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January 2006

Perplex City

Adrian Hon's Perplex City makes Boing-Boing:

Boing Boing: Perplex city : Guy says: "Perplex City is a cross between collectible-card game and Alternate Reality Game. It's centered around a stolen artefact, and there's a $200,000 reward for whoever can find it. The cards themselves are rather beautiful and feature a diverse range of mind-bending puzzles, while Anton Bogaty (who you just featured) does much of the artwork for the game. I think it's primarily worth mentioning because it's the first self-supporting ARG, as opposed to marketing something else (or being made on a lo-to-no budget basis.) Also, Boing Boing itself is on one of the cards!"

Brendan Nyhan on George Allen

The Republican bench looks--if possible--worse than the Republican lineup. Brendan Nyhan writes:

Brendan Nyhan: George Allen is well-informed about the Fed : Ladies and gentlemen, I give you the man many GOP insiders think will be their next presidential nominee, inspiring confidence with his grasp of current events:

Wall Street may be intensely interested in just about every word ever uttered by Mr. Bernanke, the former Princeton economist and chairman of the White House Council of Economic Advisers who is President Bush's choice to succeed Alan Greenspan.

But in Washington, he is barely on some people's radar screens. Indeed, here is what Senator George Allen of Virginia, who is considering a bid for the Republican presidential nomination in 2008, said when asked his opinion of the Bernanke nomination.

"For what?"

Told that Mr. Bernanke was up for the Fed chairman's job, Mr. Allen hedged a little, said he had not been focused on it, and wondered aloud when the hearings would be. Told that the Senate Banking Committee hearings had concluded in November, the senator responded: "You mean I missed them all? I paid no attention to them."

Wealth Inequality in 2003

From David Cay Johnston:

Corporate Wealth Share Rises for Top-Income Americans: [T]he concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated.... In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.

In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars. For every group below the top 1 percent, shares of corporate wealth have declined since 1991. These declines ranged from 12.7 percent for those on the 96th to 99th rungs on the income ladder to 57 percent for the poorest fifth of Americans, who made less than $16,300 and together owned 0.6 percent of corporate wealth in 2003, down from 1.4 percent in 1991....

The White House said... that since wealth is transitory for many people, a more important issue is how incomes and wealth are influenced by the quality of education. "We want to lift all incomes and wealth," said Trent Duffy, a White House spokesman. "We are starting to see that the income gap is largely an education gap." "The president thinks we need to close the income gap, and he has talked about ways in which we can do that," especially through education, Mr. Duffy said.

The data showing increased concentration of corporate wealth were posted last month on the Congressional Budget Office Web site. Isaac Shapiro, associate director of the Center on Budget and Policy Priorities in Washington, spotted the information last week and wrote a report analyzing it. Mr. Shapiro said the figures added to the center's "concerns over the increasingly regressive effects" of the reduced tax rates on capital. Continuing those rates will "exacerbate the long-term trend toward growing income inequality," he wrote.

The center, which studies how government affects the poor and supports policies that it believes help alleviate poverty, opposes Mr. Bush's tax policies. The center plans to release its own report on Monday that questions the wisdom of continuing the reduced tax rates on dividends and capital gains, saying the Congressional Budget Office analysis indicates that the benefits flow directly to a relatively few Americans.

An interesting thing is how low down in the story Johnston places his immediate source--Isaac Shapiro.

Good Tax Policy

Gene Sperling writes about progressive taxation as an important form of social insurance and risk-sharing: / Comment & analysis / Comment - How to reform a winner-takes-all economy : Progressive taxation is critical to marshall the resources to ensure that those who end up at [failing companies like] Lucent or Delphi have the support and education to get second and third chances in the global economy. Without a greater cushion against falls in the global economy, workers may opt to take less risk on their future, just as entrepreneurs would risk less if they thought a single bankruptcy would land them in debtors’ prison.

Furthermore, a tax system that eases the [luckiest one's] tax-free wealth accumulation but forces his brother to pay higher taxes on income earned through labour betrays American values that honour the hard work of the middle class over policies that perpetuate an economic elite. A better tax reform plan would prevent the most privileged Americans from paying lower taxes on their investment than typical families pay on their wages, while encouraging savings and wealth creation for struggling workers. We could start by ending our current system of giving those in the highest tax brackets more than twice the tax deduction of typical workers and creating a flat tax incentive for savings – a 30 per cent credit for everyone. More important, we should provide automatic matching credits for moderate income workers to save – essentially creating a universal 401(k) plan for retirement savings accounts for all Americans.

So if the president really wants to build support for greater openness in the economy, he needs to focus on tax reform that expands the winners’ circle, not reform that expands the current winners’ fortunes.

Bad News About Polimetrics

Mike Kellerman has some bad news about the utiity of econometrics:

Social Science Statistics Blog: Another paradox of turnout? (Part I) : Those of you who have followed this blog know that making reasonable causal inferences from observational data usually presents a huge challenge.... [I]t is worth mentioning "Comparing experimental and matching methods using a large-scale voter mobilization experiment" by Kevin Arceneaux, Alan Gerber, and Donald Green, which appears in the new issue of Political Analysis.... [T]hey base their analysis on a voter turnout experiment in which households were randomly selected to receive non-partisan phone calls encouraging them to vote.... This type of mobilization experiment suffers from a classic compliance problem; some voters either don't have phones or refuse to take unsolicited calls. As a result, in order to determine the average causal effect of the treatment on those who would receive it, they need to find a method to compare the compliers who received treatment to compliers in the control group. Since assignment to treatment was randomly assigned, they use assignment as an instrument in the spirit of Angrist, Imbens, and Rubin (1996). Using a 2SLS regression with assignment in the first stage, their estimates of the ATT are close to zero and statistically insignificant.... [T]heir experimental estimate... we might call the "truth".

The authors then attempt to replicate their experimental results using both OLS and various matching techniques. In this context, the goal of the matching process is to pick out people who would have listened to the phone call had they been contacted. The authors have a set of covariates on which to match, including age, gender, household size, geographic location, whether the voter was newly registered, and whether the voter turned out in each of the two previous elections.... [T]hey don't have much difficulty in finding close matches for the treated group based on the covariates in their data. Unfortunately, the matching estimates don't turn out to be very close to the experimental baseline, and in fact are much closer to the plain-vanilla OLS estimates.

Their conclusion from this result is that the assumptions necessary for causal inferences under matching (namely, unconfoundedness conditional on the covariates) are not met in this situation, and (at least by my reading) they seem to suggest that it would be difficult to find a dataset that was rich enough in covariates that the assumption would be met.

As a political scientist, I have to say that I like this dataset, because (a) it is not the NSW dataset and (b) it is not derived from a labor market experiment. What do these results mean for matching methods in political science?...

Tyler Cowen Finds Don Bodreaux Shopping in 1975

Tyler writes:

Marginal Revolution: Don Boudreaux Goes Shopping in 1975 : "Sears’ lowest-priced 10-inch table saw: 52.35 hours of work required in 1975; 7.34 hours of work required in 2006. Sears’ lowest-priced gasoline-powered lawn mower: 13.14 hours of work required in 1975 (to buy a lawn-mower that cuts a 20-inch swathe); 8.56 hours of work required in 2006 (to buy a lawn-mower that cuts a 22-inch swathe.... Sears Best side-by-side fridge-freezer: 139.62 hours of work required in 1975 (to buy a fridge with 22.1 cubic feet of storage capacity); 79.56 hours of work required in 2006 (to buy a comparable fridge with 22.0 cubic feet of storage capacity.) Sears’ lowest-priced answering machine: 20.43 hours of work required in 1975; 1.1 hours of work required in 2006.... [T]he fact most noticeable from the contents of this catalog’s 1,491 pages is what the catalog doesn’t contain. The Sears customer in 1975 found no CD players for either home or car; no DVD or VHS players; no cell phones; no televisions with remote controls or flat-screens; no personal computers or video games; no food processors; no digital cameras or camcorders; no spandex clothing; no down comforters (only comforters filled with polyester)."

Tyler sez:

The past is another country. I once lived there but have no desire to return.


Paul Boutin writes:

Paul Boutin : Chinese Google filter only works if you can spell. image search for Tiananmen: Gate of Heavenly Peace. image search for Tianenmen, Tienanmen and Tiananman: Tanks, tanks, more tanks. Try it yourself: Compare the same image search on and Only the results for "tiananmen" are different.

Kudos to Ed Lazear for Being Willing to Sit in the CEA Hot Seat

Congratulations to Ed Lazear for taking on this burden of public service. It won't be easy. He should do a good job. We wish him well:

Bloomberg Printer-Friendly Page : Bush to Nominate Stanford's Lazear to Head CEA, Spokesman Says Jan. 30 (Bloomberg) -- U.S. President George W. Bush will nominate Stanford University economist Edward Lazear to be chairman of his Council of Economic Advisers, White House spokesman Scott McClellan said. Lazear, 57, a member of Bush's tax advisory panel last year, would succeed Ben Bernanke at the helm of the CEA. Bernanke was nominated to be Federal Reserve chairman, replacing Alan Greenspan. Unlike Bernanke, who is known as a macroeconomist and a monetary theorist, Lazear has specialized in microeconomic labor issues, worker compensation and productivity.

The CEA chairman will be one of the chief salesmen for Bush's economic agenda, which in 2006 will include an effort to urge Congress to make tax cuts permanent. Bush also is urging Congress to cut spending to reduce the budget deficit and seeking to allay concerns of U.S. workers as the nation competes in the global economy.

To contact the reporter on this story: Brendan Murray in Washington at [email protected]

Rethinking Bank Regulation

James R. Barth, Gerard Caprio Jr., and Ross Levine (2006), Rethinking Bank Regulation; Till Angels Govern_ (Cambridge: Cambridge University Press: 0521855764).

Rick Mishkin says:

Rethinking Bank Regulation is an important book. It provides striking evidence (using a unique data set created at the World Bank) that strengthening the discretionary powers of prudential supervisors in countries with weak institutional environments leads to a lower level of bank development, greater corruption in lending, and banks that are less safe and sound. Following the Basel II recommendation of strengthening supervisory powers, therefore, may do more harm than good in developing countries, unless it is accompanied by substantial progress in institutional development. This book provides an important warning to policy makers that what works for advanced countries may not work for developing countries.

Francisco Franco Is Still Dead!

Truly the archives of National Review are a gift that keeps on giving! Here is just one of National Review's Francisco Franco obituaries, this one by James Burnham:

James Burnham (2005), "Spain Minus Franco," National Review November 21): Francisco Franco was our century's most successful ruler.... [H]e outstayed all his great contemporaries, friend and enemy: Hitler, Mussolini, Stalin, Churchill, Eisenhower, de Gaulle... "a patient stubbornness, a flawless prudence, and an unshakable faith in his mission.... Before coming to a decision he meditated before a portable Blessed Sacrament.... 'I Francisco Franco Bahamonde, Caudillo of Spain, conscious of my responsibility before God and before history...' And, besides all the rest, luck."

Franco commanded the winning side in a ferocious civil war... held Spain aloof from World War II.... Under his postwar rule Spain transformed itself... into a modern industrial state.... Illiteracy has been halved....

[W]ith the exit of Franco... the regime was going to confront a formidable array of basic political and social problems. This fact is sufficient proof of how fundamentally Spain's regime has differed from genuine totalitarian regimes like Hitler's Reich.... Under a consolidated totalitarian regime, succession... does not raise issues involving the essential nature of the regime....

The whole concept of "fascism" for that matter has been a fraud from the beginning. Like "peaceful coexistence" and "detente," it is a tactical invention of the Soviet Agitprop, and boils down in practice to the simple definition: fascism is any regime that outlaws Communism....

Of course this is nonsense. Franco was not the twentieth century's most successful ruler. Franco's Spain did not undergo an economic miracle--post-Franco Spain, however, did. We can agree with Burnham that Franco was not as bad as Hitler, and go on to say what Burnham doesn't dare say yet doesn't dare ignore: that Franco was Hitler's friend.

As to fascism: the German philospher Ernst Nolte's classic Fascism in Its Epoch set out six key characteristics of fascism:

  1. Strong belief that--through social darwinism--morality is ultimately tied to blood and race, understood as descent and genetic relationship.
  2. Strong rejection of the classical "liberal" belief that individuals have rights that any legitimate state is bound to respect
  3. In its place, an assertion that individuals have duties to the state, seen as the decision-making organ of the collectivity.
  4. A rejection of parliamentary democracy and other bottom-up institutions to assess the general will.
  5. The assertion that the general will is formed by the decrees of the leader.
  6. A strong fear of twentieth-century Communism, and an eagerness to adapt and use its weapons--suspension of parliaments, mass propaganda, rallies, street violence, and so forth--to fight it.

Franco misses only on the first of these.

Covering the Economy: January 27 GDP Release: Greg Ip Saturday Morning WSJ Story

Greg Ip's Saturday morning story for the Wall Street Journal: - Economic Growth Slowed to 1.1% In Fourth Quarter : GDP Is Likely to Rebound, But Many Say Expansion Will Moderate This Year By GREG IP Staff Reporter of THE WALL STREET JOURNAL January 28, 2006; Page A1: Economic growth slowed to its most sluggish pace in three years at the end of last year as consumers and businesses applied the brakes to spending. While a rebound is likely in the current quarter, the expansion after two brisk years appears to be moderating as higher energy prices and interest rates begin to bite.

The nation's gross domestic product, or total output of goods and services, grew at just a 1.1% annual rate in the fourth quarter, the Commerce Department said Friday. That's the slowest rate since the fourth quarter of 2002 and well below the average 4.1% growth of the prior 10 quarters. "There is a slight tone change in the economy, though nowhere nearly as dramatic as the headline suggests," said Nancy Lazar, economist at ISI Group, a New York research and brokerage firm. "Growth may be moving into a slower stage."

Continue reading "Covering the Economy: January 27 GDP Release: Greg Ip Saturday Morning WSJ Story" »

Covering the Economy: January 27 GDP Advance Release: LA Times Story

The LA Times Saturday morning story:

GDP Data Are Weak and, Many Say, Off Base - Los Angeles Times : By Bill Sing, Times Staff Writer: The U.S. economy grew at a surprisingly weak 1.1% annual rate in the last three months of 2005, the Commerce Department said Friday, but many analysts said the economy was more robust than reported and would rebound in the current quarter. The fourth-quarter growth swoon was blamed largely on sluggish auto sales, surprisingly slow growth in business spending, a surge in imports and a drop in spending by the federal government. Hurricane damage and high energy costs took their toll on consumers and businesses, analysts said.

Growth in the gross domestic product, the broadest measure of U.S. economic output, fell far below the 2.8% predicted by economists and the 4.1% pace of the third quarter. It was the slowest growth rate since the 0.2% posted in the fourth quarter of 2002, when the economy was struggling to recover from the 2001 recession. A closely watched measure of inflation also rose, nearing a level seen as worrisome to Federal Reserve policymakers. The report came at a time when polls show that many Americans are skeptical about the economy's strength. A nationwide Los Angeles Times/Bloomberg poll, released Thursday, said 59% of respondents disapproved of the way President Bush was handling the economy. The Bush administration and many experts, however, expressed doubt at the accuracy of the latest growth report, suggesting that it was at odds with other economic data. They predicted that the numbers would be revised upward.

Continue reading "Covering the Economy: January 27 GDP Advance Release: LA Times Story" »

Covering the Economy: January 27 GDP Advance Report: New York Times

The New York Times Saturday morning story:

U.S. Economy Slowed Sharply at End of 2005 - New York Times : By EDUARDO PORTER and VIKAS BAJAJ: Economic growth weakened unexpectedly in the fourth quarter of 2005, rising 1.1 percent, the slowest pace in three years, and clouding the immediate outlook for the economy, the government reported yesterday. Consumer spending slowed abruptly as purchases of motor vehicles collapsed after automakers phased out the generous incentive programs that had lifted sales through the summer. As consumers cut back on spending, business investment also slowed as companies curtailed spending on cars and trucks. Military spending also fell unexpectedly, while a surging import bill put a drag on overall growth.

The intensity of the economic slowdown, which reduced yearly growth to 3.5 percent from 4.2 percent in 2004, surprised many forecasters. They had expected a sharp pickup in business investment in the final months of the year to take up some of the slack in consumer spending and had predicted an overall growth rate of 2.5 percent to 3 percent in the fourth quarter. "It is not so much surprising as baffling," said Ian C. Shepherdson, chief United States economist at High Frequency Economics in Valhalla, N.Y.

The weak economic data pleased investors, who pushed up the price of stocks in the expectation that the Federal Reserve, whose policy-making committee meets on Tuesday, might end its 18-month campaign to raise its benchmark interest rate -- now at 4.25 percent-- after it reaches 4.5 percent or 4.75 percent. "The silver lining in this is that the Fed should look at this and realize that this economy is not overheating," said David Kelly, a senior economic adviser at Putnam Investments in Boston, the mutual fund manager.

Yet the abrupt slowdown fed into a bubbling debate over the nation's economic prospects as the housing market weakens and removes a core pillar supporting consumers' hearty spending. Many economic analysts have been warning for months that the housing bubble will burst and lead to retrenchment as rising interest rates and the stalling of home sales put a dent in consumer spending. "I believe it is a genuine slowdown," said Robert J. Barbera, chief economist at ITG, arguing that higher interest rates and expensive oil are taking the wind out of consumers' sails. Specifically, he argued, the auto sector will keep bogging the economy down because car companies have built up heavy inventories that they must unload.

After setting records last summer, sales of existing homes, which make up 85 percent of the housing market, fell in each of the last three months as mortgage interest rates rose modestly. New-home sales, a more volatile and less reliable indicator, increased 2.9 percent in December, to an annual pace of 1.27 million, after falling 9.2 percent in November, the Commerce Department said yesterday. Median prices, however, fell 3.4 percent, to $221,800 from a year ago. Yet even though the housing market has started to cool, most forecasters argued that the fourth quarter's slowdown is not the beginning of a deeper slide. As they took stock of the data, economists argued that the economic slump would prove fleeting, caused by factors that are unlikely to be repeated in the first quarter.

Some warned that the reading for growth in the fourth quarter was merely a preliminary estimate and could be revised upward -- especially business investment, which should be surging at this stage in the economic cycle, when profits are high and companies are hitting capacity constraints. Most expected consumer spending and business investment to rebound in the first half of the year as the downturn in auto sales ends. "The probability of a substantial upward revision is quite high," said Lincoln Anderson, chief investment officer at LPL Financial Services in Boston. "Then growth should rebound in the first quarter back into the region of 4 percent."

Much of the current slowdown could be attributed to Detroit. "It all boils down to the auto sector," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, a business research group. "Auto sales permeate everything in final demand." Deep discounts on cars and trucks pumped sales by the three domestic automakers during the summer and early fall. But as the incentives expired and gasoline prices surged above $3 a gallon in some places in the aftermath of Hurricane Katrina, sales dropped precipitously. In the fourth quarter of last year, final sales of motor vehicles fell 50.4 percent at an annual rate. Consumer spending on sport utility vehicles and other light trucks fell by 69 percent, at an annual rate, while business spending declined 19 percent. The effect on overall economic output was significant. Just the decline in consumer purchases of vehicles subtracted 2.06 percentage points from growth in the quarter. Other items also contributed to the decline, but analysts argued they would prove temporary. Military spending slumped, a surprising development during a war. "We are still trying to figure out where that came from," a Lehman Brothers economist, Joseph Abate, said.

Moreover, the surge in the price of oil led to a big jump in the nation's energy bill, contributing to a sharp rise in imports that put a drag on domestic output. A buildup in business inventories provided a significant lift, 1.45 percentage points, to the economy. But if consumption remains weak, that additional stock of goods could force manufacturers to cut back on production in coming months. "That's not sustainable growth," said Anthony Chan, chief economist at J. P. Morgan's private client services group.

Still, though economists believe that the economy will rebound in the immediate future, there remains a deep-rooted concern about a downturn further down the road. Mr. Shepherdson, for instance, forecast a 30 percent to 40 percent drop in the number of home sales by the end of the year, which would put a freeze on consumer spending. Mr. Barbera predicted economic growth this year would fall to about 2.4 percent. Charles Dumas, the chief international economist at forecasting firm Lombard Street Research in London, said in a note to investors: "It will take a miracle as fine as Mozart, 250 years old today and as fresh as new, to prevent a sharp U.S. slowdown in the second half of 2006, probably to nil growth" by the fourth quarter.

Covering the BEA January 27 GDP Release

There's news--lots of news--lots of bad news--in the Commerce Department's Bureau of Economic Analysis's "advance" release on GDP and the state of the economy in the fourth quarter of 2005. So I'm going to want to spend class on Tuesday, January 31 looking at (a) what the Thursday morning economic news was, and (b) how it was reported:

Here's how it was being covered on the morning of the 27:

BEA January 27 GDP Report

Full report in pdf format at:

Economist (Kash Mansouri) Instant Reaction

Reuters Immediate Wire Story

WSJ Friday Morning Release Roundup

WSJ Economists React

WSJ Chartbook

Later on: Economists:

Menzie Chinn writes about the Trade Balance and the 2005:IV GDP Advance Release

Barry Ritholtz Reacts to the GDP Number

Tim Duy watches the Federal Reserve

Macroblog is disturbed And confused

Later on: Journalists:

The New York Times Saturday morning story: U.S. Economy Slowed Sharply at End of 2005 - New York Times: By EDUARDO PORTER and VIKAS BAJAJ .

LA Times Saturday morning story by Bill Sing

Greg Ip's Saturday morning WSJ story

The Voice of the Internet-Enabled Public Sphere

In comments, Kate Gilbert is the voice of the new internet-enabled public sphere. Juergen Habermas, please pick up the white courtesy phone:

Brad DeLong's Semi-Daily Journal: Henry Farrell and His Commentors Say Smart Things : I've been thinking about this a lot but in a different vein. I think one of the "issues" for "real journalists" is that they think the world consists of professional writers and amateur readers. Our job when we read them is to accept what they say (pace minor corrections) in an utterly passive way. But blogs blur that distinction--not only for writers but for readers. Because every person who posts and comments on someone else's blog is also blogging/reporting/commenting. Shafer's main complaint, the main source of his indignation, is that "someone sent their readers over..." to criticize Howell. Its analogous to the second order Howell/Post untruth that Abramoff "directed" the indian tribes to donate money.

As a blog reader and occasional commenter I read and commented over on Howell's thread--but of course not because I was "sent" or because I was a wholly owned "reader" of Atrios or whoever. For one thing, I read a lot of blogs as I read a lot of newspapers, so the idea of being labled as one kind of person/owned by one kind of blog is absurd. For another thing, cyberspace means I was already "over there" through links. I wasn't "going somewhere" I was already there. And finally, of course--through comments on comments of comments, through links and links and links--I and all the other commenters were already in a dialogue with Howell and the WaPo even if they didn't recognize it or refused to participate in it. Just as it was legal for the Indian tribes to make donations to both democrats and republicans.

Shaefer thinks the reader's job is clearly separate from the writer/pundits job. But on blogs that simply isn't the case. Great blog posts often get elevated to the main page. Good comments spin off new threads. Links from commenters create new information for other readers. By contrast, the WAPO/Shafer model is that the reader simply reads and then either rejects or aborbs the information privately. We are to to read/buy/consume news from an authoritative source. When told about tissue paper I should buy tissue paper. When told about wealthy getaways to the islands I should long for one. When told about political "facts" I should nod my head. Anything *other* than that makes me some kind of raving lunatic who simply doesn't know my place.

The WaPo, the Times and other journalists who don't blog regularly, and who think of themselves as above the political fray, are actually frightened to discover that their formerly anonymous, passive audience contains large numbers of active, angry, politically informed people. That's not who they were writing for. Its not the job they signed up for.

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

National Review tells us that sometimes supporting democracy requires canceling elections:

National Review Online : Some critics blame the president's blindness here on his evangelical Christianity.... In the actual Bible, we learn of Jacob, who fought for his birthright, and of his brother Esau, who sold his for a mess of pottage. Now as then, the world has many brothers willing to sell the human birthright of freedom for an equally human dream of unlimited dominance over others.... Now as then, the ratio of Jacobs to Esaus varies greatly from one place and time to another... it varies in America too.

To pretend, as the president and his fellow neocons sometimes do, that it is "racist" to recognize and act on the reality of these differences, is to display the kind of unconscious racism we saw in late-to-the-party liberals of the 1970s, who claimed to love all Black people, but couldn't see the difference between brave democrats like Martin Luther King Jr. and racist thugs like the the Black Panthers.

Bush and Rice are... wrong to insist that support for democracy... [is] support for elections. In reality, supporting democracy... means supporting democrats.... In countries where [democrats] speak for substantial numbers of their fellows as, Walesa and Havel did, it makes sense to press for elections. In countries where they are more akin to lone voices, crying in the wilderness, it does not.

Hitler, after all, was elected, and elections %u2014 especially free elections %u2014 in places like Egypt, Jordan, and the Palestinian territories are bound to produce similar monsters.

The level of Bible criticism is also lower than one would expect even from National Review--even after taking account of the fact that the intellectual level of National Review is lower than one expects. Esau's sin is not to "sell the human birthright of freedom for an equally human dream of unlimited dominance over others." Esau's "sins" are that he works hard as a hunter, plays along with his brother Jacob (who he thinks is making a stupid joke), and is trusting and so falls prey to the machinations of his mother, Rebekah.

Next week: John Podhoretz explains that war is peace, William F. Buckley explains that freedom is slavery, and Michael Novak explains that ignorance is strength.

Henry Farrell and His Commentors Say Smart Things

I was going to point everybody to Henry Farrell saying smart things about the Washington NPC journalists-and-webloggers lunch:

Crooked Timber : I was at the bloggers-meet-journalists lunch a few days ago which Matt Stoller and others have been talking about, and even tried to say something, but was shut down by the moderator, who thought that I was going to say something else altogether. What struck me (and what I was going to say) was that the journalists there didn't seem to understand.... I can understand how the people at the Post would get upset at hundreds of commenters from Atrios's or Kos's comments sections showing up... while they're nothing on, say, the denizens of the slimepit at LGF, their manner of criticism can be... robust....

But even so, the incomprehension... seemed to me to point to something more fundamental. Journalism and blogging have different internal systems of authority. Newspaper articles aspire to presenting a comprehensive, neutral and authoritative judgement.... Blogposts are quite different -- they're arguments in an ongoing debate.... They comment on, and respond to, what others are saying. The point is that they have very different -- and clashing -- notions of where authority and responsibility come from. Each newspaper article has the form of a discrete statement, which is supposed to be as authoritative as possible on its own ground. Each blogpost has the form of an intervention in an ongoing conversation -- the blogger's authority rests in part on her willingness to respond to others and engage in argument with them.... These forms of authority are difficult to reconcile with each other, because the latter in large part undermines the former. If journalists start systematically responding to their critics, and getting drawn into conversations about whether or not they were right when they made a particular claim, then they're effectively admitting that the articles they have written aren't all that authoritative in the first place.... Thus... the tendency for journalists like Jack Shafer to dismiss criticism from bloggers and their commenters as "organized riots" and lynch mobs. It's a fundamental threat to their notions of where journalistic authority comes from....

But the gerbil that powers Crooked Timber appears to have worn himself out, so there's no point in going there now.

However, here are three comments I added to Henry's thread. Looking at it again, I am once again reminded of why people interested in learning about stuff should visit Crooked Timber at least once a week.

Continue reading "Henry Farrell and His Commentors Say Smart Things" »

Why Are We Ruled by These Morons? (Under Secretary of State Bob Joseph Edition)

Steve Clemons is upset because Under Secretary of State Bob Joseph is unsuited to be a diplomat:

The Washington Note: Bob Joseph broadened the traditional French application of "surrender monkeys" and added another 82 million people to it by casting Germans in the same lot. While it might work for satire on a Simpsons episode, a diplomat like Bob Joseph shouldn't be caught dead making a statement along those lines, particularly not in public, not even in United Airlines first class. If he feels so relaxed sharing such undiplomatic chatter in public, one can only wonder what his criteria are when something truly sensitive, or classified, is running through his mind. Secretary Rice, respectfully, your Under Secretary needs some "sensitivity training."

Well, yes, that is alarming. I am more alarmed by the fact that Bob Joseph has a brain that compares unfavorably to the brains of snails. The Germans "surrender monkeys"? In World War II, governed by the logistically incompetent Nazi regime, the German armed forces took on powers that outnumbered them 7-1 in manpower and 9-1 in industrial capacity--and almost won. That's not what "surrender monkeys" do. Not at all.

Minimal acquaintance with military history should be a prerequisite for employment in the Department of State.

Impeach George W. Bush. Impeach Richard Cheney. Fire Condi Rice. Dismiss Bob Joseph. Do it now.

Some of the News That's Fit to Print (Why Oh Why Can't We Have a Better Press Corps?)

In Slate, Jack Shafer writes:

Not Just Another Column About Blogging - What newspaper history says about newspaper future. By Jack Shafer: John Q. Blogger can't fly to Baghdad or Bosnia and do the work of a John F. Burns. But what a lot of guild members miss is that not everybody wants to read John F. Burns, not everybody who wants to read about Baghdad is going to demand coverage of the quality he produces...

There's a question Shafer doesn't ask: what quality of coverage does John F. Burns, chief foreign correspondent of the New York Times produce?

It's an important question.

On July 24, 2005, for example, John F. Burns tells us this that in the early summer of 2004 his successors called Iraq Proconsul L. Paul Bremer III and his staff by "a withering term... 'the illusionists'":

THE WORLD; If It's Civil War, Do We Know It? - The Archive - The New York Times : By JOHN F. BURNS July 24, 2005 BAGHDAD, Iraq: [T]he new American team that arrived [in the early summer of 2004]... headed by Ambassador John D. Negroponte, had a withering term for the optimistic approach of their predecessors, led by L. Paul Bremer III. The new team called the departing Americans ''the illusionists,'' for their conviction that America could create a Jeffersonian democracy on the ruins of Saddam Hussein's medieval brutalism. One American military commander began his first encounter with American reporters by asking, ''Well, gentlemen, tell me: Do you think that events here afford us the luxury of hope?'' It seemed clear then that the administration, for all its public optimism, had begun substituting more modest goals for the idealists' conception of Iraq...

But that's not what John F. Burns, chief foreign correspondent of the New York Times, was writing in the summer of 2004:

TRANSITION IN IRAQ: THE DEPARTING ADMINISTRATOR; Looking Beyond His Critics, Bremer Sees Reason for Both Hope and Caution - The Archive - The New York Times: By JOHN F. BURNS June 29, 2004 BAGHDAD, Iraq - For the 414 days that he was America's proconsul in Iraq, L. Paul Bremer III was forever reacting to surprises... often deeply jarring or violent ones.... On Monday, there was a surprise of a different kind, and it allowed Mr. Bremer to end America's formal occupation of Iraq in a way that pre-empted the insurgents... the 48-hour advance of Iraq's return to formal sovereignty.... Mr. Allawi's aim of forestalling insurgent attacks to disrupt the transition -- which American military intelligence had warned of in recent days -- was successful....

On Monday, Mr. Bremer, Brooks Brothers smart as always... allowed himself a smile of satisfaction.... ''It's a great pleasure to be here this day to formally hand over sovereignty on behalf of the coalition,'' he said.... [H]e boarded a Black Hawk helicopter to begin his journey out of Iraq, and eventually to his house in Vermont, teaching the gourmet cooking classes that are his favorite pastime.... Mr. Bremer seemed intent on bolstering the flagging confidence of many here and in the United States that the American enterprise can recover from the blows of the insurgency and lead to the creation of a stable, democratically governed Iraq. That has been his mantra through the months that the war has worsened.... ''I think we'll win the war, and we'll win it as we get more and more Iraqis standing up and fighting, and as we proceed on the second pillar, which is getting an Iraqi government,'' Mr. Bremer said....

If the plan holds up, the new Iraq of which Mr. Bremer was a principal architect could go down in history as an extraordinary achievement.

But at worst, things could descend into one of the doomsday scenarios... a new dictatorship, the rise of a militantly Islamic Shiite government, or worse yet, a civil war.... [H]istorians will weigh in on Mr. Bremer's stewardship, and on that score, his record seems, on balance, unlikely to win the sort of endorsements that have enveloped General MacArthur's legacy in Japan. The general, of course, did not have an insurgency to contend with....

Notably, though, Mr. Bremer left Iraq with wide respect among ordinary Iraqis -- no small thing.... There has been admiration for his courage in venturing outside the occupation headquarters.... ''I'm really upset about this,'' said Anaam Abdul Wahed, 35, having lunch with her niece in a Baghdad restaurant, when she learned Mr. Bremer had gone, in hastened circumstances that denied him even a broadcast farewell. ''He has become our friend. He's really kind, and handsome. We didn't look at him as we look at Iraqi officials.''...

Before he left, an aide described him as feeling like ''a punching bag'' for the criticisms he has taken from some quarters in Washington.... At the White House... State Department... Pentagon... he became less favored as his time here wore on.

Mr. Bremer's frustration at those shadowy assaults showed only obliquely in the interview, when he alluded to his strong personal relationship with Mr. Bush, who appears to have remained his backer even as others in the White House began looking for a scapegoat. ''I've always been amazed -- it's an interesting phenomenon, and I've talked to the president about it -- how good the view is from the back of a car,'' Mr. Bremer said. Then he added, smiling, ''Particularly looking backwards.''...

In effect, America and its allies, along with a few hundred returned Iraqi exiles, found themselves largely alone in tackling the daunting task of rebuilding a country the size of France, with a population of 25 million people, that had been devastated by three wars under Mr. Hussein, 13 years of United Nations economic sanctions and 35 years of government neglect.

When Mr. Bremer was asked in the interview whether there was anything the United States might have done better, he skirted the issue.... ''People have said the prewar planning was no good,'' he said. ''I don't know. I was a businessman until 10 days before I pitched up here, so I don't know.'' Looking back, Mr. Bremer liked to remind his critics what he inherited when he arrived.... ''Baghdad was on fire, literally, as I drove in from the airport... no traffic... no electricity... no oil production; no economic activity; there wasn't a single policeman on duty anywhere.''...

Suppose we search the New York Times international section archives in 2004 for "Iraq" and--it's a striking word--"illusionists." We get nothing. Zip. Nada. Adding "the successors to Bremer and his team have a withering term for the optimistic approach of their predecessors: 'the illusionists,'" would certainly have made Burns's June 29, 2004 story a better and truer story, wouldn't it?

It would have been very nice if Mr. Burns had given us at the end of June 2004 the assessment of Proconsul L. Paul Bremer III that he was to give us in July 2005, wouldn't it?

Jack Shafer writes, "not everybody wants to read John F. Burns, not everybody who wants to read about Baghdad is going to demand coverage of the quality he produces..." Turn it around: is there a reason that anybody would want to read coverage when you know that some of the most interesting pieces of it are going to be suppressed for a year, in this case so as not to embarrass the favored sources of Mr. Burns?

Randy Kroszner

Larry White asks:

Division of Labour : Reuters had this to say about [Randy] Kroszner: 'While his monetary policy views are not well known, economists said he would likely be in the mainstream. One University of Chicago colleague has said Kroszner would be a "sound money guy."'

I'm starting to wonder whether anyone besides me has actually read Kroszner's monetary writings (as of today!). I've been the intellectual target of some of Kroszner's monetary writings ("Scottish Banking Before 1845: A Model for Laissez-Faire?" Journal of Money, Credit, and Banking, May 1989, 221-31, with Tyler Cowen (reprinted in Lawrence H. White, ed., Free Banking (Aldershot, UK: Elgar 1993)), and the reviewer of others (Journal of Institutional and Theoretical Economics 152, June 1996, 419-22). But really, just look at the title of his book with Tyler Cowen, Explorations in the New Monetary Economics (Cambridge: Basil Blackwell, 1994): does that sound "mainstream" to you?

I have! I have!

Randy Kroszner is, as I said, eminently well-qualified to be on the Board of Governors. But, as I have also said, only one of him! Most Federal Reserve Governors should be "mainstream" in monetary policy. All don't have to be.

Getting to Fat Tuesday a Century Ago

Craig Depken writes:

Division of Labour : Mardi Gras Travel c. 1906: From the Jan. 28, 1906 NYT is an advertisement for the Washington and Southern Railway:

MARDI GRAS - NEW YORK TO NEW ORLEANS AND RETURN - $37.75: Tickets on sale February 21 to 27, good returning until March 3, 1906. Extension of limit March 16th can be had by depositing ticket and paying 50 cents at New Orleans.

I don't know how long it would have taken to get from the Big Apple to the Big Easy on a train, but I would figure two days or so. The folks over at estimate the following 2004 values for the $37 round trip:

In 2004, $37.75 from 1906 is worth:

  • $789.69 using the Consumer Price Index
  • $628.95 using the GDP deflator
  • $3,459.73 using the unskilled wage
  • $4,577.43 using the GDP per capita...

Ouch.... Today's cost of flying from NYC Laguardia to New Orleans? Travelocity has reasonably timed flights for around $160. Travel time from NYC to NO is about 2.5 hours. Wow.

Think of it this way: if the price of travel to New Orleans and back had gone up as fast as average prices have gone up, it would be $700 or so. Relative to average prices, long-distance transportation has become cheaper by a factor of nearly five. Plus we have become richer by a factor of seven (or more, taking account of increases in the capabilities invention and innovation have granted us).

Ironies of History: Chinese Communist Party as Land Baron Edition

Brad Setser writes about the Chinese Communist Party as land baron... or maybe just baron... or maybe that the eternal law of Chinese history is that the bureaucratically well-connected elite controls the land and squeezes the peasants, for the mountains are high and the emperor is far away:

RGE - Another great irony of history: The Chinese Communist party is a very profitable real estate company : Max Sawicky noted that key source of recent job creation in the capitalist United States has been the US government, which itself is financed, in no small part by the People's Bank of China.... That prompted prominent press critic Brad DeLong to add:

One of the great ironies of economic policy is that the historical role of the Vietnamese Communist Party has turned out to be that of a union-busting gang labor boss for Nike and other first-world manufacturing corporations

Let me add another: the Chinese Communist party may have the most valuable real estate franchise in the capitalist world.

The revolution ended private land ownership in China. So if you want to develop a bit of real estate outside Shanghai, you negotiate with the party. Not with the peasants who work the land, often under a long-term lease. And in a country with lots of people, not so much land, rapidly expanding cities, and banks flush with deposits that they would love to lend out, the right to turn rice paddies into apartments and factories can be rather valuable.

Joseph Kahn of the New York Times:

Peasants are not allowed to own the land that they farm and have little say if the government decides to sell it for commercial development. Compensation is assessed according to complex formulas but rarely approaches the market value of the land, leaving many feeling disenfranchised by the development around them.

China hasn't gotten its version of the original homestead act, let alone a modern version.

Disputes over changes in land use certainly seem to be the common denominator behind most violent social unrest in China.

Chinese peasants do not have clear title to the land they work. Or perhaps that should be peasants clearly don't have title to the land they work. That is one of many ways China has followed policies that do not fit well with the Washington consensus. Dani Rodrik is right to note that if China were not growing as fast as it is, western economist would say that China's slow growth stems from the absence of sufficient reforms.

We often extol speaking truth to power, but sometimes it is nice to hear power speaking the truth.

Via ex-Treasury beat reporter Joseph Kahn, China's Prime Minister Wen Jiabao:

Land grabs by officials eager to cash in on China's booming economy are provoking mass unrest in the countryside and amount to a ''historic error'' that could threaten national stability.

''We absolutely cannot commit a historic error over land problems,'' Mr. Wen said in an address delivered to a party meeting in late December and released in Chinese newspapers on Friday. ''In some areas, illegal seizures of farmland without reasonable compensation have provoked uprisings. This is still a key source of instability in rural areas and even the whole society.''....

In the last two years China abolished taxes on peasants and staple farm crops, relieving one historic source of grievance in the countryside. But even that advance, Mr. Wen said, risks being undermined by local officials who impose ''arbitrary fees'' on farmers.

Beijing has backed its words with a series of policy measures designed to bridge the rural/ urban divide. Free schooling, steps to improve rural health care and the like.

But not title to the land peasants now work. That would be too big a redistribution from the Communist party to poor Chinese peasants.

At least for those peasants lucky enough not to get land in the Chinese equivalent of Western Kansas.

But even implementing these modest reforms will be challenge. Remember that the Chinese government also introduced policy steps designed to stop over-investment, which, judging from the recent monthly fixed investment numbers (up 30% y/y), seem to have had only a limited effect. There is a serious point here. The modern-day emperors in Beijing do not necessarily exercise perfect control over all parts of China. Particularly when one of their instrument of control - the party - isn't entirely committed to their agenda.

Edward Cody of the Post:

But the party's efforts to better manage tension between urban growth and squeezed farmlands repeatedly have faltered in the hybrid of socialism and capitalism that has developed here in 30 years of economic liberalization. In the new era, the Communist Party's main ideology has become growth, creating a natural and often corrupt alliance between officials and businessmen that leaves farmers with no advocate.

Joseph Kahn made a similar point:

Local officials operate with impunity in the one-party state and have little to fear from a legal system that answers to the party. Endless exhortations by central government leaders to pay more attention to inequality have done little to address the root causes of the wealth gap and surging social unrest, Chinese and Western political experts say.

Mr. Wen did not announce any fresh steps to curtail land seizures, which many experts say stem from deep-seated problems in the way China manages land.

After all, the close alliance between the party, local banks, local firms and local real estate developers has been rather lucrative for all involved. Rapid local credit growth tends to feed rapid local growth and drive up local real estate values. And if the loans go bad, the local government assumes - probably correctly - that Beijing will be forced to pick up the bill.

Seizing land upsets peasants. Seizing bank deposits (or freezing them) -- even if the deposits have been used to finance a bunch of dud loans -- upsets the urban middle class.

The Republican War on Science Continues

People are surprised that there are so few Republicans in universities? Why?

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

Climate Expert Says NASA Tried to Silence Him - New York Times : By ANDREW C. REVKIN: The top climate scientist at NASA says the Bush administration has tried to stop him from speaking out since he gave a lecture last month calling for prompt reductions in emissions of greenhouse gases linked to global warming. The scientist, James E. Hansen, longtime director of the agency's Goddard Institute for Space Studies, said in an interview that officials at NASA headquarters had ordered the public affairs staff to review his coming lectures, papers, postings on the Goddard Web site and requests for interviews from journalists....

Dr. Hansen, 63, a physicist who joined the space agency in 1967, directs efforts to simulate the global climate on computers at the Goddard Institute in Morningside Heights in Manhattan. Since 1988, he has been issuing public warnings about the long-term threat from heat-trapping emissions, dominated by carbon dioxide, that are an unavoidable byproduct of burning coal, oil and other fossil fuels. He has had run-ins with politicians or their appointees in various administrations, including budget watchers in the first Bush administration and Vice President Al Gore.... Dr. Hansen said that nothing in 30 years equaled the push made since early December to keep him from publicly discussing what he says are clear-cut dangers from further delay in curbing carbon dioxide.

In several interviews with The New York Times in recent days, Dr. Hansen said it would be irresponsible not to speak out, particularly because NASA's mission statement includes the phrase "to understand and protect our home planet." He said he was particularly incensed that the directives had come through telephone conversations and not through formal channels, leaving no significant trails of documents. Dr. Hansen's supervisor, Franco Einaudi, said there had been no official "order or pressure to say shut Jim up." But Dr. Einaudi added, "That doesn't mean I like this kind of pressure being applied."... After that speech and the release of data by Dr. Hansen on Dec. 15 showing that 2005 was probably the warmest year in at least a century, officials at the headquarters of the space agency repeatedly phoned public affairs officers, who relayed the warning to Dr. Hansen that there would be "dire consequences" if such statements continued, those officers and Dr. Hansen said in interviews.... Dr. Hansen and some of his colleagues said interviews were canceled as a result. In one call, George Deutsch, a recently appointed public affairs officer at NASA headquarters, rejected a request from a producer at National Public Radio to interview Dr. Hansen, said Leslie McCarthy, a public affairs officer responsible for the Goddard Institute.

Citing handwritten notes taken during the conversation, Ms. McCarthy said Mr. Deutsch called N.P.R. "the most liberal" media outlet in the country. She said that in that call and others, Mr. Deutsch said his job was "to make the president look good".... Several colleagues of both Ms. McCarthy and Dr. Hansen said Ms. McCarthy's statements were consistent with what she told them when the conversations occurred. "He's not trying to create a war over this," said Larry D. Travis, an astronomer who is Dr. Hansen's deputy at Goddard, "but really feels very strongly that this is an obligation we have as federal scientists, to inform the public."

Dr. Travis said he walked into Ms. McCarthy's office in mid-December at the end of one of the calls from Mr. Deutsch demanding that Dr. Hansen be better controlled. In an interview on Friday, Ralph J. Cicerone, an atmospheric chemist and the president of the National Academy of Sciences, the nation's leading independent scientific body, praised Dr. Hansen's scientific contributions and said he had always seemed to describe his public statements clearly as his personal views.

"He really is one of the most productive and creative scientists in the world," Dr. Cicerone said. "I've heard Hansen speak many times and I've read many of his papers, starting in the late 70's. Every single time, in writing or when I've heard him speak, he's always clear that he's speaking for himself, not for NASA or the administration, whichever administration it's been."

The fight between Dr. Hansen and administration officials echoes other recent disputes. At climate laboratories of the National Oceanic and Atmospheric Administration, for example, many scientists who routinely took calls from reporters five years ago can now do so only if the interview is approved by administration officials in Washington, and then only if a public affairs officer is present or on the phone...

The Trade Balance and Consumption Growth

Menzie Chinn is distressed that last quarter's growth slowdown did not reduce imports:

Econbrowser: The 2005q4 GDP report and the trade balance : As many readers of this blog will recall, in February of last year, Chairman Greenspan saw prospects for the stabilization of the current account and by implication the trade balance (here used interchangeably with the term "net exports") to GDP ratio.... Now, admittedly many of the conditions that Greenspan listed -- for instance fiscal restraint -- have not come to pass. So rather than merely recounting the march downward of the trade balance to GDP ratio, it might be useful to reconsider how strange the current experience is relative to the 1980's episode of dollar depreciation....

During the 1980's episode, the trade balance improved after the dollar depreciation.... In the most recent episode, we would have expected the trade balance to improve sometime in 2004. Indeed there has been some improvement -- or lack of deterioration -- on the non-oil trade balance, but even on that count, one would have expected greater improvement.... Of course, not all other things are held constant. As has often been observed, US economic growth has exceeded other countries. In particular, US consumption growth has been quite rapid... predictions of a stabilization of the trade deficit/GDP ratio implicitly or explicitly rely upon a normalization of consumption patterns. The most recent GDP release indicates that this process may be just beginning.... That being said, it is still remarkable -- to me -- that non-oil goods imports only decreased slightly despite the sharp drop in durables consumption. That tells me that if the adjustment process is underway, it's at its very initial stages.

Intellectual Garbage Cleanup (Why Oh Why Can't We Have a Better Press Corps?)

The American Prospect performs a public service--one that the Washington Post would have long ago performed, were it a real newspaper:

American Prospect Online - Dems Don't Know Jack : The analysis, which was commissioned by The American Prospect and completed on Jan. 25, was done by Dwight L. Morris and Associates, a for-profit firm specializing in campaign finance that has done research for many media outlets.... Although Abramoff hasn't personally given to any Democrats, Republicans, including officials with the GOP campaign to hold on to the Senate, have seized on the donations of his tribal clients as proof that the saga is a bipartisan scandal.... [T]he ombudsman for The Washington Post, Deborah Howell, ignited a firestorm by wrongly asserting that Abramoff had given to both. She eventually amended her assessment, writing that Abramoff "directed his client Indian tribes to make campaign contributions to members of Congress from both parties." But the Morris and Associates analysis... shows that... when Abramoff took on his tribal clients, the majority of them dramatically ratcheted up donations to Republicans. Meanwhile, donations to Democrats from the same clients either dropped, remained largely static or, in two cases, rose by a far smaller percentage than the ones to Republicans did.... [W]hatever money went to Democrats, rather than having been steered by Abramoff, may have largely been money the tribes would have given anyway....

in total, the donations of Abramoff's tribal clients to Democrats dropped by nine percent... while their donations to Republicans more than doubled.... Abramoff's clients gave well over twice as much to Republicans than Democrats, while tribes not affiliated with Abramoff gave well over twice as much to Democrats than the GOP -- exactly the reverse pattern.... Bloomberg News published a similar, more limited analysis last month, which relied on a small amount of data also from Morris's firm.... The Prospect asked Morris to do two things: First, compare the contributions of all of Abramoff's tribal clients before they'd signed on with Abramoff versus after they'd become his client. And second, compare the contributions of all Abramoff tribal clients with the contributions of all non-Abramoff tribes.

Meanwhile, the Washington Post "stands by its reporting that Jack Abramoff directed campaign money to some Democrats."

A Laboratory Story

This is why Edward Teller decided to build Lawrence Livermore laboratory *far* away from Berkeley or anyplace else where people might someday live:

Uncertain Principles : How to Tell a True Lab Story: This is true. A guy I knew in graduate school, he had a buddy who was working late in the lab one night. He was all alone, and he got a little bored, so he took a two-liter soda bottle, and he filled it halfway up with liquid nitrogen. Then he screwed the cap on tight. Now, liquid nitrogen, when it boils, it takes up something like 700 times the volume of the liquid. So this guy, he's got this bottle, and he's kicking it around in the hall. But the bottle starts to swell up, so he tries to open the cap, and it's stuck. So he runs into the bathroom, and he dumps it in a sink, and runs back out in the hall.

A few minutes later, there's an earth-shattering KABOOM!, and he goes back into the bathroom. The bottle blew up, and reduced the sink to rubble. At this point, the guy telling me the story pulls out a Polaroid of the busted-up sink. There are little chunks of porcelain, twisted copper pipes, little daggers of two-liter bottle plastic sticking into the walls and ceiling. The bathroom in the picture is trashed.

The explosion, it wakes up all sorts of people, and sets off an alarm. Pretty soon the campus police are there, asking questions about what happened. They get the story from the kid with the bottle, then they call his thesis advisor. It's two o'clock in the morning, and his advisor is home in bed. The police tell his advisor that one of the students just blew up the lab with nitroglycerin.

Well, his advisor comes screaming in at two o'clock in the morning. He gets to campus, and the lab is fine. One of his students blew up the bathroom with liquid nitrogen.

"Oh," he says. "That's part of the experiment." And he goes home and goes back to bed.

A true lab story is never moral. It does not instruct, nor encourage virtue, nor suggest models of proper scientific practice, nor restrain graduate students from doing the things that graduate students have always done. If a story seems moral, do not believe it. If at the end of a lab story, you feel uplifted, or if you feel that you have learned some useful fact about science, you have been made the victim of an old and terrible lie. As an order-of-magnitude approximation, you can tell a true lab story by its absolute and utter lack of any real scientific content whatsoever. Listen to the post-doc. "Earth-shattering KABOOM!" he says. Then he laughs. He's twenty-eight years old-- it's too much for him-- so he looks at you and says "Earth-shattering KABOOM!", because it's so incredibly funny and true: the advisor went home and went back to bed.

You can tell a true lab story by the questions you ask. Somebody tells a tstory, and afterwards you ask "Can you really destroy a bathroom with liquid nitrogen in a soda bottle?" and if the answer matters, you've got your answer.

For example, you may have heard this one. Three physicists are sitting around the break room, and they take a light bulb, and put it in the microwave. Now, if you put a light bulb into a microwave oven, and turn it on, the microwaves build up a large electric field at the point ends of the metal bits inside the bulb, and the resulting plasma discharge makes the bulb light up.

Is it true?

The answer matters.

You'd feel cheated if it didn't work that way. Without the grounding reality, it's not an interesting physics trick, it's just Hollywood nonsense. Yet even if it did happen-- and you could stick a light bulb in your own microwave to find out-- even then, you know it can't be true, because a lab story that lame wouldn't be worth telling. A thing may depend on actual physical principles, and be totally dull; another thing may leave out the physics explanation, and be truer than the truth. For example: three physicists are sitting around the break room, and a post-doc comes in with a bulb from an overhead projector. "How do you tell if one of these is burnt out?" she asks. One of the guys in the break room grabs it from her, and throws it in the microwave, where it lights up. He hands it back, and says "It's fine." The other two fall out of their chairs laughing.

That's a true lab story. It may even have happened.

(With apologies to Tim O'Brien, and in honor of Seed soliciting lab lit for their fiction supplement issue....)

Now of course, Livermore has a population of 74,000, all at the mercy of the nuclear physicists at the Lab.

And I'm heading for the microwave with a lightbulb.

Oxblog Volunteers to Write for the New Republic...

Unqualified Offerings clues us in, and reminds us that we would be a better and a happier person if we read Oxblog regularly in the original, and not just in the clippings package:

Unqualified Offerings : David Adesnik writes the ur-TNR article:

At this point, the author pulls out a deck of cards and picks one at random. If the card is a ten or lower, the author concludes that the Democrats are right, but not for the reason given by some senator from Massachusetts. If the author draws a face card, he thinks to himself, "I must agree with the Republicans for no apparent reason in order to show that I'm open-minded." If the author draws an ace, it means that his thirtieth birthday is approaching and it's time to either go back to grad school or work for McKinsey.

Yes, I get the irony of David Adesnik writing this. It's still funny cause it's true!

Speaking of Oxblog, Patrick Belton is doing some very good reporting from the West Bank.

How Evil Is Google?

The Twelve-Year-Old asks: How evil is Google?

Official Google Blog: Google in China : 1/27/2006 11:58:00 AM: Posted by Andrew McLaughlin, senior policy counsel: Google users in China today struggle with a service that, to be blunt, isn't very good. appears to be down around 10% of the time. Even when users can reach it, the website is slow, and sometimes produces results that when clicked on, stall out the user's browser. Our Google News service is never available; Google Images is accessible only half the time. At Google we work hard to create a great experience for our users, and the level of service we've been able to provide in China is not something we're proud of.

This problem could only be resolved by creating a local presence, and this week we did so, by launching, our website for the People's Republic of China. In order to do so, we have agreed to remove certain sensitive information from our search results.... Launching a Google domain that restricts information in any way isn't a step we took lightly.... Filtering our search results clearly compromises our mission. Failing to offer Google search at all to a fifth of the world's population, however, does so far more severely. Whether our critics agree with our decision or not, due to the severe quality problems faced by users trying to access from within China, this is precisely the choice we believe we faced.

Google image search first result for "tienanmen" on

Google image search first result for "tienanmen" on

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Digs Itself in Deeper Department)

Ah. More mendacity this morning from the editors of the Washington Post: - The Editors Talk About Site Policies, Design and Goals : The Post stands by its reporting that Jack Abramoff directed campaign money to some Democrats.

May we speak frankly here?

The Washington Post has many problems in this situation:

One problem is an ombudsman--Deborah Howell--who appears to be extraordinarily unfit for the job.

A second problem is that this ombudsman, on January 15, 2006, made the--false--claim that Washington Post staff reporter Susan Schmidt "quickly found that [Jack] Abramoff... had made substantial political contributions to both parties."

A third problem is that ombudsman Deborah Howell did not do the appropriate thing, which would have been to write: "On January 15, I wrote that Susan Schmidt had 'quickly found that [Jack] Abramoff... had made substantial political contributions to both parties.' This was incorrect. Jack Abramoff's personal political contributions were made to Republicans only. I regret the error."

Instead, the ombudsman wrote:

Nothing in my 50-year career prepared me for the thousands of flaming e-mails I got last week over my last column, e-mails so abusive and many so obscene that part of The Post's Web site was shut down.... I wrote that he gave campaign money to both parties and their members of Congress. He didn't. I should have said he directed his client Indian tribes to make campaign contributions to members of Congress from both parties.... I do know... I have a tough hide, and a few curse words (which I use frequently) are not going to hurt my feelings. But it is profoundly distressing if political discourse has sunk to a level where abusive name-calling and the crudest of sexual language are the norm, where facts have no place in an argument. This unbounded, unreasoning rage is not going to help this newspaper, this country or democracy.... To all of those who wanted me fired, I'm afraid you're out of luck. I have a contract. For the next two years, I will continue to speak my mind.

A fourth problem is that where Deborah Howell should have written "I regret the error" she wrote "[Abramoff] directed his client Indian tribes to make campaign contributions to members of Congress from both parties." Nobody, nobody--unless they were in hock to Karl Rove or candidates for the lunatic asylum--would characterize Abramoff's business as "directing" "campaign contributions to members of Congress from both parties." Such a declaration flies in the face of Washington Post stories like:

"A Jackpot From Indian Gaming Tribes: Lobbying, PR Firms Paid $45 Million Over 3 Years," by Susan Schmidt Feb 22, 2004 A.01: A powerful Washington lobbyist and a former aide to House Majority Leader Tom DeLay (R-Tex.) persuaded four newly wealthy Indian gaming tribes to pay their firms more than $45 million over the past three years for lobbying and public affairs work, a sum that rivals spending to influence public policy by some of the nation's biggest corporate interests. Touting his ties to conservatives in Congress and the White House, lobbyist Jack Abramoff persuaded the tribes to hire him and public relations executive Michael Scanlon to block powerful forces both at home and in Washington who have designs on their money, according to tribe members. Under Abramoff's guidance, the four tribes -- Michigan's Saginaw Chippewas, the Agua Caliente of California, the Mississippi Choctaws and the Louisiana Coushattas -- have also become major political donors. They have loosened their traditional ties to the Democratic Party...

"Reed Confirms Fees From Indian Casino Lobbyists", by Thomas B. Edsall Aug 30, 2004 A.03: Ralph Reed, Southeast regional chairman of the Bush-Cheney '04 campaign and former executive director of the Christian Coalition, confirmed on Sunday that he accepted more than $1 million in fees from a lobbyist and a public relations specialist whose work on behalf of American Indian casinos prompted a federal investigation.... Scanlon's company paid Reed $1.23 million, according to sources familiar with the transactions. The two law firms Abramoff worked for, Greenberg Traurig LLP and Preston Gates Ellis & Rouvelas Meeds LLP, paid fees to Reed and Century Strategies...

"Tribal Money Linked to GOP Fundraising" by Susan Schmidt and Jeffrey H. Birnbaum Dec 26, 2004 A.01: For most politicians, fundraising is a dreaded chore. But until recently, Rep. John T. Doolittle of California and other members of the House Republican leadership had adopted a painless solution: fundraising events in luxury sports boxes leased largely with the money of Indian gaming tribes.... Abramoff spent about $1 million annually in funds largely provided by his tribal clients to lease four skyboxes -- two at FedEx Field and one each at MCI Center and Camden Yards. Season after season, he kept them brimming with lawmakers, staffers and their guests, part of a multimillion-dollar congressional care and feeding project that even the brashest K Street lobbyists could only watch with awe or envy.... Abramoff and the lobbyists who worked for... used tribal money, records and interviews show, to pay for events that appeared to be designed more to help House Republicans' campaigns and Abramoff's overall lobbying effort than the Indians' legislative causes.... A list of skybox fundraising events maintained by Abramoff at his former law firm, Greenberg Traurig, lists 72 events for members of Congress between 1999 and 2003. All but eight were put on for Republicans, many of them members of the House leadership. Some of the fundraising events, including Doolittle's, were not reported as required under federal election laws...

"Lobbyist Quits As Firm Probes Work With Tribes," by Susan Schmidt Mar 4, 2004 A.01: Abramoff and Michael Scanlon... received more than $45 million in lobbying and public affairs work from newly wealthy tribes.... Abramoff also advised the tribes to give $2.9 million in federal political contributions, two-thirds of it to Republicans.... Abramoff also has advised tribes to give hundreds of thousands of dollars to obscure organizations that appear to have no connection to Indian concerns. They include American International Center, a think tank that Scanlon, in an e-mail statement this week, said he founded. The organization paid $1.5 million in fees to Greenberg Traurig, becoming one of its largest lobbying clients. Touting his ties to conservatives in Congress and the White House, Abramoff has become one of Washington's most powerful and best-paid lobbyists. He has convinced tribes with gambling wealth that they should support conservatives who share their anti-tax philosophy...

"Tribal Grant Is Being Questioned," : by Susan Schmidt Mar 1, 2005 A.03: PUBLISHED CORRECTIONS: A March 1 article inaccurately reported that Sen. Byron L. Dorgan (D-N.D.) supported controversial legislation that provided a $3 million grant to a wealthy Indian tribe. Dorgan said he did not support it, contrary to an assertion made Feb. 28 by a spokesman for Sen. Conrad Burns (R-Mont.). Burns's office acknowledged it had been incorrect. (Published 3/2/05.) A $3 million grant from a federal program intended for impoverished Indian tribal schools went to one of the richest tribes in the country under pressure from Sen. Conrad Burns (R-Mont.), who oversees the budget of the Bureau of Indian Affairs. The tribe... was at the time a client of Jack Abramoff, a prominent Republican lobbyist.... Abramoff, his associates and his wealthy tribal clients have been an important source of Burns's campaign funds, providing 42 percent of the contributions to his "soft-money" political action committee from 2000 to 2002, according to federal election records. Burns pressed for the appropriation over the objections of Interior officials, who said that the grant was not intended for such a purpose. Sen. Byron L. Dorgan (D-N.D.), ranking minority member on the appropriations subcommittee, supported Burns's effort...

}Casino Bid Prompted High-Stakes Lobbying"by Susan Schmidt Mar 13, 2005 A.01: When a ragtag band of Louisiana Indians won their governor's support for a casino three years ago, they never could have fathomed the powerful cast of characters who would collaborate to flatten them. Jack Abramoff, one of Washington's most prominent Republican lobbyists... orchestrate[d] a far-reaching campaign against the Jena Band of Choctaws -- calling on senior U.S. senators and congressmen, the deputy secretary of the interior and evangelical leaders James Dobson and Ralph Reed.... Abramoff directed his tribal clients to give at least $225,000 to the Council of Republicans for Environmental Advocacy, a conservative group that was founded by Gale A. Norton before President Bush chose her to be his interior secretary.... Abramof... had been winning over tribes around the country, preaching that they needed to cultivate the new GOP majority in Washington as well as the Democrats they traditionally supported.... Abramoff asked the Coushatta... to contribute to politicians and conservative groups...

Look at what these stories say about what Abramoff did:

"asked [tribes]... to contribute to politicians and conservative groups..."

"preach[ed] that [tribes] needed to cultivate the new GOP majority in Washington as well as the Democrats they traditionally supported..."

"directed his tribal clients to give... $225,000 to the Council of Republicans for Environmental Advocacy, a conservative group that was founded by [Interior Secretary] Gale A. Norton..."

"Abramoff, his associates and his wealthy tribal clients... provid[ed] 42 percent of the contributions to [Republican Conrad Burns's] "soft-money" political action committee..."

"spent about $1 million annually... to lease four skyboxes... brimming with lawmakers, staffers and their guests... a multimillion-dollar congressional care and feeding project... designed... to help House Republicans' campaigns and Abramoff's overall lobbying effort... 72 events for members of Congress.... All but eight were put on for Republicans..."

"Touting his ties to conservatives in Congress and the White House, Abramoff has become one of Washington's most powerful and best-paid lobbyists. He has convinced tribes with gambling wealth that they should support conservatives who share their anti-tax philosophy..."

"Under Abramoff's guidance, the four tribes... have loosened their traditional ties to the Democratic Party..."

Would you, based on these stories, characterize Jack Abramoff as being in the business of "directing... campaign contributions to members of Congress from both parties"? Would anybody who cared about preserving the shreds of their reputation as an objective news reporter do so? No.

But you are not the editors of the Washington Post.

And here we come to Washington Post problem number 5. Rather than take steps to begin to repair their reputation and credibility, the Post editors pile the shreds of their reputation, douse them with gasoline, and set them afire by deciding to back their ombudsman's current characterization of Jack Abramoff as being in the business of "directing... campaign contributions to members of Congress from both parties."

Here's the Post's full statement. Live comments, of course, are not allowed:

The Post stands by its reporting that Jack Abramoff directed campaign money to some Democrats.

Abramoff was one of Washington’s most prominent Republican lobbyists and his political pedigree and alliances were overwhelmingly conservative and Republican. No Democrats are among the half-dozen lawmakers who The Post’s sources say are under scrutiny by the Justice Department. Abramoff convinced a number of casino-rich Indian tribes that had been historically Democratic donors to expand their political giving and to make most of their contributions to the GOP.

However, as reported in several Post stories since 2004, Abramoff also built links with the other party, as most lobbyists do. He hired a few Democrats onto his lobbying staff. He turned over his sports stadium boxes to some Democrats to use for fundraising events. Representatives of tribes including the Saginaw Chippewas, the Tiguas of El Paso and the Agua Caliente Band testified in Congress that Abramoff told them how much to give to specific lawmakers and party committees. The lists he sent to the Indian tribes included some Democrats and Democratic party groups, according to copies of the lists obtained by The Post and according to tribal members familiar with Abramoff’s operation. More than a dozen Democrats, including Sens. Byron Dorgan (N.D.) and Max Baucus (Mont.) have returned donations from Abramoff clients and associates, citing the scandal.

Here are some of the stories that touch on those points:

Papers Show Tribe Paid to Try to Sway Bill, Nov. 18, 2004

Tribal Money Linked to GOP Fundraising; Skybox Events Were Not Always Reported to FEC, Dec. 26, 2004

Casino Bid Prompted High-Stakes Lobbying, March 13, 2005

Democrats Also Got Tribal Donations; Abramoff Issue’s Fallout May Extend Beyond the GOP, June 3, 2005

Abramoff Witness Frustrates Panel, Nov. 18, 2005

Dorgan Tangled in Abramoff Web, Dec. 5, 2005

-- Post Editors

If you work for the Financial Times, for the National Journal, for the news pages of the Wall Street Journal, for the Economist, for Bloomberg or Reuters or Knight-Ridder or the Christian Science Monitor, your organization is an asset to your credibility. I would advise all journalists to think hard about whether the organization they work for is like one of these or not.

The Very Top of the U.S. Income Distribution

Mark Thoma is wishing he had already found time to read Piketty and Saez (2006), "The Evolution of Top Incomes: A Historical and International Perspective" (Cambridge: NBER WP 11955:

Abstract: This paper summarizes the main findings of the recent studies that have constructed top income and wealth shares series over the century for a number of countries using tax statistics. Most countries experience a dramatic drop in top income shares in the first part of the century due to a precipitous drop in large wealth holdings during the wars and depression shocks. Top income shares do not recover in the immediate post war decades. However, over the last 30 years, top income shares have increased substantially in English speaking countries but not at all in continental Europe countries or Japan. This increase is due to an unprecedented surge in top wage incomes starting in the 1970s and accelerating in the 1990s. As a result, top wage earners have replaced capital income earners at the top of the income distribution in English speaking countries. We discuss the proposed explanations and the main questions that remain open.

Thoma reproduces what are by far the most interesting figures in Piketty and Saez, which show that the pretax income share of the top 1% of the American income distribution jumped from 8% in 1980 to 9% in 1985 to 13% in 1990 to 17% in 2000 to 14% today. Over the same period the income share of the next 4% has risen from 13% to 15%, and the income share of the still next 5% has stayed at 12%. The top tenth of the American income distribution increased its share from 33% in 1980 to 41% today--with three-quarters of that increase going to the top 1% and fully one-quarter of that increase going to the top 0.01%.

What skills and assets do the top 1% of America's pretax income distribution have today that lead the market to grant them 14% of total income, when their counterparts back in 1980 were granted only 8% of total income? What skills and assets do the top 0.01% of the American pretax income distribution--that's 12,000 tax units--that led the market to grant them 100 times average income in 1980, and 300 times average income today?

Top of the U.S. Income Distribution in Historical Perspective

Paul Krugman on the Veterans' Administration

Paul writes:

Health Care Confidential - New York Times: I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system's success provides a helpful corrective to anti-government ideology. For the government doesn't just pay the bills in this system -- it runs the hospitals and clinics... our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate.... Last year customer satisfaction with the veterans' health system, as measured by an annual survey conducted by the National Quality Research Center, exceeded that for private health care for the sixth year in a row. This high level of quality (which is also verified by objective measures of performance) was achieved without big budget increases. In fact, the veterans' system has managed to avoid much of the huge cost surge that has plagued the rest of U.S. medicine.

The secret of its success is the fact that it's a universal, integrated system. Because it covers all veterans, the system doesn't need to employ legions of administrative staff to check patients' coverage and demand payment from their insurance companies. Because it's integrated, providing all forms of medical care, it has been able to take the lead in electronic record-keeping and other innovations that reduce costs, ensure effective treatment and help prevent medical errors. Moreover, the V.H.A., as Phillip Longman put it in The Washington Monthly, "has nearly a lifetime relationship with its patients." As a result, it "actually has an incentive to invest in prevention and more effective disease management. When it does so, it isn't just saving money for somebody else. It's maximizing its own resources. ... In short, it can do what the rest of the health care sector can't seem to, which is to pursue quality systematically without threatening its own financial viability."

Oh, and one more thing: the veterans health system bargains hard with medical suppliers, and pays far less for drugs than most private insurers.

I don't want to idealize the veterans' system. In fact, there's reason to be concerned about its future: will it be given the resources it needs to cope with the flood of wounded and traumatized veterans from Iraq? But the transformation of the V.H.A. is clearly the most encouraging health policy story of the past decade. So why haven't you heard about it?

The answer, I believe, is that pundits and policy makers don't talk about the veterans' system because they can't handle the cognitive dissonance. (One prominent commentator started yelling at me when I tried to describe the system's successes in a private conversation.) For the lesson of the V.H.A.'s success story-- that a government agency can deliver better care at lower cost than the private sector -- runs completely counter to the pro-privatization, anti-government conventional wisdom that dominates today's Washington.

The dissonance between the dominant ideology and the realities of health care is one reason the Medicare drug legislation looks as if someone went down a checklist of things the veterans' system does right, and in each case did the opposite...

Ezra Klein: Republican Corruption Comes Home to Roost

Ezra Klein paints the big drug benefit picture:

TPMCafe || Corruption Matters: The 2003 Medicare Modernization Act was a dual purpose bill... yank the prescription drug issue away from Democrats... [demanded by the] pharmaceutical industry.... The legislation passed on November 22, 2003, right around dawn. The vote was held open an unprecedented three hours to ensure passage (by contrast, when Democratic leaders held a vote open for 15 extra minutes in 1987, then-congressman Dick Cheney called it "the most arrogant, heavy-handed abuse of power I've ever seen in the 10 years that I've been here."), a lawmaker was bribed, and the arm-twisting reached such epic proportions that staffers still find severed limbs beneath desks annd behind podiums.

If you're interested in a full recounting of the night, the story is best told in Bob Cusack's definitive article, "The Night the Clocks, Scoreboard Stood Still."

For the lockstep Republican Conference of 2003 to prove so fussy and reluctant requires a truly monstrous bill, and the MMA did not disappoint. A normal drug benefit would, as Kate said, simply tack on prescription coverage to Medicare Part B, paying a portion of pharmaceutical costs as part of the outpatient benefits. Medicare could then use its massive size and market share to bargain down drug prices, ensuring affordability and long-term savings over the fractured, smaller private system. But the two losers in that equation -- private insurers and pharmaceutical companies -- were the two with access to Congress, and so the bill takes precisely the opposite approach, choosing to involve and enrich the affected industries rather than achieve savings, comprehensive coverage, or simplicity.

Medicare Part D, first, cherishes the unique contribution HMO's and private insurers make to our medical landscape, and sought from the beginning to ensure their inclusion. Thus, there is no Medicare insurance here, as there is in parts A and B. Medicare is instead a middleman and absent-minded regulator of the private, for-profit insurers who actually offer the coverage. There are, literally, hundreds of plans, each covering different drugs, offering different copays, boasting different donut holes, and suited for different conditions.

Letting a thousand insurance plans bloom might be well and good were health static, but since seniors routinely attract new ailments and require new drugs, the chance that a necessary treatment won't be covered under the Medicare sub-plans has kept all but the poorest and most needy from risking entry into the drug benefit. Add in the total confusion created by the benefit's structure and you can see why seniors are so anxious to sign up.

Worse, the Medicare Modernization Act specifically prohibited Medicare from bargaining with pharmaceutical companies. That's why the tiny Veteran's Health Administration has been able to demand prices 49 percent lower than Medicare's and why every other country with nationalized health insurance buys pharmaceuticals at around half our price....

The Medicare Modernization Act was the K Street Project in action. How karmically appropriate, then, that its inevitably disastrous implementation should fall mere days after Jack Abramoff's guilty plea. The bill is a mess of bad policy and industry giveaways, and even once the initial administrative hitches calm, the prices will remain exorbitant, the benefit will remain labyrinthine, and the stories of seniors falling ill only to find their plan lacks coverage for their treatment will remain common. Policy matters, bad policy most of all, and if progressives are looking for tangible proof that political corruption has come at a cost to ordinary Americans, they need only ask their grandparents.

Why Oh Why Are We Ruled by These Dorks? (Health Care Edition)

Dan Froomkin directs us to some real analysis of the forthcoming Bush health proposals:

On, Harvard Medical School professor emeritus Rashi Fein writes:

"One of the strengths of large employer-provided health insurance (and of Medicare) is the sharing of risk across large numbers of individuals. If the pool is fragmented and each of us has his or her individual insurance and savings account, premiums will increase for those who are sicker or older as they fall for those who are healthier or younger. This cannot be justified as a matter of social policy. For instance, it would exacerbate the present situation in which almost 20 percent of African Americans and one-third of Hispanics are uninsured.

"Furthermore, the tax-free characteristics of the savings account provide an incentive to postpone preventive care services and early diagnoses -- if I wait perhaps it will go away and I get to keep the money in the savings account. Yet in some cases such postponements lead to bad health outcomes and even higher long run costs. Thus the savings account approach is not only bad social policy, but -- because it negates the current emphasis on health promotion and disease prevention -- it represents bad medical policy."

Columbia University researchers Sherry Glied and Dahlia Remler recently found that HSAs are not likely to be an important contributor to expanding coverage among uninsured people because most of them do not face high-enough marginal tax rates to benefit substantially from the tax deductibility of HSA contributions. Leonard E. Burman and Linda J. Blumberg of the Urban Institute call HSAs a "tax cut for rich people." Ezra Klein writes in the American Prospect that "what HSA's really do is separate the young from the old, the well from the sick. Currently, insurance operates off of the concept of risk pooling. Since health costs tend to be unpredictable and illness isn't thought a moral failing, we all pay a bit more than we expect to use in order to subsidize those who end up needing much more than they ever thought possible. The well subsidize the sick, the young subsidize the old, and we all accept the arrangement because one day we will be old, and one day we will be sick, and no one wants to shoulder that alone.

"But HSA's slice right through this intergenerational, redistributionist arrangement: they're a great deal for young, healthy folks because they don't force subsidization. Just don't get sick."...

As I've said before, I believe the reason that Bush is pushing HSAs is that they are a tax cut, his only rule of domestic policy is to cut taxes, and that this is the only tax cut he thinks he can sell.

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

Fox News: More Junk Journalism

Junk journalism.

Jane Hamsher writes: Honoring that great conservative tradition of "what, you think I do this for free?" it turns out science columnist Steven Milloy has been on the payroll of Philip Morris since 2000, curiously the same time he started his job:

On March 9, 2001, he wrote a column for the website headlined "secondhand smokescreen." The piece attacked a study by researcher Stephen Hecht, who found that women living with smokers had higher levels of chemicals associated with risk of lung cancer. "If spin were science, Hecht would win a Nobel Prize," Milloy wrote. For good measure, he heaped scorn on a 1993 Environmental Protection Agency report that also linked health risks and secondhand smoke. Later that spring, he authored another smoking-related piece for In that one, he cast aside two decades of research on the dangers of exposure to secondhand smoke and concluded, "Secondhand smoke is annoying to many nonsmokers. That is the essence of the controversy and where the debate should lie--the rights of smokers to smoke in public places versus the rights of nonsmokers to be free of tobacco smoke." You might chalk it up to Milloy's contrarian nature. Or to his libertarian tendencies. Except, all the while, he was on the payroll of big tobacco. According to Lisa Gonzalez, manager of external communications for Altria, the parent company of Philip Morris, Milloy was under contract there through the end of last year. "In 2000 and 2001, some of the work he did was to monitor studies, and then we would distribute this information within to our different companies," Gonzalez said. Although she couldn't comment on fees paid to Milloy, a January 2001 Philip Morris budget report lists Milloy as a consultant and shows that he was budgeted for $92,500 in fees and expenses in both 2000 and 2001.

I wonder why they suspected him. It never would've occurred to me there was anything weird about a science expert whose health advise is "smoke 'em if you've got 'em."

As Matthew Yglesias says, until the press corps cleans its own house, those seeking objective news and information will continue to rely on internet sources of good reputation. A press corps that includes Fox News, the Washington Times, National Review, the Wall Street Journal editorial page, and CNN is hopelessly corrupt. How can it be worth anyone's time to figure out which reporters are straight and which are bent?

By contrast, it is much much easier to assess reputations and reliability on the web.

Covering the Economy: Employment and Layoffs: Ford

Ford plans for the future: - Ford Will Shed 28% of Workers In North America : By JEFFREY MCCRACKEN and JOSEPH B. WHITE Staff Reporters of THE WALL STREET JOURNAL January 24, 2006; Page A1: DETROIT -- Ford Motor Co. has made it official: Detroit is ditching its business model of the 1990s, and the cost now totals more than 60,000 jobs at Ford and rival General Motors Corp. Ford yesterday announced plans to close 14 North American factories, including seven assembly plants, and slash up to 34,000 North American jobs over the next six years. About a month ago, GM rolled out plans to cut almost as many jobs by 2010. Both companies will emerge from these retrenchments smaller, slugging it out in a crowded U.S. auto market. Underscoring the gravity of the situation, Ford yesterday also announced a $1.55 billion loss at its North American operations for 2005.

Continue reading "Covering the Economy: Employment and Layoffs: Ford" »

Covering the Economy: Employment and Layoffs: GM

GM's financial results for 2005:

G.M. Posts Worst Loss Since 1992 - New York Times : By MICHELINE MAYNARD: DETROIT, Jan. 26 -- By the middle of this decade, Rick Wagoner promised a few years ago, General Motors would again be king of the American road. The company would have dozens of new products aimed at beating foreign automakers, Mr. Wagoner, G.M.'s chief executive, said in 2002. With those new cars and trucks, G.M. would rebuild market share and its profits would help it stay ahead of the high cost of providing health care. Instead of fulfilling Mr. Wagoner's promise, G.M. went into reverse on Thursday. The company reported an $8.6 billion loss for 2005, the year it began its latest revamping, meant to reverse a string of losses and fend off relentless competition. G.M. reported a profit of $2.8 billion in 2004.

Continue reading "Covering the Economy: Employment and Layoffs: GM" »

What Does the Growth-Investment Correlation Mean?

Very interesting:

Robert's Stochastic thoughts : "Testing for cross country heterogeneity in growth models using a finite mixture approach: Marco Alfo', Giovanni Trovato, and Robert J. Waldmann: We use an empirical model to test if the economic growth can beconsidered exogenous in the Solovian sense. We apply multivariatemixture model proposed by Alfo' and Trovato (2004) to the Bernanke and Gurkainak (2000) extension of the Solow model. We find that the explanatory power of the Solow growth model is enhanced, since growth rates are not statistically significantly associated with investment rates, when cross-country heterogeneity is considered. Moreover, we find no sign of convergence to a single equilibrium.

What Do You Mean "We," Kemosabe?

"What do you mean 'we', Kemosabe" is what his fellow Republicans call Senator Judd Gregg--the last Republican fiscal conservative--when he calls on them to do a "serious budget."

Ezra Klein: Flower Child : Poor Judd Gregg. One year you're an all-powerful feudal lord commanding your corner of the Senate, the next you're an azalea:

Senate Budget Committee Chair Judd Gregg (R-N.H.) on Wednesday called for spending reductions in the fiscal year 2007 budget, "particularly in health care programs" such as Medicare, CQ Today reports. The FY 2007 budget process will begin on Feb. 6, when President Bush delivers his proposed budget to Congress. Gregg said, "I'm not here to be a potted plant.... If we're going to do a budget, it's going to be a serious budget." Gregg said that he expects the budget proposal from Bush to include spending reductions, adding, "We can't afford our government as it is currently structured." Gregg also rejected the opinion that Republicans should avoid spending reductions in an election year, adding, "As Republicans, we should look at it as a strength, not a weakness." However, "Gregg's fervor for budget cuts ... is not shared by all of his GOP colleagues," according to CQ Today.

Ah yes, budget cuts in an election year. Cutting programs as an electoral asset. Conservatives are so cute when they daydream. As for the budget, it will most assuredly not be a serious budget, a point well proven by the recently reversed reductions in Medicare spending, which demonstrated quite conclusively that a party too timid to cross either seniors or lobbyists can't really save any money on anything at all. But it's hard to blame the GOP for all this, it's just the reality of it. If anyone ever lets Gregg bloom, the Republican majority will instantly whither and die.

I can't think of a time when the Republican Senate caucus was even a third grownups. But now they seem to be down to less than five.

Great Ironies of Economic Policy

One of the great ironies of economic policy is that the historical role of the Vietnamese Communist Party has turned out to be that of a union-busting gang labor boss for Nike and other first-world manufacturing corporations.

Max Sawicky identifies a second great irony:

MaxSpeak, You Listen!: IT HAS COME TO THIS : Forgive me for repeating myself, but for job growth, this has been one stinky recovery.... [A]ctual job growth can be accounted for by growth in public sector jobs. And there's nothing wrong with that. However: The upshot is that the triumph of Republican-conservatarian economic policy consists of an expansion of government jobs financed by loans from the Communist People's Republic of China.

Why Oh Why Can't We Have a Better Press Corps? (Nell Henderson Washington Post Edition)

Max Sawicky directs us to Nell Henderson committing journamalism in the Washington Post this morning. Here is what Henderson writes:

Chairman Moved a Nation : Democrats were outraged in January 2001, when Greenspan urged Congress to cut taxes, lending a key political boost to President George W. Bush's tax cut proposal.... Greenspan believed the surpluses would continue and suggested that policymakers design "triggers" to scale back the tax cuts if deficits reemerged...

Greenspan did not "believe" the surpluses would continue. He hoped the surpluses would continue, but thought it irresponsible to plan as though they would.

Here is what Alan Greenspan "believed," as told to Ron Suskind by Bush Treasury Secretary Paul O'Neill: what he believed in 2001 was that the Bush tax cut was irresponsible:

Alan Greenspan Says That the 2001 Tax Cut Was a Mistake: Archive Entry From Brad DeLong's Webjournal: May 22 [2001]... Greenspan arrived at the Treasury for breakfast with O'Neill.... Greenspan said that wasn't enough. "Without the triggers, that tax cut is irreponsible fiscal policy," he said in his deepest funereal tone. "Eventually, I think that will be the consensus view."

From Ron Suskind (2003), The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O'Neill (New York: Simon and Schuster: 0743255453), p. 162.

We have no reason to disbelieve Paul O'Neill. Greenspan has not denied O'Neill's account. Greenspan has said that his recollection of the meeting "differs" from On'Neill's, but not how his recollection differs--a standard non-denial.

And, of course, Henderson is simply incoherent. If you believe that the surpluses will continue, what's the point of triggers? Only if you hope that the surpluses will continue but recognize that they might not will you care about triggers.

Bush Federal Reserve Appointments

From the invariably excellent Greg Ip and John MacKinnon of the Wall Street Journal news pages. As one keen observer said to me yesterday, "If it's not in the Financial Times or the news pages of the Wall Street Journal, it's probably wrong: - Bush Is Moving To Fill Two Slots At Federal Reserve : By GREG IP and JOHN D. MCKINNON: Staff Reporters of THE WALL STREET JOURNAL January 27, 2006; Page A2: WASHINGTON -- With leadership at the Federal Reserve about to change, the White House is moving to fill two vacancies on the central bank's seven-member board of governors. The White House announced that President Bush will nominate Kevin M. Warsh, a White House adviser on domestic finance and capital markets, and Randall S. Kroszner, who teaches at the University of Chicago's Graduate School of Business.

Mr. Warsh declined to comment. Mr. Kroszner couldn't be reached.

The nominations come as Alan Greenspan prepares to step down Tuesday after 18½ years as chairman. Ben Bernanke, a monetary economist who is chairman of Mr. Bush's Council of Economic Advisers, is scheduled to succeed him Wednesday. He awaits Senate confirmation, tentatively expected Tuesday.

Mr. Bernanke created one of the vacancies when he quit as a Fed governor to go to the White House last summer. Edward Gramlich, appointed by President Clinton, stepped down as a Fed governor in August.

The nominations would tilt the board's composition toward financial-industry expertise rather than macroeconomics. Mr. Warsh, a lawyer by training, was an investment banker at Morgan Stanley before joining the White House National Economic Council. He has been the White House's point person on financial-industry issues.

Randy Kroszner is eminently qualified to be a Fed Governor. (But one of him is enough: two people who think like him on the Fed would be too many.) Does anybody know whether Kevin Marsh is qualified? The Bush administration's track record suggests that there is a presumption that the answer is, "Hell no!" But I don't know about the guy.

Covering the Economy: BEA January 27 GDP Report

Lots of real news--bad news in the "advance" GDP report for the fourth quarter of 2005:

News Release: Gross Domestic Product : EMBARGOED UNTIL RELEASE AT 8:30 A.M. EST, FRIDAY, JANUARY 27, 2006

Virginia H. Mannering: (202) 606-5304 BEA 06-02

Recorded message: (202) 606-5306


Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 1.1 percent in the fourth quarter of 2005, according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 4.1 percent. The Bureau emphasized that the fourth-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3). The fourth-quarter "preliminary" estimates, based on more comprehensive data, will be released on February 28, 2006.

The major contributors to the increase in real GDP in the fourth quarter primarily reflected positive contributions from private inventory investment, personal consumption expenditures (PCE), equipment and software, exports, and residential fixed investment that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP growth in the fourth quarter primarily reflected a deceleration in PCE, an acceleration in imports, a downturn in federal government spending, and decelerations in equipment and software and in residential fixed investment that were partly offset by an upturn in private inventory investment.

Final sales of computers contributed 0.33 percentage point to the fourth-quarter growth in real GDP after contributing 0.16 percentage point to the third-quarter growth. Motor vehicle output subtracted 0.58 percentage point from the fourth-quarter growth in real GDP after contributing 0.56 percentage point to the third-quarter growth.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 3.3 percent in the fourth quarter, compared with an increase of 4.2 percent in the third. Excluding food and energy prices, the price index for gross domestic purchases increased 2.9 percent in the fourth quarter, compared with an increase of 2.5 percent in the third.

Covering the Economy: BEA January 27 GDP Report: Kash Mansouri Instant Reaction

He writes, at Angry Bear:

Angry Bear : Dramatic Slowdown in GDP Growth: The BEA has just released its first estimate of economic growth for the fourth quarter of 2005. It was dramatically lower than most people were predicting. The consensus estimate was for about 3.5% growth. Some pessimists guessed that it would be as low as 2.5%. The actual figured turned out to be just 1.1%.... This is a terrible report. Consumer spending slowed dramatically, to its lowest rate of growth in recent history. Business spending slowed even more dramatically, from a growth rate in the neighborhood of 8-10% over the past 10 quarters to just 3% this quarter - the lowest rate of business spending growth since 2003:Q1. In fact, the only thing that kept GDP growth positive at all was a massive build-up in inventories - the largest increase in inventories since early 2002. Apparently businesses were caught off guard by the slowdown in demand, and have not yet slowed their production accordingly. Presumably, they will.

All in all, this is an extremely worrying report. I've been bearish about economic growth in 2006 for a little while now, and this has just confirmed my worst fears. Kash

Covering the Economy: BEA January 27 GDP Release: Reuters Immediate Wire

By Glenn Somerville:

GDP growth at weakest in three years : Fri Jan 27, 2006 9:35 AM ET: By Glenn Somerville WASHINGTON (Reuters) - U.S. economic growth slowed sharply in the fourth quarter to the weakest pace in three years as consumers spent less robustly, growth in home building eased and businesses were less eager to boost investments, a government report on Friday showed.Gross domestic product, the broadest measure of economic activity within U.S. borders, advanced at a surprisingly weak 1.1 percent annual rate in the October-December period -- little more than a quarter of the third quarter's 4.1 percent rate and the weakest for any three months since 0.2 percent in the fourth quarter of 2002.

The softer-than-anticipated data shocked financial markets, prompting a decline in the dollar's value and a jump in bond prices as investors prepared to shift assets from stocks into debt securities.Fourth-quarter growth was far weaker than the 2.8 percent rate that Wall Street economists had forecast and reflected widespread softness.

Consumer spending, which fuels two-thirds of national economic activity, slowed to a 1.1 percent rate of growth, sharply below the third-quarter rate and the weakest since a 1 percent gain in second quarter of 2001. Spending on costly durable goods, which include cars and other items intended to last three years or more, plunged at a 17.5 percent rate.

That was the steepest drop in durables spending in nearly 19 years, since a 23.2 percent fall in the first quarter of 1987.

Analysts said the GDP report partly reflected the impact of Hurricane Katrina, which caused widespread disruption in the Gulf Coast region in late summer and fall."Taking it at face value, the hurricane played a big role in contributing to the weakness," said economist Richard DeKaser of National City Corp. in Cleveland. "Consumer spending was abysmal in October and November. It's an extremely weak report overall."

But some other analysts noted some of the negative influences -- like the hurricane impact -- could be temporary."Some of the recent data we have been getting is decidedly more upbeat," said Robert Sinche, a global currency strategist with Bank of America in New York. "The market looks at this as interesting history, likely to be revised up in future months."

In 2005, GDP expanded by 3.5 percent, slowing from 4.2 percent growth in 2004.There also were signs of increased pressure on prices in the fourth quarter. The price index for consumer spending rose at a 2.6 percent rate in the fourth compared with the third quarter's 3.7 percent. However, the core PCE index, which strips out volatile food and energy costs, picked up to a 2.2 percent rate of increase from 1.4 percent in the third quarter.

The Federal Reserve's policy-setting Federal Open Market Committee is set to meet on Tuesday, and has indicated it is closely watching inflation. The Fed has raised short-term interest rates 13 times since mid-2004 and is widely expected to boost them again on Tuesday.

Economist William Sullivan of JVB Financial Group in New York said the soft GDP data might raise speculation that the Fed is near an end to its rate-rise cycle.

"These data might introduce a bigger element of doubt as to whether you will get another Fed rate hike in March," Sullivan said. "But right now there's a sense that this is a soft patch and that there is probably a reacceleration under way."

Business investment grew at a 2.8 percent annual rate in the fourth quarter, less than half the third quarter's 8.5 percent rate and the weakest for any quarter since a 1.1 percent drop in the first quarter of 2003. Inventories climbed at a $25.7 billion rate during the final three months of last year, a sharp change following decreases at a $13.3 billion rate in the third quarter and $1.7 billion in the second quarter.

Covering the Economy: BEA January 27 GDP Release: WSJ Friday Morning Roundup

Wall Street Journal morning news roundup: - U.S. GDP Grew at 1.1% Rate As Consumer Outlays Slowed : A WALL STREET JOURNAL ONLINE NEWS ROUNDUP January 27, 2006 12:23 p.m.: The U.S. economy cooled during the final quarter of 2005 as consumers tightened their belts in the face of higher energy prices and the trade imbalance continued to damp growth. The Commerce Department reported Friday that gross domestic product, the broadest measure of U.S. economic output, rose at a seasonally adjusted 1.1% annual rate in October through December. The gain was slimmer than the third quarter's 4.1% increase, and marked the weakest quarterly showing since the final quarter of 2002, when GDP rose 0.2%. For all of 2005, GDP advanced 3.5%. It grew 4.2% in 2004 and 2.7% in 2003.

"While this was a disappointing report, there are signs of a very sharp rebound in GDP growth in the current quarter," economists at Morgan Stanley wrote in a note. Indeed, they wrote they now see a "very good possibility" the economy will grow at a 5% or better rate in the first quarter of 2006, versus their earlier estimate of 4.2% first-quarter growth.

Continue reading "Covering the Economy: BEA January 27 GDP Release: WSJ Friday Morning Roundup" »

Covering the Economy: BEA January 27 GDP Release: WSJ Economists React

The Wall Street Journal's Friday morning "Economists React" story: - Economists React : Economists React January 27, 2006 11:17 a.m. After the economy navigated a brutal hurricane season to post robust growth in the third quarter of 2005, growth cooled considerably in the fourth quarter. Gross domestic product, the broadest measure of U.S. economic output, increased at just a 1.1% seasonally adjusted annual rate as free-spending consumers became more cautious and the gaping trade deficit continued to provide a drag on the expansion. For all of 2005, GDP growth averaged a 3.5% annual rate. What does the slowdown in the fourth quarter mean for the economy in the months ahead? Economists weigh in with their reactions:

Continue reading "Covering the Economy: BEA January 27 GDP Release: WSJ Economists React" »

Covering the Economy: BEA January 27 GDP Release: WSJ Chartbook : Year-End Chartbook 2005: THE U.S. ECONOMY STEAMED through its fourth year of expansion during 2005 despite being beset on all sides by potential hazards. Soaring energy prices, increasing global imbalances, a super-heated housing market and rising interest rates were just a few of the obstacles faced down by the economy last year. Though a devastating hurricane season couldn't swamp growth in the third quarter -- gross domestic product then grew at a 4.1% annual rate -- weaker consumer spending was a drag on growth in the fourth quarter, when GDP expanded at a 1.1% rate. For all of 2005, GDP grew 3.5%.

Nonetheless, peril from high energy prices and the potential bursting of a housing-market bubble hasn't been completely cast aside. Commodity costs are still a concern for manufacturers and economists are worried that consumers could be faced with higher prices if companies attempt to pass on their higher expenses. Housing recently has been showing signs of slowing down. The homes market has ebbed in the past only to rebound, but a more permanent downturn could have serious consequences for growth.

Take a look at how six key economic indicators -- employment, retail sales, consumer confidence, consumer inflation, existing-home sales and the trade deficit -- fared in 2005, and where they could be headed this year.

Research by: Tim Annett. Illustration by: Paul Antonson

Why Oh Why Are We Ruled by These Liars?

Hale Stewart notes that the Bush administration is--once again--highballing its estimate of this year's deficit so it can take credit at the end of the fiscal year for "reducing" the deficit below "expectations":

The Blogging of the President : The deficit will reach at least $337 billion for the current budget year, the Congressional Budget Office estimates, and the deficit is likely to go higher because of tax cuts and new additional spending for hurricane relief and the war in Iraq. The deficit estimated by the nonpartisan CBO was lower than predicted by the White House budget office, which two weeks ago said the 2006 deficit would top $400 billion because of emergency aid for victims of hurricanes Katrina and Rita.

If we had a real press corps that didn't fall for such transparent tricks, they wouldn't still be trying them, would they?

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