I am worried about the US dollar. People far smarter than I are worried about the US dollar.
There is some speculation that the dollar will rapidly crash through the $1.35 mark against the Euro. Right now the US dollar is floating at $1.28 per Euro. The $1.35 mark is just another 5% away which is not far as the dollar has already declined from its high of costing only .84 cents to buy a Euro to today's values.
The dollar has not slid against the Yen and the Yuan as much for two reasons. First, it has seemed that the Asian central banks are treating the US dollar as a perfectly elastic good right now. They are willing to be the buyers of last resort of US dollars at almost any price in order to artificailly suppress the value of their home currencies in order to facilate export led growth. Secondly, the Chinees have been willing to defend the value of the yuan aggressively as they maintain a fixed peg against the dollar. Actually these are the same reasons.
This good news may come to an end soon. Stirling Newberry's Dkos diary links to a NY-Times article which indicates that the central bank of China is using its foreign currency reserves to began bailing out China's banks. The first bail-out package is consuming $45 billion dollars of hard currency which according to international economist is just a good start. The two banks in question are only having half of their bad loans liquidated and the banks have less than half of the market. Using simple logic we have a ground floor number of at least four times the current intervention as the amount that China would need to spend today to straighten out its banking sector.
The most interesting thing in this article is that the Chinese central bank are willing to allow the bailed-out banks to convert their dollars into yuan at 8 yuan/dollar instead of the current peg of 8.28/$. This is a minor revaluation of the yuan and weakening of the dollar, only 3.3% more purchasing power will flow to each yuan but the importance is not the magnitude of the change but the fact that there is a change in Chinese policy.
IF this Chinese policy change continues and it prompts the Japanese central bank to follow, then we will see a rout of the US dollar on the international market as we will see a rational currency weakening cascade. That will lead to high US interest rates, and the cut-off of international capital flows which have been keeping us afloat for the past decade.
It will not be pretty.
Crossposted at Fester's Place
Clark and Political Jujitsu
Lies, damm lies and statistics has an interesting piece of political jujitsu for the Democrats that should be a tract that the eventual nominee investigate to deal with both national security and tax policy concerns that the pundits are conceding to Bush. The basic proposal is to argue for a repeal of certain parts of the Bush tax cuts and tax shifts by advocating dedicating all reclaimed revenues for general purpose national security improvements. These could be broadly defined to include public diplomacy, educational opportunities in the math, sciences and international studies and the Peace Corps.
The Clark plan for tax reform seems to be very well suited for this type of proposal. It is aimed at increasing tax fairness for children and their guardians which almost no one opposes per se while being revenue positive for the government by reducing or eliminating almost all of the goodies that are designed specifically for the richest of the rich in the Bush tax changes. As long as Clark or the Democratic nominee uses clear numbers to illustrate that 90% of the US population will never be on the first name basis of someone whose taxes are being raised under the Clark proposal, then this will do well as a tax policy. Since he is a general, it will also do extremely well as a cheap piece of national security protection.
I agree with Matthew Yglesias and NTodd that this is a damm good tax plan that I hope that Dean if he is the nominee, quickly steals from Clark. I would probably want to work around the edges to improve the plan, but it is a good idea. The national security angle is interesting too.
Crossposted at Fester's Place
Checking In
AB here, checking in from a working vacation. Kash and I should be back to normal posting on Wednesday, though Fester is welcome to keep posting through the week (and thanks to Fester for filling in and make sure to add Fester's Place to your regular reads.)
One interesting bit of news: Angry Bear was nominated for a Koufax Award in the "Best Blog" category. Looking at the nominees, Angry Bear is clearly not going to win (though it is, of course, an honor just to be nominated.) In fact, I'll be voting for another blog, though deciding which one is very tough. On the other hand, it would be nice to not come in last, or perhaps even to be a finalist, so vote early and vote often (you vote via comments to the post or emails to Dwight or MB of Wampum. Actually, given that comments are votes, Anne could nearly singlehandedly propel us to the top -- j/k Anne.)
AB
Free Advice for Clark
DISCLAIMER: FESTER IS A DEAN SUPPORTER, so take this piece as you wish
Josh Marshall in his pre-New Hampshire travelling post lays out a pretty good and fair analysis of the primary horse race. There is an interesting question of Clark's return on investment in New Hampshire and the question of where Kerry's Iowa expectations actually are. The most important assumption that Josh is not explicitly stating is that it will drop down to a Dean-Clark race real fast, and this is an assumption that I agree with.
Now Josh after a long series of good thoughts has an interesting question:
One final thought: an interesting strategic question.
Would Clark gain more from a solid Iowa victory for Dean which effectively ended Gephardt's and Kerry's candidacies (thus forcing a two-man race by default) or by one of the other candidates breaking out, thus knocking Dean significantly off his stride?
If I am the Clark campaign manager, then I would be praying for an expectations victory for Kerry in Iowa or more preferably an outright victory by Gephardt in Iowa. I have several reasons for this opinion. First, an outright victory by Dean in Iowa will bring with it massive amounts of free and most likely very complementary press. Dean already receives fairly good press on a very consistent basis, and Clark struggles at times to maintain or increase his press share. More Dean good press will most likely translate into more Dean voters as it has been shown that Dean has some of the best net favorability ratings out there. As people get to know him, they like him, and then they vote for him. It is a virtous cycle for Dean, and it is one that Clark can not afford to allow to continue.
Secondly, if I was the Clark campaign strategist, I would want Kerry and Gephardt in the race for as long as possible for two reasons. First, I am worried about money. Dean had another record setting quarter, while Clark had a damm good one, but still raised only 67% of Dean's take. Even with matching funds, Clark is most likely poorer than Dean even when we forget about the significant cash on hand advantage that Dean possesses. However if Kerry and Gephardt can stay in the race until at least Feb. 3, 2004, the combined anti-Dean warchests will be larger than the Dean warchest. Another reason why I would want Dean to be knocked off stride is that the more candidates involved in attacking Dean the more angles that can be logically attacked. It makes no sense for Clark to attack Dean from the left on trade policies as their published positions both indicate that they buy into the Washington Consensus, however it makes plenty of sense for Gephardt to do so. This may not switch votes from Dean to Clark, but it may depress voter turnout.
Finally, looking at the most recent national poll for the hypothetical national primary, we see that Dean is trouncing Clark. Clark is doing the best among the other eight non-Dean candidates, but Dean has a signifcant edge. There is little evidence that there is a coherent and large popular Anti-Dean sentiment. Clark's best chance is to string the race out for as long as possible until he gets to favorable territory in the South and hope that Dean stumbles. If the race collapses to Dean v. Clark by Feb. 1, Dean will have fewer opportunties to screw up while he is killing the clock. However if Dean is facing pressure from several angles, then the odds, in my opinion, of a true gaffe will increase which would give Clark some maneuvering room.
Crossposted at Fester's Place
The Pittsburgh Post-Gazette is reporting that a Western Pennsylvania based Reserve MP Company has returned home and is fundamentally demobilized as of yesterday. Congratulations and welcome back home. I hope that these men and women will be able to transition back into civilian life reasonable successfully and that they can get the follow-up care that some may need.
However the interesting thing that I saw was in the last two paragraphs:
Military service isn't over for all members of the 307th. Several soldiers have volunteered to return to Fort Dix to help train the troops of B Battery, 107th Field Artillery, a Pennsylvania National Guard unit based in Shadyside.
B Battery, which was activated Dec. 18, will be leaving for Iraq in February or March, where the troops will function as military police.
The military police function is still extremely needed and valuable in Iraq. However the US Army has run through pretty much its entire military police component either through deployments to Iraq or Afganistan, security at Guatanamo and typical force protection missions. Artillery units are expected to provide their own local security and guard their own road convoys, but they are not military police, they are not infantry. It is a striking indication of how thin the Army is stretched that Reserve and National Guard artillery units are needed to act as light infantry/MPs in Iraq.
This policy will continue for a signficant amount of time because the Army is running out of troops who are willing to enlist. The US Army has instituted a comprehensive stop-loss order for every unit that is scheduled to deploy to Iraq in the next five months. This article states that over 16,000 National Guardsmen have been retained on active duty although they want to retire.
As this Boston Globe article demonstrates, the Reserves are already facing a recruitment shortfall. This shortfall was "was largely the result of a larger than expected exodus of career reservists, a loss of valuable skills because such staff members are responsible for training junior officers and operating complex weapons systems." There is also a significant recruiting problems, with a 13% underachievement of National Guards new enlistments.
The stop-loss will temporarily stop the arterial bleeding but once it is lifted there are plenty of anctedotes which suggests a large exodus will commence from both the Active and Reserve components. This will cripple the US Army and force it to either hollow itself out, discard missions or continue in a death spiral of longer deployments, shorter recuperation and reconstitution times and increased uncertainity which will drive more soldiers out of the Army. It will also lead to more situations where units which have a vital warfighting mission such as heavy artillery support will be crosstrained for only a couple of weeks in a totally different field and thrown into the mess.
So why again are Republicans good on national defense?
Crossposted at Fester's Place
Although we are seeing the economy starting to have as Brad dealing puts it "some unambiguously good unemployment news as new claims dropped below 350,000 for the first time in over two years, the economy is still weak for the average American. MB at Wampum notes that the average hourly wage for the American worker has fundamentally ceased to increase. Since November of 2002 hourly wages for non-exempt workers have been stuck in a 4 cent band in 1982 dollars. There is no new purchasing power being distributed to workers.
The Economic Policy Institute has a good graph that illustrates this point and they correctly note that wage growth, in the long run should roughly correlate to productivity growth and economic growth in general. However we have seen two good years of productivity growth and no corresponding wage growth. This is definitely a long and variable lag.
What new jobs are being created are not as good as that jobs that are being lost. Another EPI quickshot demonstrates that the growing industries in this economy have lower wages than the declining industries which are losing jobs. This is a probable explanation as to why median income has been falling for two years now.
The average Joe Six-Pack is not seeing an economic recovery. Instead he is seeing an increase in his debt service obligations, no increase in his real wages, increased housing costs and a decrease in his overall standard of living. Savings are depleted and the risk factor of being unemployed is extremely high still. One or two good reports such as the ISM survey do not remove this uncertainty and risk from the average Joe's mind.
Atrios has a good summary of the problems that the city of Pittsburgh faces for the next year. I have gone into long details about the basic problems that the city faces in previous posts. However I will recap the basic problems and provide a quick update on what is going on. Basically the city is facing a massive structural deficit and it has very little maneuvering room for legal, financial and political reasons. The city has the basic infrastructure of a city twice its population and it is decaying which drives up maitenance costs. Additionally local political wills and realities means that we can not rightsize the city government services effectively. Finally the city has rung up a massive amount of debt in an attempt to "grow" our way out of the looming fiscal crisis by offering the $50,000 a year plus suburbanite crowd a good reason to visit the city.
The solution space is fairly limited. New taxes have been proffered on a variety of items and targets. Beer, payroll preperation, wages, deed transfers etc. have all had new taxes proposed. None of these proposals have been approved as of yet. Most of these proposals will require changes in state law, and the Republican dominated Assembly will not approve of actions that result in commuter taxes. The primary plan in action right now has been for the city to apply for and be declared a "distressed city under the 1987 law ACT 47 which is the municipal bankruptcy law for the state. Act 47 status has been granted to the city and it will allow for better bargaining power with city union contracts, technical assistance from the state and the ability to levy commuter taxes.
Mayor Murphy has for two years in a row proposed budgets that do not even come close to reality and rely on invisible sources of funding to even come close to balance. Last year it was pour taxes and wage taxes, now it is a commuter tax that is not yet approved and vocation tax increases. Last year's gap was partially filled by closing down the city's Parks and Recreation programs and stretching out some payments. Additionally approximately 100 cops were either laid-off or chose early retirement.
City Council voted the 2004 Murphy budget down and approved a budget that relies on a couple new taxes, including an increaes in the parking tax and some spending cuts. However the City Council budget is still assuming that there will be several significant increases in revenue that I do not believe are realistic. The City is expecting that the Sports and Exhibition Authority which owns the new football and baseball stadiums as well as the new convention center will be able to increase the payment in lieu of taxes. However the SEA (disclosure: I have a good friend working with the SEA) is currently running at a substantial deficit for this year. The Council budget also is assuming significant first year costs savings as they propose service consolidations with the county. I have doubts about that.
Fundamentally the city is stuck at the moment. It can not balance its budgets by cuts as too much of the expenditures are legally guaranteed at the moment. It will gain some flexibility in the next two years as the majority of the municipal employee union contracts will expire, but there are few cost savings currently available that would not devestate city services. New taxes are needed in the short to medium term in order but the state government is reluctant to allow the city to raise the needed revenue from suburban commuters. Local consolidation with the county will not proceed although service sharing will increase.
The city is screwed. The best solution for this year is to buy time with a series of additional one-off revenue enhancements such as debt refinancing, selling the city's asphalt plant and rejiggering the pension plan yet again. All of these measures increase the long term cost to the city but will probably occur as the city has few to no other options left.
Cross-Posted at Fester's Place
Winning the War on Terorrism
There are many plans to win the war on terorrism. Some are completely insane, others are pretty decent. Now some non-bloggers, and people with actual influence and power are proposing plans to invade the rest of the world sometime in the second Bush term (there is a good reason why I am working to beat that SOB) But none of these strategies are victory strategies in the war on terrorism. Some are victory or at least non-loss strategies for Iraq, and I refer to Tactitus' plans, others are completely insane in general but they are not comprehensive in nature.
I can not offer a comprehensive plan, however Juan Cole has a great short list of objectives that we need to seek in order to leave 2004 more secure than 2003. I hope that I do justice to his thoughts as I condense them.
5) Stabilize Pakistan because they have nukes and a strong militant population and political base. Additionally a stable Pakistan can be leverage in the creation of a continental market which should improve living standards for most people and reduce the frustration experienced.
I would think that one policy that the US can immediately take to improve Pakistan's stability is to remove the import tariffs
4) Stabilize Afganistan --- 'nuff said, be willing to spend the money, political capital and the troops needed to create a reasonably strong and unified central government. Remove power from the clans and tribal warlords
Now here is the problem with the opportunity cost of Iraq, where can the US get the manpower and cultural expertise since it is all deployed to Iraq right now
3) Stabilize a united Iraq so that there is not a three way civil war if there is a loss federal structure of government. The Sunni Arabs have few oil resources but plenty of military experience. They can cause trouble if they are cut off from the one present source of Iraq wealth.
Now where do we get the troops and the political will to stabilize the situation versus helping the Bush re-election campaign.
2. The US must capture Osama Bin Laden, Saad Bin Laden, Ayman al-Zawahiri, Saif al-Adil, and other top al-Qaeda leaders, of both the older and the younger generations. This task was far more important for the immediate security of those of us who live in the US than conquering Iraq, and it was highly irresponsible to undertake the latter before accomplishing the former.
1) Lean heavily on Isreal to prevent the Bantustanation of the Palestinian people. The US is not seen as a fair broker in the Middle East and this is one of the prime grievances of the entire Arab world. No PR campaign will work unless there are a series of concrete and politically painful actions on the part of the US political establishment to signal that the US will become a fair broker instead of an Isreali lackey.
I agree with Juan's plans and objectives, however I have a problem of implementation. These plans sound competent, well-thought and plausible. The Bush Administration will not go for that.
Crossposted at Fester's Place
Kurdish Sell-out Watch Continues
Juan Cole has a long analytical post that is examing the Kurdish position on self-governance. Basically the Kurds are willing to be a part of Iraq as long as they have an extremely high level of autonomy. If I am understanding these articles, I would imagine that they are seeking a deal similiar to the Dayton Accords where there is a national government composed of the three major ethnic groups but a high degree of regional/ethnic indepedence. A major Shi'ite party, counting the votes, is opposing any weak form of federal government.
The threatening thing that I saw in this post by Juan is the implicit threat that the the Kurdish peshmerga which have aided the US Army in maintaining a reasonable degree of civil order in the north, may decide to undertake active combat operations against both American and potentially Turkish targets. That is one thing that we do not need as Kos points out, we have lost another twenty nine soldiers in the past two weeks and that these casualties are not in the Kurdish areas.
So bad news may be on the horizon.
Cross posted at Fester's Place
Desperately Poor Countries
Brad DeLong recently took a lot of heat in his comments for this statement:
I wonder about Bob Herbert: is he smart enough to have, when he looked in the mirror this morning, thought, "I see a man who is trying to keep India a desperately poor country?"
Brad's acerbic comment was inspired by this piece in which Mr. Herbert writes about the problem of the "off-shoring" of white collar jobs. Not only is Brad right that opposing such off-shoring is tantamount to wishing poverty upon India, if IBM doesn't outsource thusly then some other firm will, putting IBM at a competitive disadvantage, leading to job losses at IBM. But I want to focus on the "desperately poor" part of the issue, rather than the comparative advantage part of the issue.
Via Anne in comments, I see an NYT editorial today, Harvesting Poverty: The Unkept Promise. It speaks poignantly about the cost that protectionism in the US, EU, and Japan imposes on Third World nations (in addition to raising the price of food in the developed world -- a cost borne primarily by the poor):
The club of rich nations that wrote the rules of global trade has been aggressive in dismantling barriers when it comes to industrial goods and services, in which they hold a comparative advantage. But they refuse to do the same when it comes to agriculture. Politically powerful farm lobbies in Japan, Europe and the United States are not willing to face global competition on fair terms. So agriculture remains the hypocritical asterisk to our fervent free-trade and free-enterprise creed.
... Worse, the developed world funnels nearly $1 billion a day in subsidies to its own farmers, encouraging overproduction, which drives down commodity prices. Poor nations' farmers find they cannot compete with subsidized products, even within their own countries. In recent years, American farmers have been able to dump cotton, wheat, rice, corn and other products on world markets at prices that do not begin to cover their cost of production, all courtesy of the taxpayers.
... The World Bank estimates that an end to trade-distorting farm subsidies and tariffs could expand global wealth by as much as a half-trillion dollars and lift 150 million people out of poverty by 2015.
I'll say it again. U.S. farm subsidies and import tariffs are truly bad policy and the bulk of the subsidies go to large farms, not the ma and pa farms of our idyllic but distant past. They make food more expensive in the U.S. while adding to Third World impoverishment. Finally, if I can't count on them to back free trade, then what are Republicans good for?
AB
Plame On
Remember Valerie Plame? Ashcroft has apparently recused himself from the investigation:
Attorney General John D. Ashcroft has decided to recuse himself from a widening Justice Department investigation into the leak of an undercover CIA officer's identity, sources said today.The probe into the disclosure of CIA agent Valerie Plame's name to a columnist will be overseen by U.S. Attorney Patrick J. Fitzgerald of Chicago, who will report to new Deputy Attorney General James B. Comey, sources said.
AB
Ephedra Ban
Today, the FDA today banned Ephedra, a substance that has no documented beneficial effects and some documented side effects:
Manufacturers of the supplement insist their product is safe when taken as directed. But FDA and Health and Human Services Department officials have been saying for months that they would like to ban ephedra and were building their case so there could be little dissent.
One interesting thing about the ban is that it's an admission by the administration that self-regulation by industry participants doesn't always work -- though such self-regulation remains the preferred choice in the environmental arena.
A second interesting factor is that Ephedra became so widespread in the first place due to Orrin Hatch's fervid support of the "Homeopathic" or "Herbal" industry, which eventually lead to passage of the 1994 Dietary Supplement Health Education Act, which exempted herbal supplement makers from proving the efficacy of their products. No double-blind testing needed. (*)
AB
(*) Bob Park explains the virtues of double-blind testing:
The most important discovery in the history of medicine was the randomized double-blind test. It allows us to find out what works and what doesn't. So far, herbals are in the "doesn’t" category: St. John’s Wort doesn’t relieve depression, but it does interfere with some cancer drugs; echinacea doesn’t ward off colds and flu; ephedra causes frequent injuries and even death; and this week we learn that ginkgo biloba doesn’t enhance memory in people over 60.
Sugar Farmers are Morally Superior to Candy Cane Makers
Just as we decided, via the steel tariffs, that Pennsylvania residents are more deserving than Michigan residents (and along the way, made every consumer pay more for goods made out of steel or made with machinery made out of steel), the latest example from the Chicago Tribune shows that we must think residents of Louisiana are superior to residents of Illinois and Ohio (and along the way, raised the price of anything made using sugar):
In the last three years, nearly half of all U.S. candy cane production has shifted to Mexico, industry experts say.
That's true of the candy cane maker based in this northwest Ohio town, Spangler Candy Co., which recently opened a plant in Juarez that generates half of Spangler's striped treats.
But the story of the Mexican candy cane isn't your typical tale of American manufacturers chasing lower wages. It's more about the cost of sugar than the cost of labor.
Because federal tariffs and subsidies push the price of U.S. sugar far above what it fetches on the world market, candy cane makers such as Spangler are opening factories overseas, where sugar can cost 6 cents a pound compared to 21 cents back home....
Other makers of hard candy have followed a similar pattern, at least in part because hard candy, unlike chocolates which can use corn syrup substitutes, are so sugar-intensive.
In Chicago, for example, Brach's Confections plans to shut its plant in 2004, forcing about 1,000 workers out of their jobs. The Chicago area, the center of the U.S. confection business, has lost an estimated 3,000 candy-related jobs since 1998.
Yet another example of why making stuff more expensive is a bad way to protect jobs.
Via Dan Drezner, who points out that the recently passed Central American Free Trade Agreement may remedy this situation.
AB
UPDATE: In a post titled "Pour Some Sugar on Me," Matt Y. adds, "In practice, the economical hard-rocker will instead ask for some high-fructose corn syrup to be poured on him, as the price of this ersatz sugar product is not nearly so distorted by the farm dole."
General Zinni
From the Washington Post, a piece on General Anthony Zinni, a self-professed moderate Republican and former chief of the Central Command (U.S. Military Headquarters for African and the Middle East), now dismayed by the administration he endorsed in 2000:
[Gen. Zinni] was alarmed that day to hear Cheney make the argument for attacking Iraq on grounds that Zinni found questionable at best:
"Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction," Cheney said. "There is no doubt that he is amassing them to use against our friends, against our allies, and against us."
Cheney's certitude bewildered Zinni. As chief of the Central Command, Zinni had been immersed in U.S. intelligence about Iraq. He was all too familiar with the intelligence analysts' doubts about Iraq's programs to acquire weapons of mass destruction, or WMD. "In my time at Centcom, I watched the intelligence, and never -- not once -- did it say, 'He has WMD.' "
The rest of the story is definitely worth reading.
AB
[Source corrected]
Progressive Consumption Taxes
Ruy T. has an interesting post that got me, once again, thinking about consumption taxes. At first glance, consumption taxes appear intrinsically regressive because poor and middle class households spend most of their income on consumption while wealthy households spend only a fraction of their income on consumption. Suppose there's a consumption tax of 20% and that poor households spend 90% of their income on consumption (food, clothing, shelter, and miscellany) while wealthy families spend only 50% of their income on consumption. In this example, 18% of the poor household's income goes to taxes while only 10% a wealthy family's income goes to taxation.
But a system of exemptions could, in principle, make consumption taxes progressive. Exempting spending on housing from taxation is a good starting point because as income rises, a smaller portion of income is spent on housing. Continuing the example, suppose the poor household spends 40% of its income on rent and the wealthy family spends 20%. The taxable consumption by the poor family then falls to 50% of their income and the wealthy family's taxable consumption falls to 30% of income. So with a 20% consumption tax, the poor family pays 10% of its income in taxes and the wealthy family pays 6% -- still regressive, but less so. To make it actually progressive, high taxes could be added to luxury items, and further exemptions (e.g., of staple foods) could be implemented. Of course, for every exemption implemented, the tax rate on the non-exempted items has to be increased if the exemption is to be revenue neutral.
My fear is that a progressive consumption tax would lead to massively distorted relative prices, reducing economic efficiency (causing a "dead weight loss" in Econ 101 terminology). Worse, the lobbying and influence activity by firms seeking to have their goods and services favorably taxed would be severe. Even worse, development and design decisions would be distorted towards creating products likely to receive favorable tax treatment, creating further inefficiency.(*)
In short, a regressive consumption tax would be a simple, but bad, policy. A progressive tax might be good policy, but the devil is in the details; and in this case, the details are likely to swamp the otherwise potentially positive aspects of a progressive consumption tax.
What about approaching consumption taxes from the other side, by exempting savings? Because all the money you make has to go somewhere, taxing consumption and not taxing savings work out the same. Intuitively, if savings are exempted from taxation then the only money left to tax is income spent on consumption -- a consumption tax (a point I made earlier). And this is precisely what the Bush administration's proposed Lifetime Savings Accounts would accomplish.
This raises three questions: (1) Are the current Bush proposals in fact regressive? (The answer is yes); (2) Is any plan that uses tax incentives to encourage saving necessarily regressive? (The answer is no); and (3) Would a progressive savings-based tax plan also be unwieldy and introduce substantial economic distortions similar to those that would occur under a progressive tax on consumption? (The answer is perhaps not.)
The new Center for American Progress, a center-left think tank, now has a section devoted to this issue. It includes "Critiques of the Bush administration plan" (documenting point (1) above) and "A Progressive Alternative: The Universal 401(k)" (focusing on points (2) and (3) above). Soon, I'll review the CAP proposal, but in the meantime, you can check it out for yourself.
AB
(*) Don't income taxes also introduce distortions? Yes, but they only mess up one tradeoff, the labor vs. leisure decision. Moreover, the impact of income taxes on the amount of work people do is ambiguous. On the one hand, it will discourage work because whenever you tax something, people will do less of that thing. On the other hand, it will encourage work because people have to work more to afford a given set of goods. (For another Econ 101 flashback, the first effect is the substitution effect and the second is the income effect). If the two effects are roughly equal in magnitude then the amount people will work when income is not taxed and the amount they work when income is taxed are about the same, meaning that the economic distortion and inefficiency created by an income tax is modest. I doubt that the two effects precisely counteract each other in this fashion, but this does attenuate the distortion; with consumption taxes, there is no similar mitigating effect.
Money and Inside Baseball Post
This USA Today article contains some information that blows holes in my matching funds projections. I had projected Clark will be eligible to receive 8.7 million dollars off of $15 million in fundraising for Q-3 and Q-4. While USA Today supports the total fundraising amount, they are projecting Clark will be eligible for only $3.7 million dollars. This can either be due to timing of donations or a change in donor profiles as he may just be getting very big money donations instead of the numerous and more valuable small donors.
IF this is true then Clark will have a significant cash on hand deficit compared to Dean as Dean had a 9 million dollar COH advantage at the end of the third quarter and the USA Today article is indicating that the Dean campaign believes that it should be able to increase its cash on hand for this quarter. Clark is spending some serious bucks on consultants and advertising so if his matching contribution is this low then he is facing serious competitive disadvantages against Dean.
Crossposted at Fester's Place
And she forced the pills down his throat too!
Attorney: Limbaugh blackmailed by maid. Damn, I'm sick of whining Conservatives yapping endlessly about personal responsibility -- until they're caught with their hand (or other body parts) in the cookie jar. Then it's "the maid did it" or "I talked to him and God forgives me" (Rush and Gov. Rowland's respective defenses).
AB
UPDATE: More personal responsibility here.
Nader Update
I'm not sure what this means:
Ralph Nader, the third-party candidate viewed by many Democrats as the spoiler of the 2000 election for taking votes away from Al Gore, has decided not to run on the Green Party ticket next year, a party spokesman said Tuesday.Nader, who garnered nearly 3 percent of the national vote in the last presidential election, has not ruled out running for president as an independent and plans to make a decision by January.
[snip] ... Nader said running as an independent would not hurt his campaign. "As an independent, you can do more innovative things because you don't have to check with all the bases," he said.
Why Independent and not Green? Are there people inside the Green Party, people with sufficient intra-party power, opposed to Nader running? Opposed to any Green candidate running in 2004? Who knows. Still, this should get the Democratic candidate an extra .5% to 1% in some important states.
AB
It Isn't
"U.S. strategy is widely accused of being unilateralist by design," Mr. Powell wrote. "It isn't. It is often accused of being imbalanced in favor of military methods. It isn't. It is frequently described as being obsessed with terrorism and hence biased toward preemptive war on a global scale. It most certainly is not."
By non-utilateralist, non-imbalanced, and non-obsessed, Secretary Powell appears to mean not starting a war with a county or continent with a population that outnumbers ours:
"I think we have managed China, Russia and Europe rather well if you look at where we are at the end of the year since the beginning of the year," Mr. Powell said.
AB
There has been a recent poll in which 55% of Americans approve of Bush's handling of the US economy. Fox News from where I have gotten this poll is saying that this number will show that the Bush re-election is inevitable. However there are several major caveats that need to be made. First the last two paragraphs are interesting as most people expect the national economy to be getting better but a small majority of people expect that their local economies will either be the same or getting worse in the next six months.
This finding is intriguing as it shows the divorce between perceptions and realities that are occuring. The American economy is splitting into two sections; those who own captial are doing extremely well, and those who sell their labor are doing poorly. The rest of this essay will expand upon the basic economic uncertaininty that the majority of the American public faces.
The average American worker is not gaining ground. Real wage growth is decreasing and as Uber Alles shows that median income has dropped for two years in a row. This is at a time when basic necessities such as natural gas and healthcare are rapidly increasing in price. Matt Yglesias links to a Fortune column which states that "Many of his clients say they'll be giving raises of even less than 3%. Why so stingy? "Inflation is low. At the same time, many businesses have only recently gotten their costs in line, producing earnings that are much improved, and they want to stay the course until uncertainty about demand has really lifted," LeBlanc explains. "Another thing is, the labor market is still soft, so few employers are worried about turnover." Don't we know it. "For most workers, the situation will be very discouraging," he predicts. "More people will be getting zero pay increases in order to allow for bigger raises for top performers. After taxes, pay raises may not even be enough to offset higher health-insurance deductions from paychecks. On top of that, many employees are doing more work than ever because co-workers have been laid off."
These data points are the result of a declining share of national income which is going to labor. Brad DeLong is linking to an article in which the share of profits and productivity gains are shrinking for the average worker while profits are aggregating into smaller and smaller concentrations of people. Included in the share of national income which goes to labor are the costs of fringe benefits which people can not eat and these benefits are under pressure to be cut as their costs have also increased rapidly. These low wage gains are leading to a record number of personal bankruptcies. As Calpundit notes, organized labor in the service industries is the difference between barely scratching by and at the mercy of any emergency and being able to live a life that has some uncertainity insurance and asset accumulation made possible. However unionization is at a relative low rate.
Under the Bush administration, these trends will not be changing. Instead they will continue to accelerate as there are further proposals to favor the wealthy and attack union and other pension plans which give economic security to the working class. Angry Bear notes that the Republican Party wants to continue moving to a consumption based tax system in order to shelter as much wealth as possible from any and all forms of taxation. The propaganda will be one of fairness and social mobility but as Paul Krugman recently wrote that income and wealth mobility in America has signifcantly declined in the past generation as the strong institutions in American civil society which created a great Compression of wealth after the Second World War lost their strength and political consensus.
Retail sales for December are projected to be weak. Deep discounters had success as well as the very high end luxury stores while the middle ground department and mall stores had difficulty. This continues to show the bifurtification of the American economy right now. The rich truly are getting richer and benefitting from the tax and incentive policies that the Bush Administration has instituted which favor an aristocracy of incompetents.
If you are a working stiff, the Bush economy has not been a good economy for you. It has created a massive amount of uncertaininty for most people, as there has been increased job competition, high real debt service costs as wage inflation and wage growth are minimal and a continued assault on the ability of people to accumulate small amounts of wealth. For these reasons, Bush is extremely vulnerable on the economy.
Crossposted at Fester's Place
I am a #1 for Dean, strong supporter and right now it will take a couple of sticks of dynamite to get me off of the Dean campaign, but with that said, I like what I have been hearing from Wesley Clark in the past couple of days. I am firmly convinced that we will be seeing the ugliest campaign in my lifetime and probably the lifetime of my parents. The nominee of the Democratic Party will be smeared as anti-God, pro-sodomy, pro Saddam, pro-French and anti-Apple Pie and baseball. It will not matter who the nominee is.
We are already seeing the smear machine cranking up against both Dean and Clark as I think that they are the only ones with the organizations capable of running effective decentralized campaigns which are in my opinion the best way to win in 2004.
Resume will be unimportant in protecting Clark, as we have the Max Cleland example of a triple amputee from Vietnam being smeared as unpatriotic and not knowing how to protect America. He, as well as Dean, will have to convince on a visceral level that they can provide better security for all Americans than Bush. We know that Bush is a policy disaster but he is doing something so he has institutional inertia on his side.
Well Clark is doing a good job of creating the groundwork for that visceral knowledge. First he is willing to rip Tom Delay a new asshole when Clark's patriotism was impugned by the Roach. I am very glad that Clark gets that being civil is a loser's strategy in this game. I am also glad that the facts and the evidence are on our side.
More importantly in the creation of a visceral reaction are Gen. Clark's comments when asked what he would do if anyone impugns his patriotism: ""I'll beat the s--- out of them," This is the type of visceral toughness that will need to be exuded in order to convince people that Clark will protect them. Dean has controlled, focused anger and the wrestler's build which can communicate this message, and Clark has 35 years of training on how to systemically and methodically cause serious bodily harm.
I am glad that both are willing to utilize their respective assets to communicate viscerally.
Crossposted at Fester's Place
New to the Blogroll
The Decembrist--a former high level aide to Bill Bradley and current research director (on sabbatical) of George Soros' Open Society Institute. (Via Ruy T.)
AB
What is the Face of Next Year's Politics
The Boston Globe is examining the role of the economy in next year's election using New Hampshire as a case study. It has lost 20,000 jobs during this recession and jobloss recovery but it is starting to add jobs again at a reasonably rapid rate. The economy has diversified over the past decade since the last major recession and it has diversified by going into high tech and away from manufacturing. However the state's largest employer used to be Digital Computers, now part of Compaq, but now it is Wal-Mart with that honor.
New Hampshire will need to make a decision as to whether to measure the economy by the derivative of the growth path and give their support to Bush in 2004 or to ask themselves the question "Are you better off now than four years ago." This will be the primary theme of the economic issue debate over the course of the next year as the Bush administration will try and trumpet every small piece of good news while burying all of the bad news. However there are certain demographic concerns that should be making New Hampshire a little more blue.
The high tech revolution has finally reached the Granite State and that means a whole lot more college educated workers and "Creative Class" individuals are working in the state. This has already made parts of Southern New Hampshire competitive for the Democrats as that part of the state is fundamentally populated by Massachusetts Techies who are looking for some place cheaper to live.
These will be the two battle lines next year; how well are we doing, do we look at rates of change or absolutes, and do the techies/creatives have enough mass to decide the vote.
Crossposted at Fester's Place
Consumption Taxes in Disguise
Via Matt Yglesias (see Digby as well), I see that consumption taxes are back on the agenda. Here's Matt, writing about David Brooks' latest editorial:
The program that Brooks describes sounds reasonable enough, but this bundle of proposals is, in fact, designed to accomplish something rather different. The idea is to shelter from taxation various savings and investment schemes that will provide a minor level of help to average middle class folks. At the same time, however, there will be no caps on the quantity of money that can be thereby sheltered.
By definition, all money is either saved or spent. So if money saved is exempt from taxation, then only money spent is taxed -- a consumption tax. If you follow the links under the "Topics" section to the left, you'll see me argue that consumption taxes, unless very carefully designed, will be regressive. This is because as a household makes more, it spends less income on consumption, so replacing income taxes with consumption taxes benefits the wealthy. Presented as a consumption tax, such a plan would surely be unpopular; presented as a savings-encouragement plan it might sound good, but it's just a dressed-up consumption tax.
AB
Tammy Bruce is Everywhere
Bob Somerby spent much of the past week dissecting Tammy Bruce (here, here, here, and here) -- remind me never to get on his bad side. In case you missed it, Ms. Bruce is a recently hired 'liberal' analyst for Fox News, but her liberalism can really make you yearn for Alan Colmes. In a nutshell, she starts most of her statements with "as a progressive, lesbian, liberal, and feminist ..." before going on to some nutty attack on Democrats and liberals.
As I read the Howler pieces, I thought "nice job, Somerby, but why waste your time on someone so insignificant?" Sure, it highlights Fox News' silliness, but we already knew that.
Then, driving in my car the other day I hear YANCLM (yet another conservative loud-mouth) on the radio, a woman. Briefly I wonder at what point talk radio will run into diminishing marginal returns to conservative blowhards, but before I can finish the thought I hear her say something very close to "I'm a progressive and a former leader of NOW," and the alarm bells went off. Yes, it was in fact the same Tammy Bruce, guest-hosting the Larry Elder show. If you've ever heard the Larry Elder show, you might be wondering why such a staunch conservative would have a "progressive, lesbian, liberal, feminist" guest-host.
AB
Happy Holidays!
I’m leaving today to spend a week with some of my family, and before I go I wanted to wish all of you regular Angry Bear readers happy holidays. I also particularly want to say welcome and thanks to fester, who has graciously agreed to help us out through this stretch. It will be a pleasure to catch up with his posting here when I'm back.
Speaking of which, I’ll be back for a few days around December 28 to 31, before leaving again for a week of work-related travel. During those few days before the new year I’ll be opening myself up to criticism, ridicule, and provable (in another year – but who’ll be counting by then?) charges of not knowing what I’m talking about, with a series of posts entitled: Kash’s Calls: Predictions for 2004. You can expect a collection of my guesses predictions about things that will happen in the year 2004 regarding topics related to this blog.
Will my predictions be obvious, shrewd, controversial, insightful, or absurd? I guess we’ll all find out in another week...
Kash
The Republic of Texas
Via Orcinus, Texas separatists are up to it again:
But now a newly revived wing of the Republic of Texas is attempting to stage a visible comeback. The group has planted an 1836 Independence flag and declared the unassuming East Texas rail town of Overton their provisional capitol. The group's so-called "citizens" and elected "President" Daniel Miller set up what they call their provisional government in a 16,000-square-foot building that once was a hospital.
Visitors are invited to apply for passports.
I guess the implications are mixed. The current redistricting fiasco in Texas is driven by the fact that there are more Democrats than Republicans in the Texas House delegation (17-15), so Texas secession would further tilt the House towards the Republicans (redistricting will soon accomplish that anyway). On the other hand, the loss of Texas Senators Kay Hutchison and John Cornyn would leave the Senate with 49 Republicans, 48 Democrats, and Jim Jeffords in the miscellaneous category, shaking things up a bit.
Now, you might be thinking that this would also mix things up presidency-wise, given that the separatists actually claim that Texas has never rightly been part of the United States and that Article II, Section I of the Constitution says "No person except a natural born citizen, or a citizen of the United States, at the time of the adoption of this Constitution, shall be eligible to the office of President." But President Bush is safe in the event of a Texas secession; from his bio:
President Bush was born on July 6, 1946, in New Haven, Connecticut, and he grew up in Midland and Houston, Texas.
Oh well.
AB
P.S. I'm making light of this in this post, but these far-right groups are full of seriously dangerous nutbags with massive ordnance and chemical weapons (cyanide bombs).
Via Gary at Uber Alles we see that there is a new report out that the largest counter terrorism exercised conducted since 9/11 was "was marred by communications problems, serious shortages of medical supplies and hospital rooms and confusion." The context to this quote is a simulation of responding to a dirty bomb attack. Confusion is to be expected in any large scale exercise but I imagine that a dedicated administration that wants to improve domestic security and first responder resources could have seen a better exercise.
And hey it is not important as we got Saddam last week and that solves all problems... Right....
Well no. Oliver Willis is linking to a couple of stories that suggests there could be a series of attacks in New York City or other major metropolitan areas in the next couple of weeks. Well prepared and resourced first responders are the second best line of defense that we as a nation have against terrorism. The first is active and effective intelligence gathering and disruption of attacks and organizations before they can strike. However we do not have well prepared first responders due to conscious budgetary decisions made by the Bush Administration.
Crossposted at Fester's Place
Confirmed: Nader is Thinking of Running
Last month, AB did some excellent investigation to determine who was behind the “Nader 2004 Exploratory Presidential Committee.” He determined that it was, indeed, Nader’s people.
Today, the BBC is confirming AB’s conclusion:
In an interview with BBC Radio 4's Today programme, Mr Nader said he was "testing the waters" by forming an exploratory committee to look into the possibility of running.What amazes me most, however, is the reason that Nader gives for considering another run:
He said he wanted to be sure that he would have adequate funding and support to launch another presidential campaign. "I will make up my mind one way or the other in January," he said.
Mr Nader was scathing about the choices offered by the Republicans and Democrats. "The country's in real trouble and these two parties are converging more and more," he said. "You just can't stand by and watch the two parties, at varying speeds of decline, take down our country."I can’t just stand by and watch Nader spout such nonsense. It’s ridiculous to argue that both parties are taking down our country, given that only one of the two parties controls all three branches of government. And the two parties have probably not been this far apart on major issues since the 1960s. Can he really keep a straight face and say that things would be no different if Gore were president? That Gore would also have gutted environmental protections, given massive tax cuts to only the wealthy, sharply curtailed our civil liberties, and prosecuted an unprovoked war?
It’s irrational drivel and nonsense.
Kash
Introducing the First Guest-Blogger: Fester
As you may recall, Kash and I will be blogging lightly till around 1/7/2004; particularly lighly in the first week of January. So I solicited guest-bloggers to keep the content fresh and informative during the gap. I'm happy to introduce the first guest-blogger, Fester from Fester's Place. Welcome!
In the interest of disclosure, note that Fester is a Deaniac, while I'm only a Leaniac (leaning ever more towards Dean, but enthusiastic about Clark as well). I believe that Kash's presidential preferences are unknown at this point.
AB
CNN is reporting that the 1st Brigade of the 82cd Airborne Division will soon deploy to Iraq because there is a an oncoming troop shortfall. Additionally the 3rd Brigade of the 82cd Airborne, currently deployed around Fallujah have been ordered to stay for another two months. This is because the National Guard brigades are still stuck in training for combat operations.
Now lets go to the analysis here. This is yet another signifier that things are going poorly in Iraq and that next year will not be pleasent either. Currently there are sixteen US brigade groups in Iraq. We are seeing some rotation into the country, for example the 3rd Brigade, 2cd Infantry Division (Stryker equipped) has just rotated into the country. The next rotation plan assumes that there will be 14 US brigades to provide security, and three of those will be National Guard brigades. If the US thought that 14 brigades was sufficient to provide security it would not be sending a fresh, rested and ready brigade that constitutes the mobile strategic reserve right now. This is yet another admission that we just simply do not have enough forces available to occupy Iraq.
Secondly, the recent report that stated that the Army would see 4 divisions declared combat incapable assumed that the 1st Brigade of the 82cd Airborne would be combat effective. The rest of the 82cd has been assumed to be combat ineffective as they will have been coming out of Iraq and Afganistan. Now this news of an extended deployment for the 3rd Brigade and the deployment of the 1st Brigade will push back the date by which the 82cd Airborne is combat effective by at least another 2 if not 4 months. Next summer the US Army will have the 3rd Infantry Division as the sole uncommitted combat ready unit available.
Thirdly, this will contine to play hell with retention as the 1st Brigade has already fought in Afganistan in 2002-03, the 3rd Brigade will be overseas for at least 8 months and everyone can read the writing on the wall. We are already seeing the Reserves experience general retention and recruitment difficulties. Why should soldiers who are leaving the US Army sign up for the Reserves or the Guard when they know that it is another guaranteed deployment.
As I have stated before the US could commit more troops to Iraq if we decided we did not want or need a strategic reserve, a functioning army or a functioning reserve system. Choose at least one. Well we are choosing to give up the strategic reserve and the reserve system is under strain. Let's hope that we do not see a long term trifecta, but I will not put it pass the current reality that this is a distinct possibility.
Crossposted at Fester's Place
Hi everyone, I have been lucky enough to be allowed to guest blog at one of my favorite blogs over this Christmas week. My normal blog home is Fester's Place where I will still be keeping up with my normal blogging for the next week or two while I am over at Angry Bear. I plan on writing on economics, military analysis and Democratic politics. So nothing different on the topics, although AB and Kash do a far better job than I. Please tolerate my ramblings.
Dan Drezner: "the very foundation of troubles in this country?"
I knew there had to be some good reason why I nominated Drezner for the best Right-of-Center Blog for the upcoming Koufax awards.
AB
UPDATE. Sheesh. Read the article in Slate that inspired Drezner's hate-mail. It's a pretty moderate questioning of Bush's policy implementation skills that concludes "Bush's process failures make him far more vulnerable on national security issues than one might imagine." My guess is that most of Drezner's emailers only read the title of the piece, Bush the Bumbler, and not the text. In all likelihood, Drezener didn't come up with the title; Slate's editors did. (I know that news stories have text penned by the reporter and headlines penned by headline writers, which explains why you see so many articles headlined 'Up is Down' but when you read the text it clearly indicates that 'Down is Up'. However, I'm not sure if the same applies to the headlines on Op/Ed pieces -- knowledgeable commenters?)
No Sh*t
SACRAMENTO, Calif. - Gov. Arnold Schwarzenegger (news - web sites) declared California in a fiscal crisis Thursday and invoked emergency powers so he could impose $150 million in spending cuts without the Legislature's approval."I had to do this," Schwarzenegger said at a news conference Thursday.
The move comes as local governments in the state edged closer to financial meltdown following the loss of millions of dollars a day in revenue resulting from Schwarzenegger's decision to cut a car tax.
Let the recall begin.
AB
An Interesting Question
Where's the inflation?
Everywhere you turn, there are red-light indicators of inflation: the dollar's value is plunging, gold prices are through the roof and commodity prices are marching upwards, including Alan Greenspan's pet indicator, scrap steel...This piece asks the right questions. Yes, it is a bit of a mystery, though regular readers of Angry Bear already know my answer to the question…
Kash
Slightly Sinister
Yes, many of us have commented on it before, but it’s worth a repeat: the Bush administration loves to change history. Today’s Washington Post runs a short story on it:
White House Web Scrubbing: Offending Comments on Iraq Disappear From SiteMilbank picks out just two recent examples, but there are dozens. It’s a good reason to regularly check out sites like The Memory Hole.
It's not quite Soviet-style airbrushing, but the Bush administration has been using cyberspace to make some of its own cosmetic touch-ups to history...
Kash
p.s. No, I'm not awake at this hour because I just saw TROTK. I wish.
UPDATE: See this AB post for another Orwellian example.
Math and Economics
Economics and economists use a lot of math. Sometimes perhaps even gratuitously. Daniel Davies has a lengthly disquisition of the issue over at Crooked Timber. Here's a sample:
The use of mathematics in economics isn’t the sort of Theory we’re concerned with trying to stamp out; like the War on Drugs, the War on Theory isn’t meant to touch the recreational hobbies of nice people like us. Nobody would question the right of economists to use whatever mathematical toolkit they need in order to write economics, because unlike the Bad Writing crowd, they’re using mathematics precisely in order to ensure the rigour of their analysis, not to cover up a lack of such rigour.Well, not quite. The position that mathematics in economics is a) the best way to do economics and b) the only rigorous way to do economics can be attacked on two separate fronts.
I may have something to add after I actually read the post.
AB
Rogue Attack Operation?
There's a little more detail today on the funding for the anti-Dean attack ads that Kash wrote about yesterday. Who is in the group?
The group, called Americans for Jobs, Health Care & Progressive Values, was formed a month ago by veteran Democratic campaign staffers who refuse to identify their financial backers until Jan. 31 ... The group's treasurer is a longtime fundraiser for Rep. Richard A. Gephardt of Missouri, one of Dean's rivals in the Democratic presidential race, and its spokesman recently quit as press secretary for Massachusetts Sen. John F. Kerry's presidential campaign. Both Gephardt and Kerry have denied any involvement with the group.
Who is funding the group?
A secretive political group financed in part by labor unions has raised $500,000 to air anti-Howard Dean ads in three early primary states, angering the Dean campaign and drawing sharp criticism from campaign finance reform advocates.
Are they happy with their investment? Apparently not.
Two of the unions renounced the effort Tuesday, saying the ads — including one featuring an image of Osama bin Laden — are not what they thought they were paying for.[snip] ... "I tell you, these ads are despicable," said Rick Sloan, communications director for the International Assn. of Machinists and Aerospace Workers, which donated $50,000 to the effort. "If I have my way, we'll ask for a refund."
... Robert Gleason, treasurer for the International Longshoremen's Assn., said his union also donated about $50,000 for what it thought would be general issue ads on jobs and health care, as in the group's name. When the first anti-Dean ads were aired, the union decided not to send more money.
A final note: all three of the unions that have admitted funding the group behind the attack ads have endorsed Dick Gephardt. Still, I'm inclined to believe the unions' statements of regret and dismay, as well as Gephardt's denial of involvement.
AB
Today's Polls
Was the capture of Saddam good for Michael Jackson's image too?
AB
Inflation Still Falling
This news surprised most economists: today’s release of the November CPI showed a fall in prices of .2%. The core rate, excluding food and energy, showed a fall in prices of .1%. The 12-month inflation rate in the US has now fallen to 1.20% (see this graph for context).
Those economists would have been less surprised if they had read this post. I'll spare the bother of repeating it here, and just say: "Yup. Still true."
Kash
Closer to a Yuan Revaluation?
Back in August, I wrote that a rise in inflation in China might make the Chinese government more inclined to revalue the yuan against the dollar. Part of Stephen Roach's commentary this week suggests that that time might be getting closer:
Meanwhile, there has been an important shift in the Chinese inflation dynamic: After 15 months of deflation, China transitioned back into positive inflation territory at the start of 2003. And slowly but surely, the rate of inflation has begun to accelerate. The just-released inflation report for November 2003 was mildly disturbing — a 3.0% y-o-y increase, which represents the sharpest rise in nearly seven years. The mix of Chinese inflation is important, but not for the reasons we stress in the industrial world. The recent surge is concentrated in food prices, where annualized inflation is now running at an 8.1% rate. Weather-related or not, this is a big deal in a nation that still has about two-thirds of its population living at poverty levels. Unlike the West, where we strip out food in an effort to come up with “core” inflation, the Chinese have no such luxury…As you know, the China issue has been growing for months. So this news matters. If the Chinese are serious about wanting to slow inflation, they will have no choice but to revalue, for various reasons. But first, they'll probably try to sell some of their $500 billion of US government bonds.
The year 2004 could bring some interesting times...
Kash
Does This Rule Out Dean-Clark ’04?
Salon recently interviewed Wesley Clark, and asked him about the possible “dream team” Democratic ticket against Bush:
[J]ust 48 hours before before the capture of Saddam Hussein outside of Tikrit, Clark made his strongest statement to date about why a Dean-Clark ticket is a bad idea. Clark, who says that he's uniquely qualified to go "toe-to-toe" with President Bush on security issues in 2004, said that whether he's on the ticket or not, the Democrats can't win with Dean as their presidential candidate.Of course, when running for president one must not seem to be really running for vice-president. But if we take him at his word, Clark seems to be ruling out an alliance with Dean.
"I don't think the Democratic Party can win without carrying a heavy experience in national security affairs into the campaign," he told Salon in a phone interview last week. "And that experience can't be in a vice president."
Asked if he was referring specifically to the much-discussed possibility of a Dean-Clark ticket, he said: "It's no substitute. It won't work, and it won't carry the election for this party."
Or, do his comments leave that door open just a crack...?
Kash
Ugly, Ugly Fratricide
This is not pretty. And one wonders why the Republicans have gained such complete control over the US’s political system, given that the majority of American’s are closer to Democrats than Republicans on the issues...
Dr. Dean, the former governor of Vermont, had billed his speech here to the Pacific Council on International Policy as a sweeping international tour of what he said were his moderate foreign policy views…Regardless of your opinion of Dean, I think that anyone who wants to get rid of Bush in 2004 should find this disgusting.
"The difficulties and tragedies which we have faced in Iraq show the administration launched the war in the wrong way, at the wrong time, with inadequate planning, insufficient help, and at the extraordinary cost, so far, of $166 billion," he said. "The capture of Saddam does not end our difficulties from the aftermath of the administration's war to oust him."
Dr. Dean's Democratic opponents immediately seized on the speech to raise new questions about his viability in a general election... At the same time, a group of Democrats known informally as a "stop Dean" coalition began running a television advertisement in New Hampshire and South Carolina that shows a photograph of Osama bin Laden with the warning, "It's time for Democrats to start thinking about Dean's inexperience."
Kash
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.
I would like to pose two questions in response to these concerns.
First, how can one tell that outsourcing is responsible for recent job losses in IT? I would argue that nearly all of those job losses are due to the end of the massive internet technology bubble of the late 1990s, coupled with the general job market recession. In other words, I bet that job losses would be about the same in the industry if no new jobs had been created in India.
My second question is related: If outsourcing is responsible for the loss of jobs in IT, then what explains the job losses in other industries? Many have argued that manufacturing jobs have also disappeared because of international trade. But jobs have also disappeared in industries that face no international competition, such as transportation and retail trade.
The table below shows the percent change in total employment, given by the BLS, between September 2000 and September 2003. Jobs that face no international competition, such as courier services, rail transportation, and various wholesalers, have disappeared just as fast as (or faster than) jobs in software publishing, accounting, and research and development, which are supposed to be the major victims of outsourcing.
What explains this? It’s simple: the state of the economy is the reason for the loss of jobs in the US, not international trade.
As I argued at length a few weeks ago, the process of losing jobs to international competition is no different from the process of losing jobs to technological advances. They both cause pain and hardship for some people, and benefits for others. Why treat international trade any differently from technological progress? If you're worried about the state of the job market in the US, then you should focus on the state of the economy, and the competence of the people running it. Don't worry about international trade -- it's a red herring.
Let me end this post with another comment from DeLong’s post, by a contributor named Bulent Sayin:
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).
- Best Blog: Likely to be a close race between Atrios, Marshall, CalPundit, and Kos.
- Best Writing: Looks like Dave Neiwert will start with a slight edge, but Jeane DÂ’Arc and Digby are right on his tail.
- Best Post: This one is tough, I'll have to ponder it for a while. A number of people have nominated Orcinus' The Political and the Personal for Best Post, which truly is a great post and shows why Dave belongs in the "Best Writing" category.
- Best Series: You guessed it, Dave Neiwert's is again a top contender; this time for his Rush, Newspeak, and Fascism series. Deltoid's merciless dismantling of the fraudulent John Lott is another popular nominee (and Dave can't win everything, can he?) Charles Kuffner's coverage of the Texas Redistricting Boondoggle was also impressive. Finally, there's Slacktivist's ongoing heroic effort to read, analyzye, and blog the disturbing bestseller, Left Behind--so you don't have to.
- Best Single Issue Blog: I'm assuming that "politics" doesn't count as a single issue, because all the nominees are political blogs. But if by single issue they mean, for example, "Law" then Mark Kleiman is a good candidate, as is last year's winner Jeralyn Merritt. Hmm, I wonder if two economists blogging about politics and economics counts as a single issue blog?
- Best Group Blog: This is the only category where there's little doubt over the outcome. Crooked Timber wins by a mile.
- Most Humorous Blog: I don't really read blogs that are just humor, all the time. But TBogg and Roger Ailes consistently crack me up. So does Jesse.
- Most Humorous Post. Those with very short memories have an easy decision, Atrios' Preznit Giv Me Turkee. But if you think back to October when Luskin had his lawyer send a threatening letter to Atrios, the decision becomes much more difficult. The Poor Man's parody of that letter ("...tricksyness in the first degree, and we hates you") is a hilarious classic.
- Best Design: Ampersand won last year. Blah3 seems to be giving Barry some competition this time around.
- Best New Blog: I don't remember whether they qualify (the first post must be on or after 7/1/03), but 18 Minute Gap and Suburban Guerilla are strong contenders. Ruy Teixeira may prove even stronger. Ruy T. would also be strong in a most difficult to spell category.
- Best Special Effects: Uggabugga looks like this year's strongest contender--it's the go-to blog for great graphs and figures. (Speaking of which, if you haven't ever taken a look at the Four Views of the Red/Blue states maps to your left, give it a click.)
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."
I think that our efforts to date to limit the influence of money in politics have been very much like our efforts to reduce the amount of illegal drugs consumed in the US. This campaign finance law almost exclusively addresses the supply of money, just as the “war on drugs” tries to reduce the supply of drugs. As in the drug issue, however, trying to limit supply but not demand will do very little to the overall quantity consumed, because the supply is virtually perfectly elastic. For all practical purposes there’s an infinite supply of both drugs and political money.
As one piece of evidence simply take a look at the quantity of money that will be raised and spent in the 2004 election cycle. It will be far greater than the amount raised in 2000, despite the campaign finance reform. I doubt the reform has even dented the rate of growth.
There’s only one way to reduce equilibrium quantity when supply is infinitely elastic – reduce demand. So to reduce the influence of money in politics, I’m convinced that we will have to directly address the demand for money. Since the lion’s share of political money is spent to buy TV ads, I would argue that the only solution is to start limiting the quantity and/or timing of TV ads that candidates can run. Do that, and you have huge and meaningful campaign finance reform, because you’ll be cutting the demand for political money.
First amendment problems? Sure – huge ones. Which is why I don’t see it happening without a constitutional amendment, which means it will probably never happen in my lifetime. Which is also why I was basically agnostic on the Supreme Court's decision on campaign finance reform. Neither decision would have made a difference to the amount of money in politics.
Kash
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.
But who pays these higher prices? Naturally, the US taxpayer. Nearly all of the money for Iraq’s reconstruction is coming from US taxpayers, as we all know. And where does the extra money go? In this case, Halliburton will earn increased profits, most of which will probably go to its executives and largest shareholders.
With the Bush administration’s newly announced rules regarding bidding for future reconstruction contracts, we can be sure that the winners of future contracts to rebuild Iraq will also face less competition, charge higher prices, earn higher profits, and accomplish less than they would have if they had faced full international competition. Of course, some bids may still face competition, either between competing US firms, or with firms from the other members of the coalition such as the UK, Micronesia, or Albania. But many contracts will doubtless face less competition than they would have otherwise.
That's why these new rules mean that US taxpayers will have to pay more money to get less rebuilding done in Iraq -- and the difference will end up as increased profits for a few big American corporations. As AB put it yesterday in his excellent analysis of Medicare reform, I will leave it as an excercise for the reader to figure out which US firms will gain the most.
Kash
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:
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