Don't you just love this stuff?

Dr. Harold McClure comments on our LA Times/David Streitfeld critique as follows. In my view, your critique focused on a minor point missing a major issue. Let me explain both by the rule of fractions you rightfully appeal to followed by the November numbers in the Table A series from BLS. Think of the unemployment rate as Y/X with Y = reported unemployed and X = reported labor supply and then let a = number of discouraged workers. The correct series is (Y+a)/(X+a), which is indeed less than (Y+a)/X but closer to the incorrect figure than the official figure. In millions, let X = 147.28 and Y = 8.68 so Y/X = 5.89% and (Y+a)/(X+a) = 6.84%. Even if Mr. Streitfeld left the number of discouraged workers out of the denominator (and I'm not sure if he did or not), his (Y+a)/X = 6.91%, which is slightly above (Y+a)/(X+a) = 6.84%. But his 'model' is really (Y+a+b)/(X+a) where b is supposedly his 4.9 million part-time worker effect, which I'm not quite sure if he clearly explained how this works. If he let b = 4.9 million, then (Y+a+b)/(X+a) = 10.14%, which exceeds his 9.7% figure. Then again assuming part-time workers are unemployed would be an extreme assumption. Suppose we modeled the ratio this way: assume a part-time worker is z% of a full-time equivalent. BLS assumes z = 100%, while the 10.14% calculation assumes z = 0. Maybe some middleground assumption with 0 < z < 1 might seem appropriate and my best guess of Mr. Streitfeld's figures is that he is assuming z is 14%, which seems awfully low. If we assume z = 0.5, the calculation has (Y+a+b)/(X+a) = 8.5%. Of course, I'm not sure where Mr. Streitfeld gets his 4.9 million figure as BLS is saying around 24 million people "usually work part-time". And if we move away from this ad hoc math, we might wonder who to model this when people choose to work part-time. The interesting thing is that basing employment and labor supply on full-time equivalences, which is the essence of his part-time effect, would require us to deduct equal amounts from both officially reported employment and officially reported labor supply, which itself has a rule of fraction impact that I have yet to work out.

Link posted by Steve Antler : 11:39 AM

Glenn tells it like it is...

[L]et's stop pretending that what's going on between Israel and the Palestinians is some sort of family misunderstanding. It's war, and the Palestinians -- and their EU supporters -- think it's a war not just against Israel, but against us. We should tailor our approach accordingly. As InstaPundit might say, read it all.

Link posted by Steve Antler : 11:33 AM

On track?

EconoPundit predicted in October a net job gain (with generous rounding) of 5 million by election time. If confirmed, these numbers look like the economy listened to us: According to a Reuters' poll, analysts estimated that 125,000 new jobs were created in December, accelerating from the increase of 57,000 reported for November. The December employment report will be released on Jan. 9. UPDATE: Via Andrew Sullivan we find this Michigan study which seems to say we are not alone in our 5 million prediction! Yay! UPDATE II: And yet we predicted by New Year's Day net job gain would be 600,000. Things have proceeded more slowly than that, I think.

Link posted by Steve Antler : 9:27 AM

Tuesday, December 30, 2003

Nope. Not true.

Daniel Drezner, blogging for Andrew Sullivan, says: ...predictive models of elections are far from perfect. It's worth remembering that every election model worth its salt predicted Al Gore clearing 53% in the popular vote in 2000. The one thing everyone could agree on after the 2000 election was that these models were patently, obviously, needed some rejiggering. Whoa there partner! You left out the one election model that (a) seems to have a near-perfect record and (b) is openly available to everyone on the web! Quoting from this model's author: The actual outcome was that Gore received 50.3 percent of the two party vote. The last prediction on this site (October 27, 2000), which used actual values for all the economic variables, was that Gore would receive 50.8 percent of the two party vote. The error is thus 0.5 percentage points. The standard error of the equation is 2.15 percentage points, and so the actual error is well within one standard error. The presidential vote equation thus did extremely well. Why do informed pundits (with the exception of Bruce Bartlett) continue to ignore Ray Fair's important work?

Link posted by Steve Antler : 11:05 AM

What?

Today, Krugman uses CBO corporate profit tax indicidence figures to prove affluent citizens earn more corporation profits than poorer ones: A good indicator of the share of increased profits that goes to different income groups is the Congressional Budget Office's estimate of the share of the corporate profits tax that falls, indirectly, on those groups. According to the most recent estimate, only 8 percent of corporate taxes were paid by the poorest 60 percent of families, while 67 percent were paid by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class warfare!" the right shouts.) So a recovery that boosts profits but not wages delivers the bulk of its benefits to a small, affluent minority. What is this guy smoking? First, you measure the functional distribution of income on the basis of who owns shares and who works for wages. Measuring this number by tax incidence is like looking at electric bills (which went up during the summer because people used more electricity to run their air conditioners) to measure last August's temperature. Second there's that pesky little matter of where you start. Krugman measures booming profit increases during the recovery, but seems to ignore the profit recessions in earlier quarters that counterbalance these. But finally, consider these interesting words: "only 8% of corporate taxes were paid by the poorest 60% of families." Only 8%? As Krugman and Democratic politicians normally portray taxes on corporations, shouldn't that number be zero?

Link posted by Steve Antler : 7:30 AM

LA TIMES: actual unemployment rate close to 10%

David Streitfeld of the LA Times explains why the official unemployment rate understates the problem: To begin with, there are the 8.7 million unemployed, defined as those without a job who are actively looking for work. But lurking behind that group are 4.9 million part-time workers...who say they would rather be working full time...There are also the 1.5 million people who want a job but didn't look for one in the last month. Nearly a third of this group say they stopped the search because they were too depressed about the prospect of finding anything...Add these three groups together and the jobless total for the U.S. hits 9.7%, up from 9.4% a year ago. This sort of reinvention of the unemployment rate happens after every recession, but I must admit this one is particularly creative. For example, adding part time workers who say they'd rather be working full time (without bothering to adjust for moonlighters who have more than one job) shows lots of imagination. For now, I leave it to others to check whether Streitfeld has added discouraged workers to the denominator as well as the numerator of his new, adjusted unemployment rate. Failing to do so results in a more-riveting number that actually means nothing. UPDATE: Two additional and opposing comments. A good friend writes: I have been arguing for the last two years [the] actual unemployment is at least twice the official numbers and the misery of today's unemployed is many times higher than what it used to be some 20 years ago for the hourly union employees. I would like to find the economist who has some new ideas how to solve this huge national problem. Surely, we will not grow out of it with income tax gifts that are bound to expire in 2009 anyway. So far, this tax policy has created huge federal deficits as far as my eye can see and ruined (in an orderly fashion) the value of our currency without creating any meaningful new employment opportunities. And all of this with a massive war investment in Iraq, without which the demand for certain goods and services would be even lower and unemployment higher. A contrasting view from reader Anthony Smith: The writer uses part time workers who want to work full time to inflate the unemployment rate. What about people who have taken jobs that they don't like but can't find one that they do like? Or people who don't feel like they are being paid enough but can't find one that pays better? My wife works part time but would consider a full time job if the hours were very flexible (she has been offered full time work where the hours were not flexible). Should she be considered unemployed? I have a full time job but pick up other work now and then. Should I be counted as one and a quarter? I think that if you torture the unemployment rate long enough, it will tell you whatever you want to hear. Thanks for your blog.

Link posted by Steve Antler : 7:04 AM

Monday, December 29, 2003

We're baaaack -- and it's Monday!

Here's your economic calendar. Tomorrow is the Chicago PMI announcement. I used to be good at guessing these (actually had one bond trader who called each month for my opinion). When I moved from full time teaching to business, I realized all I had to do was spend a few minutes in the office and see how the phones were ringing. I'd moved from studying leading economic indicators, I finally realized, to actually being one. Anyway I'll let you know my guess later.

Link posted by Steve Antler : 7:10 AM

Thursday, December 25, 2003

Merry Christmas!

Link posted by Steve Antler : 10:29 AM

Monday, December 22, 2003

Can we paraphrase George Patton maybe?

It might go something like this: No jerk of a leader ever made a country safer by seeking a diplomatic solution. The jerk of a leader makes the country safer by getting the other country to seek a diplomatic solution. This was inspired by Dana Milbank, "The 'Bush Doctrine' Experiences Shining Moments" (washingtonpost.com): "But Bush's supporters say it is precisely his willingness to go it alone and take preemptive action that has encouraged other countries to seek diplomatic solutions before the United States launches a military attack." (Emphasis added) It is via Andrew Sullivan who seems to be working toward this simple point: there's already ample evidence that what Lenny Ben-David so colorfully calls "masturbatory diplomacy" is ineffective. Now rapidly accumulating evidence suggests its opposite, the Bush Doctrine, is extremely effective.

Link posted by Steve Antler : 10:06 AM

Interesting times, no?

Years ago, when I began teaching market economics to MBA students from the Peoples' Republic, legislation like this was more or less a utopian dream.

Link posted by Steve Antler : 7:49 AM

Excluding pseudo mobility by including pseudo numbers...

Don Luskin provides the definitive take down of Krugman's"Death of Horatio Alger" (January 5, 2004 edition The Nation).

Link posted by Steve Antler : 5:37 AM

Monday

Here's your economic calendar. Check blogroll for one with links.

Link posted by Steve Antler : 5:24 AM

Sunday, December 21, 2003

It's the economy, stupid...

On Meet the Press this morning James Carville called for policies designed to bring about (a) return to Clinton surplus and (b) a strong dollar. EconoPundit has simulated policy (a) in a number of ways. In the last instance, for example, we found the necessary tax increases creating politically unacceptable levels of unemployment and substantially slower growth. But what we haven't tried yet is Carville's amazing idea of both balancing the budget and strengthening the dollar at the same time. Will such a distinctive policy package both damp economic growth while simultaneously undermining US exports to the point of creating yet another Great Depression -- a "Great Unravelling" as it were (good title for a book!) -- or will some as yet-unanticipated factors intervene? Stay tuned to this station. This afternoon we go to the opera. Early tomorrow -- economic simulation!

Link posted by Steve Antler : 12:43 PM

Saturday, December 20, 2003

Silly and sad...

I wish I could say otherwise, but The Nation magazine seems increasingly unworthy of anyone's attention. I picked up Juan Stam "Bush's Religious Language" looking forward to spending a fun few minutes with someone with whom I knew I'd disagree. What I found was a writer who knows embarrassingly little about his subject. Here's the premise: It is remarkable how closely Bush's discourse coincides with that of the false prophets of the Old Testament. While the true prophets proclaimed the sovereignty of...the God of justice and love who judges nations and persons, the false prophets served Baal, who could be manipulated by the powerful. Karl Marx concluded that religion is "the opium of the people." But Marx never knew committed Christians like Camilo Torres of Colombia, Oscar Arnulfo Romero of El Salvador, Frank Pais of Cuba, Ernesto Cardenal of Nicaragua, Dietrich Bonhoeffer of Germany or Martin Luther King Jr. of the United States. How paradoxical, and how sad, that the President of the United States, with his heretical manipulation of religious language, insists on proving Karl Marx right. Great! Let's now see how the author supports this provocative paragraph. First, we learn Bush is no less than a Manichean heretic: [Manicheism is an] ancient heresy [which] divides all of reality in two: Absolute Good and Absolute Evil. The Christian church rejected Manicheism as heretical many centuries ago. But on the day after 9/11, the President first stated the position he would continue to maintain: "This will be a monumental struggle of good versus evil, but good will prevail." Later Bush defined his enemies as the "axis of evil," a term that is theologically and morally loaded... Bush can muster only one explanation for the terrorists' hatred of his nation: "There are people who hate freedom." In other words, they are so evil that they abhor the good because it is good. (But if the terrorists hate freedom, why have they not attacked Canada, which in some respects is more democratic than the United States? Why is there not the same hatred for Switzerland, Holland or Costa Rica?) Oy vay! Where to begin? Forget the modern politics -- whether we might consider an attack on Red Cross or UN personnel as the same as an attack on Canada, for example, or whether "modernity" and "good" are validly interchangeable. Just consider the facts of basic religious history. Christianity rejected Manicheism as a doctrine, it is true, but it never had any problem adopting its dualistic approach to good and evil as a substitute for the older Judaic notion of "tendencies" towards good or evil. The basic literature on this issue -- Elaine Pagels and Richard Elliott Friedman to name just two contributors -- make it very clear grafting the dualism of good and evil onto the earlier Judaic tradition was one of the most basic and distinctive religious innovations of early Christianity. This is a literature with which Juan Stam is clearly ignorant. Second, we discover Bush is a false prophet in the sense he's allegedly guilty of "Messianism:" When Bush, then Governor of Texas, decided to seek the presidency, he described his decision in terms evangelicals would understand as a divine mandate: He had been "called," a phrase that evoked the prophetic commissions of the Hebrew scriptures...This language of divine calling has been frequent in his declarations and at a much accelerated rhythm since September 11, 2001...As he declared in his 2003 State of the Union address, the nation must go forth to "confound the designs of evil men," because "our calling, as a blessed country, is to make the world better." "Once again," Bush announced as war preparation was building up, "this nation and our friends are all that stand between a world at peace and a world of chaos and constant alarm. Once again, we are called to defend the safety of our people and the hopes of all mankind. And we accept this responsibility...and we go forward with confidence, because this call of history has come to the right country." And once again the author is ignorant of the subject matter. He's read Chomsky and Negri one would guess, but he's obviously read neither Max Weber nor Sinclair Lewis. "Calling" or "vocation," as Weber showed, was a basic distinguishing feature of modern European Protestantism. It played an important role in the transition to both modern capitalism and modern democratic institutions. America's Puritan heritage honed this European innovation to a sparkling edge: here, public service became a calling, and -- for many -- politics became a "vocation." The Bush invocation of "calling" has everything to do with American Protestant tradition, and (directly at least) nothing to do with the prophets of the Hebrew Bible. I'll leave out other evidence the author knows nothing about the subject. (There's a serious difference between a false "prophet" and a false "Messiah," for example; Juan Stam seems to think "prophet" and "Messiah" have the same meaning.) The article is simply silly, unworthy of anyone's attention. I'll keep poking around, but the more I look the less does The Nation seem worth bothering with. UPDATE: As this was being written, a new Bin Laden tape, openly asserting Democracy is inconsistent with Islam, was reported by Al-Jazeera via Fox News. This clearly responds to Stam's silly question "if the terrorists hate freedom, why have they not attacked Canada, which in some respects is more democratic than the United States?"

Link posted by Steve Antler : 7:39 AM

Friday, December 19, 2003

It's that time of year again...

Okay, now you light them from the right to the left. Wait until sundown, then go ahead and first light the center one, then use it to light the one on the far right. And please, be very careful! Not Jewish? Who cares! Do it anyway! Hey -- do it for the Reindeer!

Link posted by Steve Antler : 2:54 PM

Can this mean what it sounds like?

I could be wrong, but it sounds like Paul Krugman is publicly advocating data-tampering to turn one set of results into another: Conservatives often cite studies like a 1992 report by Glenn Hubbard, a Treasury official under the elder Bush who later became chief economic adviser to the younger Bush, that purport to show large numbers of Americans moving from low-wage to high-wage jobs during their working lives. But what these studies measure, as the economist Kevin Murphy put it, is mainly "the guy who works in the college bookstore and has a real job by his early 30s." Serious studies that exclude this sort of pseudo-mobility show that inequality in average incomes over long periods isn't much smaller than inequality in annual incomes. (Emphasis added) His article is based on a Business Week article which in turn is based on others' work, so we'll follow up. But for now, all I can say is anyone who works in the college bookstore and has a real job by his early 30's is (in my opinion at least) upwardly mobile in the same way as anyone else. And by the way -- in case Krugman's double negative confuses you -- he concedes even after data are adjusted to change the result, taking economic mobility into account does in fact reduce measured economic inequality in the United States. UPDATE: My students regularly argue there are numerous ways to adjust poverty and distribution data to obtain alternate results. Many, for example, are anxious to start adjusting to account for undocumented immigration. So be careful Paul. Once you start adjusting and excluding, who knows where you'll wind up? UPDATE II: For anyone who's interested -- and frankly I'm not -- the rest of the article is warmed-over Marx. Nothing more. The evil Bush people who actually like caste society use their control of government to further their advantages by getting rid of the estate tax, reduce corporate and unearned income tax rates, create additional tax shelters, cut back on healthcare and other services for the poor, reduce education. They'll do anything to close off as much upward mobility as possible -- especially: ...[They will] do everything possible to break the power of unions, and [they will] privatize government functions so that well-paid civil servants [can] be replaced with poorly paid private employees. But that little Karl Marx sitting on my shoulder is whispering something in my ear right now. He's saying "This is all a lie! Paul's just courting his own favored well-off elites -- the unionized public service employees and the highly-paid, politically powerful labor aristocracy! Beware! His analysis is tainted by a substructure of underlying political interest!!!" UPDATE III: And by the way, if you hypothetically consider the US and Mexico a "single" economic unit (actually not too far-fetched given the geographic mobility of labor between the two), you're probably looking at the highest level of upward economic mobility in all of world history. UPDATE IV: Jim Glass has more: I'm surprised you let this fly by. [In the Nation article, Krugman says:] According to estimates by the economists Thomas Piketty and Emmanuel Saez--confirmed by data from the Congressional Budget Office--between 1973 and 2000 the average real income of the bottom 90 percent of American taxpayers actually fell by 7 percent. Average real income for 90% of Americans has *fallen* 7% over the last 27 years? Here's a true scandal: The Bozos at the Census should be fired for missing that!! Giving a quick scan Piketty and Saez, the closest I can figure is that they said the percentage share of all taxable income going to the top 10% rose by 7%. from about 26% to about 33%. Ergo [Kruman argues] the share of all taxble income going to the bottom 90% fell by 7%. Unless I missed something in my quick scan, or P&S wrote something else on this PK is referring to. But since real personal income rose 96% in this period (and persons making under 40k were effectively lopped off the tax roles) this reduced "share" left every income quintile gaining 18% or more in income in real terms over that period according to the Census historical income tables. With every quintile of households gaining 18% or more, how the heck can PK say 90% suffered a loss of 7%??? [Krugman continues:] During the 1930s and '40s, however, America experienced what the economic historians Claudia Goldin and Robert Margo have dubbed the Great Compression: a drastic narrowing of income gaps, probably as a result of New Deal policies. New Deal policies? ;-) Well, if an economist can totally overlook the Great Depression and World War II, I guess he can miss a little Census data too. ;-) -- Regards, Jim Glass UPDATE V: Comment from Steve Carr, December 19, 2003 07:34 AM, posted at Brad DeLong's site: The "new survey" that Krugman (via Business Week) cites was done by David Wright, Earl Wysong, and Robert Perrucci. Frustratingly, it appears not to be available on the Web, and it has not been published anywhere. Here's a short article from Wichita State (where Wright teaches) about it: http://webs.wichita.edu/dt/insidewsu/show/article.asp?201. It's not clear from Krugman's piece that he's actually looked at the study, nor that he's actually read the 1978 study (which I assume is Featherman and Hauser's work, but I don't know) either. He calls it a "classic 1978 survey," while the Business Week writer calls it a "classic 1978 study," with neither citing the authors. That seems a little sketchy. The Wright/Perrucci/Wyson study looked at 2749 father-and-son pairs. It's possible that one can extrapolate about the entire U.S. economy from 5500 people, but I'd like to see more evidence than that. More troublingly, the study was not looking purely at income mobility. Instead, it was looking at status mobility, looking at not just income but also, according to the New York Times, "occupational prestige." That seems to bring in a subjective dimension that compounds the already-difficult measurement problems. Those problems are also compounded by the fact that the authors of the study had, before the fact, a clear and explicit ideological stance on the matter. Wright, for instance, believes that no American should be legally allowed to make more than $80,000 a year. Obviously, you can be biased and still do serious work, but in a field as freighted and as complex as this one, it's not reassuring that the authors of this study found exactly what they not only expected to find but also wanted to find. And in any case, Wright, at least, seems to disagree with Krugman's argument that things have gotten significantly worse. He said: "There is not very much class mobility in the United States, and there never has been." More puzzlingly, the very Business Week article upon which Krugman is relying for all his numbers also mentions (though not by author name) a study by Katherine Bradbury and Jane Katz of the Boston Fed. This, at least to my eyes, seems like a serious study: http://www.mindfully.org/Reform/2002/Incomes-More-UnequalSep02.htm. Bradbury and Katz found that mobility was flat in the 1970s and 1980s, and "decreased slightly in the 1990s." Now, those numbers are skewed by the fact that they end in 1998, at which point the economy was really revving up, and the productivity boom was only a couple of years old. My suspicion is that if you ran the numbers through 2000, mobility would be about the same for all three decades. But in any case, there is zero sign of the "shocker" that Krugman describes. Bradbury and Katz's numbers say that if of the people in the poorest quintile (and by the way, measuring mobility by the poorest quintile's moves seems dubious to me) in 1969, 3% had made it to the top quintile by 1979. That's a long way from the other numbers PK cites. I think the way statistics are used in this Nation article is questionable at best. (Emphasis added)

Link posted by Steve Antler : 7:26 AM

Thursday, December 18, 2003

Well said...

Consider Mrs. Clinton's statement: ...what (the Bush) administration was attempting to do was turn back the progress of the entire 20th century. They were not just after Bill Clinton -- they wanted to undo Jimmy Carter, Lyndon Johnson, John Kennedy, Harry Truman, Franklin Roosevelt...They were on their way to Teddy Roosevelt. It was a bipartisan right-wing extreme agenda... Exactly what's wrong with this, other than its assumption the reader shares Mrs. Clinton's definition of "progress?" Is there a problem with undoing Jimmy Carter's painful Iran dilemma or Johnson's inability to win or withdraw from Vietnam? Take the question back to both Roosevelts: are we proud of social insurance/taxation that takes estates away from families, rich or poor, and gives any remaining surplus to a wasteful federal government, or of a federal land system that annually erupts into summer-long holocausts of brush and forest fire? Maybe she's right? Maybe it all depends on exactly what the meaning of the word "progress" is? UPDATE: Patterns may be forming and themes building. It seems to me loose talk like this can lead to an election with an unanticipated theme -- whether the Bush administration (as contrasted with its immediate predecessor) has been efficient and businesslike.

Link posted by Steve Antler : 4:32 AM

Wednesday, December 17, 2003

Why? Because we love him...

Here, once again and for no particular reason is our buddy the Appropriate Reindeer. UPDATE: Randolph. We're advised his name is Randolph. Randolph the Appropriate Reindeer.

Link posted by Steve Antler : 1:27 PM

The sneaky little political meme spreads its sticky tentacles...

Stanley Kurtz and now Mickey Kaus continue to develop their own versions of EconoPundit's Theorem #14q -- which, though neither saw it, did (ahem) come first.

Link posted by Steve Antler : 1:02 PM

No, that's not what it means...

At first I pictured all these little cute squirmy things sent off to play on the beach, but in fact it was the students who were offered a vacation in exchange for their, uh, seed.

Link posted by Steve Antler : 10:25 AM

Propaganda as major export...

National Review Online's Jay Nordlinger says: I quote from Saddam Hussein...Asked whether he had weapons of mass destruction, Saddam said, "No, of course not. The U.S. dreamed them up itself to have a reason to go to war with us." Call me a McCarthyite or any other bad, bad name, but, for the life of me, I don't see how Saddam's statement differs from the stock line of most Democrats, much of the press, many of the Euros... It is shocking to see how poorly-understood is this very simple principle, even among those who should know better: the American Left feeds slogans and talking points to the Euroleft and the Mideast anti-Israel propaganda machine. Read MEMRI or NGO press releases regularly and you're simply amazed at how quickly what we say becomes what they say. What's even more shocking, I guess, is the way European and Mideastern "echoes" of US leftist ranting come taken to be evidence of these statements' veracity. Thus we have whole politico-urban legends -- the "Arab Street," or seething discontent at global economic inequality, or the horror of US attacks during Ramadan -- with life spans of scarcely eight months or less. As far as I can tell the only US statement that never traveled beyond our borders was the one about the Osama-built day care centers.

Link posted by Steve Antler : 7:02 AM

Nationalism versus Transnational Progressivism

Those who seek to weaken all nationalism and strengthen international organizations (the transnational progressivists) favor UN participation. And those who still believe in nationalism (e.g. any supporter of Israel or anyone who's seen Lawrence of Arabia lately) favor a purely Iraqi trial.

Link posted by Steve Antler : 6:15 AM

Safire misses the point...

With all due respect, this analogy is way off: Are Republicans out of their collective mind? Why the hots to hide? A decade ago, Hillary Clinton tried to pull the same kind of wool over the people's eyes about her health care task force, but the D.C. appeals court ruled that her consultants were "de facto members" of the official group and stripped away the secrecy. The Hillary Healthforce was as public as these things can get -- for almost a year if I recall. There were large staged public hearings that for all practical purposes resembled classical Communist show trials -- testimony from crippled husbands, the woman whose sinus infection went to her brain, terrible sad stuff trotted out and staff-packaged for a political purpose. Then there were those long very-private think tank meetings that just rubbed critics' noses in the proposition: you will know what we want you to know when we want you to know it -- no sooner! Hillary Clinton's arrogant, inept, and unbusinesslike mismanagement of the task force caused privacy to become an issue. Cheney's task force took about a month to complete its job. It met privately, quickly, and in a businesslike fashion. Its report is public information. Only a silly analogy to the poorly-managed health care task force makes access to these private records seem like anything resembling an issue. UPDATE: Via Andrew Sullivan we have Drezner, who predicts this very issue (whether the administration is "businesslike" or not) may ultimately do them in: In many ways, Bush's supporters have devised a more powerful critique than anything Bush's opponents have come up with. Their complaints point to mismanagement and incompetence, never words one wants associated with foreign policy. Given the high stakes that the administration is playing for in Iraq and the war on terror, Bush's process failures make him far more vulnerable on national security issues than one might imagine. Does it all boil down to results and nothing else? They were efficient and businesslike if it all works out, and if not they were incompetent jerks? UPDATE II: On re-reading Andrew Sullivan's post, I think (with all due respect) he either didn't read far enough or didn't get the point of the Drezner essay.

Link posted by Steve Antler : 5:47 AM

Tuesday, December 16, 2003

Oopsies...

Paul Krugman, New York Times, 12.12.03: In short, this week's diplomatic debacle probably reflects an internal power struggle, with hawks using the contracts issue as a way to prevent Republican grown-ups from regaining control of U.S. foreign policy. And initial indications are that the ploy is working...In the end the Bush doctrine -- based on delusions of grandeur about America's ability to dominate the world through force -- will collapse. What we've just learned is how hard and dirty the doctrine's proponents will fight against the inevitable. Tony Czuczka, Associated Press, 12.15.03: U.S. special envoy James A. Baker III won German and French agreement Tuesday to work for Iraqi debt relief, overcoming serious misgivings in Berlin about the U.S. exclusion of German firms from Iraqi reconstruction..."Germany and the United States, like France, are ready not only for debt restructuring but also for substantial debt forgiveness toward Iraq," German Chancellor Gerhard Schroeder's spokesman Bela Anda said in a statement.

Link posted by Steve Antler : 12:01 PM

Which card was he?

Channelnewsasia.com reports: Saddam Hussein's fugitive number two, Izzat Ibrahim al-Duri, may have surrendered to US-led coalition forces in Iraq, Kuwait Television reported on Tuesday, quoting its correspondent in Baghdad. Via The Corner. UPDATE (via Instapundit): second report of this.

Link posted by Steve Antler : 11:29 AM

Cardinal Says U.S. Treated Saddam 'Like a Cow'

Says Cardinal Martino: It's true that we should be happy that this (arrest) has come about because it is the watershed that was necessary... we hope that this will not have worse and other serious consequences...But it is not the total solution to the problems of the Middle East... Now I remember when this picture appeared, but I can't remember who the guy on the left is. I do know that it's been on my wall all this time with the following caption: SOME THINGS JUST CAN'T BE STAGED OR FAKED... And by the way -- Isn't it time people of this persuasion stopped using the expression "total solution?" UPDATE: LGF Vistors -- you are welcome, but I'm afraid I can't identify the person on the left.

Link posted by Steve Antler : 10:20 AM

Krugman's Latest Bimbo Eruption

Paul Krugman seeks scandal in the normal, everyday review transparency of public contracting. He tries to for a tired, all-knowing irony -- oh, this all just gets "curiouser and curiouser", he says -- but the net effect is mostly humor. There were political pressures in Kuwait to buy gasoline from a well-connected family who were (nod, wink) "no doubt still grateful for the 1991 liberation." (Ha! Curious, no?) Even worse, Pentagon inspection reports show unsanitary conditions in Halliburton's Iraq mess halls! And, Halliburton was warned but didn't fix the problem!!!! And --- Bechtel's playground repairs were horrible: dangerous debris was left in playground areas -- and the paint jobs were sloppy and the toilets were broken! You'd undoubtedly know more if it weren't for that darned right-wing media: To top it all off, after 9/11 the U.S. media -- which eagerly played up the merest hint of scandal during the Clinton years -- became highly protective of the majesty of the office. As the stories I've cited indicate, they have become more searching lately. But even now, compare British and U.S. coverage of the Neil Bush saga. The Neil Bush saga? Paul, please give us a break. Even folks on your side say there's absolutely nothing there! Ultimately, and more seriously, patriotism is brought into the discussion. Says Paul: Some Americans still seem to feel that even suggesting the possibility of profiteering is somehow unpatriotic. They should learn the story of Harry Truman, a congressman who rose to prominence during World War II by leading a campaign against profiteering. Truman believed, correctly, that he was serving his country. (Emphasis added) And there you have it -- humour interruptus. Don't you dare criticize what Paul says. If you do, it means you're claiming he's unpatriotic! Paul -- since you raised the patriotism issue, let me say a few things. First, I was there and trust me, you're no Harry Truman. More important -- an opportunistic, shallow political editorial like yours is completely inappropriate today. Finally and most important -- your own raising of the patriotism issue in such an odd, tortured fashion points readers to an obvious question. In an objective sense, as the word is normally defined, isn't it true that Paul Krugman is in fact unpatriotic? Maybe next time you should just stick to the humor? UPDATE: This, from Orson Scott Card, suggests a movement may be in the works to restore the actual meaning of the word "patriotism" to normal American political discourse: What I'm saying is that those who try to paint the bleakest, most anti-American, and most anti-Bush picture of the war, whose purpose is not criticism but deception in order to gain temporary political advantage, those people are indeed not patriotic. They have placed their own or their party's political gain ahead of the national struggle to destroy the power base of the terrorists who attacked Americans abroad and on American soil. Patriots place their loyalty to their country in time of war ahead of their personal and party ambitions. [Opportunists, on the other hand,] can wrap themselves in the flag and say they 'support our troops' all they like--but it doesn't change the fact that their program is to promote our defeat at the hands of our enemies for their temporary political advantage. UPDATE II: Jon Henke of QandO sends us this: Isn't it odd that Paul Krugman writes an article, whose main point is to decry "profiteering" and the lack of investigation......but his main evidence is AN INVESTIGATION which indicated NO PROFITEERING. You can't make this illogic up.

Link posted by Steve Antler : 6:49 AM

Monday, December 15, 2003

Was he a prisoner?

Nobody's carrying this yet, not even Drudge. The source has a spotted track record, but the story makes sense. UPDATE: Already I'm getting objections, and frankly I don't like this story much myself. Someone's challenged it on grounds of the guns -- prisoners don't have guns, we're told. The source of this story explains this way: "Detained trying to escape were two unidentified men. Left with [Saddam] were two AK-47 assault guns and a pistol, none of which were used. " In other words, his captors tried to escape, but threw him a couple of pieces as they left. UPDATE II: Here's some overnight response: This sounds like some of the ravings of the tin foil hat community -- or it's one more desperate attempt to turn around a political coup for the Bush Administration. If they ever find OBL, and I am of the opinion that he was converted to a finely divided krispy kritter some time ago -- you will hear the same kind of looniness. Okay, so what is one supposed to do? I saw the item, realized nobody else was linking to it, and decided since I'd seen it and it was interesting in a repugnant sort of way, I'd share the experience with EconoPundit's readers and let everyone judge for themselves. (I realize my job isn't to get out there and find every crank opinion, but since I'd seen it I thought I'd share it.)

Link posted by Steve Antler : 10:25 AM

France starts to cave on Iraq debt...

One more Bush Administration failure of diplomacy? (Was it just on Friday Paul Krugman implied this couldn't happen?)

Link posted by Steve Antler : 7:15 AM

Now I understand...

Safire explains "Spider Hole": This is Army lingo from the Vietnam era. The Vietcong guerrillas dug 'Cu Chi tunnels' often connected to what the G.I.'s called 'spider holes'-- space dug deep enough for the placement of a clay pot large enough to hold a crouching man, covered by a wooden plank and concealed with leaves. When an American patrol passed, the Vietcong would spring out, shooting. But the hole had its dangers; if the pot broke or cracked, the guerrilla could be attacked by poisonous spiders or snakes. Hence, 'spider hole.'

Link posted by Steve Antler : 6:56 AM

From George Will...

Since everyone else is posting their candidate for quote of the week, here's my entry: Furthermore, no Democrat is running for president as a little ray of sunshine, but John Kerry used the occasion Sunday morning to tell Fox News that although the capture was good, the administration still has not done enough about AIDS. Can someone that tone-deaf govern?

Link posted by Steve Antler : 6:11 AM

Sunday, December 14, 2003

Standing Bernard Lewis on his head...

Check out The Nation for Robert Jay Lifton's American Apocalypse -- a kind of psychoanalytic review of America-as-ongoing-movie: ...at the core of superpower syndrome lies a powerful fear of vulnerability. A superpower's victimization brings on both a sense of humiliation and an angry determination to restore, or even extend, the boundaries of a superpower-dominated world. Integral to superpower syndrome are its menacing nuclear stockpiles and their world-destroying capacity...[T]he "war on terrorism" has represented an impulse to undo violently precisely the humiliation of 9/11. To be sure, the acts of that day had a warlike aspect. They were certainly committed by men convinced that they were at war with us. In post-Nuremberg terms they could undoubtedly be considered a "crime against humanity." Some kind of force used against their perpetrators was inevitable and appropriate. The humiliation caused, together with American world ambitions, however, precluded dealing with the attacks as what they were--terrorism by a small group of determined zealots, not war. A more focused, restrained, internationalized response to Al Qaeda could have been far more effective without being a stimulus to expanded terrorism. The core of the analysis is kinda keen, actually. We'd thought the problem was the Arabs' sense of humiliation and shame. Nope. That's backwards. As it turns out, we are the ones who are angry and humiliated. Don't you remember that special feeling of humiliation on 9/11? C'mon, be honest. You felt humiliated, no? Are you sure? Look, search deep within yourself. Can't you see how your "cosmic ambition is accompanied by an equally vast sense of entitlement", which "stems partly from [those silly] historic claims to special democratic virtue"? Anyway, read the thing. Think of it as science fiction/fantasy and it is delightful! UPDATE: Meanwhile the Arab world continues to never lose any of its own unique new humiliation opportunities.

Link posted by Steve Antler : 6:50 PM

Saturday, December 13, 2003

Smoking Gun?

London Telegraph reports it has obtained a copy of a handwritten memo dated July 1 2001 from the then-head of Iraqi Intelligence Service to Saddam Hussein which appears to show 1. Mohammed Atta was trained in Baghdad by Abu Nidal. 2. an unspecified shipment ("believed to be uranium") was transported to Iraq via Libya and Syria. UPDATE: Oh yeah, and there's this new item as well. They captured Saddam Hussein. UPDATE II: Via Instapundit, The FBI seems to indicate the Telegraph story is based on a forgery. (FBI? What?) Saddam, however, still remains in custody -- or so they'd have you believe!

Link posted by Steve Antler : 9:26 PM

Friday, December 12, 2003

I bet you thought it would be Iraq...

Important news from Don Luskin, who is currently positioned at the center of both Social Security reform the upcoming Presidential election's unanticipated central issue. UPDATE: More here.

Link posted by Steve Antler : 1:18 PM

All choked up...

We've just discovered EconoPundit has been nominated to compete in Wizbangblog's 2003 Weblog Awards under the category "most egregious omission." You can vote for EconoPundit here (scroll all the way to the bottom). UPDATE: Is it kosher for me to have posted this? Am I supposed to not do this? UPDATE II: Yeah, what the heck, this is MY blog and I'll do what I like here! For example, since my last name really is "Antler" here once again is our old pal the Appropriate Reindeer! Yeah! UPDATE III: Okay! We've moved up four spaces in the last four hours! Keep those votes coming! UPDATE IV: Yes! When we discovered all this yesterday morning we were all the way down, eighteenth from the top! Now we're in seventh place. Keep voting! Tell the world what EconoPundit means to you! Right? (You're allowed to vote once a day, remember. I've already placed my vote. Now it is your turn. Do it for the Reindeer.)

Link posted by Steve Antler : 8:18 AM

EconoPundit's Theorem #14q

In The Corner Jonah Goldberg asks: Isn't it possible that the stiffing of Germany, France and Russia is simply prelude to Jim Baker's Iraqi debt-cancellation world tour? It just seems so obvious to me now. He wanted some leverage and to send these countries a signal that we could play hardball before he left. It's fine with me as a policy or as a negotiating ploy. I mean if I hear the EUniks say this decision was 'unhelpful' one more time, I'm gonna go nuts. Look at France last year, or this year, for a definition of 'unhelpful.' And, in an apparently unrelated story, Haliburton has allegedly been overcharging for gasoline transported from Kuwait to Iraq. We'd like to use these as a platform for launching EconoPundit's new theorem, which is also so obvious it fits the old "the last thing a fish would discover is water" model. EconoPundit Theorem #14q: COMPARED WITH THEIR REPUBLICAN COUNTERPARTS SUPPORTERS OF THE DEMOCRATIC PARTY ARE EXTREMELY EMOTIONAL ABOUT VIRTUALLY EVERYTHING. There's upcoming confirmation in two ways. First, EconoPundit predicts Democrats will get so worked up about gas overcharging -- some claiming it's the central issue of the decade -- they'll go into deep depressive retreat when they realize such allegations and subsequent adjustments are all perfectly normal in war zone situations. Second, when Baker and Bush compromise on the war contracts, Republican supporters (many of whom are kinda worked up right now) will pretty much shrug everything off as normal. No depressive tailspin here. The difference is easy to explain. To Republicans, politics and markets always work to mediate between differing definitions of "perfection." To them, compromise between individuals and interest groups is part of the normal way of things. But to Democrats -- those heroic descendants of Jean Jacques Rousseau -- perfection is right out there, real, always to be fought for with (remember JFK?) vigor! Compromise? That's for Republicans -- you know, the ones who don't have real values! UPDATE: Not that he reads EconoPundit, but Stanley Kurtz, in The Corner, explains how (his version of) our Theorem #14q means all Democrats -- because of their commitment to absolute virtue -- are irreparably harmed by the Saddam capture.

Link posted by Steve Antler : 6:18 AM

Thursday, December 11, 2003

2004: "Best in Twenty Years"

The Conference Board (which charges money for what we do here for free) is now issuing revised forecasts more optimistic than those released by Yale University's Ray Fair last October. (The Yale forecasts' assumptions included the tax cut and Iraq spending, but not the prescription drug benefit; this accounts for the less optimistic results, I think.) According to the Conference Board, next year 2004 will, from the viewpoint of strict economics, be the best in the last twenty years: Revising its year-end economic forecast sharply upward, The Conference Board today projected that real GDP growth will hit 5.7% next year, making 2004 the best year economically in the last 20 years...While the U.S. economy is expected to generate more than one million new jobs next year, the unemployment rate will edge down only slightly, averaging 5.6% in 2004. Interesting how they can't seem to get the unemployment rate down much below 5.5% either. I will soon re-run the Yale model with the prescription drug benefit included to see whether Fairmodel duplicates the Conference Board's results. Stay tuned for further details.

Link posted by Steve Antler : 2:49 PM

The delightful simplicite of the "robber boomer"...

Clearly Andrew Sullivan never read our Holiday Sermon on Public Debt. I am giving up on trying to make Andrew understand anything related to the economics of public debt. His cultural/ethical imagery of the "robber boomer" is so delightful its advantages may outweigh the (frankly) dumb economics he, uh, espouses. UPDATE: Rob Stevenson (TheNeoconservative.com) comments: ...many people...confuse...how government spending is financed with the concept of government spending. Thus, they point to the deficit and say, "the government is spending too much money." We may say that the deficit is not a problem, but this does not mean that the government is not spending too much money...Although Mr. Sullivan is pointing at the deficits as the problem, what he means to be pointing to is the spending. Just because he is unable (or unwilling) to see the difference does not mean that his opposition to the Medicare bill is wrong, just poorly argued. I couldn't agree more. I tried to address your point in this post, but I can see now it was too unfocused to make the point clearly.

Link posted by Steve Antler : 6:47 AM

It's only fair...

Should Mexican citizens living in Mexico collect US Social Security? Check out (via Drudge) Sergio Bustos in the Arizona Republic, and consider this from an advocate: "Let's be honest, there are millions of Mexican immigrants contributing to the Social Security system and the U.S. economy," said Katherine Culliton, an attorney with the Washington, D.C., office of the Mexican American Legal Defense and Education Fund. "It's only fair they get back a benefit they deserve that will keep them from dying in poverty." Politically, I think this will wind up impossible to defend. Rightly or wrongly it will conflate (love that word!) with prescription drug and other benefits in the public mind. Consider: Retirees eyeing this bounty feel no pangs of guilt, thanks to their unshakable conviction that they earned every dime by sweat and toil. In fact, economists Laurence Kotlikoff and Jagadeesh Gokhale say that a typical man reaching age 65 today will get a net windfall of more than $70,000 over his remaining years. A luckless 25-year-old, by contrast, can count on paying $322,000 more in payroll taxes than he will ever get back in benefits. Imagine how much worse that sounds if the windfall flows south of the border.

Link posted by Steve Antler : 6:28 AM

Wednesday, December 10, 2003

Amazing how capitalism failed to collapse...

From the JEC: BEA's revised data confirms the economy actually contracted in the third quarter of 2000, wheras earlier data had shown weak growth. "The third quarter of 2001 -- when the terrorist attacks occurred -- was the worst quarter of the recession. The revised data thus suggest that the terrorist attacks amplified a milder downturn." And while you're at it be sure to visit the JEC's yummy new website.

Link posted by Steve Antler : 5:50 PM

And the implications for the dollar are...?

From Bruce Bartlett: A new report from the National Association of Manufacturers and the Manufacturing Alliance (MAPI) found that much of the manufacturing sector's problems are not due to unfair actions by our trading partners, but are self-imposed. It notes that we have higher corporate taxes, higher pollution abatement costs, and higher tort liability costs than our key competitors. Overall manufacturing costs are 22.4 percent higher in the U.S. as a result of such self-imposed costs, reducing our competitiveness and contributing to the trade deficit. Read the whole post, and follow the embarrasment of riches of related links Bruce serves up.

Link posted by Steve Antler : 5:43 PM

A McLeading Indicator?

Restaurants are hiring says the NYT : Since the beginning of August, the restaurant business, which includes everything from McDonald's to corner bars to four-star restaurants, has accounted for 18 percent of the 300,000 jobs created in the nation. Some economists say that an increase in low-wage jobs, which include most restaurant work, indicates that the job market over all will soon bounce back. During the economic doldrums of the early 1990's, hiring began to increase in the restaurant industry about six months before job creation began taking off. We haven't confirmed any of this yet, but a quick check seems to show a particularly high correlation between total US retail sales and total restaurant receipts lagged by two months. I'm going to poke around some more. Doesn't it seem obvious there would be higher restaurant sales associated with an increase in aggregate hours worked? I can personally testify we've been breaking our backs at the factory and picking up a lot of take-out on the way home! UPDATE: Well, the scatter diagram (and my personal experience) probably measures seasonality alone, but average weekly hours have indeed been rising for months: (Source: Fred II)

Link posted by Steve Antler : 3:42 PM

Hopefully there's a novel in the works...

Michael Crichton speaks on environmentalism as religion: With so many past failures, you might think that environmental predictions would become more cautious. But not if it's a religion. Remember, the nut on the sidewalk carrying the placard that predicts the end of the world doesn't quit when the world doesn't end on the day he expects. He just changes his placard, sets a new doomsday date, and goes back to walking the streets. One of the defining features of religion is that your beliefs are not troubled by facts, because they have nothing to do with facts. Via Don Luskin. UPDATE: A reader sends this related link along with this summary and critical comments: I just saw this article in what MSNBC.com calls its "Science" column...In summary, someone claims that there is evidence that humans 8000 years ago were introducing carbon dioxide into the atmosphere via slash and burn farming. Even more far-fetched, the claim is that 5000 years ago domesticated animals were producing detetable quantities of methane. Both of the claims seem absurd on the face of it -- especially the one about domestic livestock and methane. I wonder if these "scientists" can claim to know the number of domestic animals as compared to the wild ungulate population. I wonder if these people can show the extendt of slash and burn farming, world-wide. By the way, I like your critique of Andrew Sullivan's rantings about deficits, etc. Patently, the man has no clue as to the workings of economies. Thanks for the Sullivan comment. (Andrew is great, but it would be better if he were just perfect, no?) On the environmental stuff you've linked to, I think I've got to disagree with you. If I understand the article correctly there's no disputing the ice-core samples. Something created a more CO2-rich atmosphere around the time of early slash and burn farming. The study seems to say farming is as good a candidate as anything else. The methane argument relies on the notion there wouldn't have been as many ungulates without domestication, to be sure. We've known since at least the early 70's most methane comes from, well, cow farts. (Sure, the sheep and goats help out -- but mostly we're talking cow here.) If ice core samples show more methane just around the time we know domestication began, it seems reasonable to argue cows were just as flatulent then as they are now, and that's where the then-new methane came from. Finally -- if the ice core samples don't show CO2 and methane arising from ancient human activity, they would seem to show these will fluctuate in spite of human activity and possibly in spite of any human attempts to control them.

Link posted by Steve Antler : 9:17 AM

Tuesday, December 09, 2003

Falling dollar as "angry jerk"...

Glenn Reynolds questions the prevailing "Dean is McGovern" wisdom: Here's Dean's secret weapon in the general election: He's an angry jerk. Okay, he's not always a jerk, but he has his angry, jerky side...[I]n the current climate (heck, probably in most political climates) an angry jerk is a lot better than a wimp, and Dean doesn't come across as a wimp. Voters may conclude, and they may be right, that a President Dean would get angry at terrorists and respond appropriately, rather than rolling over and being a wimp. This, at any rate, is one reason why I'm not so sure the Dean / McGovern parallel that some people are drawing works. Worried about that falling dollar? Bruce Bartlett and others argue persuasively against the administration's current "benign neglect" policy, but maybe the falling dollar is better imagined as another "angry jerk," -- saying what it means and meaning what it says. Take a $100 out-of-warrantee VCR that can't be fixed by the starving old guy in the dirty repair shop for less than $80. Won't this old guy will have more business, a better retirement, and maybe even more money for prescription drugs, if the VCR initially sells for $150? Consider all that noncompetitive alternate energy we're supposed to want so very much. Why can't made-in-USA windmills compete with fossil-fuel-generated electricity? Can it be, maybe, fossil fuels are too cheap? And what that Canadian about tar sands oil? They used to say Alberta had reserves the size of Saudi Arabia, but only at uncompetitively high production costs. If the dollar is "artificially" high, aren't we're using "artificially low" amounts of made-in-USA alternate energy and North American fossil fuel? Every North American manufacturer has a sense of how US taxes, insurance, and regulation place it at a competitive disadvantage relative to manufacturing elsewhere. It is only a matter of time before the "artificially high dollar" displaces each and every one of these issues. There may be numbers out there to persuade me otherwise, but for now I'd contend the supply-side stimulative impact of a falling dollar can easily be greater than the stagflationary demand-side damping effect of same. And regardless of the numbers, the political implications of the issue are enormous. An administration able to say it was brave enough to allow the dollar to find a fair, international-market-determined value has taken control of the basic economic discourse of North America itself. The administration has decided what it thinks and is taking an unambiguous on the matter -- it is being an "angry jerk" in other words. Once again Bush has captured the high ground -- and, uh, Heaven help all us manufacturers and consumers if he's wrong on this one. UPDATE: Here's your recycled petrodollars at work: The Islamists’ attempt to dominate the Muslim faith and community is even more evident in the [USA's] mosques. By some estimates, as many as 70 percent of them are now controlled by Wahhabis, thanks to Saudi-associated organizations holding their mortgages. This is done through the Islamic Society of North America, a spin-off of the Muslim Students Association, and its financial arm, the North American Islamic Trust (NAIT). Yet, as we have seen, ISNA’s then-head, Muzammil Siddiqi, was the one of the Islamists most prominently featured in the Bush Administration’s post-9/11 Muslim outreach efforts. UPDATE II: Let me clarify something -- I'm not calling for artificial "beggar thy neighbor" style mercantilist economic warfare. Let the dollar find its own level. If it is allowed to do so in an orderly fashion it will be a major politico-economic victory for the USA. UPDATE III (FULL DISCLOSURE): The model EconoPundit normally uses doesn't offer direct quantitative support for the basic economic argument in this post. If falling dollar=rising import prices, Fairmodel says employment goes down, not up. I'm arguing here from the gut level instincts of manufacturer and everyday citizen, not econometrician. Economics notwithstanding, I think the political impact of the falling dollar is still thoroughly on the side of the Bush team.

Link posted by Steve Antler : 8:52 AM

Monday, December 08, 2003

New poll numbers from Iraq...

Each new poll taken in Iraq is imporant. This one may be the most important to date. UPDATE: Sebastien at Sadlyno corrects us. This is not new information, but from this original poll way back in August.

Link posted by Steve Antler : 4:07 PM

An old idea...

CADE I thank you, good people: there shall be no money; all shall eat and drink on my score; and I will apparel them all in one livery, that they may agree like brothers and worship me their lord. DICK The first thing we do, let's kill all the lawyers. CADE Nay, that I mean to do. Is not this a lamentable thing, that of the skin of an innocent lamb should be made parchment? that parchment, being scribbled o'er, should undo a man? You must read the current Newsweek cover story, which sets the bill for questionable litigation at $200 billion per year. Please stop and think for a second. Virtually the entire educated press corps are soiling themselves over the senior drug benefit because it will cost $400 billion over some unspecified future time period -- ten years, maybe?.

Link posted by Steve Antler : 10:38 AM

That special time of week...

Here's your economic calendar.

Link posted by Steve Antler : 5:54 AM

Sunday, December 07, 2003

Matters of principle vs. "what the numbers tell us"...

Gary Haubold objects: Great website but all the extreme tax/spending scenarios are just straw men to knock over and don't add anything to the real issue that Sullivan et al are writing about. Excluding defense and entitlement spending, this Bush Administration is growing spending faster than any President since Jimmy Carter. And cutting taxes at the same time. That's dumb. It's one thing to cut taxes and/or increase spending when Social Security Judgement Day is far off in the future; it's another thing entirely to do so in 2003 when SS & Medicare are perhaps a decade away from going permanently into the deep red. It would be better if the Gov't provided and paid attention to accurate accrual deficit figures, but they do not, and that sad fact makes it hard to have informed and rational debate about alternative policies. ....................... Thanks for the comment, but I'd have to disagree strongly until we sort out the issues. There are three here, but they're usually conflated. ISSUE # 1: Ill-effects of the deficit/debt -- does it crowd out private investment, cause inflation and/or exchange rate instability? How much? This is, strictly speaking, the only thing addressed my various posts on the deficit. ISSUE #2: The "proper" extent of government in the economy -- should it be large or small as measured in dollars, and active or inactive as measured in regulatory activity? ISSUE #3: The nature and funding of Social Security and Medicare, given the upcoming retirement of the baby boom generation -- what's the best way to pay for this generation's entitements? It is important to remember only ISSUE #2 is a matter of principle. The others are technical in nature, and should be addressed technically rather than ethically. On ISSUE #3, I pretty much defer to others. If nothing else, the Boskin 401k controversy suggests we may not be forecasting revenues as accurately as we'd wish. In any event, entitlements which are supposed to be self-funding aren't supposed to be linked to the deficit/surplus issue. We'd argue about the issue no matter where the deficit stood. On ISSUE #2, as a matter of principle, I favor a smaller government role. I think markets work. On ISSUE #1, we've looked at the matter many times in this weblog. The numbers say that strictly on a technical basis there's been no damage done by this administration's simultaneous tax cut and increased spending, and, as well, alternate policies look genuinely unappealing. UPDATE: I think Bruce Bartlett might accuse me of policy disloyalty, or something like it. UPDATE II: And James Taranto seems poised to call it something like "what-did-you-expect-reality": Newt Gingrich's Contract With America promised "to restore fiscal responsibility to an out-of-control Congress." But the GOP majority has been far from frugal. In fact, it was Senate Democrats, joined by only a few Republicans, who successfully filibustered a pork-laden energy bill last month, and who tried but failed to stop the GOP's vast expansion of Medicare. This role reversal leads one to think that a party's attitude toward spending is a function less of ideology than of political power. All else being equal, the party that controls Congress will be far more free-spending than the minority party, because the party in power gets to decide how to spend money, and it gets the political credit from the beneficiaries of government largesse. This is hardly cheering to those of us who would like to see government shrink, but it does appear to be a political fact of life. UPDATE III: And there's this important Niall Ferguson editorial.

Link posted by Steve Antler : 7:25 AM

Friday, December 05, 2003

Economics of the Alternate Universe

The important opinion leader Andrew Sullivan once again practices EconoEquivalence -- publicly lamenting the administration's "fiscal profligacy" and linking to this. Out of impatience with someone who should know better I have decided to construct an "alternate economic universe" in which the deficit is no longer a problem. In this universe, everything is very close to what we're familiar with, but despite 9/11 this alternate universe's president doggedly stuck to his Republican principles and announced we'd have a war on terror and a balanced budget -- financed by whatever tax increases were needed. This President's Democratic opposition demanded taxation according to ability-to-pay and -- since he had no control over Congress -- it was the basic personal income tax rate that was adjusted to assure absolutely zero deficit after the first quarter of 2001. Here's an easy-to-understand picture of the deficit, in our own (green line) and the alternate universe (red line) from 1991 through 2007. Unlike our own universe of growing deficits, in the alternate universe the budget is balanced. (That's why the red line is "flat" at zero.) The tax rate increases needed to fight the war on terror as well as keep the budget balanced seemed enormous, but administration supporters insisted after an initial runup these were rising no more quickly than rates in the previous administration. Here's a plot showing how personal income tax rates had to change to keep the budget in balance; once again, red line shows the alternate universe, green shows our own. Naturally, the citizens of this alternate universe had to make do with lower incomes than we're used to. Tax increases always choke off a certain degree of economic activity. As the difference shows up on a chart, it doesn't seem much to worry about, however. And of course this income hit made no difference, because nobody had any idea their real income might have been larger under alternate circumstances. (Well -- actually the last sentence is not exactly true. You see there was this obscure economist who had this weblog, see, and he really enjoyed running big simulation models so he ran a Princeton University model constructed by this guy name Rob Justice and he argued had the administration cut taxes they actually would have had higher income but nobody listened to him. Anyway, back to the story...) The big problem facing the administration was the unemployment rate. They started with a recession, and the tax cut worked so the recession just wouldn't go away: The Democrats charged the administration just couldn't get its planning act together, Republicans always caused recessions, you know, stuff like that. Even though the unemployment rate started declining very gradually after the second quarter of 2004, the numbers just didn't seem meaningful to the electorate. So the Republicans lost the 2004 election. The new Democratic President then ended the war on terror by apologizing to the Arab world for the Crusades and signing a nonaggression pact (containing clauses denouncing Zionism as racism) with the new Iraq/Saudi/North Korea Alliance. And this new era gave rise to a peace dividend which the Democrats used to create new social spending programs, which grew, and grew, and grew, until, three years after the election, the deficit had reached $600B. POSTSCRIPT: I will be happy to make available username and password to anyone who wishes to examine the dataset of my alternate universe, and/or run further experiments. Paragraphs following the unemployment rate discussion were made up and have absolutely no basis in econometric research. It should be noted, however, that the unemployment rate generated lots of articles like this in the alternate universe -- only they were much, much worse. UPDATE: There is yet another alternate universe in which tax rates were frozen but not raised. In that universe unemployment was still a major problem, but the deficit was cut roughly in half. Smaller deficit notwithstanding, that universe's version of Paul Krugman wrote this very same editorial without changing a single word . UPDATE II: I've been asked to discuss another alternate universe, one in which the budget was balanced by spending cuts rather than tax increases. It turns out in that alternate universe we have a recession so bad many would say it verges on a depression, with unemployment running between 7-9% for over half a decade: The required spending cuts are so draconian any war would be impossible without substantial (and politically unacceptable) cuts in all entitlement programs. UPDATE III: There are, of course, many reasonable alternate policy scenarios. More-moderate tax cuts, especially when combined with moderation in spending, would lead to a somewhat smaller deficit. EconoPundit's argument boils down to the following: current political discourse would draw no distinction between a defict of $200b and one of $500b. Absolutely no political benefit would accrue to moderated spending and a reduced deficit, and there would be massive political costs as doublethink-Democrats protested the mean-spiritedness of tight fisted Republicans. The political benefits of running a massive deficit are huge, and actual econometric numbers suggest the costs are wildly exaggerated. Add the war on Islamofascism into the calculus and consider the two parties' positions on the same, and (to me at least) the last paragraph says: Deficits? -- Bring 'em on!