AM

Wednesday, September 10, 2003

Why don't they hate us?

Get over to OpinionJournal right away. There's an intial report on a Zogby-consultation "first scientific poll of the Iraqi public" conducted in Basra, Mosul, Kirkuk, and Ramadi. Guess what? Even though there's lots of diversity of opinion, they don't hate us after all: Asked to name one country they would most like Iraq to model its new government on from five possibilities--neighboring, Baathist Syria; neighbor and Islamic monarchy Saudi Arabia; neighbor and Islamist republic Iran; Arab lodestar Egypt; or the U.S.--the most popular model by far was the U.S. The U.S. was preferred as a model by 37% of Iraqis selecting from those five--more than Syria, Iran and Egypt put together. Saudi Arabia was in second place at 28%...Our interviewers inquired whether Iraq should have an Islamic government, or instead let all people practice their own religion. Only 33% want an Islamic government; a solid 60% say no. Okay, so many US politicians are out of touch with the true opinions of (a) the Iraqi public and (b) the American public: According to yesterday's ABC poll, the public supports U.S. military presence in Iraq by 67 percent to 30 percent. Sixty-eight percent support the troops and the Bush administration policy on Iraq. Only 29 percent support the troops but oppose Bush policy. By 52 percent to 45 percent the public believes that the U.S. is doing a "good" or "excellent" job restoring order. And by an impressive 65 percent to 31 percent, Americans believe that the Iraq war is part of the war on terrorism.

Link posted by Steve Antler : 10:11 AM

The Gloomy Forecasts Begin

It begins. Many reports on the size of the deficit and how this implies a drag on the US economy: President George W. Bush's request for US $87 billion in new spending for Iraq and Afghanistan will worsen already gloomy forecasts for the budget deficit - sending it above the half-trillion-dollar mark next year - and could ultimately translate into weaker economic growth in the United States...That is the assessment of private economists who believe the surging federal deficits, while helping to boost a lagging economic recovery this year and next, will mean trouble down the road in the form of rising interest rates and higher inflation...This scenario of a classic 'guns and butter'' conflict between competing military and domestic priorities was visibly demonstrated in the 1960s when President Lyndon Johnson's 'Great Society'' programs ran up against escalating costs for the Vietnam War, triggering higher inflation and rising interest rates. (Interesting how the author seems to misunderstand what he oh-so-sophisticatedly calls the "classic guns and butter conflict". Anyway...) UPDATE: Sean M. Davis asks: Who are these "private forecasters" predicting decreased economic growth due to the budget deficit? I ask that because the Blue Chip Economic Consensus is forecasting GDP growth of 4.5 percent in the third quarter, 3.9 percent in the fourth quarter, with GDP growth averaging 3.9 percent through the end of 2004. That includes an increase in business fixed investment of a whopping 10.5 percent in the third quarter of this year. I'd be interested to see how those figures would affect Ray Fair's presidential vote model. The vote model I leave to others, but I'm putting the $87 billion funding request into Fairmodel later this morning. We will see what predictions come out.

Link posted by Steve Antler : 8:28 AM

Welcome to the Welfare State

Those of us who have lived in Canada will tell wonderful stories of easy, inexpensive health care for those normal, simple problems faced by the young and healthy. Then again we'll tell you all those nightmare stories of how long and hard it was to get taken care of when middle age moved in and things got more complicated. There's nothing magic about a single-payer system. It is just one big HMO -- only you can't switch plans if you're willing to pay for different coverage. The France heatwave story shows this with a vengance. In health care, as in everything else, the welfare state demands significant trade offs -- and these can look quite ugly: The high death toll has triggered an angry debate in France over shortcomings of the health system. The government is considering eliminating a national holiday to raise revenues for elderly care...The French lifestyle has also come under scrutiny, since some of the elderly victims died alone in their homes while families were away on lengthy August vacations. Authorities reportedly had difficulties reaching survivors who were away."

Link posted by Steve Antler : 6:52 AM

He wasn't Strangelove, and Strangelove wasn't Jewish

Robert Musil explains why the NYT's coverage of Edward Teller's death is uninformed, inaccurate, and offensive. And on the new Bush request for Iraq funding, at last -- sanity! In the long run, the Iraq investment will bear a huge return, comparable to the return realized from the demolition of the Soviet Union and the reconstruction of Russia. The Soviet excursion was expensive for the West, both in terms of military investment to confront the Soviets and in terms of losses in post-Soviet commercial investment. But there's no question that was money well spent.

Link posted by Steve Antler : 5:39 AM

Tuesday, September 09, 2003

Notice

For Econ 338 and 438 students (u know who u are!) there's some new stuff at Suggested Supplementary Readings. (Just look it over quickly, don't agonize -- trust me, we'll talk.)

Link posted by Steve Antler : 2:02 PM

Five minute adventure...

Want just a whiff of the military life without all that risk and inconvenience? Check out The Command Post, especially its, uh, shall we say "lively" commentary exchanges. For example: Hey, 'x', I have a graduate degree in engineering, so don't presume to lecture me about 'my money'. That 87 billion is chump change for a nation with an 11 TRILLION dollar GDP. And where do you suppose that 8.7E10 dollars is going? Into a pit somewhere? NOPE. As for Clinton, his parsimony, his 'I don't give a F**K about national security attitude, and his 'kick the problem into the next guy's administration' is a big contributor to our current challenges. In short, you have demonstrated you know the price of everything and the value of nothing. To help you separate your head from your colon, Here is a homework exercise for ya, if you have the gonads to try it: 1. What percentage of GDP is 87 billion dollars? 2. What percentage of government spending (all levels) is it? 3. What percentrage of federal spending? 4. Of federal DISCRETIONARY spending? 5. Of national pet product spending? 6. Of national soft drink spending? Good luck, and thanks for playing. MG"

Link posted by Steve Antler : 7:37 AM

Another contract with America?

Thomas Sowell calls for a new one between the Republican Party and African American voters: In an increasingly education-based and high-tech economy, lack of a decent education is a lifetime sentence to the bottom of the pile. Liberal judges and the American Civil Liberties Union may feel good about themselves for making it hard to expel or suspend disruptive students in ghetto schools, but the price of their little glow of self-righteousness will be paid by millions of other people -- for as long as they live. Another exercise in self-righteousness by another key Democratic Party constituency is environmental extremism. When they make it an ordeal, and sometimes virtually impossible, to build homes or offices...that means sky-high housing prices that working people cannot afford and fewer businesses to provide jobs that they need...Census data make it painfully clear that blacks are being forced out of many communities where affluent liberal Democrats have had unchallenged control for years and have let the green agenda run amok...Liberal Democrats do a lot of talking about a need for "affordable housing." The time is overdue for Republicans to call them on it, expose their hypocrisy, and get out the message that there is no free lunch -- because those who end up having to pay are often those who can least afford the green agenda.

Link posted by Steve Antler : 7:03 AM

Monday, September 08, 2003

Genuine Professionalism at Economagic

We do lots of charting and data retrieval thru Economagic.com. On the same afternoon NBER finally announced the end of the last recession Economagic's charting routines were reprogrammed so the most recent mild recession (getting to look kinda long in the tooth chartwise by then) would finally show an endpoint. When preparing a couple of demos for a class this morning, I discovered Economagic charts were again showing no endpoint for the most recent recession. ("Okay class, even though it says we're in a recession we're not, uh, even though unemployment is, well, higher than we'd like, but still lower than back in the seventies and eighties, uh, and GDP is growing even though Krugman says it isn't, and, well, maybe we should take a break...") I emailed Economagic.com with my concern, expecting no response at all. (My model was Blogspot in the old days, or my current ISP.) Well Economagic.com proved they're genuine professionals. I got a response within the hour thanking me for pointing out the problem. (It turns out they overlooked updating the multiple chart routines, a problem easily fixed.) Once again: for excellent service, reasonable rates, and a most impressive database, check out Economagic.com. (No, I don't own stock, I'm not a partner, I'm just a subscriber pure and simple.)

Link posted by Steve Antler : 2:30 PM

From the Department of Quotable Quotes

James Taranto: "If President Bush really were 'a miserable failure!', Gephardt wouldn't need to harangue us about it. True failure speaks for itself."

Link posted by Steve Antler : 12:52 PM

Bubble explains all?

I continue to be awed by Ray Fair's counterfactual studies (find an online draft of his forthcoming book here) of US-in-absence-of-tech-stocks-bubble (which he contends is the prime mover of anything unusual about the 1990-2003 US economy). Prime mover or not, it appears almost nothing would have been different in the absence of the runup in stock prices. Just degrees or magnitudes change, but not actual conclusions. For example: In the absence of the bubble, we develop a surplus and (I suppose!) a recession-induced deficit. The only difference is one of degree, not kind. UPDATE: Of course that miserable unemployment rate stands out like a sore thumb in all of this. Hypothesis: the unemployment rate is a political doctrine rather than a genuinely useful economic statistic. For dozens of reasons (e.g. it can never be zero but people think it should be anyway, even when it is going down or up things can be getting better or worse) it usually conceals more than it reveals, because it is so easy to misuse.

Link posted by Steve Antler : 8:30 AM

A Wartime Editorial

William Safire: In Cairo today, the Arab League considers whether to invite Hoshyar Zebari, the Kurd recently appointed foreign minister by Iraq's Governing Council, to provisionally occupy Iraq's seat. He is eager to make the three-hour flight to regional legitimacy. What's in it for Arab dictators who want no part of a democratic experiment in their region? Apparently the recent exercise of U.S. will and power has been taken to heart; to accommodate reality, the Arab nations are likely to play ball with post-Saddam Iraqis, expecting (1) to continue Iraq in the OPEC cartel, (2) to ensure Iraq's support of Palestinians against Israel and (3) to prevent export of anti-Sunni zealotry. If President Bush abdicates control of Iraq to the U.N. soon, Arabs may gain all that and more... Some European media that had mistakenly warned of a long, high-casualty campaign, and were discomfited by the ease of our military victory, now claim vindication. They cite the present lack of proof of mass-destruction weapons, the lawlessness that followed Saddam's emptying jails of all criminals, and continued sniping and bombing. Iraqis are shown on TV blaming American troops -- not Baathist-paid terrorists-- for lack of electric power, lack of water and lack of protection... In what is called here "the Daily Schadenfreude," the impression is being marketed that the rebuilding of Iraq is a colossal flop. That Arabs are culturally incapable of self-government. That Islamic fundamentalism will sweep away any Western notions of individual dignity. That while Saddam was admittedly a "bad guy," the hundreds of thousands of his victims who are missing are none of the West's concern, and that a cabal of neocon hawks manipulated President Bush into war. So goes the failuremongers' pitch. Their purpose, beyond justification of their decade of appeasement, is to cast as both ignoble and doomed this most necessary long-term counter to state-sponsored and fanaticism-driven terror. To wear down our will, they emphasize the likelihood that as long as we stay to rebuild, terrorists will shoot at our service members and relief workers and will sabotage power plants and oil fields. As we return fire, inevitable pictures of bloodied innocents will be shown on home screens. In the coming political campaigns, failuremongers in Europe and at home will exploit reactions to these costs in blood and treasure. They will beat the drums to abandon control to a feckless U.N. bureaucracy. George McGovern's slogan of 1972 will be echoed by de Villepin Democrats and some panicky Republicans: "Come home, America." On the European prejudice ("Arabs are culturally incapable of self-government") please see our Lawrence of Arabia theory from last week.

Link posted by Steve Antler : 6:52 AM

A Wartime Address

Full text of the Bush speech at Drudge.

Link posted by Steve Antler : 6:30 AM

Financial Times: Asian debt withdrawal threat to US deficit

According to Jenny Wiggins: Economists fear that Asian investors, who are the largest foreign owners of US Treasuries, may cut their holdings of US government debt, withdrawing a key source of financing for America's large current account deficit. The worries have been fuelled by recent sharp falls in the price of US government debt. Weakness in the US Treasury market could make Asian investors "less willing" buyers of debt securities, said Marcel Kasumovich, head of G10 foreign exchange strategy at Merrill Lynch. He said there had already been a "noticeable shift" downwards in the amount of debt issued by mortgage financiers Freddie Mac and Fannie Mae being bought by foreign investors. Asian investors have piled into the US Treasury markets in recent years, helping to push Treasury prices high and interest rates low. China, Japan, South Korea and Hong Kong owned a combined total of about $696bn in Treasuries at the end of June, up from $512bn in December 2001, according to data from the US Treasury. Okay, well, we'll watch things closely. I'd be worried but for the fact if I've been reading the same story -- change the names, magnitudes, dates, leave the rest just as it is -- since 1985.

Link posted by Steve Antler : 6:25 AM

Monday...

Here's your economic calendar.

Link posted by Steve Antler : 6:18 AM

Why would anybody need a personal genome?

Yahoo! News - Scientists Set Goal of $1,000 Genome: "WOBURN, Mass. - It's been three years since scientists completed a rough draft of the human genetic code, but nobody's rushing out yet for a personal DNA analysis. That's because the first draft took 12 years and cost billions of dollars. Today, the cost has fallen, but only to around $50 million. The target price is orders of magnitude away: $1,000 for an individual's DNA sequence." I clearly remember the days when people asked why anyone would want a "personal" computer? It was like asking about a "personal oil refinery." So I suppose in a few years we'll learn why one would want his/her personal genome, and as for why we'd want one, well, I'm sure we will. UPDATE: David Mercer responds: Steve, for just one example, if I had my personal genome on my hard drive, when scientists publish something like the peer reviewed research this last week by Israeli scientists, where they found the marker gene for lung cancer risk from smoking, I'd like to search my genome for the bad gene. No need to wait for a messy blood test to be developed, be tested and licensed by the FDA and others of such ilk. It will let me know what conditions, traits and risk factors that I have, as they are discovered and decoded. As more of the map to the genome is decoded and published, we can search are own dna to know whether we have a risk factor or not, or a latent recessive. It lets me the medical consumer take control of my medical destiny.

Link posted by Steve Antler : 6:15 AM

Sunday, September 07, 2003

In Memoriam Punditwatch...

Condi Rice on Fox News: US may ask for UN IRAN censure. (Parenthetically, for everyone who doesn't know, there exists a first use theory that might be called the Rafsanjani Doctrine: If one day, [Rafsanjani] said, the world of Islam comes to possess the weapons currently in Israel's possession [meaning nuclear weapons] - on that day this method of global arrogance would come to a dead end. This, he said, is because the use of a nuclear bomb in Israel will leave nothing on the ground, whereas it will only damage the world of Islam. What's coming is easy to see. When/if Iran comes into possession of a nuclear device, the immediate demand is for Israeli/US nuclear disarmament. The only question is how strong will be European support for such a demand, and whether any in the US would ally themselves with it.) Continuing with Fox News Sunday, Carl Levin displayed lots of that puzzling, disturbing, incoherent and self-enclosed anger I've seen in anti-Bush friends and relatives. His worry: we are playing into the terrorists' hands by allowing them to portray American presence as Western imperialism. I guess he hasn't (a) noticed this is the position taken by the official papers of many of our "Arab allies" and (b) seen all Iraqi editorials appearing in the new Iraqi free press denying this. Let's make sure we get this straight. Carl Levin wants more participation by nations whose official newspapers call the US a Zionist-Imperialist aggressor, and he hasn't noticed even the official paper of the Iraqi Communist Party denounces this position as a sham! Ed Gillespie on Meet The Press: "...When Bill Clinton ran against President Bush he didn't compare him to Saddam Hussein or the Taliban...The kind of words we're hearing from the Democratic candidates go beyond political debate. This is political hate speech..." (UPDATE: Find extensive quotes, story at Drudge.) Finally on the cultural front: Ebert & Roeper give a positive review for Istvan Szabo's new (?) cinematic treatment of Wilhelm Furtwangler's poswar De-Nazification interviews Taking Sides. Looks like a genuine don't-miss. (And when will somebody film the Herbert Von Karajan story?)

Link posted by Steve Antler : 10:04 AM

A Communist Party with Good Sense?

A new batch of Iraqi editorials in translation now available from MEMRI: The weekly organ of the Iraqi Communist Party, Tareeq Al-Sha'b, wonders in its editorial how it is that the Arab countries and Arab media tout the terror activities in Iraq as "'patriotic resistance," but "massacred such 'resistance' when it happened within their borders..." ...They [the Arab countries] are trying to use it to cover up even worse positions in the past in which they supported the regime of mass graves. They are dreaming about its return [the Saddam regime] to obliterate what is left of our Iraqi people and its human resources, but a dream such as this will only bring them shame and defeat." Remember the phrase -- it comes to us in translation: "the regime of mass graves."

Link posted by Steve Antler : 2:25 AM

Saturday, September 06, 2003

"Natural" Rate 5.5%? No lower?

This is from Ray Fair's forthcoming book, a draft of which you can read online here. After a procedure which we might frankly characterize as not for the faint of heart*, the author demonstrates US unemployment would have bottomed out at 5.5% in the absence of the tech stock bubble. I'd be extremely happy to be persuaded otherwise, but to me this demonstrates the US natural rate of unemployment is 5.5%. Bad news for politicians or anyone else whose job depends on getting the unemployment rate back down to its year-2000 level. ================================ * "The estimated residuals are first added to all the stochastic equations, including the trade share equations, and then taken to be exogenous. This means that when the model is solved using the actual values of all the exogenous variables, a perfect tracking solution is obtained. The actual values are thus the base values. Equation 25 is then dropped from the model, and the value of CG in each quarter is taken to be $131.2 billion. The model is then solved. The difference between the solution value and the actual value for each endogenous variable for each quarter is the effect of the CG change. The solution values will be called values in the "no boom” case." (pp. 107-8) UPDATE: David Malpass writes: The weak job situation in the establishment survey doesn't undercut [the] case that a strong, sustainable economic rebound is underway... ---It's not so much that unemployment is a lagging indicator -- the recession ended in November 2001 and was the shallowest on record. ---We think jobs are being lost in the establishment survey because job growth was so strong in the late 1990s. Unemployment was pushed down to 3.8%, an unsustainable employment level related to Nasdaq 5000 and the super-strong U.S. dollar. ---Japan had the same experience in 1992-1995 after its strong currency boom. The super-strong yen of the late 1980s caused a bulge in investment and jobs, which gave way to a decline in jobs in the early 1990s. We would like to see robust job growth in all the surveys all the time. However, given the unique deflationary nature of the 2001 recession, robust job growth in the establishment survey may have to wait a bit longer for a less risk-averse business community and a bigger head start for business investment. Lots more here, check it out.

Link posted by Steve Antler : 11:18 AM

Congratulations

If you can read this, good for you! Blogger's been down all day, and this is the first contact I've been able to make.

Link posted by Steve Antler : 11:10 AM

Friday, September 05, 2003

What Reuters didn't tell you...

Here's the story: WASHINGTON (Reuters) -- U.S. employers cut jobs in August at the fastest pace since March, the government said in an unexpectedly grim report on Friday showing Americans are struggling to find jobs even as other areas of the economy are recovering... They left out the part about average hourly earnings recovering: Once again, here are the ECM predictions Real GDP and % increase===Unemployment Rate 2003/3 9705.0 +4.1% ====6.2 2003/4 9791.2 +3.6% ====6.0 2004/1 9875.4 +3.5% ====5.9 2004/2 9957.7 +3.4% ====5.7 Today's 6.1% announcement is right on track, but the monthly job gain/loss is less than ECM's prediction.

Link posted by Steve Antler : 9:08 AM

They weren't popular in high school...

Henninger : Democratic politicians, academics and pundits have been articulating their alternative since 1966 when Sen. J. William Fulbright coined 'the arrogance of power' and spoke of 'practical cooperation for peace' with Russia, the need for 'respectful partnership' with Western Europe and 'abstention from the temptations of hegemony.' In the years since, there has been a steady stream of books elaborating this view, with titles such as 'The Paradox of American Power: Why the World's Only Superpower Can't Go It Alone' by Joseph Nye of Harvard's Kennedy School, or 'The End of the American Era' by Charles Kupchak (both held positions in the Clinton administration). This week, nearly four decades after Fulbright, Sen. Kerry said: "Pride is no excuse for making enemies overseas. It is time to return to the United Nations, not with the arrogance of Rumsfeld and Wolfowitz but with genuine respect. For the Bush Administration to reject the participation of allies and the UN is a miscalculation of colossal proportions." For more than 20 years, Democrats have accused GOP presidents of forsaking "multilateral solutions" for what Richard Gephardt recently called "chest-beating unilateralism." This Democratic policy formula reappears no matter what the issue, whether Saddam or Soviet SS-20 ballistic missiles. During the great showdown with Manuel Noriega over the Panama Canal in 1989, Democrats urged Mr. Bush's father not to act without the support of the Organization of American States. Bush-41 invaded Panama, and two weeks later Noriega was in a Miami jail. Democrats have been urging "cooperation" and "consultation" for 40 years. Maybe in this election we'll finally find out what this means. Democrats strongly imply that the mere process of talking with the U.N. or even with an enemy such as North Korea constitutes success. The cardinal Democratic sin in foreign policy is to "alienate our friends."

Link posted by Steve Antler : 7:14 AM

The China Syndrome

Today, Paul Krugman's column has something to do with international trade, which Paul knows something about. Or it has to do with macroeconomics. Or Korea. Or banking. Or Iraq. Or something.

Link posted by Steve Antler : 5:54 AM

Quo Vadimus?

Bill Hobbs see signs of impending doom and blames the Bush tax cut.

Link posted by Steve Antler : 5:27 AM

Thursday, September 04, 2003

How we learned our lesson...

NYT: small businesses now mean big growth: While financial services and other sectors still languish, according to the National Association of Purchasing Management - New York, small businesses...have been growing...New York offers few programs aimed at such businesses. To its credit, the city government recently announced it would develop [additional] much-needed industrial space. There are also some tax incentives... Reflecting New York's labyrinthine regulatory environment, the city also offers help dealing with its own agencies, including the departments of sanitation, health and police...Most small manufacturers, however, will not use these services. They are too busy running their business, and some may fear that if they contact the government, officials will interfere with their business or workers. How true, how true. At our factory three years ago some unknown neighbor left a half ton of used cooking oil, packaged for disposal and ready to go, at our doorstep one night. Some innocent in the factory called the City, foolishly thinking our taxes might have paid for services which might help us out. Instead of help we received endless visits by environmental bureaucrats, threats, and an astounding series of ever-increasing costs. Never again will we call the City.

Link posted by Steve Antler : 5:20 PM

Wm. Beeman: Iraqi civil war has begun...

Review the movie Lawrence of Arabia to see the argument presented dispassionately. For the Arabs, modern Western-style nationalism (i.e. democracy, not Baathist thugocracy) is either possible or impossible, depending on whether modern economic incentives can overcome tribalism. (Ironic indeed -- the very term "Arab" itself refers to those Muslims with more a tribal than national identity.) On the one side we find Lawrence and his more-sympathetic progressive Arab followers. On the other, the less-sympathetic, more-traditional Arabs and their allies, patiently waiting to take over. In contrast to Lawrence, these allies believe the backward, tribal Arabs are incapable of governing themselves. We speak of course of the Europeans. Virtually nothing has changed except the names of the participants. Now, Lawrence is played by the US -- specifically, by the Neocons who believe in the world-historic inevitability of Democracy. Their allies are the more-progressive Iraqis and the Iranian democratic student movement. Their enemies are the Baathists and Wahabis of course. And, somewhat less-patiently and certainly less-quietly in the background are their allies -- the Euro-American Left-Liberal Alliance -- still of the opinion that the backward, tribal Arabs are incapable of governing themselves: The assassination of Ayatollah Mohammed Baqer al-Hakim in Najaf on Aug. 28 was the opening volley in the coming Iraqi civil war.... [US Neocons] were so wedded to the fantasy scenario that...removal of Saddam Hussein...would result in...democracy...they brushed aside all warnings. A central obstacle to stability is Iraq's makeup. Present-day Iraq was three provinces of the Ottoman Empire before World War I. It was cobbled together by the British for their own convenience after that conflict. The British installed King Faisal, a Hashemite and the son of Hussein, the Sharif of Mecca, and glued the Iraqi mess together with the British Army. The three regions were incompatible in ethnicity, religion and interests. Shiites note two active US strategies. First, they see the US as pursuing the British doctrine of favoring the Sunnis -- possibly by installing a Hashemite ruler. Indeed, one early neoconservative plan from 1996 considered by the Bush administration was to annex post-war Iraq to Jordan. Failing that, the US has opposed Shiite religious forces taking power. Iraqi National Congress leader Ahmad Chalabi, Washington's favorite candidate for Iraqi leadership, is nominally Shiite, but secular. He promised the White House that religious forces would never come to power if he were in charge. Could the US have done anything to prevent Hakim's death? Of course. American officials knew of the dangers threatening the ayatollah. Charges of American indifference or even complicity in his death are already flying. Washington must now ask whether it can stop an inevitable Iraqi civil war. When the shooting starts, where does the US Army, caught in the crossfire, aim its guns? (Emphasis added). The above bit of propanganda, seemingly designed to inflame as much as to enlighten, illustrates we're in a dispute over history itself. And history will show us which side is right and which side is wrong.

Link posted by Steve Antler : 9:41 AM

Sino-Capitalist Crisis, 2003

NYT reports worries in China as companies finance a boom in commercial real estate: China's central bank expresses growing alarm that reckless bank lending, reminiscent of the pattern that preceded the American savings and loan collapse in the late 1980's, may be causing an unsustainable boom that could end badly. In a rare statement on Aug. 23, the central bank said its economic policy units 'unanimously think that the loans right now are increasing too fast.' Chinese banks issued more new loans in the first seven months of this year than in all of last year, and the pace is still accelerating. Yet in a sign that China remains stuck halfway between Communism and capitalism, the central bank has found itself with curiously little power to stop the runaway lending. Chinese financial markets are not well-enough developed for the central bank to do the kind of trading in overnight credit markets that the Federal Reserve uses to move short-term interest rates.