Incompetence
Take a look at Kash's last post (two below this one), which contains yet another great graph.
How could any group of employees be as consistently and dramatically wrong as the administration's employment forecasters and still keep their jobs?(*)
AB
(*) Ok, so O'Neill, Hubbard and Lindsey are gone, but that's had no discernible impact on policy-making. Basically, they formulate a hypothesis: tax cuts create a lot of jobs and then the the data turn out inconsistent with that hypothesis. Based on the scientific method, they shoud reject the hypothesis. Instead, they repeated the experiment and got the same result: data inconsistent with the maintained hypothesis. We're now in the midst of the third iteration of this experiment. I wonder what the result will be? (If they repeat it enough times, the business cycle will eventually give them the result their looking for.)
Tuesday, February 10, 2004
Intended and Actual Spending
Kash, Brad, and I have been hamering Bush's "15% discretionary spending growth" lie pretty hard. Now even the conservative/libertarians are getting in on the game. Posting on the subject, Jacob Levy at the Volkh Conspiracy writes this rather damning paragraph:
Authorization is not spending. A question about whether one is spending a lot of money is not responded to with an answer about how much one said one intended to spend. And "discretionary spending" is not the same as "non-defense, non-homeland discretionary spending." This isn't harmless abbreviation. In order to obscure the explosion in spending, the president's advisors had to come up with an obscure and tortured way to measure what has happened (one that, again, doesn't measure what actually happened but only what it was said that it was intended to have happen). If you're going to offer an answer that's intends to mislead about substance but is technically true, one had better be sure to get the technicalities right. (That is what Bill Clinton excelled at, of course: "There is no sexual relationship.") Bush's answer intended to mislead about substance (a strange way of measuring was used for the clear purpose of having a more palatable spending story to tell than is reflected in actual expenditures), and didn't even manage to be technically true (because 'discretionary spending' wasn't qualified).Levy (a smart guy and, along with Dan Drezner, a conservative who uses reason to argue his points) is referring to a graph Calpundit found in the current budget, which contains alleged numbers for "authorized" [not actual] spending. That graph puts non-defense and non-homeland discretionary spending at 15% in 2001, and 6, 5, 4, and 1 percent in 2002-2005. However, those numbers don't add up. (Somehow, intended/authorized spending growth of 5%, 14%, and 15% somehow averaged out to realized overall spending growth of 5.5% so either "authorization" is meaningless or the 15% growth is inaccurate.)
I'd give Levy's post an A if he could somehow manage to criticize Bush without referencing Clinton's penis (Andrew Sullivan managed that feat, here.) Still, a strong effort overall. A-.
AB
The CEA’s Forecast Record
If you’re a regular visitor to this or Brad DeLong’s site, you probably know all about the White House’s unlikely forecast for job creation that was released this week. To put it in context, I thought it might be helpful to compare this year’s forecast of job creation by the White House's Council of Economic Advisors (CEA) to the forecasts that they’ve made in previous years.
The picture below tells the story. It shows the predictions that the White House made in Feb. of 2002, Feb. of 2003, and Feb. of 2004, juxtaposed with what actually happened in the US job market from 2000 to 2003. All figures are annual averages and are taken from the Economic Report of the President.
It seems that, in fairness to the White House, this year’s forecast is no more optimistic than any previous year’s forecast. Will be just as far off? Probably not... but it will be surprising if it’s right, too.
Kash
Josh Marshall
I have to quote this one in full:
Given the president's record as a businessman, and since he's now run the country hopelessly into debt, isn't it about time he sells the country off to some rich friends who will swallow the loss so he can move on to greener pastures?Now that's funny. On a more serious note, Josh also has White House spokesman McClellan having a hard time with the press over the AWOL issue this morning (on second thought, that's kind of funny too.)
AB
How Long Will This Keep Going On?
What I’m referring to, of course, is the seemingly endless purchases of US dollars by Japan. (Isn’t that the first thing that came to your head?) This week’s Buttonwood column in The Economist elaborates on the point that I made yesterday about the self-contradictory G-7 communiqué regarding currency interventions, starting with this:
A CAMEL, goes the old saw, is a horse designed by a committee. What that makes this weekend’s statement by the Group of Seven (G7) finance ministers and central bankers is anyone’s guess, but a duck-billed platypus is Buttonwood’s offering.They end the column asking the question we’ve all repeatedly asked: how long can the current state of affairs – with Japan keeping the dollar strong through enormous purchases of US dollars – continue? The question matters, because right now the purchases of US debt by Japan (and to a lesser degree, China) is having a major effect on the US economy. As one of today's columns in CNN/Money.com says: “Like low rates? Thank Japan.”
Kash
The Press Picks Up On the White House Jobs ‘Forecast’
From CBSMarketwatch.com:
Fuzzy Math: Bush plan would need up to 5mln jobsLikewise, we have this from CNN/Money:
Report's call for 2.6 mln doesn't add up
The U.S. economy would need to add between 3.6 million and 5 million jobs between now and the end of the year to meet the administration's official job-growth forecasts, not the 2.6 million figure cited Monday by the White House.
In the Economic Report of the President released Monday, the White House's Council of Economic Advisers said employment would average 132.7 million jobs in 2004, about 2.6 million more than the 2003 monthly average. All day, the White House bandied the 2.6 million forecast without explaining just how difficult that average would be to achieve.
White House: 3.8 million new jobsIs the press becoming more skeptical? Or just reading more blogs?
NEW YORK (CNN/Money) - The White House forecast for job growth this year is even more optimistic than it first appeared -- a source says the Bush administration expects about 3.8 million new jobs in 2004, as opposed to the 2.6 million widely reported on Monday.
Kash
Monday, February 09, 2004
Weapons of Math Destruction, Part III
CORRECTION: Brad re-ran the numbers and finds that the actual necessary job growth is 320,000/month, not 470,000. That's still an impossible target: it's been reached in only 18 of the 119 months between Feb. 1994 and Dec. 2003.
Brad DeLong catches another one: Table 3-1 of the 2004 The Economic Report of the President, on page 98 predicts that the US economy will average 132.7 million jobs in 2004 (not end with, but average); 2003 averaged 130.1 million jobs. Given the January number Brad ballparks that the economy will need to create 470,000 new jobs per month for the rest of the year (we've lost about 2.2 million jobs since Bush took office.)
How could this get into the budget? In a follow up post, Brad speculates that
Whatever powerful person it was then called the forecasters in on the carpet: "We cannot publish a number saying that payroll employment in 2004 will be lower than it was at the start of the administration. That number *must* be bigger than 132.5 million [the number at the start of Bush's administration]. If that number is smaller than 132.5 million, there will be lots of negative newspaper stories saying 'Bush administration forecasts negative job growth over first term'. We can't have that."But perhaps Brad is too harsh. Maybe, just maybe, 470,000 per month isn't that crazy -- we all remember the booming Clinton years; surely they had monthly job growth over 470,000. How often was monthly job growth over 400,000 under Clinton? The answer: 7 times, and in only two of those months were over 470,000+ jobs added. That's right, the prediction underlying the jobs numbers in the current Economic Report of the President requires that the economy create more jobs in the next 11 months in a row than it created in any eleven months in the last decade (not 11 months in a row, the best 11 months out of the last 120 months). Here are the data, color coded to help the reader see how times have changed:
And so the number is 132.7 million.
Flat out, the 132.7 million jobs in 2004 is impossible and whoever wrote that knows this. It is a lie, not a mistake or misguided optimism.
AB
UPDATE: Further proof that the 470,000 target is impossible. Atrios says "I believe after the last tax cut I promised that if they made their jobs projection I would vote for Bush in '04. I make that promise once again with this new round of numbers."
Weapons of Math Destruction, Part II
Calpundit, Angry Bear, and Joshua Claybourn have all had things to say about the issue that I addressed in my “Lies, Direct from the President’s Mouth” post of yesterday. Several people have offered up theories to explain the President’s incorrect statement, most of which revolve around the idea that Bush was talking about non-defense discretionary spending. Along those lines, Calpundit helpfully found the source of Bush’s untrue statement – it’s from the overview of the just-submitted budget, and it shows “non-defense, non-homeland spending” to be just as Bush described it on MTP yesterday.
The problem is that there is no supporting data for the chart. Furthermore, the OMB doesn't even give us much insight into how they calculated those growth rates, so we have to guess.
Undeterred, I have been trying to replicate their graph. To do so, I’ve assumed that they took the data from their own historical budget documents. One particular White House document contains the salient information: “Historical Tables, Budget of the US”. The two tables that contain the relevant information are table 4.1, which contains spending for homeland security, and table 8.1, which contains budget outlays by category (i.e. discretionary vs. mandatory). When you subtract defense spending and homeland security spending from the numbers given by the White House for discretionary spending, this is what you end up with:
1999: $284 bn
2000: $307 bn, +8.1%
2001: $328 bn, +6.8%
2002: $367 bn, +12.0%
2003: $389 bn, +6.0%
But this still doesn’t match the White House chart (or what the President said on MTP). If someone has any insight into how the OMB came up with that chart of theirs, please let me know. Because at the moment, I’m starting to think that the OMB just made up that chart out of thin air – and then told the President that those numbers actually represented reality.
Kash
UPDATE: Spinsanity has provided the best explanation yet for how the OMB derived their numbers.
A Self-Contradictory G-7 Statement
Finance ministers from the G-7 countries met over the weekend. As is customary at the end of such meetings, they issued a joint statement yesterday containing their thinking about the state of the world economy – and specifically addressed exchange rate movements. The statement was a compromise, and thus somewhat confused and self-contradictory. Here’s the relevant paragraph from the text of the communiqué:
We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely and cooperate as appropriate. In this context, we emphasize that more flexibility in exchange rates is desirable for major countries or economic areas that lack such flexibility to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.They quite reasonably note that “excess volatility in exchange rates are undesirable for economic growth” – a statement with quite a bit of empirical validity, by the way. The statement implies that they prefer fixed exchange rates (or a very carefully managed float, such as Japan is currently practicing), to avoid volatility.
At the same time, they explicitly ask for “more flexibility in exchange rates” – which means allowing exchange rates to float freely. But another well-documented empirical fact is that when exchange rates float freely, they move in unpredictable, volatile ways. The unfortunate fact of the matter is that no one has yet figured out how to have flexible exchange rates without volatility.
So which do they really want – fixed or flexible exchange rates? This statement says that they want both.
Of course, the reason for this self-contradiction is that some of the G-7 members want one, and some the other. Japan wants to continue managing its exchange rate to keep its currency weak, while the US and EU want it to float against the dollar so the yen will strengthen. What I find interesting is that this statement perfectly reflects tremendous and deep-seated disagreement about where they would like exchange rates to go from here. I expect the tensions between the US, the EU, Japan, and China over this issue – which I've remarked on before – to just get worse. Whose preference will win? Time will tell…
Kash
Sunday, February 08, 2004
Budget Update: Weapons of Math Destruction(+)
CalPundit has an explanation, of sorts, for Bush's untrue statement about discretionary spending:
[referring to a chart in Bush's budget titled "Percent Change in Discretionary Budget Authority] ... discretionary spending outside of defense and homeland security went up 15% in 2001. Or rather, that discretionary spending authority — not actual spending — went up 15%. See, he was just speaking in a kind of shorthand, that's all.I too am curious about how the numbers 5%, 14%, and 15% (respectively, FY2001 growth in defense, homeland security, and non-defense/non-homeland discretionary spending) can average out to 5.5% (the overall growth of discretionary spending in 2001.) Mathematically, it's possible, but a quick calculation shows that for this to be true, roughly 95% of 2001 discretionary spending must have been on Defense (*). I don't buy that. In fact, Josh Clayborn's second figure in this post shows that defense spending accounted for less than half of total discretionary spending in both 2000 and 2001 (2000: $305b of $637b; 2001: $308b of $665b) -- again, flatly contradicting Bush's statement.
But even if that's what he really meant, you may be thinking that it still doesn't make any sense. After all, if total discretionary spending went up only 5.5%, how is it possible for his chart to show all three separate components going up by that much or more? Klingon math?
In almost plain English, this means that if (1) defense accounted for 95% of discretionary spending while other stuff accounted for 5% of discretionary spending and if (2) defense grew at a 5% while other stuff grew at 14 to 15 percent, then and only then would the overall rate of discretionary spending growth be 5.5%. The numbers don't add up.
AB
(+) The title is from commenter Pierre at CalPundit; it was too good not to use.
The Soft Bigotry of Lowered Expectations
The reviews are in, and with the notable exception of Juan Cole, almost nobody -- conservatives included -- agrees with my take. And that's a good thing. Rooting for Bush's Iraq policy or economic policy to go poorly is one thing (i.e., I'm against doing that), but rooting for a bad performance in an interview is perfectly fair game. I suppose I was expecting it to be really bad, when in fact it turned out to be somewhere between a somewhat bad and middling.
Andrew Sullivan: "BUSH IS OUT OF IT: On the budget, this president is frighteningly unaware of the reality of his own legacy and policies. That's the only conclusion you can draw from his answers on Tim Russert. Either that, or he really is lying. Sully also links to a conservative blogger Josh Claybourn's refutation of Bush's statement about discretionary spending growth under Clinton and Bush. Clayborn has more numbers that support Kash's earlier post (and clearly indicate that Bush was either wrong or lying.)
Brad DeLong has a bunch of excerpts from the conservatives at the National Review, all saying that Bush's performance was weak. Brad himself doesn't give his take (other than to, of course, laugh at the economic numbers Bush cites.) But he does give a nice critique of Russert.
CalPundit: "...Bush's responses were uniformly labored and uninteresting. He sounded like he was addressing a class of sixth graders."
Atrios: "Well, I'm not going to watch it. Some of you have already seen it, depending on where you live. From what I gather, Russert asked decent questions but no followups."
Matt Yglesias: "Russert beat my (very low) initial expectations by offering some reasonable questions on the "imminent threat" issue." Matt's post also has a good list of questions not asked by Russert. No comment on Bush himself.
Pandagon's Ezra K.: "It's funny, I don't think Bush did half as bad on Meet the Press as The Corner seems to. Bush came off as a man with strong values but not much else ... The interview may have been a disappointment to some and a boon to others, but it'll do little for either side."
Pandagon's Jesse Taylor: "I may be a partisan Democrat, but damn, that Bush/Russert interview was awful. The tenor of Bush's presidency is, has been, and will be that nobody could possibly understand what America needs but him, and as such, either you're an America, or you're a partisan doubter of America's resolve."
Andrew Northrup (the Poor Man): Northrup gives Russert a B ("I think it's the same interview Clinton would have gotten under similar circumstances" -- I agree. Presidents do and should get more deference than candidates) and a C to C- to Bush. "When in doubt, he'd just repeat 'Saddam was dangerous' over and over, and perhaps throw in something about he's the kind of leader who just does what he thinks is right, and ain't nobody going to change what kind of man he is, by gum, and then give an inappropriate half-grin. Normally, this would be considered a disasterous answer, but it doesn't vary significantly from what he's been saying for three years now, and people find this charming, I'm led to understand."
Susan M. (Suburban Guerilla) has a very provocative excerpt from Colin Powell's book, My American Journey: "I [Powell] am angry that so many of the sons of the powerful and well-placed... managed to wangle slots in Reserve and National Guard units ... Of the many tragedies of Vietnam, this raw class discrimination strikes me as the most damaging to the ideal that all Americans are created equal and owe equal allegiance to their country." (Of course, you noted how Bush tried to conflate attacks based on him possibly failing to serve in the National Guard with attacks on the Guard itself.)
Josh Marshall only addressed the exchange on the AWOL issue: "Superficially, I think Bush came off okay [in the AWOL exchange], largely because Russert failed to press the president sufficiently on some deceptive responses."
Juan Cole: "Overall, it was largely uneventful, but the president acquitted himself well enough. He came across as thoughtful and considered. And, while he was almost certainly prepared for hours by staff members, he didn’t appear to be giving the memorized speeches that one is accustomed to from politicians on these programs. Bush actually seemed to pause and consider his answers." Finally, someone agrees with me, more or less.
Eric (The Hamster) reports that (1) Former Reagan speechwriter and hack columnist Peggy Noonan gives it a thumbs down. More substantively, Eric links to and excerpts a detailed refutation by the Democratic Senatorial Campaign Committee (DSCC).
Lambert (Corrente): "Anyone spot Bush wearing an earpiece? Readers? If the earpiece can't be spotted, does analysis of the transcript itself yield any clues?" I take that as a roundabout way of saying Bush did well.
Blah3:"They must be one depressed bunch over at the White House today. They ran the pre-recorded Bush interview on MTP today, and while the videotape is still warm, the consensus seems to be that Bush pretty much sucked. [snip] My bold prediction - any bump in the polls they were hoping for is not going to materialize."
Body and Soul: "I watched Bush on Meet the Press and then went immediately to the computer to see if the cool kids had the same reaction I did, which was that the interview was a smidge better than I expected." By "a smidge better," Jean means that it was a bit tougher on Bush than she expected, so count this as another in the "Bush did poorly" column.
A final note: The Center for American Progress has an Annotated Text of the President's Interview, which is probably a much better read than the transcript itself.
AB
UPDATE:
Mark Kleiman: "A pair of awful performances, but Bush's was even worse than Russert's."
Dave Neiwert: "I'm not sure why Tim Russert, host of NBC's Meet the Press, has the reputation for being the bulldog interviewer that he has. Well, I know why: He's very much the bulldog when it comes to Democrats and liberals. With conservatives, well, he has a long track record of letting them off the hook ... And this Sunday's interview with George W. Bush was perfectly consistent with this trend."
My Take on MTP
Here's my take, prior to looking at other blogs: Bush did really, really, well. Most importantly, he sounded knowledgeable (which may fuel suspicions about vetting of questions.) Russert almost never interrupted or contradicted him, and I even caught him nodding in agreement a few times, which surely helped create this impression. This is only a statement about form.
On the substance side, his answers contained varying amounts of truth, spin, distortion, and inaccuracy (viz., his budget statement that Kash easily refuted). Another example was Bush's invocation of his pre-war use of the phrase "grave and gathering" to demonstrate that he and his administration never said the threat was imminent, while ignoring (as did Russert) a whole host of other statements that the threat was, in fact, imminent.
So in a battle between form and substance, which one wins? My guess is form. Expect Bush to get a bounce from this. Now I'm off to read some other blogs, where I'll hopefully see something that changes my mind. (One possibility, as Kash points out, is that the release of military records could be a big deal, if there's anything there. Still, this seems unlikely since, if there were anything there, why release them?)
Transcript here.
AB
Bush’s Military Records
I’m still digesting the President’s MTP appearance. One interesting bit of possible fallout just caught my eye. Bush was asked about the well-known allegations that he failed to report to duty with the National Guard for a period of time in 1972-73.
Russert: But would you allow pay stubs, tax records, anything to show that you were serving during that period?Is this a real scoop, a new development? Some commenters, like Calpundit, say no – this statement by Bush doesn’t mean anything. However, what's interesting is that the Washington Post is running with it as a legitimate pledge by the President:
President Bush: Yeah. If we still have them, but I you know, the records are kept in Colorado, as I understand, and they scoured the records.
And I'm just telling you, I did my duty, and it's politics, you know, to kind of ascribe all kinds of motives to me. But I have been through it before. I'm used to it. What I don't like is when people say serving in the Guard is is may not be a true service.
Russert: Would you authorize the release of everything to settle this?
President Bush: Yes, absolutely.
Bush to Release Vietnam-Era Military RecordsIt will be interesting to see where, if anywhere, this goes...
President Bush committed to the release of additional military records that would prove definitively whether or not he fulfilled his National Guard duties during the Vietnam War. Bush, seeking to quell a renewed controversy over whether he earned the honorable discharge he received, said he would "absolutely" release records such as pay stubs that would likely indicate more precisely how often he showed up for duty.
Kash
Lies, Direct from the President's Mouth
From Bush’s MTP appearance this morning:
RUSSERT: But your base conservatives, and listen to Rush Limbaugh, the Heritage Foundation, CATO Institute, they're all saying you are the biggest spender in American history.Hmm. Seems easy enough to verify. Here is the level of discretionary spending over the past 5 years, from the CBO:
BUSH: Well, they're wrong. If you look at the appropriations bills that were passed under my watch, in the last year of President Clinton, discretionary spending was up 15 percent, and ours have steadily declined.
1999: $572 bn
2000: $615 bn, +7.5% change
2001: $649 bn, +5.5% change
2002: $734 bn, +13.0% change
2003: $826 bn, +12.5% change
Oops. Unless "the last year of President Clinton" was 2002, I think Bush is quite incorrect. The real question is how he can get away with lying about things that are so obviously and verifiably untrue.
Kash
UPDATE: I've written a new post about this, with a bit of new information and a bit of new analysis. The result is that it's starting to look like the OMB may have gotten something seriously wrong.
Saturday, February 07, 2004
Opinion from the UK
No, this isn't from the liberal Guardian, though it sounds like it is. Instead, it's from the Sunday Herald (which, as far as I know is neither left nor right. The Telegraph and London Times are both right leaning, the Telegraph moreso. Perhaps a commenter can give some background on the Sunday Herald.)
When we later are told that the intelligence was flawed and that the head of the CIA, George Tenet, claims he never said there was an imminent threat from Saddam Hussein’s Iraq and that, anyway, the reports of weapons of mass destruction were “faulty” due to poor human intelligence on the ground, then we all know that the game is up. That’s why the polls on both sides of the Atlantic show that Prime Minister Tony Blair and President George Bush are fast losing the trust of the people. Yesterday, an NOP poll for The Independent found 54% of the public think Blair “lied” – yes, that is the word they were asked to give their opinion on – “to the nation” over Iraq. And the public has also lost any trust in Blair’s attempts to placate their concerns with his new Butler Inquiry into the failure to find any WMD. The poll showed 68% believe it will be another whitewash. Finally 51% believe Blair should go, while the Tories move into the lead over Labour. In short, the public have had enough of having the wool pulled over their eyes.AB
The South
Bill Maher's HBO show is very good -- either in spite of or because of his including both liberals and conservatives on the panels. If you like The Daily Show, then it's a pretty safe bet that you will also like Real Time. He had a great line last night: after discussing Kay's testimony and intelligence failures, he quipped [paraphrasing] "intelligence this bad and the only person who gets fired is me."
It looks like Salon will be posting a brief highlight from each week's "New Rules" segment. This week's was on Southern voters:
...if Southerners don't want to have an inferiority complex, I say, "Stop doing things that make reasonable people think you're inferior!"AB
Like, getting rid of slavery was a good start. But don't quit there: Stop being the place that's always challenging the theory of evolution. What's next, gravity? Is that just a plot by the Jews up North to get people to drop spare change?
Southerners need to let go of the Civil War, beginning with those reenactments. First of all, you're reenacting something you lost. It's one thing to gloat about victory -- when you do it about losing, your front porch is a few couches short of being decorated.
P.S. I'm from Texas.
Red vs. Blue
Given my proclivity for Red and Blue numbers (see "Topics," left), I'm not sure how I missed this until now. On 1/30, the NYT ran an Op/Ed by Gore's former speechwriter Daniel Pink on th subject:
You might expect that in the 2000 presidential election, Republicans, the party of low taxes and limited government, would have carried the Giver states — while Democrats, the party of wild spending and wooly bureaucracy, would have appealed to the Taker states. But it was the reverse. George W. Bush was the candidate of the Taker states. Al Gore was the candidate of the Giver states.AB
Consider:
78 percent of Mr. Bush's electoral votes came from Taker states.
76 percent of Mr. Gore's electoral votes came from Giver states.
Of the 33 Taker states, Mr. Bush carried 25.
Of the 16 Giver states, Mr. Gore carried 12.
Friday, February 06, 2004
Prospects for Consumption Growth
In the comments, General Glut asks the salient question in the wake of today’s unemployment report: "How long until these poor jobs numbers (and the even poorer wage and salary numbers) start eating into US consumption levels?"
Good question! This is especially important when you consider that consumption spending (spending by households and individuals) makes up close to 70% of all spending in the economy. Whatever economic growth we’ve seen over the past 2 years has been all the result of increasing consumer spending.
Up to now consumption has remained strong even while wage income has barely grown thanks to three factors. 1) To some degree, households have been spending some of their assets such as houses (e.g. through taking cash out when refinancing); 2) There have been some temporary windfalls such as the tax rebates of 2001 and 2003; and, most importantly, 3) Households have increased consumption faster than their income has grown, simply by devoting a smaller and smaller fraction of their (stagnant) income to savings, and more of it to consumption.
All three trends seem destined to end soon. The last GDP figures may have warned of the beginning of the end of the recovery, in fact. But there are specific reasons why the three exceptional factors listed above are not likely to continue boosting consumption. 1) The refinancing boom is beginning to peter out, since mortgage rates have stopped falling for some time (so most people who were going to refinance at these rates already have), and house values may be nearing their peak. 2) There will be one more tax boost with refund checks that are a couple of hundred bucks larger for most families than usual in April and May, but after that no more tax boosts for the foreseeable future. At this point, our fiscal policy ammunition has been pretty much completely used up. 3) Savings rates are about as low as they can go. That means that there’s precious little room for households to further increase their consumption.
So, the job reports – not just number of jobs, but also how well they pay – matter a LOT to the future of this economic recovery over the coming year. A few more mediocre reports like this and it looks a sure bet that economic growth in 2004 will be slower than 2003, not faster.
Kash
Bush Approval Drops Below 50
The AP just released its poll results this morning. It’s the second major poll this week (the other was Gallup) that shows Bush’s approval rating sinking below 50% for the first time. Do chickens really come home to roost, even for the Republican machine?
For your edification and amusement, here's a nice picture of the trend in the AP's poll results over the past 12 months.
Kash
Sluggish Job Creation
The new unemployment report is out. The estimate is that 112,000 jobs were created in January. That’s more job creation than we’ve seen in a couple of years, but still below expectations. The unemployment rate fell to 5.6%, thanks to a continuation of the surprisingly low labor force participation rate. All in all, this report suggests that, while there's some hope of improvement on the horizon, the sluggish job market continues...
Kash
Thursday, February 05, 2004
Meet the Press
In a sign of desparation, optimism, or perhaps possession of very incriminating photos of Tim Russert doing things that Rick Santorum can only dream of, President Bush will be on Meet the Press this Sunday.
Most expect Russert to lob softballs at the president, but even so, it's not Bush's best forum. Russert once had a reputation as a very tough interviewer, though liberals question that now, with a fair amount of justification. In any event, Brad DeLong has some great ideas for questions Tim could ask, if he wants to be tough.
Note: "Meet the Press" is regularly seen from 9-10 a.m. ET, except in Washington, D.C. and New York City where the broadcast is seen from 10:30-11:30 a.m. ET. Set your TiVos and VCRS.
AB
Costco
I put part of this year's Roth IRA money(*) into Costco. In part, it was because they have industry leading productivity and revenue per-square foot. In larger part, it's because they pay their workers more and because they offer benefits (CEO Sinegal said back in the early 1990s, “We pay $1 more an hour than Sam's or Price ... We start our people at $8 an hour and boost them in three years to $14 an hour. It works for us. If you pay good wages, you get better productivity.”) Now I find that there's yet another reason to support Costco:
Costco Wholesale Corp. Chairman Jeffrey Brotman and CEO James Sinegal gave $95,000 each in December to a political fund that aims to defeat President Bush in the November election, records filed with the Internal Revenue Service show.Via Pandagon.
AB
(*) Speaking of Roth's, it's that time of year where you should really, really, scrape up some money for either your Roth or traditional IRA. As a rule of thumb, if you have $3,000 available, then you probably make enough so that the Roth is better for you (with a Roth, you get no tax savings now, but the disbursements are tax free). If you don't have $3,000 lying around, then you should probably put as much as you can into a traditional IRA (the contribution will come off your AGI, increasing your refund). If you're confused about what stocks to buy, broad-based Exchange-Traded Funds (ETFs) (like the ones described here; you may have seen commercials for "Spiders" (SPDR) and "Cubes" (QQQ), both of which are ETFs) are a pretty good idea. Even if you don't have much money, most online brokers have low or no minimum balances for a no fee IRA account.
Here's a proposal I'd like to see analyzed: means-tested matches on a sliding scale to Roth and Traditional IRA contributions, with EITC recipients getting some amount match-free. Of course, that would take some money, which the federal government is about 1 trillion dollars short on in the current and upcoming fiscal years.
Dick and Tony: Conflict of Interest
Dwight Meredith explains it:
So while a case about whether or not Dick Cheney must turn over documents that some think will show undue influence by energy companies, the defendant and one of the judges take a hunting trip together hosted by the head of an energy company. Wait, it gets worse.AB
Those Wacky Liberals at The Economist (and they're anonymous!)
On Bush's budget: "George Bush presented Congress with a $2.4 trillion budget for the next. Think of it as a campaign brochure, complete with glossy pictures of the president bringing relief to the elderly, restoring the environment and exhorting the young."
The Economist writers also appear more skilled at crafting sentences than their peers at the NYT (though they spell "defence" in that funny, European, way): "For the armed forces and homeland defence come big proposed increases in spending, up by 7% and 10% respectively." (The NYT said that the homeland would be 10% more secure, rather than correctly stating that we'd be spending 10% more on homeland security.)
There's also more substantive content in the Economist piece:
If this [cutting the deficit in half over the next five years] all looks too good to be true, it is. For once, the administration has not fiddled the books by relying on unrealistically high growth rates in the coming years; but it has relied on other fibs. For a start, the budget does not factor in the future costs of keeping soldiers in Iraq and Afghanistan: even Mr Bush's own budget director says costs could be as much as $50 billion for Iraq alone in 2005. Then the usual implausible savings are found from “waste, fraud and abuse”. Third, all the president's cuts are to fall on the one-fifth of the total budget that counts as domestic discretionary spending—hardly likely to happen in an election year.Get it? If Bush excludes war costs, and makes unrealistic assumptions, and defines the time window just right, then maybe, just maybe, the deficit will be cut in half. Of course, cutting it in half will still mean a deficit over 1/4 billion dollars, or a bit more thant 2.2% of GDP -- which is about the size of Clinton's last surplus, but of course, in the opposite direction. Under the most optimistic of scenarios, the current budget proposes to run deficits the size of Clinton's surpluses.
Mr Bush's most culpable failing lies in his refusal to think beyond the 2009 horizon. Take, first, the tax cuts of 2001 and 2003, which Mr Bush wants to make permanent at a ten-year cost, when other new proposals for tax-free savings schemes are added in, of $1.25 trillion. The cuts may well have provided a welcome economic stimulus at a time when confidence was knocked by recession and terrorist attack. But after 2009, these cuts will equal three-quarters of the total deficit, even by the administration's own numbers. [more ...]
AB
Georgia Decides Not to Mandate Ignorance
College biology teachers in Georgia (or anywhere that admits students from Georgia) can breath a sigh of relief that they won't have to start out teaching at the 8th grade level:
Georgia's school superintendent Thursday dropped plans to remove the word "evolution" from the state's high school science curriculum.AB
"I will recommend to the teacher teams that the word 'evolution' be put back in the curriculum," Kathy Cox said in a statement.
Cox said she originally wanted to replace "evolution" with the phrase "biological changes over time" to avoid controversy.
Why Can't We Have a Better Press Corps?
USA Today has a column by Roy Blunt (R-MO) titled, "Bush Pushes Fiscal Discipline." Not surprisingly, the argument is rather typical and not particularly interesting or convincing.
The odd part comes at the end, where the USA Today makes this note:
Rep. Roy Blunt, R-Mo., is the deputy majority leader of the U.S. House of Representatives. The Office of Management and Budget declined an offer to write the Opposing (sic) view.Ok, USA Today editors, let's visit the OMB web page, where this graphic is featured prominently at the top:
Now that's fairness and balance! The President's Budget Office -- the office that freakin' wrote the budget -- declined an offer to oppose the view that "Bush pushes fiscal discipline." As long as all sides of the issue had a chance to weigh in on the subject.
AB
P.S. What would Atrios do? Probably post this URL: USA Today Feedback. Or this one: USA Today Letter to the Editor.
P.P.S. I stole the title to this post from Brad DeLong.
UPDATE/CORRECTION: Commenter Steve offers a plausible explanation. Online, all you see is Blunt's column, followed by the "opposing view" statement. But apparently there's also a USA Today editorial saying that the budget is irresponsible. USA Today offered to let OMB write the opposing view to USA Today's editorial, OMB declined, and so USA Today got Blunt to do it. That explains why "Opposing" is capitalized above. Though if this is the case, the article being opposed really should be linked or somehow identified.
Good News in the President's Budget!
No, it's not that this year's budget contains glossy ads. Nor is it that the 1/2 trillion dollar in the red federal government will be paying a Republican ad agency (the makers of RATSTM brand Democrats) $9.5 million to tout the benefits of the $400b $535b Medicare package.
Instead, the good news from the NYT is that, based on Bush's budget, domestic security will be 10% higher than it otherwise would be:
Mr. Bush would increase military spending by 7 percent and domestic security by 10 percent but would limit growth in discretionary domestic programs to just one-half of 1 percent.AB
P.S. Yes, it's just a carelessly crafted sentence, but I thought it was a funny phrasing nonetheless.
UPDATE: More substantively, the same NYT article contains this nugget:
On Tuesday, barely 24 hours after Mr. Bush unveiled his $2.4 trillion budget for next year, the administration threatened to veto a $311 billion transportation bill that the Republican-controlled Senate passed on Monday. The Senate bill would authorize $55 billion more for highways and mass transit over the next six years than Mr. Bush has proposed, and a bill in the Republican-controlled House would authorize nearly $100 billion more.Why the big concern in the Congress over transportation? It's pork. Highway and transit money gets spent directly in supporters' home districts, or states. I'm generally in favor of infrastructure spending, but this is more not-taxing and spending. If the programs are worthwhile and not pure pork, then politicians should be able to garner support for taxes, fees, and bond issues to fund those programs.
This is a great example of how the concentrations of costs and benefits affect decision-making. If passed, this highway money comes from all taxpayers -- even at $100b, the cost to the average taxpayer is under $100. But, particularly for House members, the political benefits are very concentrated -- a new road project in a moderately sized district is a big deal. As a result, even if a given project is not worth it from a society-wide view, it's worth it to any given district precisely because all the benefits accrue to that district while the costs are spread over all tax payers.
The same is true, to a lesser extent, for Senators. For the president, however, the benefits are very diffuse, roughly as diffuse as the costs. Thus, the numbers in the above paragraph are ordered exactly as a cost-benefit analysis would predict: House members want the most ($150b), Senators want less ($55b), and the President wants $0.
Wednesday, February 04, 2004
To Reiterate From Last Week
Last Thursday, I said this about Dean:
... Dean's likely to finish third next Tuesday in most of the states, and fourth in some of the more populous ones (SC, OK, MO, AZ). After such a disastrous result, the financial spigots shut completely and it's over.Dean took 3rd in AZ, MO, NM, and ND; 4th in DE; and 5th in OK and SC. So I was right that he wouldn't do better than 3rd in any state, but wrong about which states he'd get 4th in. Still, I think it will be extremely difficult for Dean to raise money at this point, and his concession is visible in the distance -- though surely not before Michigan votes on the 7th. After that, Virginia and Tenessee vote on the 10th, which could give a big boost to Edwards and/or Clark, but won't help Dean by any stretch.
Still, anyone who can make it to March 2nd has a shot -- as Digby sarcastically reminds us, "Bigtime Loser Clinton won just 3 of his first 14 contests."
AB
UPDATE: Jon Stewart sums it up better than I do. First he explained that the show is taped, so the primary results he just gave had a margin of error of "total". Then, the summary:
But I really can confidently predict the following. Today, voters in seven states from North Dakota to New Mexico humored Joe Lieberman, ignored Dennis Kucinic, reminisced about Dean, and admired Clark's hustle but still found him too creepy.
Tuesday, February 03, 2004
Good News
Ruy T. has some numbers that constitute great news -- unless you're a Republican, that is.
AB
Extras in Bush's Budget
Not surprisingly, there's some extra stuff in the Bush budget; Mark Schmitt has the details.
AB
P.S. This is about par for the course and very reminiscent of Bush's 2001 letter to taxpayers announcing that, thanks to President Bush, they would be receiving a $300 rebate/advance against their next year's taxes.
Jobs in Missouri
My latest post at The American Street is up. This one is on the jobs picture in Missouri, where Bush/Buchanan combined to garner 50,000 more votes than Gore/Nader. Since Missouri has lost a lot more than 50,000 jobs (roughly twice as many, in fact), this swing state just might swing.
AB
Joementum
Apparently Joementum is exactly like momentum, but without any forward progress:
South Carolina: Edwards 44, Kerry 30, Sharpton 10AB
Oklahoma: Edwards 31, Kerry 29, Clark 28
Missouri: Kerry 52, Edwards 23, Dean 10
Delaware: Kerry 47, Dean 14, Lieberman 11, Edwards 11
Arizona: Kerry 46, Clark 24, Dean 13
Monday, February 02, 2004
John Kerry Getting the Kid Gloves Treatment?
I've seen a few posts here and there claiming that John Kerry's been treated with kid gloves the last few weeks, both by the press and by the rival democrats. One theory is that Dean and Gephardt were both badly damaged by their mutual fierce attacks in Iowa, and the contenders learned a lesson from that. That's plausible as an explanation for the candidates' circumspection, and good news if it's true, but what about journalists?
The only explanation I've seen for the journalists' light touch has been rather circuitous and loony: the media love Bush, know that Dean can beat Bush, and that Kerry can not. So they tore Dean down and pushed Kerry up. Crazy, I know. But I did read that in passing, somewhere that I can't recall at the moment.
A third theory, my theory, is that the media haven't been light on Kerry at all. First, there's the botox stuff, which seems to lack traction. But there's also this asinine and pathetic attempt by Washington Times' editor in chief Wes Pruden. If this followed the script, Wes Pruden would pitch it in his Washington Times column, then The National Review, The Weekly Standard, and the WSJ editorial page would pick it up. Then the NYT and Washington Post would report on the reports for a few days, the wires might run a story on "reports that Kerry said ...," and eventually Pruden's allegation would be accepted as conventional wisdom.
What broke the chain this time? Pruden baldly and badly doctored his quote, as Nick Confessore amusingly recounts (Pruden's reply after being caught red-handed faking a quote was classic: "I did doctor the quote to attribute the statement directly to Kerry, but since Kerry didn't refute the people he was quoting, faking the quote was the right thing to do.")
AB
P.S. Note to Pruden: The fine folks at Liberty High School in Bethlehem, PA have conveniently placed their style guide on line. Here's the part on eliding quotes. If you would like to bring your standards at least up to the high school level, you should write Liberty High School's quotation mandate 100 times on the nearest blackboard:
IMPORTANT: In no way may any change in a quote alter the intent or meaning of the original writer! [Emphasis in original.]
Costs and Benefits
Sound policy decisions require analysis of both the costs and benefits of a given proposal. Most proposals have some positive benefit, which allows supporters to make arguments along the lines of "Don't you agree that achieving X is a good thing?" Then opponents have to make a slightly more complex counter-argument along the lines of "Yes, there are benefits to achieving X, but the costs are even greater. Therefore your proposal is unwise."
This logical shortcoming is starkly illustrated by pro-war advocates who seek to refute criticism of the war, the pre-war intelligence, and the post-war execution by making this argument: "Don't you think it's a good thing that Saddam is out of power?" Or the more disingenuous framing, "You would prefer to see Saddam still in power?"
The reply to this is that there are, of course, many benefits to the removal of Saddam and his regime from power. However, that does not remotely begin to imply that removing Saddam from power was sound or wise. It simply means that there is a benefit, B>0, to removing Saddam from power. To come to a conclusion, the costs, C, must also be realistically assessed. Once this is done, the questions of interest are
- Is B > C? If so, then removing Saddam was a good idea.
- Is B < C? If so, then removing Saddam was a bad idea. Furthermore, relying upon the fact that B>0 to justify the invasion is a clear sign of willful ignorance or calculated disingenuity.
What are the costs, C? The direct monetary costs were at least $87 billion last year, and now the administration is seeking another $50 billion. (Which the administration says won't count against its promise to cut the deficit in half in five years.) Some of that $50b is for Afghanistan, so this is an upper estimate. On the other hand, the White House's estimates of the costs of things are frequently biased downward -- reliably unreliable, if you will -- so $50 billion for Iraq is probably about right. Then there are the costs of over 525 dead U.S. soldiers and 92 dead allied soldiers, plus the costs of at least 8,000 Iraqi dead. Then add the intangible cost of lost good will abroad (which is costly since we need their cooperation in the War on Terror.) At last, you have a pretty good idea of what the costs of the war are.
I think reasonable people can disagree about the magnitude of the costs and benefits, though as the costs continue to wax while the benefits wane, it becomes ever more difficult to make the case that the benefits exceed the costs. And the adminstration's claims about the costs and benefits were systematically and perhaps intentionally biased toward understating the cost and overstating the benefits.
What reasonable people cannot honestly disagree over is the claim that any policy with positive benefits is justified, regardless of the costs. A shiny new $15,000 car for every adult in the U.S. certainly has some benefits. If I make this proposal and encounter some opposition then I can easily reply, "You would prefer that citizens of this great nation not have new cars?" Case closed. Bring on the new cars.
Wait. It would cost about $3 trillion to implement this proposal. Are the benefits of the Angry Bear New Car Plan at least $3 trillion? Probably not. (It would work about as well as Hoover's Chicken in Every Pot plan.)
Finally, how does this analysis apply to Afghanistan? I think it works rather well. First, the costs were much lower in that instance. Second, the benefits were surely higher. While hard to quantify, the benefits of sending a message along the lines of "Any government that attacks or directly supports an attack on the United States will be eliminated and the perpetrators will be tried and convicted" are extremely high. Certainly they are much higher than the benefits of a message like, "if you annoy us and it strikes our fancy, then you will be eliminated."
AB
Personal Income Growing, Barely
This morning the BEA released its estimate of personal income and spending in December. Income was up by 0.2% in December, while spending grew by 0.4%, in nominal terms. In real (inflation-adjusted) terms, income showed virtually no growth, while spending grew a little. This has continued a trend over the past few months of spending growing faster than income. What does that mean? A falling saving rate:
The falling savings rate (which is now lower than it was back in 2000, at the peak of the stock market boom) means that there’s very little scope for consumers to spend more unless their income starts rising. And unfortunately, consumer income is not growing very fast – over the last quarter of 2003, it grew at a 2.9% annual rate. In real terms, growth was even lower. That’s not fast enough to sustain more than a rather tepid expansion.
Kash
Statement and Refutation
In Dana Milbank's latest Washington Post piece, Mr. Milbank actually presents White House statements about Iraqi WMD, and then follows them up with direct refutations. This is a very welcome departure from the more typical but less informative style in which a journalist first writes "Democrats allege X" and then adds "Republicans deny allegation X," followed by no reporting on which side is correct:
On Wednesday, for example, Bush suggested that war came because Saddam Hussein did not let inspectors into Iraq, when in fact it was the United States that called for inspections to end. "It was his choice to make, and he did not let us in," Bush said.AB
That same day, Bush press secretary Scott McClellan said the White House never said Iraq was an "imminent" threat. But when McClellan's predecessor, Ari Fleischer, was asked whether Iraq was an imminent threat, he replied: "Absolutely." And when White House communications director Dan Bartlett was asked whether Hussein was an imminent threat to U.S. interests, he replied: "Well, of course he is."
In addition, Bush aides have regularly said that they were following the advice of intelligence experts. On Thursday, national security adviser Condoleezza Rice said the weapons conclusion "was the judgment of our intelligence community, the judgment of intelligence communities around the world." Yet the White House, at various times, went beyond what the CIA advised.
Friday, January 30, 2004
Trouble By Summer?
It looks like that renowned leftist rag, BusinessWeek, agrees with Kash:
Yet the market fiesta could be fizzling -- and not only because of negative reaction to the Fed's post-meeting statement, say some Wall Streeters. The central bank had made a nuanced shift in expressing how soon it may be considering a hike in interest rates. While practically no one expects the market to drop dramatically in the next few months, they predict that a mostly steady climb over the past 10 months or so could turn into a less confident, up-and-down pattern by summer, if not earlier.AB
The latest quarter likely represents a peak in the effect of fiscal and monetary stimulus resulting from Bush Administration tax cuts and rock-bottom interest rates, says Chuck Hill, First Call's director of research in Boston. As the Fed signals that it may nudge rates higher sooner than expected, it's far from clear that the White House can convince Congress to make current temporary tax cuts permanent. "The stimulus has peaked," Hill notes.
MISSING DRIVERS. Furthermore, as the federal budget deficit rises, pressure could mount to hike interest rates to keep investors interested in U.S. bonds, which are a primary means for Uncle Sam to raise capital. Typically, higher interest rates translate into lower equities prices. "A lot of unresolved things out there could go bump in the middle of the night at any time," says A.C. Moore, chief investment strategist with Dunvegan Associates in Santa Barbara, Calif. "I really think markets could soften between now and the end of the summer."
What are We Getting for Our $535 billion?
As Kash noted earlier, the projected price tag for the Republican Medicare reform has shot up by a third, from $400b to $535 billion.
Now is as good a time as any to remind everyone that the coverage seniors get under this plan is fairly meager. For example, most seniors will still pay at least 60% of their drug costs and virtually all seniors will pay 40% or more of their own drug costs. Only when total drug costs exceed $25,000 does the government's share rise to 80%.
This CNN story has an interesting explanation of how the numbers were so far off -- by my reading, McClellan is saying that the administration simply made up the $400b figure:
White House spokesman Scott McClellan said the disparate numbers do not mean the president misled Congress. He said the administration's actuaries in the budget office began work on the numbers only after the bill became law.
I suppose the president can't lie to Congress when he doesn't know the true number. Instead, someone simply made a guess, Bush repeated it, the government took action, and only then did they bother analyzing the data and gathering facts. This sequence is causing a strong sense of deja vu ...
And by the way, has anyone seen numbers on how much of the $535 billion is attributable to actually paying for drugs, as opposed to the various subsidies to employers and insurers?
AB
What's New
It's Friday, which means that Bob Park's newsletter, What's New, is out. One item this week is the deficit:
BUDGET: HOW TO BRING DOWN AN OUT-OF-CONTROL BUDGET SURPLUS. When George W. Bush took office he was confronted with a looming $5.6 trillion surplus over the next decade (WN 9 Mar 01). OMB turned to fabled budget guru Elie Mosinari for help. Her first move was missile defense, a tactic previous administrations had relied on to control surpluses. Toss in a tax rebate, and by the end of summer the nation was safely in red ink. President Bush hailed it as "incredibly positive news"(WN 31 Aug 01). Elie was indignant when the Congressional Budget Office projected a mere $477B deficit for this year. It's actually going to be $521B. I called Elie to congratulate her. "How do you do it," I asked? "Discipline," she replied, "things like space stations help, but we never miss a chance to correct social injustice. [more ...]AB
Is the Recovery Fading Already?
The BEA just released their first estimate of economic activity in the fourth quarter of 2003 (October through December). The overall number for GDP growth is a solid 4.0% annual rate. However, that is below what many economists had been expecting.
One part of the report that’s discouraging is that it looks like the boom in spending by businesses (also known as investment spending) during the summer of 2003 may already be running out of steam. While the Q4 figure on nonresidential investment spending was a respectable 6.9%, that’s actually pretty low for the period immediately after a recession. In the year after the 1974-75 recession, nonresidential investment grew by 9.6%. The year after the 1981-82 recession, it grew by 20.5%. The year after the 1991-92 recession, it grew by 9.7%. In all of 2003 it grew by just 5.6%, and growth now seems to be slowing. The graph below illustrates the possible waning of the 2003 boom. The blue line is spending by individuals, the green line is construction activity on housing, and the red line is spending by businesses. All three have faded from their summer highs.
The second part of the report that doesn’t bode well is disposable personal income. The after-tax income of individuals grew by just 0.1% in the fourth quarter – the lowest rate of personal income growth since the depths of the recession in 2001. If income isn’t growing, it’s hard to see how consumption can continue to grow. Of course, the explanation for the lack of income growth is easy to understand -- few new jobs are being created, so income isn't growing.
It’s certainly too soon to call the recovery over – this quarter’s numbers will be revised, and they could just be a 1-quarter aberration. But I fear that it suggests that my stated pessimism about the recovery may be justified.
Kash
Thursday, January 29, 2004
By the Way, When We Said “$400 Billion” We Really Meant...
Shocking, just shocking. I am shocked and surprised. Really.
CNN: President Bush's new budget will project that the just-enacted prescription drug program and Medicare overhaul will cost one-third more than previously estimated... Instead of a $400 billion 10-year price tag, Bush's 2005 budget will estimate the Medicare bill's cost at about $540 billion, said aides who spoke on condition of anonymity.Well, at least it’s the first time the Bush administration has ever been slightly imprecise about the cost of their proposals. We all make occasional mistakes, right? I know it’s pure coincidence that their new cost estimate was made public just one month after Bush signed the bill into law. And I’m still going to confidently assume that Bush’s estimate is correct that putting bases on the moon and Mars will only take $1 billion.
Bush just signed the Medicare measure into law last month. While it was moving through Congress, Bush, White House officials and congressional Republican leaders had assured doubting conservatives that the bill's costs would stay within the $400 billion estimate.
Kash
Alphabet Soup From the Alpha Quadrant
I'm not actually sure where the Alpha Quadrant is, but based on this DeLong post, it must be somewhere near Berkeley. Here's my favorite paragraph:
And every single senior Republican economic policy appointee comes out of a look back at the past three years looking very badly. X fails to organize meetings so that the long-run budgetary consequences of short-run policy moves are properly considered. Y pirouettes in midair and transforms from a deficit hawk into a deficit dove so as not to offend White House Media Affairs. Z lowballs the interest rate effects of higher deficits--and manages not to talk about the savings and investment effects at all. W mutters in the privacy of his own office about the importance of maintaining a surplus--but doesn't have the nerve to say "Boo!" to a goose (let alone to George W. Bush) once he steps outside his office door. V remains silent while the clown show that is the Bush economic policy process--a process he cannot view with equanimity--rolls forward. U cuts his own agency staff off at the knees and shows no interest in the very important and interesting work on the long-run fiscal options that they have done. Outsiders like R who assured me back in the fall of 2000 that Bush understood and would tackle the long-run problems of funding entitlements and the social-insurance state manage not to emit a public peep of complaint. Q talks about how much the president wants to reduce the deficit without daring to put his own position on the line within the administration by demanding that words like "deficits are bad" be accompanied by an actual plan to reduce the deficit. Every one. Every single last one.Some fun for the policy nerds:
AB
Where's the Fork?
You've likely heard that Dean fired his campaign manager, Joe Trippi, yesterday. The more surprising news, news I hadn't heard until today in Salon, is that he's out of money too:
According to staffers, Dean held a meeting with campaign workers in which he announced that there was no money to pay staff at the beginning of February. He said that the campaign had $3 million in the bank, but that it had also racked up $3 million in debt that needed to be paid off. A senior aide confirmed the meeting, but not the numbers in question.The conventional wisdom on Dean has consistently been wrong: first it was who is this guy?, Then it was Dean's inevitable (until he inevitably becomes evitable, at which point evitability is itself evitable), then it became well he's behind now but his money and organization still dominate his rivals'.
But if -- emphasis on if -- he's truly out of money, in debt actually, then the Dean party really is over. Perhaps with a more Dean-friendly slate of states on Feb. 3, Dean could recover. But Dean's likely to finish third next Tuesday in most of the states, and fourth in some of the more populous ones (SC, OK, MO, AZ). After such a disastrous result, the financial spigots shut completely and it's over. Still, his Daily Show bit (scroll down) was a classic, and so was his campaign.
If he truly is out of money, the only question is whether Dean will exit more gracefully than Joe "Mentum" Lieberman.
AB
Pre-War Intelligence Inquiry?
David Kay is now advocating an independent investigation:
David A. Kay, the former chief weapons inspector in Iraq, called on Wednesday for an independent inquiry into prewar intelligence about Saddam Hussein's weapons programs, but he said he did not believe that the Bush administration had pressured intelligence analysts to exaggerate the threat.Not surprisingly, the White House has spurned that suggestion while Democrats mostly embrace it.
Kay also had this to say:
"It turns out we were all wrong, probably, in my judgment," Dr. Kay told the Senate Armed Services Committee. "And that is most disturbing."Here's one more quote from Kay -- the one you're sure to see at the various pro-war blogs:
"If I had been there, presented what I have seen as the record of the intelligence estimates, I probably would have come to -- not probably -- I would have come to the same conclusion that the political leaders did."
AB
Wednesday, January 28, 2004
The Causes of the Budget Deficit: A Reckoning
In case you missed it yesterday:
There seems to be some disagreement about the true cause of the US’s current budget woes. Conservatives blame it on federal spending, which they claim has risen too fast. The Bush administration, on the other hand, blames the state of the economy for the budget deficit. Refuting both arguments, the Center for Budget Policy and Priorities argues that lower tax revenues are to blame. Who’s right?
I've agreed to be the arbiter between these three claims. My job here is to gauge the relative importance of these three factors (spending increases, tax cuts, and the economy) on the budget deficit through the end of the decade, using the most concrete dollar figures available.
First, we need to precisely estimate the budgetary effects of the tax cuts. To do so, we can turn to the CBO. They provide periodic estimates of the effects of all specific changes in tax or spending policy on the federal budget. Looking through CBO publications over the past few years it is possible to piece together the specific revenue costs associated with the various Bush tax cuts. Assuming that Congress approves Bush’s request to extend the tax cuts that are currently scheduled to expire, the total cost of his tax cuts was about $83bn in 2002 and will grow to about $470bn in 2010. Note that both Republicans and Democrats in Congress use the CBO's estimates as a neutral, non-partisan prediction.
Next, consider the spending increases. Congress and the President have no direct control over mandatory spending, so assume that those spending levels remain at the levels estimated by the CBO through 2010. For discretionary spending, however, let’s suppose that spending on everything that was not related to 9/11 (i.e. reconstruction costs, additional homeland security, and the war in Afghanistan) had grown at just the rate of inflation, instead of growing at the rate that we’ve actually seen. If discretionary federal spending had been restrained to grow at the rate of inflation, it would have been $38bn lower in 2002, and about $200bn lower in 2010 than currently projected.
The following graph shows the combined effects of the two. The blue line shows the CBO’s projection of the deficit through 2010, assuming that the expiring tax cuts are indeed made permanent. This will be Bush’s budget legacy, if he gets his way. The green line shows what it would have been without the tax cuts or faster-than-inflation increases in discretionary spending. One can think of the green line as what the deficit would have been were Bill Clinton still President.
The result is clear. Yes, the state of the economy has contributed somewhat to the US’s budget woes – even without tax cuts or unusual spending increases, the budget would have been in deficit from 2002 to 2004. The economy’s effect on the budget balance looks like a neat bite taken out of the green line from 2002 to 2005. The size of that bite, and thus a rough estimate of the 10-year budgetary costs of the recession and 9/11, is about $0.8 trillion. So the White House is slightly right -- the economy has indeed had a negative effect on the budget. However, it’s also clear that the large and persistent deficits that the US is facing over the next decade are by and large NOT due to the state of the economy. By next year, the budget would once again be in surplus if it weren’t for the tax cuts and unusual spending increases. The majority of the budget deficit is due to deliberate, discretionary policy choices.
Of the two remaining possibilities, which is more responsible for the remaining budget shortfall – tax cuts or spending increases? The next graph shows the shares of the budget shortfall due to each.
Those who argue that the budget deficit is the result of spending growth are about 30% right. A bit under one-third of the avoidable budget shortfall between 2002 and 2010 – roughly $1.4 trillion – is due to discretionary spending (other than spending related to 9/11) that has grown unusually fast. But they are also about 70% wrong, because the other 70% of the remaining budget shortfall is due to the Bush tax cuts. The cost of the tax cuts will be about $3.1 trillion over the decade.
We can think of the implications of this in two ways. First, if discretionary spending had somehow remained restrained to just the rate of inflation, the budget would STILL be in deficit as far as the eye can see (about $200bn by 2010). Keeping spending growth down would not have balanced the budget. Put another way, if spending was at current (supposedly high) levels but the tax cuts had never happened, then the budget would STILL return to surplus by 2006, and remain in surplus thereafter.
To sum up, here’s the definitive reckoning:
- Recession + 9/11: 10-year budgetary effect = $0.8 trillion, or about 15% of the total shortfall.
- "High" spending growth: 10-year budgetary effect = $1.4 trillion, or 25% of the total shortfall.
- Tax cuts: 10-year budgetary effect = $3.1 trillion, or 60% of the total shortfall.
Kash
-----------
Sources: Budgetary effects of the tax cuts is given by the CBO as “legislative changes to revenue,” and is taken from the CBO’s “Budget Updates” of January 2002, August 2002, January 2003, August 2003, and January 2004. Spending increases related to 9/11 are given by the CBO in “Letters” to John Spratt and Pete Domenici. CBO documents available here.
Tuesday, January 27, 2004
Tariffs and Jobs
The bloggers over at The American Street are supposed to be focusing -- sometimes, but not exclusively -- on swing states. While Michigan is very likely to vote Democratic, the margin was still too narrow for comfort: 51%-46%, with 2.6% other (mostly Nader, I suspect). On second thought, if Nader voters comprised most of that 2.6%, then only in the most optimistic Republican projections would Michigan really be a swing state. Add to this the disastrous effects of Bush's steel tariffs on the Michigan economy, and I'd say Michigan's 17 electoral votes will safely go to Kerry/Edwards/Clark/Dean, or whoever emerges from the primary.
How disastrous were the tariffs for Michigan? More details are in my latest post at TAS, but here's a snapshot:
AB
No Criticizing Reagan or Bush II
As you may have heard, CBS (the network that didn't bring you a somewhat unflattering biographical movie about the Reagans) is refusing to broadcast MoveOn's ad during the Super Bowl. MoveOn is responding by doing what it does best: organizing emails, letters, and phonecalls. Since my favorite ad was the winner, I may as well do my part.
AB
History Never Exactly Repeats Itself
In the late 1960s, the US had a very expansionary monetary policy. To keep their currencies from appreciating, the world’s major central banks had to keep buying dollars, effectively expanding their own money supply at the same fast rate. Being inflation-shy, however, they hated doing so, and soon stopped. That brought about the end of the Bretton-Woods Age.
In the early and mid 2000s, the US had a very expansionary monetary policy. To keep their currencies from appreciating, the world’s major central banks had to keep buying dollars, effectively expanding their own money supply at the same fast rate. Being deflation-shy, however, they loved doing so, and continued...
Kash
Calculating the Cause of the Budget Deficit
You can check out a thorough decomposition of the causes of the US budget deficit at The American Street. The punchline: the state of the economy only accounts for a small fraction (less than 15%) of the US's budget problems this decade. On the other hand, tax cuts are responsible for about 70% of the remaining budget mess. Undo the tax cuts, and the US's budget problems would disappear.
Kash
Monday, January 26, 2004
Greenspan and Job Security
Fed Chair Alan Greenspan must both want to keep his job and think that Dean is going to be the next president. On Friday, CNN and others reported that
Former Vermont Gov. Howard Dean tried out a new tactic Friday while campaigning in New Hampshire, accusing Federal Reserve Bank chairman Alan Greenspan of making decisions that were "too political" and suggesting it may be time to replace him.Dean was mostly criticizing Greenspan's cooperation, at least publicly, with the Bush tax cuts. Today, CNN has a story titled Greenspan to get tough on deficit:
Greenspan is expected to say that deficits are in fact important to the nation's economic health and may offer ways to curb spending, Fortune magazine reports in issues due to hit newsstands on Feb. 2.... The central bank chairman could deliver the speech next month when he gives his semi-annual testimony on monetary policy to Congress ...
AB
Yet More Speaking for Itself
This time, from John Ashcroft:
"Weapons of mass destruction including evil chemistry and evil biology are all matters of great concern, not only to the United States but also to the world community. They were the subject of U.N. resolutions," Ashcroft said.We'll see whether the nefarious chemistry and biology turn out to only be evil-related. Via SK Bubba.
AB
P.S. Biology and Chemistry evil? This reminds me of the Hardball skits on Saturday Night Live, when one of the fake guests is Harry Belafonte. Whenever Matthews needs to liven things up, he goes to Belafonte. For example, these Matthews to Belafonte lines from the episode featuring John McCain:
Matthews: Wow! An impressive display of insanity! Harry Belafonte, keep this crazy train rolling!"Matthews: Dear Lord. Belafonte! Hit me with a quick one!
The second possibility is that to a devout Pentacostal like Ashcroft, Biology truly is evil because it is rooted in and supports evolution.
Breakdown of Higher Government Spending
AB noted that this morning the CBO released its new estimates of the budget deficit for 2004 and beyond. The news continues the almost monotonous upward revisions in the US’s budget deficit problems over the rest of the decade. This dovetails with a debate that has been growing of late, and which has been reflected in the Conservative v. Bush issue: what is the cause of the budget deficit? Is spending indeed out of control, and if so, spending on what? (For an example of what people are saying in this debate, you might want to read this NYTimes piece from over the weekend.)
I’ve put a table together to get at this question. The table shows government spending (and percent changes) in both discretionary and mandatory spending during the 4 years before Bush was elected and the 4 years after. Note that Bush and the Congress only have direct, budget-to-budget control over the discretionary portions of spending. To change mandatory spending, they would have to alter one of the US’s social benefit policies. Anyway, here are the results:
Clearly, skyrocketing defense spending over the past few years is the single biggest contributor to the increase in spending in both dollar and percentage terms... but there are lots of other contributions, too. Government spending on health care comes in as culprit #2. Discretionary non-defense spending has been rising, too, though not as fast as defense spending.(*) Later this week I’ll show you a further breakdown of the data by sub-category within non-defense discretionary spending.
One interesting note: surprisingly, Social Security is not a major contributor to higher government spending right now. But as I’ve noted elsewhere, that will change soon enough.
Kash
(*) note: the figure in the table includes $27bn for homeland security in 2004. Excluding HS, non-defense discretionary spending is $418 in 2004, which represents a 31% rise from 2000.
Going in the Wrong Direction
Just last week, the president announced that he planned to cut the deficit in half over the next five years. Yet the latest deficit projection for 2005 is now $20b higher than the previous projection:
In its bi-annual budget outlook, details of which were obtained by Reuters from congressional sources, the nonpartisan agency forecast a federal deficit of $477 billion in 2004, only $3 billion less than the last forecast made in August.Of course, it might be easier to cut the deficit in half after first doubling it.
It predicted next year's deficit will total $362 billion, up from $341 billion predicted in August. Based on current federal spending plans and tax policy, the deficit is expected to reach nearly $1.89 trillion between 2005 and 2014, up from prior predictions of $1.4 trillion in the next decade.
AB
More Speaks for Itself
This time from a Yahoo news story excerpting from a forthcoming biography of Tony Blair:
The extent of Mr Cheney's opposition emerges in the biography of the British prime minister by Philip Stephens, the Financial Times' political columnist.AB
In the run-up to the war, Mr Blair worked closely with Mr Bush to try to secure prior UN backing.
But Mr Stephens writes that Mr Cheney's opposition to UN involvement left Mr Blair uncertain whether Mr Bush would go down the UN route until he uttered the relevant words in his speech to the UN general assembly in September 2002. One Blair aide remarked: "[Mr Cheney] waged a guerrilla war against the process . . . He's a visceral unilateralist". Another agreed: "Cheney fought it all the way - at every twist and turn, even after Bush's speech to the UN."
Sunday, January 25, 2004
What it Takes To Be President ...
Apparently, the media has concluded that Dean lacks it. August Pollack lays out a great plan for Dean to become more presidential.
AB
UPDATE: Click here for a scandalous Dean photo. Seriously, click. You'll be glad you did. (Via Atrios)
Blogging of the President
Tonight on NPR from 9-11 Eastern, a bunch of bloggers (Atrios, Andrew Sullivan, Gary Hart, Jerome Armstrong, Frank Rich, Josh Marshall, Garance Franke-Ruta, Ed Cone, Jeff Jarvis, Kevin Phillips, Richard Reeves) will be talking politics).
You can find the list of participating stations here. Or you can listen to the webcast.
AB
UPDATE: Well, I listened to it. In case his blog failed to dispel all doubt, Andrew Sullivan really is a jackass. Instead of substantively debating Atrios, Sully instead decided that Atrios' anonymity was sufficient grounds for attack (moreover, the discussion was about blogging and politics; Sully decided to make it left vs. right and anonymous vs. named-and-usually-begging-for-money.) At one point, Atrios stated that he took on liberals when the situation warranted it, but he was unable to come up with an example on the spot. Here's one for you, Atrios: free trade.
You can go here for a link to the Atrios/Sully part of the show, which was about 15-20 minutes.
UPDATE 2: Speaking of anonymity, The Federalist Papers were originally written as a series of essays published in various papers, mostly in New York, under the anonymous pen name Publius. At some point, it became known that John Jay, James Madison, and Alexander Hamilton wrote them, though to this day, the author or authors of some of the Papers remains somewhat in question. Yes, our Constitution is deeply rooted in anonymous political writing. But I guess we can forgive a Tory for not knowing that.
Another Speaks for Itself Statement
One day after David Kay, the chief U.S. weapons inspector in Iraq, said he believes Hussein had not stockpiled unconventional weapons for years, Powell told reporters that his prominent Feb. 5 argument was based on "what our intelligence community believed was credible."However, neither Powell nor Kay has definitively addressed whether Iraq had stockpiles of WMDPRAs, stockpile-related WMD program activities, mass activity stockpile of destruction related programs, destruction-related mass activity programs, activity-related mass weapon program destructions, or other threatening linguistic permutations.
AB
Saturday, January 24, 2004
No Annotation Necesary
Usually, I feel that I should add something to statements that I quote, but this speaks for itself:
Asked directly if he was saying that Iraq did not have any large stockpiles of chemical and biological weapons in the country, Dr. Kay replied, according to a transcript of the taped interview made public by Reuters, "That is correct."AB
Friday, January 23, 2004
Hitting the Nail on Its Head
Slate's Michael Kinsley on the administration's philosophy (hint: it's not actually compassionate conservatism):
So, to sum up: Talk loudly. Carry a big stick anyway. Spend money. Borrow to pay for it. Fiddle the books. I guess that's a governing philosophy of sorts.Via Mark Kleiman.
AB
Roach Describes the “Frothy” 2000’s
Stephen Roach (chief economist at Morgan Stanley) is attending the annual World Economic Forum at Davos, Switzerland right now. He sends back this report:
I conceded the near-term outlook to the momentum crowd, [but] I dug in my heels on what I continue to believe is the key bone of contention in the macro debate — sustainability.I don’t always agree with Roach, but I do think that in this case he has hit the nail on the head.
The response was right out of the script of the late 1990s. One new paradigm after another was offered as explanations as to why this global recovery is for real... [and] these are precisely the assumptions that ever-frothy financial markets must be making in order to sustain asset values at current levels.
...[H]ave we truly learned nothing from the Great Bubble? As was the case in the late 1990s, the sustainability of a wealth-driven US economy is critically dependent on the permanence of asset appreciation. Yet bubbles are, by definition, the antithesis of such permanence.
Kash
Best N.H. Dem Debate Performance
In my opinion, the award goes to Peter Jennings, who displayed masterful control of himself by maintaining a perfectly straight face while asking the following:
JENNINGS: Reverend Sharpton, I'd like to ask you a question about domestic policy, if you don't mind... [G]ive us a little bit about your views on monetary policy.Kash
Membership Has its Privileges
Especially when you've been around for a while. Earlier, I pointed out that the per capita earmark is only slightly higher for Red states than Blue states. At the time, I speculated that the Republican districts within states were getting the majority of the pork. For example, perhaps Sugarland (Tom DeLay) gets a lot while San Antonio (Leticia Van de Putte's area) gets little.
Astute commenter and blogger Ben Muse did a bit more investigating and found a very plausible explanation:
I've ranked the states by earmark per capita and indicated whether or not the state had a senator on the Senate Appropriations Committee. Of the top 25 ranked states, 20 had someone on the committee; of the lower 25 states, only nine had someone on the committee. Of the top five ranked states, three had Democratic (minority) members on the committee. [Supporting data here.]
This is a great example of why, even though nearly everyone dislikes their incumbent senator, it may still be better for the voters to keep him or her around.
AB
100,000
There's a slight chance that Angry Bear will get its 100,000th visitor sometime today; more likely, the meter will turnover sometime this weekend. 100,000 is not too bad for a bit under a year. If you're excited by Angry Bear history, my first post was on 2/14/03 (my girlfriend was out of town then; when I saw her on the 16th, I asked her to guess what I had done on Valentine's day. Somehow, even after many tries, she was unable to guess the obvious: "started a blog!")
My first big link came from Dave Niewert, helping to propel my daily readership into the double digits (thanks, Dave!).
Kash joined the blog on 8/19/2003 with a prescient post about the need for the administration to alter its plan and commit more resources to Iraq. Originally, Kash was only going to fill in while I was on vacation, but I was so impressed with his posts (as were our readers) that I wisely invited him to stay.
After Kash's joined the blog, the rate of traffic growth increased nicely (not just correlation, I presume). It didn't quite grow as fast as actual and projected deficits under Bush, but the pace was nice nonetheless. We're now over 500 per day on the weekdays, which is far more than I ever expected. So thanks to all who linked Angry Bear, and most of all, thanks to the readers!
AB
P.S. Another story I've been meaning to tell. In early January, at the annual meetings of the American Economics Association, Kash and I finally met, at The Bitter End in San Diego. A good time was had by all, and several many beers were consumed. Eventually my girlfriend joined us. Her reaction was "wow, he seems really nice, and normal." If you know many economists, you'll agree that that's no small feat.
One last story: whence the title Angry Bear? Most would guess that it's based on anger at the Bush administration combined with some skepticism about the prospects of the stock market. Both are good guesses and contributed somewhat to the naming of the blog. But the principle impetus was the expression, which I've rarely heard outside of Texas, "It's like shooting a bear with a .22, you'll only make him angry!"
We now return to our regularly scheduled economic and political analysis.
Thursday, January 22, 2004
Public Service Announcement
Scammers get better all the time. Everybody knows not to answer an email with their account information. But many might think it's safe to visit PayPal's website in response to an apparent email from PayPal. In any event, in the latest scam, the actual link is to pcypal.com, but the text is colored blue and underlined (to appear like a link to PayPal) and says https://www.paypal.com/us/wf/f=ra_default, which actually is a PayPal URL. If you click it, however, you go to the fake site, PoyPal.
Once there, all of the front page, including the links, is an exact duplicate of PayPal's front page -- except the login button. If you use that button to log in, the scam operators will have the information they need to clean out your PayPal account.
My advice: never use an email link to visit a sensitive site. Use your bookmarks or type the site name (carefully!). And if in doubt, call, assuming you can find a phone number.
AB
Surprising
In the last post, I mentioned that "I'd like to see a break down by district and party." So I got the state-by-state data from Taxpayers for Common Sense and then aggregated to get a Red/Blue state breakdown of the earmarks:
Surprisingly, the difference is actually very small, about 2.4% more per capita for the Red states. Yet I know that I've read a number of stories claiming that the House Republicans in particular have shut off the flow of pork into Democratic districts (anyone have a cite for this?). If those claims are true, the gap must be across districts within a state. The Taxpayers for Common Sense page linked above does allow you to click on a state and see the earmark by earmark breakdown, so someone with a lot of time on their hands could add district level population and voting data to create a more accurate view of the Red/Blue breakdown of pork.
Note that this only applies to earmarks, which are a bit over $10.1 billion. If you itemize total federal spending, the Red states get about $1.12 per capital and the Blue get about $0.87 (based on 2002 data).
AB
Omnibus Spending Bill Passes
WASHINGTON (AP) -- The Senate overcame Democratic delaying tactics Thursday and sent President Bush an overdue $373 billion bill financing a vast swath of government and bearing a bushel of victories for the White House.
Senators approved the measure 65-28 a month after House passage.
The bill finances agriculture, veterans and most other domestic programs for the budget year that began October 1 -- nearly four months ago.
The mammoth measure also protects Bush administration policies on overtime pay, media ownership and food labeling. Angry over those issues, Democrats had succeeded on Tuesday in blocking a vote on final passage.
While I don't see the direct connection to funding and spending issues, the bill also contains the President's desired alteration of overtime rules (hint: less overtime) and easing of media consolidation restrictions:
The bill would let the administration proceed with new rules that would let companies pay overtime to fewer white collar workers, and allow media conglomerates to own more television stations.And there's something for everyone (though I'd like to see a break down by district and party):
The measure also has 7,932 so-called earmarks -- for local items like museum upgrades and agricultural research -- costing $10.7 billion, according to Taxpayers for Common Sense, a group that pushes for lower spending.
AB
Cheetos of Mass Destruction
Well, not exactly. But Slacktivist does provide a great illustration of how the validity of a noun decreases with the number of adjectives appended to that noun.
Patrick Hayden has another amusing take on WMDRPAs.
AB
Health Savings Accounts
Mark Schmitt has the definitive explanation of why HSAs are a bad idea:
What the administration is doing, first with health savings accounts, which are now the law, and then with this [catastrophic insurance] proposal, is to confer enormous tax advantages on a type of insurance that is already advantageous, but only for the relatively wealthy. But the consequence of it would be that, as young and healthy people withdraw from the standard, low-deductible insurance market, premiums in that market would go through the roof, insurers would desperately try to find ways to deny coverage to higher-risk people, and the whole delicate balance would surely collapse.The problem is very similar to the problem with the recently passed Medicare Drug Benefit that I pointed out in this post and the one just before it. Basically, the only way around the adverse selection problems that plague the various Republican health care proposals is to make the programs mandatory, which I doubt will happen.
AB
Wednesday, January 21, 2004
More Then and Now
Tonight's Daily Show cited this quote from the 2002 SOTU (after 9/11 and, apparently, after there were already solid plans for invading Iraq):
To achieve these great national objectives -- to win the war, protect the homeland, and revitalize our economy -- our budget will run a deficit that will be small and short-term, so long as Congress restrains spending and acts in a fiscally responsible manner.
Contrast that to Bush in the latest SOTU:
In two weeks, I will send you a budget that funds the war, protects the homeland and meets important domestic needs, while limiting the growth in discretionary spending to less than 4 percent.Four percent spending growth would require unprecedented sobriety from our spending-like-drunken-sailors Republican Congress and President (from the 11/12/03 Washington Post):
This will require that Congress focus on priorities, cut wasteful spending and be wise with the people's money. By doing so, we can cut the deficit in half over the next five years.
Confounding President Bush's pledges to rein in government growth, federal discretionary spending expanded by 12.5 percent in the fiscal year that ended Sept. 30, capping a two-year bulge that saw the government grow by more than 27 percent, according to preliminary spending figures from congressional budget panels.And speaking of McCain, did anyone else notice how he had a hard time saying with a straight face that he would be "supporting President Bush" during an upcoming trip to New Hampshire? He sort of said it once, then did a double-take, and said it again.
Speaking of The Daily Show, here's Jon Stewart's reaction to Bush's "weapons of mass destruction-related program activities":
[speaking slowly and emphatically] "Dozens of weapons of mass destruction-related program activities?" ... "What the f**k is that?"Overall, I think the reception to this year's SOTU has been somewhere between fairly negative and mixed, but there is at least some good news for the administration: TV Viewership for Bush State of Union Slips.
AB
UPDATE: For a more substantive, and damning, critique of Bush's 4%/cut the deficit in half line, see CalPundit, who concludes "Explain to me again why I'm not allowed to call this a lie?"
Why Can't I Come up With These?
TBogg on Sen. Kennedy's obvious disapproval of the SOTU:
---Although I enjoyed Ted Kennedy and his head-shaking, I think making jerk-off motions with his fist while rolling his eyes would have been more effective.
AB
Conservatives v. Bush, Part II
So, some Republicans who are also fiscal conservatives have been reacting to the SOTU. This story contains some examples:
WASHINGTON, Jan 21 (Reuters) - U.S. President George W. Bush faced open rebellion on Wednesday from some members of his fiscal conservative base for not laying out concrete plans to reduce government spending and the budget deficit...These reactions conjure up two possibilities for me. The first is to take them at face value, and believe that fiscally conservative Republicans are losing their patience with Bush, and therefore may be less enthusiastic about supporting him for reelection (though I have no doubt that they will still support him over any Democrat).
Though Bush announced a relatively small number of inexpensive domestic proposals [in the State of the Union address], Heritage analyst Brian Riedl said fiscal conservatives were angry over what Cato estimated to be a nearly 25 percent surge in spending over the last three years -- the fastest pace since the Johnson administration of the mid-1960s.
Stephen Moore, president of the Club for Growth, a politically powerful conservative group, called Bush's State of the Union pledge to tackle the deficit "really unpersuasive."
"Conservatives were left grumbling," Moore said.
William Niskanen, the chairman of Cato Institute who advised former President Ronald Reagan, called it "most misleading."
..."He (Bush) did not identify any cuts. He didn't demonstrate how in any way the actions he proposed would cut the deficit in half over the next period of time," Niskanen said.
The second (far more cynical) possibility is that their reaction is simply following a script given them by Rove/Cheney. Maybe their marching orders right now are to help publicly build the case (and perhaps some astroturf) for dramatically cutting domestic spending, which is what the brains of the White House have wanted all along.
What do you think – are the fiscally conservative Republicans supporting or undermining the White House right now? I’m honestly undecided.
Kash
SOTU
I didn't listen to the entire SOTU, primarily because it pains me to hear the leader of the Free World say NU-CUE-LAR (yes, Carter did it too, but that doesn't make it right). But of the parts I did hear, one passage really struck me:
We're seeking all the facts. Already, the Kay report identified dozens of weapons of mass destruction-related program activities and significant amounts of equipment that Iraq concealed from the United Nations. [emphasis mine]I've long been painfully amused by the administration's substitution of "WMD Program" for "Actual WMD" but this brought it to a new level. Now, the purported threat to America is not WMD, nor WMD programs, nor even WMD-related programs, but instead WMD-related program activities, whatever that means. Perfunctory but true note: Saddam was in fact a very evil and cruel dictator. But there are many dictators and before deposing them, we must decide which ones are worth 500-and-counting lives of American soldiers (plus several thousand injured) to depose.
In any event, contrast tonight's "weapons of mass destruction-related program activities" to Bush last year:
Before September the 11th, many in the world believed that Saddam Hussein could be contained. But chemical agents, lethal viruses and shadowy terrorist networks are not easily contained.AB
Year after year, Saddam Hussein has gone to elaborate lengths, spent enormous sums, taken great risks to build and keep weapons of mass destruction. But why? The only possible explanation, the only possible use he could have for those weapons, is to dominate, intimidate, or attack.
UPDATE: Apparently, I wasn't the only one who found that phrase noteworthy.
UPDATE: The "Kay report" is the report from David Kay, the weapons inspector who failed to find WMD and, along with his team, recently withdrew from Iraq. (See Ken liberal but pre-war Hawk Ken Pollak's story in the February Atlantic for much more on Kay and the lack of Iraqi WMD.)
Tuesday, January 20, 2004
Employment Charts in Thirty Seconds
I just came across a really cool application, Labor Force Statistics from the Current Population Survey, at the Bureau of Labor Statistics web page. There, you can quickly assemble charts and graphs on a number of labor and economic measures collected by the BLS, broken down by a variety of demographic categories. Just to try it out, I thought I'd take a look at the seasonally adjusted number of people looking for full-time work, and within seconds I had a table (then select the "include graph" box for a graph.) My only complaint is that exporting the graph doesn't work well -- it looks great on the BLS page, but there's no convenient export function. In any event, here it is:
Seasonal Adjusted
Series title: (Seas) Unemployment Level - Looking For Full-Time Work
Labor force status: Unemployed looking for full-time work
Type of data: Number in thousands
Age: 16 years and over
The number looking for full time work climbed by by 2.5 million from 1/01 to mid-2003, before falling by 500k. Notice any similarities between 1993 to 2003? (In fairness to the younger Bush, the population is larger now than in 1993 by about 20 million, so his 7.5 million isn't as bad as Bush Sr.'s 7.5 million looking for full time work.)
AB
Iowa's Effect on the Political Markets
As I’ve mentioned before, the Iowa Electronic Market is a great place to see how events shape the perceived probabilities of each candidate winning the nomination. Here is today’s graph, showing the last night’s Iowa caucus results have affected the shares of all of the candidates. Note that Edwards is contained in the grey ROF line just below Kerry’s line in recent days.
The market apparently now thinks that Kerry and Dean have almost equal chances of winning the nomination now (about 30-35% each) while Clark and Edwards both have around a 20% chance of winning. I agree with AB: This is going to be good – pass the popcorn!
Kash
A Preview of the State of the Union: More Concealed Costs?
Bush has made a specialty of proposing policies that are tremendously expensive without actually addressing their costs. Some examples include:
- Tax cuts. Stated cost by Bush before the fact: none. The claim was that they would boost the economy so much that tax revenue would increase. Actual cost: hundreds of billions of dollars per year.
- War in Iraq. Stated cost by Bush before the fact: none. As Paul Wolfowitz said, "Such estimates are so dependent on future, unpredictable circumstances as to be of little value." Actual cost: $100bn so far and counting.
- Moon and Mars bases. Stated cost by Bush before the fact: $1 billion. Someone at some point in the future will presumably pay for and accomplish these missions, after all; Bush is just in charge of getting the vision started. Actual cost: We’ll see, but estimates are in the neighborhood of $130 to $250 billion.
Kash
Edwards-Clark or Clark-Edwards?
The title is actually intended to mock the proclivity of the press for taking any event and projecting it linearly into the future: Dean is definitely down, but not out. Also, I remain firm in my conviction that Kerry will not be the nominee (though I will support him if he is). Overall, it's definitely tough to attribute Dean's dramatic fall to anything other than the rash of negative press he got, unfairly for the most part (I'm giving Iowa Democrats enough credit to assume that the Club for Growth ads didn't play a role in Dean's defeat). And I'd like to attribute Edward's strong second place finish to his lack of negativity vis-a-vis other Democrats so far, but perhaps that's too optimistic.
So what does it all mean? Beats me. Where's the popcorn?
On second thought, I'll venture a call now: Edwards or Clark will be the nominee, and the winner will choose the loser to complete the ticket. Perhaps my predictive skills will surpass those of Atrios. On the other hand, my Condoleeza Rice Resignation Watch is now in day 175, so my prognistications are questionable at best.
AB
P.S. Just a week ago, Matt Y. predicted that "Dean's moment of inevitability would be followed by an inevitable moment of evitability which would be followed by victory. Now it really doesn't look inevitable right now, but I stand by that prediction." Query: Did Matt predict the Iowa outcome, or not?
Monday, January 19, 2004
We don't care if it's right, thorough, or helps prevent future attacks...Just get it done!
And by get it done, we mean get it done soon enough that voters won't remember it come November:
A growing number of commission members had concluded that the panel needs more time to prepare a thorough and credible accounting of missteps leading to the terrorist attacks on the World Trade Center and the Pentagon. But the White House and leading Republicans have informed the panel that they oppose any delay, which raises the possibility that Sept. 11-related controversies could emerge during the heat of the presidential campaign, sources said.
Much of the delay is due to the lack of cooperation by the White House, as spokesman Erin Healy explained:
"The administration has given them an unprecedented amount of cooperation."Not an unprecedentedly large amount of cooperation, but simply an unprecedented amount. That is, find the smallest amount of cooperation by any White House in an investigation of this sort. If the current White House cooperates a bit less than that amount, then Healy's statement is technically true.
AB
The No Jobs President
James K. Galbraith, who heads the University of Texas Inequality Project and who I correspond with fairly often, has today's lead piece in Salon, The no jobs president. Here's a highlight:
Next, notice when the deep dive ends. That's right: It was just after Sept. 11, 2001. It's true that President Bush ought not to be blamed for the job losses of the Internet bust. But neither can he properly blame his troubles on Osama bin Laden: Job losses slowed down when the war on terror began.
Bush should be judged on the record after that -- on the creation of jobs in 2002 and 2003. After all, the recession officially ended in November 2001. How many new jobs did we get since then? An average loss of 22,000 jobs every month.
There are no new jobs. Total job growth in the Clinton years: 23 million. Total job losses so far in the Bush years: over 2 million. Total gains in the last six months, since the so-called recovery supposedly accelerated in the third quarter? Just 221,000. That's less than a single month's average under Clinton. And last month? One thousand new jobs.
There's a lot more, including a discussion of the decline in labor force participation, a cynical (but not inaccurate) take on Bush's major policies, and a very pessimistic take on Bush's proposed immigration reform. Read the whole thing.
AB
Sunday, January 18, 2004
Mea Culpa?
Washington Post ombudsman Michael Getler has apparently been getting lots of email alleging that the Post is burying or slanting anti-Bush stories, particularly stories related to Iraq (the WaPo editorial page is pro-war). Point by point, Getler reviews the charges and then admits that they have some merit. The tone is one of denying actual impropriety, but admitting that there may in fact be an appearance of impropriety. Gertler's conclusion:
Editors should not edit because things may "look bad" to some readers. But there is a lot of smoke out there, and probably a fire.
Not mentioned is a plan for addressing these concerns.
AB
P.S. For another mea culpa, this time from NPR Ombudsman Jeffrey Dvorkin, click here (scroll down to "mea culpa").
Saturday, January 17, 2004
What's With Sully?
Noted conservative hack, Andrew Sullivan, posted this on Thursday:
LET THE KIDS PAY FOR IT: I'm talking about this $170 billion foray into space. After all, the next generation will be paying for a collapsed social security system, a bankrupted Medicare program, soaring interest on the public debt, as well as coughing up far higher taxes to keep some semblance of a government in operation. But, hey, the president needed another major distraction the week before the Iowa caucuses, and since he won't be around to pick up the bill, why the hell not? Deficits don't matter, after all. And what's a few hundred billion dollars over the next few decades anyway? Chickenfeed for the big and bigger government now championed by the Republicans. This space initiative is, for me, the last fiscal straw. There comes a point at which the excuses for fiscal recklessness run out. The president campaigned in favor of the responsibility ethic. He has governed - in terms of guarding the nation's finances - according to the motto: "If it feels good, do it." I give up. Can't they even pretend to give a damn?
Later that same day, he added this:
AND WHEN IN DOUBT, LIE: Leave it to Rick Santorum to say the following: "I would just suggest we stayed within the budget targets the President has set forth. They are substantially less than what the increases were under the Clinton administration. They are, I would argue, fiscally responsible." Here's the truth: If you take defense and entitlement spending out of the picture altogether (and they have, of course, gone through the roof), Bush and the Republican Congress have upped domestic spending by a whopping 21 percent in three years...
Astounding! I completely agree with both posts. But Sully was only experiencing a brief moment of clarity. On Friday, he returned with a very disingenuous and specious account of Gen. Clark's pre-war assessment of the steps America should take to deal with Saddam Hussein. (To see why Sully's argument is specious, see Kleiman, Marshall, Drum, or Columbia Journalism Review's new blog.)
AB
American Street Update
There's one more to-be-revealed contributor, but the list is otherwise complete:
Angry BearThe most recent additions are Ross, Tom Burka, and General J.C. Christian. Ross adds some great expertise on health care issues, while Tom Burka and The General ably mix healthy doses of insight with even healthier doses of humor. Overall, I think Kevin Hayden did a great job of assembling a group with complementary skills. Nice job, Kevin.
Bill Scher
Chuck Currie
Dave Johnson
David Neiwert
Digby
Dirk Steele
General J.C. Christian
Jeff Alworth
Jeralyn Merritt
Kash
Kevin Hayden
Luis Toro
Mary Ratcliff
Mark A.R. Kleiman
Ross
skippy
Tom Burka
AB
Friday, January 16, 2004
Full-Scale War in the Senate?
With this news, President Bush may have fired the launched a meaner, dirtier, nastier Senate than any of us has ever seen in our lifetimes.
Kash
Why Are Long-Term Interest Rates Still So Low?
In a thought-provoking post, Brad DeLong ruminates on the fact that bond prices yields are far below where most economists think they should be.
My two favorite explanations:
1. Vast quantities of foreign demand for US bonds is keeping bond prices high. As the Treasury report mentioned in the post below indicates, foreigners (especially central banks) are plunking down $20 to $30bn every month to buy US government bonds. I think that should be plenty to keep prices significantly higher than they would be otherwise. In addition, some of those buyers (again, especially central banks) have other priorities (such as exchange rate goals) that supercede their beliefs about the future of US inflation and interest rates.
2. Short-term rates affect long-term rates. The fact that the Fed is keeping short-term rates so low for so long does seem to cause long-term rates to fall. Yes, the Fed is supposed to only be able to affect short-term rates, but as one of my friends at the Board of Governors says, “I don’t know how or why, but we DO have control over long-term rates.”
Kash
Foreigners Still Buying US Assets
Today the US Treasury released the latest statistics on international capital flows into the US, covering the month of November 2003. It shows a few interesting and surprising things.
1. Foreign private firms and individuals increased their purchases of US stocks and bonds in November. In fact, through Nov 2003 private net purchases of stocks and bonds totaled $575bn, up from $511bn in 2002. This surprises me, since I expected that the falling dollar was in response to weak private foreign demand for US assets. However, foreigners were still gobbling up US stocks and bonds in November. This suggests that the fall in the dollar may be due more to speculative activity in short-term investments rather than due to a major shift in long-term investor sentiment.
2. Foreign central banks continued accumulating US government bonds, buying a net of about $19bn during November. However, nearly all of this is accounted for by Japan alone. Japan’s central bank now owns over $525bn worth of US government bonds, up from about $385bn at the beginning of the year. (See chart below.) This is a stunningly massive quantity of US government bonds under the control of one institution. Good thing they’re on our side.
3. China’s central bank has not been accumulating large amounts of long-term US government bonds – contrary to what I expected, given their massive increase in foreign reserves. Together, China and Hong Kong have only added about $30bn in US government bonds to their portfolio this year. (Again, see chart below.) This creates a bit of a puzzle: where is China putting all of their dollars, if not in US government bonds? Is it all in short-term assets such as cash and T-bills?
It’s an interesting report. I need to take a closer look at it and think about it some more, but my preliminary conclusions are to be less worried about a significant drop-off in the willingness of private foreigners to lend in the US right now, to be more perplexed about China’s reserves, and to be more sanguine about the possibility of a huge sell-off in US government bonds this year, since I think Japan is much less likely to do that than China would be.
Kash
Thursday, January 15, 2004
Pension Problems
Not good:
WASHINGTON, Jan 15 (Reuters) - The federal agency that provides a safety net for U.S. corporate pension funds said on Thursday that its deficit had more than tripled last year, to a record $11.2 billion.This is a problem that’s going to get a lot worse before it gets better. Expect US taxpayers to pony up several tens of billions of dollars to fund these pensions over the next decade.
The U.S. Pension Benefit Guaranty Corp., which insures the pensions of about 44 million Americans, had started fiscal 2003 with a $3.6 billion deficit. Executive Director Steven Kandarian said the growing red ink threatened the agency's ability to protect pensions in the future.
Kash
Kash’s Call #4: Housing Market Prices
My prediction is that housing prices will peak in 2004 in many (perhaps most) of the major regional markets in the US. By late 2004 or 2005 house prices will actually begin to fall in many of those markets.
Why? First, because housing prices are historically high. The chart in the post below that shows house prices in several states describes what I mean. I’m a great believer in reversion to long-run trends in general, and housing is one market in particular where prices have almost always reverted to long-run trends. As the IMF report also cited in the post below concludes, "housing booms are more likely than stock booms to end in a bust."
Second, because the discrepancy between rents and house prices is huge. Right now, rental markets are soft in many places. Rents are stable or falling, and renting is cheaper than buying a similar place almost everywhere in the US. Historically, such a condition does not persist – people arbitrage between renting and buying (albeit slowly), and in the long run the two types of housing prices tend to converge.
Third, because interest rates will rise later this year. Various forces make this likely, including decreased lending by foreign investors and an increase in inflation in the US from its historically low levels. Recently, low interest rates have enabled people to put off repaying more of their house until later, so some people have been willing to pay a higher price for a given house than they would have otherwise (see the post below for further explanation). Well, the reverse is also true – when interest rates and inflation rise, people will react by being willing to pay less for their house.
Put these factors together and I am forced to conclude that we’re near the peak of house prices in several markets – and that once we’re past the peak, they will go down.
Kash
Dispelling Myths About The Real Estate Market
To lay the groundwork for my next prediction, let me first summarize and dispel a few commonly-held misperceptions about home ownership.
Myth #1: Real estate prices never fall.
In fact, housing price busts are extremely common. For some examples, take a look at the graph below, which shows real housing prices in several different states in the US since 1975. (Note: data is from the Office of Federal Housing Enterprise Oversight.) It’s evident that house prices can fall as well as rise, despite the overall upward trend.
To provide a broader picture of house price busts, the IMF published a couple of papers about asset price bubbles and crashes last April (available here). They studied 52 stock market busts and 20 housing market busts that have happened in the last 30 years. Among the numerous interesting points they made were:
- Whereas only about 25% of stock market booms are followed by busts, about 40% of housing booms are followed by busts.
- On average, when there is a bust in the housing market, real prices fall by an average of about 30%.
- The bigger the price boom in the period leading up to the peak, the bigger the fall in prices after the peak.
Myth #2: Owning is always preferable to renting, because at least you build up some equity with your monthly payments.
While it is true that you build up equity when you own a home, there are other factors to consider.
- During the first 5 years of the typical mortgage with 10% down, about 85% of your mortgage payments go straight to the bank’s pockets as interest payments.
- If the price of your house falls by just 5% during those first five years, your equity in the house will be lower than your initial down payment, so you will have lost money despite the fact that you were supposedly building up equity.
- If your monthly payments to buy a house are 15% more than your monthly payments to rent something similar, you could rent at the lower monthly rate, save the difference in a money market account, and still come out ahead (in the absence of capital appreciation) by renting versus buying.
Myth #3: It’s okay to pay a high price for a house right now because interest rates are very low, reducing the monthly payments.
Actually, interest rates are not particularly low right now in real terms. The following graph shows the average interest rate on 30 year fixed mortgages, adjusted for inflation. Yes, nominal interest rates are very low right now, but that’s simply because inflation is very low. Real interest rates are about average for the past 15 years.
What does this mean? It means that while low nominal interest rates make monthly payments on a mortgage look cheap, it also means that the burden of your monthly payments won’t be eroded over time by inflation as much as it would if inflation were higher. Effectively, this means that you pay off less of your loan now, and more of it in the future. But the house is not any cheaper because of low nominal interest rates any more than a car is cheaper when you repay your car loan over 5 years instead of 3 years.
The fact that these commonly-held conceptions are wrong does not mean it’s never worth buying a house. In fact, it almost always still makes sense to buy a house if you’re going to be living there for several years. And even if it’s more expensive to own versus renting, there are non-monetary benefits to home-ownership that are not trivial. However, the points made above are important to understanding my next prediction...
Kash
Wednesday, January 14, 2004
Offered Without Comment
From the Washington Post (Mike Allen Reporting):
In the winter, Bush and his heartiest alpha aides burn the towering pyramids of cedar.
That may sound like a chore, but Bush would certainly rather be there than here. The early-rising president can get crabby and punchy if he doesn't hit the pillow by 10 or so at night. On Monday, Bush was not scheduled even to arrive at a dinner hosted by Mexican President Vicente Fox until 9:10 p.m. local time (10:10 Eastern).
Bush, who returned to the White House on Tuesday night, sounded tired and bored at the few public appearances during his 28-hour visit. His remarks had unusually long pauses. Cutaway television shots captured Bush glowering into space as other heads of state talked about "economic growth with equity to reduce poverty," "investing in people" and "democratic governance."
AB
How Much Oxygen is There in Mars' Atmosphere?
Here's what I think would be a really bold experiment that NASA could use to determine whether there's enough oxygen on Mars.
- Build another Mars Rover. Call it Spirit II (cost: about $500 million, assuming the second one will be cheaper than the first one):
- Fill it up with cash, large bills.
- Send to Mars.
- Conduct experiment: see if cash will burn on the surface of Mars.
__________________________________
??
If the money does not burn, then fire powerful missile at the cash.
- Repeat steps (1) through (4) as needed until need to waste money and unquenchable thirst for deficits are satiated.
AB
BTW, those are plus signs, though they could double as crosses, in which case they would represent the faith-based component of the Mars mission.
UPDATE: Dwight Meredith astutely observes that this proposal "bears an uncanny resemblance to the ethanol program here at home."
American Street Update
As Ezra K. at Pandagon quipped, the number of bloggers at TAS is "growing by the minute too ... Like liberal bacteria." Our latest paramecium contributor is Digby, of Hullabaloo, writing about Bush's credibility gap.
AB
UPDATE: Digby's post brings to mind this exchange from Brit Hume's interview of George Bush:
HUME: How do you get your news?
BUSH: I get briefed by Andy Card and Condi in the morning. They come in and tell me. In all due respect, you've got a beautiful face and everything.
I glance at the headlines just to kind of a flavor for what's moving. I rarely read the stories, and get briefed by people who are probably read the news themselves. But like Condoleezza, in her case, the national security adviser is getting her news directly from the participants on the world stage.
HUME: Has that been your practice since day one, or is that a practice that you've...
BUSH: Practice since day one.
HUME: Really?
BUSH: Yes. You know, look, I have great respect for the media. I mean, our society is a good, solid democracy because of a good, solid media. But I also understand that a lot of times there's opinions mixed in with news. And I...
Dollar up Sharply
Apparently, Kash knows what he's talking about. Two posts below this one, he predicted that the dollar's fall should stop. In the news today, Dollar Up Sharply:
In morning trading, the euro was at $1.2655, down from $1.2751 late Tuesday in New York. Sterling was also lower at $1.8350 from $1.8447, while the dollar rose against the Swiss franc to 1.2326 from 1.2227.
Theory number two is that the dollar traders are reading Kash's posts and making their trades accordingly.
AB
End of the Dollar's Decline?
This week’s Buttonwood column in The Economist is all about the prospects for further decline in the dollar. Buttonwood is starting to think that we’re near the end of the dollar’s fall. It’s worth a read, if the subject interests you. The column ends with some good questions without ready answers:
The dollar has already fallen a lot, but how much further does it need to fall to correct America’s imbalances? American assets are already a lot cheaper than they were, and thus, presumably, more attractive to foreign buyers. How long will European policymakers be content to see the euro rise so sharply when Asian currencies are not? Judging by comments from Mr Trichet and others, not that much longer, especially given that Europe’s recovery is a lot more fragile than America’s seems to be. And how long will Asian countries continue to spend money building up foreign-exchange reserves that earn next to nothing and carry the risk of currency losses, rather than use the money to invest in their own region, which seems set to grow an awful lot in coming years? Fund managers’ view of the dollar is at an all-time low—reason enough, one might have thought given their track record, for being a bit more bullish.Kash
Koufax Awards Update
I just noticed that Angry Bear was nominated for a third Koufax Award, this time in a category where Kash and I have a shot at finishing in the top ten: Best Expert Blog. Ok, so there are only fourteen nominees, but still. Right now, they're just taking nominations in order to narrow down the list; I'll update when the voting opens.
And speaking of contests, MoveOn has announced the winners of the Bush in Thirty Seconds contest, and my favorite ad, Child's Play (warning: sound), won.
AB
Tuesday, January 13, 2004
The American Street
Now available: Kash's first post, A Preview of Bush's Budget Plans, and my first post: Myths: Fiscal Responsibility and Irresponsibility.
AB
One Reason Why a Weak Dollar May Not Help the Trade Deficit
This morning the BLS released an interesting tidbit of data:
The price index for overall imports rose for the third consecutive month, rising 0.2 percent in December. From December 2002-December 2003, the index was up 1.9 percent, which followed a 4.2 percent increase over the previous year.Why is this interesting? Because the US dollar has lost around 15-20% of its value against its trading partners, which means that imports should have cost the US 15-20% more over the year. The fact that they only cost about 2% more tells us one thing: importers and/or foreign firms who sell in the US have substantially cut the price that they’re willing to accept, presumably in order to keep market share in the US.
Economists call this phenomenon “exchange rate pass-through,” and it is crucial to understanding if the we