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January 2006

Michael Hiltzik on the Prescription Drug Benefit Rollout

Michael Hiltzik has a good piece about the Medicare Part D prescription drug rollout:

Golden State: Bush's Catastrophic Drug Benefit: The defining fiasco of the Bush Administration may prove to be the utterly disastrous Medicare prescription drug benefit, formally known as Medicare Part D. Already the newspapers are filled with stories about Medicare-Medicaid patients, the poorest of the poor, being denied prescriptions by the thousands because the government, with only two full years to prepare, didn't have its computer systems tested, up, and running when the program launched January 1. The pain is just beginning.

What's instructive about this project is that it provides a concrete illustration of what Social Security would have looked like after a Bush privatization job: A program that should be designed to serve citizens turned instead into a plaything for lobbyists and business interests.... Is there a saving grace in the disaster? Only that, considering that most eligible people will be signing up in early May, then discovering the flaws in the system through the summer and early fall, they'll be reaching the peak of fury and be well poised to wreak vengeance on the perpetrators at the ballot box in November. Good riddance.

When I began to research this issue some weeks ago, my intention was to write one column. I soon realized that wouldn't scratch the surface. This column will be followed by a second column on Monday, explaining the so-called "doughnut hole" in the system that will trap millions of Americans in doughnut hole hell....

One recent afternoon in Los Alamitos, I watched Marcy Zwelling-Aamot, M.D., pick her way through a government website designed to help elderly patients select the right Medicare drug plan.... The website... identified 48 individual plans... sponsored by private health insurance companies administering the government drug benefit for a profit. The plans' monthly premiums ranged from $5.41 to $66.08; their lists of covered drugs differed from one another, sometimes significantly; and all imposed different annual out-of-pocket costs on enrollees - a critical consideration for patients on fixed incomes.

Zwelling-Aamot is a private internist who accepts a limited number of patients but places herself at their beck and call. She and her staff have spent months helping her patients navigate the new benefit, a process that requires at least an hour and a half of research per patient (time for which she's not compensated by Medicare).... [S]he has come to see it not as a boon for elderly consumers, but as a scandal. "As a patient, you are totally hoodwinked by this system," she told me. "It's not just an economic tragedy; it's a moral tragedy."

The Medicare drug benefit is shaping up as the single most cynical scam perpetrated by the Bush Administration on American consumers. Designed to maximize profits for drugmakers and health insurers, the program was launched so ineptly Jan. 1 that hundreds of thousands of patients have been prevented by computer glitches from filling their prescriptions. California and 25 other states have had to step in temporarily to pay for improperly rejected prescription claims.... The program is ostensibly tailored to serve up to 43 million elderly Americans, most of them subject to an enrollment deadline of May 15 and a stiff financial penalty for late enrollment. Yet, most seniors seem to be biding their time; Medicare says that only 3.6 million persons people, out of an estimated 18.3 million who are eligible for the stand-alone benefit, have signed up thus far. Even the government acknowledges that selecting a plan is dauntingly confusing for those without access to its Internet help site. That's a big hurdle, because an estimated 70% of Americans over 65 have never been online.

The toll-free information lines set up by Medicare and various health plans have been overwhelmed for weeks. Medicare regulations discourage physicians, pharmacists and healthcare advocates from helping patients select a specific plan. Yet many professionals say they themselves are so confounded by the program's intricacies that their patients will be hard pressed to make the right choices on their own. The health plans have filled the vacuum with glossy marketing brochures, some of which are flagrantly misleading....

It's worth remembering that the prescription drug program was born in an act of fraud. The Bush Administration sold it to Congress in 2003 by estimating its cost at less than $400 billion over 10 years. Scarcely a month after its enactment, the White House issued a new estimate: $535 billion....

As written, the legislation complied with a drug industry demand that Medicare be prohibited from negotiating with manufacturers for lower drug prices. Among those helping the industry make its stand was Rep. Billy Tauzin (R-Louisiana), whose committee on energy and commerce oversaw Medicare. In an odoriferous development, Tauzin soon quit Congress to become president of the Pharmaceutical Research and Manufacturers of America - Big Pharma's Washington lobbying group...

Judicial Activism

Mark Kleiman points out that it's only "judicial activism" when liberal judges do it:

The Reality-Based Community: Judging and personal beliefs : Now comes Justice Scalia, in dissent in the Oregon assisted-suicide case. As a legal matter, the key question was whether the Justice Department could use the its [licensing] power... to regulate the practice of medicine, as opposed to using that power only to prevent "script-doctoring" and the diversion of drugs to the illicit market. The regulations provide that physicians may prescribe drugs only for a "legitimate medical purpose." Could that rule be used to overrule the decision of the voters of Oregon, voting in a referendum, to allow physicians in that state to help badly suffering terminally ill patients put an end to their misery? To Scalia, the answer is clear. "If the term 'legitimate medical purpose' has any meaning, it surely excludes the prescription of drugs to produce death." Savor that "surely," if you will. Because Scalia finds assisted suicide morally offensive, it "surely" must be the case that relieving suffering by hastening death isn't a legitimate part of what a physician does.

I'm glad Scalia's opinion was a dissent, not so much because a few Oregonians will continue to have access to physician assistance in ending their lives - the job can be done without the use of controlled substances, for example by using a breathing mask hooked up to a tank of an inert gas or nitrous oxide - as for the sake of striking down what seemed to me a clearly illegitimate power grab by the Federal government on behalf of the prejudices of the "God" faction of ruling God-and-Mammon coalition that is the political base of the current ruling oligarchy. But it's also worth noticing how empty the conservatarian promise of "neutral" judging turns out to be when push comes to shove.

The Missing Grownup Republicans Stay Missing

Steve Clemons writes:

The Washington Note : There are many thoughtful, fair-minded, and deeply concerned senior Bush administration Republicans who think that the administration must turn itself around and get out of the "thumb in their eye" national security positions it has taken... believe that there have been huge public relations and policy disasters surrounding Guantanamo, the management of accountability after Abu Ghraib, the rendition of prisoners abroad, the administration's battle with John McCain over torture policy, and even the NSA intercepts.... This person is introspective and self-critical about these problems and wants to fix them. He wants to address the problem and to reconnect to real debates. This is exactly the right strategy -- and this writer and pundit is more than happy to help those inside the Bush administration try to get to more constructive ground than that on which the administration currently stands.

If so, then where the *&^%$#&(&! have they been for the past five years?

If there were even six grownup Republicans in the Senate, they would issue a joint statement calling for the withdrawal of Alito's nomination on the grounds that when the executive branch is incompetent is not the time to put an executive branch royalist on the supreme court.

Me and Susan Tedeschi

Don't get me wrong. I like the music that Susan Tedeschi does enormously. But, still, I have to ask: Is it legal to do what she does without a Janis Joplin license?

In Praise of Knight-Ridder

Also from Poynter:

Poynter Online - Forums : From ERIC ALTERMAN: I think with all the difficulties facing Knight Ridder these days, we should take a moment to praise their Washington Bureau. My impression during the run up to the war in Iraq was that they bought less of the BS coming from the Bush administration than any other major news outlet, and backed it up with inspired investigative reporting, shaming the employers of Judy Miller and Bob Woodward. Ditto the story mentioned here in re Alito's historical record. Merely doing such conscientious journalism these days invites bad-faith charges of "liberal bias" as part and parcel of the right's strategy of "working the refs." But these guys stick to their guns, do the difficult gruntwork, and then stand by their story. Dammit, it's inspiring.

Another Word on Deborah Howell and Howard Kurtz


Poynter Online - Forums: From VANCE LEHMKUHL: Re: Your Howard Kurtz item. Kurtz says Deborah Howell's statement about Democrats receiving money from Abramoff was not a lie, only "inartfully worded," and cites the phrase "have gotten Abramoff campaign money" as though this was the only instance in that column of her referring to this concept.That's wrong, though. As Kurtz must know, the other reference was beyond artful or inartful; it was simply untrue: "Schmidt quickly found that Abramoff was getting 10 to 20 times as much from Indian tribes as they had paid other lobbyists. And he had made substantial campaign contributions to both major parties." No. Schmidt did not report (nor has anyone else to date uncovered) JackAbramoff himself making ANY campaign contribution to Democrats. Howell and now Kurtz should apologize for continuing to parrot this falsity.

Bush Administration Ineptness Watch

Kevin Drum writes:

The Washington Monthly : THE PRESCRIPTION DRUG DEBACLE....PART 341....Jon Cohn -- who's writing a book about the American healthcare system -- promises more about the Medicare prescription drug debacle shortly but wants to pass along one tidbit while we're waiting:

It's a Government Accounting Office report, issued in December, warning that the Bush administration hadn't done enough to make sure the most medically and financially vulnerable Medicare beneficiaries could actually get their drugs.

If you do get around to reading it, make sure to check out the part where Mark McClellan, director of the Center for Medicare and Medicaid Services, says the GAO has it all wrong -- the part where he insists that "CMS has established effective contingency plans to ensure that dual-eligible beneficiaries will be able to obtain comprehensive coverage and obtain necessary drugs beginning January 1, 2006."

You know, that sounds familiar. The Bush administration is warned that its planning is inadequate but it ignores the advice and plows ahead without listening.

Very familiar. It's on the tip of my tongue. Help me out here.

Inequality Continues to Rise...

Another thing noted by Kevin Drum--from Bloomberg's coverage of the American Economic Association meeting:

The Washington Monthly : BUSHONOMICS....Bloomberg News writes the following about the state of the economy:

After 16 consecutive quarters of economic growth, pay is rising at a slower rate than in any similar expansion since the end of World War II. Companies are paying less of their cash gains in the form of wages and salaries than at any time since the Great Depression, according to government figures.

...."There is no doubt that something is happening" to reduce labor's share of income, says Robert Solow, a Nobel Prize- winning economist and professor emeritus at Massachusetts Institute of Technology in Cambridge. An economy that doesn't distribute its gains widely is "poorly performing," he says.

From the final quarter of 2001 through last year's third quarter, total compensation paid to employees by corporations, including health benefits, rose at a 4.3 percent average annual rate, according to government figures. That's the slowest growth for any similar period in post-war expansions lasting at least four years.

Translation: supply side economics works. It just doesn't work for you or me.

Covering the Economy: Semi-Final Syllabus


Covering the Economy: The Story Behind the Numbers

Journalism 298, Spring 2006:

J-School B1
2:30-4 Tuesday
10-12 Wednesday

Susan Rasky
J. Bradford DeLong

You are all guinea pigs.

We have never done this before. Neither has anybody else as far as we know.

In fact, it is not at all clear to us what "this" is or will be. But a number of our colleagues in economics and journalism think we’re on to something and want to help. You’ll be hearing from them in person, over the speaker phone and in Washington, D.C. over spring break.

Susan Rasky is here to get people ready to cover the U.S. and world economy for the wire services, for daily newspapers and websites and for week-in-review style pieces in print and broadcast.

Brad DeLong is here for two reasons: first, because Susan thinks he has something to offer; second, because he is being gradually driven insane by stories in major newspapers and other outlets. He’ll share some bad budget reporting from his bag of journalistic atrocities in the first class.

We both start with this premise: Nobody goes into journalism to write bad stories that mislead their readers and omit or downplay the important news of the events that they are covering. Journalists, especially daily journalists have a very difficult job. They are under ferocious deadline pressure. They are beat reporters--which means that they cannot afford to alienate their sources too far, for they have to go back to them again and again. They are dealing with complicated and subtle issues. And at least half the people they talk to are telling them subtle (and sometimes not so subtle) lies.

So what has gone wrong? And how can journalists--and those among their sources who are interested in public education and in raising the level of the debate--make things go right?

We plan to spend about the first six weeks looking at how the bread-and-butter economic news is covered and how it should be covered. What the standard statistical releases suggest about whether the economy is going up, down, or sideways--and what "up," "down," and "sideways" mean.

During the next six weeks, we will focus more closely on four or five big economic trends from which you will select story projects for publication or broadcast:

  1. Pensions and Social Security - who pays for retirement.
  2. Health Insurance, Drugs, and Medicare.
  3. The Government: Taxing and Spending.
  4. Trade, Jobs, and Earnings

Students with approved Washington reporting agendas will travel there over Spring break (week of March 27 April 2) to interview sources and meet journalistic and economic contacts.)

Tuesday classes will be Brad’s informal lectures on the economy; his readings will be posted on our JSchool intranet and on his website.

Wednesday classes will be discussion of readings, sources and story project planning and pitching. During the first few weeks we’ll also do some timed writing exercises on the indicators just to keep your fingers warm.

Guests will be scheduled for both sessions. We’re still working on the final line-up.

1/17 First Class: Overview of semester, logistics, DeLong’s horror stories, DeLong’s website, textbook, and other resources. Economic literacy test.

"Senate Passes Budget With Benefit Cuts and Oil Drilling." By ROBERT PEAR; CARL HULSE CONTRIBUTED REPORTING FOR THIS ARTICLE. November 4, 2005

The Senate on Thursday narrowly approved a sweeping five-year plan to trim a variety of federal benefit programs and to allow drilling for oil and natural gas in a wilderness area of Alaska, increasing the chances that the energy industry and Alaska officials will achieve a long-sought goal. The budget bill, the most ambitious effort to curb federal spending in eight years, was approved by a vote of 52 to 47. Five Republicans opposed the measure; two Democrats voted for it. Senator Judd Gregg, Republican of New Hampshire, the chairman of the Senate Budget Committee, said, "This bill is a reflection of the Republican Congress's commitment to pursue a path of fiscal responsibility." It will, Mr. Gregg said, reduce the deficit and save roughly $35 billion over the next five years...

The Federal government currently spends money at the rate of $2.6 trillion a year. Total incomes in the entire American economy are about $12 trillion a year. Saving $35 billion over five years means that you are saving $7 billion a year--0.3% of federal spending; 0.06% of GDP. Out of a federal budget that spends $9,000 per person per year, Judd Gregg is saving $27 a year.

Thus reading a lead like that makes Brad DeLong, at least, foam at the mouth: phrases like "sweeping," "ambitious," "commitment," and "fiscal responsibility" simply have no place here--especially since Carl Hulse does not give his readers any of the numbers needed as reference points to assess the magnitude of the Senate's action.

Brad DeLong finds similar holes in the Washington Post's coverage. And others agree. As Paul McCleary wrote for the Columbia Journalism Review last November 4:

The Washington Post's Jonathan Weisman">

... obscure[s] rather than delineate major parts of the purported deficit reduction package.... Weisman first goes a little fuzzy in the fourth paragraph when he states that the bill "would shave payments to some farmers. A proposal to limit payments to rich farmers failed yesterday...." How rich?... Weren't there some specific numbers tied to this proposal? If so, why didn't Weisman include them?...

But back to the Post, where Weisman isn't done distorting by omission. Down toward the middle... "a $70 billion tax cut that could come to a vote soon after the budget bill, more than wiping out the first bill's deficit reduction."... With that, Weisman qualifies for the Buried Lede of the Week Award. As Sam Rosenfeld noted... "could it have hurt Jonathan Weisman to mention somewhere before the tenth paragraph of the piece (and less obliquely than in the passing reference he makes there) that there's a second component to the reconciliation package that's been artificially severed from the spending one, which will cut taxes for the wealthy by $70 billion?... Viewed as a whole, budget reconciliation would increase the deficit by more than $30 billion."... [T]he Post's headline..."Senate Passes Plan to Cut $35 Billion From Deficit," while technically correct, gives the reader precisely the wrong impression. Someone forgot to warn the Post's copyeditors that the news -- and the headline -- were actually tucked into that tenth paragraph.

  • January 24/25: The Employment Release: Employment and Unemployment Numbers (with readings for that Tuesday now available here:

  • January 31/1: The Employment Release: Wages and Earnings

  • February 7/8: The GDP and Productivity Releases

  • February 14/15: Inflation: The CPI Releases

  • February 21/22: International Trade Numbers

  • February 28/1: The Federal Reserve FOMC Meeting

Then we will go into coverage of longer-run issues and processes:

  • March 7/8: Poverty and Income

  • March 14/15: Budget Proposals and Spending Resolutions

  • March 21/22: Budget Outcomes and Entitlement Spending

  • April 4/5: Trade and the WTO

And, perhaps, thereafter we'll examine the work done by some extremely good and skilled practitioners of journalism: perhaps William Greider, John Berry, Greg Ip, Paul Blustein, Julie Rovner, Rebecca Smith. We’ll also look at the explanatory writing of some non-journalists who can be extremely helpful to reporters on deadline, among them, Stan Collender, Jean Ross and Ed Yardeni.

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

For the record, Deborah Howell--the ombudsman, the "readers' representative"--is the *only* person at the Washington Post or at who has failed to return my phone calls. 925-708-0467.

Will Bunch has a good piece, and writes:

Poynter Online - Forums :

Topic: Letters Sent to Romenesko
Date/Time: 1/17/2006 10:37:42 AM
Title: Why no WP clarification?
Posted By: Jim Romenesko

From WILL BUNCH: We don’t remember too much from four years of high school Latin, but we do recall this phrase: Quis custodiet ipsos custodes -- Who will guard the guards themselves? Is there a way to say in Latin, “Who will be an ombudsman for the ombudsman?” Seriously -- to whom does one complain at the Washington Post when the person who is there to receive reader complaints defiantly gets it wrong?

We’re referring, of course, to Sunday’s piece by the Post’s new ombudswoman, Deborah Howell, which ... ended up on a note that read like it was straight from the offices of the Republican National Committee. Here’s what she wrote: “The second complaint is from Republicans, who say The Post purposely hasn't nailed any Democrats [in the Abramoff scandal]. Several stories, including one on June 3 by Jeffrey H. Birnbaum, a Post business reporter, have mentioned that a number of Democrats, including Senate Majority Leader Harry Reid (Nev.) and Sen. Byron Dorgan (N.D.), have gotten Abramoff campaign money. "So far, Schmidt and Grimaldi say their reporting on the investigations hasn't put Democrats in the first tier of people being investigated. But stay tuned. This story is nowhere near over.”

The first assertion is flat-out wrong. Dorgan and Reid could not have received “Abramoff campaign money,” because as numerous articles and investigations have shown, Abramoff never donated a dime to any Democrat. Not one. That’s not surprising, since Abramoff... is a Republican. Which is one of the primary reasons why this is a Republican scandal, despite assertions to the contrary in the Post, on CNN, and elsewhere.

Did Dorgan and Reid receive donations from some of Abramoff’s many clients? Yes. But if that’s what Howell meant, that’s not what she wrote. When you’re lumping public figures into an ongoing criminal investigation, you should be pretty damn clear on the facts.... If a newspaper prints something that is wrong, there should be a correction, and if something is unclear to the point where it suggests something that is not true, then there should be a clarification. And yet so far the Post has offered neither....

As for the second point that Howell makes above, her disappointment that the Post hasn’t bagged a Democrat yet is palpable, as she begs readers to “stay tuned.” We would hope that the Post’s reporting will be guided by the truth, not a zealous desire to make sure that both political parties are implicated. We get the sense that Howell would have wanted Woodward and Bernstein to keep reporting on Watergate until some Democrat entered “the first tier” of the scandal -- a notion not much more ridiculous than what she wrote on Sunday.

It’s easy for the Post to brush aside 700 blog posts from political partisans (even before that darned “glitch” made them disappear), because while we journalists love to write about politics, deep down we think that anyone who truly cares about it must be some kind of nut. So maybe they’ll listen instead to one journalist with 25 years of experience.

Deborah Howell’s column was wrong.

Will we get that correction?

We'll "stay tuned.”

Why Oh Why Are We Ruled by These Liars? (Supreme Court Edition)

Ruth Marcus is upset by Roberts's and Alito's disingenuous claims that they just apply the settled law to the case, ma'am:

Underneath Their Robes : [T]he judge's job, as Roberts and Alito surely know, is far more complicated.... That is... what makes who is nominated to the high court matter. And it is what I find so frustrating about the vapidity of their answers.... For even the most responsible, well-intentioned judge, respectful of precedent... is called on to make, well, judgment calls, filling gaps in legislation or interpreting capacious constitutional phrases. The higher up the judicial ladder, the harder the cases -- and the more important the judge's underlying worldview, judicial philosophy and constitutional vision. There is, in short, a soul inside every judicial machine.

Justice Benjamin Cardozo... described the inescapable, hidden forces tugging at judges -- "inherited instincts, traditional beliefs, acquired opinions" -- forces, that, he said, produced "an outlook on life, a conception of social needs... which, when reasons are nicely balanced, must determine where choice shall fall." Cardozo dismissed judges who see themselves as mere painters hired to touch up a room. "Their notion of their duty is to match the colors of the case at hand against the colors of the many sample cases spread out upon their desk. The sample nearest in shade supplies the applicable rule. But of course," Cardozo continued, "no system of living law can be evolved by such a process, and no judge of a high court, worthy of his office, views the function of his place so narrowly.... It is when the colors do not match... when there is no decisive precedent, that the serious business of the judge begins."...

On a more elevated but even more important plane, different judges bring to the bench different attitudes about presidential power, federalism and constitutional interpretation. What has been so disappointing about the nominees' testimony is their unwillingness to engage in this discussion in an honest, meaningful way. What has been so maddening about the questioning is the senators' inability to penetrate their platitudes or robotic restatements of the law...

It is possible to penetrate the platitudes and robotic restatements. But we can start down that road only if the Washington Post and other opinion leaders have the guts to recommend the rejection of any nominee who is unwilling to engage in honest, meaningful discussion about presidential power, federalism, and constitutional interpretation.

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

Washington Post staff writer Derek Willis asserts, at

firedoglake: 01/15/2006 - 01/21/2006 : Writing as someone who was involved in researching campaign contributions for these [Abramoff] stories, I'd like point out what the Post's reporting on this has demonstrated.... Abramoff... direct[ed] his tribal clients to contribute to both Democrats and Republicans, with Republicans getting the bulk of such funds

Jane Hamsher comments:

The quasi-hit piece co-authored by Mr. Willis in June of last year entitled "Democrats Also Got Tribal Donations: Abramoff Issue's Fallout May Extend Beyond the GOP" buries this bit at the bottom:

A spokesman for [Patrick] Kennedy said the congressman's donations from the tribes "have nothing to do with Abramoff." Kennedy traces the money's genesis to his family's long-standing commitment to Indian causes, to the fact that he co-founded the Congressional Native American Caucus in 1997, and to his personal relationship with Mississippi Choctaw Chief Philip Martin, whom Kennedy met in 1999 on a fundraising trip for the Democratic Congressional Campaign Committee. "They just became close friends," said Kennedy spokesman Sean Richardson.

So let me ask Mr. Willis. If the Indian tribes had a relationship with Patrick Kennedy completely independent of Jack Abramoff, isn't it a bit patronizing to say that Abramoff would "direct his tribal clients" to give money to him?

Derek Willis assertion, and many other comments as well, appear to have been deleted from

Why the War on Drugs Is Hard to Win

Tyler Cowen provides more evidence for the empirical hypothesis that Gary Becker, Michael Grossman, and Kevin Murphy are geniuses:

Marginal Revolution: Why the War on Drugs is hard to win: Here is a summary of forthcoming work by Gary Becker, Michael Grossman, and Kevin Murphy:

The authors demonstrate how the elasticity of demand is crucial to understanding the effects of punishment on suppliers. Enforcement raises costs for suppliers, who must respond to the risk of imprisonment and other punishments. This cost is passed on to the consumer, which induces lower consumption when demand is relatively elastic. However, in the case of illegal goods... where demand... [is] inelastic[,] higher prices lead... to an increase in total spending.... The authors argue that excise taxes and persuasive techniques such as advertising are far more effective uses of enforcement expenditures. "This analysis... helps us understand why the War on Drugs has been so difficult to win... why efforts to reduce the supply of drugs leads to violence and greater power to street gangs and drug cartels," conclude the authors. "The answer lies in the basic theory of enforcement developed in this paper."

Virtual Blogroll Link-of-the-Week: General Glut's Globblog

With the coming of RSS, my blogroll is no longer a good guide to what I find worth reading. So let me try to remember to, every Monday, create a link to something that would be at the top of my list of weblogs-to-read if that list were still current.

Today's entry is:

General Glut's Globblog :

Here's a sample:

Good luck to the South Korean government and to the Bank of Korea. They'll need it.

South Korea's finance ministry said on Friday it would mobilise all possible means to curb the won's recent sharp appreciation against the US dollar... concern among government officials that the stronger won could hurt exports, which account for more than a third of Asia's fourth-largest economy....

Korea is the most battered member of the East Asian bloc propping up the US dollar. Perhaps "bloc" is too strong a word "Coalition of the unwilling" might be better for it certainly describes Korea's participation in it. Led by the Chinese peg to the USD -- or rather now, the Chinese "basket" which continues to function as a crawling near-peg to the USD -- the Japanese yen, the Korean won and the Taiwanese dollar (along with their respective central banks) are also moving in a flock, trying desperately to hold their currencies down by holding the dollar up in order to keep China's pace. Korea has rebelled briefly several times in the past against membership in a coalition which is costing the Bank of Korea billions.... The problem was always the pain of a rapidly rising currency which the government and the Bank of Korea could not stand.

Why the Bushies Should Leave Iran Alone

Josh Micah Marshall makes an important point. What should be done to contain Iran is beside the point. The only relevant point is that whatever the Bush administration does to contain Iran will be incompetent and counterproductive:

Talking Points Memo: by Joshua Micah Marshall January 16, 2006 11:06 AM : [A] group of commentators (I'd include myself among them)... bought into the basic argument about the danger posed by the Iraqi regime.... [W]hat didn't make sense about 'my' position was that folks like myself were debating Iraq policy in the abstract. How would I deal with Iraq if I were president? What would be the sensible approach if we had a president and foreign policy team... acting in good faith and competent.... That was just a fantasy.... President Bush et al. [were] calling the shots. Any discussion of the issue which didn't take those key facts into account was just a parlor game.... So with Iran.

The prospect of a nuclearized Iran seems far more perilous to me.... [But] there is no Iran Question.... There's only how to deal with Iran with this administration in place. Do you trust this White House's good faith, priorities or competence in dealing with this situation? Based on everything I've seen in almost five years the answer is pretty clearly 'no' on each count.... [T]hat has to be the starting point of the discussion.

National Review Celebrates Martin Luther King Day!

I recommend the archives of National Review: a gift that keeps on giving:

As part of National Review's celebration of Martin Luther King day, we present William F. Buckley, from the February 22, 1956 issue:

On February 6, Miss Autherine J. Lucy went to class at the University of Alabama, which admitted her by the order of a federal court. When she left the building she was assaulted by a mob.... It was the culmination of a weekend of demonstrations against the admission of a Negro.... [T]he nation cannot get away with feigning surprie at the fact that there was a demonstration by students, nor even that the demonstration became ugly and uncontrolled. For in defiance of constitutional practice, with a total disregard of custom and tradition, the Supreme Court a year ago illegalized a whole set of deeply-rooted folkways and mores.... The incident involving Miss Lucy is only one of many such incidents whose occurrence we had better get used to if we intend to enforce the Supreme Court's decision at bayonet point... the consequences of exacting of a whole region of our country compliance with a law that in the opinion of Southerners unsettles the basis of their society. The Supreme Court elected to tamper with organic growth. It must, under the circumstances, accept the fatherhood of social deformity.

We continue with a little historical background on Birmingham, Alabama:

Birmingham, Alabama - Civil Rights: The Alabama Christian Movement for Human Rights (ACMHR) filed petitions for integrated public facilities and an integrated downtown business community, city officials refused their demands.... [T]he ACMHR... invited Martin Luther King Jr.... selective buying campaigns to protest segregation of downtown businesses; planned demonstrations to protest the city's refusal to fully integrate; and followed the legal tactics of the National Association for the Advancement of Colored People (NAACP). When thousands of children participated in a march for integration, Police Commissioner Eugene "Bull" Connor ordered the use of fire hoses and dogs to drive back the youthful demonstrators. Across the country, television stations fanned images of firefighters attacking citizens with powerful hoses and police carting children away in paddy wagons. This police riot in Birmingham drew national attention.... After being arrested during the demonstrations, King wrote his famous "Letter from a Birmingham Jail"...

And we complete National Review's celebration of Martin Luther King day by turning the microphone over to L. Brent Bozell, from the June 4, 1963 issue:

The... governor of Alabama, acting for his state, filed a suit in the United States Supreme Court that asked... whether the educated citizens of the Kennedy Administration are concerned with discharging this special responsibility [to uphold the law] or merely with gassing about it.... [D]id the President act within his authority in sending federal troops to Alabama in the wake of the Birmingham riots?.... Alabama's principal contention... is that the Act of Congress under which the President dispatched the troops is unconstitutional... that the 14th amendment... is "null and void"... that the President's actions did not comply with [the act's] conditions....

The statute... a law the Reconstruction Congress enacted in 1871.... [T]he President can send in troops... only when... there must be some "domestic violence" or "insurrection," and let us agree that condition was met b the Negro rioters.... [T]he domestic violence must be the cause... [of] a denial of equal protection... [or] obstruction of federal laws. Now: how in Heaven's name--granted they created a certain amount of havoc--can the Negro riots be said to have caused either of those consequences? Finally, assuming it is a violence-inspired enail of equal protection... the local authorities must have shown themselves either unable or unwilling to deal with the situation. Yet the authorities in Birmingham [police chief "Bull" Connor and Governor George Wallace] apparently did have the matter under control before Kennedy pushed the button....

[T]he legality of the 14th amendment.... The argument that it was improperly ratified is historically irrefragable....

It is undoubtedly too much to hope that Alabama will win her case: the President's cavalier action is not likely to raise many eyebrows on a Court that handed down those sit-in decisions. But... Alabama's lawyers can help but the public straight on who is and who isn't concerned these das with working otu the nation's terrible racial problem within the framework of law.


This is really depressing:

Educated Guesswork: Abortions for sex selection in India : The Lancet has a new article (unfortunately blocked by pay wall so I'm working from the summaries) about the question of missing women in India:

Researchers based in Canada and India looked through data from a national survey, conducted among 1.1 million households in 1998, and at information about 133,738 births that took place in 1997. They found that in cases where the preceding child was a girl, the gender ratio for a second birth was just 759 girls to 1,000 boys.

And when the two previous children were girls, this ratio fell even further, to 719 girls to 1,000 boys. On the other hand, when the preceding child or children were male, the gender ratio among successive births was about the same. Based on the natural sex ratio in other countries, around 13.6-13.8 million girls should have been born in India in 1997 -- but the actual number was 13.1 million.

The implication, of course, is that women are using ultrasound for sex determination followed by selective abortion. This data is pretty suggestive, particularly as the effect seems to get stronger after two previous female children, which is the opposite of what you would expect if biased birth ratios were the result of some systematic bias in the women's physiology, like, say Emily Oster's hepatitis theory. The other piece of suggestive evidence is the fact that the effect is stronger from educated women, who presumably have more access to ultrasound and abortions.

Two Lies from Washington Post Ombudsman Deborah Howell (Why Oh Why Can't We Have a Better Press Corps

Skimming this morning, I spotted two lies from Washington Post ombudsman Deborah Howell. No doubt there are others as well.

She writes:

Getting the Story on Jack Abramoff: [A] Dec. 29 story said the two were not personally close. DeLay had once called Abramoff "one of my closest and dearest friends" and said on Fox News recently that they were friends. Schmidt and Grimaldi said that their reporting showed that the two were politically, not personally, close....

On October 18, Sue Schmidt and Jim Grimaldi wrote: "Abramoff, whom DeLay once described as 'one of my closest and dearest friends'..."--with no caveats about how the closeness was not personal but political. On December 29, Sue Schmidt and Jim Grimaldi wrote: "DeLay, a Christian conservative, did not quite know what to make of Abramoff, who wore a beard and a yarmulke. They forged political ties, but the two men never became personally close, according to associates of both men..."--with no caveats about how DeLay nonetheless called Abramoff "one of my closest and dearest friends." At least one of these stories is false. Certainly both are, at best, "incomplete."

And another:

Several stories, including one on June 3 by Jeffrey H. Birnbaum, a Post business reporter, have mentioned that a number of Democrats, including Senate Majority Leader Harry Reid (Nev.) and Sen. Byron Dorgan (N.D.), have gotten Abramoff campaign money.

Abramoff gave money to Republicans only. Some Indian tribes that hired Abramoff as a lobbyist also gave some money to Reid and Dorgan. But is that "Abramoff money"? Only for a certain definition of "Abramoff money"--and not an innocent one.

Dariush Zahedi and Omid Memarian on Ahmadinejad's View of the World

Dariush Zahedi and Omid Memarian review the situation in Iran:

A Firebrand in a House of Cards - New York Times: Western leaders would do well to consider what President Mahmoud Ahmadinejad's bravado really says about Iran's likely posture in the region and at the nuclear talks that are scheduled to resume at the end of January. To continue down the path of conflict could be very costly, both for the regional interests of the United States and most of all, for the territorial integrity of Iran.

Mr. Ahmadinejad is surely motivated by ideology and the desire to solidify the position of the "security" faction within Iran's ruling elite. But he also appears to be acting on the perception that the United States is in a position of considerable, indeed unprecedented, weakness... overstretched in Iraq and Afghanistan... focused on monitoring North Korea's nuclear program rather than Iran's.... Iran could wreak havoc in Afghanistan, Iraq, Lebanon and Israel. These observations may lead Mr. Ahmadinejad to an incorrect assessment of Iran's strength....

Iran has serious domestic frailties... unemployment and popular resentment... drug abuse and a brain drain. But President Ahmadinejad no doubt takes comfort not only in his belief in divine protection but also in the knowledge that Shiite religious parties aligned with Iran are now the dominant political forces in Iraq, while the American public hardly seems amenable to waging another war in the region. Moreover, Mr. Ahmadinejad very likely believes that the best way to guard against regime change from without is to emulate North Korea by swiftly advancing Iran's nuclear capacity.

[M]eaningful multilateral sanctions against the Islamic Republic will most likely be vetoed by Russia or China. Flush with petrodollars, Iran has become a major purchaser of Russian technology.... China, seizing on Iran as a key producer of oil and gas not beholden to the United States, has quickly emerged as one of Iran's largest trading partners. Given this favorable strategic picture, Mr. Ahmadinejad might even welcome an American or Israeli strike on Iran's nuclear facilities. Tehran could then retaliate against American and Israeli interests.... Ahmadinejad's faction in government would make full use of the war footing to marginalize its rivals at home and crush the remnants of Iran's civil society.

But... [j]ust as Iran can use the Shiite card to create mischief... [m]any of Iran's ethnic and religious minorities see themselves as victims of discrimination, and they have not been effectively integrated into Iranian economic, political or cultural life. Some two million disgruntled Arabs reside mainly in the oil- and gas- rich province of Khuzestan. The United States could make serious trouble for Tehran by providing financial, logistical and moral support to Arab secessionists... [o]ther aggrieved Iranian minorities... Kurds and the Baluchis....

Furthermore, the plummeting Iranian economy will only worsen if the United States succeeds in referring Iran's nuclear file to the Security Council, whether or not meaningful sanctions follow. Such a referral would accelerate capital flight, deal a blow to the country's already collapsing stock market, devastate its hitherto booming real estate market, and wipe out the savings of a large part of the middle class. It would also most likely result in galloping inflation, hurting Iran's dispossessed, whom the Ahmadinejad administration claims to represent.

In light of these ominous possibilities, both Mr. Ahmadinejad and Mr. Bush would do well to avoid overplaying their hands. They should take a leaf from the book not of Ayatollah Ruhollah Khomeini the ideologue, but of Ayatollah Khomeini the pragmatic politician. Like Mr. Ahmadinejad, Ayatollah Khomeini argued that the "Zionist entity" should be wiped off the map. But he chose regime preservation over ideology when he ended the Iran-Iraq war and even bought weapons from Israel.... Iran should accept the Russian offer to process Iranian uranium gas into fuel and voluntarily stop... insisting on its right to do so at home... the United States should lift its unilateral sanctions from Iran. These sanctions, which include a ban on the sale of aircraft and spare parts to Iran, have absolutely no effect on the regime's nuclear capacity, but they harm Iranian civilians. Today the incentive for both sides to step away from the brink of conflict is even greater than it was at the end of the Iran-Iraq war...

I have not met Omid Memarian, but I know Dariush Zahedi relatively well. Dariush Zahedi is one of the people in the United States best qualified to understand and analyze and debate the current state of Iran, and what U.S. policy toward Iran should be. He is very smart, very thoughtful, and very pragmatic. It is a great pleasure to see him participating in the public debate in this way.

We are lucky in the Political Economy major here at Berkeley to have Dariush Zahedi teaching for us. He is a superb teacher. His courses are freshly redesigned to be relevant to the political-economic problems and opportunities of the modern world--and not to the problems and opportunities of 1951 or 1913 or 1848. His enthusiasm for his subjects and concern for his students make him an enormous asset to Berkeley's International Studies teaching programs. And we get him to teach for us at a lecturer's pay scale yet.

From a broader perspective, however, it is not good for the university, the country, or the world that Dariush Zahedi is making money by teaching Political Economy courses at lecturer pay scales. Lots of people could teach his courses well. Very few people in the United States have the background of knowledge and the intellectual skills to think intelligently, coherently, and pragmatically about the dilemmas of modernization of Iran. Dariush Zahedi does. Brookings, CSIS, CFR, JHSIS, Stanford, Harvard, Yale, Princeton--and Berkeley--badly need more people who *know* Iran, and should be throwing cushy fellowships and tenure-track appointments at him and people like him so that he can devote the bulk of his time to what is his comparative advantage. I would rather, for all our sakes, that he was spending more time thinking about Iranian politics and less time correcting the essays of students in the major I chair.

Why Oh Why Are We Ruled by These Morons? (Special Thank-You-David-Frum Edition)

Dariush Zahedi and Omid Memarian write:

A Firebrand in a House of Cards - New York Times: President Ahmadinejad no doubt takes comfort not only in his belief in divine protection but also in the knowledge that Shiite religious parties aligned with Iran are now the dominant political forces in Iraq, while the American public hardly seems amenable to waging another war in the region. Moreover, Mr. Ahmadinejad very likely believes that the best way to guard against regime change from without is to emulate North Korea by swiftly advancing Iran's nuclear capacity...

Thank you, David "Axis-of-Evil" Frum. Thank you very much.

That's all I'm sayin'.

The Economy: Up, Down, or Sideways?: Ruy Texeira and EPI's View

Ruy Texeira writes about the state of the economy:

The Emerging Democratic Majority WebLog - DonkeyRising: Last week, I pointed out that, while views of the economy had improved somewhat toward the end of last year, that didn't mean the public now thought the economy was in good shape. They merely thought it was less bad than before. And this week we have a new poll from Ipsos-AP that indicates views of the economy may be declining once again. From the Ipsos report on the poll:

Despite strong job numbers for December, Americans' confidence in the economic state of the country declined in January, according to the most recent results of the RBC CASH (Consumer Attitudes and Spending by Household) Index. This was primarily due to low expectations in economic performance over the next six months and increasing fears about job security.

This stubborn failure of the public to get happy about fairly solid GDP and job growth has occasioned much head-scratching among the commentariat and, of course, among GOP operatives who smell a press plot to discredit Bush's alleged economic achievements. But there is a much, much simpler explanation for the available data: people don't think the economy is so great because it isn't so great. The indispensable Economic Policy Institute has produced a crisp one-page summary supporting this viewpoint. Here are some choice excerpts:

Profits are up, but the wages and the incomes of average Americans are down.

--Inflation-adjusted hourly and weekly wages are still below where they were at the start of the recovery in November 2001. Yet, productivity--the growth of the economic pie--is up by 13.5%....

--Consequently, median household income (inflation-adjusted) has fallen five years in a row and was 4% lower in 2004 than in 1999, falling from $46,129 to $44,389.

More and more people are deeper and deeper in debt.

--The indebtedness of U.S. households, after adjusting for inflation, has risen 35.7% over the last four years.

--The level of debt as a percent of after-tax income is the highest ever measured in our history. Mortgage and consumer debt is now 115% of after-tax income, twice the level of 30 years ago....

--The personal savings rate is negative for the first time since WWII....

Rising health care costs are eroding families' already declining income.

--Households are spending more on health care. Family health costs rose 43-45% for married couples with children, single mothers, and young singles from 2000 to 2003.

--Employers are cutting back on health insurance. Last year, the percent of people with employer-provided health insurance fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. Taking population growth into account, 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level.

There you have it. The public's not so crazy after all. Commentators and GOP operatives take note.

I would add a big caveat: If you own a house in what Paul Krugman calls the "Zoned Zone," the value of your house has gone up a lot. Of course, changes in the value of the existing housing stock are not additions to national wealth--they are redistributions of wealth from future to present homeowners.(1)

(1) Thinking about it, that's not quite right. If housing prices go up with real interest rates remaining the same, that's a redistribution from future to present homeowners. If housing prices go up because interest rates have fallen, that's... more complicated. It's a redistribution from future to present homeowners plus a whole bunch of other effects I have to think about...

Frederick Douglass, Abraham Lincoln, Stephen Douglas

I am procrastinating this morning by reading the 1858 Abraham Lincoln-Stephen Douglas debates from that year's Illinois senate race:

Fourth Debate : I do not understand that because I do not want a negro woman for a slave I must necessarily want her for a wife. [Cheers and laughter.] My understanding is that I can just let her alone. I am now in my fiftieth year, and I certainly never have had a black woman for either a slave or a wife. So it seems to me quite possible for us to get along without making either slaves or wives of negroes.

I will add to this that I have never seen, to my knowledge, a man, woman or child who was in favor of producing a perfect equality, social and political, between negroes and white men. I recollect of but one distinguished instance that I ever heard of so frequently as to be entirely satisfied of its correctness-and that is the case of Judge Douglas's old friend Col. Richard M. Johnson. [Laughter.]

I will also add to the remarks I have made (for I am not going to enter at large upon this subject,) that I have never had the least apprehension that I or my friends would marry negroes if there was no law to keep them from it, [laughter] but as Judge Douglas and his friends seem to be in great apprehension that they might, if there were no law to keep them from it, [roars of laughter] I give him the most solemn pledge that I will to the very last stand by the law of this State, which forbids the marrying of white people with negroes. [Continued laughter and applause.]

I will add one further word, which is this: that I do not understand that there is any place where an alteration of the social and political relations of the negro and the white man can be made except in the State Legislature--not in the Congress of the United States--and as I do not really apprehend the approach of any such thing myself, and as Judge Douglas seems to be in constant horror that some such danger is rapidly approaching, I propose as the best means to prevent it that the Judge be kept at home and placed in the State Legislature to fight the measure. [Uproarious laughter and applause.]

I do not propose dwelling longer at this time on this subject...

Abraham Lincoln, from the first Lincoln-Douglas debate:

First Debate : Now, gentlemen, I don't want to read at any greater length, but this is the true complexion of all I have ever said in regard to the institution of slavery and the black race. This is the whole of it, and anything that argues me into his idea of perfect social and political equality with the negro, is but a specious and fantastic arrangement of words, by which a man can prove a horse-chestnut to be a chestnut horse. [Laughter.]

I will say here, while upon this subject, that I have no purpose, directly or indirectly, to interfere with the institution of slavery in the States where it exists. I believe I have no lawful right to do so, and I have no inclination to do so. I have no purpose to introduce political and social equality between the white and the black races. There is a physical difference between the two, which, in my judgment, will probably forever forbid their living together upon the footing of perfect equality, and inasmuch as it becomes a necessity that there must be a difference, I, as well as Judge Douglas, am in favor of the race to which I belong having the superior position.

I have never said anything to the contrary, but I hold that, notwithstanding all this, there is no reason in the world why the negro is not entitled to all the natural rights enumerated in the Declaration of Independence, the right to life, liberty, and the pursuit of happiness. [Loud cheers.] I hold that he is as much entitled to these as the white man. I agree with Judge Douglas he is not my equal in many respects--certainly not in color, perhaps not in moral or intellectual endowment. But in the right to eat the bread, without the leave of anybody else, which his own hand earns, he is my equal and the equal of Judge Douglas, and the equal of every living man. [Great applause]...

This puts me in mind of ex-slave Frederick Douglass's 1876 judgment of Lincoln:

Oration in Memory of Abraham Lincoln by Frederick Douglass : Abraham Lincoln was not, in the fullest sense of the word, either our man or our model. In his interests, in his associations, in his habits of thought, and in his prejudices, he was... the white man's President, entirely devoted to the welfare of white men.... ready and willing at any time during the first years of his administration to deny, postpone, and sacrifice the rights of humanity in the colored people to promote the welfare of the white people.... To protect, defend, and perpetuate slavery in the states where it existed Abraham Lincoln was not less ready than any other President to draw the sword of the nation. He was ready to execute all the supposed guarantees of the United States Constitution in favor of the slave system anywhere inside the slave states. He was willing to pursue, recapture, and send back the fugitive slave to his master, and to suppress a slave rising for liberty, though his guilty master were already in arms against the Government....

[Y]ou, my white fellow-citizens... were the objects of his deepest affection and his most earnest solicitude. You are the children of Abraham Lincoln. We are at best only his step-children; children by adoption, children by forces of circumstances and necessity. To you it especially belongs to sound his praises, to preserve and perpetuate his memory, to multiply his statues, to hang his pictures high upon your walls, and commend his example, for to you he was a great and glorious friend and benefactor.... But... despise not the humble offering we this day unveil... for while Abraham Lincoln saved for you a country, he delivered us from a bondage.... The name of Abraham Lincoln was near and dear to our hearts in the darkest and most perilous hours of the Republic.... When he tarried long in the mountain; when he strangely told us that we were the cause of the war; when he still more strangely told us that we were to leave the land in which we were born; when he refused to employ our arms in defense of the Union; when, after accepting our services as colored soldiers, he refused to retaliate our murder and torture as colored prisoners; when he told us he would save the Union if he could with slavery; when he revoked the Proclamation of Emancipation of General Fremont; when he refused to remove the popular commander of the Army of the Potomac, in the days of its inaction and defeat, who was more zealous in his efforts to protect slavery than to suppress rebellion; when we saw all this, and more, we were at times grieved, stunned, and greatly bewildered; but our hearts believed while they ached and bled. Nor was this, even at that time, a blind and unreasoning superstition. Despite the mist and haze that surrounded him; despite the tumult, the hurry, and confusion of the hour, we were able to take a comprehensive view of Abraham Lincoln, and to make reasonable allowance for the circumstances of his position....

[I]t mattered little to us, when we fully knew him, whether he was swift or slow in his movements; it was enough for us that Abraham Lincoln was at the head of a great movement, and was in living and earnest sympathy with that movement, which, in the nature of things, must go on until slavery should be utterly and forever abolished in the United States. When, therefore, it shall be asked what we have to do with the memory of Abraham Lincoln, or what Abraham Lincoln had to do with us, the answer is ready, full, and complete. Though he loved Caesar less than Rome, though the Union was more to him than our freedom or our future, under his wise and beneficent rule we saw ourselves gradually lifted from the depths of slavery to the heights of liberty and manhood... we saw two hundred thousand of our dark and dusky people responding to the call of Abraham Lincoln, and with muskets on their shoulders, and eagles on their buttons, timing their high footsteps to liberty and union under the national flag....

Can any colored man, or any white man friendly to the freedom of all men, ever forget the night which followed the first day of January, 1863, when the world was to see if Abraham Lincoln would prove to be as good as his word? I shall never forget that memorable night, when in a distant city I waited and watched at a public meeting, with three thousand others not less anxious than myself, for the word of deliverance... the emancipation proclamation....

I have said that President Lincoln was a white man, and shared the prejudices common to his countrymen towards the colored race.... His great mission was to accomplish two things: first, to save his country from dismemberment and ruin; and, second, to free his country from the great crime of slavery. To do one or the other, or both, he must have the earnest sympathy and the powerful cooperation of his loyal fellow-countrymen. Without this primary and essential condition to success his efforts must have been vain and utterly fruitless. Had he put the abolition of slavery before the salvation of the Union, he would have inevitably driven from him a powerful class of the American people and rendered resistance to rebellion impossible. Viewed from the genuine abolition ground, Mr. Lincoln seemed tardy, cold, dull, and indifferent; but measuring him by the sentiment of his country, a sentiment he was bound as a statesman to consult, he was swift, zealous, radical, and determined...

Fuel Prices in 1856

Mark Thoma is reading about the energy crisis of 1856 in Paris:

Economist's View: Fuel Prices in 1856, What You Don't Know, and Washington's Corset: A few tidbits from Scientific American: I wonder if there were worries about peak wood and peak coal during the energy crisis in '56:

FEBRUARY 1856 FUEL PRICES--"The fuel required to cook a dinner in Paris costs nearly as much as the dinner itself. Fuel is very scarce, and the American is surprised to find shops all over the city, fitted up with shelves like those in shoe stores, upon which is stored wood, split in pieces about the size of a man%u2019s finger, and done up in bundles, like asparagus. Larger sticks are bundled up in the same way, and sell at a frightful price. Hard coal being nearly as expensive as wood, can be bought in the smallest quantity at any of these fuel shops."

As to worries about "peak coal," yes, definitely:

William Stanley Jevons, Biography: The Concise Encyclopedia of Economics: Library of Economics and Liberty : [William Stanley] Jevons... became famous in Britain for his [1865] book The Coal Question: [An Inquiry Concerning the Progress of the Nation, and the Probable Exhaustion of Our Coal-Mines (London: MacMillan)]. In it he wrote that Britain's industrial vitality depended on coal and, therefore, would decline as that resource was exhausted. As coal reserves ran out, he wrote, the price of coal would rise. This would make it feasible for producers to extract coal from poorer or deeper seams. He also argued that America would rise to become an industrial superpower. Although his forecast was right for both Britain and America, and he was right about the incentive to mine more costly seams, he was almost surely wrong that the main factor was the cost of coal. Jevons failed to appreciate the fact that as the price of an energy source rises, entrepreneurs have a strong incentive to invent, develop, and produce alternate sources. In particular, he did not anticipate oil or natural gas. Also, he did not take account of the incentive, as the price of coal rose, to use it more efficiently

Washington Wire

The Wall Street Journal's Washington Wire column looks like it has turned into... a weblog:

Washington Wire : Regularly Updated Political Insight and Analysis From The Wall Street Journal's Capital Bureau January 13, 2006 6:08 p.m.: Speaker's News Scoop: House Speaker Dennis Hastert's office late Friday emailed Washington reporters a news bulletin from Roll Call reporting that Hastert was considering removing the scandal-tarred Rep. Bob Ney as chairman of the House Administration Committee. Some reporters received the email ahead of the Capitol Hill newspaper's own email of the story.

Ney, an Ohio Republican, hasn't been charged with anything but features prominently in the scandal surrounding former Republican lobbyist Jack Abramoff, who pleaded guilty to federal corruption charges Jan. 3. Ney's office says the congressman has done nothing wrong, but Hastert's spokesman Ron Bonjean confirmed to Roll Call that the speaker and Ney have had recent discussions about Ney's role at the Administration Committee, which is responsible for the operations of the House. The speaker can't oust Ney from the chairmanship. But he can ask House Republicans to vote to do so when they gather Feb. 2 for a leadership election to replace House Majority Leader Tom DeLay, who had to forfeit the second-ranking House post upon his indictment in Texas last September. Amid the scandals embroiling congressional Republicans, both the House and Senate leadership are scrambling to make ethics and lobbying reform a priority. --Jackie Calmes

Our Obligations to "the Men in the Field and the God to Whom We Must Answer for Their Lives"

It is true that nothing can match the bar set by the economics coverage of National Review. But I'm not impressed with the rest of it either. I don't think the people writing about national security for National Review know as much as they think they do.

Here's Victor Davis Hanson, saying that an earlier, better generation of Americans would not be criticizing George W. Bush and company.

Victor Davis Hanson on War on National Review Online: Due to the success of George Bush at keeping the United States secure, he, not Osama bin Laden, can... be the target of a relieved Left — deserving of assassination in an Alfred Knopf novel, an overseer of Nazi policies according to a U.S. senator, a buffoon, and rogue in the award-winning film of Michael Moore. Yes, because we did so well against the real enemies, we soon had the leisure to invent new imaginary ones.... Afghanistan... conjured up... warnings of quagmire, expanding Holy War at Ramadan, unreliable allies, a trigger-happy nuclear Pakistan... American corpses to join British and Russian bones in the high desert — not a seven-week victory and a subsequent democracy in Kabul.... Are we then basking in the unbelievable notion that the most diabolical government of the late 20th century is gone... and in its place are schools, roads, and voting machines? Hardly, since the bar has been astronomically raised... the Afghan parliament is still squabbling and a long way from the city councils of Cambridge, La Jolla, or Nantucket — or maybe not.

The same paradox of success is true of Iraq. Before we went in... had anyone predicted that Saddam would be toppled in three weeks, and two-and-a-half-years later, 11 million Iraqis would turn out to vote in their third election — at a cost of some 2100 war dead — he would have been dismissed as unhinged.... What explains this paradox of public disappointment over things that turn out better than anticipated? Why are we like children who damn their parents for not providing yet another new toy when the present one is neither paid for nor yet out of the wrapper? One cause is the demise of history. The past is either not taught enough, or presented wrongly as a therapeutic exercise to excise our purported sins... a historically ignorant populace who knows nothing about past American wars and their disappointments.... Few Americans remember that... during the bloody American retreat back from the Yalu River in late 1950 thousands of our frozen dead were sent back stacked in trucks like firewood.... [W]e of the present think that... there simply were to be no fatalities in the American way of war. If there were, someone was to be blamed, censured, or impeached — right now!...

Hanson is truly and massively in error in thinking Americans in 1950-1951 did not cast blame and censure as a result of America's defeat at the hands of Peng Dehuai's forces at the Yalu River. Here is one of the greatest of the "Greatest Generation"--Matthew B. Ridgway--casting blame primarily at Douglas MacArthur, but also at his own friend and patron George Marshall:

Matthew Ridgway (1967), The Korean War (New York: DaCapo: 0306802678): p. 55 ff: Perhaps the most shattering surprise was achieved by the Chinese in their attack on the 3rd Battalion of the 8th Cavalry Regiment west of Unsan.... The force charged with security of the bridge let men cross over unchallenged. They... were taken for ROKs.... Chinese attacked the command post from all sides.... Having gone to sleep to await the signal for withdrawal, [the Americans] crawled ot of their foxholes into hand-to-hand fighting.... By twos and threes and half-dozens the men... proceeded south and east....

The men left behind in the valley managed to draw together into islands of resistance, some of which held out until daylight, when air support gave them a respite.... Efforts to break through to rescue these remnants... were vain. The enemy was too well dug in and friendly artillery support was lacking.... The relief forces had to give up the effort.... The Chinese came at them in the darkness with a mortar barrage and an infantry attack.... Six times... the Chinese attacked.... The command post dugout at one point was overrun.... Daylight brought no air support. What rations were left were divided among the wounded... 250, while but 200 combat-fit troops remained. Early on the morning of November 4, the survivors decided they must try to escape, leaving the wounded to be surrendered to the Chinese.... They travelled all night through a drenching rain, to the east and north and finally south and southwest.... But before they could reach American lines, a Chinese force surrounded them and forced them to break into smaller groups.... Only a few... ever reached our lines and no truly accurate reckoning was mde of how many were killed, wounded, or captured....

Altogether the 8th Cavalry Regiment lost more than half its authorized strength at Unsan.... General Walker well knew that he lacked the force and equipment for a sustained offensive against an enemy whose numerical superiority now seemed clear. He sent a straightforward message to [MacArthur in] Tokyo acknowledging AN AMBUSH AND SURPRISE ATTACK BY FRESH, WELL-ORGANIZED, AND WELL-TRAINED UNITS, SOME OF WHICH WERE CHINESE COMMUNIST FORCES. The eventual response from Tokyo, however, was one of irritation and impatience at Walker's failure to move forward on schedule.... By November 9... [MacArthur's] messages to the JCS expressed confidence in... the ability of the United Nations Forces to destroy all armed resistance now before them. This was MacArthur's answer to a warning from JCS that Chinese intervention now seemed an accomplished fact. Ths wholly human failing of discounting or ignoring all unwelcome facts seemed developed beyond the average in MacArthur's nature....

[W]hatever the private attitude of MacArthur's superiors [in the Pentagon]... no voice was raised against him. I say no voice, because I do not include my own, which did express private protest and had no right to do more. I well remember my impatience on that dreary Sunday, December 3, as we sat through hours-long discussions in the JCS War Room.... Much of the time the Secretaries of State [Dean Acheson] and Defense [George Marshall] participated in the talks, with no one apparently willing to issue a flat order to the Far East Commander [Douglas MacArthur] to correct a state of affairs that was going rapidly from bad to worse. Yet the responsibility and the authoirty clearly resided right there in the room.... I blurted out--perhaps too bluntly but with deep feeling--that I felt we had already spent too damn much time on debate and that immediate action was needed. We owed it, I insisted, to the men in the field and to the God to whom we must answer for those men's lives to stop talking and to act. My only answer, from the twenty men who sat around the wide table, and the twenty others who sat around the walls in the rear, was complete silence--except that I did receive from a Navy colleague sitting behind me a hastily scribbled "proud to know you" note.... I felt no regrets at these outbursts and have never regretted them since. It has always seemed to me that a commander has as deep a duty to the men with whose lieves he is temporarily entrusted as they have to him--and part of that duty is to see that those lives are not needlessly squandered.

Several field commanders in Korea were... aware of the dangers ahead... did what they could, while still obeying MacArthur's orders... to forestall disaster. Indeed, had it not been for the foresight--and in one instance the deliberate foot-dragging--of some of these commanders the subsequent defeat might have been what some of the newspapers tried to make it into--a complete debacle.... MacArthur, like Custer at the Little Big Horn, had neither eyes nor ears for information.... General Walker moved with both courage and discretion.... In the light of his relations with MacArthur, I do not see how he could have done any better than he did...

It may well be the National Review way to tell American to shutup and be quiet when idiots in government break their obligations to "the men in the field and to the God to whom we must answer for those men's lives." It is not the American way. It has never been the American way.

Why Oh Why Are We Ruled by These Liars? (Administration Budget Issue)

Jonathan Weisman writes a good article about the administration's budget proposals to be:

Deficit Could Top $400 Billion : Friday, January 13, 2006; A19: Driven by the cost of hurricane relief, the federal budget deficit is expected to balloon back above $400 billion for the fiscal year that ends in September, reversing the improvements of 2005, a White House official told reporters yesterday. But some budget analysts cautioned that the estimate should be considered more of a political mark to inform the coming budget debate than an economic forecast. This is the third straight year in which the White House has summoned reporters well ahead of the official budget release to project a higher-than-anticipated deficit. In the past two years, when final deficit figures have come in at record or near-record levels, White House officials have boasted that they had made progress, since the final numbers were below estimates. "This administration has a history of overestimating the deficit early in the year, lowering expectations, then taking credit when it comes in below forecast," said Stanley E. Collender, a federal budget expert at Financial Dynamics Business Communications. "It's not just a history. It's almost an obsession."

Indeed, the dire new forecast came the same day that Treasury Department officials were touting a very different picture: The federal government posted the first budget surplus for December in three years, buoyed by a rush of corporate tax payments that more than offset record spending. On Jan. 6, the nonpartisan Congressional Budget Office reported that the deficit for the first three months of the fiscal year was about $119 billion, almost exactly where it stood for the first quarter of fiscal 2005.

After four years of budget surpluses, the government fell back into a deficit in fiscal 2002, after which the deficit climbed to $378 billion in 2003 and $412 billion in 2004. In 2005, the tide of red ink receded to $319 billion. Still, Joel David Kaplan, the deputy director of the White House budget office, lamented the rising tide of red ink, ascribing it to necessary spending in the hurricane-ravaged Gulf Coast. "We have made substantial investments in the region and the new deficit projections will include costs of Katrina and Rita recovery," he said. "We believe that those increased outlays associated with Katrina recovery efforts are a temporary event." Kaplan joined top Bush administration officials who in recent days have warned that the president's budget for fiscal 2007, due out next month, will call for significant belt-tightening....

Adding to the problem, Congress adjourned last month without passing a temporary fix to limit the reach of the alternative minimum tax, a parallel tax system enacted to hit the rich but increasingly affecting the middle class. In the coming months, Congress will almost certainly pass an AMT cut. The Senate-passed version of AMT relief would cost the Treasury $30.5 billion in revenue, $12 billion of that in fiscal 2006.

Congressional Republicans seized on the White House estimate to urge lawmakers to take budget cutting more seriously."The expected increase in the deficit is to some degree understandable due to the extraordinary expenses incurred as a result of the Gulf Coast hurricanes. But it is still unacceptable," said Senate Budget Committee Chairman Judd Gregg (R-N.H.).

Alas, however, the article does not have any of the scale numbers needed to make the size of the deficit real--a $400 billion annual deficit vs. $12 trillion in annual GDP, $2.5 trillion in annual federal spending; a $400 billion annual deficit is $6,000 a year for each family of four, et cetera.

Plumer vs. Crook on American Corporate Governance

Bradford Plumer has smart things to say about what the very keen-witted Clive Crook writes in the Atlantic about corporate governance:

Bradford Plumer: As short overviews of the problems with corporate governance in America go, you could do worse than Clive Crook's piece in this month's Atlantic. But after pointing out that shareholder oversight is often ridiculously lax, that many mangers and CEOs have had carte blanche to loot and pillage the companies they're supposed to be running, and that the "division of capitalism's spoils has become more lopsided in recent years," Crook strangely argues that we shouldn't worry too much:

Beyond [Sarbanes-Oxley], what [should be done]? "First, do no harm" is a good rule. Modern American capitalism has charges to answer, but it is best to keep a sense of proportion. The U.S. economy remains the most productive--and by almost any measure the most successful... in the world.... America's economic pre-eminence must have something to do with its distinctive business model, the very model many people now question--which in different ways continues to reward success more generously and punish failure more brutally... than the milder systems to be found in, for instance, Europe and Japan.

And then says "it all comes down to traditional values," whatever that means. No major reforms necessary. The system that produced Enron and Tyco basically works and we should leave it in place. Now I'm no big fan of... "modern American capitalism," but if it's what we're stuck with, we may as well get it right.... There's no need to get into "business model" comparisons with Europe and Japan. These things tend to go back and forth anyway... it's... more instructive to compare companies within the United States.

A 2003 Harvard University/Wharton School paper entitled "Corporate Governance and Equity Prices" ranked 1,500 companies in terms of management power, sorting firms into a Democracy Portfolio (firms in which shareholder rights were strongest) and a Dictatorship Portfolio (firms in which managers were subject to less oversight). Shockingly--or not--the democratic firms outperformed the dictatorship firms by 8.5 percentage points per year throughout the 1990s. If you believe that's a good thing, then stronger corporate governance doesn't just make things "nicer" or "fairer" and stick it to "greedy" CEOs--it actually makes better economic sense in many cases. It's hard to believe, as Crook suggests, that "lower standards of corporate governance" is the price we simply must pay for high productivity growth in the United States...

Death from Above

Were our ancestors hunted by giant birds? The answer appears to be "yes":

Afarensis: Anthropology, Evolution and Science: Was Australopithecus africanus Hunted By Birds?: According to this story the answer is yes:

A South African anthropologist said Thursday his research into the death nearly 2 million years ago of an ape-man shows human ancestors were hunted by birds. "These types of discoveries give us real insight into the past lives of these human ancestors, the world they lived in and the things they feared," Lee Berger, a paleo-anthropologist at Johannesburg's University of Witwatersrand, said as he presented his conclusions about a mystery that has been debated since the remains of the possible human ancestor known as the Taung child were discovered in 1924.


The Ohio State study determined that eagles would swoop down, pierce monkey skulls with their thumb-like back talons, then hover while their prey died before returning to tear at the skull. Examination of thousands of monkey remains produced a pattern of damage done by birds, including holes and ragged cuts in the shallow bones behind the eye sockets.

Berger went back to the Taung skull, and found traces of the ragged cuts behind the eye sockets. He said none of the researchers who had for decades been debating how the child died had noticed the eye socket damage before.

The study will be published in the AJPA...

Evil Geniuses: Tlacaelel

The theology of human misery, from Charles Mann (2005), 1491 (New York: Knopf: 140004006X):

pp. 188 ff: The [Aztec] empire grew rapidly. Its presiding genius was... Tlacaelel (1398-1480).... A visionary and a patriot, Tlacaelel believed that the Mexica were destined to rule.... [H]e wanted to furnish the alliance with an animating ideology.... He came up with a corker: a theogony that transformed the Mexica into keepers of the cosmic order.

At its center was Huitzilopochtli, a martial god who wore a helmet shaped like a hummingbird's head... long the Mexica's patron deity.... In Tlacaelel's vision, Ometeotl had four sons, one of whom was Huitzilopochtli. These four sons had been vying for supremacy since the beginning of time.... At intervals... a precarious equilibrium... with one brother on top.... In these interregnums of order, Tlacaelel explained, the topmost brother linked himself to the sun, on which all living creatures depend.... [L]ife could exist only when one brother held sway.... But when the balance came apart, as it always did, the brothers would resume their strife. The sun would go dark....

Each day of sunlight was a victory that must be fought and won again the next day. Because the sun could not hold out forever... it would one day inevitably lose... the calamity could be postponed.... [T]he sun needed chalchihuatl... life-energy. The sacred mission of the Triple Alliance, Tlacaelel proclaimed, was to furnish this vital substance to Huitzilopochtlli... [through] ritual human sacrifice... [of] prisoners of war.... In Tlacaelel's scheme, imperial conquests were the key to the "moral combat against evil," explained Miguel Leon-Portilla.... "The survival of the universe depended on them."...

We're lucky all we have to deal with is L. Ron Hubbard. Just sayin'.

When the Going Gets Weird, the Weird Turn Pro

This is genuinely weird:

This Is a Defense of Alito?: I admit I haven't been following every twist and turn of the issue of Alito's membership in Concerned Alumni of Princeton (CAP), but I really don't understand Arlen Specter's point here:

"Judge Alito's name never appeared in any document," Specter said. "It was not mentioned in any letters to or from the group's founder or executive director, did not appear on any canceled checks for subscriptions, was nowhere to be found on any articles, lists of board members or contributors, and was not in any minutes or attendance records from CAP meetings," Specter said.

He quoted CAP founder William Rusher as saying: "I have no recollection of Samuel Alito at all. He certainly was not very heavily involved in CAP, if at all."

Is the Republican position now that Alito was never a member of CAP at all, but just lied about being a member when he was applying for a job in the Reagan Justice Department?

In a word, yes. The Republican line-of-the-day is essentially that he badly needed right-wing street cred, and claiming membership in CAP was a way to do that. Now, of course, Alito badly needs centrist street cred.

Getting weirder: Alito says he thinks the reason he joined Concerned Alumni of Princeton was that he wanted ROTC back on the campus. Robert Waldmann writes:

Robert's Stochastic thoughts : Dale Russakoff writes in the January 12 Washington Post:

[Alito] said he assumes he joined only because he supported the return of ROTC to the Princeton campus. As an undergraduate, Alito was a member of Princeton's Army ROTC unit when it was expelled from the campus -- a move that he said "rankled" him because "the attitude seemed to be that the military was a bad institution and that Princeton was too good for the military." The Army ROTC unit was back on campus by the time Alito wrote his 1985 job application, but he said the Navy and Air Force units were not.

This last sentence is true in the same sense that World War II was over by the time Alito wrote his job application. Army ROTC returned to Princeton in 1972 before Alito graduated. Thus he claims he joined CAP to advocate a policy that had already been implemented.

Chile's Privatized Social Security System

Mark Thoma brings us Larry Rohter's piece on the flaws in Chile's Social Security system:

Economist's View: Chile Confronts Problems Caused by Social Security Privatization : Remember when Chile's private account system was hailed as a model for Social Security reform? As this article notes, the Chilean system was endorsed by President Bush, who has called it "a great example" from which the United States can "take some lessons." So what are the lessons?:

Chile's Candidates Agree to Agree on Pension Woes, by Larry Rohter, NY Times: Michelle Bachelet is a pediatrician and a Socialist, while Sebastián Piñera is a billionaire businessman and a conservative. They may agree on little as the opposing candidates in Chile's election for president, but they concur on one important point: the country's much vaunted and much copied privatized pension system needs immediate repair.... "Most people perceive the costs of pensions and the pensions themselves as unfair," said Patricio Navia, a political science professor at New York University and at Diego Portales University here. "Many of those who started work when the system was first adopted are realizing that they have not been able to contribute enough to get a significant pension... overhead costs that are so high"...led to record profits for the pension funds that manage contributions....

"There are two big issues, coverage and costs," Andrés Velasco, Ms. Bachelet's economic adviser, said ... "Too many people are outside the system," he said, adding that too many of those in the system have found that "saving via the pension funds is quite expensive."... [E]ven advocates of an untrammeled free market, like Mr. Piñera, the conservative candidate, are jumping in with criticisms, to the surprise of some here. Mr. Piñera is the brother of José Piñera, the former labor minister who imposed the personal account system during the dictatorship of Gen. Augusto Pinochet. [and co-chairman of the Project on Social Security Choice at the conservative Cato Institute]... "Chile's social security system requires deep reforms in all sectors, because half of Chileans have no pension coverage, and of those who do, 40 percent are going to find it hard to reach the minimum level," Mr. Piñera said ... "This has to be confronted now..."

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

Sebastian Mallaby writes that he could criticize Republicans who have power rather than powerless Democrats, but that wouldn't be sporting... or something. Ezra Klein reports:

TAPPED: January 2006 Archives: PUNCH THAT AIR! What a truly bizarre statement by Sebastian Mallaby:

Of course, attacking Bushonomics is too easy, like shooting a lame duck. So I want to focus instead on Democrats' response to the Bush chest-thumping...

George W. Bush is the President of the United States of America. His party, the Republican Party, controls the House of Representatives and the United States Senate. Justices nominated by Republicans enjoy a majority on the Supreme Court. Whether or not attacking Bushonomics requires pathetically little mental exertion, his economic policy is the only relevant economic policy... his policies are, indeed, so awful that their manifold flaws are self-evident, it's incumbent on pundits to publicly eviscerate them until they cease being self-actualizing, not to stroll off and find more worthy targets for their giant, giant brains...

How a Journalist Should Cover the Economy...


Possible schedule (you will notice that the semester ends on May 9--not May 23...

January 17/18: Introduction/Organization

Daily News

January 24/25: The Employment Release: Employment and Unemployment Numbers readings

January 31/1: The Employment Release: Wages and Earnings

February 7/8: The GDP and Productivity Releases

February 14/15: Inflation: The CPI Releases

February 21/22: International Trade Numbers

February 28/1: The Federal Reserve FOMC Meeting

Longer-Run Trends and Policies

March 7/8: The Annual Poverty and Income Release

March 14/15: The President's Budget Proposals

March 21/28: The Spring Budget Resolution

April 4/5: The Fall Reconciliation/Omnibus Process

April 11/12: Long-Run Budget Projections and Entitlements

April 18/19: Trade and the WTO

Skilled Professionals

April 25/26: William Greider

May 2/3: John Berry

May 9/10: Greg Ip

May 16/17: Peter Gosselin

May 23/24: Paul Blustein

Important Reference Points:

  • Who wants to hear these numbers?
    • The wire service stories
      • Asset price reactions: why?
    • The next day's stories: employers, workers, consumers, politicians
  • What are these numbers?
  • Who needs to hear these numbers?
    • The week-in-review stories

The Condition of the Working Class in Britain, 1300-


Data built by Greg Clark on real wages coupled with population estimates.

I read this as showing slow improvements in technology from 1300 to 1600 offset by the coming of the "little ice age." Thus from 1300-1600 when population went up real wages went down, and vice versa. After 1600, with the climate no longer deteriorating, improvements in technology get you a more favorable population-real wages tradeoff. After 1700 the speed at which the tradeoff moves left accelerates ("agricultural revolution") and after 1800 it accelerate again ("industrial revolution").

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

If the Economist is this... peculiar... on events about which I know a great deal, what should I conclude about its reliability on events about which I know nothing? Journalistic credibility is very fragile indeed.

Brendan Nyhan has the goods, as his shrill screeches rend the Massachusetts night:

Brendan Nyhan: What is John Micklethwait talking about? : In the special Economist issue "The World in 2006," US editor John Micklethwait notes the setbacks suffered by President Bush during 2005 -- the failure of Social Security privatization, our struggles in Iraq, Hurricane Katrina, and the DeLay scandals -- before offering this ridiculous analysis (sub. required):

As a result, a president who stormed back to power in 2004 with more votes than any previous candidate will spend a good deal of 2006 on the defensive.

Using the number of votes as a metric of electoral success is ridiculous. (Ever heard of population growth?) By more standard metrics such as presidents' popular vote and Electoral College margins, Bush's re-election victory was one of the closest in history, as Ron Brownstein pointed out... "Bush beat Kerry by just 2.9 percentage points: 51% to 48.1%. That's the smallest margin of victory for a reelected president since 1828."... Not exactly storming back to power...

Executive Compensation Oversight

Christopher Cox does good as head of the SEC: - SEC to Propose Overhaul of Rules On Executive Pay : By KARA SCANNELL: The Securities and Exchange Commission, responding to rising criticism of soaring -- and partially hidden -- executive pay, is poised to propose the most sweeping overhaul of pay disclosure rules in 14 years, seeking to push companies to divulge much more about their top executives' perquisites, retirement benefits and total compensation. The proposed changes, according to SEC officials, would for the first time require corporate proxy statements to provide a column with a total annual compensation figure for each of a company's five highest-paid executives and be far more specific about the value of their various benefits. Total compensation is an elusive number under the current system, and one for which investor advocates have long sought greater disclosure.

In addition, the SEC would force companies to take the monetary value of the stock-option grants given to top executives and place those figures side-by-side with salary and bonus information. Under a new accounting rule, companies must start expensing the value of their stock options. These and other proposed changes will be presented at a public SEC meeting on Jan. 17, where commissioners will question staff members and vote whether to proceed with the plan. If approved, the proposed overhaul will be subject to a period of public comment, followed by a final SEC vote....

Mr. Cox has worked hard to make the commission -- composed of three Republican and two Democratic commissioners -- more harmonious by trying to get consensus on major issues. Just last week, he won unanimous backing for new guidelines on how much to fine a company that has engaged in financial fraud.... Mr. Cox said that a lot had changed since the SEC last addressed the issue in 1992. "The prevalent forms of compensation have migrated away from what is transparent to what is opaque," he said. "The market is capable of disciplining excessive compensation, provided that the market has adequate information. Too often in recent days, however, shareholders have been surprised to learn after the fact what their executives are being paid."

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

A Tiny Revolution is shrill:

A Tiny Revolution: NY Times: Downing Street Memo Background Is Too Good For The Likes Of Us: James Risen's new book State of War... contains critical new background on the Downing Street Memo. And incredibly enough, this information has NEVER been published by the New York Times.... [T]he Downing Street Memo is the official minutes to a meeting of the highest officials of the British government... on July 23, 2002. Part of the memo describes a presentation by Sir Richard Dearlove, head of MI6, the British equivalent of the CIA:

[Dearlove] reported on his recent talks in Washington. There was a perceptible shift in attitude. Military action was now seen as inevitable. Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy. The NSC had no patience with the UN route, and no enthusiasm for publishing material on the Iraqi regime's record. There was little discussion in Washington of the aftermath after military action.

...[W]ho exactly [did] Dearlove [meet] with in Washington.... Pundits wishing to play down the significance of the memo, such as Michael Kinsley, opined that Dearlove may have just been talking to "the usual freelance chatterboxes" and perhaps was simply reporting on the "mood and gossip of 'Washington.'"

This isn't what Risen writes, to say the least. According to State of War:

Dearlove was in part reporting on a CIA-MI6 summit he attended with other top MI6 officials at CIA headquarters on Saturday, July 20, 2002... the meeting was held "at the urgent request of the British"; CIA officials believe "Blair had ordered Dearlove to go to Washington to find out what the Bush administration was really thinking about Iraq"... Dearlove met privately with CIA head George Tenet for an hour and a half....

But the most puzzling issue may be this: what on earth makes the New York Times just sit on this kind of information?... As various outlets have reported, State of War also reveals that the CIA sent thirty relatives of Iraqi scientists to Iraq to ask them whether they were working on WMD programs. Every single relative reported back that the scientists said they weren't, and that Iraq had nothing. Not a word of this has appeared in the Times.

And it doesn't seem to be because Risen wasn't trying. The New York Observer has reported that:

...according to current and former Times sources familiar with the Washington bureau, Mr. Risen was gathering reporting from sources in the prewar period that cast a skeptical light on Saddam Hussein's alleged W.M.D. stockpiles, but either couldn't get his stories in the paper or else found them buried on the inside pages....

From the Times' perspective, there are some things we members of the great unwashed simply don't need to know.

Public Capital Flows into the U.S.

Mark Thoma finds Martin Feldstein in the Financial Times worrying about the state of the international economy:

Economist's View : Martin Feldstein: Uncle Sam’s bonanza might not be all that it seems, Commentary, Financial times: A major reason for the dollar’s current overvaluation is the widespread misunderstanding of the nature of capital flows to the US. The business press and many financial analysts provide the reassuring message that the flow of capital to the US substantially exceeds the amount needed to finance the US current account deficit, and that that inflow is coming primarily from private investors.... This... results from a misinterpretation of the data provided by the US Treasury.... The figures... while technically correct, are misleading for two reasons. First, the... [Treasury] release... excludes bank deposits... bank lending... foreign direct investment.... If the total net inflow were larger than the current account deficit, the US would be accumulating large reserves of foreign exchange....

A second source of confusion... is... the ... measure of inflows from “private” sources overstates the actual private investment... if the Chinese government purchases US bonds through... private bank[s], these funds will be recorded in the... data as a private purchase.... My own belief... is that the inflow of capital that now finances the US current account deficit is coming primarily, perhaps overwhelmingly, from governments and from institutions acting on behalf of those governments.... OPEC governments and other oil producers that are temporarily placing revenue in dollar bonds and bank deposits... Asian governments that wanted to accumulate foreign exchange to eliminate the risk of speculative attacks... China and other Asian governments to stop a falling dollar reducing their net exports....

The US current account deficit... is widely predicted to move much higher in 2006... equal to 6.4 per cent of US gross domestic product.... [T]he dollar must fall by at least 30 per cent just to shrink the trade deficit to a more sustainable level of 3 per cent of GDP. Much larger dollar declines are also possible....

The current small interest rate differences in favour of US bonds are not nearly enough to compensate investors for the fall in the dollar that is likely over the next few years.... The dollar must fall faster than these small interest differentials.... At some point, that will trigger a shift away from the dollar. Private investors and the governments... will inevitably shift at some time from dollars to euros or yen.... That that has not happened already reflects investors’ belief that it is still possible to benefit from the interest differentials before the dollar depreciates. That sanguine belief may, however, reflect a serious misunderstanding of the magnitude and nature of the capital flow to the US.

I am still looking for somebody who can tell me how China (and the rest of Pacific Asia) are financing their reserve accumulations. How much are they borrowing from the good burghers of Shanghai? How much are they raising by increasing the supply of high-powered money? How much is coming straight out of tax revenue? These are very important questions, and I don't know the answer to them.

Returns on Private Equity

Daniel Gross catches an interesting fact calculated by Steve Kaplan and Antoinette Schoar:

Daniel Gross: January 08, 2006 - January 14, 2006 Archives : HAPPY RETURNS: Steven E. Kaplan of the University of Chicago, perhaps the leading academic expert on private equity, and Antoinette Schoar of M.I.T., conclude that, after accounting for fees, the average private equity firms essentially turns in the same performance of the S&P 500.

The Oil Shock of 2005

Jim Hamilton of UCSD wonders why we are not in recession:

Econbrowser: 2005: the oil shock that didn't bite? : All but one of the recessions in the United States since World War II have been preceded by a dramatic increase in oil prices. Did we escape unscathed in 2005?... Historically, the big economic effects of oil price shocks seem to come when there are sudden shifts in the pattern of spending, for example, if consumers stop buying the kinds of cars that the U.S. auto manufacturers are relying on for sales. This response by consumers involves not just the price of gasoline, but also their overall perceptions of the source and likely persistence of the price changes along with expectations about the consumers' own income prospects. I argued that the nature of the response of American consumers to gasoline prices changed in the late summer and early fall, when we saw a dramatic decline in consumer confidence and profound shifts in American vehicle purchases. The loss in consumer confidence has fortunately proven to be relatively short-lived.... And how about autos?... American SUV's had done quite well in June and July in terms of number of units sold thanks to company incentives.... The intertemporal effects of these incentives makes it difficult to judge just how dismal were the September through November sales figures. December sales were back to mediocre....

Another way in which historical oil price shocks may have contributed to economic downturns is through the response of the Federal Reserve to the shocks. Thinking they have to fight the inflation, the Fed has often raised interest rates in response to an increase in the price of oil. Even if the Fed quits now with its rate hikes, we could see a significant economic slowdown in 2006 as a result of the actions the Fed has already taken.

Did we dodge the bullet of the 2005 oil shock? Perhaps yes, but I would say that it's too early to tell for sure.

"It's Not My Fault!" Says Paul Bremer. "I'm Just the Fall Guy!"

"It's not my fault that the occupation of Iraq went down the toilet!" says Paul Bremer. It's also not the fault of George W. Bush, Bremer says, for George W. Bush is a manly man who backed Bremer in "most of [Bremer's] battles" with Rumsfeld and company. How has Bremer reached his advanced age without realizing that the cossacks work for the czar, not for themselves?

Impeach George W. Bush. Impeach Richard Cheney. Do it now. / Middle East & Africa / Iraq - Bremer claims he was used as Iraq "fall guy" : By Edward Alden and Guy Dinmore in Washington: Paul Bremer, former head of the Coalition Provisional Authority in Iraq, says that senior US military officials tried to make him a scapegoat for postwar setbacks, including the decision to disband the Iraqi army following the US invasion in 2003... Mr Bremer portrays himself in a constant struggle with Donald Rumsfeld, the defence secretary, and military leaders who were determined to reduce the US troop presence as quickly as possible in 2004 despite the escalating insurgency.... A Pentagon spokesman on Monday confirmed that Mr Bremer had sent Mr Rumsfeld a memo based on a report by the Rand Corporation consultancy that recommended 500,000 US troops would be needed to pacify Iraq -- far more than were sent. But Mr Bremer's advice was rejected by military leaders and Mr Rumsfeld. Mr Breme's account of his 13 months as Iraq's governor is... scathing of the Iraqi exiles who formed the initial Iraqi Governing Council, resentful of Democrats... the press for focusing on the negative... and bureaucrats in Washington who obfuscated when he was trying to rebuild an entire country....

What emerges clearly from the diary is that there was no detailed postwar reconstruction plan, that the US lacked decent intelligence to deal with an insurgency it failed to predict, and the naivety of Americans who were shocked at the dismal state of Iraq's economy and infrastructure after years of sanctions. Mr Bremer accuses Pentagon officials of setting him up to take the fall for the postwar failures in Iraq, even though the decision to disband the army was personally approved by Paul Wolfowitz, the deputy defence secretary, and cleared by Mr Rumsfeld and President George W. Bush.... [H]e defends the decision, insisting that reconstituting a Sunni-led Iraqi army would have plunged the country into civil war. He says that military leaders, including the commanding US general John Abizaid, exaggerated the readiness of Iraqi police and military forces in an effort to justify reducing the US troop presence.... In one particularly bleak moment in October 2003, Mr Bremer pleaded with the president to back him in this internal struggle. "I'm concerned that a lot of the Pentagon's frenetic push on the political stuff is meant to set me up as a fall guy," he told Mr Bush at the White House... the president looked puzzled.... Mr Bremer lauds the president for backing him in most of these battles...

If I Had Infinite Hours in the Day: 20060109

If I had infinite hours in the day:

Some straighter-than-usual talk from General Vines. A good article by Eric Schmitt:

Iraq Facing Hurdles, U.S. General Warns : Lt. Gen. John R. Vines of the Army warned... that "the ability of the [Iraqi] ministries to support [troops], to pay them, to resupply them, provide them with water, ammunition, spare parts and weapons is not as advanced"... other important ministries, like oil and electricity, must also strengthen their operations for the security forces to succeed - and for Iraq to prosper politically and economically. "The reason it's important to look at areas like governance and infrastructure is because oil is the lifeblood of Iraq," said General Vines, who commands the XVIII Airborne Corps at Fort Bragg, N.C. "If they don't produce enough income to support their security forces, members of those forces could turn to ulterior purposes and could become militias or armed gangs."... General Vines cited a string of notable successes... the building of the Iraqi security forces.... But he also warned of potential trouble in the weeks and months ahead, as Sunni Arabs look to a Shiite-dominated government for signs that their voices and needs will be addressed.... [H]e lamented that the balloting broke down largely along religious and ethnic lines.... "There was enormous enthusiasm for the election. But it must be a government by and for Iraqis, not sects. I don't think we can know that yet."... "If competent commanders were to be replaced by those whose main qualification is an allegiance to a sect, that would be of concern to us."...

The original Battlestar Galactica was so bad I find it hard to believe that the new version can be any good at all. But now Cowen Tyler has been assimilated:

Marginal Revolution: Battlestar Galactica : I've started watching this excellent show on DVD since my return from Buenos Aires. Firefly fans should apply. Chalk up another one for The Golden Age of TV. Addendum: I am told the new episodes start tomorrow night at 10 p.m..

The MinuteMan succumbs to Friday Cat Blogging:

JustOneMinute: Friday Cat Blogging : This story about how the entire feline family tree was recreated from mitochondrial DNA and fossil records scores very high on the Cool Scale.

Max Sawicky succumbs to Tuesday Supernatural Cat Blogging. Aslan is not a tame lion:

: We took the little one to see Narnia last night. O.K., I wanted to see it too. I told you before I luv the medieval Armageddon stuff. The story is completely predictable. Like King Kong, you know pretty much what's going to happen. The acting is excellent. It really saves the picture. Maybe the lion should get nominated for best actor. I'd put one of those beavers up against Tom Cruise any day. And you don't want to get caught in a dark alley with Tilda Swinton, unless it's for, you know . . .

Some sick jokes:

War and Piece: 'Comedy, Congressional GOP style. Ellen Miller writes: "Dennis Hastert is making the House take a refresher course on ethics rules.Guess who the instructor is? That would be "Representative #1" from the Abramoff plea agreement, a.k.a Bob Ney."' Vegacura: You mean we can clone him? 'Heh. Indeed. "What the Republicans need is 50 Jack Abramoffs," his friend Grover Norquist told National Journal in 1995. "Then this becomes a different town."' "Chris Matthews, just now, on Tom DeLay's lifestyle: 'You have one guy Tom DeLay who lives in some sort of 20th floor apartment way down on Route 95, nothing special at all -- I mean really lives basically, like a regular middle class person. He doesn't live well at all.'" vs: "As Tom DeLay became a king of campaign fund-raising, he lived like one, too. He visited cliff-top Caribbean resorts, golf courses designed by PGA champions and four-star restaurants, all courtesy of donors who bankrolled his political money empire. Over the past six years, the former House majority leader and his associates have visited places of luxury most Americans have never seen, often getting there aboard corporate jets arranged by lobbyists and other special interests. Public documents reviewed by the Associated Press tell the story: At least 48 visits to golf clubs and resorts; 100 flights aboard company planes; 200 stays at hotels, many world-class; and 500 meals at restaurants, some averaging nearly $200 for a dinner for two." Sounds like an extremely basic livestyle.

Mark Schmitt calls for George Lakoff on the Batphone:

TPMCafe || Please, Don't Say "Lobbying Reform": Democrats and Republicans are falling over each other to introduce "lobbying reform" bills -- requiring lobbyists to disclose contacts with legislators, banning trips, etc. By the end of next week, we will have between two and four lobbying reform packages, and will enter a ridiculous debate about which bill would leave fewer loopholes. Can I take this Sunday evening calm to plead with Democrats not to go down this road. Where's George Lakoff when we need him??? Please don't reinforce the frame that this is a "lobbying scandal" and the villain a "lobbyist" named Jack Abramoff.... This is not a lobbying scandal. It's a betrayal-of-public-trust scandal. Lobbyists have no power, no influence, until a public servant gives them power. That's what DeLay and the K Street Project was all about. What they did was to set up a system by which lobbyists who proved their loyalty in various ways, such as taking DeLay and Ney on golf trips to Scotland, could be transformed from supplicants to full partners in government. Abramoff did lots of terrible things... but... every single criminal and unethical act of his was made possible by a public official. On his own, Abramoff had no power. At another time -- say, 1993 -- he would have been a joke.... [E]very time we say "lobbying reform," we reinforce the idea that it is only the lobbyist who is the wrongdoer.... [N]o one forces any legislator or staffer to accept lunches, trips, or favors from a lobbyist. And the reason not to do that is that the legislator risks surrendering some of her power, which is a public trust, to these private interests.

The Bushies use Time to say what they really always thought about Tom DeLay:

TPMCafe || Not Our Kind, Dear: By Matthew Yglesias: Via Mike Crowley, the White House political team must be off their a-game if they think this is a good way to distance Bush from Tom DeLay:

Even before DeLay's announcement that he would abdicate his leadership post, top Bush advisers tell TIME, the President's inner circle always treated DeLay as a necessary burden. He may have had an unmatched grip on the House and Washington lobbyists, but DeLay is not the kind of guy--in background and temperament--the President feels comfortable with. Of the former exterminator, a Republican close to the President's inner circle says, "They have always seen him as beneath them, more blue collar. He's seen as a useful servant, not someone you would want to vacation with."

So the President is professionally in hoc to DeLay and is closely allied with him, but on a personal level he secretly loathes the working class types on whose votes he depends? For what it's worth, DeLay's always struck me as more nouveau riche than blue collar as such. Seemed to be living pretty high on the hog in recent years, at a minimum.

Matthew Yglesias explains why Bush administration policies are always so bad:

TPMCafe || It's The Policy, Stupid: By Matthew Yglesias: Republicans are loving lobbying reform bills. Such bills allow them to seemingly get out from under the cloud of sleaze while remaining, fundamentally, in hock to corporate interests.... [Y]ou need to attack some of the substance of what K Street Republicanism has done, not just the atmospherics of the lobbying trade. After all, why is the Medicare bill so crappy? Because the GOP is run by lobbyists. Why can't we make student loans cheaper? Because the GOP is run by lobbyists. Why can't we secure chemical plants against terrorist attacks? Because the GOP is run by lobbyists. Why is the tax code so full of loopholes? Because the GOP is run by lobbyists. And so on down the line.... Or, again, why don't we have a serious energy policy? Becase the GOP is run by lobbyists. Why is our broadband internet so slow and crappy? Becase the GOP is run by lobbyists. This analysis works for about 90 percent of possible topics.

Alex Tabarrok finds Bob Geldof being a shrill unbalanced critic of agricultural protectionism:

Marginal Revolution: Must have been a Monday : [Sir] Bob Geldof is angry about European farm subidies:

The CAP is a protection racket Al Capone would look at in admiration and be proud of. Why do Europe's farmers need protection?.... Some are growing stuff through subsidy that we don't even need - then we are paying more taxes to store the stuff we don't need and more taxes to destroy the stuff we don't need. The CAP was responsible for the butter mountains and the wine lakes. These surpluses are also being shipped out to Africa and destroying local markets and economies. It is not giving people a chance to get back on their feet. The CAP should be scrapped and farmers should be open to competition. We're not a free market. There is no free trade. The CAP is anti-free trade....

The FISA Court is unhappy:

Surveillance Court Is Seeking Answers: The members of a secret federal court that oversees government surveillance in espionage and terrorism cases are scheduled to receive a classified briefing Monday from top Justice Department and intelligence officials about a controversial warrantless-eavesdropping program, according to sources familiar with the arrangements.... Some judges who spoke on the condition of anonymity yesterday said they want to know whether warrants they signed were tainted by the NSA program. Depending on the answers, the judges said they could demand some proof that wiretap applications were not improperly obtained.

Former Iraq Viceroy Paul Bremer Joins the Shrill Unbalanced Critics of George W. Bush

Kevin Drum writes:

The Washington Monthly: BREMER ON IRAQ....On Dateline last night, Paul Bremer confirmed something that he briefly alluded to last year: we never had enough troops on the ground to keep order in Iraq, and both George Bush and Donald Rumsfeld knew it.

Bremer said he sent a memo to Rumsfeld suggesting that half a million soldiers would be needed, three times the number deployed by the Bush administration.

"I never had any reaction from him," the former diplomat told NBC's Brian Williams on "Dateline."

Although he never heard back from his direct boss, Bremer said he discussed his concerns with Bush, who told him he would seek troops from other countries, but did not mention increasing U.S. forces.

...[T]hat half million number is pretty stunning. It's one thing to tell your boss you need more troops, but it's quite another to tell him you need three times as many as you have. That's the kind of warning that really ought to make someone sit up and listen, and if Bremer is on the level here it means that Rumsfeld and Bush screwed the pooch even worse than we thought -- something I'm not sure I would have thought possible until now.

Kevin: haven't you learned yet that the Bush administration is worse than you imagined, even after taking account of the fact that the Bush administration is worse than you imagined?

Impeach George W. Bush. Impeach Richard Cheney. Impeach everyone who has sat at the table in the Roosevelt Room during the George W. Bush administration. Do it now.

China and Economic Growth

A somewhat different take on Ben Friedman's Moral Consequences of Economic Growth than the review I wrote for Harvard Magazine. Written for Caijing in China:

Up until 8000 or so years ago, it was crystal-clear why humans should pursue greater wealth--understood as better spearheads, more knowledge of the local environment, and occupation and control of regions where game was abundant and nourishing plants plentiful. Back when our ancestors were hunter gatherers life was short--high infant mortality plus all the attendant risks of the hunting-and-gathering ecological niche--and quite brutish: low technological levels and being always on the move meant that levels of comfort were low, and the absence of literacy meant that the cultural depth and historical memory of the band could not grow very deep. Life before agriculture was not especially nasty: our hunter-gatherer ancestors were healthy, well-nourished, alert, and engaged. But greater wealth for the band and the individual had very clear benefits: fewer of your babies died, you had a greater chance of living through the next winter, and you had a greater share of what comfort was attainable.

For all of the past 8000 years since the invention of agriculture, the benefits of pursuing have been much, much greater than back in the hunter-gatherer days. For the vast majority of the human race, agriculture has been a poisoned cup. Malthusian population pressures have--until the last century or so--kept our numbers high enough relative to our technological expertise that the overwhelmingly large majority of humans have been close to the edge of starvation and well over the edge of malnutrition. If the typical adult male hunter-gatherer human grew to be 5'8", the typical adult male peasant-farmer human over the past several millennia has only grown to be 5'2"--or less. Here too the benefits of increasing wealth for the individual and the group are obvious: richer people have more food and a better diet; their children aren't as protein-deprived and so grow taller, stronger, and smarter; their ability to engage in conspicuous consumption via something as simple as having meat on the table gives them status and social power; plus they have access to the amazing depth of riches of human culture. The rich have enough food that they aren't hungry (and good-enough quality food that their brains and bodies can grow, and their immune systems remain strong), enough clothing that they aren't cold even in the winter, enough shelter that they are not wet, and enough literacy and access to culture that they are not bored.

We are still in the agricultural age, or, rather, many of us are still in the agricultural age, or--perhaps and we hope--we are about to exit from the agricultural age. Perhaps one billion humans today have lives that are effectively equivalent to those of our pre-industrial ancestors. Perhaps two billion have lives better than those of our pre-industrial ancestors, but not better enough: they are still, sometimes, hungry and malnourished; they are still, sometimes, cold; they are still, sometimes, wet; and they are often bored. But there are three billion of us whose children have life expectancies greater than seventy or more years, who are well-fed, who are warm, who are dry, and who if we are bored it is largely our own fault. We three billion vary enormously in wealth, from Bill Gates down to farmers growing watermelons under plastic sheets outside of Shanghai. We are all able to do the important things: live a healthy life, fall in love, make plans for the future, watch our children grow, and play status games with each other--status games in which everyone (except Bill Gates) is both a winner and a loser, for as one journalist who covers Silicon Valley's "post-economic" says, they quickly find that the problem with owning a Gulfstream 4 as your personal jet is that you start meeting people who own a Gulfstream 5.

Why then are we still focusing so much on economic growth--on making more and more things, and becoming richer and richer--when at least the most prosperous three billion of us have what we need? More than two centuries ago Adam Smith--in his first book, The Theory of Moral Sentiments--mused on the puzzle of the prosperous merchant who drives himself mercilessly and ruins his eyesight pouring over his accounts all so that he can sit in the sun at leisure in his old age. John Maynard Keynes thought that at least the most prosperous of countries were on the verge of a cultural transformation: he thought that his peers' great-grandchildren would pursue not wealth and accumulation but rather human excellence and the cultivation of mental and aesthetic faculties. Yet the pursuit of wealth continues.

One reason that we still pursue wealth is that we are, collectively, not yet wealthy enough. Half the human race is still desperately poor. But give it another century, and the whole world may well be rich enough to strike any of our agricultural-age ancestors as being a total material utopia. Will we still accumulate and strive to be richer then? The answer is that we will because we will be playing the relative-status games of conspicuous consumption: I am richer than you. But should we?

My old Harvard professor Benjamin Friedman has just written a book, The Moral Consequences of Economic Growth (New York: Knopf), which implies that we should still strive for economic growth and increasing wealth. He argues that the wiring of our brains is such that the process of becoming richer relative to the reference point provided by our parents and their peers has a large number of beneficial moral as well as material effects. First, there is the effect of wealth on whatever upper class a society happens to develop. It was John Maynard Keynes who wrote that it is a much better idea for somebody to tyrannize over his bank balance than over his neighbors. Adam Smith wrote in the Wealth of Nations about how the growing wealth of London made it attractive for the British aristocracy to abandon their feudal armies and private wars and move to London to take up positions in society and at court. A society that is growing richer will have an upper class that focuses on gaining stutus by demonstrating its wealth as power-over-nature, rather than demonstrating its power as power-over-people). Adam Smith wrote about how wealth. The senior cadres in the days of Mao Zedong's dotage struggled not to display their wealth and cultivation to each other but rather to display their power to move people around as if they were counters on some giant game board, to China's immense cost.

Friedman makes a powerful argument that—-politically and sociologically-—modern societies are like bicycles. As we all know, the laws of physics (specifically the conservation of angular momentum) make a bicycle extremely stable as long as its wheels are spinning fast and it is moving forward rapidly, but extremely unstable as it slows to a halt. Friedman argues that whenever the wheels of economic growth stop—-in the sense not even of a depression but just of stagnation--political democracy, individual liberty, and social tolerance are greatly at risk even in countries where they are well established, and even in countries where by any standard the absolute level of material prosperity remains high. If you want all kinds of non-economic good things, Friedman says--like openness of opportunity, tolerance, economic and social mobility, fairness, and political democracy--rapid economic growth makes it much, much easier to get them.

Consider, for example the case of Japan during the Great Depression in the 1930s. Rising unemployment and declining incomes in Japan in the 1930s certainly played a major role in the assassinations and coups by which that country, which was a functioning constitutional monarchy with representative institutions and a government focused on economic development in 1930, to a fascist military dictatorship by 1937--a dictatorship that could be dragged into a major attack on China by the initiative of relatively low-ranking military officers in the region of China that they had occupied and called the puppet state of Manchukuo. In western Europe the calculus is equally simple: had there been no Great Depression in Germany in the 1930s, there would have been no Adolf Hitler in power, no Nazi dictatorship, and forty million fewer Europeans would have murdered in the 1940s. The saddest book on my shelf is a 1928 volume called Republican Germany: An Economic and Political Survey, the thesis of which is that after a decade of post-World War I political turmoil, Germany had finally become a stable, legitimate, democratic republic. And only the fact that the Great Depression came and offered Hitler his opportunity made it wrong.

We are all very fortunate that we live in a world in which the great powers of 1940 took action--even if their action was much too long delayed and much to hesistant--to destroy the German Nazi and Japanese Fascist-Militarist regimes. Winston Churchill's pushing British Prime Minister Neville Chamberlain and French Premier Edouard Daladier to declare war on Nazi Germany in 1939, and Franklin Delano Roosevelt's ultimatum to Japan to withdraw its military from China or face a complete embargo on exports of oil from the United States, the Middle East, and Indonesia were acts of great statesmanship in pursuit of world peace. But would World War II have taken place in the absence of the Great Depression? Probably not?

Even in the United States--where we Americans believe that our political democracy and obedience to the order of law are unshakeable--the 1930s were a politically tumultuous decade. The story of Huey Long in Louisiana (fictionalized in Robert Penn Warren's brilliant novel All the Kings Men, crypto-fascist radio broadcasters like Father Coughlin over the airwaves, California's treatment of Depression-era migrants from other states that we read about today only in The Grapes of Wrath, and the white-hot hatred for Roosevelt as a class traitor--up until his dying day, my grandfather who lived to be 98 would still say the country was lucky to have survived Roosevelt.

And, of course, I draw powerful lessons from Friedman's argument. I consider that there are some today in Washington who look forward to a future in which China is in some sense America's "enemy" and that "national greatness" requires that the United States fight a new Cold War in Asia. There are those who work for Vice President Cheney's office who think that trade with China is a bad idea: it creates a pro-China lobby that will stop any attempts by the United States to slow down China's growth and acquisition of technology. Better, they think, to try to keep China as poor and barefoot as possible for as long as possible.

From my perspective, this is totally insane. In all likelihood, China a century from now will be a full-fledged post-industrial superpower whatever the policies of the United States. The national interest of the United Staets is to maximize the likelihood that that superpower will have a representative government presiding over a prosperous, open, and free society? The China policy of the Clinton administration was to try to do whatever we could to speed China's growth in the expectation that rapid economic growth would have greatly beneficial moral, sociological, and political consequences for the evolution of China. As sociologist Barrington Moore wrote two generations ago, those countries that crossed the bridge from agrarian to industrial civilization most easily and peaceully were those with a rapidly growing, prosperous middle class will be interested in liberty and opportunity. Such a rapidly-growing Chinese middle class would be a much more powerful force for prosperity, opportunity, freedom of thought, and representative government in China than a battalion of lecturing neoconservative think-tankers in Washington D.C. or a host of remotely-guided cruise missiles on U.S. warships based in Pearl Harbor.

Let's all try to keep the bicycle that is modern China moving forward as fast as we can.