Previous month:
August 2005
Next month:
October 2005

September 2005

Avian Flu

If WHO is really trying to "calm bird flu fears," it is not succeeding:

WHO Tries to Calm Bird Flu Fears: By EMMA ROSSThe Associated Press: GENEVA -- The World Health Organization moved Friday to dampen fears over alarming predictions quoted by one of its own officials that a pandemic stemming from the bird flu virus ravaging parts of Asia could kill as many as 150 million people.... Dr. David Nabarro -- a senior WHO official named Thursday as the new U.N. coordinator for avian and human influenza [[ cited the number during a press conference at the U.N.'s New York headquarters. WHO's flu spokesman at the agency's Geneva headquarters made a surprise appearance Friday at the U.N. regular media briefing in an effort to put Nabarro's comments in context.

While he did not say the 150 million prediction was wrong, or even implausible, he reiterated that WHO considers a maximum death toll of 7.4 million a more reasoned forecast. Scientists have made all sorts of predictions, ranging from less than 2 million to 360 million. Others have quoted 150 million. "We're not going to know how lethal the next pandemic is going to be until the pandemic begins," said WHO influenza spokesman Dick Thompson. "You could pick almost any number," until then, he said, adding that WHO "can't be dragged into further scaremongering."

Experts agree that there will certainly be another flu pandemic -- a new human flu strain that goes global. However, it is unknown when or how bad that global epidemic will be. It is also unknown whether the H5N1 bird flu strain circulating in Asian poultry now will be the origin of the next pandemic, but experts are tracking it just in case and governments across the world are preparing themselves for such a possibility....

Normal seasonal flu viruses have an attack rate of between 5 percent and 20 percent, but a death rate of less than 1 percent. Between 250,000 and 500,000 die from flu every year.... Pandemic flu strains tend to infect between 25 percent and 35 percent of the population. The worst death rate was seen in the 1918 pandemic... killing a total of about 40 million people.The other two pandemics were gentler. The 1957 one killed 2 million people and the most recent one, in 1968, killed 1 million people.

Economist's View: Divine Coincidence is Unlikely

Mark Thoma tells us to go read Blanchard and Gali on nominal vs. real "rigidities" and the business cycle:

Economist's View: Divine Coincidence is Unlikely: The... the general question is straightforward. Do policymakers face an inflation-output tradeoff when conducting monetary policy?...

"Real Wage Rigidities and the New Keynesian Model," Olivier Blanchard and Jordi Gali, September 9, 2005: Abstract: Most central banks perceive a trade-off between stabilizing inflation and stabilizing the gap between output and desired output. However, the standard new Keynesian framework implies no such trade-off. In that framework, stabilizing inflation is equivalent to stabilizing the welfare-relevant output gap. In this paper, we argue that this property of the new Keynesian framework... is due to a special feature of the model, the absence of non-trivial real imperfections. We focus on... real wage rigidities. When the baseline new Keynesian model is extended to allow for real wage rigidities... central banks indeed face a trade-off between stabilizing inflation and stabilizing the welfare-relevant output gap. We show that not only does the extended model have more realistic normative implications, but it also has appealing positive properties. In particular, it provides a natural interpretation for the dynamic inflation-unemployment relation found in the data.

The Chocolate Ration Has Been Raised Again!

Tony Copaccio of Bloomberg writes: U.S.: Bush said yesterday the U.S. was making progress in preparing Iraqi forces to take on a bigger role in securing the country and in rooting out terrorists who have been staging attacks on U.S. and Iraqi targets...

And Yochi Dreazen writes: - Military Gives Mixed Iraq View, Says Withdrawal May Hit Snag: In a joint appearance on Capitol Hill, Defense Secretary Donald Rumsfeld and three senior generals... said the number of Iraqi army battalions capable of operating without U.S. help had decreased to one from three over the past year. They declined to specifically explain the decrease but said many Iraqi units had suffered from a lack of stability and managerial expertise within Iraq's Ministry of Defense as successive Iraqi governments shuffled the ranks of both the ministry and the armed forces.... At the same time, they said, the country's police and army units have become riddled with insurgent sympathizers...

I'll stop calling this crew "Orwellian" when they stop using 1984 as an operations manual.

Comment on Barro, "Rare Events and the Equity Premium"

New Economist writes:

New Economist: Has Barro solved the equity premium puzzle? : A new paper by Robert Barro to this year's Minnesota Workshop in Macroeconomic Theory attempts to answer the puzzle: Rare Events and the Equity Premium (PDF). Barro's paper builds upon a 1988 JME article by Thomas Rietz entitled "The equity premium: A solution" (sorry, no PDF available), which argued that the premium could be explained by infrequent but very large falls in consumption (i.e. wars, depressions or disasters), if the intertemporal elasticity of substitution of consumption is low. Or as Brad DeLong recently put it:

Rietz's (1988) answer to the equity premium puzzle was this: a long, fat lower tail to the return distribution. A small probability of very bad things happening to stock returns could support both (a) a relatively small sample variance of returns, and (b) rational aversion to large-scale stock ownership large enough to produce the observed equity premium. The question that Rietz was unable to answer was: "What exactly are these very bad things?"

Mehra & Prescott immediately dismissed the Rietz arguments in a 1988 JME article.... But Barro has resurrected Rietz, and added his own twist. Barro explained the origins of his 2005 paper in an interview just published by the Minneapolis' Fed's journal, The

Mehra and Prescott were extremely critical of the Rietz analysis, and I think they managed to convince most people that low-probability disasters were not the key to the equity premium puzzle. But, although I highly value the insights in their original 1985 paper (which Mehra and Prescott like to point out was actually written in 1979), I think the arguments in their 1988 comment on Rietz were incorrect. I had not thought much about this issue until a few months back--it's not an area that I've worked in. But when I began to study it, it seemed that low-probability disasters could be quite important. And then I found Rietz's paper, which I thought was a great insight, and I have been building on it. Frankly, I think this idea explains a lot. Of course, there is a good deal more to work out, to think about further, but I think his basic insight is correct.

He elaborates:

Suppose that you have potential events with, say, a 1 percent annual probability, where you lose half of your capital stock and GDP. This possibility seems to be enough to get something like the observed equity premium. Moreover, this mechanism has implications for a lot of other variables, not just for the excess of the average return on stocks over the return on government bills. For example, it can explain the very low "risk-free" rate and low expected real interest rates during most U.S. wars back to the Civil War. It can also explain some of the evolution of price-earnings ratios for the U.S. stock market. ...I've looked at the 20th century history of large, short-term economic contractions as a way of motivating the general orders of magnitude for the parameters in the model. So, looking at the world wars and the Great Depression, and other depressions--for example, in Latin America and Asia in the post-World War II period--you find a substantial number of these events. If you take that whole history covering many countries over 100 years, you get some idea of the probability and potential size of these rare disasters. I show in the model that if you use these "reasonable" parameters, the theoretical results match up with empirical observations, such as the equity premium.

I think Barro has missed something important. Finance economists talk of the equity premium as a suspiciously low price of stocks relative to the prices of risk-free real bonds. But that's not really correct. In the real world, the equity premium takes the form of a suspiciously low price of stocks relative to *short-term nominal government bonds.* To say that stock prices relative to nominal bond prices can be explained by the risk of disaster--having a Great Depression or becoming the battleground in a World War--requires that the real value of nominal government bonds not be affected by such a disaster. Yet one standard response of governments to the budget crisis brought on by disaster is inflation.

In order to make Barro's theory work, you need a (1) significant probability of (2) economic disaster that nevertheless (3) does not lead to significant inflation and (4) does not lead to a formal government default. Besides the Great Depression itself, it's hard for me to think of a disaster in the past that fits those four requirements. Typically, inflation means that economic disasters that reduce stock values also reduce real bond values as well: the 1% disaster that removes half your capital stock and cuts real GDP in half also needs to leave the price level and the government's commitment to repaying its bonds unaffected.

Moronic Behavior

Matthew Yglesias wonders why the Washington Post has such moronic columnists:

TPMCafe || The Hoagland Variations : It's hard not to trip over this series of assertions from Jim Hoagland:

Bush's floundering since he was caught off base and off guard by Hurricane Katrina strips the veil from a broad pattern of recurrent inattention to the duties of governance, of misplaced loyalty to incompetent subordinates, and a crippling refusal to look back at and learn from mistakes. I take no pleasure from that harsh assessment. I have never shared the unreasoning conviction of many of his more partisan opponents that Bush as a national leader is illegitimate, moronic or both. He isn't.

Let's try that out of order. "I have never shared the unreasoning conviction of many of his more partisan opponents that Bush as a national leader is illegitimate, moronic or both. He isn't." Nevertheless, "Bush's floundering... strips the veil from a broad pattern of recurrent inattention to the duties of governance, of misplaced loyalty to incompetent subordinates, and a crippling refusal to look back at and learn from mistakes." So what is it Hoagland disagrees with about the "unreasoning conviction" of Bush's "more partisan opponents?" To reiterate, we're talking here about a "broad pattern of recurrent inattention to the duties of governance, of misplaced loyalty to incompetent subordinates, and a crippling refusal to look back at and learn from mistakes." Isn't that moronic?

And he wonders why we have such moronic generals:

TPMCafe || I'll Quit Tomorrow : General Abizaid seems to have a bad case of doublethink:

Because the American presence itself provokes antagonism, he said, Americans would need to "reduce our military footprint in the region," but could do so only after stabilizing Afghanistan and Iraq, deterring Syria and Iran, and protecting the flow of oil.

Obviously, the extent to which the American military presence in the Middle East does more to provoke violence than to prevent it is controversial. Indeed, in some ways Abizaid is to be congratulated for breaking the taboo on discussions of this point in mainstream circles. On the other hand, if you do think it's provocative, then surely you can't think we should start doing something about it after we stabilize Iraq, deter Iran and Syria is some unspecified way, and complete the amorphous mission of "protecting the flow of oil." Especially if our deployments themselves are terrorgenic, then this is a set of things we're going to be finished doing a week or so after never.

Silva Rhetoricae: The Forest of Rhetoric

Saheli Datta points us to:

Silva Rhetoricae: The Forest of Rhetoric : This online rhetoric, provided by Dr. Gideon Burton of Brigham Young University, is a guide to the terms of classical and renaissance rhetoric. Sometimes it is difficult to see the forest (the big picture) of rhetoric because of the trees (the hundreds of Greek and Latin terms naming figures of speech, etc.) within rhetoric.

This site is intended to help beginners, as well as experts, make sense of rhetoric, both on the small scale (definitions and examples of specific terms) and on the large scale (the purposes of rhetoric, the patterns into which it has fallen historically as it has been taught and practiced for 2000+ years).

A forest is the metaphor for this site. Like a forest, rhetoric provides tremendous resources for many purposes. However, one can easily become lost in a large, complex habitat (whether it be one of wood or of wit). The organization of this central page and the hyperlinks within individual pages should provide a map, a discernible trail, to lay hold of the utility and beauty of this language discipline.

In Defense of Bill Bennett

Bill Bennett is a hypocrite, a loathsome fungus on the tree of American politics, a man who has worked unceasingly to make America a worse place--when he's not publishing the work of others under his own name, or rolling the dice at Las Vegas while claiming that America's poor would be rich if only they had the righteousness and moral fiber than he does.

But Bill Bennett is not afflicted with genocidal fantasies about ethnically cleansing African-Americans. The claim that he is is completely, totally wrong. This:

I cite: Bill Bennett on abortion and race: The Right is becoming ever more open about the genocidal fantasies that guide its policies: Link: Bill Bennett: "[Y]ou could abort every black ba ... [Media Matters].

Addressing a caller's suggestion that the "lost revenue from the people who have been aborted in the last 30 years" would be enough to preserve Social Security's solvency, radio host and former Reagan administration Secretary of Education Bill Bennett dismissed such "far-reaching, extensive extrapolations" by declaring that if "you wanted to reduce crime... if that were your sole purpose, you could abort every black baby in this country, and your crime rate would go down." Bennett conceded that aborting all African-American babies "would be an impossible, ridiculous, and morally reprehensible thing to do," then added again, "but the crime rate would go down."

is simply wrong.

Bennett did not "concede" that "aborting all African-American babies 'would be... morally reprehensible.'" That was his point. His caller said: "Abortion is bad because it has worsened the financing of Social Security." Bennett says: "Stay focused. We're anti-abortion not because we think that abortion is a means that leads to bad ends like a higher Social Security deficit; we're anti-abortion because abortion is bad; make arguments like 'abortion is bad because it increases the Social Security deficit' and other people will make arguments like 'abortion is good because it lowers the crime rate' and we'll lose sight of the main point."

Bennett is attempting a reductio ad absurdum argument.

Never attempt a reductio ad absurdum argument on talk radio. You can't keep exact control over your phrasing in real time, and so somebody is bound to think you are endorsing the horrible absurdity that you are rejecting.

(And, while we're at it: never get involved in a land war in Asia; do not read My Pet Goat when death is on the line; never play poker with a man named 'Doc'; never accept a battle of wits where iocane powder is a factor; never blithely download and install a file from Microsoft without carefully, carefully researching what it will do beforehand; never get involved in an argument over Noam Chomsky; and never post about human genetics on you weblog.)

Why Isn't the Fed Pausing Right Now?

William Polley wonders why the Federal Reserve keeps raising interest rates at a steady clip:

What's the harm in pausing the rate increases? : In my last post, I asked some questions that have been occupying my mind lately. Keep the comments coming. Here's an interesting remark from Jacob at Everyone's Illusion, a relatively new blog worth adding to your blogroll.

The danger in pausing is the Fed may be running out of time. The Fed is worried about monetizing the ever growing deficit as well as oil price increases. Oil price (really gas price) inflation makes politicians do odd things, most of which are inflationary. The temptation is for more subsidies, increased payments for exploration companies, cash handouts to alternative sources, in other words more government spending.

Normally the risk of a pause would probably be minimal as it is the cumulative effect of Fed increases that matter, not any particular 25bps. Furthermore, they could always raise 50bps if things were looking like they were getting out of hand. This time there is one major difference; Greenspan is leaving.


The Bush administration clearly values loyalty in its appointments. The new Chairman will likely start at a time where the risks of a slow down and inflation are quite high. The Republicans are facing an election in 2006 where they certainly do not need a “fed caused” recession when voters go to the polls. If you don’t think these issues will come up when Bush interviews candidates I think you are being naive.

Greenspan knows the successor will have less cover then he does.... Even if the Fed thinks 4.25% is enough (or even 4%) they run the risk of the new Chairman being forced into pausing for a few meetings and things getting out of hand. Better to raise too much (possibly) and let the new Chairman gain political favor...

It's an interesting hypothesis, that Greenspan might want to give the new Chairman the ability to pause at some point early in his tenure. It's certainly possible. The one slight problem with it is that while Bush may value loyalty, the job of Fed chair is not the same as a cabinet post. The Fed chair (indeed, any Fed governor) does not serve at the pleasure of the president.... But this much is certainly true. The tension between the Fed and Congress over the deficit is building by the day. That will be the new chair's biggest challenge.... I'll toss out this hypothesis... there will not be a pause until we know who Greenspan's replacement is...

Dangerous Shortage of Junk Scientists!

Good news from Wonkette: The Republicans have run out of Junk Scientists!

Jurassic Perk: Crichton's Fame Exchanged for Dignity of Senate Panel - Wonkette : An operative writes to alert us that certified blockbustersaurus Michael Crichton is testifying today before Oklahoma Sen. James Inhofe's Senate Environment and Public Works Committee. The man who gave the world Disclosure--you know, the book that demonstrated sexual harassment is a tool of oppression wielded by powerful women over their countless male-drone underlings--will now be holding forth on the state of global warning. His qualifications, you ask? He's written a novel about on the subject, and--we hope you're sitting down--the book in question, State of Fear, is, in the words of our tipster, "a heart-pounding, edge-of-your-seat story about its hero's struggle against those who are trying to dupe the world into thinking global warming is a real problem."

Wow. The GOP must have officially run out of obliging junk scientists. Still, we're glad to have this precedent set. We hotly anticipate future Senate hearings in which Tom Clancy unveils the dark conspirators who have kept American military power a soul-sapping leash, Nelson DeMille shows us the real killer is... the colonel's daughter, and the grad finale, in which Tim LaHaye and Jerry Jenkins conduct all the GOP senators except those with memberships in the Gang of 14 to their eternal reward...

Dealing with the Housing Bubble

Mark Thoma reports Janet Yellen's views on the housing bubble:

Economist's View: Yellen: There is a Bubble But Don't Pop It With Monetary Policy: [W]hile I'm certainly not predicting anything about future house price movements, I think it's obvious that the housing sector represents a risk to the U.S. outlook.

This brings me to the debate about how monetary policy should react to unusually high prices of houses--4or other assets, for that matter. ... As a starting point, the issue is not whether policy should react at all; I believe there is quite general agreement that policy should be calibrated to the wealth effects of house prices on output and inflation. The debate lies in determining when, if ever, policy should be focused on deflating the asset price bubble itself. In my view, the ... decision to deflate an asset price bubble rests on positive answers to three questions. First, if the bubble were to collapse on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble?

My answers to these questions in the shortest possible form are, "no," "no," and "no." ... In answer to the first question on the size of the effect, it could be large enough to feel like a good-sized bump in the road, but the economy would likely to be able to absorb the shock... In answer to the second question on timing, the spending slowdown that would ensue is likely to kick in gradually... That would give the Fed time to cushion the impact with an easier policy. In answer to the third question on whether monetary policy is the best tool to deflate a house-price bubble, ... For one thing, no one can predict exactly how much tightening would be needed, or by exactly how much the bubble should be reduced. Beyond that, a tighter policy to deflate a housing bubble could impose substantial costs on other sectors of the economy that would lead to equally unwelcome imbalances. Finally, it's possible that other strategies, such as tighter supervision or changes in financial regulation, would not only be more tailored to the problem, but also less costly to the economy. Taking all of these points into consideration, it seems that the arguments against trying to deflate a bubble outweigh those in favor of it. ... But let me stress that the debate surrounding these issues is still very much alive.

Why Oh Why Can't We Have a Better Press Corps? (New Republic Edition)

Kevin Drum's jaw drops as he contemplates The New Republic's Michael Crowley. Bill Clinton, you see, likes public policy and likes to talk about it. Michael Crowley doesn't like public policy--which makes one wonder why he doesn't go and write about things that do interest him. Crowley is, I think, one example of a larger trend:

The New Republic Online: Second Coming: Bill Clinton was briefing Elvis Costello on the future of New Orleans.... Clinton was really enjoying himself.... Clinton talked on.... Costello had looked starstruck himself. But now, his enthusiasm seemed to be waning.... [T]he Bill Clinton show--a chance for the ex-president to talk an endless number of hapless (though often rich and famous) souls like Costello blue in the face.

Clinton's pathological need for adulation is well-documented. (When a friend of mine--who is not famous and had never spoken with Clinton before--ran into the ex-president at a hotel gym recently, he had to fabricate an excuse to escape his long-winded ruminations.).... The conference's specific topics were suitably grandiose: poverty, climate change, religious strife, and Third World governance.... Poverty, of course, was an unfamiliar condition to those present, many of whom had paid a $15,000 registration fee to attend. At one point, one attendee whispered to an associate, "She has her own helicopter."

A little cognitive dissonance didn't preclude some genuinely noble results.... The pledges, written documents that Clinton required donors literally to sign "on the dotted line," ranged from $1 million (to improve the justice systems of Bolivia and Peru) to a promise by Michael Jordan's mother (for a hospital in Nairobi) to $1.5 million for "cheap sustainable mobility"--translation: free bicycles--for Sri Lankan tsunami survivors....

[O]ne reporter to call her editor in a mild panic. "It's just, like, so incredibly boring...."

And--as seems to be typical among our elite media--Crowley sneers most at Clinton's concern for the developing world:

For Clinton, it was just the opposite. Partly, it was a chance to show off his astounding grasp of global affairs, whether it was the 15,000 job losses in "the little mountain kingdom of Lesotho" due to an expired trade pact; or grain production in Argentina and Brazil ("because they have topsoil, in some places as deep as 22 feet"); or the promise of solar energy ("There are a million homes in Latin America today where the light and cooking heat come from solar generators ... at a cost of about a month's worth of candles"). This, in sum, was a man who wanted to demonstrate total understanding of the planet Earth....

We've seen this before, last year. People who wanted to trash Clinton's book did so by complaining that it talked about details of policy:

The second example is the Weston Kosova and Michael Isikoff review of Bill Clinton's My Life. Kosova and Isikoff lament how Clinton "forces [them] on a joyless march through... arid policy debate[s]" that they must slog through before finding a "raw, confessional moment that almost makes the book seem worth the $35 price of admission." But to politicians like Clinton (and to those who have ever worked for one, whether full-time, part-time, or volunteering just out of citizenship) the "arid policy debates" are of the essence: one runs for office--one works for or supports people who run for office--because one has strong beliefs about what policies will make America a better place. It is only to a reporter like Isikoff that debates about policies are "arid". To ask Isikoff to review Clinton is like asking someone tone-deaf to review a performance of Beethoven's "Eroica". The element of self-parody--unintentional self-parody--is there, especially as Isikoff and his editors repeatedly fail to grasp that they are tone-deaf, and are thus not hearing and incompetent to review the symphony. Where others see the real business of government--real policies with complicated and uncertain effects on millions of real people's lives--they see only the Gedrosian Desert.

The third example is another review of Clinton's My Life: Michiko Kakutani's. She sneers at Clinton's "messy pastiche of everything that [he] ever remembered and wanted to set down in print; he even describes the time he got up at 4 a.m. to watch the inaugural ceremonies for Nigeria's new president on TV." That, to her, is the low point: Clinton actually interested in a place like Nigeria! And--Kakutani is clearly thinking--could there be anything more a total boring and uninteresting waste of time than getting up at 4 A.M. to watch a broadcast from Lagos?

Well, here's the sum total of what Clinton has to say about Nigeria (that I could find, at least) in his book. It's two paragraphs:

p. 856: I got up at four in the morning to watch the inaugural ceremonies for Nigeria's new president, former general Olusegun Obasanjo, on TV. Ever since gaining independence, Nigeria had been riddled by corruption, regional and religious strife, and deteriorating social conditions. Despite its large oil production, the country suffered periodic power outages and fuel shortages. Obasanjo had taken power briefly in a military coup in the 1970s, then had kept his promise to step aside as soon as new elections could be held. Later, he had been imprisoned for his political views and, while incarcerated, had become a devout Christian and had written books about his faith. It was hard to imagine a bright future for sub-Saharan Africa wihtout a more successful Nigeria, by far its most populous nation. After listening to his compelling inaugural address, I hoped Obasanjo would be able to succeed where others had failed.

pp. 920-921: I flew to Nigeria to see President Olusegun Obasanjo. I wanted to support his efforts to curb AIDS before Nigeria's infection rate reached the levels of southern African nations, and to highlight the recent passage of the African trade bill, which I hoped would help Africa's struggling economy. Obasanjo and I attended a gathering on AIDS at which a young girl spoke of her efforts to educate her schoolmates about the disease, and a man named John Ibekwe told the gripping story of his marriage to a woman who was HIV-positive, his becoming infected, and his frantic search to get the medicine for his wife that would enable their child to be born without the virus. Eventually John succeeded, and little Maria was born HIV-free. President Obasanjo asked Mrs. Ibekwe to come up onstage, where he embraced her. It was a touching gesture and sent a clear signal that Nigeria would not fall into the trap of denial that had contributed so much to the spread of AIDS in other countries.

Plague, coups, famine, revolution, and--we hope--steps toward development and democracy. For Nigerians, the stuff of life and death. For President Clinton, the potentially most important country in Africa that he needs to know about as he tries to use his policy levers to make a better world. For an elite journalist like Michiko Kakutani, it's boring--and it is a gross violation of etiquette for Clinton to use two paragraphs in his book to try to teach Americans a little about Nigeria and give them a President's eye view of this piece of Africa.

Kakutani, Kosova and Isikoff, and Crowley. Their complaints that an ex-president is interested in governance and issues--and is actually curious about places like Lesotho and Nigeria--are self-parody. "How dare an ex-president bore me!" they say. "I know nothing about global development or foreign affairs. How dare he find them interesting!"

I have not yet figured out why so much of our elite press--the Crowleys, the Kakutanis, the Isikoffs, and the Kosovas--is so... what should I call it? Feckless. Corrupt (in the sense of well-rotted). Decadent. Why does Michael Crowley react with contempt to Clinton's interest in Lesotho, or New Orleans? Why do Weston Kosova and Michael Isikoff cover the government--rather than, say, cover something like advances in bartending--if they find debates over policy the equivalent of crossing the Gedrosian Desert? Why does Michiko Kakutani think it pointless and boring to wake up early to watch the inauguration of the first democratically-elected president in sixteen years in a country of 130 million people?

It is a mystery to me.

It is, however, one reason that we are saddled with an incompetent president like George W. Bush. As David Frum writes, it has long been clear to insiders that Bush is not a "diligent manager of the office of the presidency, [or] a close student of public policy, [or] a careful balancer of risks and benefits"--that, in short, George W. Bush is totally unqualified to be president, totally unprepared to make the decisions a president has to make. But by and large the elite press has simply not cared about the necessary qualifications to be a good president, and fears a president who is qualified to be president. For, after all, strikes them as bizarre and weird for somebody to actually know where Lesotho is.

A Real Energy Policy

Meanwhile, back in the reality-based community, Rob Stavins outlines what a real energy policy might be:

Environmental Economics: Rob Stavins on the gas tax: A gas tax increase — coupled with an offsetting reduction in other taxes, such as the Social Security tax on wages — could make most American households better off, while reducing oil imports (read dependence on Middle Eastern regimes), local pollution, urban congestion, road accidents, and global climate change. This revenue-neutral tax reform would exemplify the market-based approaches to environmental protection and resource management I examined in previous columns.

Such a change need not constitute a new tax, but a reform of existing ones. It is well known — both from economic theory and numerous empirical studies — that taxes tend to reduce the extent to which people undertake the taxed activity. In the United States, most tax revenues are raised by levies on labor and investment; the resulting reduction in these fundamentally desirable activities is viewed as an unfortunate but unavoidable side-effect of the need to raise revenue for government operations. Would it not make more sense to raise the revenue we need by taxing undesirable activities, instead of desirable ones?

Combustion of gasoline in motor vehicles produces local air pollution as well as carbon dioxide that contributes to global climate change, increases imports of oil, and exacerbates urban highway congestion. Can anyone really claim that — given a choice between discouraging work and discouraging gasoline consumption — it is better to discourage work?

According to the U.S. Department of Energy, a 50-cent gas tax increase could eventually reduce gasoline consumption by 10 to 15 percent, reduce oil imports by perhaps 500,000 barrels per day, and generate about $40 billion per year in revenue. Furthermore, this approach would be far more effective than ongoing proposals to increase the Corporate Average Fuel Economy standards, which affect only new cars (not trucks or other vehicles) and lead to serious safety problems by encouraging automakers to produce lighter vehicles. Remember that a major effect of CAFE standards has been to accelerate the shift from cars to SUVs and light trucks (so that overall fuel efficiency of new vehicles sold is no better than it was a decade ago, despite the great strides that have taken place in fuel efficiency technologies). As my Harvard colleague Martin Feldstein pointed out in The Wall Street Journal in 2001, the conventional approach “does nothing to encourage individuals to drive less, to use their cars more efficiently, or to shift sooner to new and more fuel efficient [and cleaner] vehicles.” A more enlightened approach — a marketbased approach — would reward consumers who economize on gasoline use. And that is what a revenue-neutral gas tax is all about.

The revenue from the gas tax could be transferred to the Social Security Trust Fund and credited to current workers. If $40 billion per year from new gas tax revenues were transferred to Social Security, the payroll tax — the employee contribution to Social Security — could be cut by perhaps a third: a worker with annual wages of $30,000 would take home an additional $750 per year! The extra income would more than offset the cost of the gas tax, unless the worker drove over 35,000 miles per year in a car getting 25 miles or less per gallon. Rebating the gas tax in this way addresses the greatest concern about higher gas taxes — that they can hit hardest those workers who drive to their jobs. Further, a tax of this magnitude could be phased in gradually, perhaps no more than 10 cents per year over 5 years, allowing individuals and firms to adjust their consuming and producing behavior.

Proposals for gasoline tax increases in the last Congress would have dedicated the revenue to public spending (for transportation and other programs). A key difference is that the proposal I have outlined here is for a revenue-neutral change in which the gas tax revenue would be returned to Americans through reduced payroll taxes. To adopt some of the language I developed in my previous columns, such a change can be both efficient and equitable, and — for those reasons — perhaps even politically feasible...

Why Oh Why Are We Ruled by These Fools?

Ana Marie Cox writes:

WH Gaggle: Lights, Camera, Inaction - Wonkette: At today's White House gaggle, press secretary Scott McClellan built upon the President's suggestion that Americans -- including those inside the White House -- look for ways to conserve energy. McClellan said that the staff would "take steps to increase the thermostats, scale back non-essential travel" and that the President himself would start "reminding them to turn off lights and printers and copiers and computers when they leave the office." And we thought the Democrats were the "mommy party." These measures aren't meaningless, of course, they're just trivial. Even worse: They were supposedly enacted in 2001, proudly announced in a statement on the "White House Energy Savings Plan." So, you know, keep turning out those lights. The only real difference in this year's conservation measures is the promise to consider shortening the press motorcade, which this White House can hardly consider a sacrifice.

It would, of course, be silly to ask for a real energy policy rather than a fake one, wouldn't it?

Oil Shale

Jim Hamilton--who knows much more about this than I do--is not wild about oil shale:

Econbrowser: Oil shale retort: A number of observers have been pointing to oil shale as the solution to all our energy problems. If oil shale does turn out to be the resource of the future, then our problems are only beginning...

An Attempted Media Hit on Laura Bush...

Washington Post reporters Jim VanderHei provide the channel for somebody--Grover Norquist?--to make a media hit on Laura Bush. I would have thought that even Washington Post reporters would have more honor. I would have been wrong:

President Struggles to Regain His Pre-Hurricane Swagger: President Bush flew here ahead of Hurricane Rita on Friday to show command of a federal disaster response effort that even supporters acknowledge he fumbled three weeks ago. The president said he wanted to see the emergency response system from the ground floor at U.S. Northern Command headquarters. "I need to understand how it works better," he told reporters before leaving Washington. But Bush was also embarking on a broader, and possibly more important, mission: restoring strength and confidence in his presidency. A president who roamed across the national and world stages with an unshakable self-assurance that comforted Republicans and confounded critics since 2001 suddenly finds himself struggling to reclaim his swagger....

A top Republican close to the White House since the earliest days said the absence of a "reelection target" and pressure from first lady Laura Bush and others to soften his second-term tone conspired to temper Bush's swagger well before Katrina hit. "A reelection campaign was always the driving principle to force them to get things together," said the GOP operative, who would speak candidly about Bush only if his name was not used. He said the "brilliance of this team" was always overstated. "Part of the reason they looked so good is Democrats were so discombobulated." Since the election, this official said, White House aides reported that Laura Bush was among those counseling Bush to change his cowboy image during the final four years...

Emptywheel at The Last Hurrah has comments

Stupidest People Alive

The staff of National Review, that is.

The on-budget federal deficit--the deficit treating Social Security as a separate stand-alone entity--will in all likelihood total some $3.4 trillion over the next ten years even if all the Bush tax cuts are allowed to expire and even if discretionary spending is effectively frozen. If the tax cuts are extended--as George W. Bush dearly wishes them to be--and if real discretionary spending grows as fast as population (as it will), then the ten-year on-budget deficit estimate is some $6.6 trillion.

The editors of National Review are alarmed at the budget crisis. They call on George W. Bush to show "leadership":

Editors on Federal Budget on National Review Online: The most important ingredient at the moment, however, is presidential leadership. It has been absent for five years on spending. Bush is said to rise to the occasion when confronted with crises. He is about to confront one within his own party on spending. Let the rising begin.

And what leadership do they want him to show? Here is the National Review-endorsed deficit reduction program:

President Bush must endorse a serious, realistic set of budget offsets, and the most promising area is corporate welfare.... According to the RSC, eliminating corporate welfare would cut $5 billion in 2006 and $50 billion over ten years....

$50 billion is a small fraction--0.0076--1/132 of the projected ten-year deficit.

That is what National Review calls a "serious, realistic" approach to the budget crisis.

Stupidest people alive.

David Frum Is Almost Shrill!

He tiptoes up to the border of shrill Bush-hatred, and then steps back. Come across the line, David! / Comment & analysis / Comment - Bush is still the right leader: This has been a very bad month for the Bush presidency, maybe the worst to date: Hurricane Katrina, bad news from Iraq and grumbling from within the president’s own party over spending and immigration.... [M]uch of the trouble is the president’s own fault. He chose to appoint Michael Brown to head the Federal Emergency Management Agency. He chose to spend lavishly on highways and farmers and a new prescription drug benefit at the same time as he was fighting a global war on terror. And of course it is he who remains the final decision-maker on national security....

[A]s one who... still critically supports him, I find the sudden surge of public disenchantment with Mr Bush very difficult to understand. If you were looking for a diligent manager of the office of the presidency, a close student of public policy, a careful balancer of risks and benefits – George W. Bush would never be your man. But is this news?...

In a 2003 book about Mr Bush, I offered this assessment of his personality: Mr Bush is “a good man who is not a weak man. He is impatient, quick to anger; sometimes glib, even dogmatic, often uncurious, and as a result ill-informed... 

David: that Bush sometimes appoints people with views of which you approve to jobs (but is incapable of figuring out when they are telling him pleasing lies), and sometimes ineptly pursues policies that you would approve of if they were implemented well (and sometimes, as in the case of Iran today, pursues policies that you regard as disastrous)--these aren't reasons to support him, even to "critically support" him.

Minister for Propaganda

Josh Micah Marshall notices that Guy Dinmore of the Financial Times has eaten his wheaties this morning, and has a very apt description of the job of Karen Hughes: / World / Middle East & Africa - Bush's confidante urges fair Egyptian elections: By Guy Dinmore in Cairo Published: September 27 2005 03:00 | Last updated: September 27 2005 03:00: Before embarking on her first tour of the Middle East, Karen Hughes, the new US minister for propaganda, said she was coming to listen to how the US could improve its image. Yesterday however, she turned into lecturing mode as she urged Egypt's prime minister to ensure fairer parliamentary elections in November...

Martin Wolf Assumes the Mantle of Jeremiah

And he warns a feckless and accursed crew of policy makers: / Comment & analysis / Columnists - Martin Wolf: Do not put off imbalances correction: Many agree, therefore, that the US is solely to blame for its huge current account deficits. But the US is neither as potent nor as profligate as its critics suppose. The challenge is global....

[A]nalysts have advanced two contrasting views of what is driving the global pattern of surpluses and deficit. The first is that the fiscal deficits of President George W. Bush and monetary laxity of Alan Greenspan, Federal Reserve chairman, have caused the US external deficits. The US is chronically under-saving, rather than the rest of the world over-saving. The alternative view is that the driving force has been an increase in the surplus of savings over investment particularly in emerging Asia and, more recently, in the oil exporting countries. These surpluses have been channelled to the US as borrower and spender of last resort.... Regular readers will know that I have long taken the second of these views.... This is not a blanket defence of US policy: its structural fiscal deficits are perilous. Yet, it should not be hard to accept that countries with large current account surpluses bear at least as much responsibility for global “imbalances” as those with the deficits....

[T]he WEO makes the following observations.

First, across the world as a whole, global investment and savings rates have tended to fall since the early 1970s.

Second, while investment rates have converged... savings rates have not....

Third, Asian countries both save and invest a much higher share of GDP than other emerging market economies and than oil producers....

Fourth, China’s savings rate is now running at close to 50 per cent of GDP. Government savings are close to 12 per cent of GDP, household savings at 16 per cent and company savings at 22 per cent....

Desirable adjustment would then see higher investment in many parts of the developing world, higher savings in the US and a smooth shift in the global pattern of deficits, all without a significant recession. The WEO itself analyses three scenarios: a benign market-led adjustment, a malign adjustment and a policy-driven adjustment.

Under the first, US savings rise and the dollar depreciates by a further 15 per cent, in real terms. There is also some slowdown in US economic growth. But the current account deficit falls to a sustainable 3 per cent of GDP.... The more abrupt market-led adjustment assumes rising protectionist pressures, a loss of confidence in US assets and abandonment of exchange-rate pegs. This generates a significant slowdown in the US. The dollar experiences a sharp decline and US inflation jumps, generating a sharp rise in interest rates.... Growth slows sharply....

Finally, the WEO explores policy options.... [F]iscal consolidation in the US, leading to a balanced budget by 2010, lowers the current account deficit by about 2 per cent of GDP over 10 years. The WEO looks at structural reform in the eurozone and Japan, which generates an investment boom. This helps adjustment, but considerably less than US fiscal consolidation.... [T]o be confident of a benign adjustment one needs changes in policies in several places at once... significant movements in real exchange rates, higher savings... higher spending... particularly in emerging Asia. The result would not only be more balanced global growth, but each region would be better off.

Is this benign outcome likely? No...

Ever since the Mexican peso crisis of 1994-1995, I have been well aware that the Gods of the Dismal Science are cruel and capricious, at times punishing small sins against them with disproportionate retribution.

Why Oh Why Are We Ruled by These Fools? (Government Programs Work Department)

Peter G. Gosselin and Ricardo Alonso-Zaldivar catch onto something very important, and write:

Limiting Government's Role - Los Angeles Times: Bush favors one-time fixes over boosting existing programs to help Katrina victims: Two days after Hurricane Katrina slammed into the Gulf Coast, the Department of Housing and Urban Development announced plans to issue emergency vouchers aimed at helping poor storm victims find new housing quickly by covering as much as $10,000 of their rent. But the department suddenly backed away from the idea after White House aides met with senior HUD officials. Although emergency vouchers had been successfully used after the 1994 Northridge earthquake, the administration focused instead on a plan for government-built trailer parks, an approach that even many Republicans say would concentrate poverty in the very fashion the government has long sought to avoid.

A similar struggle has occurred over how to provide healthcare to storm victims. White House officials are quietly working to derail a proposal by leading Republican and Democratic senators to temporarily expand Medicaid. Instead, the administration is pushing a narrower plan that would not commit the government to covering certain groups of evacuees. As President Bush tackles the monumental task of easing the social problems wrought by Katrina, he is proving deeply reluctant to use some of the big-government tools at his disposal, apparently out of fear of permanently enlarging programs that he opposes or has sought to cut. Instead of depending on long-running programs for such services as housing and healthcare, the president has generally tried to create new, one-shot efforts that the administration apparently hopes will more easily disappear after the crisis passes. That has meant relying on the Federal Emergency Management Agency, which has run virtually all of the recovery effort....

And Matthew Yglesias comments:

TAPPED: September 2005 Archives: SABOTAGE. The LA Times has a nice report on how the Bush administration is looking at effective ways to help the poor people displaced by Katrina, then rejecting those methods in favor of less effective ones. The reason for deliberately choosing ineffective measures is that the White House fears that implementing effective measures would make it politically easier in the future to get the government to do stuff to help poor people. And the crazy thing about it is that they're not really crazy!

This is the basic dilemma the right faces. It's committed to the view that the government shouldn't help poor people. But things happen from time to time that make it politically imperative to do something to help poor people. And if the government responded to those circumstances in ways that were efficient and effective, that would generate more political momentum for further poor-helping measures. Thus, the right finds itself forced to implement policies it knows to be ineffective. The Section 8 housing vouchers discussed in the article are a case in point. This was an idea that came into vogue with Ronald Reagan as his free-market advisers noted that poor people didn't lack houses (implying a need for the government to build some) but rather money for rent (implying a need for the government to give them some) and that by taking option number two you could avoid the catastrophic poverty-sinks of public housing.

Flash forward to today, and liberals (who care about poor people) have learned to love Section 8. Well-meaning right-wing economists still like them because, well, they're good. But Republicans hate them. Public housing disasters make the case against big government, housing vouchers make the case for... more housing vouchers. The EITC has made a similar ideological journey, beginning on the right as a suggestion that anti-poverty spending could be put to better use and now opposed by the right precisely because the idea is too good. The purely ideological case against helping poor people is grossly unpopular, so conservatives need to rely on the pragmatic case which, in turn, relies on deliberately rejecting good ideas in favor of bad ones in order to "prove" that government programs don't work.

Impeach George W. Bush. Impeach him now.

The LA Times Needs Some Math Quality Control (Why Oh Why Can't We Have a Better Press Corps? Department)

Kevin Drum is confused by math "gurus" David Klein and Jennifer Marple:

The Washington Monthly: FRACTION DIVISION.... In the LA Times today, math gurus David Klein and Jennifer Marple tell us that one of the reasons high school kids in Los Angeles aren't learning math is because the teachers themselves get rotten training. This particular anecdote struck me as especially bizarre:

Too often, the math that teachers are taught at district training sessions is just plain wrong. For instance, middle school teachers are erroneously taught that fraction division is repeated subtraction. This makes sense only for special examples such as 3/4 divided by 1/4 . In this case, 3/4 may be decreased by 1/4 a total of three times, until nothing is left, and the quotient is indeed 3. Understanding division as repeated subtraction, however, is nonsensical for a problem like 1/4 divided by 2/3 because 2/3 cannot be subtracted from 1/4 even once. No wonder students have trouble with fractions in high school.

"Fraction division is repeated subtraction"? I don't even get that. Even in the example that "works," how does getting nothing somehow translate into 3?

And what's the point, anyway? It's one thing to try some weird new technique when the old one is difficult to understand, but fraction division is simple. Why would anyone spend any time trying to come up with some new way of teaching it?

Well, division can be thought of as--in fact, is--repeated subtraction. That's one way of defining what division is, just you can define multiplication to be repeated addition and exponentiation to be repeated multiplication (and taking roots to be repeated division; the cube root is the answer to: "what number can I divide this by three times to get one?").

You can see that division can be thought of repeated subtraction most clearly in long division: 50,008/14, say. First we subtract 3,000 fourteens from 50,008, and get a remainder of 8,008. Then we subtract 500 fourteens from 8,008, and get a remainder of 1,008. Then we subtract 70 fourteens from 1000, and get a remainder of 28. And then we subtract two fourteens from 28, and get zero. Voila: we have subtracted 3,000 + 500 + 70 + 2 = 3,572 fourteens from 50,008--we have divided 50,008 by 14 and gotten 3,572.

The idea that "division is repeated subtraction" is much better when a student is first confronted by division by a fraction--3/4 divided by 1/4, say--than is the alternative of "division is dividing into piles." You divide 50,008 into piles of 14 and you have 3,572 piles. But you divide 3/4 into 1/4 of a pile and... a student who thinks "division is dividing into piles" is immediately lost. By contrast, if the student starts out thinking that "division is repeated subtraction," it is easy for him or her to see what 3/4 divided by 1/4 is: how many times can you subtract 1/4 from 3/4 before you get zero? And the answer is three.

It even works with 1/4 divided by 2/3: you can't subtract a whole 2/3 from 1/4 and get zero; but you can subtract 3/8 of a 2/3 from 1/4 and get zero. I at least, think it is more intuitive to think of 1/4 divided by 2/3 as "what fraction of 2/3 can you subtract from 1/4 to get zero?" rather than "suppose you divide 1/4 into 2/3 piles, how much is in each pile?"

The fact that David Klein and Jennifer Marple claim that it is erroneous to say that division is repeated subtraction makes me extremely skeptical about their qualifications. Math is hard. People learn it in lots of different ways.

Grownup Republican Watch

Doug Henwood emails the views of Alan Greenspan, as relayed by French Finance Minister Thierry Breton:

Reuters - September 24, 2005: Paul Carrel: WASHINGTON -- U.S. Federal Reserve Chairman Alan Greenspan told France's Finance Minister Thierry Breton the United States has "lost control" of its budget deficit, the French minister said on Saturday. "'We have lost control' -- that was his expression," Breton told reporters after a bilateral meeting with Greenspan. "The United States has lost control of their budget at a time when racking up deficits has been authorized without any control" from Congress, Breton said. "We were both disappointed that the management of debt is not a political priority today," he added.

Ministers from the Group of Seven rich nations on Friday called for vigorous action around the world to curb rising imbalances in international trade and investment accounts. A decrease in the U.S. budget deficit were cited by the G7 as one way to ease those imbalances. U.S. Treasury Secretary John Snow said the U.S. administration was still committed to halving its budget deficit by 2009.

Breton spoke as International Monetary Fund Managing Director Rodrigo Rato said U.S. plans to cut its government expenditures now looked ambitious in the light of huge reconstruction costs to be borne in the wake of Hurricane Katrina.

Breton said: "The situation that is creating tension today on the currency market ... is clearly the American deficit." The United States needed to address its budget deficit, he said, adding: "It seems to me that my counterpart John Snow is completely aware of this, he wants to harness the problem, but it seems to me he doesn't have the room for maneuver." Breton added that after hearing Greenspan talk about inflation: "One has the feeling -- though he didn't say so -- that interest rates will probably continue to rise slightly until his departure."...


From Charles Dickens, Nicholas Nickleby:

They rattled on through the noisy, bustling, crowded street of London, now displaying long double rows of brightly-burning lamps, dotted here and there with the chemists' glaring lights, and illuminated besides with the brilliant flood that streamed from the windows of the shops, where sparkling jewellery, silks and velvets of the richest colours, the most inviting delicacies, and most sumptuous articles of luxurious ornament, succeeded each other in rich and glittering profusion. Streams of people apparently without end poured on and on, jostling each other in the crowd and hurrying forward, scarcely seeming to notice the riches that surrounded them on every side; while vehicles of all shapes and makes, mingled up together in one moving mass, like running water, lent their ceaseless roar to swell the noise and tumult.

As they dashed by the quickly-changing and ever-varying objects, it was curious to observe in what a strange procession they passed before the eye. Emporiums of splendid dresses, the materials brought from every quarter of the world; tempting stores of everything to stimulate and pamper the sated appetite and give new relish to the oft-repeated feast; vessels of burnished gold and silver, wrought into every exquisite form of vase, and dish, and goblet; guns, swords, pistols, and patent engines of destruction; screws and irons for the crooked, clothes for the newly-born, drugs for the sick, coffins for the dead, and churchyards for the buried-- all these jumbled each with the other and flocking side by side, seemed to flit by in motley dance like the fantastic groups of the old Dutch painter, and with the same stern moral for the unheeding restless crowd.

Nor were there wanting objects in the crowd itself to give new point and purpose to the shifting scene. The rags of the squalid ballad- singer fluttered in the rich light that showed the goldsmith's treasures, pale and pinched-up faces hovered about the windows where was tempting food, hungry eyes wandered over the profusion guarded by one thin sheet of brittle glass--an iron wall to them; half-naked shivering figures stopped to gaze at Chinese shawls and golden stuffs of India. There was a christening party at the largest coffin-maker's and a funeral hatchment had stopped some great improvements in the bravest mansion. Life and death went hand in hand; wealth and poverty stood side by side; repletion and starvation laid them down together.

But it was London; and the old country lady inside, who had put her head out of the coach-window a mile or two this side Kingston, and cried out to the driver that she was sure he must have passed it and forgotten to set her down, was satisfied at last....

Is this a positive or a negative assessment of mid-nineteenth century London? Discuss.

MaxSpeak, You Listen!: THE TRUTH HURTS

Max Sawicky posts Bruce Bartlett before the Senate Democratic Policy Committee

MaxSpeak, You Listen!: THE TRUTH HURTS: Conservative Republican and Reagan tax honcho Bruce Bartlett testifies before the Senate Democratic Policy Committee....

Statement by Bruce R. Bartlett

September 23, 2005

Thank you for the opportunity to testify before you this morning. As you know, I testify as a Republican—I have served in senior political positions in Ronald Reagan’s White House and George H.W. Bush’s Treasury Department, and as executive director of the Joint Economic Committee, a cosponsor of this hearing. However, I do not represent the Republican Party or any organization with which I may be associated. I am here speaking only for myself.

I testify as someone who is very disenchanted with his party’s fiscal policy since 2001. Unlike the other witnesses, I am less concerned about the deficit per se or about the size of the tax cuts enacted over the last five years. Rather, what really bothers me is the increase in spending and expansion of government that my party has been responsible for.

I used to believe that the Republican Party was the party of small government. That’s why I became a Republican. I don’t believe that the federal government has the right to one penny more than absolutely necessary to fulfill its essential functions as spelled out in the Constitution. I think government is over-intrusive and could do what it has to do far more efficiently and at lower cost, which means with lower taxes.

Therefore, it bothers me a great deal when Republicans initiate new entitlement programs, massively expand pork-barrel spending, and show the most callous disregard for fiscal integrity. Not too many years ago, Ronald Reagan vetoed a politically popular highway bill because it contained 157 pork-barrel projects. The latest bill contained at least 5,000. Yet President Bush signed this $295 billion bill into law, despite having promised repeatedly to veto a bill larger than $256 billion.

For the life of me, I cannot understand why President Bush seems so incapable of using his veto pen. His father knew how to veto bills. He vetoed 29 of them in his four years in office. But in his first four-plus years, this President Bush has vetoed nothing. He is the first president since John Quincy Adams to serve a full term without vetoing anything. Curiously, Adams is also the only other son of a former president to become president—and his father, John Adams, didn’t veto anything, either.

When I complain about this to the White House, they tell me that it is very hard to veto bills when your party controls both Congress and the White House. But this explanation is simply implausible. Franklin D. Roosevelt had huge Democratic majorities, yet vetoed a record 372 bills. John F. Kennedy, Lyndon Johnson and Jimmy Carter also had large majorities of Democrats, yet Kennedy vetoed 12 bills during his short presidency, Johnson vetoed 16, and Carter vetoed 13.

I won’t bore this committee with numbers. You know them as well as I do. Suffice it to say that our fiscal situation is dire and growing worse by the day. My principal concern, however, is not with today’s deficits—even if they are swollen by Katrina and Rita-related emergency spending. What worries me is the retirement of the baby boom, the first of which turns 62 in 2008. I’m not saying that we are close to driving off a fiscal cliff, but clearly the implications of this event have not impacted on policymakers in any way whatsoever.

I have struggled with a way to illustrate the consequences of an aging population and its effect on the budget. This is the best I have been able to do. Social Security’s unfunded liability comes to 1.2 percent of GDP in perpetuity (1.4 percent without the trust fund)—about what is raised by the corporate income tax—according to that program’s actuaries. The comparable number for Medicare is 7.1 percent of GDP—about what is raised by the individual income tax. And remember that these figures are for the unfunded portion of these programs, so they are over and above payroll taxes.

The chilling conclusion, therefore, is that virtually 100 percent of all federal taxes, on a present value basis, do nothing but pay for Social Security and Medicare. Unless there are plans to abolish the rest of the federal government, large tax increases are inevitable.

Let me be clear that I am no advocate of higher taxes. I’m the one who drafted the Kemp-Roth bill back in the 1970’s and I have spent most of my career looking for ways to cut tax levels and tax rates. But that was predicated on an assumption those supporting tax cuts also wanted to downsize government. I never saw tax cuts as a substitute for spending cuts, but more as sugar to make the medicine go down. My ultimate goal was to reduce both taxes and spending.

Unfortunately, few in my party seem to share this philosophy any longer. For many, tax cuts have become a substitute for spending cuts. It truly amazes me how often I hear people on my side talk about cutting taxes as if this is the only thing necessary to downsize government. They seem genuinely oblivious to the fact that the burden of government is largely determined by the level of spending, not taxes. Nor do they understand that in the long-run, all spending must be paid for one way or another. Increasing spending today, therefore, absolutely guarantees that taxes will have to be raised in the future.

I am often criticized by friends on my side of the aisle for implicitly endorsing tax increases. I do no such thing. I am simply adding two and two and getting four while my friends seem to think there is some way of only getting three.

They also criticize me for implicitly abandoning the fight to cut spending and downside government. Again, I plead innocent. It is not I who has abandoned the fight, but my party. I don’t need to remind anyone here that the biggest spending increases in recent years passed Congresses with Republican majorities largely without Democratic votes. Nor do I need to remind anyone here that during the Clinton years we not only went from budget deficits to budget surpluses, but did so to a large extent by cutting spending—something my conservative friends seldom acknowledge.

Here’s the basic accounting. Defense spending fell by 1.4 percent of GDP between 1993 and 2000, and domestic discretionary spending fell from 3.8 percent to 3.3 percent. Even spending on entitlements fell for temporary demographic reasons, from 10.2 percent of GDP to 9.8 percent. Finally, interest on the debt fell, largely because of falling interest rates, from three percent of GDP to 2.3 percent. The result was an overall decline in spending of three percent of GDP, from 21.4 percent to 18.4 percent, the lowest level since 1966, before the Great Society geared up.

On the revenue side, individual income taxes rose by 2.5 percent of GDP, mainly as the result of rising incomes that pushed people up into higher tax brackets and higher capital gains taxes from the booming stock market. Corporate income taxes and payroll taxes added another 0.8 percent, for a total revenue increase of 3.3 percent of GDP. Thus lower spending and higher revenues constituted a fiscal turnaround of 6.3 percent of GDP, which explains how a deficit of 3.9 percent of GDP in 1993 became a budget surplus of 2.4 percent by 2000.

I don’t give President Clinton full credit for this performance. I think most of the credit goes to gridlock. Mr. Clinton wouldn’t support the Republican Congress’s spending and it wouldn’t support his. So for a blessed six years, government effectively was on automatic pilot. Sadly, unified government has led to an utter lack of restraint by my party that is simply inexcusable. It is extremely dismaying for me to hear House Majority Leader Tom Delay say that there is no fat in the budget and that Republicans have cut it to the bone. This is, quite frankly, ludicrous. My real fear, however, is that he may actually believe it.

I remain convinced that given the total lack of fiscal responsibility demonstrated by the Republican Party that very large tax increases are inevitable. I believe that the fiscal hole is now so large that it is unrealistic to think that we can just tinker with the tax system, as we did so often in the 1980’s, and raise enough revenue to pay for spending commitments that have been made. And under the circumstances, I have no faith whatsoever that spending will be significantly restrained—at least not by my side. They would first have to admit error and beg for forgiveness from people like me, something I don’t expect to be forthcoming any time soon.

Therefore, like it or not, we must travel the same route taken by the Europeans, who long before us made peace with the welfare state and tried to figure out how to pay for it with the least negative impact on economic growth and incentives. They all imposed a broad-based consumption tax called the value-added tax as an add-on tax to all the others. I think it is only a matter of time before we are forced to do the same thing and the longer we wait the more painful it will be when it is finally done. Unfortunately, we are more than likely going to have to be forced into it by a financial crisis of some sort. It would be better to avoid that cost and deal with our fiscal situation rationally. But I see no leadership on either side that would allow that to happen.

I don’t know when, where or how a financial crisis will develop. I only know that trends that can’t continue don’t. Since it is unlikely that the vast fiscal imbalance will be resolved with a whimper, it becomes a certainty that it will end with a bang. Among the areas ripe for triggering a crisis are a popping of the housing bubble, a crash of the dollar, a mistake by some big hedge fund, excessive tightening by the Fed and others too numerous to mention. It will take extraordinary luck and skill to avoid every boulder in the stream and I have little confidence that this administration has the personnel to even give us a fighting chance. There are too many Michael Browns at senior levels of the government today and too few Bob Rubins or Alan Greenspans.

Contrary to popular belief, I don’t think the American people are a bunch of children who only want hand-outs from the government and will only reward the party that promises them something for nothing. Experience and academic research confirm that they are more likely to support the candidate who treats the public purse with prudence and trust and not as a piggy bank to be routinely broken on a whim. In short, I think there is a political market for the party and the candidate who speaks honestly about the nature of the fiscal crisis that is looming. The payoff may not be immediate and the public trust has to be earned by more than just rhetoric. But if, as I believe, some event will eventually change the political landscape, voters will remember who spoke the truth and who mouthed the platitudes.

It’s dirty work, but someone has to do it. Since my party won’t do it, yours is going to have to. If it’s done right, your party will gain at the expense of mine and you will deserve the benefits and my party will deserve the electorate’s disdain.

Bruce's judgment about the political maturity of the American people is a relatively rare one among Republican budget policy people. The much more common position is that Bush's fiscal policy is long-run disaster but good politics. In the words of Greg Mankiw and Phil Swagel:

Mankiw and Swagel: if you think that complaining about budget deficits will advance your career, just ask President Mondale.

By and large the Democratic High Politicians seem to agree with Greg. They are eager to criticize the Bush administration for the profound stupidities of its budget policy. They are eager to promise economists and others that they understand the importance of fiscal discipline, and will pursue policies that restrict the growth rate of nominal federal government debt to less than 2% plus the growth rate of real GDP. But they don't want to run for election with a sane budget policy as their leading platform plank--they remember "President Mondale" very well.

This is, I think, why the public disappearance of grownup Republicans has been so damaging. We can, I think, push the Democratic High Politicians to be two steps more fiscally responsible in public than the most grownup cluster of Republicans. But only two steps. And as long as Bruce Bartlett and his Gideon's band are out there by themselves--without public support from the Kruegers, Taylors, Kroszners, Hubbards, and Mankiws--there is not even the slightest pressure on any Republican High Politicians to act like grownups.

Why Are We Ruled by These Fools? (Weather too Sunny Edition)

David Sanger writes:

Bush's Crisis Itinerary at Mercy of Weather, Even Nice Weather - New York Times : SAN ANTONIO, Sept. 23 - President Bush was supposed to land here on Friday afternoon on the first stop of a tour intended to make clear that he was personally overseeing the federal government's preparations for Hurricane Rita's landfall. But the weather did not cooperate.... Just minutes before Mr. Bush was scheduled to leave the White House, his aides in Washington scrubbed the stop in San Antonio.... Bush flew straight to Colorado Springs, where he plans to monitor the response to the hurricane from the headquarters of the Northern Command, responsible for the military defense of the United States....

At the Federal Emergency Management Agency's command center in Washington a reporter asked him: "Sir, what good can you do going down to the hurricane zone? Might you get in the way?"

Mr. Bush quickly shot back, "One thing I won't do is get in the way." After explaining the purpose of his trip was to make sure federal, state and local officials coordinate well, he added, "We will make sure that my entourage does not get in the way of people doing their job, which will be search and rescue immediately."

But... [W]hen Mr. McClellan announced that the president had scrapped his trip, he said that with the search-and-rescue team preparing to move with the storm, "we didn't want to slow that down."

Another White House official involved in preparing Mr. Bush's way noted that with the sun shining so brightly in San Antonio, the images of Mr. Bush from here might not have made it clear to viewers that he was dealing with an approaching storm.

Impeach George W. Bush. Impeach him now.

External Imbalances and Adjustment in the Pacific Basin

My contribution to this week's conference at the Federal Reserve Bank of San Francisco's Center for Pacific Basin Studies:

On March 2, 1995, the Washington Post announced that I was a genius. I had, it wrote, warned Treasury muckamucks in April 1994 that they should "pay careful attention" to the late Rudi Dornbusch's predictions of a coming peso crisis, and had written "bottom line: peso overvalued." "TREASURY AIDES' MEMOS WARNED OF PESO PLUNGE... ADMINISTRATION DIDN'T HEED SIGNALS" was the headline that the Washington Post editors gave to reporter Clay Chandler's story.

But Clay Chandler was wrong. I was not a genius. Rather than representing my policy-analytic zenith, my few and brief memos on Mexico in the spring of 1994 represented my policy-analytic nadir. I did write--eight months before the Mexican peso crisis--that everyone should "pay careful attention" to Rudi's analysis. I did write that Rudi's bottom line was that the peso was overvalued and headed for crisis. But Clay Chandler was at that moment doing the bidding of Senator Alfonse D'Amato, who wanted to gin up accusations of incompetence against Clinton political appointees. Thus there was no space in his article for him to report my own bottom line: My bottom line was that I could not conceive of a world in which long-run capital flows from America to Mexico netted less than $20 billion a year, and that given that magnitude of fundamental capital flow, the peso was not currently overvalued.

I'm still not sure where I went wrong. U.S. rich and capital intensive. Mexico poor and capital scarce. Mexico moving from a kleptocratic bureaucracy toward a more open political system more interested in capitalist development. Mexico gaining guaranteed tariff-free access to the largest consumer market in the world. It seemed to me that the consequence had to be a large capital inflow into Mexico--and thus that the fundamental value of the peso was one that supported a substantial Mexican trade deficit.

But American businesses' desires to locate their capital to earn higher profits by taking advantage of Mexico's relatively low wages and relatively literate workers was outweighed by the desires of the Mexican rich to locate their savings in places they regarded as safe. The big risk they thought they faced was something going wrong politically in Mexico, and so they thought one had better have a large Citicorp (or Barclays) account in case one had to suddenly cross the Rio Grande in a small rubber boat. The capital flow in the mid- and late-1990s--the capital flow today--was not out of but into the United States, and the true "fundamental" value of the peso was a low-value one that supported substantial net capital exports from Mexico, not a high-value one that supported substantial net capital imports.

As I said, my policy-analytic nadir. What I had thought was external balance--Mexico's current-account deficit--turned out to not be balance at all.

Since I am here replacing Dooley, I have to ask: Is it possible that what we now see as imbalance is not really imbalance at all? Back in the late-1990s, the standard talking points were that the world economy was out of balance, that it could not function indefinitely with the U.S. serving as importer of last resort, and that it was important that the world economy balance up and not balance down because balance it would, and balance soon.

Since then the U.S. current-account deficit has only grown.

Is the current situation "unsustainable"? For how long could the U.S. continue to run a current-account deficit of, say, 7% of GDP?

We can all do the math. Assume a U.S. real growth rate of 3.5% per year, a real rate of return on foreign capital invested in the U.S. of 4% per year, and a constant 7% of GDP current-account deficit, and find that in 2022 the U.S. net foreign asset position crosses -100% of GDP, with a current-account deficit of 7% of GDP, a trade deficit of 3% of GDP, and net income payments to foreign owners of capital of 4% of GDP. A net foreign asset position of -100% of U.S. GDP is conceivable: Britain, after all, had a net foreign asset position of +150% of then-British GDP in 1913. The trade deficit between now and 2022 has to shrink by an average of a little less than a quarter of a percentage point per year. That's a very gradual rate of closure of the trade deficit. Is the real exchange depreciation necessary to support such a gradual closing of the U.S. trade deficit large enough to make investments in dollar-denominated securities a bad deal at current exchange rates? The private market has voted "no": while it is no longer eager to take up the flow of dollar-denominated assets moving abroad, it is still more than happy to hold the stock of dollar-denominated assets that move abroad in the past.

There is an alternative scenario, one in which foreigners'--including foreign central banks'--desired holdings of dollar-denominated assets shortly hit the wall, and the asset price shifts that result from desired holdings' hitting the wall reduce, or do not increase, confidence in the dollar.

In this alternative scenario, the U.S. has to move about ten million workers out of currently-favored sectors--construction, home-equity-credit financed consumer expenditures, and so on--into export and import-competing manufactures. How much structural unemployment does such a sectoral shift require, and how long does the structural unemployment last? Other countries have to shift up to forty million workers out of export manufactures into other industries, and to generate demand for the products of those industries (without destabilizing their own monetary systems and asset prices, as Japan appears to have done at the end of the 1980s). The U.S. Federal Reserve would have to cope with whatever inflationary pressures are generated by rising import prices. Foreign central banks would have to cope with whatever stresses on their own asset prices are created by enormous losses of value in the stocks and bonds of their exporting companies.

I suffered a big enough shock from my policy-analytic nadir moment a decade ago that I am very cautious about declaring that I know a fundamental external imbalance when I see it. But one thing makes me exceptionally nervous--makes all of us exceptionally nervous right now. The market's current prices appear to give a zero weight to the hit-the-wall hard-landing scenario, and 100% weight to the U.S.-acquires-an-enormous-negative-net-foreign-asset position.

More Bush-League Executives in the Executive Branch

In February 2003 Daniel Davies asked the question:

Bush-League Implementation: Archive Entry From Brad DeLong's Webjournal : D-squared Digest -- A fat young man without a good word for anyone: Can anyone... give me one single example of something with the following three characteristics:

1. It is a policy initiative of the current Bush administration
2. It was significant enough in scale that I'd have heard of it (at a pinch, that I should have heard of it)
3. It wasn't in some important way completely f***** up during the execution.

Now the Washington Post reports that the Bush administration's "reform" of the CIA is, not unexpectedly, a SNAFU: that Porter Goss is the wrong person for the job:

Panel Briefed by Spy Manager Who Quit: Robert Richer, the outgoing No. 2 official in the CIA's clandestine service, made an unusual appearance at a closed session of the Senate Select Committee on Intelligence yesterday to answer questions about how his concern over a lack of leadership at the agency triggered his retirement. The afternoon session was not publicly announced; neither senators nor staff members who attended would even confirm Richer's presence during their weekly session devoted to "hot topics." "He was impressive," was all one participant in the meeting would say yesterday, insisting that because of committee rules he could not be identified.

Richer's departure is a setback for the CIA and particularly CIA Director Porter J. Goss, who selected him for the job less than a year ago. In leaving as assistant deputy director of operations, Richer joins a number of senior clandestine managers, including several with Middle East expertise, who have left since Goss took over the agency one year ago Saturday. Richer is a former CIA station chief in Amman, Jordan, and had headed the Near East division.

On Sept. 14, less than a week after Richer announced his retirement at a Directorate of Operations leadership meeting, he had a private session with Goss to explain his decision.According to sources close to both men, Richer was blunt in his assessment of Goss's tenure and urged Goss, a Republican former congressman from Florida who once chaired the House Permanent Select Committee on Intelligence, to communicate a vision for the agency and demonstrate leadership that senior career officials could rally behind."

Rob laid at his doorstep, in a collegial way, that Goss is out of touch," said one officer whose identity is protected by law. "It fell on deaf ears," the officer said. Richer left the meeting angry and walked out of the Langley headquarters for perhaps the last time, several officers said.

Impeach George W. Bush. Impeach him now.

Grounds for Complaint

Let me acknowledge now that Prometheus 6 has *enormous* *justified* grounds for complaint--not just in 2006, but now and for as far in the future as eyes can see.

I'm reminding you of this now so I have all the grounds for complaint I need in 2006 | Prometheus 6: There are three posts from my archives I'd like you to read, in order.

Come get yer identity politics right here

Atrios and Tapped never read my blog (with comments by Brad DeLong)

I think I have too many RSS feeds

The point?

1. The issues that inform the posts have never been addressed

2. I have always been difficult-don't expect that shit to change

All are well worth reading.

Continue reading "Grounds for Complaint" »

Vested Interests...

Google writes:

Official Google Blog: Google Print and the Authors Guild: Posted by Susan Wojcicki, Vice President, Product Management: Today we learned that the Authors Guild filed a lawsuit to try to stop Google Print. We regret that this group chose to sue us over a program that will make millions of books more discoverable to the world -- especially since any copyright holder can exclude their books from the program. What's more, many of Google Print's chief beneficiaries will be authors whose backlist, out of print and lightly marketed new titles will be suggested to countless readers who wouldn't have found them otherwise.

Let's be clear: Google doesn't show even a single page to users who find copyrighted books through this program (unless the copyright holder gives us permission to show more). At most we show only a brief snippet of text where their search term appears, along with basic bibliographic information and several links to online booksellers and libraries.... The use we make of all the books we scan through the Library Project is fully consistent with both the fair use doctrine under U.S. copyright law and the principles underlying copyright law itself, which allow everything from parodies to excerpts in book reviews....

Just as Google helps you find sites you might not have found any other way by indexing the full text of web pages, Google Print, like an electronic card catalog, indexes book content to help users find, and perhaps buy, books. This ability to introduce millions of users to millions of titles can only expand the market for authors' books, which is precisely what copyright law is intended to foster.

Nineteenth Century Household Staff

From Victorian Web:

What Kind of Staff Would a Victorian Household Have?: John Burnett, Professor of Social History, Brunel University: Victorian households built up their staffs of domestic servants in accordance with a well-understood pattern: this was based on a natural and logical progression from general functions to more specialized ones, heavily reinforced by an outpouring of literature and advice on domestic economy and household management. Domestic help began with a daily girl or charwoman. The first living-in servant would be a 'general' maid-of-all-work, almost always a young girl often of only thirteen or fourteen: the next addition a house-maid or a nurse-maid, depending on the more urgent needs at the time. The third servant would be the cook, and these three -- either cook, parlour-maid and house-maid, or cook, house-maid and nurse-maid -- then formed a group which could minimally minister to all the requirements of gentility. At this point, the first manservant would usually appear, whose duties would combine indoor work such as waiting and valeting with care of the horse or pony and carriage; J. H. Walsh placed the income level necessary for this at £500 a year in 1857.

Beyond this, the progression was not so predictable. The fifth servant might be a lady's maid or a kitchen-maid to act as assistant to the cook, or a nursemaid if there was not one already. The sixth would almost certainly be another man, acting as butler and releasing the other as a wholetime coachman or groom, which would be necessary with ownership of a four-wheeled carriage and an income of £1,000 a year. Beyond six servants, increases would follow as a result of increasing specialization -- on the male side footmen, valets, a chef and a housesteward, and on the female a housekeeper, a governess, more lady's-maids, upper and lower parlour-maids, a laundry-maid and additional kitchen- and scullery-maids. On landed estates, there would, of course, also be outside staff such as gardeners and gamekeepers, as well as many more men and boys working about the stables.[176]

Thus, in a very wealthy town house there might be up to about twenty servants, and on a country estate up to thirty or forty. Great establishments like this could still form in the nineteenth century very much the same kind of total communities they had in the Middle Ages, highly structured, authoritarian and inward-looking, largely self-sufficient and independent of the rest of society. [145]

Why Oh Why Can't We Have a Better Press Corps? (Mike the Mad Biologist Weighs in)

Mike the Mad Biologist is not mad in the sense of "insane," but mad in the sense of "outraged." He is shrill:

Mike the Mad Biologist: What Was Richard Cohen Thinking?: Richard Cohen's column is... mind boggling:

But if you told me, as some have been implying, that Bush is a racist or that he doesn't care about black people, I would not only say that you're wrong but add, "Not the George Bush I know." Of course, I don't know George Bush personally. But in his first presidential campaign, I traveled with him and tried, as he might say, to look into his heart. Conveniently enough, he sometimes wears it on his sleeve -- never more so, as I discovered, than when he talks about poor kids and racial and ethnic minorities. His feelings for them -- especially for poor kids -- are genuine. This is what I believed then and this -- his incompetent performance regarding Hurricane Katrina notwithstanding -- is what I believe now....

But Bush is not cut from that cloth. He is a contemporary Republican, a person of another generation who, you may have noticed, has a black woman as secretary of state and had a black man before her. Under him, the GOP began an outreach to black Americans, and unless the Democrats wake up it will ultimately succeed. As Karl Rove well knows, all he has to do is pick up a small percentage of the black vote and he ends the current 50-50 electoral split. Bush, who won an impressive 27 percent of the black vote in his reelection bid for Texas governor, could have been the man to do this.

Sounds pretty reasonable, until you start, erm, thinking. Nevermind the 'some of my best Cabinet members are black' crap, has Cohen forgotten what Bush did to win the Republican primary in South Carolina? For those keeping score at home, Bush and his sociopathic minions smeared John McCain by claiming that McCain's adopted Bangladeshi daughter was his illegitimate black child. Then, of course, Bush also made the mandatory Republican pit stop at segregationist Bob Jones University. I would be really interested in hearing a defense of race baiting in the pursuit of political power.

[crickets...silence...sun rises...sun sets]

There is none. The only reason Bush has not used race baiting is because he hasn't had to. Until Katrina, Bush could play the "if you're against repeal of the estate tax, you're for the terrorists" card. Rest assured, if it's politically expedient, he will play the race card.... It's not as if it would be out of character for him. Like all aristocrats who possess a strong sense of personal perogative, Bush will do whatever it takes to maintain power. Does that mean I think he constitutively hates black people? No, he's an equal opportunity sociopath.

Why Oh Why Are We Ruled by These Fools? (Tora Bora Department)

Lost at Tora Bora - New York Times: By MARY ANNE WEAVER: Well past midnight one morning in early December 2001, according to American intelligence officials, Osama bin Laden sat with a group of top aides - including members of his elite international 055 Brigade - in the mountainous redoubt of Tora Bora in eastern Afghanistan.... [A]s the last major battle of the war in Afghanistan began, hidden from view inside the caves were an estimated 1,500 to 2,000 well-trained, well-armed men. A mile below, at the base of the caves, some three dozen U.S. Special Forces troops fanned out. They were the only ground forces that senior American military leaders had committed to the Tora Bora campaign.

Yunis Khalis long worried that such a moment would arrive. A theologian and warrior of considerable repute, Khalis knew the Americans well.... And if there was one thing that the octogenarian leader knew, it was that he really didn't like the Americans much at all. Nevertheless, as one head of the fratricidal alliance of Afghan resistance groups, he had accepted Washington's largess.... As the godfather of Jalalabad, the capital of the province of Nangarhar, Khalis controlled a vast territory, including Tora Bora.....

[W]hen bin Laden returned to Afghanistan in May 1996 from his base in the Sudan (after the United States insisted that the Sudanese government expel him), it was Khalis, along with two of his key commanders - Hajji Abdul Qadir and Engineer Mahmoud - who first invited him. And it was also Khalis who, later that year, would introduce bin Laden to the one-eyed leader of the Taliban, Mullah Muhammad Omar.... Khalis gave him two of his fighting positions in the mountains - Tora Bora and Milawa....

Some six weeks after the Sept. 11 attacks and nearly two weeks after the bombing of Afghanistan began on Oct. 7, American military leaders - who had no off-the-shelf invasion plans, not even an outline, for Afghanistan - finally succeeded in getting the first forces in: a 12-man Special Forces A-team helicoptered in from Uzbekistan to the Panjshir Valley. There they joined forces with the Northern Alliance, an anti-Taliban militia that controlled only 10 percent of Afghanistan but to whom Washington delegated the ground war. The view prevailing among senior American military leaders was that overwhelming air power, suitcases full of cash and surrogate militias could win the war. The intricacies of Afghan tribal life appeared to elude everyone.

In late October or early November, according to Scheuer, American operatives went to see Khalis to seek his support.... "It was so bizarre! Didn't anybody know about Khalis's friendship with bin Laden? Or that Khalis was the only one of the seven mujahedeen leaders who remained neutral about, and sometimes even supported, the Taliban?"...

Bin Laden had returned to Jalalabad on or about Nov. 10, a U.S. intelligence official told me recently, and that same afternoon, according to a March 4, 2002, report in The Christian Science Monitor, he gave a fiery speech at the Jalalabad Islamic studies center - as American bombs exploded nearby - to a thousand or so regional tribal leaders, vowing that if united they could teach the Americans "a lesson, the same one we taught the Russians" when many of the chieftains had fought in America's first Afghan war.... [T]he leader of Al Qaeda moved through the banquet hall dispensing white envelopes, some bulky, some thin.... Lesser chieftains, according to those present, received the equivalent of $300 in Pakistani rupees; leaders of larger clans, up to $10,000. Bin Laden really didn't have to buy the loyalty of the Pashtun tribal chiefs; they were already devoted to him. He was, after all, the only non-Afghan Muslim of any consequence in the past half-century who had stood with the Afghans.... The last time bin Laden was seen in Jalalabad was the evening of Nov. 13, when he, along with Khalis's son, Mujahid Ullah, and other tribal leaders negotiated a peaceful hand-over of power from the Taliban to a caretaker government....

As the convoy was being readied, bin Laden said his goodbyes: to the Taliban governor; to Mujahid Ullah, Khalis's son; and to scores of the tribal leaders who had received his white envelopes three days before.... Then he entered a custom-designed white Toyota Corolla, and the convoy sped away toward the mountains of Tora Bora, where he waited for the Americans to arrive....

The American bombardment of Tora Bora, which had been going on for a month, yielded to saturation airstrikes on Nov. 30 in anticipation of the ground war.... On a map, it was little more than a mile from the bottom of the White Mountains to the first tier of the Qaeda caves, but the snow was thick and the slopes were steep and, for the Afghan fighters, it was a three-hour climb. They were ambushed nearly as soon as they arrived. The battle lasted for only 10 minutes before bin Laden's fighters disappeared up the slope and the Afghans limped away. Over the coming days, a pattern would emerge: the Afghans would strike, then retreat. On some occasions, a cave would change hands twice in one day. It was only on the third day of the battle that the three dozen Special Forces troops arrived. But their mission was strictly limited to assisting and advising and calling in air strikes, according to the orders of Gen. Tommy Franks... who was running the war from his headquarters in Tampa, Fla....

Even after the arrival of the Special Forces, the Afghan militias were making little headway in their efforts to assault the Qaeda caves.... They had sent none of their forces to the south, where the highest peaks of the White Mountains are bisected by the border with Pakistan. The commanders, according to news reports, argued vehemently among themselves on what the conditions on the southern side of the mountain were: some insisted it was uncrossable, closed in by snow; other commanders were far less sure....

Brig. Gen. James N. Mattis, the commander of some 4,000 marines who had arrived in the Afghan theater... was convinced that with these numbers he could have surrounded and sealed off bin Laden's lair, as well as deployed troops to the most sensitive portions of the largely unpatrolled border with Pakistan. He argued strongly that he should be permitted to proceed to the Tora Bora caves. The general was turned down. An American intelligence official told me that the Bush administration later concluded that the refusal of Centcom to dispatch the marines - along with their failure to commit U.S. ground forces to Afghanistan generally - was the gravest error of the war.

A week or so after General Mattis's request was denied... Hajji Zaman made radio contact with some of bin Laden's commanders and offered a cease-fire. The Americans were furious.... American intelligence officials now believe that some 800 Qaeda fighters escaped Tora Bora that night. Others had already left; still others stayed behind, including bin Laden.... On or about Dec. 16, 2001, according to American intelligence estimates, bin Laden left Tora Bora for the last time, accompanied by bodyguards and aides....

Tora Bora was the one time after the 9/11 attacks when United States operatives were confident they knew precisely where Osama bin Laden was and could have captured or killed him.... There is no indication that bin Laden ever left Pakistan after he crossed the border that snowy December night.... Defending its decision not to commit forces to the Tora Bora campaign, members of the Bush administration - including the president, the vice president and Gen. Tommy Franks - have continued to insist, as recently as the last presidential campaign, that there was no definitive information that bin Laden was even in Tora Bora.... It was not until this spring that the Pentagon, after a Freedom of Information Act request, released a document to The Associated Press that says Pentagon investigators believed that bin Laden was at Tora Bora and that he escaped....

I puzzled over whether Musharraf... [was] serious about the hunt for bin Laden. No one to whom I spoke was at all convinced. A few weeks earlier, I had asked George Perkovich of the Carnegie Endowment for International Peace, an expert on South Asian security issues, what he thought about Musharraf's commitment to the search generally. "For me, the outstanding question is, At the highest levels in Islamabad is there a conviction that capturing or killing bin Laden would be good for the leadership of Pakistan?" Perkovich replied. "And given the answer to that question, how hard are they willing to try? And can they afford to be seen as being solidly on America's side? I think Musharraf also worries about whether or not Washington will stay the course. Therefore, he's got to keep the Americans online: hold back something that they want. And, in that respect, Osama could be seen as an insurance policy for them."

According to Gary Schroen, the former C.I.A. officer... "If [Musharraf's] hand was ever seen as the one that turned bin Laden over, he wouldn't be able to survive."

Impeach George W. Bush. Impeach him now.

Bad News: Hurricane Rita Is Category 5

From Weather Underground:

Weather Underground: Wunder Blog: SEP 21 2005 - 1:20PM CDT: The latest RECON reports confirm RITA is now a CATASTROPHIC CATEGORY 5 Hurricane. Center Pressure is down to 920mb, and MAX Sustained winds of 153KTs at Flight level -- implying 155mph surface winds. with gusts to 175mph.

SEPT 21, 2005 / 11:45 AM RITA EXTREMELY DANGEROUS CATEGORY 5 INTENSITY WITHIN HOURS SEVERE THREAT TO COASTAL TEXAS FROM NEAR PORT O'CONNOR NORTHWARD TO PORT ARTHUR -- LANDFALL IN 70 HOURS: A RECON just arrived - and found a central pressure of 934MB, with a MAX sustained Flight level wind of 137kts in the east quadrant, implying a surface sustained wind of 135mph. Satellite estimates now indicate RITA may in fact have reached CAT 5 Intensity -- although this cannot be confirmed until the Aircraft completes a full sampling of the winds around the entire storm. The Thermal Eye wall temperature gradient is now up to 10°C - indicate of a strong CAT 4 / borderline CAT 5 hurricane. The 25NM Wide eye is currently located near 24.1N/ 85.80W or 700NM SE of Galveston, TX - and is moving west at 10Kts - slightly slower than 12 hours ago...

Though the storm may or may not have actually attained CAT intensity --based on the current imagery derived data - and that fact RITA will be spending the next 12-18 hours crossing the Loop Current -- there is no longer much doubt the storm will become a CAT 5 Hurricane. From that point on -- Rita will likely fluctuate in intensity as eye wall replacement cycles commence -- but also -- by Thursday, the storm will be moving over slightly cooler waters -- and the SST analysis shows a serious of 'warm' and 'cool' water pools of water scattered about the Gulf. Passage over a slightly cooler area of water would no doubt cause some weakening, while the converse would be true if is moves across a warmer pool of water. However, with the storm moving at a solid 10-12Kts -- and no significant slowdown expected -- the change in intensity may not be as pronounced as typical -- since the storm is 'on the move' and will continually be moving over still relatively warm surface waters.

The major area of shallow warm water is within 100NM of the Texas coast. This combined with some slight increase in shear expected during the final 12 hours before landfall -- should drop the WIND INTENSITY down by 1 full Category. HOWEVER, as we learned from Katrina -- Wind Intensity, used for Categorizing a Hurricane, doesn't always tell the whole story. Assuming RITA does attain CAT 5 intensity, and stays at that strength, or close to it -- it will develop a huge CATEGORY 5 storm surge that will strike the Texas coast - regardless of any wind speed decrease during the final 12 hours before landfall. Officially, Katrina hit the MS Coast as a strong CAT 3 - but produced a catastrophic Category 5 storm surge damage for a 120 mile stretch of coast line to the east. Rita may strike with the same CAT 5 storm surge -- but I believe it will cover a somewhat smaller extent of coastline -- about 50NM - compared to Katrina's 120 mile wide path of utter devastation. But keep in mind even if the storm does come ashore near Freeport -- the storm surge in Galveston Bay will be severe.

The latest 12Z model runs are clustered very tightly on a landfall between Port O'Conner and Freeport Saturday morning & the consensus for intensity estimates are for a strong CAT 4. Those living in the coastal area from near Corpus Christi to Galveston should begin evacuation within the next 24 hours. Those living north of Galveston to Lake Charles, LA, and from Corpus Christi to Brownsville -- should have a 'Plan' in place in the event the storm veers off the expected track...

Republican Quality Intelligence

Here we have:

Susie Madrak: WASHINGTON, Sept. 13 -- American aviation officials were warned as early as 1998 that Al Qaeda could "eek to hijack a commercial jet and slam it into a U.S. landmark," according to previously secret portions of a report prepared last year by the Sept. 11 Commission.


Pacific Views: Who could have predicted 9/11?: From Condoleezza Rice on May 16, 2002: "I don't think anybody could have predicted that these people would take an airplane and slam it into the World Trade Center, take another one and slam it into the Pentagon; that they would try to use an airplane as a missile, a hijacked airplane as a missile."

Will China Allow the Renminbi to Appreciate?

Brad Setser writes:

RGE - Show me the money (really, show me China's reserves): In order to understand China's exchange rate policy, I think it is becoming increasingly important to understand China's exchange rate politics.... Different parts of the state have different interests.... The central bank fairly clearly wants a stronger exchange rate, accelerated banking reforms and more monetary policy independence. It is worried that China's economy is too dependent on investment and exports - and thus is dangerously unbalanced. Other parts of the Chinese state are not so sure.... I don't think China's unwillingness to let the exchange rate move more is just normal prudence... there are times when not moving is more risky than moving. I think this is one of those times.

The combination of faster productivity growth in China than in the US... and the fall in the dollar/ renminbi v. Europe led to a surge in investment in China's export sector.... By the end of 2005, exports will account for 40% of China's GDP, up from about 20% a few years ago. About 2/3s of those exports... go to the US and Europe. That is an enormous sum. More importantly, China is investing over 50% of its GDP, and a very large of that investment is going into the export sector. China is gearing up to export 60% of its GDP - with most of that output going to the US and Europe....

It is widely known that the central bank wanted a bigger move in July, but was overruled by the State Council.... [T]he longer China waits, the bigger the impact of any change will be. The more China invests, the more unbalanced China's economy becomes - the more vulnerable it becomes to a global slump, or to a political tsunami that would reduce the openness of the US and European markets...

Andrew Card as Treasury Secretary?

Bruce Bartlett does not think that Andrew Card is qualified to run the Treasury Department:

The Washington Post reported on Sept. 9 that Treasury Secretary John Snow is once again being shown the door. His rumored replacement is White House chief of staff Andrew Card, who would then be replaced either by deputy chief of staff Karl Rove or Office of Management and Budget Director Josh Bolten. This sounds like a bad plan to me. It was only a few months ago that there were almost daily leaks from the White House about Snow being dismissed. When asked to comment on the record, the White House denied any intention of firing him. Secretary Snow could stay as long as wanted to, a spokesman said, “provided it is not very long,” the Post reported.

Although Mr. Snow eventually got a White House reprieve, he might as well have left.... Even though the secretary of the Treasury chairs the board of trustees of the Social Security trust fund... fundamental reform of our nation’s oldest and largest entitlement program was largely entrusted to a couple of mid-level White House staffers with neither the experience nor the resources to manage such an important project.... Little wonder, then, that the reform effort has gotten no traction, despite an enormous commitment of time by the president in giving pep talks all over the country.... Usually, there is a report drafted by the cabinet department with primary expertise that is published by the Government Printing Office and widely distributed. Such a report would explain the philosophy and rationale for the policy change, and contain a detailed proposal.... Nothing like this was done for Social Security....

Yet despite the widespread criticism of the White House for putting an inexperienced political hack in charge the Federal Emergency Management Agency, it appears poised to do the same thing to the Treasury Department. But as Katrina shows, while it’s not too hard to run a government agency during normal times, it can be extremely difficult in a crisis. In such circumstances, we desperately need people with leadership skills and technical expertise, neither of which former FEMA director Michael Brown had.

Many experts are now deeply concerned about the stresses and strains in the financial sector of the economy and fearful that a crisis could emerge at any moment. The huge budget and current account deficits, rising energy and gold prices, a bubble in the housing market, out of control hedge funds, and a corporate pension system in the process of collapse are just some of the things that could trigger a financial crisis. Should that happen, I fear that Andy Card would be as out of his depth as Michael Brown was in New Orleans...

Certainly there is no reason to think that Andrew Card is qualified to direct either international economic policy coordination, manage the fiscal policy of the United States, or regulate its financial system. And I have not met anybody who has in private praised Andrew Card's performance as White House chief of staff. The consensus is that he has made sure that the president hears only what the president wants to hear. But the job of chief of staff is to make sure that the president hears what the president needs to hear.

Why Oh Why Are We Ruled by These Idiots?

I'll stop calllng this crew "Orwellian" when they stop using 1984 as an operations manual:

FDA Rethinks Women's Chief: Agency Denies Naming Veterinary Official By Marc Kaufman: One week ago, the Office of Women's Health of the Food and Drug Administration sent an e-mail notice to women's groups and others announcing the appointment of Norris Alderson as its new acting director. An FDA veteran trained in animal husbandry who spent much of his career in the agency's Center for Veterinary Medicine, Alderson quickly became the subject of active and largely negative comment on the Internet and elsewhere. The Office of Women's Health serves as a liaison with women's health groups and as an advocate on women's issues; critics said that a man with a primarily veterinary background could not properly fill the role.

The last director, Susan Wood, resigned last month to protest the agency's unwillingness to make a decision on whether to make emergency contraception more easily available.

Three days after the Alderson announcement, the FDA main press office sent out a very different announcement. It said that 20-year FDA veteran Theresa A. Toigo would be the new acting director of the women's health office, and that she would be a champion for women's health inside and outside the agency. Alderson -- and the statement announcing his appointment -- was never mentioned. Asked yesterday who exactly was running the office, FDA spokeswoman Suzanne Trevino said that Alderson had never been appointed acting director. She said that Toigo would take over from the departed Wood, and that her office knew nothing about the statement regarding Alderson, who is the agency's associate commissioner for science. "There was no official decision made until we announced Theresa Toigo's appointment on Friday," Trevino said.

The seeming mystery thickened when several women's groups said that not only did they receive e-mails announcing Alderson's appointment, but also that he was also listed on a Health and Human Services directory last week as the acting director of the office.... Alderson was introduced to the staff last week as the new acting director... had some one-on-one discussions with staff members....

Kirsten Moore, director of the Reproductive Health Technologies Project.... "It underscores our concern about the degree of competence at the leadership level, and about political appointees who just don't know much" about the issues before the agency.

Impeach George W. Bush. Impeach him now.

Why Oh Why Can't We Have a Better Press Corps? (Cable News Department)

Bruce Bartlett is not a happy camper. He's also completely right on this:

Poynter Online - Forums: From BRUCE BARTLETT, senior fellow, National Center for Policy Analysis: Once again, I just got off the phone with a booker for one of the cable news channels who wanted me to play the role of the knee-jerk Bush supporter and I had to decline. Although I am a conservative who generally supports Republican policies and generally opposes those that come from Democrats, I am uncomfortable being locked into that position. I also don’t think it makes for very good television.

I understand that news shows want to show both sides -- or perhaps I should say two sides -- to controversial issues, lest they appear biased towards one position. But why must this always take the form of a debate? Why can’t they interview a person with one position separately and then interview someone else with another position in another segment? Wouldn’t this be a better way of achieving balance than by always having a debate?

It’s hard enough to make one’s point in sound-bite form without being distracted by the debating tactics of one’s opponent. And, unfortunately, everyone is now trained to know that when one has the camera and microphone they are pretty much free to say what they like, even if it is totally off topic and even untrue. On one occasion, my opponent called me a liar on air at the end of the segment, so that I could not respond. Afterwards, off camera, he conceded that I was right. But no one watching the exchange ever knew that....

The fact is -- and everyone knows this -- that few issues are black-and-white. There are always nuances that are impossible to discuss in a debate format. But the debate format creates the illusion that there is always a simple answer to every complex problem and encourages average television viewers to assume that those of us in the Washington policymaking community are all idiots totally beholden to our party, without a lick of common sense or integrity...

Should the Dollar Dive...

The Economist asks what will happen to U.S. interest rates if the value of the dollar dives: If the dollar dives, what will happen to America's interest rates? WHEN policymakers and pundits debate America's current-account deficit, the phrase "hard landin"D is never far from their minds. It sums up what might happen if foreigners tired of financing the gap, now over 6% of GDP: a sinking dollar, soaring interest rates, tumbling asset prices--all dragging America's economy into recession. Optimists, including Alan Greenspan, chairman of the Federal Reserve, think that all this is pretty unlikely. It is far more probable, they say, that America's imbalances will come right gradually, via a (gently) weakening dollar and slower demand growth at home.... But what if it did sink suddenly? Then, surely, the hard-landing logic would come into play: bond yields would rise sharply as investors demanded compensation for the risk of higher American inflation and further falls in the dollar.

Or maybe not. In a new paper*, Joseph Gagnon, an economist at the Federal Reserve, takes issue with this argument. It is true, he says, that currency crashes in emerging economies have sent interest rates soaring. And it used to be true of rich countries, too; but in the past 20 years their experience has been rather different. Since 1985, every industrial country whose currency has crashed--defined by Mr Gagnon as a depreciation of at least 8% in the first year and over 20% in two years--saw its bond yields fall, by 1.5 percentage points on average, the following year.... Mr Gagnon ascribes this change in rich countries' experience to the taming of inflation. A weaker currency might boost bond yields if investors fear higher inflation, or if they think monetary policy might be tightened to combat it. Yields might also be pushed up because investors fear further depreciation, or suspect that borrowers--in particular, the government--might default.... What really matters is the inflation risk, and this has become much less of a worry in the past 20 years. If inflationary expectations are falling, the link between tumbling currencies and rising bond yields may be weakened.... In 1997-98, Australia's dollar tumbled. Net foreign purchases of the country's bonds, worth 5% of GDP in 1996, turned into an outflow of 1% in 1998. Yet bond yields fell by more than two percentage points, partly because of the inflation-fighting reputation of Australia's central bank, but also because investors were worried about the country's growth in the wake of the Asian financial crisis.

The point is that there is no mechanical connection between currency crashes, long-term interest rates and the hardness of a landing. A fall in the dollar when America's economy was at full tilt ought to boost exports and might cause the economy to overheat; interest rates might rise, but no recession would ensue. Or a fall in the dollar might be the product of a slowdown--if, say, America's consumers stopped spending. Then lower, not higher, interest rates could ensue. Mr Gagnon has not refuted the idea that America could have a hard landing; but he has exposed some loose thinking on the subject.

Well, it depends on why the value of the dollar declines. There are a number of possibilities...

  1. If foreigners--especially foreign central banks--stop buying dollar-denominated assets because they decide they have enough dollars, then U. S. long-term interest rates rise as the dollar falls because the lower demand for U.S. long-term bonds pushes their price down and their yield (unless the Federal Reserve takes immediate and strong action to try to keep long-term yields from rising)...
  2. If bad macroeconomic news leads to expectations of a growth slowdown in the U.S., which leads people to expect easier Federal Reserve policy in the future, the dollar will fall (because dollar-denominated assets will be expected to have lower interest rates) and U.S. long-term interest rates will fall too (because financial institutions' attempts to lock-in higher yields boost demand for U.S. long-term bonds...
  3. If the dollar declines because people expect the U.S. to follow a tighter fiscal policy in the future, U.S. long-term bond yields will fall for the same reasons as in (2)...
  4. If the dollar declines because people give up hope that the U.S. will ever control its deficit and so expect a large increase in inflation, the resulting capital flight will push the dollar down and nominal yields on U.S. long-term bonds up (what will happen to real yields is a difficult question to answer)...

These are mixed up with the consequences of:

  1. If after the dollar declines, people expect the dollar decline to continue--then they will sell U.S. long-term bonds and push their yields up...
  2. If after the dollar declines, people expect the previous fall in the dollar to make it likely that it will appreciate and give them the opportunity to earn capital gains on their dollar-denominated assets--then they will buy U.S. long-term bonds and push their yields down...

This was, IIRC, the gravamen of Barry Eichengreen's discussion of Sebastian Edwards's U.S. current account paper at Jackson Hole. Sebastian presented correlations without inquiring as to what the impulse that caused the currency decline and the current-account reversal was. Barry wanted a taxonomy: if the currency declines because of impulse X, then result Y.

Serial Monogamy in Penguins

The National Review's Rich Lowry has won the Stupidest Man Alive contest. Don Luskin can never catch him now:

The Observer | UK News | How the penguin's life story inspired the US religious right: Rich Lowry, editor of National Review, told a conference of young Republicans: '[Emperor] penguins are the really ideal example of monogamy. The dedication of these birds is amazing.'

The "ideal" monogamy that Lowry praises is serial monogamy: the penguins change mates every year. That's not "really ideal" monogamy... unless, of course, Newt Gingrich is the really ideal monogamist.

The mated pair also spends very little time with each other--one or the other is always out in the ocean catching fish. And the male appears to do at least half of the egg-care and child-care.

Why Oh Why Can't We Have a Better Press Corps? (Moral Imbeciles Department)

Eric Alterman watches Fox News. The poor s.o.b. He writes:

Found in the Flood: Bill O'Reilly, deaf and blind to the obvious class implications of the pre-flood exodus, speculated, "A lot of the people who stayed wanted to do this destruction" and wondered why "looters" were not being shot on sight.... Fred Barnes complained that those in need had purposely bilked the taxpayers with their cavalier choice of domiciles. "They know they're going to flood. And when these things happen, they want the taxpayers all over the country to pay, and they do." Charles Krauthammer joshed back, "It's a bit unseemly to talk about cutting off aid to these people while the hurricane is still roaring through Mississippi. But let's give it a try," proceeding to needle Barnes about his own summer house. Together with Brit Hume, the Fox pundits laughed about the rain damage to the cover of the Barnes family swimming pool...

Human Development: More Bigtime Divergence

The reference is to a Journal of Economic Perspectives paper that I was lucky enough to commission from Lant Pritchett, and that he titled: "Divergence, Bigtime." The argument was that over the past century and a half--at least until 1980--as the world became richer and more populous it also became a vastly more unequal place.

Ed Hugh comments:

A Fistful of Euros: More Bigtime Divergence: As people may have noted, last weekend Tobais and I were in Stockholm. One of the topics I wanted to post on but couldn't was the latest Human Development report from the UN.... The report itself is a lengthy document.... A convenient overview can also be found here.

First of all not everything is gloomy. As the report notes:

On average, people in developing countries are healthier, better educated and less impoverished.... Since 1990 life expectancy in developing countries has increased by 2 years. There are 3 million fewer child deaths annually and 30 million fewer children out of school. More than 130 million people have escaped extreme poverty. These human development gains should not be underestimated.

However, there are pluses and minuses.... 18 countries - 12 in Sub-Saharan Africa and six former Soviet Republics...

with a combined population of 460 million people registered lower scores on the human development index (HDI) than in 1990%--an unprecedented reversal. In the midst of an increasingly prosperous global economy, 10.7 million children every year do not live to see their fifth birthday, and more than 1 billion people survive in abject poverty on less than $1 a day. The HIV/AIDS pandemic has inflicted the single greatest reversal in human development. In 2003 the pandemic claimed 3 million lives and left another 5 million people infected. Millions of children have been orphaned.

Aids is certainly an important part of the problem:

Life expectancy gaps are among the most fundamental of all inequalities. Today, someone living in Zambia has less chance of reaching age 30 than someone born in England in 1840--and the gap is widening. HIV/AIDS is at the heart of the problem. In Europe the greatest demographic shock since the Black Death was suffered by France during the First World War. Life expectancy fell by about 16 years. By comparison, Botswana is facing an HIV/AIDSinflicted fall in life expectancy of 31 years. Beyond the immediate human costs, HIV/AIDS is destroying the social and economic infrastructure on which recovery depends. The disease is not yet curable. But millions of lives could already have been saved had the international community not waited until a grave threat developed into a fully fledged crisis.

But the problem in fact extends beyond AIDS, to general population imbalances.... Sub-Saharan Africa accounts for a rising share of child deaths: the region represents 20% of births worldwide and 44% of child deaths. The world has in fact not one population problem, but two. While some economically highly developed societies are increasingly short of children some other, third world, societies are effectively trapped by extraordinarily high birth rates. Niger, for example, with aTFR of 8.0, or Guinea-Bissau with 7.1, or Mali also with 7.1, or Somalia with 7.0, or Uganda with 6.9....

Russian mortality trends pose one of the gravest human development challenges of the early twenty-first century. Such an acute upsurge in mortality highlights the need for better research to identify the causes of excess male mortality and proactive public policies to identify and protect vulnerable populations during periods of rapid socio-economic transition. Particularly important is the development of institutions perceived as legitimate by the population and capable of overseeing a complex process of economic reform...

Why Oh Why Can't We Have a Better Press Corps? (Newsweek Edition)

Dan Froomkin notes yet another reason not to accept anything in Newsweek at face value, ever:

Mr. Big Government: Amid a slew of stories this weekend about the embattled presidency and the blundering government response to the drowning of New Orleans, some journalists who are long-time observers of the White House are suddenly sharing scathing observations about President Bush that may be new to many of their readers. Among them was Newsweek's Evan Thomas.

Now Aaron Kinney writes in Salon, comparing Thomas's piece with some of Newsweek's earlier coverage: "Witness its cover story by Richard Wolffe from Jan. 24, 2005 . . . the subhead of which read: 'He's hands-on, detail-oriented and hates 'yes' men. The George Bush you don't know has big dreams -- and is racing the clock to realize them.'" Wolffe described the president as a man whose 'leadership style belies his caricature as a disengaged president who is blindly loyal, dislikes dissent and covets his own downtime' -- a caricature that looks like a dead ringer after the vacationing president's reaction to Katrina.

Kinney offers a few examples of the contradictions. Wolffe: 'To hear his friends tell it, Bush hates toadies.' Thomas: 'Bush can be petulant about dissent; he equates disagreement with disloyalty' and 'aides sometimes cringe before [his] displeasure.' Wolffe: Bush's 'style in policy briefings is to narrow the debate with a series of questions, crystallizing the competing opinions and exploring the disagreements between his staff.' Thomas: 'After five years in office, [Bush] is surrounded largely by people who agree with him.'...

The interesting thing is that Wolffe--and the high executives of Newsweek--believe that their denials that Bush is a "disengaged president" will have any long-term reputational cost.

Economist's View: Cato Calls for Leadership from Fiscal Authorities

Mark Thoma picks up Jagadeesh Gokhale calling for less fiscal insanity on the part of the Bush administration:

Economist's View: Cato Calls for Leadership from Fiscal Authorities: Cato's Jagadeesh Gokhale speaks on the federal budget deficit in The Financial Times and he is not happy with the leadership he sees from the administration and congress on this issue. The worry is that the fiscal deficit will eventually lead to debt monetization by the Fed:

Only leadership can defuse US fiscal time-bomb, by Jagadeesh Gokhale, commentary, FT: Alan Greenspan recently warned that monetary policy “cannot ignore the potential inflationary risks inherent in our current fiscal outlook . . .” He also said: “I assume that [fiscal] imbalances will be resolved before stark choices again confront us and, if they are not, the Fed will resist any temptation to monetise fiscal deficits.” ... Unfortunately, the “stark choices” fiscal policymakers would face if they fail to resolve the growing fiscal imbalance will eventually confront the Fed. Why? Because continued high deficits and growing debt will drain the economy of investible resources. It will also reduce foreign lenders’ confidence in US ability to resist the temptation to inflate away the real value of growing federal debt – much of which is held abroad. That may lead them to divert their savings from US shores, further draining domestic investment.

If that happens, ... domestic unemployment will increase and political pressure on the Fed to stimulate economic activity will grow. Direct monetary stimulus entails purchasing more Treasury debt for cash to keep interest rates lower than would be consistent with an “inflation neutral” level – precisely the action Mr Greenspan abjures. So the question remains: how long can his successor continue serving the price-stability goal and ignore calls for direct action? ...

Managing the public’s inflation expectations has been Mr Greenspan’s quintessential skill. ... However, and here is the really hard question, does performing such a superb job of managing inflation expectations while maintaining price stability exacerbate the problem by allowing the nation’s fiscal imbalance to grow? ... By allowing fiscal policymakers to prolong their “no tax-hikes” versus “no-spending-cuts” ... Greater confidence in the ability of monetary policy to mop up problems created by fiscal profligacy may be enabling the very irresponsible fiscal policies ... Ultimately, defusing the fiscal time-bomb will require sustained leadership directly in federal fiscal management.

We've seen this game between the fiscal and monetary authorities before. I’m sure I disagree with Cato as to how to solve the deficit problem, but that aside I too worry about the pressures to monetize the debt in coming years. That’s why I think it is appropriate and necessary for the Fed chair to discuss the implications of budget deficits and this is another place where, in my opinion, more leadership is needed.

"Debt monetization" is economist-speak for "lots and lots of inflation"

The Efficiency of Large Organizations Once Again

Apropos of my view on the consequences of the fact that there are large organizations that are nevertheless highly, highly efficient:

Shouldn't the fact that WalMart finds it more efficient to be a bureaucracy of 1.5 million people--rather than to split itself up into 15,000 companies of a hundred employees each--make Arnold Kling a little hesitant in his declarations that FEMA was bound to foul up this badly no matter what? Serious thoughts about when wants to use market and when one wants to use command-and-large-organizations--and how one then controls command-and-bureaucracy--would be very welcome here.

Sebastian Holsclaw comments:

Large company bureaucracy can sometimes minimize the inherent problems of bureaucracy because they are constantly disciplined by losing money when they don't act properly. Government bureaucracy almost never has that kind of month-to-month accountability. Small government bureaucracy can be disciplined by other means--usually social connections with the community. These types of things don't scale up into a large bureaucracy. The military sometimes avoids this trap by repeatedly focusing the minds of their soldiers on the fact that their own personal survival depends on working efficiently--and even then the military often has the kinds of problems that are endemic in a large government bureaucracy. An organization like FEMA, with tests to its efficiency often coming years apart, is highly likely to be deeply inefficient....

Sebastian Holsclaw is an extremely insightful writer and thinker from whom I have learned an enormous amount: that is why it is worth noting the times he goes awry, and I think he goes awry here. He says that it is because of market competition that large company bureaucracies "can" minimize inefficiency. That seems to be wrong. Market competition gives large-company managers powerful reasons to minimize inefficiency. But just because there are reasons to do things doesn't automatically mean that they happen--people still have to do them.

There is no magic "market dust" that the market sprinkles on organizations to make them efficient. Managers make organizations efficient. Managers of organizations embedded in markets have strong incentives--the fear of losing your job and the desire for more commodious living--to work hard at making their organizations more efficient. But there are other possible motivators as well: the pleasant feeling of a job well done, the pleasant feeling of having helped someone, the shame of public humiliation when you have messed up, loyalty to the person who put you in the job, and so forth.

I think we would all agree that these alternative motivating factors were not sufficient to induce appropriate performance and effort on the part of George W. Bush, Michael Chertoff, and Michael Brown. But this is at least as much a statement about who they are as a statement about whether FEMA could have been expected to do a reasonable job in New Orleans.

Why Oh Why Are We Ruled by These Idiots? (Fiscal Irresponsibility Watch)

Andrew Samwick is not a happy fiscal camper:

Vox Baby: A Katrina Tax Surcharge: Discouraging news from the President's remarks today:

WASHINGTON (AP) - President Bush on Friday ruled out raising taxes to pay for Gulf Coast reconstruction, saying other government spending must be cut. "You bet it will cost money, but I'm confident we can handle it," he said.

Bush spoke after his advisers warned that Hurricane Katrina relief and reconstruction costs will swell the national debt by $200 billion or beyond. "It's going to cost whatever it costs," he said. "We're going to be wise about the money we spend." Bush did not put a price tag on the costs or say what government programs will be cut.

Where to begin?

I'll start by noting for the benefit of the folks working on the President's speeches that the sentence, "It's going to cost whatever it costs," gives the audience no confidence in the next statement, "We're going to be wise about the money we spend."

I was a fan of cutting other government spending before Katrina, and I am a fan of it now. I hope that the President is right that "we can handle it." The President will have to sort that out with the Republican leadership on the Hill, who seem to believe (quite counterfactually) that there is no more fat to trim. Leave that aside for the moment, and let's ask the following question:

If we can handle it now, why weren't we handling it before?

Why does rebuilding New Orleans compete favorably with this unspecified set of least useful programs, but not funding Social Security personal retirement accounts? Or the new Medicare prescription drug benefit? Or simply lowering the debt burden on future generations?

But I digress. If we have decided that rebuilding New Orleans to the tune of $200 billion is a national objective (and I haven't seen nearly enough debate on that subject in the Capitol), then we ought to fund it by reducing our consumption of everything else. The simplest way to do that would be to impose an income tax surcharge that funds the rebuilding over a given period. Over the next three years, for example, individual income tax receipts are projected to average about $1 trillion per year. So everyone has to pay a 6.7% surcharge over those years, maybe a bit more, since Katrina's economic impact should lower the projections for taxable income and the surcharge itself will discourage economic activity. Over a four year horizon, the surcharge would be 5%, before those adjustments. These are percentages of the taxpayers' tax bill, not of their taxable incomes.

Taxes may be bad, but deficits are surely worse. What's the explanation for why future generations should have to pay for this one, too?

One--very partial--explanation would be that neither of the Bush Treasury Secretaries and neither of the Bush OMB Directors have done their institutional jobs as guardians of long-run fiscal stability. Bush's refusal to finance the costs of rebuilding from Katrina provided a very good opportunity for Snow and Bolton to resign--if they cared about their reputations outside the administration, that is.

Applications to New Orleans?

What are the chances that the Bush administration will be able to manage the rebuilding of New Orleans? Via Laura Rozen:

War and Piece: Iraq Reconstruction Fiasco: Compliments of the Bush administration:

The United States has poured more than $200 million into reconstruction projects in this city, part of the $10 billion it has spent to rebuild Iraq. Najaf is widely cited by the military as one of the success stories in that effort, but American officers involved in the rebuilding say that reconstruction projects here, as elsewhere in the country, are hobbled by poor planning, corrupt contractors and a lack of continuity among the rotating coalition officers charged with overseeing the spending...

But in a series of interviews, American military officers and Iraqi officials involved in the reconstruction described a pattern of failures and frustrations that Army officers who have worked in other parts of Iraq say are routine. Residents complain that the many of the city's critical needs remain unfulfilled and the Army concedes that many projects it has financed are far behind schedule. Officers with the American military say that corruption and poor oversight are largely to blame...

But American officers say there is almost no oversight after a contractor is given the job. The Army pays small Iraqi contractors in installments - 10 percent at the outset, 40 percent when the work is half done, 40 percent on completion and the final 10 percent after fixing problems identified in a final inspection. On larger projects, contractors are paid by the month, regardless of how much work is actually done.

Penalty clauses for missing deadlines are rare, and some contractors drag out their projects for months, officers say, then demand more money and threaten to walk away if it is not forthcoming...

Part of the problem is that much of the money is spent before any work is done. The International Monetary Fund reported recently that a third to half of the money paid to foreign contractors is spent on security and insurance. Importing equipment also eats up cash. Major Smith said the hospital's new boiler, for example, was being shipped from the United States.

At the maternity hospital across town, Dr. Yassin could hardly disguise her mounting frustration. She said the contractor, the Parsons Corporation, had repaired the hospital's reverse osmosis water purification equipment, but that little else had been accomplished in the five months since the renovation began.

Only one of the hospital's four elevators is working, and that is the one Parsons left in operation while the others were supposedly being repaired, she said, adding that no one is working on the elevators now. Major Smith said Parsons had completed the work but that it was so shoddy the Army would not certify the elevators for use. He said the company had since agreed to bring in elevator specialists to redo the job.

Parsons was also supposed to fix the hospital's incinerators, but it completed the work without hooking up gas lines to fuel them, Dr. Yassin said.

A Parsons spokesman in California said that all work on the hospital would be completed in November and blamed insurgent activity in the area for the delays. The hospital director, though, said that there had never been any fighting around the site, and that Najaf had been free of major violence for more than a year.

Budget Illiteracy

Jesse Taylor bangs his head against the wall as he realizes that Glenn Reynolds knows next to nothing about what the government spends money on:

Pandagon: As far as I can tell, the conservative conception of the federal budget is a lot like a 4-year-old's, except that "candy" is replaced with "DARE funding". Instapundit asks where budget cuts should be made in order to pay for Katrina recovery, and here's the post in full:

FUNDING KATRINA RELIEF: Bush seems to be shoveling out the cash, which has led some people to suggest cutbacks elsewhere -- though curiously the press mostly seems to mention Iraq. Here's an InstaPundit poll on the question that explores some other alternatives. Express yourselves!

Where should we cut spending to finance Katrina relief?

  • Farm subsidies
  • Federal support for public broadcasting
  • The DARE program
  • Congressional travel and staff allowances
  • All of the above

There's a reason the press mentions Iraq - it costs a lot of f------ money. Guess what? You want to cull money from the federal budget, defense is likely the first place you're going to find it, particularly in an unpopular and unfocused war effort that's spinning its wheels.

Federal support for the Corporation for Public Broadcasting is $400 million a year. DARE, according to its opponents, spends $700 million a year...but only about one percent comes from federal funding - around $7 million, at its highest. Slashing congressional travel and staff allowances would likely save money - but you're talking about the hundreds of millions at best, not billions. Farm subsidies are the only truly fruitful area of slashing, but the fact that three areas that would barely scrape together a billion dollars are being shoved in with an area that constitutes (as of 2003) $16 billion in federal spending says something really disturbing - conservatives want to cut a budget they know nothing about in order to run a government they know even less about.

You've gotta wonder what these fiscal illiterates think these programs actually cost. And then you have to laugh at them. Repeatedly.