I recognize many would loudly disagree, but face it -- a reasonable person could argue the combination of post 9/11 solidarity, welfare reform, Starbucks, Chicago-style urban renewal and (yes) the Costco/Wal-Mart phenomena have all sucessfully implemented much of Mickey Kaus' 1992 "civic liberalism" vision.
Supporters of drug decriminalization -- and I am one of them -- have to face the reality that decriminalization could easily reverse this progress.
Tomorrow, while you're waiting for the dollar to crash, don't forget to worry about these as well:
1. Between August and October multitudes of reports claimed high oil prices were the result of Chinese (and Indian) hoarding behavior. Indeed, Chinese controled prices combined with deregulated trade may be (a) causing the whole problem of the current petroleum price spike and, worse, (b) setting up conditions for a somewhat disorderly petroleum price crash.
If one day...the world of Islam comes to possess [nuclear] weapons... - on that day [Israel's] global arrogance would come to a dead end[,] because the use of a nuclear bomb in Israel will leave nothing on the ground, whereas [such a nuclear exchange could at worst ] only damage the world of Islam.
So remember, Iran is officially committed to first use of nuclear weapons. The massive loss of life arising from this nuclear exchange will be suffered by not by us, but by others and their families. We will only feel its effects indirectly -- in major oil supply cessacions and accompanying price shock waves.
The larger worry is that the Bush Treasury, and perhaps Mr. Bush himself, seem to have fallen for the notion that a country can devalue its way to prosperity. This is the patent medicine of the manufacturers' lobby, as well as the kind of economist who has done so much for Argentina, Mexico and other nations over the years. Britain tried this in the 1970s, and had to call in Margaret Thatcher to save the country from sinking to Third World status. The Carter Administration also tried talking down the dollar and ended up inspiring a global run on U.S. assets.
I'm sorry to say this, but you simply have to ask yourself whose interests are being represented here?
Even worse: doesn't the editorialist really know more about international currency movements than is evidenced by these words?
What's the impact of a new rumor that this or that central bank tried to but couldn't stop the slide? Did they know something you didn't? Are they afraid?
So right now you're in the middle of a thousand people all calmly walking across a flimsy metal bridge designed to hold one hundred and no more. Yes, you hear loud metallic creaking sounds, sudden snaps, alarming things like that. But face it -- the dumbest thing you can do is to start running.
Just keep walking, slowly and calmly. If everyone does the same thing there's a better chance all will get to the other side.
On the one hand: it is very easy to start adding up what you see as indirect costs and externalities to prove, for example, some sort of social evil like legalized gambling actually costs more than it brings in.
On the other hand: if the study is correct, similar work would possibly show legalization of cocaine and all those other banned substances would (a) be unable to generate prices equal to the social cost of the now-legal substances and (b) actually generate a total social cost greater than the current and costly "war on drugs."
First of all, to anyone reading this today: happy Thanksgiving! I'm spending a happy morning getting the turkey ready, and in the living room in front of a nice fire auditioning old CDs thru my new NAD T-773. (Audio geeks like me have to spend at least a year proving to themselves what they purchased was a great choice; the old Richter Mass in B Minor, Stravinsky conducting Threni, Ormandy's Sibelius #2, all those old great reference recordings, get trotted out yet again and prove how great they and NAD are together. Anyhow...)
What really prompted this post however was this story, which reminds us "benign neglect" is actually an old term.
Which brings me to the point -- isn't it curious how distasteful are some of the expressions specifically associated with international currency trading? Think of it. Besides "benign neglect" we have "sterilization" and "dirty float," and I am sure there are others.
Why is this? Econ jargon normally runs from neutral to imaginatively pleasing, as with "elasticity," for example.
Why does international finance happen to collect all the terms with negative or distasteful connotations?
Here's an awesome site that can answer thousands of important questions quickly and easily. For example, it took me just three minutes to find total exports from businesses within the State of Illinois, all major (and minor!) trading partners, trade shares, everything.
And for those who watched this documentary and are convinced we're exporting nothing but raw materials to China -- well, now you don't have to rely on guesswork from the Long Beach Port Authority!
UPDATE: Here's a hint regarding the China trade: in the documentary the Port Authority Employee made a big fuss about "cotton." We're sending all this raw cotton to China, she said, and just buying it back in the form of cheap shirts and pants.
Well if I'm reading the numbers right all cotton -- including woven yarn and finished cloth -- accounts for less than 3% of our exports to China.
I've just been told there are 10-13 foot wave warnings for our region of Lake Michigan. This would be enough to swamp the Outer Drive north of Fullerton, and will be a good test of new construction designed to keep it Lake Shore Drive rather than Lake Shore River.
And it won't do the beaches any good.
UPDATE: Upstairs neighbor reports waves now 6 feet and rising. May have to rent boat to get home tonight.
UPDATE II: From the sane, levelheaded people at Investica.com (emphasis added by EconoPundit):
Will Asia dump the dollar?
The ever-rising level of dollar reserves held in Asia poses a significant threat to the global stability. The US and Asia both have a powerful interest in avoiding a destabilising dollar plunge and a gradual adjustment is still realistic, especially if there is a US commitment to budget adjustment. The net dollar risks have, however, risen and could increase further, especially if individual central banks start to sell dollars more aggressively. The possibility of a destabilising dollar collapse must be taken seriously, particularly by the US. Benign neglect by the US administration is increasingly untenable.
Dollar fears increase
The issue of rising dollar reserves held by Asian central banks has been an underlying market concern for the past two years at least as intervention has pushed up Asian reserve levels, but the issue has received greater prominence over the past few weeks. The concerns have been brought into focus by the weak US dollar and by the reports of central bank reserve selling.
Scale of the problem
Asian central banks have been intervening heavily over the past year to prop up the dollar. During the first quarter of 2004, for example, Japan bought over US$300bn to stem yen appreciation. There has also been consistent and heavy intervention by the Chinese central bank to maintain the yuan peg and there has been consistent buying by other Asian banks. Chinese and Japanese central bank reserves have both increased to over US$500bn and total Asian reserves have increased to over US$2.2trn with around US$1.4trn of these denominated in dollars. Some of the increase in dollar terms has been due to a revaluation impact of non-dollar reserves, but the increase has still been very substantial.
There has been increased concern over the implications of a switch out of the dollar. Currently over 60% of reserves are still held in dollars and a reduction to around 50% would be likely to put an additional US$300bn into the global market. With dollar sentiment weak, it would be very difficult to absorb these dollars without a further significant US currency decline.
Complex relationship
There are, therefore, significant risks to the US economy as the dollar could weaken sharply. The relationship is, however, more complex than that as Asian economies are also dependent on strong US demand to support their export sectors. If there is a very sharp dollar decline, the risk of a US recession would increase as US Treasury yields rise and this would hurt Asia. There is, therefore, a strong incentive to maintain the uneasy balance that has existed over the past year. Asian central banks will also be happy to hold dollars if they can secure attractive returns in the US Treasury market.
Game theory
Students of game theory will watch the Asian situation closely. The Asian economies in general want to remain competitive and they will, therefore, not want the dollar to depreciate rapidly. It is therefore, in their interest to continue dollar buying in order to support the US currency. There will, however, be significant economic benefits to individual countries if they can quietly reduce their dollar reserves while other countries keep on buying. Such action would increase the risk of other countries following suit as they will not want to be left holding all the risk. This scenario could quickly develop into a cascade of dollar selling.
US needs to respond
The risks of China and Japan pursuing such a policy are still fairly low, but there will be a high risk in countries such as India. Reports of Russian central bank dollar selling will also increase tensions. In this context, it will be important for the US administration to make constructive proposals for correcting the US budget and trade deficits. A rise in US bond yields and narrowing of the current and budget deficits would allow a gradual market adjustment. The overall message is that dollar neglect by the US will be increasingly untenable.
The central banks will also be careful to avoid selling the dollar at its weakest point as this would compound capital losses and this suggests that they are more likely to sell into dollar strength rather than sell when the US currency is already under pressure. Sharp dollar depreciation could, however, force panic selling.
EconoPundit adds this: I hate game theory. But seriously folks, all that's really needed here is virtually the only thing President Bush can do under these circumstances: make a public statement saying federal deficits are bad, and that he intends to bring them under control.
The problem is this: he never says it unless he means it and knows he can do it.
The US dollar fell to a fresh low against the euro on Tuesday, breaching the $1.31 barrier for the first time.
The cataylst was a hint from the Russian central bank that it plans to step up its policy of switching its foreign exchange reserves into euros, at the expense of the dollar.
Alexei Ulyukayev, the first deputy chairman of the Russian central bank, told reporters: "Most of our reserves are in dollars and that's a cause for concern. It's a real problem.
"Looking at the dynamics of the euro/dollar rate, we are discussing the possibility to change the reserve structure."
Russia, which had a record $113.1bn of foreign reserves as of November 12, is already believed to hold some 25-30 per cent of these reserves in euros, with the bulk of the rest in dollars.
Analysts speculated it could move towards a 50-50 split, or even push its euro holdings as high as 60-65 per cent, in line with the basket arrangement it is believed to prefer for the management of the rouble, at the expense of its current "dirty" float against the dollar.
More importantly, the Russian comments highlighted the prospect of Asian central banks with larger reserves following suit. China has an estimated 80 per cent of its $515bn of reserves in dollars, while Middle Eastern central banks were rumoured to be selling dollars and buying sterling on Tuesday.
We're increasingly concerned about the evolving U.S. policy on the dollar. Fed Chairman Greenspan seemed to link the dollar's value to the trade deficit on Friday. President Bush and Secretary Snow seemed to link it to progress on the fiscal deficit over the weekend. These positions came on top of the November 10 Fed statement that it thinks inflation expectations are well contained.
We don't think the value of the dollar should be contingent on trade or fiscal accounts. In 1999, Europe made the value of the euro contingent on European growth -- both the linkage and disappointing growth caused the euro to weaken. Instead, the U.S. should seek a "strong and stable" dollar as a matter of policy . This doesn't mean currency intervention or any linkage with the euro and yen (which themselves change value). It means that the U.S. government would be known to prefer currency stability and the Fed would naturally incorporate the value of the dollar into its thinking on the inflation outlook and interest rates. Instead, the evolution of U.S. policy seems to be toward linkage of the dollar with the twin deficits and acceptance of dollar weakness, both causes for concern.
On these and similar data Bear Stearns' David Malpass warns:
Stock and bond prices fell with the dollar this morning in a so-far mild case of capital flight from the U.S. They were responding to Fed Chairman Greenspan's comments in Frankfurt linking the value of the dollar to the U.S. trade deficit. The gold price topped $448, signaling the weakest value for the dollar since the 1987-1988 dollar crisis (when the stock market crashed and gold nearly hit $500.)
Until today, dollar weakness had not hit U.S. stock or bond prices.
--The argument was that stock and bond prices could stay high (yields low) in the face of dollar weakness because: 1) the weak dollar forced foreign central banks to buy U.S. Treasuries and also harmed global growth prospects in a bond-favorable way; and 2) the weak dollar would add to U.S. corporate earnings and lower bond yields would boost equity valuations.
--The problem with those arguments is that they assume no capital flight - that U.S. bond and equity holders ignore their currency-related losses and don't have an alternative. Chairman Greenspan discussed this in his Frankfurt speech, noting that "home bias, the propensity of residents of a country to invest their savings disproportionately in domestic assets...diminished rather dramatically over the past ten years."
--We disagree with the idea that there is a natural adjustment process underway, that a weak dollar somehow makes U.S. assets more attractive allowing the dollar to stabilize. Currency movements are momentum-based. Rather than responding to fundamentals, the currency's value is itself one of the most important fundamentals. As the dollar weakens, it causes U.S. fundamentals (like inflation, interest rate expectations, and expected total return on investment) to deteriorate. This invites further dollar weakness. As the cycle progresses, it will require more pronounced action (rate hikes) than would otherwise have been needed, itself a deterioration in the fundamentals. See momentum discussions in Wall Street Journal articles, e.g. The Willy-Nilly Dollar on 2/11/04, Strengthening the Euro Isn't Rocket Science on 9/27/2000, Floating Into Monetary Trouble (in Asia) on 7/23/1997.
--We think a weak dollar trend, if it persisted, would cause capital flight and a further decline in U.S. asset prices. This would hit the most liquid non-physical domestic assets first. We're not ready yet to assume that a weak-dollar trend will persist. The value of the dollar is very responsive to U.S. interest rate expectations, which in turn respond to Fed comments and actions. Interest rate expectations fell 120 basis points (December 2005 euro-dollar future) between July and October, a cut in effective interest rates. If the Fed were to sound less dovish, interest rate expectations would rise and dollar weakness would likely stop.
We think the dollar has weakened more than dollar indices would suggest.
--Trade-weighted currency baskets have a substantial amount of herd behavior. The value of currencies tend to move together. In the 1970s, the dollar was weak, but so was the yen and mark. In the 1990s, the dollar was strong, but so was the yen and yuan. This makes dollar indices based on other currencies useless in anticipating inflation or financial market sensitivity.
--The dollar and other currencies can't be evaluated against each other since they all change in value, often in the same general direction. As a least-bad option, we think currencies have to be evaluated against gold and commodities (which hold their value better than currencies) in order to measure weakness or strength. On this basis, the dollar's value has weakened by 40% since 2001. Roughly half of that move reversed previous dollar strength and caused a healthy reflation. However, the other half is actual dollar weakness, causing substantial upward pressure on prices and inviting capital flight.
--In sum, the dollar is already weak and moderately inflationary, so financial markets are very sensitive to further weakness.
We don't think this dollar problem will end the expansion, at least not right away.
--The Fed and Treasury have massive influence on the value of the dollar and might choose to stop its slide, quickly ending the selling pressure. (However, we were wrong on this point in our election-related analysis, thinking the new Bush administration would choose a "strong and stable" dollar rather than a weak dollar.)
--The U.S. can probably tolerate more inflation than foreign countries, lessening the momentum-nature of the dollar's decline. The U.S. has a very long-term capital structure for both household and corporate debt (though less long-term for government debt). Its CPI and PCE inflation indexes are heavily weighted toward rental housing, deepening the normal lag in these indices and delaying the recognition of the inflation problem in the U.S. longer than in other countries.
--Importantly, we note big policy opportunities, partially offsetting the damage from dollar risk. The Administration appears to be making substantial progress limiting the growth in discretionary spending without yet having to resort to vetoes. A growth-oriented tax reform based on reducing the compound double taxation of savings is under discussion.
--Apart from the risk of a weak-dollar trend, the economic platform is solid in our view. We note the 5.5% unemployment rate, high levels of liquidity, the relatively low U.S. government debt/GDP ratio, strong corporate profit growth, and growth-oriented tax cuts.
UPDATE: This is for anyone who knows what "CPI" means but is still puzzled by the term "PCE price index."
UPDATE II: Now I know there are only four data points here (more are available at the data's source, but some in-between years are missing), and I know you can't place too much confidence in the data, but still, I think this gives you the basic picture and makes an important long-term point for anyone worried about the dollar:
The problem over the long term is not what Alan Greenspan will or won't do to slow or not slow the dollar's decline. The problem is one major trading partner (1) knows how to make things we want much more cheaply than we can, and (2) saves too much and spends too little.
The Peoples Republic of China is an almost unimaginably huge market. All it would take could be a tiny fraction of a decimal point of her awesomely-low MPC to completely swamp our capacity to produce for her market.
Now let's think about this for a moment. Hmmmm. What kind of autos do we make? Might some of these actually be more attractive to Chinese managers, professionals, and highly skilled workers than would be, say, Japanese autos? Yes? No? Maybe?
UPDATE: And then there's this. It's all about ooiiilll !
This year I'm not alone. And hey -- before anyone gets too offended at the graphic, remember my family's last name gives me very special privileges in this matter.
Interestingly, European tax cuts have included meaningful cuts in individual income tax rates for the rich -- the most controversial element of Mr. Bush's program. According to the OECD, 17 of 30 countries cut tax rates on the rich between 2000 and 2003 -- some by much more than here. The rich are defined as those with 10 times the average worker's income.
Now wait just a doggone second here. Ten times the average worker's income? That would mean in the US you don't start being "rich" until you're earning not $200,000 but something like, uh, is that number about $430,000? Yes?
One more day and I can release the whole paper. For now, suffice it to say I'm giving a short paper on some numerical implications of immigration reform, having hypothetically reduced US noninstitutional working age male population by varying amounts in accordance with three ("mild, moderate, severe") immigration reform scenarios.
Marx's law of increasing concentration states economic development is non-neutral with respect to size and concentration of enterprise.
Its strongest prediction is a capitalism much like Fritz Lang's vision of Metropolis: a single firm producing everything, a small elite of owners and their families living in parks and splendor on the city's surface -- and insect-like workers living in bare dormitories far below the city's black, awesome, greasy machinery.
The counter to Marx's law has no widely agreed-upon name. I've come up with "the law of continual competition," which simply states (much to most of my friends' disagreement) no monopoly lasts forever.
...as long as markets are theoretically contestable, monopolists invariably price as if competition were a present reality (that is the reason, incidentally, that Wal-Mart doesn't jack up prices once its competitors are neutralized; it doesn't want to tempt others into the market).
Vespasian turned over command of his army to his son, Titus. On May 1, 70, Titus began his siege of Jerusalem with about 80,000 soldiers. Unfortunately for the Jews, they were in no way united against the Roman enemies -- despite having only about 24,000 troops of their own. Different camps of Zealots fought against each other and all of them fought against those Jews who adopted anything resembling a moderate position. Many earlier Jewish leaders were systematically killed because the ranks of priests were filled with collaborators -- after all, pleasing the Roman rulers was the best means to advancement.
After the walls were finally breached, more than 100,000 Jews were killed and more than 90,000 were taken prisoner - these would later be sold into slavery throughout the Empire. Almost the entire city was razed to the ground. Judah became a minor province of Rome and the Jewish state was finished. The Sanhedrin was abolished and the priesthood was over. The only religious leaders left to continue the Jewish traditions were the Pharisees and, out of them, developed the position of rabbi, a religious teacher.
Colleague Steve Balkin sends this -- thereby opening new and exciting avenues of controversy and discussion for EconoPundit:
Prof. Steve Balkin
sbalkin_AT_roosevelt.edu
Roosevelt University
Chicago, November 2004
Economics Debate Assignment: Is what is good for Wal-Mart, also good for America?
Wal-Mart is the largest corporation on the planet and is the largest private sector employer in the U.S.. If its sales were counted as GDP, it would be the 18th largest economy in the world.
Pick your side of the issue: Pro or Anti Wal-Mart. You do not have to be either Pro or Anti Wal-Mart to engage in this debate. I suggest you choose the opposite stance that you intrinsically believe in to sharpen your understanding of the issues on the other side.
The entire class is required to watch the PBS Documentary, Is Wal-Mart Good for America? which is broadcast Tuesday, November 16, 2004 – PBS Channel 11, 9 to 10PM CST; and to visit their website www.pbs.org/wgbh/pages/frontline/shows/walmart/
Also, try to watch the second airing of CNBC's two-hour Wal-Mart documentary, The Age of Wal-Mart: Inside America's Most Powerful Company, Friday, Nov. 26, 2004, 1-3PM.
Also, check the library for books and articles about Wal-Mart.
Below are some questions to address for your side of the debate:
1. What are the benefits of Wal-Mart's low retail prices? Look at the concept of consumer surplus. What are the harms of low prices? Look at the concept of negative externalities.
2. What are the benefits of Wal-Mart's big box stores and super centers? What are the harms of such stores? Do they contribute to sprawl? Is sprawl good or bad?
3. Why are unions against Wal-Mart? If Wal-Mart is so bad for workers, why do people want to work there?
4. Are neighborhood businesses helped or hurt by Wal-Mart moving into their community? Is that a good or bad?
5. Does Wal-Mart lead to more job creation or less creation? Is there a difference when you consider the answer at the local, national or global level?
6. If more businesses imitate Wal-Mart, who will that be good for? Consider this from an investor's point of view, a worker's point of view, and a consumer's point of view.
7. What should policy makers and politicians do to help Wal-Mart create more positives for society? Or, should government officials just stay out of the way and leave Wal-Mart alone to operate as it sees fit?
8. How does Wal-Mart's business strategy compare to potential European competitors such as German Aldi and French Carrefour and to U.S. competitors such as CostPlus and Target?
UPDATE: Loyal EconoPunditista Joel McDade sends this report:
Last night I watched the less than flattering PBS documentary on Wal-Mart.
Seconds after it was over, the ad for the next program came on. "The following program is sponsored in part by.." you guessed it... "Wal-Mart."
Simply amazing.
UPDATE II: And now this:
Dear Professor Antler,
Regarding your Wal-Mart debate questions... I know the answer to this one. Oooh! Oooh! Pick me! Pick me!
3. Why are unions against Wal-Mart? If Wal-Mart is so bad for workers, why do people want to work there?
Because they can't get a better paying job anywhere else?
This coming Thursday I'm giving a brief paper on immigration reform.
The paper's conclusion is, simply, that the results must be viewed in their entirety since they tend to mutually cancel and thereby fall on both "sides" of the issue.
However, what's the point of having a weblog if you can't leak stuff to your readers and quote yourself out of context? So here's one of the more dramatic results:
Now please understand if you poll me as a citizen, I'm strongly in favor of the most liberal immigration policies out there. That having been said, we must recognize what the macroeconomic numbers tell us. Among other things, they say we could get back to near to those pre-recession, 90's boom-year unemployment rates with vigorous control of the border.
Comprehensive and complete, from a guy who knows this stuff...
Bruce Bartlett has posted a new paper on tax reform. Just full of juicy material like this:
Another idea that has been put forward lately is to use a VAT to eliminate the Social Security payroll tax. It is thought that the reduction in taxes on labor would expand employment. Research, however, indicates that the payroll tax is much less of a disincentive to employment than is commonly believed. That is because workers view it as more of a forced saving requirement akin to putting money in a 401(k)plan than a tax for which nothing specific in return is expected or received. Moreover, the benefit formula gives most workers more in future benefits than they pay in taxes, thus reinforcing work incentives.
We expect persistent inflation in coming years due to dollar weakness. We had thought it would be mild, but now think it will be moderate, pushing core inflation indicators above 3%.
--U.S. CPI is a deeply lagging indicator of inflation, so the inflation will show up in CPI well after it impacts the economy and financial markets.
--Already, year-over-year core CPI has risen from 0.9% to 2.0%.
--Gold is at $437, nearly 31% above its ten-year moving average, sending as clear an inflation signal now as it did a deflation signal in the late 1990s.
--The Bush administration's apparent signals (and indications from some parts of the Fed) are that it will welcome or tolerate dollar weakness, especially relative to Asian currencies.
--Adding to the inflation risk, the Fed's November 10 statement said that "longer-term inflation expectations remain well contained". Many forward-looking inflation indicators point to higher inflation. The timing of the Fed's movement toward a more neutral interest rate level will be a key variable in the value of the dollar, the price of commodities, and the extent of the inflation problem.
A moderate inflation shouldn't stop the expansion, but it would cause the growth rate to be less than it otherwise would be.
The Commerce report said exports hit a record $97.5 billion in September, suggesting a weakening dollar is making American goods more competitive around the world.
The dollar firmed initially after the trade report, but then sank to new record lows against the euro as traders used the dollar rally as an opportunity to sell the greenback. (Emphasis added)
"Voters were very concerned about the economy," Mr. Greenberg said, "but in the end, they did not respond to John Kerry on the economy. And after that, they voted their values. And that produced a cultural polarization of the electorate."
"These voters were waiting to hear an economic choice before the election, and they didn't get it."
Just out of curiosity I asked how bad the economy was compared with, say, the situation faced by typical voters when each voted for the first time.
Just imagine Joe Sixpack going into the voting booth musing to himself: "Wow! The economy is just so really different from the way it was back then the first year I voted!"
Here is the unemployment rate faced by voters of different ages during the first year each could have legally voted:
So forty- and 55-60 year-old voters might have something to gripe about. (These folks also have years of experience to offset their grievances, though.) For everyone else, well, it's not so hard to see how they "missed" the bad economy.
UPDATE: A distinguished MIT grad student and cyclist sends this critique:
Why 21...? Voting age is 18, even if drinking age is 21. (something I never quite understood -- why "we" trust those of draft age to help decide the fate of the nation but not to behave responsibly on an individual level -- but I digress, and it's besides the point...)
EconoPundit responds: Heck, when I was a young whippersnapper like you drinking age was 18 (at least in Madison, Wisconsin) but voting age was 21. I guess things have changed. Maybe I, uh, lost too many brain cells after turning 18? Anyhow...
UPDATE II: A reader complains:
I hate to nit-pick, but where on God's green earth did you get your unemployment figures for your age chart? I am 40 now, which means I was 21 in 1985. The unemployment rate sure wasn't 4.2%. In fact, it was 7.2% according to the BLS.
Love the site, but either you goofed up the data or I am reading your chart completely incorrectly (which I admit is entirely possible).
EconoPundit defends himself as follows: Ohhhkay, actually I did the whole thing rather quickly and while I'm now looking at my pencil-scribbled notes I (ahem) am honestly not sure exactly what I did or which dataset I used.
I don't believe in changing history like Stalin so I'm leaving the post as it is, and invite everyone else to look up the numbers themselves.
Conservatives are divided into three main camps. One group supports a national sales tax of more than 20 percent to replace the income tax. A second favors one income tax rate of less than 20 percent to replace the current four tax brackets, and a third prefers reforming the current income-tax system by ending many tax preferences and reducing overall tax rates.
Read it all (if only for Bruce Bartlet's Sherlock-Holmsian deduction of the Bush intent to retain the personal income tax).
UPDATE: Yes, I know, I left out "equity" in the desiderata list. Think for a second: isn't it politically inevitable that simplicity and tranparency will lead to equity?
[The warning] is well taken [but] at the same time the Democrats can't push the "not a landslide" theme too far. How many Democratic presidential candidates in the last ONE HUNDRED YEARS have matched Bush's popular vote share? FDR, LBJ...(er, that's it). Simple majority? NOT Wilson, Truman, Kennedy or Clinton (only Carter, who had 50.08%). Few if any Democrats urged restraint on Carter or Clinton.
It's true Bush didn't do so well by GOP standards. Every 20th Century Republican -- Teddy Roosevelt, Taft, Harding, Coolidge, Hoover, Eisenhower, Nixon ('72), and Reagan -- did better than Bush, in most cases significantly so, especially in re-elections.
At best, the Democrats' talking point could be that Bush didn't win a true GOP-sized mandate, merely a Democratic one.
I read your site on occasion from my home here in NYC. You can imagine that most people in this city violently disagree with your views.
In any case, most New York City dwellers are downright depressed about the election outcome.
On two separate occasions I was asked "How can it be that the rest of America is so out of touch with reality?" Well, folks, majority rules. It's all great when you're in the majority, but not so much when you're not. And in a democracy, majority sets the reality. So maybe it isn't everyone else that's out of touch.
Related to the election outcome, two separate acquaintances are now making applications to emigrate to Canada. I was told by one of them that "In Canada the government takes a more active role in people's lives and at least in Canada they speak French..." Cool, I guess.
Maybe New York should secede from the union. We'd be bigger than Denmark or any of the other Scandies. But it probably wouldn't work. Back in the early 1860s, the authorities killed 500,000 Americans to prove a point: a house divided cannot stand. But then how do you explain Yugoslavia[?]
Two brief closing thoughts: (1) It's not the EconoGonzo who's going on vacation, and (2) has anyone ever noticed Luskin's first name sounds like a Spanish aristocrat's title? You know, like: "Buenas dias Don Luskin!"
(Sorry, I guess I'm still a little tired out from Tuesday night.)
Although I'm a great fan of exotic statistics, the "winner-loser margin as a percent of total voters" (which I admittedly don't understand) has too many pins and not enough angels. I believe the issue is whether given a clear choice in the election, how did the aggregate choose and what was the diversity of that choice.
I would argue that a more relevant measure would be how Pres. Bush did in the wide spectrum of individual electoral contests relative to 2000. Based on C-SPAN votes counts (Wednesday p.m.) and final 2000 results, the data below shows Bush's net gain/loss in the share of total votes cast (+3.2% overall) by state (+DC).
Bush increased his share of the total vote in 49 out of 51 of these contests. He sustained a decline in just two states (VT and SD) and they accounted for <1% of total votes cast. He remarkably increased his share by 5% or more for 8 states accounting for 16% of votes cast, including 5 states that went to Kerry (HI, RI, NJ, CT, NY).
This would dispel the notion that Bush merely held on to his base and made marginal increases in a few swing states. While the turnout increased 9.3% over 2000, Bush's votes increased 16.7%. He even found almost 1,000 more people to vote for him in DC.
Thanks to a dataset sent by reader Ken Harlan, I can report a warning: don't listen to the jabber about highest winner's vote count in history and so on.
We all know there are more US voters than any time in history, right? So to judge the Bush 2004 mandate we should look at the winner-loser margin as a percent of total voters, and check it out, this number doesn't play so great:
Sooner or later those on the other side will notice there were only four elections since 1920 with a lower "mandate" number than that generated by our just-finished election.
So take care, don't crow, be quiet, the presidential numbers don't support the hi-mandate landslide thesis. (We can leave Senate and House races for another discussion however.)
I'd like to point out an additional factoid. EconoPundit has taken the liberty of reversing the winner/loser numbers for election 2000, as a means of generating a kind of counterfactual hypothesis of a Gore victory. This allows us to see the Bush 2004 mandate (3.075%) as compared with the hypothetical Gore 2000 mandate of 0.536%.
So they always say everything is relative, right? These data argue Bush 2004 has nearly six times the mandate Gore 2000 could have claimed.
Regardless of my vote, I think that Bush is one of the worst presidents in decades in ways in which I can not begin to list. I am glad that he was re-elected. Being the pessimist that I am I think that US is going to hell in a hand basket. The economy, the trade deficit, the budget deficit, the stock market, the war in Iraq, the war in Afghanistan, the war on terror. I am just glad that Bush and the Republican Congress will be there when the chickens come home to roost. And they will have no one else to blame but themselves. But they will try.
BTW, I think that Bush is going to take this win as a sign from God to continue His work. Rather than move to the center, he will turn to the right. Look for an amendment to allow prayer in school. And I don't mean the kind before tests.
Econopundit adds: well, in terms of improving US secondary education, since virtually everything else has been tried and things get only worse, maybe letting prayer back in is the answer.
I don't agree with the following paragraphs -- but today is the day when, after we vote, the healthiest thing we can do is find reasons why the other candidate is also genuinely worthy.
Why I'm for Kerry: You don't want to read a long explanation. Luckily, I've put this off for so long that I don't have time to write one.
1) It's about Iraq and the fight against terror: Bush has virtually no appealing second term domestic agenda. Kerry's domestic plans are attractive, especially the expansion of health care coverage, plus he's uniquely positioned to defy traditional Democratic interest groups--especially unions. He doesn't owe them much --most supported his oppponents--and, thanks to the Internet, he isn't that dependent on them for campaign dollars. But it's doubtful Kerry has the skills to get anything ambitious past a Republican House. (More on Kerry's limited presidential abilities here.) On the domestic front, I expect a quick Carteresque stalemate. Malaise by May!
It doesn't matter. The election is the first chance Americans have had, post-9/11, to figure out how to confront the terrorism problem. What's at stake isn't how to give millions of relatively healthy Americans better health care. It's how to stop millions of relatively healthy Americans (and other humans) from eventually dying at the hands of aggrieved groups who will in coming decades a) find it easier and easier to organize, thanks to the Web, and b) be increasingly be able to get their hands on increasingly destructive weapons, especially bioweapons. I get this basic framework from my colleague Robert Wright's excellent series on terrorism, available here. (For appropriate accompanying atmospherics, I recommend the unsuccessful but eerily prescient film Twelve Monkeys.) Currently the dominant threat is Islamic extremist terrorism. But after that it will be some other flavor of terrorism--environmental radicals, perhaps, or animal rights fanatics, or separatists, or superempowered Columbine nihilists, or all of them at once.
2) The voters have it wrong: Polls show doubts about President Bush's ability to handle the Iraq war but relative confidence in his approach to the larger war on terror. It seems to me this gets it backwards. On Iraq, I'm highly suspicious of the strident attacks on Bush's prosecution of the war from those who pushed the war (like Andrew Sullivan, Christopher Hitchens and the editors of New Republic). Arguing that Bush horribly botched the job is one convenient way of avoiding the conclusion that it was a bad idea to take on the job in the first place. (For example, what if we'd kept the Iraqi army--and then it staged a coup in a few years?) In any case, we're now in Iraq. We have some chance of succeeding-- with positive long term consequences for the region--and it would be very bad to fail and leave. So the issue is who is more likely to make the best of the situation. Bush, having made the mess, has every incentive to see through the unmaking of it. Kerry always has the tempting option of blaming his predecessor. As David Adesnik notes, there's ample reason to worry about Kerry's commitment to democracy in Iraq.( It's alarming that he talks mainly about setting up a "viable" government. Did thousands of people die for a viable government? Saddam was "viable.") If all we were talking about was Iraq, it would be hard to have much more confidence in Kerry than Bush (though we might still want to punish Bush for his mistakes).
In the larger war on terror, however, it's no contest. Both candidates will hunt down and kill existing terrorists. The issue is how many new terrorists are we creating--as Donald Rumsfeld famously wrote, "Is our current situation such that 'the harder we work, the behinder we get.'?" Let's say that n is the number of net new terrorists who'll come online in the next four years. Isn't it obvious that n is a lot lower if Kerry is president than if Bush is president? Even if you think the Iraq war was worth fighting, as it may well turn out in the long run to have been, it's hard to deny that it has angered millions around the world, and that Bush is a focal point of their anger. A tiny but definitely non-trivial percentage of these people will be angry enough to try to do us harm, and as the years go by technology will make it easier for them to accomplish this. We lower the volume of lethal hatred simply by thanking Bush for his efforts and retiring him.
Significantly, President Kerry will not have to do anything to accomplish this. He won't need any grand foreign policy framework. It will happen to him automatically if he wins, whether he likes it or not. In all probability he will have to fight against the tide of smarmy international goodwill that will envelop his administration--forcefully reminding the world that he intends to be tough, America should still be feared, etc. Unless he's an utter incompetent, however, he should be able to accomplish that while simultaneously lowering the level of anti-Americanism and at least partially defusing the self-fulfilling prospect of a "clash of civilizations." Meanwhile, if President Bush worries about how many people around the world his policies are enraging, he gives no sign of it. In four more years the "n" number could rise to calamitous, irreversibly high levels, even if the lethal effects might not be felt for a decade or two.
I'm continually amazed that bloggers, of all people, don't appreciate the way intensely motivated individuals, operating without centralized state (or any other) control, can be empowered by new technology to do us tremendous harm. To put it in mundane current blogospheric terms, when it comes to preventing future attacks, the terrorists will more and more come to resemble bloggers in their pajamas and America will come to resemble CBS. That's not a position we should be comfortable in. (Yes, it may be hard for small groups of non-state malcontents to develop nuclear weapons. But it might not be hard to acquire nuclear weapons. And bioweapons may well be developable by alarmingly small groups.)
If all Kerry does is lower the hatred level while making the best of Iraq (and continuing to pursue Al Qaeda) he will have done his job. In every other respect, he has "one term president" written all over him. This may not be so good for the Democrats in the medium run. That doesn't matter either.
Fairmodel has gone thru its quarterly update, has been reestimated, and has generated new forecasts.
Normally this would excite me but I've been walking around in some kind preelection digital fuzz all day and figured I'd post news about it on Wednesday.
The predictions of GROWTH, INFLATION, and GOODNEWS for the previous forecast from the US model (July 31, 2004) were 2.7 percent, 2.1 percent, and 2,respectively. With the release of the NIPA data on October 29, 2004, all the actual economic data are available for the vote prediction. The actual values (as of October 29, 2004) of GROWTH, INFLATION, and GOODNEWS are 2.9 percent, 2.0 percent, and 2, respectively.
Given that the actual economic values are close to the values used for the previous vote prediction, the current vote prediction is little changed. The new economic values give a prediction of 57.70 percent of the two-party vote for President Bush rather than 57.48 percent before.
The good news is that more Arizonans are starting to realize that Proposition 200 isn't the answer to their problems, because it isn't real reform. If the goal is to reduce illegal immigration, denying a welfare check to a Mexican alien seeking work isn't much of a disincentive to someone who was willing to brave dehydration and freezing temperatures to get here. Labor unions, the Chamber of Commerce and other opponents have also been making the case that Proposition 200 would be worse than doing nothing. Should it pass, for example, hospital workers and police and fire officials would be subject to fines for saving someone's life without first checking identification.
Politically, the debate in Arizona reflects a larger immigration debate within the GOP. Proposition 200 is a Republican initiative, created in conjunction with restrictionist outfits like the Federation for American Immigration Reform, which see all immigration--legal or illegal--as a net negative for the U.S.
But others within the party have stepped forward to reject this view. Every GOP member of Arizona's Congressional delegation has denounced the measure, as has the Republican mayor of Tucson. Like President Bush, they recognize that Mexicans crossing the border are, first and foremost, economic migrants coming here in search of more work and opportunity. Nothing in Proposition 200 acknowledges that reality, which is why it's a distraction, not a solution.
