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November 2005

Does Manufacturing Matter?

Menzie Chinn says that it does. When the U.S. current account deficit shrinks, it will have to shrink accompanied by an increase in manufacturing employment, because manufactures are the easiest goods to export and also are substitutes for imports. Manufacturing employment has gotten hammered to an unbelievable degree in the Bush era:


Worse Than You Can Imagine

The Bush administration is not only worse than you imagine even after taking account of the fact that it is worse than you imagine, it is worse than you can conceivably imagine:

Issuing Contracts, Ex-Convict Took Bribes in Iraq, U.S. Says - New York Times : By JAMES GLANZ: A North Carolina man who was charged yesterday with accepting kickbacks and bribes as a comptroller and financial officer for the American occupation authority in Iraq was hired despite having served prison time for felony fraud in the 1990's. The job gave the man, Robert J. Stein, control over $82 million in cash earmarked for Iraqi rebuilding projects.

Along with a web of other conspirators who have not yet been named, Mr. Stein and his wife received "bribes, kickbacks and gratuities amounting to at least $200,000 per month" to steer lucrative construction contracts to companies run by another American, Philip H. Bloom, an affidavit outlining the criminal complaint says. Mr. Stein's wife, who was not named, has not been charged with wrongdoing in the case; Mr. Bloom was charged with a range of crimes on Wednesday. In the staccato language of the affidavit, filed in Federal District Court in the District of Columbia, Mr. Stein, 50, was charged with wire fraud, conspiracy, interstate transportation of stolen property and conspiracy to commit money laundering.

But the list of charges does little justice to the astonishing brazenness of the accusations described in the complaint, including a wire transfer of a $140,000 bribe, arranged by Mr. Bloom, to buy real estate for Mr. Stein in North Carolina. The affidavit also says that $65,762.63 was spent to buy cars for Mr. Stein and his wife (he bought a Chevrolet; she a Toyota), $44,471 for home improvements and $48,073 for jewelry, out of $258,000 sent directly to the Bragg Mutual Federal Credit Union into accounts controlled by the Steins.

Mr. Stein's wife even used $7,151.58 of the money for a "towing service," the complaint says. Much of this money was intended for Iraqi construction projects like building a new police academy in the ancient city of Babylon and rehabilitating the library in Karbala, the southern city that is among the holiest sites for Shiite Muslims.

After Mr. Stein awarded contracts for this work to Mr. Bloom, who eventually received at least $3.5 million himself, according to the complaint, the work often was not performed or was done shoddily, the prosecutors say. Mr. Stein was arrested in North Carolina on Monday, the Justice Department said in a statement. He appeared in court on Tuesday, represented by Jane Pearce, an assistant federal public defender in North Carolina's Eastern District, said Elizabeth Luck, a spokeswoman for the office. The Eastern District includes Fayetteville, where Mr. Stein is listed as a homeowner.

Beyond confirming Mr. Stein's appearance in court, "we do not comment on pending litigation in this office," Ms. Luck said, adding that she could not say whether Mr. Stein planned to retain a private lawyer. Little is known about Mr. Stein except that he served in the Army and was convicted in federal court in 1996 for "access device fraud," a felony. Court papers show he was sentenced to eight months in prison and ordered to pay $45,339.25 in restitution.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.

Civic Virtue

The right to vote: your most important right:

THE RELIABLE SOURCE: Ken Starr may have bailed on the Beltway for the sun and surf of Malibu, where he's dean of the Pepperdine law school... but he left his electoral heart in the Old Dominion.Starr showed up with his wife at a Fairfax County polling site Sunday to vote early as an absentee but was turned away when his name was not found on the rolls. Officials say the former Bill Clinton nemesis lost his Virginia registration by responding affirmatively to a change-of-address query earlier this year. Records show that Starr has not yet registered to vote in California, more than a year after moving there.


Nathan Newman has a convincing argument that Alito should not be confirmed: that he is an enemy of liberty, democracy, and good government: [F]orget Roe--that's just confirmation of what everyone suspected, and I continue to believe (along with Ruth Bader Ginsburg) that Roe was not particularly helpful to abortion rights in the long-term. But what is most striking about Alito's statement is this line:

In college, I developed a deep interest in constitutional law, motivated in large part by disagreement with Warren Court decisions, particularly in the areas of criminal procedure, the Establishment Clause, and reapportionment.


For the non-lawyers out there, Alito meant he was against the Supreme Court decisions requiring that all state legislative districts be designed to guarantee "one person, one vote."... [T]he reapportionment cases--Baker v. Carr and Reynolds v. Syms--dealt with a problem that democratic voting inherently could not correct, namely the lack of real democracy in most state legislatures. In Tennessee for example, the state had drawn up voting districts back in 1901 and had refused to redraw the district lines since then, meaning that all urban growth had been packed into a few districts where those voters were denied equal political power to voters in other districts with fewer voters and thus far more power per voter.

UPDATE: My father was taking a class taught by legal process honcho H.L.A. Henry Hart when one of the reapportionment cases came down. He says that Hart went berserk in the classroom: since the U.S. Constitution included a radical departure from one-person one-vote--the Senate--how could the Supremes, as a matter of legal process, dare say that states could not do (as part of their own internal politics) what the federal government had done (as part of its internal politics)? That it was unjust for Tennessee's government to be dominated by rural voting interests was, to Hart, beside the point: the business of the Supreme Court was to say what the law is, not to establish justice.

In addition to legal process folks, originalists have an enormous problem with the reapportionment cases. Ask Jemmy Madison whether state legislative and congressional districts should have to be drawn to include equal populations, and he would think you insane. The Constitution guarantees a republican form of government, he would say, not a mob-rule democracy. If the legislature of Tennessee wants to discount urban voters 75%, he would say, it has a perfect right to do so.

But I haven't read recently about any originalists (save Alito) saying that the reapportionment cases were wrongly decided. Perhaps they are recognizing that a written constitution for a common-law judicial system is a strange, subtle, and wondrous thing.

Crush That Mortgage Interest Deduction!

Writing from his huge villa on the hillside (three miles northwest of my 3400 square foot villa in the canyon) Hal Varian endorses the Tax Reform Commission's attempt to cut back on the home mortgage deduction. He is, of course, right:

Economic Scene: Certainly the panel's least popular suggestion is to limit the mortgage interest deduction. Under current law, homeowners can deduct interest on mortgages of up to $1.1 million... the panel proposed that this cap be significantly reduced and that the deduction be replaced with a 15 percent tax credit.

A change of this sort would probably have a significant impact on housing values.... But many economists would argue that the panel's proposal does not go far enough.... The truth of the matter is that housing is highly subsidized in this country and we would probably be better off if the tax treatment of housing were brought more into line with that of other assets. How is housing subsidized? Let me count the ways... the mortgage interest deduction... the deduction for property taxes... the capital gains exclusion... the deduction for points on mortgage loans... the deduction of up to $100,000 on home equity loans... home office deductions... homeowners are not taxed on the implicit rent they receive from their housing investment....

An excessive subsidy on one asset means that less will be invested in other assets. The money put into building those huge villas on the hillside could have been put into factories, office buildings and schools.... Given the huge subsidies to housing, it is likely that we as a country have overinvested in this area....

[T]his is unlikely to happen anytime soon.... The housing tax subsidy has been built into housing prices... cutting back could lead to painful capital losses on home values. If you give a lollipop to a baby, it may make him smile, but you will pay dearly for that smile if you try to take the candy away...

Kevin Drum, Hornswogglee

Kevin Drum gets hornswoggled. He writes:

The Washington Monthly: LET THE SELLER BEWARE.... Jonah Goldberg is taking some abuse for pointing out today in his maiden column for the LA Times that FDR lied about World War II. I don't think that defending Jonah will become a regular feature here, but there's actually nothing much objectionable about saying this. FDR, after all, was a pretty consummate smooth talker...

Ah. But Jonah Goldberg doesn't say that FDR lied about World War II. Jonah Goldberg says:

Los Angeles Times: Clare Boothe Luce... insisted that FDR "lied us into war."... Luce wasn't slandering Franklin Delano Roosevelt. Indeed, the evidence that FDR lied is far greater than the evidence that Bush did...

Yes, FDR wanted desperately to convince America to rearm, and to aid the allies. He was eager to fight Hitler to the last Briton, and to use American economic pressure to convince Japan to end its attempt to conquer China.

But Jonah Goldberg's claim that FDR "lied us into war"? That's a lie. America's war in the Pacific began when Admiral Nagumo's warplanes attacked Pearl Harbor. America's war in Europe began when Hitler declared war on the United States.

Save your powder, Kevin. The interesting thing for you to write about is not Jonah Goldberg's lies about FDR, but Jonah Goldberg's "Yeah. Bush lied. So what?"

History of Economic Thought

Steven Guess's Wednesday evening class on Marxism rolls toward its conclusion. I know he put a lot of work into preparing it last spring. I'll have to chase him down and ask him how it went:

Marxism/Communism: A Survey and Analysis: Contact: Faculty Sponsor: [Gerard] Roland. Course Website: Marxism is often discussed but rarely objectively described. This class will introduce students to Marxist ideology, and explore modern challenges to Centrally Planned Economies in the post-Soviet era. It will also compare theoretical Marxism with historical Communism. Finally, students will be encouraged to challenge the course facilitator and Marxist/Capitalist ideas during the semester.

Steven's Pub: The Final Paper for The Decal: This is the list of topics students can choose from for the final paper in my Marxism Decal.

  1. Write a Letter to Wal-Mart CEO H. Lee Scott . In your letter, address the issues of Outsourcing, Low Wages, Unionization, and local community disruption (feel free to throw in anything else you'd like too).
  2. Respond to the statement "The Soviet Union was an unforeseen consequence of Marxist ideology rather than a perversion of Marxist principles."
  3. Look up Cuban statistics on health, productivity, education, and other standards of living. You may wish to consult the CIA World Fact Book and the United Nations website. Did the centralization of economic production result in a better society? Offer some analysis as to why, or why not. Be sure to define what you mean by "better society."
  4. Respond to the statement "Marxism is an Unproven Proposition that is mostly theoretical"
  5. Go to the American Communist Party website. Analyze their page "Why YOU should join the Communist Party" Address the following questions in your analysis:
    1. Will Communism solve the three problems outlined by the Party?
    2. Is Communism the best way to solve these problems?
    3. In what way do these ambitions relate to the Principles of Communism, as expressed by Engels?
  6. If exploitation in America is increasing, inequality is rising, and capitalism thriving, why is the union movement in decline? And secondly, if the union movement is in decline, does that mean Marx's vision for Communism in America impossible? Be sure to put some general time frame in your ideas.
  7. Respond to the statement "Europe has both private property, and social equality. Therefore, capitalism can be reformed and it is not necessary to adopt a socialist state to achieve a better society."
  8. Analyze the Democratic Party platform. Should a Communist vote Democrat, or should they boycott the Democratic party and vote for more substantial change? Contrast the issue of "lesser of two evils" and "standing on principle."

The Community College Dean Tries to Stop the Cycle of Abuse

The Community College Dean writes lasciate ogni speranza:

Confessions of a Community College Dean: Ask the Administrator: Stopping the Cycle of Abuse: At the risk of alienating my entire readership and everybody with whom I work, I’d strongly advise against targeting a career as a college history professor.... The job market for history professors is dreadful, and has been for a generation. In fact, you can strike the word ‘history’ from that sentence and replace it with any liberal-arts discipline without invalidating the meaning. It’s absurdly difficult to find full-time work on which you could make an adult wage.... The length of training for college professors is dysfunctional, archaic, and abusive. Ph.D.’s in liberal arts disciplines usually take about 7 years... [during which] you will live on a pauper’s income... that’s 7 fewer years during which you were building up equity in a house, stashing away money for retirement, and generally enjoying life. (The cost of income foregone is what economists call ‘opportunity costs.’ Most academics try very hard to repress this knowledge, since it’s profoundly depressing.)... A more life-friendly option that would still allow you to teach in a college would be to get the high school teaching gig, use tuition remission to get a Master’s degree in history while you’re working there, and then sign on as an adjunct....

I know that one of the first commandments of academia is Thou Shalt Reproduce Thy Own, but I can’t in good conscience.... I don’t know what I would have done differently. Had I not moved to the state in which I went to grad school, I wouldn’t have met The Wife, and my life would be unimaginably different. My career path has been idiosyncratic enough that to generalize from it would be silly, so I won’t. But I certainly don’t recommend this to anyone who could imagine himself happy any other way. The chain of abuse has to stop.

Economics is very different. First of all, Economics Departments appear to have made a conscious collective decision (I still can't figure out how) to downsize their graduate programs in the 1970s--to accept smaller numbers of teaching assistants and larger class sizes in order not to be churning out Ph.D.s for which academic jobs would be absent. Then the explosion of business schools created a large additional demand for economists. Then the expansion of world finance created a host of other jobs--in the Federal Reserve, at the IMF, in private-sector banks--that economists could fill. Plus there's the fact that deans appeal to all kinds of social-solidarity and other motives to discourage professors in other disciplines from bargaining hard for higher salaries and fishing for outside offers. In Economics, by contrast, responsiveness to market forces is a moral imperative.

I remember noticing back in 1980 that the economists applying for assistant professorships in Social Studies were 26 and had written drafts of two articles, while the historians were 35 and had published two books...

Vernor Vinge

Charlie Stross is happy:

Charlie Stross: What did I discover but a bound manuscript copy of "Rainbows End" by Vernor Vinge, and a request for promotional quotes?

I could do that! How about:

  1. I have not yet been sent a bound ms. copy, but I am sure that Vernor Vinge's Rainbow's End is the finest space opera ever written!
  2. When confronted by a new science fiction novel written by Vernor Vinge, all sophonts immediately down tools and read it from cover to cover--twice.
  3. Nothing could do more to increase the well-being of science fiction fans than the mass cloning of Vernor Vinge. As it is, we all have to wait painfully long periods of time between novels.
  4. If I had a bound ms. copy of Vernor Vinge's Rainbow's End, I would have something much better to do than to type out promotional quotes.

Donald Rumsfeld Sez: Iraq? War? Who, Me?

Noah Schachtman observes Donald Rumsfeld whispering that he never really wanted to attack Iraq, and that responsibility for America's massive strategic defeat lies on people like Feith, Wolfowitz--and George W. Bush:

Defense Tech: Rummy Backing off from Iraq?: This article from Sunday's Washington Post Magazine is the second major attempt I've seen in the last few months to separate Donald Rumsfeld from the Iraq war.... The idea, basically, is that Rummy was more fixated on modernizing the military than invading any country. Iraq just happened to be the country that the President wanted to wack.

Rumsfeld portrayed the memo as a warning blast, an attempt to do "everything humanly possible to prepare" Bush for the awful responsibility that had settled onto his presidential shoulders -- and his shoulders alone. For there comes a point when even the secretary of defense must realize that "it's not your decision or even your recommendation," Rumsfeld reflected with Woodward. By which he meant the Iraq war wasn't Don Rumsfeld's decision or recommendation.

As if to underline the point, Rumsfeld also told Woodward that he couldn't recall a moment, in all the months of planning for the war, when Bush asked whether his defense secretary favored the invasion. Nor did Rumsfeld ever volunteer his opinion.... "After considerable time with the top-ranking civilian and military leaders of the Pentagon, a new picture of Donald Rumsfeld has emerged for me, and I now believe something that I would have thought preposterous before: There are no 'Rumsfeld wars,'" Thomas P.M. Barnett wrote in July's Esquire.

Of course, he's integral to how the Pentagon has conducted these operations.... But they're not his wars, and they never were. And in that, critics of the war might have something. The rationales behind the Iraq war belonged to the departing neocons Wolfowitz and Feith.... And of course the president.

But if that's true, then what was Rummy doing in the White House on February 11, 1998? That's the day he and six other conservatives pleaded with then-National Security Advisor Sandy Berger to go after Iraq. Or a few days earlier, when he signed an open letter to President Clinton which said: "The only acceptable strategy is one that eliminates the possibility that Iraq will be able to use or threaten to use weapons of mass destruction. In the near term, this means a willingness to undertake military action as diplomacy is clearly failing. In the long term, it means removing Saddam Hussein and his regime from power. That now needs to become the aim of American foreign policy."

For that matter, what was the Secretary of Defense thinking on September 11, 2001? "Rumsfeld was saying that we needed to bomb Iraq," [Richard] Clarke said to [60 Minutes' Leslie] Stahl. "And we all said ... no, no. Al-Qaeda is in Afghanistan. We need to bomb Afghanistan. And Rumsfeld said there aren't any good targets in Afghanistan. And there are lots of good targets in Iraq. I said, 'Well, there are lots of good targets in lots of places, but Iraq had nothing to do with it.'"

Rumsfeld may not like how this war is turning out. But he's been for it for a long time. And no amount of after-the-fact spin is going to change that.

Why Oh Why Are We Ruled by These Liars? ("Imminent Threat" Edition)

Firedoglake says that the only reason that Bush didn't call Saddam Hussein an "imminent threat" was because "imminent" has too many syllables:

firedoglake: Define "Imminent": The new GOP meme, as repeated by White House marionette Chris Wallace on Fox News Sunday this morning, is that "The President never said Saddam posed an imminent threat." (You can watch it at Crooks & Liars.)

I'm guessing Chris pinched this off the daily Fox News "official opinion" crib sheet and didn't actually do much research into the claim himself, because that is just some remarkable revisionist history. Sadly Jay Rockefeller was ill-prepared to answer the charge, so mindful of being ever-helpful, we present this little historical refresher:

"Well, of course he is.” -- White House Communications Director Dan Bartlett responding to the question: “Is Saddam an imminent threat to U.S. interests, either in that part of the world or to Americans right here at home?”, 1/26/03

"No terrorist state poses a greater or more immediate threat to the security of our people and the stability of the world than the regime of Saddam Hussein in Iraq." -- Secretary of Defense Donald Rumsfeld, 9/19/02

"Absolutely." -- White House spokesman Ari Fleischer answering whether Iraq was an "imminent threat," 5/7/03

"This is about imminent threat." -- White House spokesman Scott McClellan, 2/10/03....

"The world is also uniting to answer the unique and urgent threat posed by Iraq whose dictator has already used weapons of mass destruction to kill thousands." -- President Bush, 11/23/02

"There are many dangers in the world, the threat from Iraq stands alone because it gathers the most serious dangers of our age in one place. Iraq could decide on any given day to provide a biological or chemical weapon to a terrorist group or individual terrorists." -- President Bush, 10/7/02

"The Iraqi regime is a threat of unique urgency." President Bush, 10/2/02

You're right. He didn't use the specific word "imminent."

Too many syllables.


Somebody else who sees the new Pride and Prejudice as "Brontefied":

The New Yorker: The Critics: The Current Cinema: “Pride and Prejudice” by ANTHONY LANE: What has happened is perfectly clear: Jane Austen has been Brontëfied. In the book, Lady Catherine appears in daylight, “too early in the morning for visitors.” The film has rightly kept the hint of social insolence but switched the hour, so that the dramatic may be shaded and inked into melodrama. The question is not whether the director was justified in that transmutation but whether he had the choice; whether any of us, as moviemakers, viewers, or readers, retain the ability—-not so much the scholarly equipment as the imaginative clairvoyance—-to see Austen clearly. Maybe we are doomed to view her through the smoked glass of the intervening centuries, during which the spirit of romance, and the role of the body within it, have evolved out of all recognition. Why, when Lizzie accompanies her aunt and uncle to the Peak District of England, should the film take care to set her silent upon a peak, her dress and tresses stirring in the wind, if not to drop the clanging hint that Mr. Darcy is less an icy gentleman of means than a britches-busting Heathcliff in the making?

The hint becomes a yodel toward the end, as Matthew Macfadyen strides grimly through a wet meadow, at some ungodly hour, with Keira Knightley squarely in his sights. He has donned a long coat, which sways fetchingly in the mist; obviously it was copied from a Human League video of the nineteen-eighties.... For her part, Knightley has been crisp and quick throughout-—more girl than woman than seems fit, perhaps, and a boyish girl to boot, but ready and able to hold her own in any rally of wits. Now, like the queen in “Aliens,” she extends her famous underbite and gets down to business.... Any resemblance to scenes and characters created by Miss Austen is, of course, entirely coincidental.

Pay No Attention to the Memo Behind the Curtain!

This is very bad for Judge Alito. Not only did he tell Ed Meese that he believes very strongly in the legal position that Roe v. Wade was wrongly decided, but he tells Dianne Feinstein that he didn't mean what he told Meese--that he was just telling a powerful person who controlled a job he wanted what he thought that powerful person wanted to hear.

Ezra Klein writes:

Ezra Klein: Any Questions?: Well, this should pretty much end debate on Alito's true leanings:

Judge Samuel A. Alito Jr., President Bush's Supreme Court nominee, wrote that "the Constitution does not protect a right to an abortion" in a 1985 document obtained by The Washington Times. "I personally believe very strongly" in this legal position, Mr. Alito wrote on his application to become deputy assistant to Attorney General Edwin I. Meese III.[...]

"It has been an honor and source of personal satisfaction for me to serve in the office of the Solicitor General during President Reagan's administration and to help to advance legal positions in which I personally believe very strongly," he wrote.

"I am particularly proud of my contributions in recent cases in which the government has argued in the Supreme Court that racial and ethnic quotas should not be allowed and that the Constitution does not protect a right to an abortion."

UPDATE: Judge Alito tells Senator Dianne Feinstein not to take the memo seriously: back in 1985, Alito says, he was simply saying what he thought would please a powerful person who controlled a job he very much wanted to have: - Feinstein: Alito backs away from memo - Nov 15, 2005: "What [Alito] said was, 'It was different then. I was an advocate seeking a job. It was a political job,'" the California Democrat said. She said Alito said 1985 was a "very different" time, when he was an advocate for the Reagan administration. As a judge for 15 years, he looks at legal matters differently. "I don't give heed to my personal views. What I do is I interpret the law,'" she said, quoting the 55-year-old judge from New Jersey.

Yglesias's Unified Theory of Bushism

Matthew Yglesias proposes a unified theory of Bush domestic policy:

TPMCafe || Domestic Policy By Idiots: Ordinary political movements take one of two stances on the idea of launching a big, expensive new program to have the government deliver some services. Either they favor such endeavors, or else they oppose them. The Bush Republicans have chosen a third way -- they don't favor this sort of thing, but they implement it anyway in search of political gains and ways of funneling money toward their financial supporters. The result is disaster. Keep in mind that these poor policy outcomes aren't really mistakes or the much-cited "incompetence." It's malice. As during the post-Katrina recovery, the fear is that if you design a program well, people will like it, and support for the dread "big government" will grow. New programs must be poorly designed in order to "prove" that such things don't work.

Tax Reform Books

Joel Slemrod on right-wing tax books:

'The Fairtax Book' and 'Flat Tax Revolution': Almost everyone agrees that our tax system could be a lot better - simpler, fairer and less of a drag on the economy.... These two new books, both coming from the right, suggest that merely reforming the current system is too timid. The correct policy medicine, the authors say, is to junk the income tax entirely and replace it with a consumption tax with a single tax rate for all Americans.

In "The FairTax Book," the syndicated radio host Neal Boortz and Representative John Linder, Republican of Georgia, claim that replacing all federal taxes - income, payroll and estate taxes - with a national sales tax would increase the average household's purchasing power by about 20 percent, end the need for the I.R.S. and turn April 15 into just another spring day. "Once the FairTax takes effect," they declare, "you'll be receiving 100 percent of every paycheck, with no withholding of federal income taxes, Social Security taxes or Medicare taxes - and you'll be paying just about the same price for T-shirts and other consumer goods and services that you were paying before the FairTax."

For a book that claims in its introduction to be "about honesty," this statement falls far short.... The honest truth is that replacing the current tax system with any system that raises the same amount of revenue (as Boortz and Linder claim their plan does) may make us better off, but only by redirecting our resources away from dealing with complex filing requirements and improving our incentives to work, save and innovate - not by creating the kind of free-lunch miracle suggested here. As for "saying goodbye" to the I.R.S., the authors' plan does so only by passing the responsibility for tax collection to the states. And what a responsibility it would be....

There's one more problem. Moving to a national sales tax would drastically shift the tax burden away from high-income families and toward low-income families....

Steve Forbes is also pushing a tax plan, one he claims would "free America" from "the tyranny of the federal tax code."... Under the flat tax, there would be no deduction for mortgage interest, state and local taxes or charitable contributions. A 17 percent rate would apply to all taxable income, whether the taxpayer is Bill Gates, Steve Forbes or the mechanic who fixes their cars. Investment income would not be taxed at all under the individual tax, which by itself benefits predominantly higher-income taxpayers. The flat tax would indeed represent a significant simplification over the current system. (On the book's cover, Forbes is shown brandishing a postcard printed with "The Steve Forbes Flat Tax Form" - though, to be fair, the current 1040EZ would fit on the same card.) And cleaning up the tax base would, on balance, allow the economy to operate more efficiently and reduce the extent to which one's tax burden depended on arguably irrelevant factors such as whether one rented or owned a home. These benefits, however, have nothing to do with having a single tax rate. In fact, one of the architects of the flat tax, Robert E. Hall of Stanford University, now favors a plan, known as the X-Tax, that would apply a graduated rate structure to this simplified tax base.

Aspects of the flat tax deserve serious consideration. Unfortunately, Forbes's book does not provide it. Instead, like "The FairTax Book," it promises a free lunch. "Everyone" gets a tax cut under his plan. To guarantee that sound-bite feature, he would give people the choice of computing taxes under the flat tax or staying with the old tax system. That stunning concession guarantees that the nine million words of the current tax code and regulations would not go away after all but would be expanded by hundreds of thousands of new words laying out the flat tax rules and, inevitably, the new rules governing the consequences of going back and forth between the two systems. And then there's the hundreds of billions of dollars that Forbes's plan would add to the deficit. Forbes says that his plan will stimulate the economy so much that the apparent revenue shortfall doesn't materialize. If only this were true. Serious analyses suggest that a flat tax would be good for the economy, but would not produce the economic nirvana needed to close the huge revenue gap....

Tax reform deserves objective analysis of the sort these books do not provide. Fortunately, the president's tax reform panel has done a much better job.... Both the proposals they outline simplify the tax base, though they retain a reduced mortgage interest break (in the form of a flat credit rather than an itemized deduction, which reduces the tilting of the benefits toward wealthier taxpayers). Both retain a graduated personal rate structure and try to maintain the current distribution of the tax burden.

Contemplation of radical tax alternatives is exhilarating, and could help to avoid the kind of loophole-to-loophole combat that tax war veterans recall from 1986, the last time we made wholesale changes in the system. But much progress toward these goals - including eliminating the need for most Americans to file tax returns - can be made within the basic framework of the current system. These books, to use the language on the jacket of "Flat Tax Revolution," are calls to join a crusade. We'd be better off just starting a conversation.

Matt Drudge Goes Into Opposition

Pam Spaulding of Pandagon writes:

Pandagon: 'Bush rarely speaks to father, family is split': Get the Drudge siren going... Insight Mag is reporting (via... Drudge - and I'm not linking to him) that [George W. Bush] isn't getting on well with Poppy these days, and that it really is a bunker mentality at the White House.... I think about it -- this guy is running the country and has access to nukes, for god's sake.

President Bush feels betrayed by several of his most senior aides and advisors and has severely restricted access to the Oval Office, INSIGHT magazine claims in a new report.

The president's reclusiveness in the face of relentless public scrutiny of the U.S.-led war in Iraq and White House leaks regarding CIA operative Valerie Plame has become so extreme that Mr. Bush has also reduced contact with his father, former President George H.W. Bush, administration sources said on the condition of anonymity.

"The atmosphere in the Oval Office has become unbearable," a source said. "Even the family is split."

INSIGHT: Sources close to the White House say that Mr. Bush has become isolated and feels betrayed by key officials in the wake of plunging domestic support, the continued insurgency in Iraq and the CIA-leak investigation that has resulted in the indictment and resignation of Lewis %u201CScooter%u201D Libby, Vice President Dick Cheney%u2019s former chief of staff.

The sources said Mr. Bush maintains daily contact with only four people... first lady Laura Bush, his mother, Barbara Bush, Secretary of State Condoleezza Rice and Undersecretary of State Karen Hughes. The sources also say that Mr. Bush has stopped talking with his father, except on family occasions.

Maybe Poppy's finally told the little guy that the current administration has f*ed up U.S. relations with half... the globe.... After all, Poppy's had to help the poor bastard out all his life, and what does he have to show for it -- a son that is a dangerous, unstable dunce -- and everyone knows it.

Someday, I want to find somebody who can tell me why George H.W. Bush thought it a good idea to give his rolodex and his political base to his eldest son.

I'm Sad to See That Douglas Holtz-Eakin is leaving the Congressional Budget Office

He has done a very good job--both at the CBO and earlier at the CEA.

I do wish that David Rosenbaum could have written the real story: the story is that under Doug the CBO produced a lot of highly credible and useful information to assist Congress in making its decisions. It's not that Doug was a "thorn in the side" of the Bush administration. Reality was the "thorn in the side."

Director of Congressional Budget Office to Leave - New York Times: Douglas J. Holtz-Eakin, a former White House economist who has often been a thorn in the side of the Bush administration since he became director of the nonpartisan Congressional Budget Office nearly three years ago, announced on Monday that he planned to leave at the end of the year.

In a message to the budget office staff, Mr. Holtz-Eakin, 47, said he would join the staff of the Council on Foreign Relations here.... Mr. Holtz-Eakin is the most recent in a series to irritate Republican Congressional leaders by refusing to adopt a party line. Within weeks of his appointment by Republican leaders in early 2003, Mr. Holtz-Eakin declared, to their dismay, that Mr. Bush's tax and spending plans would do little or nothing to stimulate long-term economic growth. Subsequently, the budget office released a report that found that Mr. Bush's tax cuts were heavily skewed in favor of the wealthiest Americans. Mr. Holtz-Eakin rejected Republican demands that budget forecasts take account of strengthened economic activity from tax cuts without analyzing the drag caused by increased spending.

Under his direction, the budget office often took issue with the political goals of Republicans. It raised doubts about proposals to partly privatize the Social Security system, concluded that abolishing estate taxes would reduce charitable contributions and calculated that allowing same-sex marriages would slightly increase federal revenues. Donald B. Marron, the deputy director, will become the acting director of the budget office until Congressional leaders choose a replacement for Mr. Holtz-Eakin.

Problems with the Market for Health Insurance

Paul Krugman writes:

Health economics 101: SEVERAL READERS have asked me a good question: we rely on free markets to deliver most goods and services, so why shouldn't we do the same thing for health care?.... It comes down to three things: risk, selection, and social justice....

In 2002 a mere 5 per cent of Americans incurred almost half of U.S. medical costs. If you find yourself one of the unlucky 5 per cent, your medical expenses will be crushing, unless you're very wealthy -- or you have good insurance. But good insurance is hard to come by, because private markets for health insurance suffer from a severe case of the economic problem known as "adverse selection," in which bad risks drive out good.... That's why insurance companies don't offer a standard health insurance policy, available to anyone willing to buy it. Instead, they devote a lot of effort and money to screening applicants, selling insurance only to those considered unlikely to have high costs, while rejecting those with pre-existing conditions or other indicators of high future expenses.... What happens to those denied coverage?... Some of those unable to get private health insurance are covered by Medicaid. Others receive "uncompensated" treatment, which ends up being paid for either by the government or by higher medical bills for the insured. So we have a huge private health care bureaucracy whose main purpose is, in effect, to pass the buck to taxpayers....

I'm not an opponent of markets. On the contrary, I've spent a lot of my career defending their virtues. But the fact is that the free market doesn't work for health insurance, and never did. All we ever had was a patchwork, semiprivate system supported by large government subsidies.

That system is now failing. And a rigid belief that markets are always superior to government programmes -- a belief that ignores basic economics as well as experience -- stands in the way of rational thinking about what should replace it.

Budget Reconciliation Stalls...

Stan Collender, who knows the federal budget process, writes about "reconciliation":

BUDGET BATTLES: A Dead Horse? Tuesday, Nov. 15, 2005: Anyone who has followed the 2006 federal budget debate since it began in January has known that reconciliation was always going to be difficult to enact this year. Even after the political strength President Bush proclaimed after his reelection last November, it was clear that the spending and tax changes likely to be considered would present very difficult budget challenges for the White House and congressional leadership alike. So when the House and Senate reconciliation efforts both stalled on the same day last week, the only thing surprising or shocking about the surprise-bordering-on-shock that was apparent around Washington was that anyone was caught off-guard.

The House leadership stopped the spending cut reconciliation bill debate because it didn’t have enough votes; the Senate Finance Committee decided it did not have enough support to report out its reconciliation tax cut plan. Both things happened within hours of each other. Yet both were extremely predictable. In many cases, they had actually been predicted. Given everything that has happened since the first doubts were cast on reconciliation as the budget debate began, the fact that it has run into problems is anything but surprising.

For example:

The debate in the full House and the Senate’s Finance Committee were scheduled to take place less than two days after the 2005 election, which was widely regarded as a disaster for the White House and the strongest indication yet of the decreasing support for Bush and his policies.

Second, since January, there has been a steady and significant drop in the president’s and Republican leadership’s job approval ratings. That means the political capital the White House thought it had to spend on the budget debate either was far less than it expected or was already gone by the time reconciliation was considered. It also means that the leadership was less able to demand and receive the political obeisance it had always previously received on budget matters.

Third, reconciliation and reconciliation-related votes have already had to be postponed several times this year. Immediately after Hurricane Katrina, congressional leaders decided to delay the debate because they feared the spending cuts would not be approved. They also didn’t want to consider the reconciliation tax changes many said would primarily benefit higher-income families and individuals when lower-income people were seen to be the ones hurt by the storm.

Fourth, House leaders also postponed, apparently indefinitely, a vote to amend the budget resolution adopted earlier in the year so that additional spending cuts -- especially appropriations -- would be required. This was in spite of the fact that the proposed amended budget resolution was announced by the leadership with great fanfare and was said to demonstrate its continued commitment to reduced federal spending. That amended budget resolution was also a sop to Republican fiscal conservatives in the House whose influence was seen to be on the rise. That presumed increase in power was shown to be fleeting in the extreme when the leadership prevented the vote because of a lack of support.

Fifth, the people who in previous years have been so instrumental in enforcing White House and congressional leadership policies and decisions have all become less powerful since the Bush budget was sent to Capital Hill and Congress approved the fiscal 2006 budget resolution. The ethics issues facing Senate Majority Leader Bill Frist, R-Tenn.; the legal problems facing House Majority Leader Tom DeLay, R-Texas; White House Deputy Chief of Staff Karl Rove’s continuing concerns involving the CIA leak case; and the recent questions raised about Vice President Dick Cheney mean that all the enforcers are less able to impose discipline than at any time in the Bush presidency.

Finally, all of these factors enabled Republican moderates to do something on the budget they haven’t done for some time -- stand up to the leadership and the White House. In theory, they have always had this power given the relatively small Republican majorities in both houses. But they have been unwilling to use it for fear of White House or leadership retribution. That fear is now greatly diminished.

The Republican moderates have also not acted because of a concern about being said to be out-of-step with the rest of their own party and the country. That label is now far less likely to stick, given the polls showing that most Americans think the country is going in the wrong direction on the economy and other key issues.

The leadership may be able to work out these problems... the Senate Finance Committee might have managed a deal.... The House leadership is also widely expected to come up with a substantive or procedural deal that will allow the reconciliation spending cut bill to be approved as well.

None of this will diminish the very strong likelihood that the budget world in Washington has shifted significantly away from the White House and congressional Republican leadership over the past few months. That will make a compromise between the House and Senate on what’s left of the budget reconciliation process even more difficult than it was already likely to be. Therefore, it may very well be that the deals worked out in the next few days don’t actually help get reconciliation enacted this year.

Perceptions of Ben Bernanke

Edmund Andrews writes:

Inflation Issue to Dominate Questioning of Fed Choice - New York Times : Ben S. Bernanke, President Bush's nominee to lead the Federal Reserve, will have to fend off two contradictory perceptions at his Senate confirmation hearing on Tuesday. Some Democratic lawmakers worry that Mr. Bernanke, who has contended for years that the Fed should set policy according to an explicit inflation target, will be too focused on price stability and not attentive to employment. Some bond investors, by contrast, fret that Mr. Bernanke will be soft on inflation. As a Fed governor in 2003, he raised alarms about the "jobless recovery" and the dangers of deflation. As a top adviser to Mr. Bush since June, he has been more confident than many Fed officials that inflation would remain low.

Both images are likely to prove simplistic....

Mr. Bernanke, a former professor at Princeton University and a Fed governor from 2002 until earlier this year, is likely to win Senate confirmation without a major fight. "It's noncontroversial," said Senator Jack Reed, Democrat of Rhode Island. "It's hard to argue about his qualifications."...

[S]ome Democrats, worry that inflation-targeting would conflict with the Fed's dual mandate of pursuing both price stability and full employment. In practice, Fed policy under Mr. Bernanke might not be all that different. Many analysts contend that the Fed already has an unstated inflation target, about 2 percent a year.... Mr. Bernanke, for his part, has written that the Fed can deviate from its inflation target - perhaps for several years, if necessary - to cope with an unexpected shock to the economy.

On inflation, many analysts predict that Mr. Bernanke would, at least at the beginning, err on the side of toughness.... But Mr. Bernanke was among the more dovish members of the Federal Open Market Committee, which sets interest rates, when policy makers were worried the United States might be headed toward a downward spiral in consumer prices. In August, as chairman of the Council of Economic Advisers, Mr. Bernanke sounded more confident than Fed policy makers about inflation....

As an academic economist and as a Fed governor, Mr. Bernanke prided himself on speaking clearly and sometimes even bluntly. But on Tuesday, Mr. Bernanke will face lawmakers who want "flexibility" and bond markets that want inflation-fighting credibility.

To satisfy both constituencies, he may have to sacrifice on his plain-speaking.

Ummm.... Some people (who won't let themselves be named) worry that Bernanke is too much an inflation hawk, other people (who won't let themselves be named) worry that Bernanke is too much of an inflation dove, and the only source that will allow himself to be named says that Bernanke's not a controversial nomination. Doesn't Andrews have the wrong lead? And doesn't Andrews have the wrong conclusion? There's no need for Ben Bernanke to "sacrifice on his plain speaking." All he has to do is duck and let those who worry he's too much of an inflation hawk argue with those who think he's too much of an inflation dove.

The Power of Narrative

Two years ago Patrick Nielsen Hayden wrote:

Electrolite: Light of reason. : Light of reason. Arthur Silber is one of the blog world's authentic voices: a free-market capitalist, Ayn Rand-quoting libertarian who is't awed by power or transported by dreams of Middle Eastern empire. An inconvenient voice, if you will.... [T]his liberal holds Arthur Silber in high regard.... Consider hitting his tip jar. We need more Arthur Silbers, definitely not fewer.

Now it looks as though Arthur Silber is back at Go read what he has to say--and do hit the tip jar.

Why Oh Why Can't We Have a Better Press Corps? (When Is Mosul Not Mosul? Department)

Unqualified Offerings spots Condi Rice both visiting and not-visiting Mosul:

Unqualified Offerings: First sentence of the NYT report on Condoleezza Rice's travels:

MOSUL, Iraq The U.S. secretary of state, Condoleezza Rice, made a surprise stop Friday in this violent, Sunni-dominated city in northern Iraq, declaring that it had recently become a success story for the strategy of using Iraqi forces to quell the insurgency.

Ninth sentence, same article:

A month ago, four State Department security officers were killed in Mosul by a roadside bomb, and the city, Iraq's third largest, was not deemed safe enough for her to visit.

How can we send the Secretary of State to Mosul and not send her to Mosul at the same time? By using our advanced super-science. Also, "Mosul" in the first sentence really means Camp Courage, "a heavily fortified military base north of the Tigris River, surrounding an old palace of Saddam Hussein's on the city's northern outskirts," and not Mosul, a "violent, Sunni-dominated city in northern Iraq" at all. But close enough for government (public relations) work!

And close enough for the New York Times as well.

Google as a Post-Von Neumann Architecture

Highly recommended:

Edge: TURING'S CATHEDRAL by George Dyson: Exactly sixty years ago, at the Institute for Advanced Study in Princeton, New Jersey, mathematician John von Neumann began seeking funding to build a machine that would do this at electronic speeds. "I am sure that the projected device, or rather the species of devices of which it is to be the first representative, is so radically new that many of its uses will become clear only after it has been put into operation."... "Uses which are likely to be the most important are by definition those which we do not recognize at present because they are farthest removed from our present sphere."... When the machine finally became operational in 1951, it had 5 kilobytes of random-access memory: a 32 x 32 x 40 matrix of binary digits, stored as a flickering pattern of electrical charge, shifting from millisecond to millisecond on the surface of 40 cathode-ray tubes.

The codes that inoculated this empty universe were based upon the architectural principal that a pair of 5-bit coordinates could uniquely identify a memory location containing a string of 40 bits. These 40 bits could include not only data (numbers that mean things) but executable instructions (numbers that do things) — including instructions to transfer control to another location and do something else. By breaking the distinction between numbers that mean things and numbers that do things, von Neumann unleashed the power of the stored-program computer, and our universe would never be the same.... From an initial nucleus of 4 x 10^4 bits changing state at kilocycle speed, the von Neumann's archetype has proliferated to individual matrices of more than 10^9 bits, running at speeds of more than 10^9 cycles per second, interconnected by an extended address matrix encompassing up to 10^9 remote hosts....

In the early 1950s, when mean time between memory failure was measured in minutes, no one imagined that a system depending on every bit being in exactly the right place at exactly the right time could be scaled up by a factor of 10^13 in size, and down by a factor of 10^6 in time.... Fifty years later, thanks to solid state micro-electronics, the von Neumann matrix is going strong. The problem has shifted from how to achieve reliable results using sloppy hardware, to how to achieve reliable results using sloppy code. The von Neumann architecture is here to stay....

As organisms, we possess two outstanding repositories of information: the information conveyed by our genes, and the information stored in our brains.... He considered the second example in his posthumously-published The Computer and the Brain: "The message-system used in the nervous system... is of an essentially statistical character," he explained. "In other words, what matters are not the precise positions of definite markers, digits, but the statistical characteristics of their occurrence... a radically different system of notation from the ones we are familiar with in ordinary arithmetics and mathematics... Clearly, other traits of the (statistical) message could also be used: indeed, the frequency referred to is a property of a single train of pulses whereas every one of the relevant nerves consists of a large number of fibers, each of which transmits numerous trains of pulses. It is, therefore, perfectly plausible that certain (statistical) relationships between such trains of pulses should also transmit information.... Whatever language the central nervous system is using, it is characterized by less logical and arithmetical depth than what we are normally used to [and] must structurally be essentially different from those languages to which our common experience refers."...

In a digital computer... everything depends not only on precise instructions, but on HERE, THERE, and WHEN being exactly defined. It is almost incomprehensible that programs amounting to millions of lines of code, written by teams of hundreds of people, are able to go out into the computational universe and function as well as they do given that one bit in the wrong place (or the wrong time) can bring the process to a halt.

Biology has taken a completely different approach. There is no von Neumann address matrix, just a molecular soup, and the instructions say simply "DO THIS with the next copy of THAT which comes along." The results are far more robust. There is no unforgiving central address authority, and no unforgiving central clock. This ability to take general, organized advantage of local, haphazard processes is exactly the ability that (so far) has distinguished information processing in living organisms from information processing by digital computers....

[T]emplate-based addressing did not catch on widely until Google (and brethren) came along. Google is building a new, content-addressable layer overlying the von Neumann matrix underneath.... We call this a "search engine".... However, once the digital universe is thoroughly mapped, and initialized by us searching for meaningful things and following meaningful paths, it will inevitably be colonized by codes that will start doing things with the results. Once a system of template-based-addressing is in place, the door is opened to code that can interact directly with other code....

My visit to Google? Despite the whimsical furniture and other toys, I felt I was entering a 14th-century cathedral — not in the 14th century but in the 12th century, while it was being built. Everyone was busy carving one stone here and another stone there, with some invisible architect getting everything to fit. The mood was playful, yet there was a palpable reverence in the air. "We are not scanning all those books to be read by people," explained one of my hosts after my talk. "We are scanning them to be read by an AI."...

Why Oh Why Are We Ruled by These Liars?

Carol Leonnig and Jim VandeHei state the obvious: if Libby is not insane, his perjury is intended to protect Cheney in some way:

Libby May Have Tried to Mask Cheney's Role: In the opening days of the CIA leak investigation in early October 2003, FBI agents... had something that law enforcement officials would later describe as their "guidebook"... the daily, diary-like notes compiled by I. Lewis "Scooter" Libby....

The investigators had much of this information before they sat down with Libby on Oct. 14, 2003, and first heard from him what prosecutors now allege was a demonstrably false version.... Libby said that, when he told other reporters about the CIA operative and her marriage to Iraq war critic Joseph C. Wilson IV, he believed he had first learned the information from Tim Russert of NBC News and was merely passing along journalistic hearsay.... In the aftermath of Libby's recent five-count indictment, this curious sequence raises a question of motives that hangs over the investigation: Why would an experienced lawyer and government official such as Libby leave himself so exposed to prosecutor Patrick J. Fitzgerald? Libby... gave a false story... even though he knew investigators had his notes, and presumably knew that several of his White House colleagues had already provided testimony and documentary evidence that would undercut his own story....

The vice president is shown by the indictment to be aware of and interested in Plame and her CIA status long before her cover was blown.... White House aides privately wonder whether Libby was seeking to protect Cheney from political embarrassment. One of them noted with resignation, "Obviously, the indictment speaks for itself."...

[T]o Libby's defenders, the timing of Libby's alleged lies supports his claims of innocence. They say it would be supremely illogical for an intelligent and highly experienced lawyer to mislead the FBI or grand jury if he knew the jurors had evidence that would expose his falsehoods. Libby, they say, is guilty of nothing more than a foggy memory and recollections that differ, however dramatically, from those of several witnesses in the nearly two-year-old investigation....

Libby... during his first FBI interview... said he believed that he first learned about Plame on July 10 or July 11, 2003, in a conversation with Russert. ... Libby did not seek to deny that he had learned about the Plame link from Cheney -- as revealed by Libby's own notes -- but simply said it had slipped his mind that the vice president was an earlier source of the information than Russert, lawyers familiar with the case said.... Fleischer reportedly told investigators that, at a lunch on Monday, July 7, Libby told him that Wilson's wife worked at the CIA and confided that the information was not widely known. Fitzgerald, in announcing the indictment two weeks ago, called attention to this conversation with Fleischer to show how improbable he regarded Libby's account: "What's important about that is that Mr. Libby . . . was telling Mr. Fleischer something on Monday that he claims to have learned on Thursday."... Fitzgerald got all the reporters' testimony that he had sought. Russert, Time magazine reporter Matthew Cooper and Judith Miller of the New York Times all testified about their conversations with Libby. All contradicted Libby.

Paul Krugman Talks to Campus Progress

They say: | Five Minutes With: Paul Krugman: Q: What prompted you to write your November 4th column “Defending Imperial Nudity?”....

A: We finally reached a point where a lot of people are starting to acknowledge the obvious, which is that we were deliberately hyped into war, and a lot of defenses are coming up. People are still trying to pretend that nothing happened and it all made sense, and I felt that it was time to find a way to play how ridiculous that is.

Q: I get the feeling that we’re living in a really good political satire.

A: Yeah, or a really tawdry political novel. If you tried to make this stuff up, nobody would dare – they’d say that it’s ridiculous.

Q: You’ve written economics textbooks before. If you had to imagine writing another textbook thirty years from now characterizing economic policy under various presidents, how would you talk about the Bush administration?

A: Well, the answer is that there is no policy. What’s interesting about it is that there’s no sign that anybody’s actually thinking about “well, how do we run this economy?” Everything becomes an excuse to do pre-set things instead of an actual response to an event or a real problem. So, the idea was “we’re going to cut taxes on capital income, as opposed to earned income” and whatever happened became a reason to do that....

Q: Having been a strong proponent of globalization whose enthusiasm on the subject seems to have waned a bit, can you talk about where you stand now and how you think it might be most productive for students who work on this issue to talk about it?

A: If you aren’t a little bit tortured about globalization, you’re not paying attention. I got into economics nearly 30 years ago, in grad school. At the time, development was too depressing as a field – there were no success stories. The club of rich countries had closed in the late 1880s, and there really was no way forward. The very good news is that there has been a lot of upward movement in select parts of the third world. All of that is based on exports, on the opportunities presented by globalization. You can’t be against globalization in general if you support third world countries making their way up in the world.

The downside is that there have by no means been success stories across the board. On the one side, you clearly have some of the most vulnerable people in our own society that have been paying the price, and a lot of developing countries have been following the advice from Washington on globalization, and things have gone very badly. It’s a very mixed picture. What I want to hear is not “let’s rally against globalization,” but “let’s try to fix it.” It’s easy enough to say, but where’s the political constituency for that? Anyone who thinks of globalization as a great unambiguous evil hasn’t been paying attention. Anyone who thinks it’s a total good hasn’t been following things that have been happening in places like Argentina.

Q: I recently got good health insurance for the first time in a while, and I can safely say how what a relief it is. Clearly the US lags well behind other industrialized nations in terms of our numbers of uninsured. Can we make the move to universal coverage?

A: There are two questions there: one is economics, one is politics. The economics is really straight forward. Some kind of national health insurance financed out of a mandatory premium on all wages, a tax, however you want to do it – is clearly the dominant system. The US system is a patchwork with big gaps in it, Medicare, Medicaid, employer based coverage, it’s a mess. It’s the wonder of the world. We get worse results at greater cost than anyone else. We have enormous bureaucracy and administrative expenses basically because private insurers and lots of other players in the system are spending lots of money trying not to cover people.

Now, politics, the trouble is, how do you do that? How do we achieve some approximation to a national healthcare system, given the political realities? The funny thing is, happy majorities in the American public, according to polls, favor guaranteed healthcare for everybody, so we’re not talking about something where the public is against the idea. What we’re talking about is a very powerful set of interests and a very powerful set of ideologues in Washington, who have managed to intimidate the politicians. That’s a really hard thing to get through....

Q: Obviously journalism isn’t your only or even your primary job. It seems like that lets you be more independent and more risk taking.

A: Very much so. There was a long period, from September 2001 until early 2004 when I felt like I was really alone among prominent commentators in saying “hey, we’re being lied to, these people are not defending us, they’re lying to us a lot.” I think had I been worried about a journalistic career, about “will the Times keep me?” I would have been much more inhibited. But, the fact is, if the Times had given into pressure and gotten rid of me, my life actually would have improved in a lot of ways. Personally, it would be easier. Still, I don’t think it would be good if every op-ed columnist was like me. Journalism is a craft and there are things I can’t do. I can’t do investigative reporting, I can’t play Carl Bernstein....

The Latest Word on High European Unemployment

Olivier Blanchard's latest on European unemployment:

Olivier Blanchard (2005), European Unemployment: The Evolution of Facts and Ideas (Cambridge: NBER Working Paper No. 11750): Abstract: In the 1970s, European unemployment started increasing. It increased further in the 1980s, to reach a plateau in the 1990s. It is still high today, although the average unemployment rate hides a high degree of heterogeneity across countries. The focus of researchers and policy makers was initially on the role of shocks. As unemployment remained high, the focus has progressively shifted to institutions. This paper reviews the interaction of facts and theories, and gives a tentative assessment of what we know and what we still do not know.

6 Do We Know Enough to Give Advice?

At the end of this tour, one may ask whether we know enough to give advice to policy makers about how to reduce unemployment. I believe we do—-with the proper degree of humility. In this last section, I summarize what I think we know and we do not know.

6.1 A General Story Line

Going back over the last thirty years, there is little question that the initial increase in unemployment in Europe was primarily due to adverse and largely common shocks, from oil price increases to the slowdown in productivity growth. There is not much question that different institutions led to di®erent initial outcomes. Whether collective bargaining led to a decrease in the growth of bargained wages, whether inflation could be used to reduce real wage growth, all played a central role in determining the size of the increase in unemployment.... [T]he increase in unemployment led, in most countries, to changes in institutions as most governments tried to limit the increase in unemployment through employment protection, and to reduce the pain of unemployment through more generous unemployment insurance.... [S]ince the early 1980s, because of financial pressure and intellectual arguments, most governments have partly reversed the initial change in institutions. But this reversal has been partial, and sometimes perverse. The different paths chosen may well explain the differences in unemployment rates across European countries today.... The role of shocks and the interaction with collective bargaining emphasized by initial theories, the role of capital accumulation and insider effects emphasized by the theories focusing on persistence, the role of specific institutions clarified by flow-bargaining models, all explain important aspects of the evolution of European unemployment.

6.2 Which Institutions?

It is one thing to say that labor market institutions matter, and another to know exactly which ones and how. Humility is needed here, and there is no better reminder than the comparison between Portugal and Spain. Both experienced revolutions and wage explosions in the 1970s (the Portuguese labor share reached 100% in the mid 1970s...); both have, at least on the surface, rather similar institutions, including high employment protection. Yet, Spanish unemployment has been very high, exceeding 20% in the mid–1990s, whereas Portuguese unemployment has remained low, with a high of 8.6% in the mid–1980s, and a decrease thereafter.... [T]he history of the last thirty years is a series of love affairs with sometimes sad endings, first with Germany and German–like institutions—-until unemployment started increasing there in the 1990s... -—then with the United Kingdom and the Thatcher–Blair reforms, then with Ireland and the Netherlands and the role of national agreements, and now with the Scandinavian countries, especially Denmark, and its concept of “flexisecurity”....

We know much more about the incentive aspects of unemployment insurance on search intensity and unemployment duration, be it the length and time shape of unemployment benefits, or the form of conditionality or training programs.... We know more about the effects of decreasing social contributions on low wages.... We know more about the effects of employment protection, and the effects on the labor market of introducing temporary contracts at the margin while keeping employment protection the same for most workers.... [A] large consensus-—right or wrong—-has emerged: It holds that modern economies need to constantly reallocate resources, including labor, from old to new products, from bad to good firms. At the same time, workers value security and insurance against major adverse professional events, job loss in particular. While there is a trade-of between efficiency and insurance, the experience of the successful European countries suggests it need not be very steep. What is important in essence is to protect workers, not jobs. This means providing unemployment insurance, generous in level, but conditional on the willingness of the unemployed to train for and accept jobs if available. This means employment protection, but in the form of financial costs to firms to make them internalize the social costs of unemployment, including unemployment insurance, rather than through a complex administrative and judicial process. This means dealing with the need to decrease the cost of low skilled labor through lower social contributions paid by firms at the low wage end, and the need to make work attractive to low skill workers through a negative income tax rather than a minimum wage.

These measures are probably all desirable. If they were to be implemented, would they be enough to eliminate the European problem? I see at least two reasons to worry.

6.3 Collective Bargaining and Trust

The first worry is that these reforms deal only with a subset of the institutions that govern the labor market. An early theme of the research on European unemployment was the importance of collective bargaining. And it is a fact that some of the successful countries, the Scandinavian countries in particular, have very different structures of collective bargaining from, say, France or Italy, with much more of an emphasis on national, trilateral, discussions and negotiations between unions, business representatives, and the state.

This raises two questions. First whether countries such as France or Italy need to also modify the structure of collective bargaining. Second whether, even if they did, the results would be the same as in Sweden or Denmark.... [V]arious measures of trust, from strike intensity in the 1960s to survey measures of trust between firms and workers, [can] explain a substantial fraction of differences in unemployment across European countries. Even if these findings reflect causality from lack of trust to unemployment, it is just a start. The question is whether trust can be created....

6.4 Low Inflation, the Natural and the Actual Rate of Unemployment

Since 2000, European unemployment has been associated with roughly constant inflation. This would suggest that the current high unemployment rate reflects a high natural unemployment rate, rather than a large deviation of the actual unemployment rate above the natural rate. This is indeed the assumption which justifies the focus on inflation by the European Central Bank: Maintaining constant inflation is then equivalent to maintaining unemployment close to its natural rate; this natural rate can only be reduced by labor market reforms, and this is not the responsability of the central bank.

One may however question this assumption. Inflation in the EU15 is now running under 2%, and close to 0% in countries such as Germany. At these low inflation rates, it is not implausible that nominal rigidities matter more, that workers for example are reluctant to accept nominal wage cuts—-a hypothesis explored, for example, by Akerlof et al (1996). In such an environment, it may be that an unemployment rate above the natural rate may lead to low rather than declining inflation. Put another way, it may be that, in fact, an expansion of demand might decrease unemployment without leading to steadily higher inflation. The experience of Spain, where unemployment has steadily decreased without major labor market reforms and without an increase in inflation, can be read in this light.

Another, conceptually different, argument for a more expansionary monetary policy, is that institutional reforms encounter less opposition when economies are growing and unemployment is decreasing.... This argument is an old one (Blanchard et al (1985) already argued for such a “two-handed” approach in Europe) but is still relevant today. One issue however is whether, in fact, growth and the decrease in unemployment do not alleviate the political need for reform, and thus delay rather than encourage reforms. The experience of the late 1990s in Europe, where a cyclical expansion often delayed reforms, is not reassuring in that respect. Developing this last point would take us to the political economy of labor market reform, and this should be the topic of another survey.

Cheney Is All Alone

Gary Farber notes that even John "Death Squads Buried Their Victims Under My Airport" Negroponte won't support Dick "Waterboarding" Cheney:

Amygdala: WHEN EVEN NEGROPONTE WON'T SPEAK UP FOR TORTURE, you know that brave Vice-President Cheney is leading a truly heroic charge for the need to torture.

At a secret briefing for U.S. Senators on Oct. 26, Director of National Intelligence John Negroponte was pointedly neutral on Vice President Dick Cheney's Capitol Hill lobbying on to have the CIA exempted from legislation banning mistreatment of detainees, a senior U.S. intelligence official tells TIME. "It's above my pay grade," the spymaster said, then artfully dodged another question about whether the harsher interrogation tactics Cheney wants the agency to be free to use actually produce valuable intelligence.

Why Oh Why Are We Ruled by These Liars?

The Moderate Voice writes:

The Moderate Voice - Washington Post Says Bush Speech Not Quite Accurate: [I]t contends President George Bush's speech contained a fundamental inaccuracy that some are sure to dismiss as a slight oversight and others will insist represents falsification.... The Post writes:

President Bush and his national security adviser have answered critics of the Iraq war in recent days with a two-pronged argument: that Congress saw the same intelligence the administration did before the war, and that independent commissions have determined that the administration did not misrepresent the intelligence.

Neither assertion is wholly accurate.... Bush and his aides had access to much more voluminous intelligence information than did lawmakers, who were dependent on the administration to provide the material. And the commissions cited by officials... were not authorized to determine whether the administration exaggerated or distorted those conclusions.

To repeat what we've said in many posts here: this administration's biggest problem is its credibility. Stories such as this mean his speech will (once again) be welcomed by always-loyal partisan supporters, immediately seized upon by partisan foes -- and will be yet ANOTHER nail in the coffin for GWB & Co in terms of independent voters or even some of the more conservative Democrats that voted for him and the GOP....

If the White House intent is to indeed go on the offensive against war critics (read that: Democrats, in particular), turning once again to the power-enhancement via division playbook, it may not work this time. Convincing arguments are not arguments that can be shot down in a mere newspaper story -- and this Post story will not be welcome news for the White House.... Add to that White House Press Secretary Scott McClellan's war with the White House press corps and it looks more like more than ever Bush is going to try to get through the next three years by rallying his base.

And expanding his number of political enemies.

It's considerably worse than that. The Bush administration's recent embrace of Chalabi tells us that they are lining up on the side of the deceivers. As Jack Fairweather of the Telegraph wrote a year and a half ago:

Telegraph | News | Chalabi stands by faulty intelligence that toppled Saddam's regime : Mr Chalabi, by far the most effective anti-Saddam lobbyist in Washington, shrugged off charges that he had deliberately misled US intelligence. "We are heroes in error," he told the Telegraph in Baghdad. "As far as we're concerned we've been entirely successful. That tyrant Saddam is gone and the Americans are in Baghdad. What was said before is not important. The Bush administration is looking for a scapegoat. We're ready to fall on our swords if he wants."

Few members of even the Bush base will stand for this.

Harry's Place Reads the Tehran Times

Harry's Place reads the Tehran Times and remembers Noam Chomsky's disingenuous characterization of Robert Faurisson:

Harry's Place: Has Noam Chomsky ever recanted what he wrote in 1980...?

[I]s it true that Faurisson is an anti-Semite or a neo-Nazi? As noted earlier, I do not know his work very well. But from what I have read -- largely as a result of the nature of the attacks on him -- I find no evidence to support either conclusion. Nor do I find credible evidence in the material that I have read concerning him, either in the public record or in private correspondence. As far as I can determine, he is a relatively apolitical liberal of some sort.

As Harry finds Faurisson himself being interviewed by the Tehran TImes...

UPDATE: The consensus is that the answer is "no": No admission by Chomsky that it was wrong to claim that Faurisson was a "relatively apolitical liberal."

Here's the interview:

Interview with Faurisson:

Q: As you know the UN General Assembly on Tuesday (November 1) passed a resolution designating January 27 as an international day of commemoration of the Jewish and other victims of the Holocaust. What is your view on the decision at this time?

Faurisson: For many years now I have been telling my acquaintances in the Muslim world that the Jews and the Zionists want to impose the religion of the alleged "Holocaust" of the Jews on the whole world. It is normal that Jews and Zionists should seek to foist such an imposture on us, for it is the sword and the shield of the Jews in general and of the Jewish State in particular. It is also normal that the Jews and the Zionists should have got the UN to submit to their will to power and so decree that every year the six billion people who inhabit the Earth shall be reminded of the "Holocaust". The Muslim world has been awakening from its too long torpor for only a few years. It ought to have listened to the revisionists long ago and denounced out loud the sham of an alleged German project to exterminate the Jews, the alleged Nazi gas chambers and the alleged six million Jewish victims.

Q: The Holocaust is (claimed) alleged to have happened in Europe so why is its commemoration being set by an international body like the UN?

Faurisson: Allow me to tell you that your question tends to prove that you haven't understood the warnings given by the revisionists. Whenever I, for my part, told Muslims: "Be revisionists! Support the revisionists! Try to understand that it's in your interest to do so", they would respond saying: "All that doesn't concern us. It's a matter between Europeans or Westerners, Jews or Christians. It happened in Europe." For me, such an answer was discouraging but I would come charging back saying: "Open your eyes! What makes for the strength of the Jewish State is the political support, rooted in supposedly ethical grounds, that it enjoys in the entire Western world, where people feel sorry for the Jews because they believe that, during the Second World War, the Germans sought to exterminate them physically, in particular in the alleged gas chambers (not to be confused with the cremation ovens, which did actually exist and about which there was positively nothing criminal).... [T]he citizens of all those Western countries, swamped with Jewish propaganda as they are, believe the "Holocaust" lie and, as long as they believe it, will feel bound to support the Jews and to supply the Jewish State and the Jewish Army with ever more money and arms. The more those in the West believe in the "Holocaust", the more Muslims they will kill and cause to be killed in Palestine, in Afghanistan, in Iraq or elsewhere.... The Jews do not tolerate any questioning of the "Holocaust". Against the revisionists they use physical violence and judicial repression because, on the level of historical and scientific argumentation, they have been defeated hands down by the revisionists. We have been able to expose their lies, one by one. Therefore Jews and Zionists seek refuge in violence and intimidation. They treat revisionists like Palestinians...

Why Oh Why Are We Ruled by These Liars?

Wonkette finds George W. Bush delivering an unbelievable straight line:

History Is Written By the Mission Accomplishers - Wonkette : In a Veteran's Day speech today, Bush came out with the administration's official policy on criticizing the war in Iraq: "While it's perfectly legitimate to criticize my decision or the conduct of the war, it is deeply irresponsible to rewrite the history of how that war began."

Yes. It is. Impeach George W. Bush. Impeach Richard Cheney. Do it now.

Creeping Closer and Closer to the International Financial Crisis Red Zone

This isn't "news"--it's not surprising at all. But it is disappointing.

September Trade Gap Set Record: By VIKAS BAJAJ: The United States trade deficit widened by a surprisingly large 11 percent in September, reflecting both a surge in energy imports after Hurricane Katrina and a steep drop in airplane exports because of a strike, the government reported yesterday. The trade gap with China also set a record. The United States imported $66.1 billion more in goods and services than it exported in the month, breaking the record of $60.4 billion set in February, the Commerce Department reported. The trade deficit in the first nine months of the year totaled $529.8 billion, about 18 percent higher than in the first nine months of 2004. That figure itself was up 21 percent over the period in 2003.... "One-third of the widening of the deficit is the oil bill, and aircraft sales explains most of the rest," said Carl Weinberg, chief global economist at High Frequency Economics, a research firm....

"Only with very weak U.S. growth or a major drop in the U.S. dollar will the trade deficit improve on a sustained basis," said Ethan Harris, chief United States economist for Lehman Brothers. "The reason you need these dramatic movements is that the U.S. has, according to almost every study, an incredible appetite for imports."... "If the Chinese abandon our Treasury market, we would see an enormous jump in interest rates," Mr. Harris said, "and, of course, if we stop buying their products their economy is going to go into recession."

The Chinese government reported yesterday that its October trade surplus with the rest of the world jumped to a record $12 billion in October. It had a total trade surplus of $80.4 billion for the first 10 months of the year, 2.5 times the figure for the period last year....

The time we have to get the U.S. trade account unwedged is limited. We don't know how long we have before we enter the webzone, but we have a year less than we had last November.

Eloi, Eloi, Lama Sabachthani?

Gary Farber takes time away from his plan for Global Internet Domination to direct us to the cage match between Phillip "Republic of Heaven" Pullman and C.S. (Jack) "Aslan the Jesus" Lewis:

Amygdala: PULLMAN VS. LEWIS GRUDGEMATCH. Phillip Pullman again lights into C.S. Lewis in an Observer interview/story. The Beeb covers it, with lots of reader comments.

For Pullman, who is an avowed atheist and a critic of Lewis, that is bad news. 'If the Disney Corporation wants to market this film as a great Christian story, they'll just have to tell lies about it,' Pullman told The Observer.

Pullman believes that Lewis's books portray a version of Christianity that relies on martial combat, outdated fears of sexuality and women, and also portrays a religion that looks a lot like Islam in unashamedly racist terms.

'It's not the presence of Christian doctrine I object to so much as the absence of Christian virtue. The highest virtue, we have on the authority of the New Testament itself, is love, and yet you find not a trace of that in the books,' he said.

The Narnia books, Pullman said, contained '...a peevish blend of racist, misogynistic and reactionary prejudice; but of love, of Christian charity, [there is] not a trace'...

Certainly that is not the view of Disney. Film executives are eagerly anticipating repeating the success last year of Mel Gibson's Jesus biopic The Passion of The Christ, which was shunned by mainstream studios and then picked up by the evangelical churches.

At one level, Pullman is wrong: there's plenty of love in Narnia.

At a second level, Pullman is right: there is very little of: "love your enemies: do good to them that persecute you" in Narnia. More important, I think, is that The Lion, the Witch, and the Wardrobe fails as a Christian allegory: Aslan is not Jesus--at the narrative climax of TLTWATW, Aslan "dies" knowing that it's a trick to destroy the power of the White Witch, while (in the Synoptic Gospels at least) Jesus dies thinking that he has been forsaken.

And at a third level, Pullman is once again wrong: "Christianity" is not just the Synoptic Gospels--it is also the Gospel of John, where Jesus has and knows he has power over the grave; it is the Apocalypse with the human-sized locusts with the stings of scorpions and the faces of women; it is the Knights Templar, and the Crusades, and John Calvin's view that God's attitude toward (most of) us is like the potter's attitude toward the pot that doesn't measure up. What Pullman is saying is not that Narnia is un-Christian, but that Narnia is a kind of Christian that he (and I) do not like very much.

The Deadly Doughnut - New York Times

Tyler Cowen recommends Paul Krugman on the Medicare Drug Benefit:

The Deadly Doughnut - New York Times: Soon millions of Americans will learn that doughnuts are bad for your health. And if we're lucky, Americans will also learn a bigger lesson: politicians who don't believe in a positive role for government shouldn't be allowed to design new government programs. Before we turn to the larger issue, let's look at how the Medicare drug benefit will work over the course of next year.

At first, the benefit will look like a normal insurance plan, with a deductible and co-payments.

But if your cumulative drug expenses reach $2,250, a very strange thing will happen: you'll suddenly be on your own. The Medicare benefit won't kick in again unless your costs reach $5,100. This gap in coverage has come to be known as the "doughnut hole."... [I]f you are a retiree and spend $2,000 on drugs next year, Medicare will cover 66 percent of your expenses. But if you spend $5,000 - which means that you're much more likely to need help paying those expenses - Medicare will cover only 30 percent of your bills.... How will people respond when their out-of-pocket costs surge? The Health Affairs article argues... that it's likely "some beneficiaries will cut back even essential medications while in the doughnut hole." In other words, this doughnut will make some people sick, and for some people it will be deadly.

The smart thing to do, for those who could afford it, would be to buy supplemental insurance that would cover the doughnut hole. But guess what: the bill that established the drug benefit specifically prohibits you from buying insurance to cover the gap. That's why many retirees who already have prescription drug insurance are being advised not to sign up for the Medicare benefit.

If all of this makes the drug bill sound like a disaster, bear in mind that I've touched on only one of the bill's awful features. There are many others, like the clause that prohibits Medicare from using its clout to negotiate lower drug prices. Why is this bill so bad?

The probable answer is that the Republican Congressional leaders who rammed the bill through in 2003 weren't actually trying to protect retired Americans against the risk of high drug expenses. In fact, they're fundamentally hostile to the idea of social insurance, of public programs that reduce private risk. Their purpose was purely political: to be able to say that President Bush had honored his 2000 campaign promise to provide prescription drug coverage by passing a drug bill, any drug bill.

Once you recognize that the drug benefit is a purely political exercise that wasn't supposed to serve its ostensible purpose, the absurdities in the program make sense. For example, the bill offers generous coverage to people with low drug costs, who have the least need for help, so lots of people will get small checks in the mail and think they're being treated well.... Can the drug bill be fixed? Yes, but not by current management. It's hard to believe that either the current Congressional leadership or the Mayberry Machiavellis in the White House would do any better on a second pass. We won't have a drug benefit that works until we have politicians who want it to work.

I've been looking for something good and short on how the Center for Medicare and Medicaid Services is going to try to make this drug benefit work. It's not at all clear to me that they can.

Inbox, November 9, 2005

In today's inbox--November 9, 2005--we have:

Yes, George R.R. Martin's A Feast for Crows is excellent. But it is one of the middle books of a series. Finishing this book reminds me why I have sworn an oath not to read any more series-in-progress: much better to wait to begin the first book of a series until you are certain that the very last book of the series has been... staked and encoffined.

Why Iraq Has No Army

Jim Fallows writes:

The Atlantic Online | December 2005 | Why Iraq Has No Army | James Fallows: When Saddam Hussein fell, the Iraqi people gained freedom. What they didn't get was public order.... This summer an average of ten Iraqi policemen or soldiers were killed each day. It is true, as U.S. officials often point out, that the violence is confined mainly to four of Iraq's eighteen provinces. But these four provinces contain the nation's capital and just under half its people.

The crucial need to improve security and order in Iraq puts the United States in an impossible position. It can't honorably leave Iraq—-as opposed to simply evacuating Saigon-style—-so long as its military must provide most of the manpower, weaponry, intelligence systems, and strategies being used against the insurgency. But it can't sensibly stay when the very presence of its troops is a worsening irritant.... Early in the occupation American officials acted as if the emergence of an Iraqi force would be a natural process. "In less than six months we have gone from zero Iraqis providing security to their country to close to a hundred thousand Iraqis," Donald Rumsfeld said in October of 2003. "Indeed, the progress has been so swift that ... it will not be long before [Iraqi security forces] will be the largest and outnumber the U.S. forces, and it shouldn't be too long thereafter that they will outnumber all coalition forces combined."...

But most assessments from outside the administration have been far more downbeat than Rumsfeld's.... [I]f American troops disappeared tomorrow, Iraq would have essentially no independent security force.... The moment when Iraqis can lift much of the burden from American troops is not yet in sight. Understanding whether this situation might improve requires understanding what the problems have been so far.

Over the summer and fall I asked a large number of people why Iraq in effect still had no army, and what, realistically, the United States could expect in the future.... What I heard amounted to this: The United States has recently figured out a better approach to training Iraqi troops. Early this year it began putting more money, and more of its best people, on the job. As a result, more Iraqi units are operating effectively, and fewer are collapsing or deserting under pressure....

How the Iraq story turns out will not be known for years, but based on what is now knowable, the bleak prospect today is the culmination of a drama's first three acts. The first act involves neglect and delusion.... The second act involves a tentative approach to a rapidly worsening challenge during the occupation's second year. We are now in the third act, in which Americans and Iraqis are correcting earlier mistakes but too slowly and too late....

There is no single comprehensive explanation for what went wrong. After the tension leading up to the war and the brilliant, brief victory, political and even military leaders seemed to lose interest, or at least intensity. "Once Baghdad was taken, Tommy Franks checked out," Victor O'Reilly, who has written extensively about the U.S. military, told me. "He seemed to be thinking mainly about his book." Several people I spoke with volunteered this view of Franks, who was the centcom commander during the war. (Franks did not respond to interview requests, including those sent through his commercially minded Web site, In retrospect the looting was the most significant act of the first six months after the war. It degraded daily life, especially in Baghdad, and it made the task of restoring order all the more difficult for the U.S. or Iraqi forces that would eventually undertake it. But at the time neither political nor military leaders treated it as urgent. Weeks went by before U.S. troops effectively intervened....

Throughout the occupation, but most of all in these early months, training suffered from a "B Team" problem. Before the fighting there was a huge glamour gap in the Pentagon between people working on so-called Phase III—-the "kinetic" stage, the currently fashionable term for what used to be called "combat"—-and those consigned to thinking about Phase IV, postwar reconstruction. The gap persisted after Baghdad fell. Nearly every military official I spoke with said that formal and informal incentives within the military made training Iraqi forces seem like second-tier work.... But of course that didn't happen. "I couldn't believe that we weren't ready for the occupation," Terence Daly, a retired Army colonel who learned the tactics of counterinsurgency in Vietnam, told me. "I was horrified when I saw the looting and the American inaction afterward. If I were an Iraqi, it would have shown me these people are not serious."...

Language remained a profound and constant problem. One of the surprises in asking about training Iraqi troops was how often it led to comparisons with Vietnam. Probably because everything about the Vietnam War took longer to develop, "Vietnamization" was a more thought-through, developed strategy than "Iraqization" has had a chance to be. A notable difference is that Americans chosen for training assignments in Vietnam were often given four to six months of language instruction. That was too little to produce any real competence, but enough to provide useful rudiments that most Americans in Iraq don't have.... Every manual on counterinsurgency emphasizes the need for long-term personal relations. "We should put out a call for however many officers and NCOs we need," Daly says, "and give them six months of basic Arabic. In the course of this training we could find the ones suited to serve there for five years....

At the end of June 2004 Ambassador Bremer went home.... The first U.S. ambassador to postwar Iraq, John D. Negroponte, was sworn in as Bremer left. And a new American Army general arrived to supervise the training of Iraqis: Dave Petraeus, who had just received his third star.... Petraeus, who holds a Ph.D. from Princeton, had led the 101st Airborne during its drive on Mosul in 2003 and is one of the military's golden boys.... By all accounts Petraeus and Negroponte did a lot to make up for lost time in the training program.... More emphasis was put on embedding U.S. advisers with Iraqi units.... Negroponte used his discretion to shift $2 billion from other reconstruction projects to the training effort. "That will be seen as quite a courageous move, and one that paid big dividends," Petraeus told me....

Ethnic tensions divide Iraq, and they divide the new army. "Thinking that we could go in and produce a unified Iraqi army is like thinking you could go into the South after the Civil War and create an army of blacks and whites fighting side by side," Robert Pape, of the University of Chicago, told me....

What is needed for an honorable departure is, at a minimum, a country that will not go to war with itself, and citizens who will not turn to large-scale murder. This requires Iraqi security forces that are working on a couple of levels: a national army strong enough to deter militias from any region and loyal enough to the new Iraq to resist becoming the tool of any faction; policemen who are sufficiently competent, brave, and honest to keep civilians safe....

The U.S. military does everything in Iraq worse and slower than it could if it solved its language problems. It is unbelievable that American fighting ranks have so little help. Soon after Pearl Harbor the U.S. military launched major Japanese-language training institutes at universities and was screening draftees to find the most promising students. America has made no comparable effort to teach Arabic. Nearly three years after the invasion of Iraq the typical company of 150 or so U.S. soldiers gets by with one or two Arabic-speakers. T. X. Hammes says that U.S. forces and trainers in Iraq should have about 22,000 interpreters, but they have nowhere near that many. Some 600,000 Americans can speak Arabic. Hammes has proposed offering huge cash bonuses to attract the needed numbers to Iraq....

[I]f the United States is serious about getting out of Iraq, it will need to re-consider its defense spending and operations rather than leaving them to a combination of inertia, Rumsfeld-led plans for "transformation," and emergency stopgaps. It will need to spend money for interpreters.... It will need to make majors and colonels sit through language classes.... It will need to commit air, logistics, medical, and intelligence services to Iraq—-and understand that this is a commitment for years, not a temporary measure. It will need to decide that there are weapons systems it does not require and commitments it cannot afford if it is to support the ones that are crucial. And it will need to make these decisions in a matter of months, not years—-before it is too late.

America's hopes today for an orderly exit from Iraq depend completely on the emergence of a viable Iraqi security force. There is no indication that such a force is about to emerge. As a matter of unavoidable logic, the United States must therefore choose one of two difficult alternatives: It can make the serious changes—-including certain commitments to remain in Iraq for many years—-that would be necessary to bring an Iraqi army to maturity. Or it can face the stark fact that it has no orderly way out of Iraq, and prepare accordingly.

The Nelson Report Is Shrill

Josh Micah Marshall reports that the Nelson Report is really shrill. It is calling for the impeachment of George W. Bush:

Talking Points Memo: by Joshua Micah Marshall: November 06, 2005 - November 12, 2005 Archives: A snippet out of this evening's Nelson Report ...

Scandals.... on the torture scandal part of the ongoing psychodrama called America, the political theme is that the Republican Leadership continues to trip all over itself, contradicting each other, insulting each other, and generally looking like incompetent fools. This is almost too much for the Democrats, who can hardly believe what they see unfolding, and who thus, so far, remain in something of a comic stupor, pending an organized, coherent attack.

But things are happening, and Senate Dems are coalescing around efforts to force real hearings on the misuse of Iraq war intel, and the torture scandal...even as the Republicans flounder between trying to deny everything, while simultaneously excusing or explaining it away. Latest example...former Republican Senate Majority Leader Trent Lott, whom, you will recall, was forced to resign for insensitive racial remarks, is clearly revenging himself with comments that it was a fellow Republican who leaked the "CIA torture" story to the Washington Post last week.

On the larger topic, law and morality...the ethic of being an American leader, and its betrayal by the Bush Administration...the NY Times today details last year's CIA Inspector General's classified report that Bush Administration torture directives carried out by the Agency "might violate some provisions of the International Convention Against Torture..." and remember we warned last night that the CIA pros have it out for the White House....

We checked with a highly informed/involved former State Department source. His comments: " 1988 when John Whitehead signed the Convention in New York, and then later, when we ratified it, we enacted domestic laws where necessary to make it 'the law of the land'... we had this to say to the UN, copy to the Senate:

Torture is prohibited by law throughout the United States. It is categorically denounced as a matter of policy and as a tool of state authority. Every act constituting torture under the Convention constitutes a criminal offense under the law of the United States. No official of the government, federal, state or local, civilian or military, is authorized to commit or to instruct anyone else to commit torture. Nor may any official condone or tolerate torture in any form. No exceptional circumstances may be invoked as a justification of torture. US law contains no provision permitting otherwise prohibited acts of torture or other cruel, inhuman or degrading treatment or punishment to be employed on grounds of exigent circumstances....

Hummm....sounds like a pretty solid case for an impeachment proceeding, were there anything resembling either a sense or shame, or national ethics, in the Leadership of the House of Representatives and Senate. Something to be argued out in the 2006 Congressional campaigns?

They've brought us very, very low.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.


My father clashes with Larry Lessig over GooglePrint:

IPcentral Weblog: Wednesday Morning Fights: DeLong vs. Lessig: Larry Lessig objects to my characterization of his characterization of Causby, and its connection to the Google Print program. At the end of the entry, though, he comments on an area in which we are in partial agreement, and that is worth re-emphasizing:

But there is one great and true part to DeLong's email. As he writes,

Causby was entitled only to the decline in his property value, not to a share of the gains from the air age.

Truly, if there is a principle here, that should be it. The baseline is the value of the property BEFORE the new technology. Does the new technology reduce THAT value. Put differently, would authors and publishers be worse off with Google Print than they were before Google Print?

To ask that question is to answer it -- of course the authors and publishers are better off with Google Print.

Are they as well off as they could be, if the law gives them the power to extort from the innovator some payment for his innovation?

To ask that question is to understand why this case has been filed: Like Valenti with the Betamax, the publishers and Authors Guild simply want to tax the value created by Google Print. They are not complaining about any "decline in [their] property value" caused by Google Print. They are instead racing to claim the value that ancient law is said to give to them, despite the harm that claim produces for "progress."

This is indeed the crucial distinction. But I don't think Lessig is fair to either Valenti or the authors; they have genuine and legitimate concerns about the impact of the new technologies on their existing values.

Would they like to hold the new technologies for ransom? Probably. There is certainly grounds for suspicion in a recent oped co-authored by Pat Schroeder. And I agree with Lessig that such ransom should not be permitted, as the Supreme Court specifically noted in the Sony case. But to refuse to allow ransom does not mean that the legitimate interests can be ignored.

In the case of Google Print, the publishers legitimate concerns include two problems:

1) A digital copy of each book goes to the participating library, and the only restriction is that it abide by copyright law. There can be no guarantee that the library will impose security akin to that adopted by Google.

2) The law has no doctrine that allows Google to be special. So what Google is allowed to do, others can do. The authors and publishers can legtimately object to having a huge burden of policing imposed on them. In our internal PFF debates, I am the Google-symp -- but I have not come up with a way to solve these problems.

Nonetheless, as I said in another, longer recent discussion of these issues: "So the bottom line is -- and must be -- that when technological change occurs, we as a society will not automatically assign the value created by the new technology to existing property holders.

I tend to put on my right-wing public-choice hat here, and side with GooglePrint. The private beneficiaries from assigning too much of the value of innovation to the dead hand of old property rights are concentrated. The private beneficiaries of assigning too little of the value are diffuse. In a public-choice world ruled by lobbyists, there will be strong pressures on legislation and law to overprotect existing property. And it is the duty of intellectuals seeking the sweet spot to push back--to be an anti-lobbyist lobby.

Syllabus Part II: Economics 101b Fall 2005

Economics 101b Fall 2005

Syllabus Part II

October 14, 17: Japan's Decade-Long Slump

Readings: Paul Krugman, “Japan’s Liquidity Trap”
Adam Posen, “Macroeconomic Mistake, Not Structural Stagnation”
Adam Posen, “Recognizing a Mistake: Not Blaming a Model”

October 19, 21, 24: Europe's High Unemployment

Readings: Olivier Blanchard and Lawrence Summers (1986), "Hysteresis and the European Unemployment Problem"
Olivier Blanchard and Justin Wolfers (1999), "Shocks and Institutions in European Unemployment"
Olivier Blanchard (2004), "The Economic Future of Europe"

October 26, 28, 31: America's "New Economy"

Readings: Alan Blinder and Janet Yellen (2001), The Fabulous Decade: Macroeconomic Lessons from the 1990s (New York: Century Foundation)
William Nordhaus (2004), "The Story of a Bubble"

November 2, (no class on the 4th), 7, 9: Emerging Market Financial Crises:

Readings: Michael Mussa (2002), Argentina and the Fund: From Triumph to Tragedy
Morris Goldstein (1998), The East Asian Financial Crisis

November 14, 16: America's Current Macroeconomic Dilemma

Readings: Lecture notes to be issued...

The Virtues of Single-Payer Health Care

Paul Krugman writes about the virtues of single-payer:

Pride, Prejudice, Insurance - New York Times: Employment-based health insurance is the only serious source of coverage for Americans too young to receive Medicare and insufficiently destitute to receive Medicaid, but it's an institution in decline. Between 2000 and 2004 the number of Americans under 65 rose by 10 million. Yet the number of nonelderly Americans covered by employment-based insurance fell by 4.9 million.

The funny thing is that the solution - national health insurance, available to everyone - is obvious. But to see the obvious we'll have to overcome pride - the unwarranted belief that America has nothing to learn from other countries - and prejudice - the equally unwarranted belief, driven by ideology, that private insurance is more efficient than public insurance.

Let's start with the fact that America's health care system spends more, for worse results, than that of any other advanced country. In 2002 the United States spent $5,267 per person on health care. Canada spent $2,931; Germany spent $2,817; Britain spent only $2,160. Yet the United States has lower life expectancy and higher infant mortality than any of these countries. But don't people in other countries sometimes find it hard to get medical treatment? Yes, sometimes - but so do Americans. No, Virginia, many Americans can't count on ready access to high-quality medical care.... Americans are far more likely than others to forgo treatment because they can't afford it. Forty percent of the Americans surveyed failed to fill a prescription because of cost. A third were deterred by cost from seeing a doctor when sick or from getting recommended tests or follow-up.

Why does American medicine cost so much yet achieve so little?... The U.S. system is much more bureaucratic... because private insurers and other players work hard at trying not to pay for medical care. And our fragmented system is unable to bargain... for lower prices. Taiwan, which moved 10 years ago from a U.S.-style system to a Canadian-style single-payer system, offers an object lesson in the economic advantages of universal coverage. In 1995 less than 60 percent of Taiwan's residents had health insurance; by 2001 the number was 97 percent. Yet... this huge expansion in coverage came virtually free: it led to little if any increase in overall health care spending beyond normal growth due to rising population and incomes.... The economic and moral case for health care reform in America, reform that would make us less different from other advanced countries, is overwhelming. One of these days we'll realize that our semiprivatized system isn't just unfair, it's far less efficient than a straightforward system of guaranteed health insurance.

Gene Sperling's New Book, "The Pro-Growth Progressive"

Gene Sperling writes about his excellent new book: Gene Sperling (2005), The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity (New York: Simon and Schuster: 0743237536)

TPMCafe || The Pro-Growth Progressive: I felt frustrated by the view - often from both sides - that there was an inherent conflict between promoting progressive values and being hard-headed about the power of markets incentives, the law of unintended consequences and the inevitability of globalization.

What do I mean by progressive?.... A belief in economic dignity for those who take responsibility... the opportunity for upward mobility... life's outcome should not be determined by the accident of your birth.... [W]e best promote the three values above when we seek policies that are focused on both raising the tide and lifting all boats.... [An] agenda that focuses on personal savings and wealth creation, as well as a laying a foundation for private sector growth, can be completely consistent with progressive values if we make our test not only whether we are raising the tide, but lifting all boats. I push hard for progressives to champion an expansive Universal 401 K and a Flat Tax Incentive where everyone gets a 30% refundable credit for savings.... Democrats need to not only have these policies on the shelf - we need to move them to the front of our policy agenda if we are to show Americans we not only a party that is there for you when your down, but a party that wants to see you reach your highest economic aspirations.

[T]he reigning conservative assumption that all expansions of government are anti-growth and interfere with markets is just as unfounded.... [T]here are a host of powerful public policies that because they flow directly to workers... are progressive, pro-growth and in no way interfere with markets or restrict employers. The EITC.... A quality 0-5 education program.... Yes, it is an expansion of government, but how exactly is that anti-growth?...

[T]here was nothing I struggled with and agonized about more than the sections on a new progressive compact on globalization. These are the most difficult issues we face... while our nation benefits enormously from the innovation, low-prices and competition that open markets bring... we still have little means to prevent or cope with the unacceptable degree of economic devastation this openness brings for some workers and families both here and abroad.... [T]hose seeking to restrict trade too often have no vision of the future, while those pressing for open markets have no vision for the present.... [P]rogressives on both sides of the trade debate should be more open in recognizing the exaggerations and flaws in their arguments.... I do support the labor standards we put in the Jordan Free Trade agreement, [but] progressives have to understand that poor nations often see our approach as punitive, and that we should be looking for to add to labor standards a broader array of tools from positive partnerships and incentives....

I realize that by standing by President Clinton's effort... I... have perfectly positioned myself to draw fire from all sides....

While many of us may agree that President Bush has been the worst fiscal President in our nation's history, I imagine there will be more lively disagreement on where progressives should go from here....

I eagerly await the discussion to come and thank the excellent array of commentators that Josh has pulled together for this book forum for agreeing to participate.