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Guest Blogging
Just a reminder: Kash and I are looking for guest-bloggers from 12/20 to 1/7 (I'll be blogging through the end of the year, then taking a week off. Kash is off for 2.5 weeks.) Happily, we have one great guest so far (the much anticipated unveiling will come at the end of this week), but we could use one or two more. If you're interested, click here.
AB
It's Your Children's Money. Quick! Keep Taking It!
Here's the new fiscal responsibility plan: cut the deficit in half by 2009. Maybe. There's a major caveat:
In an interview Friday, Joel Kaplan, deputy director of the White House budget office, said Bush would halve the deficit "by pursuing very aggressively his pro-growth economic policies, and by leading the Congress toward overall policies of fiscal restraint. And if the Congress adheres to those two programs, we'll be successful in halving the deficit from its '04 peak within that time period."
I'm pretty sure the Republican Congress is in on the tax cut side. They're still working on the spending restraint, however (via Atrios).
Seeing this made me want to track down some old Bush quotes about his budget and tax plans. Here's a nice excerpt from the 2000 campaign website:
Cut Taxes Responsibly: Governor Bush’s $460 billion tax cut over five years will contribute to raising the standard of living for all Americans. His budget uses only about a quarter of the surplus for tax cuts, reserves all Social Security funds for Social Security only, and still leaves extra money for debt reduction, defense, education, and other priorities.
Of course, you have to visit the Internet Wayback Machine to find that promise. For some reason, it's no longer part of the official site.
Also while wandering the Web for quotes from 2000, I found this from an 11/1/2000 CNN piece:
"We've got a surplus in Washington, D.C.," [Bush] said. "Let me tell you what I think a surplus means. It means the government has got more money than it needs. That's why it's called a surplus."When you have a surplus, it means our people are overtaxed, that your government is overcharging you. I propose responsible priorities for our surplus -- a balanced budget and a fiscally responsible plan."
But that was then.
AB
P.S. I'm pretty sure that when the administration says (first quote, above) "pursuing very aggressively his pro-growth economic policies" they mean more tax cuts. Yes, tax cuts are stimulative in the short run, but when did Conservatives morph into Keynesians? Must have been some time in early 2001.
Good News
The latest news is that Saddam Hussein may have been captured. Clearly, that would be unambiguously good news. But it leads me to wonder whether the opposition is driven by pro-Saddam loyalty or anti-American sentiment. If the former, then things could take a turn for the better; if the latter, then we're likely to keep seeing more of the same. Either way, it is -- at the least -- an important symbolic victory.
AB
Yet Another Miserable Failure
From today’s Washington Post:
KIRKUSH, Iraq, Dec. 12 -- More than half the men in the first unit to be trained for the new Iraqi army have abandoned their jobs because of low pay, inadequate training, faulty equipment, ethnic tensions and other concerns, leaving the nascent 1st Battalion dramatically understaffed just days before it is scheduled to leave training camp for its first assignment, Iraqi, U.S. and other coalition officials say.Kash
How Do You Decide on a New Constitution?
It’s not easy. Just take a look at what the EU is going through this weekend as they try to write their first Europe-wide constitution. The biggest issue is how much representation in the Council of Ministers to give to each country. They have to be careful to set it up right, or they could end up with a system that’s not very representative… maybe even one that allows a minority of population to control policy-making, or even elect the EU’s leaders…
Kash
Into the Breach Again I Go...
Fight it... Fight it... No... Can’t... Resist... Must... Bring up... Trade... Again...
It's not my fault. Blame Brad DeLong. He put up a provocative post yesterday about this week’s Economist piece (subscription required) on white collar jobs in the US being outsourced to places like India. DeLong’s point is that The Economist goofed. He says:
The fact that trade balances--that dollars paid to Indian call-center workers show up as demand for American exports or as funding for investments in America*--means that the Economist is doing a bad thing when it talks about "job loss" rather than "job shift." Bad Economist! Go lie down now!! No biscuit for you!!!Needless to say, Brad’s post has generated a storm of comments, many of which are intelligent, articulate, and almost all of which I’ve enjoyed reading. Numerous commenters raised the issue of the job losses that the IT sector in the US has experienced over the past 2 or 3 years. There are dozens of comments along this line, but I’ll reproduce one particularly persuasive comment by a contributor named Camille Roy to give you the flavor:
Dear Mr DeLong,I am completely sympathetic to the feelings and fears behind these types of comments. It is true that jobs have dramatically disappeared in Silicon Valley. And it is truly awful for those who lost jobs, or can’t find jobs.
Love your blog, but this is bogus. In fact the stream of consciousness in this thread, in so far as it characterizes these out sourced jobs as low-skill jobs we may be better off without, is bogus. (The ivory tower mentality reflects poorly on your profession.) I am speaking from the line of fire, as a silicon valley software engineer with over a decade of advanced lab experience in the best companies in the valley. I know what's going on and it is ugly. The wages dropping like a stone etc, etc. I know the companies around here are sending work off-shore as fast as they can and I know that there are very few replacement jobs. Job losses here are around 300K and there is nothing on the horizon for these highly trained unemployed.
Suppose, just suppose, that these whatchamacallit "call center" operations did not go offshore, instead, they were completely automated.Kash
I mean suppose these call center jobs were lost to software, not to workers in India, with exactly the same effects on American call center workers. (If it is going to make you happy, assume that the conputers hosting that software is located in US; but that won't make helluva difference, I can tell you.)
What would you say to that?
More importantly, what would you do about it?
Uncompetitive and Unmonitored
Josh Marshall has a lovely follow up to Kash's earlier post on the likely impact of the administration reducing competition for reconstruction contracts in Iraq (illustrative example of this effect: importing gasoline from Kuwait costs $2.64/gallon). Here's the news from Marshall:
When Congress voted the $87 billion for military expenditures and reconstruction in Iraq they were keen to create an office of Inspector General at the Coalition Provisional Authority (CPA) to watch out for all manner of waste, fraud, abuse, price gouging and various other shenanigans.Now it seems that Paul Wolfowitz has gutted that provision. ...
I still try to picture Wolfowitz as a misguided idealogue, but damn it if he doesn't make it tough to see him as anything other than a naked shill for war profiteers.
AB
UPDATE: Wolfowitz must have been anticipating this morning's NYT, which alleges more attempted profiteering:
Kellogg, Brown & Root, also submitted a proposal for cafeteria services that seemed to be inflated by $67 million, the officials said. The Pentagon rejected that proposal, they said.The problems involving Halliburton, where Vice President Dick Cheney was chief executive, were described in a preliminary report by auditors, the officials said. The Pentagon contracts were awarded without competitive bidding and have a potential value of $15.6 billion; recent estimates by the Army have put the current value of the Halliburton contracts at about $5 billion.
The solution to inflated bids? More competition? No. Less auditors!
Medicare, continued
Reader and commenter Greg refers me to this important story on Medicare in the Boston Globe. It's an oped by two professors, Jacob S. Hacker, assistant professor of political science at Yale and Theodore R. Marmor, professor at Yale School of Management. There's a lot of good stuff in the piece, some of which I've touched on already, but there's one little piece that I hadn't heard about until now:
In a relatively unnoticed provision that wasn't in either the original House or Senate legislation, the bill creates a new standard for Medicare "insolvency." It would define the program as insolvent whenever, in two consecutive years, more than 45 percent of its spending comes from general income tax revenues (not incidentally, the most progressive source of Medicare financing) rather than payroll taxes and premiums. When this ceiling is hit, which is likely to happen sometime in the next decade, the law will require the president to propose spending cuts and tax increases within the program.
What this provision means is that if premiums do not cover 55% of the costs of the programs, then the president has to cut benefits or increase payroll taxes (which are a flat 2.9%), rather than income taxes (which are progressive). And the adverse selection problem seems almost certain to ensure that enrollees' premiums do not cover 55% of the costs.
AB
P.S. All of these posts are not intended to endorse a broad and generous Medicare drug benefit. In fact, my feelings about this issue are quite mixed. I'm in favor of coverage for poor seniors (as measured by wealth, not income) and even catastrophic coverage for most seniors, but there are a number of other social programs that may deserve even more attention. For instance, education and health care for children. What I am definitely opposed to is the media systematically overstating the benefits and understating the costs of the plan (Hint: if it truly is fantastic, then why delay implementation untill after the 2004 election?)
Best Lefty Blogs
Wampum is now taking nominations for the "Koufax Awards," a set of awards for various outstanding achievements in the field of excellence by lefty blogs. In most of the categories, the competition is likely to be fierce (but friendly).
The nominations are open throughout December and the voting starts in January.
AB
P.S. Where's the "most charts and graphs" category?
P.P.S. Every time I hit "Publish" I remember one more great blog or post that I forgot to mention. You can corrrect my omissions in comments here or at Wampum.
Real or Parody?
I really can't tell. Read No More Mr. Nice Blog's for an (alleged) exchange between Tim Russert and Hillary Clinton on the subject of her being the nominee and see if you can tell whether it's a parody or if Russert is that much of a moron.
AB
P.S. Sure, I could go to msnbc.com and find the transcript, but that would take the fun out of it.
Thoughts on Campaign Finance
I used to be a huge supporter of campaign finance reform. I love the ideal of reducing the influence of money in politics, and the unseemly quid pro quos that it engenders. But I’m starting to wonder.
So far, the efforts to temper the importance of money in the political process have primarily addressed the source of money. The campaign finance law upheld yesterday by the Supreme Court, for example, is chiefly significant for its ban on soft money contributions, which had no legal limit and were thus generally enormous.
But, as the LA Times notes today, the law will probably have minimal effect in reducing the importance of money in politics. They’re right.
The law wiped out a vast source of unregulated funding, known as "soft money," that became a subject of scandal in the 1990s as corporations, unions and wealthy individuals wrote large checks to political parties. But as opponents of the law predicted, much of that money is finding its way back into the political system through other means.I can’t believe I’m saying this, but I have to agree with McConnell on this one. (Just goes to show that this universe is indeed big enough that everything happens at least once.)
"This law will not remove one dime from politics," said Sen. Mitch McConnell (R-Ky.), the law's leading congressional opponent. "Outside special interest groups have become the modern-day political parties. Soft money is not gone — it has just changed its address."
Be Famous!
Not really, but you can be famous for fifteen minutes, or more accurately, famous for fifteen people. For various vacation and job-related reasons, Kash will be posting rarely from around 12/25 to 1/8 and I won't be able to post much during the first week in January. But you can.
My first guest-blogging experiment was a smashing success (it brought Kash to the blog), so bringing in a guest-blogger or two seems like a much better idea than going on hiatus. If you're interested, email me a sample post. Regardless of who wins, I'll definitely post every reasonable entry (perhaps with some editing), so there's nothing to lose.
There are few requirements. An interest in economics is important but a Ph.D is not. Acceptable political views range from a bit right of Nader to John McCain, which probably encompasses at least 70% of the population. And it's definitely open to people with their own blogs. In fact, it's probably a great way for a new blog to gain a modest amount of exposure.
AB
If You Thought Ari Fleischer Was Good
Susan, in her run-down of the candidates, has an idea for an even better press secretary, though I'd replace "Dean" with "any Democratic President":
Al Sharpton. Rev, I like your style. I really do. But I wish you'd answer questions directly, it's really annoying. However, my fondest wish would be to see you as White House press secretary under President Dean's first administration.
AB
A New Transfer from US Taxpayers to Corporate America
This newly announced transfer is more subtle than some of the Bush administration’s many, many actions that have transferred wealth from US taxpayers to a few select corporations – and thus to those few individuals who own and run them – but it’s a transfer nonetheless.
What am I referring to? I’m referring to the Bush administration's announcement that firms from Canada, France, Germany, Russia, and other war-opposers are not allowed to bid for the $19bn in Iraq reconstruction contracts. The result of such a ban will be to reduce the competition that the various contracts will be subject to. And when competition is reduced, prices almost always go up. A perfect example of what happens when contracts are awarded with less-than-full competition can be found in today’s NYTimes:
The United States government is paying the Halliburton Company an average of $2.64 a gallon to import gasoline and other fuel to Iraq from Kuwait, more than twice what others are paying to truck in Kuwaiti fuel, government documents show...Less competition (and Halliburton faced none in receiving its contract), higher prices.
A company's profits on the transport and sale of gasoline are usually razor-thin, with companies losing contracts if they overbid by half a penny a gallon. Independent experts who reviewed Halliburton's percentage of its gas importation contract said the company's 26-cent charge per gallon of gas from Kuwait appeared to be extremely high.
Campaign Finance Reform Upheld
The Supreme Court just issued a ruling upholding the McCain-Feingold campaign finance law that was passed in 2002. So now it's official: the ban on soft money stands.
Who is celebrating more today, Democrats or Republicans? I think it’s an open question -- but it may well be Republicans. Democrats have suffered most under the campaign finance law, because in the past they’ve typically received a few mega-donations for the bulk of their funding, whereas Republicans have been better at receiving a larger number of $1000 or $2000 hard money donations.
But that may be becoming less relevant. As I discussed in this previous post, some mega-donors are finding alternate ways to use their money to help Democrats. One unintended consequence of campaign finance may therefore be the rise of organizations like MoveOn, as this interesting Salon article describes. It’s an interesting question, whether MoveOn would have been so successful without campaign finance reform.
Kash
Playing Hardball with Bush
Hardball is the only game that the Bush administration is interested in playing, both domestically and internationally. It played it again yesterday, with the news that countries that didn’t support the Iraq invasion will be punished by being declared ineligible to bid on reconstruction contracts.
The Europeans are catching on, though. First, there was the case of the steel tariffs, where the EU discovered that threatening to impose tariffs on the US worked to get Bush’s attention. Now the lesson seems to be sinking in: diplomacy and dialogue won’t accomplish things with the Bush administration – only threats and punishment will. So, they’ve switched tactics over another trade dispute, and on December 8 they decided to levy tariffs on $4bn of US goods in retaliation for a US law that the WTO has ruled unfairly subsidizes US exporters at the expense of other countries.
The interesting thing is that the WTO actually issued its final ruling in the EU’s favor on this case back in May, at which time the EU had the legal authority to impose retaliatory tariffs on the US. However, until this week, they had decided not to actually impose the tariffs, and instead pursue a dialogue with the US to allow for a non-confrontational resolution to the US’s violation of WTO rules. It seems that after having hardballs thrown at them by the Bush administration for 3 years – with another one yesterday – and seeing the positive results when they throw a hardball back at Bush, the Europeans have learned that dialogue and patience will not be rewarded.
Kash
Food For Thought
Take a quick look at the graph in the previous post and ask yourself what happens when healthy seniors who are reasonably sure that their drug costs will be under $800 decide to opt out of the coverage program. Hint: total revenue from drug premiums goes down and the average drug cost per enrollee goes up.
AB
Medicare Drug Benefit Update
Reading Today's Daily Howler, I see that the NYT has a new story on the Medicare drug benefit. The Problem? The NYT's figures and analysis exclude the $420 annual premium, grossly overstating the true benefits provided under the plan.
To illustrate the distortion, I took the data from an earlier post on the Medicare Drug Benefit and divided the out-of-pocket expense by total drug costs to derive the percentage of drug costs paid by the enrollee. Then I repeated the analysis with the enrollee's premium costs excluded. As you can see, excluding those costs changes the picture substantially, particularly when expenses are in the non-catastrophic range. For example, $810 is the break-even number, meaning that if an enrollee's total drug costs are $810 then total out-of-pocket expenses are exactly $810. If drug costs are less than that, the enrollee is paying more than she would without coverage, and vice-versa. While in reality a senior with $810 in drug costs pays an amount equal to 100% of their drug costs, the Times' error makes it incorrectly appear that the government is paying a bit more than 50% of that senior's drug costs (and the senior a bit less than 50%).
Note that the problem is not that seniors with less than $810 in drug costs will pay more under the plan than they would otherwise. That's the nature of insurance and risk-sharing. Everybody puts some money into a pool at the start of the year. Those who are unlucky and need a lot of prescription drugs withdraw money; the fortunate ones are healthy and do not take money out of the pool. (One difference in this case is that seniors put only a portion of the money into the pool. Taxpayers add the rest.)
The problem is that by excluding the deductible the NYT -- either out of ignorance or malevolence -- grossly overstates the value of the just-signed plan. Left as an exercise for the reader is why the allegedly Liberal New York Times would distort thusly.
AB
The Dean Endorsement, con’t
Wondering if Gore’s endorsement of Dean matters? Take a look at this graph to see the effect it has had on Dean shares in the Iowa Electronic Market. The price of Dean shares is represented by the green line.
Apparently, at least among the individuals trading shares on the IEM, this news has increased Dean’s chance of winning the nomination from about 60% to about 70%. Not a bad bounce from a single endorsement.
For those who aren’t familiar with it, by the way, the IEM is a forum at which individuals can buy and sell shares representing individual candidates, either for the nomination or for the general election. If you’re holding a share of Dean and he wins the nomination, you get $1. If you paid less than $1 for the share, you keep the profits. It’s a fantastic way to check the opinion of a bunch of people (those who trade on the IEM) who put their money where their mouth is.
Kash
The Fed’s Take
The Fed’s Open Market Committee – the group that sets the US’s short term interest rates – met today and decided to hold interest rates constant. They also issued a statement indicating their sense of the economy’s direction:
The Committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. The probability of an unwelcome fall in inflation has diminished in recent months and now appears almost equal to that of a rise in inflation. However, with inflation quite low and resource use slack, the Committee believes that policy accommodation can be maintained for a considerable period.Kash
Comparing Two Great Depreciations
The dollar continued its fall against the euro today, hitting its eighth record low in a row. It’s now down to around 1.22 $/€. This set me to wondering. Sure the dollar has fallen pretty consistently over the past couple of months. But is this depreciation of the dollar large by historical standards?
The most dramatic depreciation of the dollar over the past quarter century was the roughly 50% fall in the dollar between early 1985 and late 1987. That dollar depreciation was intentional – all of the major economies of the world agreed to jointly act to push down the dollar, in the famous “Plaza Accord” of 1985. (Okay, maybe 'famous' is the wrong word to use... unless you're talking to a bunch of international economists.)
So I find it interesting to see that the recent history of the dollar against the euro looks remarkably similar to the path of the dollar against the DM back in the 1980s. Here’s the graph:
The answer to my original question is yes. The current depreciation is indeed large by historical standards – and is starting to approach the magnitude of the most dramatic dollar depreciation in the past quarter century.
Kash
Dean Endorsement
I'm not sure what to make of Gore's endorsement of Dean, other than that it's clearly good news for Dean. If I were a right wing columnist or blogger, I suppose I'd be trying to figure out how this either proves that (1) Hillary will run in 2004, or (2) Hillary will run in 2008, so Bill Clinton wants the 2004 Democratic candidate to fail and is somehow using Gore's endorsement to achieve that end.
AB
UPDATE: Dan Drezner steps up to the plate on Hillary:
Gore's endorsement would throw a significant monkey wrench into this Southern Strategy. [Wouldn't the Clintons be happy about this, since it increases the odds that Hillary will be able to run in 2008?--ed. ]
That makes sense, Prof. Drezner. Dean won't do well in the South so supporting Dean means you want the 2004 Democratic nominee to lose, which means you really want Hillary to run in 2008 (notwithstanding that she'll do no better in the South than Dean). All conservatives (including Mickey Kaus) should pause, count to ten, and reflect on the logic of their argument before making any statements about Hillary Clinton.
Just Like the Texas "Education Miracle"
We learned last week that the Texas Miracle was really the result of low standards on the TAAS, not accurately reporting dropouts, and excluding expected low-performers from taking tests.
John Ashcroft, meet Rod Paige: it appears that the same tactics are being used to inflate the terrorism conviction rate:
In a speech before the FBI Academy in September, President Bush said that since the attacks, U.S. prosecutors have charged more than 260 suspected terrorists, of whom 140 have already been convicted.
But critics say the new data - compiled by researchers at Syracuse University's Transactional Records Access Clearinghouse, using Justice Department reports - provide a very different picture, one that suggests the government is inflating its success by categorizing minor prosecutions as related to terrorism ... but the number of individuals [convicted of international terrorism related offences] who received sentences of five or more years actually dropped.
I suppose the administration could counter that only the minor offenders are being tried, while the alleged serious offenders are simply being held without trial in Guantanamo -- though now about 20% of those prisoners are scheduled for release.
AB
P.S. Regular Daily Hower readers knew way back in 2000 that there was something fishy about the Texas education numbers.
Even the Conservative Washington Times...
... is reporting negatively on current deficit and spending levels:
"In the historical context, you can think of times when politicians have gone for big-government solutions, and you can think of times when politicians have gone for tax cuts and limited government," said Robert Bixby, executive director of the budget-watchdog Concord Coalition.
"What's been unique about this Congress is they've tried to do both at once," he said.
But we can all be thankful, says Lindsey "I was worried about blowjobs not budgets in the 1990s" Graham:
Republican leaders also say spending is more restrained than it would have been if Democrats were in control.
"The Republican Party could be fairly criticized for not having the discipline in spending we should have," said Sen. Lindsey Graham, South Carolina Republican, who voted against the Medicare bill last month because of its huge costs. "But we're the best game in town. Compared to the Democrats, we're great."
Due to the onerous time commitment from his role as a leading member of the impeachment brigade, Graham must have failed to notice that the size of the federal government shrank when the Senate and White House were under Democratic control in the 1990s.(*)
AB
(*) The above link shows that the number of executive and legislative branch employees fell from 1985 to 2000; the number of judicial branch employees actually increased. Because the executive branch employs by far the most people, that decline in the 1990s drives the total change. The following graph, from this post from July, shows Federal spending as a percent of GDP falling sharply under Clinton -- from 22% of GDP to 18.5% of GDP:
The Rhetoric v. Reality Game: Military Readiness
Here’s one of my favorite games for a snowy weekend: Rhetoric v. Reality! Simply compare things that Bush said while campaigning to the reality of his administration. Here's an easy one from today's news.
First, George Bush during the RNC, August 3, 2000:
“Our military is low on parts, pay and morale. If called on by the commander-in-chief today, two entire divisions of the Army would have to report, "Not ready for duty, sir."”Second, Dick Cheney, August 27, 2000:
“Military readiness has reached its lowest level in modern times, and the Clinton-Gore administration has done very little to reverse that decline.”Note that at the time, the U.S. Army disputed those claims:
The U.S. Army said Friday that Bush was wrong when he said in his speech Thursday night to the Republican National Convention that two of the Army's 10 divisions were not ready to fight.So much for the rhetoric. What about the reality? How well have Bush and Cheney done in improving military readiness? From today's Washington Post, December 6, 2003:
Bush had said: "If called on by the commander-in-chief today, two entire divisions of the Army would have to report ..., 'Not ready for duty, sir.'"
But Maj. Thomas Collins, an Army spokesman, told CNN: "All 10 Army divisions are combat-ready, fully able to meet their war-fighting mission."
Four Army divisions -- 40 percent of the active-duty force -- will not be fully combat-ready for up to six months next year, leaving the nation with relatively few ready troops in the event of a major conflict in North Korea or elsewhere, a senior Army official said yesterday.Excellent -- a find like this should get me a lot of points in Rhetoric v. Reality!
Briefing reporters at the Pentagon, the official said the four returning divisions will be rated either C-3 or C-4, the Army's two lowest readiness categories...
(*) note: the term 'wholesome' not meant to be taken literally -- game not actually wholesome.
(**) note: game not suitable for children, people with heart conditions, or people susceptible to fits of rage in the face of breathtaking hypocrisy.
Loud Mouth Jackass
But you already knew that about Bill O'Reilly. But did you know that he's ignorant too, as SadlyNo! makes clear:
Bill "Shut Up!" O'Reilly displays his keen understanding of the economy in the latest edition of the Talking Points Memo:The conservative take is a supply side system, whereby consumers spend and jobs are created by the private sector, which profits from the spending, obviously.Jeebus Bill, what you described is obviously, demand-driven economic growth.
Keynes? Laffer? What's the difference?
AB
P.S. SadlyNo!'s post on Reagan is also a must-read for those who are unsure whether Reagan's face should replace FDR's on the dime.
Attack and Counter-Attack
On Thursday, the Club for Growth launched attack ads against Howard Dean in Iowa and New Hampshire. While I'm no Deaniac (though I may be some day), I am impressed by the speed and message of Dean's counter-ad. Skeptical Notion has the details.
AB
Weblog Awards
For those who like voting, winning, and losing (or rather, watching others win and lose), check out Wizbang's 2003 Weblog Awards. Angry Bear is not currently in the running, though should that change I'll provide a link.
AB
Louisiana Update
In a previous post, I referenced the troubles one young Louisiana student experienced after telling other students that his parents are gay. You can see the actual note the school made the student send to his parents, along with a teacher's explanatory note, here.
Never slow to adopt a really good idea, the White House press office has now adopted a similar policy for the press pool. Witness here the travails of one recalcitrant reporter (but be ready to laugh).
AB
Mixed Unemployment Report
The BLS reported this morning that the unemployment rate fell slightly, to 5.9%, and the number of jobs in the US increased by 57,000, which was less than most economists had expected. Job creation is better than job destruction, which is what we've mostly seen over the past couple of years, but it was still a rather disappointing report. Taking a look at the graph puts it in context.
The US economy has recovered from the worst part of the downturn in employment that we experienced during the spring and summer of 2003. Put another way, the labor market has almost (but not quite) clawed its way back to where it was throughout most of 2002. Unfortunately, the third quarter boom in the economy may well already be petering out.
Kash
Knowledge City
As Kash points out, the steel tariffs are being rescinded. If you watch The Daily Show then you know that Bush was in Pittsburgh on Wednesday, where he went to great lengths to avoid referencing the steel industry. How great were the lengths? I report, you decide:
"It's great to be back in Knowledge City, Pittsburgh, Pennsylvania," Bush said at a $2,000-a-plate luncheon at Westin Convention Center Hotel.
Ah yes, I remember the many tragic defeats my once-beloved Houston Oilers suffered at the ignominious hands of the Pittsburgh Knowledgers.
No word yet on whether the administration now plans to impose tariffs on knowledge.
AB
Food For Thought
Good stuff from Dwight Meredith at Wampum today. Dwight unintentionally makes a good case that Gary Aldrich should be on Pandagon's list of 2003's 20 Most Annoying Conservatives. Upon reflection, Aldrich is plenty annoying but too insignificant for the list. There's another great Daily Howler, too.
AB
Era of Big Government, Part Too Many to Count Anymore
In the pursuit of ever more massive deficits, this administration shall leave no stone unturned. Even if that stone is on the freakin' moon.
AB
UPDATE: I like this part:
One person consulted by the White House said some aides appear to relish the idea of a "Kennedy moment" for Bush, referring to the 1962 call by President John F. Kennedy for the nation to land a man on the moon and return him safely to Earth by the end of the decade.
Mother and Son
Why is the picture below not suitable for children in Louisiana schools? Click here to find out, but be prepared to be angry. Yet another installment in the "why I am Angry Bear" series.
AB
P.S. These days, it's particularly important to toss a few bones in the ACLU's direction if you can spare it.
Something Odd
The spell-check utility available from blogger doesn't recognize the word "blogger" (it suggests "blocker"). I'm sure they use third party software for the spell check, but you'd think they'd want the company name in their own lexicon. [If Blogger has spell check software then why do you have so many typos? --ed. Shut up, Mickey.]
AB
Atrios in a Landslide
Congratulations! He's apparently as annoying to righties (scroll down) as Hesiod, Kos, and Marshall combined.
Most Annoying Left-Of-Center BloggerAB
2) Hesiod from Counterspin Central (24)
2) Kos from Daily Kos (24)
2) Joshusa Micah Marshall from Talking Points Memo (24)
1) Atrios from Eschaton (71)
It’s official: Bush Drops Steel Tariffs
Bush’s statement about why he dropped the steel tariffs was, shall we say, disingenuous. From his remarks today:
I took action to give the industry a chance to adjust to the surge in foreign imports and to give relief to the workers and communities that depend on steel for their jobs and livelihoods. These safeguard measures have now achieved their purpose, and as a result of changed economic circumstances it is time to lift them.As Brad DeLong has so clearly pointed out recently, the change in the Bush administration rhetoric regarding the tariffs over the past 2 months (when they said that the tariffs had NOT yet achieved their purpose) has been nothing short of breathtaking. The real reason that the administration decided to drop the tariffs, of course, was the threat by the EU, Japan, China, and others to put tariffs on US goods. In the last couple of hours the EU has politely announced that they will drop their plans to impose tariffs on the US. The others will follow shortly, I'm sure.
Serious Anxiety about the Dollar... In Europe
Last night there were a few hours of near-panic in the currency markets as the result of a report that the EU was considering the imposition of capital controls to slow down the euro’s appreciation against the dollar. Capital controls in this case would presumably limit the amount of European assets (e.g. stocks, bonds, bank accounts) that non-EU citizens could purchase in any given month. Such a move would reduce the demand for euros, and thus help to keep the euro from rising further against the dollar. Such a move would also be totally shocking to the financial world, since they take for granted the perfect freedom that they currently have to move money in and out of Europe whenever they want.
I think that this rumor says something very interesting about the level of anxiety both in Brussels and in the currency markets about the dollar’s fall and euro’s rise. As this CBS Marketwatch report notes, it’s high.
LONDON (CBS.MW) - It says a lot about the current state of the foreign exchange market that a report Brussels is studying 1970s-style capital controls to stem the euro's rise received any attention at all on Thursday.The EU has vigorously denied that they will impose capital controls, and I believe them. However, this episode makes me wonder if they are worried enough about the rise of the euro to be considering some intervention in currency markets to try to prop up the dollar and keep the euro from getting stronger. I'm reminded of the possibility of the three-way currency contest that I discussed back in October. If the ECB is indeed considering such intervention, things could get very interesting indeed...
Europe can hardly lasso in the euro with exchange controls, and London currency analysts quickly dismissed the report in the Daily Telegraph. Yet the hullabaloo the report caused in overnight trading lingered. It may be signaling some unease with the relentless dollar selling.
The euro has struck a fresh all-time high against the dollar every day this week, outside of the slight decline Thursday. The common currency has been on a tear despite the stunning string of U.S. economic data for the third quarter...
[T]he fear among Europeans is that the euro is bearing the brunt of the great dollar correction underway because Asian nations - notably Japan - are intervening to force a more measured dollar decline against their own currencies. The pressure is bound to build on European policy makers to do something as the dollar continues to slide.
Controlling the Rules in Guantanamo
Today’s Guardian is running an interesting (and apparently exclusive) story about the legal defense of the prisoners held at Guantanamo Bay:
US Fires Guantanamo Defence TeamOne thing that the Bush administration understands – probably better than any other administration in recent memory – is how important the rules of the game are to ensuring the desired outcome. That’s why they have consistently devoted incredible attention to controlling the rules of the game in a host of different situations, from changing the congressional districts in Texas, to changing the rules on conference negotiation and on roll call procedures in Congress, to this. They know that if you can change the rules in the right way, then more often than not you can win perfectly legitimately – according to the rules.
A team of military lawyers recruited to defend alleged terrorists held by the US at Guantanamo Bay was dismissed by the Pentagon after some of its members rebelled against the unfair way the trials have been designed, the Guardian has learned.
And some members of the new legal defence team remain deeply unhappy with the trials - known as "military commissions" - believing them to be slanted towards the prosecution and an affront to modern US military justice.
Productivity and Capacity Puzzles
The BLS released its revised productivity numbers for the June – September quarter (Q3), which show that productivity leapt by 9.4% over that three month period. The strongest gains in productivity were in the durable goods manufacturing sector – i.e. producers of cars, washing machines, furniture, and capital equipment. That remarkable productivity growth came from two sources. First, those businesses produced more goods. Second, they used less labor to do it. In fact, they were able to squeeze 8% higher production out of their factories while using 6% fewer workers. It’s a pretty remarkable feat.
But I think that this adds to a puzzle that I’ve been thinking about for some time. Why is there still so much excess capacity in the economy? If productivity has been growing so rapidly, and factories are churning out more and more stuff using fewer workers, then presumably that means that businesses are getting better at using the resources that they have. So shouldn’t we see that the US is using more and more of its productive capacity, since its productivity has improved so much recently? Yet total capacity utilization in the US is still incredibly low (see graph here).
There’s another facet to this capacity puzzle. On the one hand, business spending grew at a very fast rate in the third quarter. Specifically, businesses increased spending on equipment and software by 18.4%, which alone accounted for 1.4% of the 8.2% increase in GDP in Q3. That’s the fastest rate of business purchases since 1998. But on the other hand, businesses have tons of spare capacity, as the graph illustrates.
So, to sum up:
- businesses have done an incredible job of squeezing more output out of fewer workers lately, presumably by more fully and more efficiently using the equipment that they have.Something here doesn’t fit together. I’m not quite sure what, but something odd is going on here.
- businesses still have tons of excess capacity, which means that they can produce far, far more than they actually are.
- businesses are currently buying new equipment at a remarkably fast rate.
Looks Like Nader Might Run
Via Talking Points Memo, I see that there is a Nader 2004 Presidential Exploratory Committee website now. Not wanting to criticize Nader without cause, I first thought that this might be a site made by someone urging Nader to run, similar to the various Draft Clark sites. So I did a quick whois domain registration search (*), which reveals that the person who registered the site hails from the domain votenader.org, which is registered to "Nader2000". I vaguely recall that Nader2000.org was the official campaign site of Nader in 2000, but it's no longer active. Fortunately, a quick search of archive.org reveals that Nader2000.org actually was a web site in 2000 and that it directs people to the "official" 2000 campaign site, votenader.org.
In a nutshell, the website is real, and Nader -- not some enthusiastic supporter -- does in fact have an exploratory committee. Allow me to suggest this as the official campaign slogan: "Four More Years". And no, this post is not another attack on the Greens, but rather an appeal to Greens to recognize that Nader running in 2004 is a bad idea. Every vote counts and taking any away from the eventual Democratic nominee is perilous, unless you want more energy bills, more regressive tax cuts, more war, and so on.
AB
(*) Ok, I was secretly hoping to find that the site is registered to the Republican National Committee. It's not.
UPDATE: Via TBogg, I see that Eric Alterman has a post on the subject. I have to endorse TBogg's take: "Whatever good that Ralph Nader did years ago is now gone. Vanished. Zero balance. If he runs again, he goes into the negative."
Tim Russert is Bob Somerby's Bi**h
There's not really any other way to read this installment of the Daily Howler.
AB
Bush to Repeal Steel Tariffs
The Washington Post is reporting that Bush has decided to repeal the steel tariffs. Given the growing crowd of countries that had recently announced that they would retaliate by putting tariffs on US products (as noted by AB in this post), I’m not surprised. As I argued in another earlier post, I think that the Bush administration will use the WTO ruling and the threat of retaliation by the US's trading partners as political cover to do something that many in the administration have been wanting to do anyway.
From the WaPost story:
The Bush administration has decided to repeal most of its 20-month-old tariffs on imported steel to head off a trade war that would have included foreign retaliation against products exported from politically crucial states, administration and industry sources said yesterday. The officials would not say when President Bush will announce the decision but said it is likely to be this week…I particularly liked this line in the story, though:
Bush advisers said they were aware the reversal could produce a backlash against him in several steel-producing states of the Rust Belt -- including Pennsylvania, West Virginia and Ohio. That arc of states has been hit severely by losses in manufacturing jobs and will be among the most closely contested in his reelection race.
The sources said that Bush's aides agonized over the options to present to the president and that they considered it one of the diciest political calculations of this term.Notice that it was a political calculation, not an economic one. Of course all presidents make decisions based on politics, but no administration that I can think of has made economic decisions so exclusively based on political calculus rather than economic concerns.
More Medicare
Part of the reason I made this graph of the just-passed Medicare Prescription drug benefit was to facilitate some clear thinking on the subject by commenters and other bloggers. In this post, Ruy Texiera points out that
[Seniors] will be hyper-aware of how much they will and will not be helped by the new bill. That’s why the concept that the GOP will be generally helped just because a bill with some sort of benefit for seniors–no matter how lousy!-- has been passed is so ridiculous. Seniors are going to be calculating how much–“to the penny”, as one senior put it in this article–their out-of-pocket drug costs are going to be under this new bill and they’re not going to be pleased. And they are going to know there’s nothing stopping drug prices from continuing to escalate rapidly and, therefore, their out-of-pocket costs as well.
In another post, Ruy T. gives some poll data to support his contention that the GOP may not gain much politically from this particular drug plan. Given the actual amount of non-catastrophic coverage is at most 48% (i.e., the government pays 48% of total drug costs and the senior pays the rest), and that even under catastrophic coverage the goverment only plays for more than 50% of drug costs when total drug costs exceed $8366, Ruy just might be on to something.
AB
Era of Big Government, Cont'd.
John McCain sums it up nicely:
"Congress is now spending money like a drunken sailor," said McCain, a former Navy officer, "and I've never known a sailor, drunk or sober, with the imagination that this Congress has."[snip] "The administration originally supported an energy bill that would cost about $8 billion. This one is up to $24 billion, and the administration is still saying it's one of its highest priorities," McCain said. "I don't know how you rationalize that."
"Any economist will tell you cannot have this level of debt of increasing deficits without eventually it affecting interest rates and inflation," he said. "Those are the greatest enemies of middle-income Americans and retired Americans."
AB
Free Trade and Retaliation
Up to now, most of my arguments -- and Kash's -- in favor of free trade have been premised on the idea that access to inexpensive imports is good for U.S. consumers and also good for the countries selling the goods. A second line of argument is that when the imports being limited or having tariffs attached are inputs (like steel), the harm to industries that use those inputs outweighs the benefits to the protected domestic industry.
There is also another element to the argument for free trade: avoiding the imposition of retaliatory tariffs on U.S. exports. If the rest of the world responds to U.S. protectionism with more protectionism, then we really hit the trifecta of higher prices for consumer goods, lost jobs in import-consuming domestic industries, and lost jobs in export industries. And it looks like that's where we are heading:
The United States' growing trade dispute with Europe, Japan, and China over steel and textiles is sparking threats of retaliation that may slow global investment and hurt the sales of companies such as Boeing Co., Ford Motor Co. and AMF Bowling Worldwide Inc.
Japan and Norway has joined the European Union in saying they'll impose sanctions on US goods to strike back at the Bush administration for steel-import tariffs imposed last year.
... in March, the EU will begin phasing in $4 billion in duties on US products, from leather goods to nuclear reactors, to pressure American lawmakers to scrap a tax break that the WTO says violates export-subsidy rules.
... Products of AMF Bowling Products Inc., a unit of AMF Bowling Worldwide, are on the EU's retaliation list. The company estimates that as much as 30 percent of its $125 million in annual revenue comes from sales of bowling alley equipment in the EU. "I would view that business as being significantly at risk if these tariffs get passed," said company president John Walker. AMF may lose sales to Brunswick Corp., which has a factory in Hungary, and to Asian competitors, he said.
Tariffs are bad. Trade wars are really bad.
AB
Are Faculty in the Humanities Liberal?
Yes, almost surely so. But Stanley Fish, Dean of the College of Liberal Arts and Sciences at the University of Illinois at Chicago, has what I think is the right response:
David Brooks is only the most recent sage to point out that, especially in the humanities and social sciences, a huge percentage of the faculty is self-identified as left of center. The result, says Brooks, a columnist for the Times, is a small brave band of conservative professors and students who are the victims of discrimination and can cope only if they "keep their views in the closet."
This is a mixture of nonsense and paranoia. In any institution I have ever taught at, conservative students are more vocal than their counterparts, especially when they are complaining loudly that their voices aren't being heard. And as for the assertion that "faculties skew overwhelmingly to the left," I would say first, that it is a supply-side problem -- if conservatives really want to spend their lives teaching modern poetry and Byzantine art, they should stop whining and do the dissertations and write the books, and they'll get the jobs -- and second, that it's not a problem.
It really would be that simple, but incessant whining is much easier than the hard work required to complete a dissertation in the humanities, endure years of meager pay as a post-doc, and then perhaps finally land a tenure-track position.
AB
Even the Pro-Free Trade Paul Krugman
Via Matt Yglesias, Paul Krugman offers some thoughts that I think a fair number of Angry Bear readers will agree with:
First and foremost, the promise of export-led growth has failed in too many places. In particular, Latin America has signally failed to replicate Asia's success: Latin nations have liberalized, privatized and deregulated, with results ranging from disappointing (Mexico) to catastrophic (Argentina). Open world markets, it seems, offer the possibility of economic development — but not an easy, universal recipe.
Meanwhile, competition from newly industrializing economies does hurt some workers in advanced countries. I could tell you how sensible government policies could minimize this cost, but since we don't have those policies and aren't about to get them, free trade is, in reality, a morally ambiguous issue. And someone in my situation has to acknowledge being in a particularly weak moral position, since they aren't yet having newspaper columns written in Bangalore.
AB
More Reading For Your Thanksgiving Enjoyment
This one is suitable for children, but should be digusting to everyone. Bob Novack, in the Sun-Times:
On the House floor, Nick Smith was told business interests would give his son $100,000 in return for his father's vote. When he still declined, fellow Republican House members told him they would make sure Brad Smith never came to Congress. After Nick Smith voted no and the bill passed, Duke Cunningham of California and other Republicans taunted him that his son was dead meat.
Perhaps if they had hinted that, should Smith fail to vote for the package, the $100,000 would instead be used to take out a contract on his family, Smith would have caved.
Via Suburban Guerrilla.
AB
The Era of Big Government, Continued
In the NYT today: Broad Bills Stuffed With Lawmakers' Pet Items. Some highlights:
"The Medicare bill establishes a "special payment for brachytherapy," a procedure that uses radioactive "seeds" to treat a wide array of cancers. The bill stipulates that Medicare will pay for the seeds, in addition to the procedure required to implant them.
Two Georgia Republicans, Senator Saxby Chambliss and Representative Nathan Deal, proposed the new method of payment. Theragenics, which produces and sells seeds for use in brachytherapy, is based in Buford, Ga." [Won't the free market direct more resources to Theragenics if their seeds are truly useful?]
Seriously, conservatives. This is big government at its worst, Sixties-Style but without the redeeming benefit of at least being targeted at the downtrodden.
AB
UPDATE: I just realized that I should have titled this "Have some pork with your turkey." Happy Thanksgiving!
In Case You Haven't Seen It Yet ...
... I offer you this exchange for your Thanksgiving amusement (warning: not suitable for children):
AB[Neil Bush's] ex-wife's attorney sounded skeptical. "Mr. [Neil] Bush, you have to admit it's a pretty remarkable thing for a man just to go to a hotel room door and open it and have a woman standing there and have sex with her," said Brown.
"It was very unusual," the errant husband replied.
Medicare Drug Benefit
The Washington Post has an impressively informative piece on the new Medicare drug benefit--they numbers are detailed and useful. In fact, I hereby nominate the authors, Edward Walsh and Bill Brubaker, for the Bush Budget Beat through at least the 2004 elections. Had work like this been common throughout 1999 and 2000, the election could well have turned out differently. It was known, but not covered, at the time that Bush's budget proposals didn't add up. But I digress. Based on the numbers in the Walsh and Brubaker piece, I came up with a chart comparing total drug costs (on the X-axis) to total out of pocket costs (Y-axis). Note that where the line is flatter the portion covered by the government is higher; where the line is steeper, the portion covered is lower.
First, a few comments. The chart below shows the benefit starting in 2006; the interim plan consists of, well, coupons basically. Second, click on the graph below to open up a larger graph with more details and explanation. I may have more to say about this soon, but at first sight, it seems like a decent plan for the somewhat sick (drug costs between $800 and $2500) and the extremely sick (drug costs well over $5000), but for the elderly who fall in between those extremes, the plan will only cover 36% of drug costs (for an enrollee with $3000 in drug costs) to 21% (for an enrollee with $5100 in drug costs).
Also, the plan in the chart is for the 27.5 million seniors making more than 150% of the poverty line. The 6 million seniors below the poverty line who previously had drug coverage under Medicaid will continue to have coverage ($1 generic and $3 branded). The 4.5 million seniors not eligible for Medicaid but earning less than 135% of the poverty line will receive generous coverage ($2 for generics and $5 for branded). The 2 million seniors earning between 135% and 150% of the poverty line will have a $50 deductible and pay 15% of their drug costs thereafter. Again, all of this is for 2006 and after. In the meantime, the plan is to give billions in subsidies to insurance companies in exchange for discount cards (the aforementioned "coupons").
AB
UPDATE: I plan to comment on this a bit more (it's boring but important), but in the meantime, Mark Kleiman has a good preliminary list here.
Why are Bond Yields Still so Low?
One of the fundamental conclusions of basic macroeconomics is that when the economy booms, interest rates should rise. That’s because when the economy is doing well, people and businesses borrow more money to finance their spending and investment. When the demand for borrowed money rises, we know that the cost of borrowing money will rise – i.e. interest rates will go up. And lately we’ve had a raft of data showing that the economy is recovering very nicely, thank you. GDP growth was revised up to 8.2% in the July-September quarter. Employment grew in September and October. Home construction is at record levels.
If the economy is improving so strongly, then why in the world have long-term interest rates fallen over the past two months?
The Economist’s Buttonwood column has this to say about it:
The simple explanation for this... is that investors sense a chill beneath the warm glow of the numbers. One cold wind blowing across this particular recovery is that Americans are up to their necks in debt. With short-term interest rates at a 45-year low, households are spending some 13% of their disposable income on servicing their debts—a higher number even than in the sharp recession of the early 1980s, when the Federal funds rate topped 13%. How much longer can they carry on spending at this rate, let alone increase it? If they don’t, then someone else will have to spend on their behalf.This echoes the concerns that I raised in this earlier post. But The Economist goes on to add that there’s a more fundamental problem that the US economy will be facing over the next several years: the economic leadership of George Bush. As Buttonwood puts it, “George Bush is a man who wants to get re-elected and seems prepared to sacrifice the long-term economic good—assuming (a big assumption) he knows how it is best served—to get back into the Oval Office.”
The government, perhaps? The Bush administration has turned a budget surplus of 2.4% of GDP into a deficit that official numbers say will amount to 4.3% of GDP next year. Not much room, in other words, to raise spending. Nor do American companies have oodles of money to play with. For all the talk of restructuring, they continue to increase their borrowing, though at least a slowdown in the rate at which they borrow and better profitability mean that their dreadful financial ratios are starting to look better than they were. Whether they will continue to do so is another matter.
Reflections on Medicare and the Democratic Party
Take a look at this bit of fascinating analysis of the Medicare fight by the Washington Post:
For Democrats, A Wake-Up CallThe piece suggests that people in Washington are getting used to the idea of Republican dominance for the foreseeable future. I have to say, after this week, I’m starting to see why. This story reminds me of the Tory party in Great Britain – a party that, as the years have gone by since Tony Blair first defeated it, has gone from moderate losses to huge losses, from disorganization to utter disarray, and from being the party of the loyal opposition to being virtually irrelevant. Could the same fate be store for the Democratic party?
Democrats have owned the Medicare issue for nearly 40 years. But this week, the Republicans climbed into the driver's seat and mashed the gas pedal. In closed-door sessions that excluded nearly all Democrats, through rule-bending roll calls, dishing out goodies to friends and twisting arms of the recalcitrant, the Republicans passed $400 billion worth of changes. Democrats spent the day picking carpet fibers out of their hairdos and sorting out their reactions.
Should they be outraged or envious in the face of GOP audacity and discipline? Disheartened or energized by President Bush's latest victory? This inability to choose a voice, to stick to one path, was a worrisome sign for many Democrats -- especially after such a disorienting year for the party.
Longtime party strategist Harold Ickes was at a loss to see any upside to a Republican victory in an area Democrats have always owned. He said he was flabbergasted that key Democratic senators, led by John Breaux (La.) and Max Baucus (Mont.), went along with it... "We just don't have the discipline on our side that's needed."
Robert Borosage of the Campaign for America's Future blamed Senate Minority Leader Thomas A. Daschle (D-S.D.) for the collapse. In the House, he said, Minority Leader Nancy Pelosi (D-Calif.) held the line so effectively that Republicans had to hold open their middle-of-the-night vote for nearly three hours on Saturday -- the longest flouting of the 15-minute rule in House history -- just to eke out a win. After which the Democratic filibuster in the Senate swiftly collapsed.
"There's clearly an absence of forceful leadership at the top of the Senate," Borosage said. "In the Senate we saw the difference between the other side's discipline and our lack of it, and I think Democrats are disappointed in the extreme."
Corporate Responsibility
Nice move by Boeing:
Michael Sears, executive vice president and chief financial officer of Boeing Co., had the required pedigree and background to become the next chairman and chief executive of the Chicago-based company.
But on Monday, Sears, 56, a resident of Lake Forest, was fired from his $1.2 million-per-year job. His wife said he was unavailable for comment.
[snip]
Sears' undoing came in the wake of a scandal over an Air Force lease/purchase contract for 100 refueling tankers based on the Boeing 767 airliner.
The company said Sears, a member of Boeing's three-member Office of the Chairman and the second-ranking officer of Boeing, was fired for violating company policies by communicating with Darleen Druyun, then an Air Force purchasing official, about future employment, when she hadn't disqualified herself in matters involving Boeing.
The firing came shortly after Boeing said it learned of Sears' discussions with Druyun. Druyun also was fired.
AB
Era of Big Government, Continued
While the energy bill is down, Pork remains at an all time high. Via Calpundit, see the "Grand Old Porkers: Special Favor 'Earmarks' contained in Annual Labor-HHS-Education Appropriation Bills" report by the minority staff of the House Appropriations Committee. (Needless to say, Pork is up since Republicans took over. Way Up.)
AB
Nice Job
Except for you, Tom Ethanol Daschle:
Washington -- The White House and Republican leaders Monday abandoned a vigorous effort to try to revive a sweeping energy bill this year after a liability waiver for the makers of a gasoline additive stalled the measure last week.AB
Why does Kurtz Have a Job?
Here's Kurtz on Gephardt's criticism of Dean's willingness as governor to cut spending, including spending on social services, to balance Vermont's budget:
Does Gephardt really want to argue that balancing the budget (which states, by the way, are constitutionally required to do) is bad?
In case it's unclear, the parenthetic is Kurtz speaking. However, the parenthetic is false.(*) Many, in fact the majority of, state constitutions prohibit deficit spending (even those states use tricks to circumvent their constitution), but there is no constitutional requirement that all states balance their budgets. Admittedly, Kurtz claims to be a media critic, but when he wanders into politics, which is most of the time, he should make a small effort to know what he's talking about. On the other hand, his job security appears to be unrelated to the quality of his work, so why bother?
AB
(*) The U.S. Constitution, Article I, Section 10 says
No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.
The prohibition on "bills of credit" may make it appear that Kurtz is right (notwithstanding the factual counter-evidence: States do run deficits), but this is really a prohibition on states issuing currency. Tom DeLay helpfully defines the term for us: "bills of credit: A paper medium of exchange, intended to circulate between individuals and between government and individuals, whether or not the quality of legal tender is imparted to such paper."
The Era of Big Government, Continued
Yes, it was on hiatus for a bit in the 1990s, but it's back with a vengance. First, the energy bill. Now the Republicans are using the same pork belly tactics on all of their bills (DeLay to recalcitrant Republican Congressperson: "how many millions of taxpayer money would it take to get your vote?"):
As Congress rushes to conclude its 2003 session, Republican leaders are trying to garner votes for controversial legislation by loading the bills with billions of dollars in added costs that analysts said would expand the budget deficit for years to come. The year-end binge has alarmed analysts in Washington and on Wall Street, coming as it does after three years of presidential and congressional initiatives that have both substantially boosted government spending and shrunk its tax base."The U.S. budget is out of control," the Wall Street investment firm Goldman Sachs & Co. warned Friday in its weekly newsletter to clients.
As the post story recounts, massive amounts of pork are flowing into bills covering Energy, Medicare, Veterans Affairs, Forest-thinning projects, funding for Iraq, and I'm sure everywhere else.
I'll have to second Warren Rudman's take, which is tantamount to my earlier take, "It's your children's money. Quick! Take it!":
"The only thing I can tell you is evidently the word 'tomorrow' no longer exists in the vocabulary of otherwise responsible members of Congress," said Warren Rudman, a former New Hampshire Republican senator and long-standing budget hawk. "They are acting as if there is no tomorrow."And,
"It is puzzling, unless you take the most cynical political view of 'I've got to do what I've got to do, and whatever bad that's going to happen is not going to happen on my watch,' " he said, trying to explain lawmakers' motivations. "If that is what's happening, we are facing the Titanic of fiscal crises in eight to 10 years."
There's a lot more in the full story -- all disgusting. Democrats aren't blameless in this (witness Daschle's selling out for ethanol subsidies), but as the party in control of the House, Senate, and White House, this spending is certified 94% Republican (96% if you count Zell Miller as a Republican).
AB
At Least we’re Popular in Northern Iraq…?
I thought that anti-American feelings in Iraq are confined to the Sunni triangle, as Bush and Co. tell us? Mosul is in northern Iraq, on the edge of Kurdistan… where the US is supposed to be popular.
MOSUL, Iraq - Gunmen killed two American soldiers driving through this northern Iraqi city Sunday, and then a crowd swarmed the scene, looting the soldiers' vehicle and pummeling their bodies, witnesses said. Another soldier was killed in a roadside bombing north of Baghdad.If one or two gunmen kill an American soldier, it doesn’t necessarily represent Iraqi opinion. But when a crowd of randomly selected individuals (i.e. those that were passing by at the time of the attack) decide to loot and mutilate the American soldiers, that says something very worrying about US popularity in a city that is supposed to be one of the most pro-American in Iraq.
Bahaa Jassim, a teenager, said the soldiers' vehicle crashed into a wall after the shooting. Several dozen passers-by then descended on the wreckage, looting the car of weapons and the soldiers' backpacks.
After the soldiers' bodies fell into the street, the crowd pummeled them with concrete blocks, Jassim said.
The FTAA is Dead
Two developments this week lead me to that conclusion. First, as this story describes, the framework agreed to in Miami this week was a shadow of the original intent, since it allows individual countries to pick and choose which parts of the FTAA they want to sign on to. So, for example, Brazil can choose to adopt the portion of the FTAA that requires it to lower tariffs while opting out of the portion of the FTAA that would require it to harmonize its intellectual property rights or government procurement policies. And the US can opt out of the portion that it doesn't like, which would require it to reduce agricultural subsidies.
In principle, I like the idea of flexibility, but it raises the question of what value is added by the FTAA agreement. If countries opt only for the portions of the agreement that they like, with no assurances that anyone else will opt for the same portions, then couldn’t they have just done those things (such as lowering tariffs) without all of the hassle of an FTAA in the first place?
The second development was the surprise announcement by the US Trade Representative, Robert Zoellick, that the US would pursue bilateral trade deals with six individual Latin American countries (Colombia, Peru, Ecuador, Bolivia, Panama, and the Dominican Republic). Some news reports have suggested that the US is doing this to apply pressure to the other Latin American countries to hurry up and agree to the FTAA.
But I have a different reading. I think that the Bush administration has decided that it is easier to do bilateral deals (which it is), and realized that in one-on-one negotiations with weak Latin American countries, the US pretty much gets to dictate the agreement. On a practical level, a web of individual bilateral deals will make any future FTAA negotiations that much more complicated (in addition to making it more complicated to do business in Latin America), since all of those individual agreements will have to be taken into account. So I think that this move signals an unspoken abandonment of the multilateral FTAA in favor of less ambitious, easier deals. That’s why I’ll be very surprised if any substantive FTAA agreement is reached in the next few years.
Is that a bad thing? Personally, I have mixed feelings about the FTAA. While I do believe that trade generally makes both trading partners better off (see numerous posts from this week), I’m not convinced that an FTAA is the way to get there. So I’m not going to lose any sleep about this effective end of the FTAA initiative. I do wonder, however, what this says about this administration’s general level of engagement with Latin America as a region. Of course, neglecting relations with Latin America has been a consistent theme of the Bush administration since it entered office, so why should they change now?
Kash
Borrowing and the Business Cycle
Since I’m in a data groove today, I thought I’d put up a picture showing why I worry about whether the current economic recovery is sustainable. You can read about some of the details of my concerns in this earlier post, but here’s a graph to go with it.
The point is simple: borrowing should typically fall during recessions, and rise during booms. The shaded areas in the graph represent recessions (approximately), and the two lines represent two important types of borrowing: borrowing by the US as a whole from foreign countries (that’s the current account deficit, the blue line), and the total debt service that consumers in the US have to pay as a percent of their disposable income. As you can see, in every recession in the past, the US as whole, and consumers in particular reduce their borrowing and debt burdens. And then during every economic expansion, both measures of borrowing rise. That’s how the business cycle normally works. But this time, that hasn’t happened.
If the US economy were to enter a period of strong growth now, we would expect both series to rise sharply, as they have during every previous recovery. But it seems impossible that consumer debt could boom at this point, and that the US current account deficit could grow much larger. Hence my feeling that somehow, these two measures have to fall first before they can rise again – and hence my fears that the other shoe has yet to drop on the US economy.
Kash
Trade and Income Growth: some data
I'd like to finish up our discussion about international trade by presenting some data. There have been lots of comments in our discussion that have involved assertions regarding trade, income, and employment. I thought I’d provide a couple of graphs to help give some meat to your arguments.
The first graph shows the quantity of imports (adjusted for inflation) as the black line, rising throughout the 70s and 80s, but much more rapidly in the 1990s. The red line shows employment, which grew strongly during the 1990s (despite the rapid growth in imports). The green line shows that total compensation rose, but slowly. Between 1978 and 1995 real hourly compensation rose slowly, but from 1995 to 2002 real compensation grew quite rapidly. Total compensation, by the way, includes both wages and benefits (health insurance benefits taking up the majority of those).
The graph shows that while imports boomed, so did employment in the US. When imports stagnated during the period 2000-02, so did employment.
However, hourly compensation did indeed grow slowly during most of this period. Maybe the increased imports are to blame?
I will argue that imports are not the culprit. You may first notice that the fastest growth in real compensation since the 1970s occurred in the last half of the 1990s, when imports were growing faster than ever. If more imports caused wages to fall, that shouldn’t happen.
But the real evidence is this: higher wages are the direct result of, and are impossible without, higher productivity. Productivity drives wages. That is the conclusion of a mountain of theoretical and empirical evidence. The chart below provides one example of that.
The chart shows that real compensation almost exactly follows real productivity. Compensation grew much more slowly during the period 1973-1994, because productivity did. Compensation grew faster in the 50s, 60s, and late 1990s because productivity did. Trade is not the culprit.
Kash
In Case You Weren't Sure ...
... what Campaign 2004 will look like, the RNC is starting it's first ads:
With somber strings playing in the background, the commercial flashes the words "Strong and Principled Leadership" before cutting to Mr. Bush standing before members of Congress. Intended to call out the Democrats for their opposition to Mr. Bush's military strategy of pre-emptively striking those who pose threats to the nation, the screen flashes "Some call for us to retreat, putting our national security in the hands of others," then urges viewers to tell Congress "to support the president's policy of pre-emptive self defense."
I'm not sure which candidate with a prayer of winning is calling for a retreat (hint: none of them), nor whose "other hands" that refers to. Still, at this stage, the war could go either way for Bush. I'm not sure how it would play in the swing states, but a commercial using the "Bring it On" and Lincoln flight suit/"Mission Accomplished" episodes with a "make-believe is easy, we need leadership" tagline might be worth a shot.
AB
Hooverism in the Modern Era
Bush is getting closer and closer to the Hoover Trifecta:
1. Presiding over a net loss of jobs? Check.
2. Stock market crash? Check.
3. Global trade war leading to a Great Depression? (Instigated, or at least exacerbated by Hoover's signing of the Smoot-Hawley Tariff Act of 1930) Based on Kash's last two posts, on the way.
Here's Robert Samuelson describing the Great Depression:
It is hard for those who did not live through it to grasp the full force of the worldwide depression. Between 1930 and 1939 U.S. unemployment averaged 18.2 percent. The economy's output of goods and services (gross national product) declined 30 percent between 1929 and 1933 and recovered to the 1929 level only in 1939. Prices of almost everything (farm products, raw materials, industrial goods, stocks) fell dramatically. Farm prices, for instance, dropped 51 percent from 1929 to 1933. World trade shriveled: between 1929 and 1933 it shrank 65 percent in dollar value and 25 percent in unit volume. Most nations suffered. In 1932 Britain's unemployment was 17.6 percent. Germany's depression hastened the rise of Hitler and, thereby, contributed to World War II.
Now, do I really expect Bush's anti-trade policies, or even a full-blown trade war, to spark a second Great Depression? No. We have many counter-cyclical measures now that did not exist last time. But it's still a step -- and a big one at that -- in the wrong direction.
AB
...But Pro-Trade Forces are Mustering Against Bush
From the NYTimes:
Greenspan Warns Against 'Creeping Protectionism' in TradeAnd from The Economist:
In an apparent criticism of the Bush administration, Alan Greenspan, the Federal Reserve's chairman, said today that it was "imperative" that the "creeping protectionism" in the nation's trade policy be reversed.
Mr. Greenspan "is getting right in the middle of this debate," said Robert Hormats, vice chairman of Goldman Sachs International, "and he is not mincing words. It's not normal Greenspan-speak. That was as close as you get to a shot across the administration's bow."
George Bush's free-trade rhetoric looks increasingly hollowKash
A GENERATION ago, bra-burning was a symbol of the womens' movement. This week, bras found a new political significance—as a symbol of the Bush administration's retreat from free trade. On November 18th, the Commerce Department announced that safeguard quotas would be imposed on imports of bras, dressing gowns and knitted fabrics from China. Future import growth in these products will be limited to 7.5%.
Until this week, the White House had restricted itself to bellicose rhetoric, usually to do with the value of the Chinese currency. Now it has crossed the Rubicon. “This is only the beginning,” bragged one textile lobby group this week. More anti-Chinese safeguards will hardly induce the Chinese to open their own markets. Indeed, on November 20th China's commerce ministry announced it would raise tariffs “on some commodities imported from the United States.”
George Bush, Anti-Trade Protectionist...
This week, Bush has:
- suggested that he will not lift the steel tariffs that were declared illegal by the WTO
- undermined efforts for a substantive FTAA deal, by moving toward bilateral trade negotiations
- applied new tariffs to imports of textiles from China, at the risk of starting a trade war
The anti-trade protectionist forces in the US apparently have an staunch ally in this Republican president.
Kash
Free Trade, Jobs, and Choosing
Reading the comments to Kash's last post, and reading articles like this one in the Houston Chronicle, it's clear that concern over lost jobs is the major reason for most anti-trade sentiment. However, free trade opponents need to understand that protecting jobs by restricting trade also costs jobs. The recent steel tariffs, under which we saved jobs in Pennsylvania and lost jobs in the auto industry in Michigan, highlight this point:
"The duties have cost steel users, such as Troy-based Delphi Corp., the world's biggest auto parts maker, and Caterpillar, the largest earth-moving equipment maker, about $680 million, the Washington-based International Trade Commission said in September."
"... If you keep those tariffs in place until 2005," said Lopes, "perhaps (the steel industry) is in a better economic situation than before, but now your customers, if they're small and medium size business, have shut down, and your bigger customers ... have been forced to shift production overseas."
"The tariffs have been especially destructive to small auto suppliers that use specialty steels only available from foreign steel makers, said Neil de Koker, who heads the Original Equipment Suppliers Association in Troy."
"They can't pass that price increase onto their customers because they refuse to accept it," said de Koker. 'If they can't pass it on, they're dead."
In the face of either losing jobs in Michigan or losing jobs in Pennsylvania, how do we choose?(*) With steel tariffs, we save jobs in Pennsylvania at the expense of jobs in Michigan; along the way, all Americans get to pay more for anything made out of steel or made using machinery that's made out of steel (in other words, just about everything). If we instead choose free trade, then we preserve jobs in Michigan at the expense of jobs in Pennsylvania. However, in the process, all American get to pay less for things made out of steel and things made using equipment made out of steel.
Viewed in this light, the choice is obvious: free trade, which creates wealth, is better than restricting free trade, which destroys wealth. (Note that by "wealth", I mean national wealth, as in GDP, not wealth as in more money for rich people.) Jobs are going to be lost either way, but with free trade, a portion of the benefits can be allocated to job retraining, adult education, and unemployment insurance to help soften the losses in the affected industry. With restricted trade, there is less wealth to go around so there is less money, not more, available to spend on easing the burden of unemployed workers.
Finally, how are the benefits of free trade distributed? With the sole exception of workers in industries that lose jobs (and remember that jobs will be lost either way), the benefits go to people who sell, make, or buy stuff--meaning just about everyone. And, unlike most things in life, the benefits of free trade accrue in a progressive fashion. Free trade lowers the price of food, clothing, consumer electronics, and cars. Poor and middle class families spend the large majority of their income on just these goods; as family income rises, a smaller portion is spent on these goods. For example, one study estimates the savings due to expanded free trade under the proposed Free Trade Area of the Americas (FTAA) at $814 for a family of four. That estimate is from FTAA advocates and may be high but whatever the true number is, the savings are about the same regardless of where a family lies in the income distribution. In percentage terms, this makes the benefits very progressive. For a family near the poverty line (about $16,000), saving $814 is a 5% reduction in the cost of living. For a family making $100,000, the same benefit amounts to a $.08% savings. (**)
It has always struck me as odd that people who oppose free trade are generally in favor of progressive policies. On the other hand, this gives me a new theory of why the Bush administration has been surprisingly anti-trade.
AB
(*) With the current administration, the choice is easy: which state is closer to voting for Bush in 2004? Pennsylvania! Oh, then go with steel tariffs and screw the auto industry workers. That's opportunism, not policy.
(**) The benefits are spread fairly evenly across the population even though the wealthy spend more on food, clothes, and cars than the poor, because as you move up the luxury scale a smaller amount of the total price of the good is attributable to the costs of inputs. A Corvette and an entry model Saturn use about the same amount of steel, so each car would be a few hundred dollars cheaper without steel tariffs. In percentage terms, this is a noticeable benefit to Saturn buyers and a trivial benefit to Corvette purchasers. The same is true for high-end clothing and expensive meals.
Trade with China as Technological Revolution
There have been some thought provoking comments recently about the US’s trade with China, and we haven’t had a good trade debate on here in a few months, so I thought I’d open up a thread to discuss it more fully. Let me first stick out my pro-trade neck as a target, though.
Some people suggest that while trade with a country like China helps consumers, it hurts workers, and therefore can’t be good. For some context, here’s a chart that shows the US’s trade with China over the past decade.
So how can economists so consistently assert that trade is good, if our imports from China continually grow and US workers lose their jobs as a result? Workers and consumers are the same people, after all. Naturally, economists recognize that it doesn't do people any good to be able to get goods cheaper if their incomes have fallen by even more.
But typically that's not what happens: instead, trade causes overall incomes to rise in real terms. There is a mountain of theoretical and empirical evidence to support that assertion. True, incomes have been rising very little for the past 3 years (and may have fallen) – but that is due to the recession, and not to our imports from China.
HOWEVER, there is an important qualification. While trade increases overall incomes, there are definitely winners and losers. Some individuals are unambiguously hurt by trade – namely those that lose their jobs to foreign competition. Others are helped by trade – namely those that keep their jobs and just get to enjoy lower prices, and those that get jobs that wouldn't have otherwise existed in the export sector if it weren’t for increased world trade. But there's no getting around the basic reality that trade helps some people while it hurts others.
Does that mean that trade with China (or any other country) should be limited by government intervention? No.
The reason is that international trade functions exactly like technological progress. Essentially, by moving production to China, the US has discovered a new way to produce a lot of consumer goods more cheaply than before. An invention that magically reduced the labor requirement for manufacturing consumer goods would have the exact same effect on the US economy – it would cost thousands of US manufacturing workers their jobs. Increasing trade with China is no different from a technological revolution.
But, one might still ask, what about the winners and losers from trade? Shouldn’t we still limit trade to help the losers? Let me turn the question around. What makes international trade any different from any other type of economic change – almost all of which create winners and losers? When any new technology is invented there are winners and losers. When the railroad was invented, thousands of people who worked on the canals and on ships lost their jobs to competition from the railroads – and many couldn’t find jobs in the railroads, since they required very different skills. When the tractor was invented, one farmer could do what it used to take ten to do by hand, so millions of farmers who couldn’t compete against the tractor lost their jobs, and had to move to new industries. Yet somehow the US economy still grew and propsered.
You get the idea. My point is this: international trade causes the pattern of economic activity to shift, transform, and evolve in a different way from before – just as technological progress does. If your goal is to try to prevent anyone from ‘losing’ as the economy evolves, banning technological progress would probably work much better than banning international trade. But we don’t, because we know that technological progress makes us all better off in the long run. So instead, we try to help the losers from economic change in other ways, such as by providing a secure social safety net.
So why do things seem worse right now? That’s because the US economy is currently suffering from a prolonged (though relatively mild) economic downturn. That makes it seem like there are more ‘losers’ than usual. And there are. The thing is, most of those additional ‘losers’ right now are losing from the recession, not from trade. Even if we imported nothing from China, there would be more ‘losers’ right now.
One last point. I’ve addressed why I think that imports from China simply make the US economy evolve faster, but what about the trade imbalance? Does it matter that we buy a lot more from China than China does from the US? The answer is yes, it matters in the long run, because the trade deficit means that the US must essentially give China (and other countries) our assets to pay for what we’re importing. But, as I’ve discussed in posts here and here, the cause of our trade imbalance is our low savings and high consumption, so limiting our trade with China wouldn’t help with that problem. All it would do would be to limit the technological revolution that is currently transforming US manufacturing, one which will inevitably make the US more prosperous.
Kash
The Resumption of The Big Dollar Slide?
The US dollar hit a record low against the euro today, of about .83 €/$. It’s been trending down for the last year and a half, so that’s not that surprising. But listen to what currency traders were saying today:
Traders cited two factors behind the dollar's fall.Okay, that’s not surprising either – neither the Bush administration contradiction of its own economic team, nor the protectionism. However, this definitely caught my attention:
First, Commerce Undersecretary Grant Aldonas told reporters that the Bush administration has decided to set new quotas on textile imports from China... The timing of the measure seemed odd, given that the World Trade Organization just ruled that the United States' steel tariffs are illegal and given that Treasury Secretary John Snow said yesterday that the United States wasn't headed into a "protectionist mode."
[Second], the Treasury Department released figures showing that foreign investment in U.S. stocks and Treasurys slowed sharply in September -- which pressures the dollar since there's less apparent demand for U.S. assets.So, which foreign country could plausibly have sold $35 billion in US Treasury bonds in one month? Only one candidate immediately leaps to mind: China. Given the gigantic stocks of US Treasurys that China owns, this news reminds me of some of my long-standing concerns and makes me wonder if there isn’t worse to come in the months ahead for the dollar.
Breaking down the numbers, foreign investors sold $6.3 billion worth of U.S. equities compared with $11.5 billion worth of equity purchases in August. They bought just $5.6 billion worth of Treasurys -- down sharply from the $25.1 billion they bought the month before.
The drop off in Treasury buying was especially notable since the Japanese government reported that it bought $40 billion of the U.S. currency in September in its efforts to stem the yen's strength. Much of that money would have gone into Treasurys. The suggestion is that some other country or countries were big sellers.
Have We Passed the Cyclical Bottom?
The CPI report for October was just released this morning. The core rate (which is the important rate to check if you want to understand the underlying trend in inflation) of consumer price inflation was up .2% last month. That means that the 12-month core CPI inflation rate edged up from 1.25% to 1.30%. With the exception of last May, that's the first time we've seen the 12-month inflation rate rise in nearly 1 ½ years. (See this earlier post for a chart and a bit of context.) Is it time to say that we've passed the bottom of the cycle? The PPI report from last week also showed a slight uptick in core prices last month... So put that together with all of the good news on output lately, and one could start making the case that we’ve reached the bottom of the business cycle -- at least for now.
Kash
Bush to Comply with the WTO?
Well, it looks like Bush may indeed lift the steel tariffs. Many (most?) of the relevant parties in the administration have wanted to lift them for some time, but now it may happen. To emphasize the point, Senator Charles Grassley (an unusually sensible Republican from Iowa who chairs the Senate Finance Committee) apparently wrote Bush a letter suggesting that he remove the tariffs, according to CBS Marketwatch:
"The purpose of the steel safeguard tariffs has therefore been met, but this has come at a heavy cost," Senate Finance Committee Chairman Charles Grassley, R-Iowa, wrote in a letter to Bush dated Friday.US Trade Representative Bob Zoellick has begun laying the groundwork by saying things like "the polictical climate has changed since the tariffs were imposed" and "the tariffs have already done their job." So why will Bush now remove the tariffs, after all of this time? A news item from Yahoo suggested one reason:
The quasi-judicial U.S. International Trade Commission "estimates that the steel safeguard tariffs have already cost U.S. businesses and workers over $680 million since their imposition," Grassley added.
Bush is widely expected to lift the tariffs, according to administration sources speaking on condition of anonymity. But the president, who likes to make surprise announcements, has been guarded in the last few days about his intentions.
Grassley's letter gives the White House more ammunition for arguing it is lifting the tariffs for domestic reasons, rather than "buckling under" to the threat of EU retaliation.But I don’t buy this line of reasoning. If the White House was looking for domestic reasons to remove the tariffs, they had plenty with the ITC report back in September. Plus, why remove the tariffs now, right after the WTO ruling, if you want to make it look like your decision has nothing to do with possible EU retaliation?
Blogroll Down
It looks like someone hacked Blogrolling.com to make it replace all links with a link to someone's blog. To avoid promoting the hacker's blog, links are now down until blogrolling fixes the problem.
AB
Bush in the UK
There's surely lots of interesting stuff for bloggers of all stripes in Salon's transcript of Bush's interview with the BBC's David Frost. But the following juxtaposition struck me as peculiar:
On Iraq's nonexistent biological weapons (page 2):
"And David Kay found evidence of weapons programs. He found some biological weapons - evidence of biological weapons."
On North Korea's nuclear weapons (page 3):
"And I would refer people to North Korea where we've got a multilateral attempt to convince Kim Jong Il to get rid of his nuclear ambitions ... But what I've done is I've convinced China and South Korea, and Japan, and Russia to speak with one voice to the North Koreans and say, 'Get rid of your nuclear ambitions.'"
Iraq has no WMD? Then they have WMD programs, or we have evidence of WMD, or perhaps evidence of WMD programs, though of course no actual WMD. North Korea announces that they have a nuclear deterrent ready to go, and the CIA believes the only thing stopping them from detonating a test bomb is the international backlash? That's merely ambitions.
AB
P.S. The Sun's interview is up now too (while visiting the illustrious Sun, reading the words of the leader of the free world, be sure to check out the latest Page 3 girl, "Sarina, 20, from London" (link on lower left sidebar) and learn about "Kylie's Flashy Show: Crowds roar at her fishnets."
Clark 1, Russert 0
Appearing on Meet the Press with Tim Russert is basically mandatory for presidential candidates these days (though I think Bush will only do so again if he's forced to do so by very close polls). Dean tried and didn't do so well, though the attacks on his performance were largely unfair. Clark, on the other hand, didn't really seem to give much meat to his critics, and came across appearing much more knowledgeable on the issues than Russert (transcript here). Russert would throw out a quote and Clark responded ably. A quick check of the conservative National Review's blog, The Corner, and Instapundit support this take -- neither has posts criticizing Clark's appearance (though perhaps they are still waiting for the faxes from the RNC).
In any case, the following exchange was amusing and it illustrates the general give and take (and who was doing most of the taking) of the interview:
MR. RUSSERT: After the war was commenced in April, you did write an article for The London Times and you said, “Can anything be more moving than the joyous throngs swarming the streets of Baghdad? Memories of the fall of the Berlin Wall, and the defeat of Milosevic in Belgrade flood back. Statues and images of Saddam are smashed and defiled. ... President Bush, Tony Blair should be proud of their resolve in the face of so much doubt.”
GEN. CLARK: But, Tim, do you have the rest of the article with you?
MR. RUSSERT: I’ve read...
GEN. CLARK: The rest of the article you should show because what it says is: “You can have your victory parade. You can have the soldiers parade up and down. You can be proud of the fact that you commanded these troops and they crushed this Army, but you must recognize that the job isn’t done. It may be only beginning. You haven’t found the weapons of mass destruction. And you’ve got a long way to go to put anything in place in the postwar.”
I’m writing as a commentator. I’m fair, and I respect the men and women in the armed forces. I love them, I’ve spent my life there, and I’m proud of them. And they did, in their military duties, a fabulous job in following the orders of the commander in chief. I simply wouldn’t have given those orders at that time. Those weren’t the right orders. Diplomacy hadn’t been exhausted, we hadn’t brought our allies on board, and we didn’t have an adequate plan for what would happen next. You cannot go to war in those circumstances and be successful. In Kosovo, we had exhausted diplomacy. We had our allies on board and we had a plan for what we would do when the fighting stopped. It was exactly the opposite situation.
AB
