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May 2006

The Current Recovery

Paul Krugman gives his take, which I think is broadly right:

Krugman - NYT Web Journal:

Alan Gertler, Reno, Nev.: I'm a scientist, not an economist, so I'm fairly naive when it comes to what drives the economy. My question is this: Have the tax cuts stimulated the economy as claimed (which I don't believe given the past cases of Reagan and Bush senior), or has it been the willingness of the government to continue massive spending by increasing our debt that has led to the growth of the economy?

Paul Krugman: It's actually neither. About the Bush tax cuts: the tax cuts of 2001 evidently didn't do the job; these days, the Bush people talk about the economy as if history began in the middle of 2003, after their SECOND wave of tax cuts.

But while the economy did start growing, finally, in 2003, the growth wasn't at all of the form you'd expect if tax cuts were responsible. The main tax cuts were on dividends and capital gains; supposedly this would make it easier for businesses to raise funds and invest. But business investment hasn't been the main driver of growth; in fact, businesses have been sitting on huge piles of earnings, reluctant to invest. Instead, the big driver was housing construction and consumer spending.

So what really happened? Low interest rates led to a housing boom that eventually turned into a housing bubble. High house prices made people feel richer, and they could borrow against the increased value of their homes, feeding consumer spending. Tax cuts had nothing to do with it.


Because Writing About Energy Policy Is *So* Boring...

Joshua Green, writing in Hotline, he says that HRC's energy speech was boring because it was substantive:

Hotline On Call: Clinton's 50 By 25....: Senator Hillary Clinton was well attuned to her audience when she paused, during her major energy speech at the Press Club this morning, to apologize for "probably a more wonkish speech than many of you had anticipated."

Fittingly so, because even the most enthusiastic wonks have a tough time digesting talk of "cellulosic ethanol" and "biomass fuels" before lunch.

Thankfully, the centerpiece of Clinton's speech was easier to grasp: her "fifty-by-twenty-five energy initiative," as she put it, would reduce America's dependence on foreign oil by fifty percent by the year 2025. Clinton compared her proposal to the Manhattan Project; given the specificity and detail with which she explained it, a nuclear engineering degree might have helped her audience.

Clinton's speech provided a sharp contrast to the Bush administration's recent cautious rhetoric about energy and gas prices, both by countering their generalities with specifics (plenty of those!) and rebutting their notion that little can be done to change things by asserting otherwise and then, in a style that would do her husband proud, backing up those assertions with detailed plans to boost everything from wind power to biofuels to a Strategic Energy Fund she hopes to create by introducing legislation today (it will be funded partially by a two-year windfall profits tax on oil companies, who she also whacked for not providing ethanol pumps at gas stations).

On a dais heavy with New York state reporters, Clinton also deftly wove in mention of some of her state's business-environmental success stories, among them the low-sulfur diesel fuel produced by Cummins and the school-bus exhaust filters made by Corning -- a traditionally Republican company that has lately swooned, Murdoch-like, for the state's junior Democratic Senator.

Why oh why can't we have a better press corps?


The Horse's Mouth Looks at the Press

Greg Sargent has a nice weblog:

The Horse's Mouth: TIMES READERS SOUND OFF ON STORY ABOUT CLINTONS' MARRIAGE. Well, it looks as if Times readers are pretty ticked off with the paper for running [Pat Healy's] 3,000 word front page story on the state of the union -- the Clintons' union, that is. Check out these reader comments about the piece on The Times's new political blog. Many readers are very, very upset, and sentiment is running overwhelmingly against the piece, though that could be a reflection of the intense blogospheric reaction.

Before the lectures about blogospheric civility and the "angry left" start, let me quote from one of the comments:

I expect front page articles in The New York Times to be well-sourced, newsworthy, and related to important national and international issues. This article, though, was a gossipy, mean-spirited hit piece that seemed to serve no purpose except as a forum for idle speculation about the state of the Clintons' marriage.

Your reporter cannot find anyone to give a quote that says that the Clintons have anything but a normal, loving, supportive marriage, but he consistently implies that this is not the case. The most glaring example is when he writes that their friends' stories about their affection for each other are a product of "eager[ness] to smooth any rough edges on the relationship." What if the stories are simply true?


Lloyd Bentsen Dies

As my boss Alicia Munnell said in 1993: "After a week working for Bentsen you understand why he is the Treasury Secretary and you are not, and you are happy that that is the way it is."

Former Democratic Sen. Lloyd Bentsen Dies - Yahoo! News: HOUSTON - Lloyd Bentsen, a courtly Texan who represented the state in Congress for 28 years and served as President Clinton's first treasury secretary, died Tuesday, his family said. He was 85....

Bentsen's distinguished political career took him from the humble beginnings of a county office in the Rio Grande Valley in the 1940s to six years in the U.S. House, 22 in the U.S. Senate and two in the Clinton Cabinet, where he was instrumental in directing the administration's economic policy.

A shrewd legislative operator, the silver-haired politician maneuvered with ease in Democratic and Republican circles alike on Capitol Hill, crafting deals behind the scenes in a dispassionate, reserved fashion.....

The scion of a wealthy Rio Grande Valley family, Bentsen first distinguished himself in World War II, where he flew 50 bomber missions over Europe. Returning home as a decorated veteran, the 25-year-old was elected Hidalgo County judge in 1946. Two years later, he moved to the House.

In his first House term, Bentsen was one of a handful of Southern congressmen voting against the poll tax, which was used to keep blacks from voting...

A better legislator and cabinet secretary than the political judgment of the American people deserves. He liked the old story about Marshall Lyautey--and said it was one of Jack Kennedy's favorite stories, too:

Marshall Lyautey, retired on his chateau, asked his gardener if the following morning he wouldstart planting a row of oak trees.

"But Mon Marechal," said the gardener, looking at the eighty-year old Lyautey. "The trees will take more than fifty years to grow."

"Oh," said the Marshal. "In that case, plant them today. We have no time to lose."


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

John Tierney snipes at Al Gore:

Gore Pulls His Punches - New York Times: Gore isn't exactly likable in the film -- he still has that wooden preachiness and is especially hard to watch when he tries to be funny. Yet you end up admiring him for his nerdly persistence. He turned out to be right about something important: global warming is a problem worth worrying about.

But the story he tells in the movie is hardly "an inconvenient truth." It's not really true, and it's certainly not inconvenient for him or his audience....

[E]ven as propaganda, the film is ultimately unsatisfying. Gore doesn't mind frightening his audience with improbable future catastrophes, but he avoids any call to action that would cause immediate discomfort, either to filmgoers or to voters in the 2008 primaries.

He doesn't propose the quickest and most efficient way to reduce greenhouse emissions: a carbon tax on gasoline and other fossil fuels. The movie gives him a forum for talking sensibly about a topic that's taboo on Capitol Hill, but he instead sticks to long-range proposals that sound more palatable, like redesigning cities to encourage mass transit or building more efficient cars and appliances...

Would it have strained John Tierney's brain to tell his readers that Gore did propose a carbon tax back in 1993, got no backup at all from John Tierney and company, and lost? That the topic is "taboo on Capitol Hill" in large part because John Tierney and company gave Gore no backup when he tangled with the American Petroleum Institute a decade ago?

But that would undermine John Tierney's narrative, wouldn't it? John Tierney is in the business of trying to paint Gore as an unlikeable coward, isn't he?


Morning Coffee Videocast: Gasoline Prices and American Politics

In which I hog Google's bandwidth, drink my morning coffee, and express my frustration at the politics of gasoline prices in America today:

Gasoline Prices and American Politics: Brad DeLong 4 min 35 sec - May 23, 2006:

Brad DeLong's Morning Coffee. It's very sad to watch both political parties abandon all shred of principle in the hope of winning political advantage by exploiting the gasoline price issue.


Why Oh Why Can't We Have a Better Press Corps?

Outsourced to the Daily Howler:

A CARTOON PRESS CORPS: Only Elisabeth Bumiller could overlook the mordant humor in her presentation. At the start of this morning's "White House Letter," she describes the press corps' conduct during a recent plane ride:

BUMILLER (5/22/06): Reporters en route to Arizona on Air Force One last week opted to watch the movie ''King Kong'' in the press cabin. Not so Tony Snow, the new White House press secretary and former Fox News commentator, who told reporters that he spent the flight in the staff cabin watching Gen. Michael V. Hayden's confirmation hearings to be the new C.I.A. director--on CNN.

Got milk--and cookies? While Snow watches Hayden's confirmation hearings, the "press corps" chooses King Kong!

Readers, let's review: It's the middle of a work day. An important hearing is under way. The press corps is stuck on a long plane ride. And they choose to watch an inane, year-old movie! Only Bumiller could offer this fact and fail to see the dark humor involved--the portrait it paints of her hapless cohort, the people who steward our discourse.


The Washington Times Is Shrill

Bruce Bartlett points us to this shrill and unbalanced editorial by the Washington Times. Yes, John Snow has finally pushed them over the edge:

TODAY'S EDITORIAL May 22, 2006: Treasury Secretary John Snow might find his credibility rising if he would recognize that his listeners are intelligent. Testifying May 17 before the House Financial Services Committee, he noted that "real [i.e., inflation-adjusted] GDP rose an impressive 4.8 percent at an annual rate in the first quarter of this year." Moments later Mr. Snow, trying to "stress how broadly the benefits of this strong growth impact Americans," cited as example that "average hourly earnings are picking up. We learned from this month's jobs report that average hourly earnings have risen 3.8 percent over the past 12 months -- their largest increase in nearly five years."

Rep. Barney Frank asked Mr. Snow: "What's the [consumer price index] increase over the past 12 months?" Presumably referring to the Labor Department's consumer price index number for April, issued just an hour and a half before Mr. Snow began testifying, the Treasury secretary replied, "It came out recently, as you know. The headline [CPI rate] . . . " He was interrupted by Mr. Frank, who repeated his request for the consumer price index number "over 12 months," the precise period for which Mr. Snow had earlier boasted that "average hourly earnings have risen 3.8 percent." The Treasury secretary replied, lamely, "Well, about 5 [percent], I think, 5.1 [percent]."

Mr. Frank then asked Mr. Snow to "acknowledge that [the] 3.8 percent increase in wages you're talking about is nominal, not adjusted for inflation." Mr. Snow, who holds a Ph.D. in economics, nevertheless hadn't figured it out: "I'll have to go back, congressman, and check these numbers." Mr. Frank persisted. Perhaps helped by an assistant (perhaps without a Ph.D.), Mr. Snow conceded, "For the 12 months, it's nominal."... [T]he actual not-so-good news, beyond the microscopic increase in average real wages, is that America's secretary of the Treasury has no clue about the 12-month "headline" rate of inflation...


Greg Mankiw Criticizes Lieberman, Bush, and Krugman...

Greg Mankiw criticizes Joe Lieberman, George W. Bush, and Paul Krugman--but, I think, gets important elements of the situation wrong:

Greg Mankiw's Blog: Krugman blasts Lieberman (unfairly): Lieberman (and Bush) said: "Every year we wait to come up with a solution to the Social Security problem... costs our children and grandchildren and great-grandchildren $600 billion more."... [W]ere Lieberman and Bush telling the truth or not? It helps to understand what that $600 billion figure represents.

It all comes down to the economics of discounting. Let's say I have a $200 debt to a bank that is due in 10 years, and the interest rate is 7 percent. The present discounted value of that obligation is $100 today. That is, if I were to extinguish the debt right now, it would cost me $100. If I wait a year, the repayment obligation would then be only 9 years away. At that point, extinguishing the debt would cost me $107. One might say that waiting an extra year costs me an extra $7. Or one might not. After all, paying $107 next year is equivalent in present value to paying $100 today. One might say I haven't cost myself anything by waiting.

Now suppose my friend Joe offers me some financial advice: "Greg, you should really pay off that debt now, because waiting a year will cost you an extra $7." How should I respond?

(a) "Yes, Joe, you are right."
(b) "No, Joe, that's not the best way to think about it."
(c) "Joe, you are a liar."

I think (a) and (b) are defensible points of view. But Krugman chose (c).

Three comments:

First, in this case (a) is not a defensible point of view. Some $200 billion of the $600 billion number is a simple inflation adjustment--2006 dollars have less purchasing power than 2005 dollars. In any other situation, Greg would sharply downgrade someone who believed that changes in the value of the measuring rod that is money were changes in real income and wealth. The statement, "Yes, Joe, you are right," is simply not true.

Second, with respect to (b), what is the best way to think about it? It is not quite right to say, as Greg does, that "paying $107 next year is equivalent in present value to paying $100 today... I haven't cost myself anything by waiting." By waiting a year, you've given up your capability to use this year's resources to help settle the debt. The real cost of delaying Social Security reform is that we gave up the our ability to change this year's taxes and benefits to start dealing with the shortfall. (Of course, since the never-fully-spelled-out Bush plan never envisioned changing this year's taxes and benefits...) A good plan would have raised taxes a little bit this year to prefund a little bit more of the long-run shortfall.

Jason Furman--who is, all by himself, a large and well-trained professional analytical staff--has done the math:

The cost of delaying Social Security reform an additional year is about $160 billion.... [W] missed the opportunity to tax 2005 GDP or reduce Social Security benefits in 2005. According to the Social Security Trustees, taxes would need to be raised by 1.3 percent of GDP to achieve solvency over an infinite horizon. So we have to do about $160 billion more in adjustment because we did not address the problem last year.... Here's the CBPP note on the cost of delay. http://www.cbpp.org/4-28-06socsec2.htm... [T]he same methodology shows that the cost of the tax cuts goes up by $1.1 trillion annually.... I also wrote something making the obvious point that you could only talk about a cost of delaying if you delayed a plan that had prefunding http://www.cbpp.org/4-28-06socsec.htm...

Jason is, of course, right. The right number--the number you put down for full credit on any public finance exam--is $160 billion. Put down $600 billion, and you'll get little or no credit for the question.

Thus I'm not at all sure that (b) is defensible either. We economists believe that analyses that confuse nominal and real magnitudes and that do not focus on opportunity cost are not just "not the best way to think about it" but are wrong.

Third, what is the real point of Lieberman's saying the "$600 billion" number, the number that Greg Mankiw's coworker in the White House Chuck Blahous told him to say, rather than the "$160 billion" that Paul or Jason or I or Peter Orszag or any of a large number of other economists interested in raising the level of the debate would have told him to say? The point is that the $600 billion number was created because it was (a) big, and (b) misleading and wrong in a subtle way that could not be easily explained to a journalist who was either an English major or who has wiped all memory of Econ 101a from his or her brain.

The purpose of the $600 billion number is to mislead those who hear it into thinking that the urgency of Social Security reform is much greater than it in fact is.

Is it a lie? It's a lie in the same sense that Bill Clinton's claim that "there is no relationship" with Monica Lewinsky is a lie: it's a statement calculated to mislead and deceive those who hear it, made by people who have an interest in clouding men's minds, making the worse appear the better cause, and otherwise lowering the level of the debate.

The right way to put it is, I think, the way Stephen Colbert does. The statement "Every year we wait to come up with a solution to the Social Security problem costs our children and grandchildren and great-grandchildren $600 billion more" is not a true statement, it is a statement that has "truthiness." It's not a statement that anyone who wants to belong to the reality-based community would ever say.


Morning Coffee Videocast: The "Ownership Society" Is Not What It's Cracked Up to Be

In which I hog Google's bandwidth, fail to drink my morning coffee, and muse on the implications of the fact that new White House press secretary Tony Snow doesn't have a 401(k) account:

Tony Snow's 401(k): The "Ownership Society" Is Not What It's Cracked Up to Be: Brad DeLong: 2 min 28 sec - May 22, 2006:

Brad DeLong's Morning Coffee. New Bush press secretary Tony Snow doesn't have a 401(k). This is very bad news for Bush's "ownership society." The "ownership society" fails if people don't act responsibly. Yet it seems that even Bush's closest aides are not certain to act responsibly.


Paul Krugman on Talk-Show Joe Lieberman

Paul Krugman writes:

Talk-Show Joe - New York Times: Friday was a bad day for Senator Joseph Lieberman.... Ned Lamont, an almost unknown challenger... [gained] the right to run against Mr. Lieberman in a primary, and suggests that Mr. Lamont may even win.... Some news reports may lead you to believe that he is in trouble solely because of his support for the Iraq war. But there's much more to it than that. Mr. Lieberman has consistently supported Republican talking points. This has made him a lion of the Sunday talk shows, but has put him out of touch with his constituents -- and with reality.

Mr. Lieberman isn't the only nationally known Democrat who still supports the Iraq war. But he isn't just an unrepentant hawk, he has joined the Bush administration by insisting on an upbeat picture of the situation in Iraq that is increasingly delusional. Moreover, Mr. Lieberman has supported the attempt to label questions about why we invaded Iraq and criticism of the administration's policies since the invasion as unpatriotic... his warning, late last year, that "it is time for Democrats who distrust President Bush to acknowledge that he will be Commander-in-Chief for three more critical years, and that in matters of war we undermine Presidential credibility at our nation's peril"?

And it's not just Iraq. A letter sent by Hillary Clinton to Connecticut Democrats credited Mr. Lieberman with defending Social Security "tooth and nail"... that's not what happened.... Lieberman repeatedly supported the administration's scare tactics. "Every year we wait to come up with a solution to the Social Security problem," he declared in March 2005, "costs our children and grandchildren and great-grandchildren $600 billion more." This claim echoed a Bush administration talking point... simply false... Mr. Lieberman was providing cover for an administration lie....

Lieberman supported Congressional intervention in the Terri Schiavo affair, back when Republican leaders were trying to manufacture a "values" issue out of thin air.... On each of these issues Mr. Lieberman, who is often described as a "centrist," is or was very much at odds not just with the Democratic base but with public opinion as a whole.... Lieberman's defenders would have you believe that his increasingly unpopular positions reflect his principles. But his Bushlike inability to face reality on Iraq looks less like a stand on principle than the behavior of a narcissist who can't admit error....

[T]he common theme in Mr. Lieberman's positions seems to be this: In each case he has taken the stand that is most likely to get him on TV.... [T]he talking-head circuit loves centrists... a Democrat is considered centrist to the extent that he... lends his support to Republican talking points, even if those talking points don't correspond at all to what most of the public wants or believes. But this "center" cannot hold. And that's the larger lesson of what happened Friday. Mr. Lieberman has been playing to a Washington echo chamber that is increasingly out of touch with the country's real concerns...

As Jonathan Chait writes:

Jonathan Chait: [L]ots of Democrats supported the Iraq war initially and believe now that we can and must win.... Lieberman, unlike other Democratic hawks, musters little passion for exposing and correcting the massive blunders the Bush administration has committed. When the Abu Ghraib scandal broke, Lieberman noted, in Bush's defense, "Those who were responsible for killing 3,000 Americans on Sept. 11, 2001, never apologized." (As if anybody was suggesting we were as bad as the terrorists.) Last fall he said, "In matters of war, we undermine presidential credibility at our nation's peril." The clear implication is that it's counterproductive -- traitorous, even -- to call the administration on its foreign policy dishonesties. This is not how the loyal opposition in a democracy ought to behave.

Foreign policy is hardly the only smudge on Lieberman's record.... He has long opposed sensible financial regulations. Even after his pro-business stance came under fire in the wake of the Enron scandal, Lieberman opposed sensible reforms. (As one of Lieberman's friends told the New Republic's Michael Crowley in 2002, "It'll be remembered that he didn't go off the deep end" -- meaning, after the populist furor dies down, Lieberman could resume raking in contributions from grateful executives.) He supported the disgraceful energy bill and federal intervention in the Terri Schiavo case.

Lieberman obviously relishes his role as every conservative's favorite Democrat. It's a mutually beneficial relationship. He's lavished with praise for his statesmanship, vision and bipartisanship. And, in the process, Republicans implicitly get to show what's wrong with the rest of his party. Bush and Dick Cheney applaud Lieberman regularly for believing we must win in Iraq, as if to suggest no other Democrat thinks the same...


Eddie Lazear Gets Bad Reviews on his NTA Speech

Eddie Lazear gets bad reviews on his National Tax Association speech:

The Washington Post:

Down Is Still Up: The White House continues to tax reality: Sunday, May 21, 2006; B06: WHEN BEN S. Bernanke left the White House Council of Economic Advisers to become Fed chairman, his place was filled by Edward P. Lazear, an accomplished economist from Stanford University. For all his credentials, Mr. Lazear is not doing well.

In a speech Thursday, Mr. Lazear contended that "low taxes are consistent with rising federal revenues, which helps bring the deficit down." This deliberately implies that low taxes cause a rise in federal revenue, even though they don't. Last year one of Mr. Lazear's predecessors as chairman of President Bush's Council of Economic Advisers, N. Gregory Mankiw of Harvard University, examined whether tax cuts pay for themselves: In other words, do they boost work incentives enough to generate sufficient extra growth that government revenue ends up higher than it would have been without tax cuts? Mr. Mankiw concluded that this "dynamic" effect is way too small to justify Mr. Lazear's message. Tax cuts cause falls in federal revenue, and implying the opposite is irresponsible.

Mr. Lazear also stated that "higher productivity translates directly into higher wages -- even over the relatively short run." But one of his own charts showed how wages of production workers have lagged behind productivity gains for nearly all of the past 50 years and how this gap has grown wider in the past five years. In a recent paper titled "Where did the Productivity Growth Go?" Robert J. Gordon of Northwestern University reports that between 1966 and 2001, everyone in the bottom 90 percent of the income distribution saw wages grow more slowly than productivity and that fully half the gains from extra productivity went to the richest tenth. Mr. Lazear did not address this issue.

In a Wall Street Journal op-ed recently, Mr. Lazear stated that the Bush tax cuts have narrowed gaps in take-home earnings. This is wrong, as a previous editorial noted; but in Thursday's speech Mr. Lazear returned to the subject of progressivity from the opposite angle. "To further investment in human capital, it is necessary that the progressivity of the tax system not become too pronounced," he said; in other words, inequality usefully boosts the incentive to get an education. To illustrate the dangers of equality, Mr. Lazear cited Eastern Europe circa 1990, when "highly skilled individuals chose to drive taxis for tourists."

It is true that equal wages dampen work incentives, but the invocation of communist Czechoslovakia or Poland is far-fetched. In the late 1980s, the Gini coefficient, a standard measure of inequality, averaged around 24 points in the Soviet bloc; the contemporary United States, with a Gini score of about 40, is far less equal. Does Mr. Lazear honestly believe the United States is anywhere close to a situation in which engineers or doctors forsake their professions to act as tour guides? Or is he scraping around for an argument -- any argument -- to play down justified concerns about rising inequality?

Dan Shaviro:

Start Making Sense: Fun in the nation's capital: I was in Washington for the spring meeting of the National Tax Association this past Thursday, and the lunch talk was given by Ed Lazear, the labor economist and recent Tax Reform Panel member who is now on Bush's Council of Economic Advisors. Though I realize the job puts pressure on one's public utterances, I was dismayed by the level of sales pitch that I was hearing, all this stuff about how the Administration's tax policy has wonderfully boosted economic growth, increased national saving, etc., etc. E.g., attributing the recent economic growth rate to the tax cuts, rather than to the recessionary trough that the growth came from, and not acknowledging the fairly obvious point that there were also high growth rates after the 1993 tax increases. Claiming that the dividend tax cuts will create vast increases in national saving and economic growth, as predicted by economic theory, blah blah blah.

With no ill will towards Lazear, I must say I found it a bit stomach-turning, even more so than the cardboard cheesecake with raspberry sauce that was sitting in front of me. So I waved my hand like a first grader so I would get to ask the first question, and was I suppose a bit blunt. I noted that economic theory can't predict the consequences of a tax cut in isolation; it needs to be a balanced-budget exercise that includes the offset. I noted that the Administration has vastly increased the fiscal gap, with huge likely negative effects on national saving even if there is no catastrophe. I noted the immense transfers to older generations, from unsustainable tax cuts that will have to be reversed later on plus the Medicare prescription drug benefit, likely to reduce national saving due to the income effect (seniors save less than younger people for lifecycle reasons). Maybe I had one or two more points before I subsided and let Lazear have at it.

I wouldn 't say he answered me, though I can't say I blame him. At some point he started saying something about how, with just a little economic growth, all the deficits will totally disappear. This was a bit thick. So I started to cut in: "There isn't a single reputable expert in the country who believes - "

"I've got the floor now!" was his answer, so I subsided again. He did acknowledge sharing some of my concerns.

No hard feelings, but a job in the Council of Economic Advisors really isn't very good for one's reputation these days.

Is there anybody whose reputation has been enhanced by their term in the Bush administration? I can think of Zalmay Khalilzad. That's all.


Don Kohn to Fed Vice Chair

Should be an excellent choice:

Economist's View: Kohn Nominated to be Vice Chair of Fed:

Fed's Kohn Is Nominated to Be Bernanke's Deputy, Bloomberg: Federal Reserve Governor Donald Kohn, a 36-year central bank veteran, was nominated by President George W. Bush to be the board's new vice chairman. Kohn, 63, will replace Roger Ferguson, who left in April... The move gives Chairman Ben S. Bernanke a deputy who served as Alan Greenspan's top strategist and embraces much of the former Fed chief's thinking on interest rates, financial markets and risk. Kohn is also an opponent of inflation targeting, a goal favored by Bernanke, Greenspan's successor....

The partnering of Bernanke, the 52-year-old academic who spent his career researching monetary economics at universities, and Kohn, who has attended more Open Market Committee meetings than any other Fed official, will probably strengthen the Fed, central bank watchers said. ''It's a stellar appointment,'' said Alan Blinder, a former Fed Vice Chairman and now a professor at Princeton University. ''It's hard to imagine anyone that would be more qualified for the position than Don Kohn.''... Greenspan, attending a reception in New York today, said: ''It's a superb nomination.''...

Kohn earned a doctorate in economics at the University of Michigan and went to work for the Kansas City Fed in 1970, then moved to Washington to start with the board in 1975.


Firefox Gets Fireyer and Foxier

On my machines, this acts not like an alpha but like a late beta release:

Bon Echo Alpha 2 Milestone: Please note: We do not recommend that anyone other than developers and testers download this Alpha 2 milestone release. It is intended for testing purposes only. Bon Echo Alpha 2 is the second developer milestone on the path to Firefox 2. This milestone is focused on testing the core functionality provided by many new features and changes to the platform scheduled for Firefox 2...


Sensation Seeking, Overconfidence, and Churning Your Portfolio

Mathing up the General Theory department:

John Maynard Keynes:

The General Theory of Employment, Interest and Money by John Maynard Keynes: If the reader interjects that there must surely be large profits to be gained from the other players in the long run by a skilled individual who, unperturbed by the prevailing pastime, continues to purchase investments on the best genuine long-term expectations he can frame, he must be answered, first of all, that there are, indeed, such serious-minded individuals and that it makes a vast difference to an investment market whether or not they predominate in their influence over the game-players.

But we must also add that there are several factors which jeopardise the predominance of such individuals in modern investment markets. Investment based on genuine long-term expectation is so difficult to-day as to be scarcely practicable. He who attempts it must surely lead much more laborious days and run greater risks than he who tries to guess better than the crowd how the crowd will behave; and, given equal intelligence, he may make more disastrous mistakes. There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable. It needs more intelligence to defeat the forces of time and our ignorance of the future than to beat the gun.

Moreover, life is not long enough; -- human nature desires quick results, there is a peculiar zest in making money quickly, and remoter gains are discounted by the average man at a very high rate. The game of professional investment is intolerably boring and over-exacting to anyone who is entirely exempt from the gambling instinct; whilst he who has it must pay to this propensity the appropriate toll.

Furthermore, an investor who proposes to ignore near-term market fluctuations needs greater resources for safety and must not operate on so large a scale, if at all, with borrowed money -- a further reason for the higher return from the pastime to a given stock of intelligence and resources. Finally it is the long-term investor, he who most promotes the public interest, who will in practice come in for most criticism, wherever investment funds are managed by committees or boards or banks.

For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion. If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy. Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

Mark Grinblatt and Matti Keloharju:

Mark Grinblatt and Matti Keloharju (2006), Sensation Seeking, Overconfidence, and Trading Activity. NBER Working Paper No. 12223: Issued in May 2006: This study analyzes the role that two psychological attributes--sensation seeking and overconfidence--play in the tendency of investors to trade stocks. Equity trading data are combined with data from an investor's tax filings, driving record, and psychological profile. We use the data to construct measures of overconfidence and sensation seeking tendencies. Controlling for a host of variables, including wealth, income, age, number of stocks owned, marital status, and occupation, we find that overconfident investors and those investors most prone to sensation seeking trade more frequently.


Yet Another Lesson: Proof of Divine Providence

Amanda Marcotte discovers that even John Derbyshire has a place in the Plan of Divine Providence. He is to be mocked:

Amanda Marcotte: I was feeling a little low, like the level of wingnuttery I've been reading lately isn't entertaining enough to mock. The Disco Ball must have heard my cries of woe because an angel sent to me in the form of Jill alerted me to the fact that John Derbyshire has a review of [Vladimir Nabokov's] Lolita up at National Review....

Everything Amanda writes is good. I note that Derbyshire reaches the quintessence of wingnuttery when he takes murderer, pedophile, and rapist Humbert Humbert's views on moral order as authoritative. You see, Hummbert Humbert mocks:

the rules of those American ads where schoolchildren are pictured in a subtle ratio of races, with one--only one, but as cute as they make them--chocolate-colored round-eyed little lad, almost in the very middle of the front row.

And Derbyshire then chimes in:

He would have been horrified to see how this how these silly but harmless and well-intentioned courtesies have swollen into a monstrous dreary tyranny, shutting off whole territories of speech and thought, acting as a sheet anchor to hold back our commercial and intellectual progress, corrupting our constitutional jurisprudence, turning unscrupulous mountebank attorneys into billionaires, and making art like Nabokov's incomprehensible.... That we are stupider, coarser, duller, lazier, narrower of mind, more fearful of strangeness, more abject, and more craven than the Americans of 1958 is bad enough... our civilization is, and richly deserves to be, on its way out...

Nabokov's intent is not that we identify with Humbert's racism--his "poke[ing] gentle fun" at the "harmless and well-intentioned courtesy" of treating Black people as Americans. Nabokov's intent is that we see Humbert Humbert's racism as a (small) part of what makes him loathesome. Derbyshire doesn't get it--it doesn't occur to him that he should separate Vladimir Nabokov the author from Humbert Humbert the narrator. That Humbert Humbert would be horrified by something is an argument that that something is good, not that it is bad.

Stupidest man alive.


Why Oh Why Can't We have a Better Press Corps? (Jonah Goldberg at the Los Angeles Times Edition)

Can the LA Times please remove Jonah Goldberg before he writes again?

Here's one point he makes: presidents don't control the economy:

Jonah Goldberg: It's Iraq, stupid - Los Angeles Times: The idea that any White House "creates" jobs is absurd and always has been. Alas, there is no machine in the West Wing basement churning out job openings for welders and ophthalmologists. The $12-trillion American economy is too big, too diverse and too complicated for the government to "run"...

Here's another point: it's unfair that George W. Bush isn't getting credit for recent growth in employment:

It's just so unfair... if Bush "lost" a few million jobs in his first term, surely by the same standard Bush has "created" 5 million jobs since 2003. Of course, Republican presidents rarely receive such fairness...

Here's a third point: Goldberg says that Bush's management of the economy has been lousy:

Of course, there are reasons to fret about the economy: growing entitlements, demographic time bombs, health insurance woes, the national debt and the deficit...

And here's a fourth point: but it's unfair to blame Bush for lousy management of the economy when Reagan got a pass:

But these are perennial concerns. The debt and deficit didn't sour President Reagan's boom...

As Busy, Busy, Busy puts it:

Busy, Busy, Busy: Shorter Jonah Goldberg: The media's failure to give Mr. Bush undeserved credit for the economy's performance is proof of its liberal bias.


Today's Lesson: And Samuel Hewed Agag in Pieces Before the LORD in Gilgal.

Rabbi Mark Gellman says the sacred scriptures are "a critique... of every thing we do to betray the better angels of our nature":

Rabbi Gellman Tries to Understand Angry Atheists - Newsweek Society - MSNBC.com: Religion must remain an audacious, daring and, yes, uncomfortable assault on our desires to do what we want when we want to do it. All religions must teach a way to discipline our animal urges, to overcome racism and materialism, selfishness and arrogance and the sinful oppression of the most vulnerable and the most innocent among us. Some religious leaders obviously betray the teachings of the faith they claim to represent, but their sacred scriptures remain a critique of them and also of every thing we do to betray the better angels of our nature. But our world is better and kinder and more hopeful because of the daily sacrifice and witness of millions of pious people over thousands of years...

I wonder what Rabbi Mark Gellman makes of the actions of the "pious person" Samuel:

Bible, King James Version, 1 Samuel 15: Samuel also said unto Saul, "The LORD sent me to anoint thee to be king over his people, over Israel: now therefore hearken thou unto the voice of the words of the LORD. Thus saith the LORD of hosts, 'I remember that which Amalek did to Israel, how he laid wait for him in the way, when he came up from Egypt. Now go and smite Amalek, and utterly destroy all that they have, and spare them not; but slay both man and woman, infant and suckling, ox and sheep, camel and ass.'"

And Saul gathered the people together, and numbered them in Telaim, two hundred thousand footmen, and ten thousand men of Judah. And Saul came to a city of Amalek, and laid wait in the valley.... And Saul smote the Amalekites from Havilah until thou comest to Shur, that is over against Egypt. And he took Agag the king of the Amalekites alive, and utterly destroyed all the people with the edge of the sword. But Saul and the people spared Agag, and the best of the sheep, and of the oxen, and of the fatlings, and the lambs, and all that was good, and would not utterly destroy them: but every thing that was vile and refuse, that they destroyed utterly.

Then came the word of the LORD unto Samuel, saying, "It repenteth me that I have set up Saul to be king: for he is turned back from following me, and hath not performed my commandments." And it grieved Samuel; and he cried unto the LORD all night. And when Samuel rose early to meet Saul in the morning, it was told Samuel, saying, "Saul came to Carmel, and, behold, he set him up a place, and is gone about, and passed on, and gone down to Gilgal."

And Samuel came to Saul: and Saul said unto him, "Blessed be thou of the LORD: I have performed the commandment of the LORD."

And Samuel said, "What meaneth then this bleating of the sheep in mine ears, and the lowing of the oxen which I hear?"

And Saul said, "They have brought them from the Amalekites: for the people spared the best of the sheep and of the oxen, to sacrifice unto the LORD thy God; and the rest we have utterly destroyed."

Then Samuel said unto Saul, "Stay, and I will tell thee what the LORD hath said to me this night."

And he said unto him, "Say on."

And Samuel said, "When thou wast little in thine own sight, wast thou not made the head of the tribes of Israel, and the LORD anointed thee king over Israel? And the LORD sent thee on a journey, and said, 'Go and utterly destroy the sinners the Amalekites, and fight against them until they be consumed.' Wherefore then didst thou not obey the voice of the LORD, but didst fly upon the spoil, and didst evil in the sight of the LORD?"

And Saul said unto Samuel, "Yea, I have obeyed the voice of the LORD, and have gone the way which the LORD sent me, and have brought Agag the king of Amalek, and have utterly destroyed the Amalekites. But the people took of the spoil, sheep and oxen, the chief of the things which should have been utterly destroyed, to sacrifice unto the LORD thy God in Gilgal."

And Samuel said, "Hath the LORD as great delight in burnt offerings and sacrifices, as in obeying the voice of the LORD? Behold, to obey is better than sacrifice, and to hearken than the fat of rams. For rebellion is as the sin of witchcraft, and stubbornness is as iniquity and idolatry. Because thou hast rejected the word of the LORD, he hath also rejected thee from being king."

And Saul said unto Samuel, "I have sinned: for I have transgressed the commandment of the LORD, and thy words: because I feared the people, and obeyed their voice. Now therefore, I pray thee, pardon my sin, and turn again with me, that I may worship the LORD."

And Samuel said unto Saul, "I will not return with thee: for thou hast rejected the word of the LORD, and the LORD hath rejected thee from being king over Israel." And as Samuel turned about to go away, he laid hold upon the skirt of his mantle, and it rent. And Samuel said unto him, "The LORD hath rent the kingdom of Israel from thee this day, and hath given it to a neighbour of thine, that is better than thou. And also the Strength of Israel will not lie nor repent: for he is not a man, that he should repent."

Then he said, "I have sinned: yet honour me now, I pray thee, before the elders of my people, and before Israel, and turn again with me, that I may worship the LORD thy God." So Samuel turned again after Saul; and Saul worshipped the LORD.

Then said Samuel, "Bring ye hither to me Agag the king of the Amalekites." And Agag came unto him delicately.

And Agag said, "Surely the bitterness of death is past."

And Samuel said, "As thy sword hath made women childless, so shall thy mother be childless among women." And Samuel hewed Agag in pieces before the LORD in Gilgal.


Impeach George Bush. Impeach Him Now!

Training the Iraqi police:

Rising Hegemon: While it goes through the continuing series of clusterf------ the Bush Administration has exhibited in developing the Iraqi police force the NY Times has this little nugget:

Bernard B. Kerik, the former New York City police commissioner sent to Iraq in 2003 to lead the police mission, said Pentagon officials gave him just 10 days notice and little guidance.

"Looking back, I really don't know what their plan was," Mr. Kerik said. With no experience in Iraq, and little time to get ready, he said he prepared for his job in part by watching A&E Network documentaries on Saddam Hussein...

Impeach George W. Bush. Impeach him now.


Backup

Backup. Backup. Backup:

Mathematician vs. Philosopher: A Series Of Unfortunate Events: It seems that it's that time of the year again; the time when a young server's thoughts turn to destroying its own file system, along with the most recent backup of that file system. My server seems to be having an especially difficult time of things. I managed to restore all of its files and databases, but it decided to pout by refusing to build key PERL modules for me. I don't take any shit from machines, so I took off my belt and beat the shit out of it to show it who's boss.

We seem to have reached an understanding.

In order to preserve our friendship, we both agreed to make some changes. I am going to try to drink less and stop embarrassing the server by pointing out it had processor augmentation surgery. In return, the server is going to try to reliably serve my websites for more than a year and a half at a time without completely melting down. If either of us reneges on the terms of our agreement, the offender will be beaten with a wrench for a period of no less than seven minutes and forty-five seconds.


Zero Tolerance for Grahams!

Over at National Review, Tim Graham attacks Katie Couric and demands "intolerance":

The Corner on National Review Online: Katie Couric's so very GLAAD: On the occasion of the final episode of NBC's Will & Grace, Katie Couric insisted, "on a serious note," that it's one of her daughter's favorite shows, and it's so important to teach tolerance of "people who are different" at a "very early age." Anyone who expected a fair and balanced anchorwoman at CBS on the hot-button social issues, shred your illusions now...

I agree. It is especially important to be intolerant of Grahams. As every reader of Steel Bonnets knows, Grahams are invariably cowards--you certainly don't want them along when stealing horses in the night. Plus they cheat at dice. And they can't hold their liquor.

Give me an Armstrong, a Dodd, or a Carey any day. Those we can tolerate. But Grahams are very different from the rest of us. All right-thinking people agree that zero tolerance is the only sensible Graham policy.


Feel the Power of the Competitive Enterprise Institute...

Fred Smith chooses the Dark Side, and then clumsily cuts off his hand with his own light saber.

From ThinkProgress:

Climate Scientist To CEI: Stop Misrepresenting My Research: On Wednesday, the Competitive Enterprise Institute -- a front group funded by ExxonMobil and other big oil companies -- launched two advertisements in response to Al Gore's new movie about global warming, An Inconvenient Truth. One of the advertisements attempts to show that the scientific evidence for global warming is in dispute, claiming a study found the "Antarctic ice sheet is getting thicker, not thinner." The primary author of that study, Curt Davis, has issued statement blasting CEI's use of his study. Here's an excerpt:

These television ads are a deliberate effort to confuse and mislead the public about the global warming debate. They are selectively using only parts of my previous research to support their claims. They are not telling the entire story to the public.

The whole story, according to Davis, is that increased precipitation in the interior of Antarctica is a "predicted consequence of global climate warming." Warmer temperatures mean more participation and more snow on the interior of the continent. Meanwhile, "Growth of the ice sheet was only noted on the interior of the ice sheet and did not include coastal areas. Coastal areas are known to be losing mass."


How to Improve Journalism

Greg Mankiw's view: they don't take enough economics in college:

Greg Mankiw's Blog: How to Improve Journalism: There are probably many reasons why the quality of economics journalism is not better than it is, but an article in today's Wall Street Journal suggests one of the problems:

According to the forthcoming book "The American Journalist in the 21st Century," 36.2% of journalists with college degrees were journalism majors. If you include journalism-related "communications" majors, the percentage jumps to 49.5.... [T]there's a heavy emphasis on process and theory... classes such as Principles of Civic Journalism, Topics in Public Affairs Journalism or Industry Research Methods.

In short, many journalists simply do not have sufficient training to do a good job.

Here's my radical suggestion to the editors of the world: Require all your economics reporters to have an undergraduate degree in economics. And give a raise to those who spent the extra year or two getting a master's in economics as well. (We don't have such a program at Harvard, but there is a good one at the LSE.)

Economics is a technical field that cannot be easily learned on the fly. Unfortunately, that is often what economics journalists try to do.

I'm sure Greg's proposal would produce articles I would like a lot more. While (somewhat) sufficient, however, is it necessary? What proportion of the WSJ news reporters or the FT reporters were economics majors?


O Brave New World, That Had Such Resources in It!

Bob Barde writes:

The new, Millennial, edition of Historical Statistics of the United States from Cambridge University Press is now available on-line! UCB has subscribed, and presumably anyone with a .berkeley.edu address can access it at http://hsus.cambridge.org/HSUSWeb/index.do There are five volumes, 29 pounds (in hard copy) worth of data.

One of the beauties of the Millennial Edition of HSUS is that in the on-line version, one can download data series as Excel files. What CUP has currently on-line is the Beta version--somewhat clunky and can take a rather long time to load (it is, after all, a very large resource)--but a wonderful tool for teaching and research.


Sticky Information

Mankiw and Reis write:

Pervasive Stickiness (Expanded Version): Pervasive Stickiness (Expanded Version): N. Gregory Mankiw, Ricardo Reis: NBER Working Paper No. 12024: Issued in February 2006: This paper explores a macroeconomic model of the business cycle in which stickiness of information is pervasive. We start from a familiar benchmark classical model and add to it the assumption that there is sticky information on the part of consumers, workers, and firms. We evaluate the model against three key facts that describe short-run fluctuations: the acceleration phenomenon, the smoothness of real wages, and the gradual response of real variables to shocks. We find that pervasive stickiness is required to fit the facts. We conclude that models based on stickiness of information offer the promise of fitting the facts on business cycles while adding only one new plausible ingredient to the classical benchmark.

Good idea. But why should information be "sticky"? And why should its stickiness be "pervasive"? Isn't a better world possible in which much more infoermation about macroeconomic events is available in a non-sticky way?


Unequal Effects of Liberalization in India

A point for the neoliberals:

The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India: Philipe Aghion, Robin Burgess, Stephen Redding, Fabrizio Zilibotti: NBER Working Paper No. 1203: Issued in February 2006: We study the effects of the progressive elimination of the system of industrial regulations on entry and production, known as the "license raj," on registered manufacturing output, employment, entry and investment across Indian states with different labor market regulations. The effects are found to be unequal depending on the institutional environment in which industries are embedded. In particular, following delicensing, industries located in states with pro-employer labor market institutions grew more quickly than those in pro-worker environments.


Should Bush Abandon His Tax Cuts?

Should Bush have the political courage to abandon large chunks of his tax cut now that it has turned out to generate substantial deficits?

2003-2004 Bush CEA Chair N. Gregory Mankiw says yes, and that a good president would have the political courage to do so--or at least Greg Mankiw said yes, back in 2000:

But the $2 trillion [projected 2001-2010 budget] surplus is not exactly money in the bank.... So should the next President aim to enact a tax cut, and if so, what size? This question will dominate the presidential campaign. But it's not a very relevant one. More vital than choosing a President with the right tax plan is electing a President with the political courage to change course when events demand it... --N. Gregory Mankiw, Fortune, 3/20/00

Couldn't have said it better myself. The changed circumstances--our large current deficits--make abandonment of the tax cut wise policy. Presidents and economic advisers do need a lot of political courage to admit this, however. :-)


Why Oh Why Can't We Have a Better Press Corps?

Over at CJR, Steve Lovelady mourns the departure of Donald Barlett and James Steele from Time:

CJR Daily: Once There Were Giants: In a doleful shirt-tail, or footnote, to the New York Times story this morning on the appointment of a new managing editor at Time magazine, we learn this: "Donald Barlett and James Steele, two investigative reporters who have chronicled the vicissitudes of the American economy for Time magazine since 1997, have lost their jobs in a budget squeeze. The reporting duo, who together won two Pulitzer Prizes and two national magazine awards, were on the payroll of Time Inc. Their jobs were among about 650 that the company has eliminated in the last six months."

With that, there ended a chapter in American journalism the likes of which we may not see again. First at the Philadelphia Inquirer for 26 years and then at Time for nine years, Barlett and Steele came to be regarded by many as the premier investigative team in the business, and one that consistently met benchmarks to which others could only aspire. As Jim Warren of the Chicago Tribune has admiringly noted, in an age of singles hitters, Barlett and Steele swung for the fences every time, and seldom failed.

Their body of work is a testament to an exacting, relentless, painstaking and meticulous determination that other reporters could only shake their heads at as they admired it from afar. What they practiced was the opposite of "Gotcha!" journalism, or quick hits, or cheap shots. Rather, they burrowed in for months -- sometimes years -- at a time, and then returned with an examination of entire systems gone awry, whether it be an oil crisis, the nuclear waste dilemma, corporate welfare run rampant, the nation's ramshackle tax system, or the economy itself....

Ummm... No. I have a very different view of Barlett and Steele. My view was that they didn't know enough to write the stories they wrote--and were unwilling to learn. So whatever they produced was unreliable.

Examples? Sometime last decade I wrote, on some email list or other:

Email: Barlett and Steele, Who Pays the Taxes?: Examples of unreliability? Barlett and Steele's Who Pays the Taxes? has been dug out of the basement. Let me start on page 20, with "[Single parent] Jacques Cotton [paid] 19.8 percent of his income [of $33,500] in taxes. George and Barbara Bush's tax rate, remember, was 18.1 percent."

As I noted before, this is the only year of the Bush presidency during which the Bushes paid such a low average tax rate. The cause is that the denominator includes royalties from Millie's Book, which the Bushes declared as income, gave away, and took a charitable deduction for. Our tax system is not as progressive as I would like. But it is progressive. And Barlett and Steele are trying to mask the fact that it is progressive.

Page 21: "[The Federal Government] encourages people to secure an advanced education to qualify for jobs at companies that are not hiring or are paying wages that make the degree a poor economic investment."

In fact, the educational wage premium today is higher than at any time since the end of World War II: getting a college education is an extremely good economic investment.

Page 21: "[The Federal Government] talks of retraining the newly unemployed to fill high-tech jobs that don't exist."

Stagnant real wages are--according to Janet Yellen--the result not of the fact that new jobs are by and large bad, low-wage, low-skill jobs, but the result of declining real wages at old, already-existing jobs.

Page 23: "Squeezing the American Family--Part One"

No mention of the fact that the Earned Income Tax Credit more than makes up for the decline in the relative value of personal exemptions for a typical family making less than median income.

Page 25: "If you are a middle-income [California] family, you may pay nearly as much in real estate taxes as a wealthy family whose home has a market value ten to fifteen times what yours is worth."

No mention of the fact that this is a result of the overwhelmingly-popular Proposition 13: as long as you don't sell your house, your property taxes do not rise as your house's value appreciates. Proposition 13 was not the result (as Barlett and Steele imply) of nasty politicians in smoke filled rooms eager to give the rich a break while the rest of us aren't watching, but of a voter* *referendum.

Page 30: "Every so often Congress... extends a benefit reserved for the privileged to everyone. It never lasts. A case in point: retirement savings plans.... When the Tax Reform Act of 1986 was finally signed into law, the tax-deductible IRA disappeared for millions of workers."

Barlett and Steele don't seem to understand that the tax deductible IRA as it existed between 1981 and 1986 was a regressive piece of the tax code.

That's just ten pages. Once again, enough. Barlett and Steele are unreliable. They don't understand what they are talking about.

Brad DeLong


House Judiciary Chair Sensenbrenner: Bush Double-Crossed Me

House Judiciary Committee Chair Jim Sensenbrenner is shrill:

Sensenbrenner: "[Bush] turned his back on provisions of the House-passed bill, a lot of which we were requested to put in the bill by the White House," Sensenbrenner, R-Wis., angrily told reporters in a conference call. "That was last fall when we were drafting the bill, and now the president appears not to be interested in it at all.".... He said it was the White House that had requested two controversial felony provisions in the bill the House passed last winter.

"We worked very closely with White House in the fall in putting together the border security bill that the House passed," he said. "... What we heard in November and December, he seems to be going in the opposite direction in May. That is really at the crux of this irritation," he said of Bush.... "I was very disappointed in the president's speech," Sensenbrenner said. "I think he doesn't get it."...

Sensenbrenner did not attend a closed-door meeting between Bush political adviser Karl Rove and House Republicans, but said that some members complained to him that Rove didn't stay around for many questions or hear what lawmakers had to say. "The overwhelming majority of those that I talked to who were at the conference believe that he dissed the House Republicans," Sensenbrenner said.


John Berry on the Bush Tax Policy Clown Show

John Berry writes:

The official title of the bill, which President George W. Bush proudly signed into law yesterday, is ``The Tax Increase Prevention and Reconciliation Act of 2005.'' It cuts taxes by roughly $70 billion over the next 10 years.

Nevertheless, Republican Senator Charles Grassley of Iowa, chairman of the Senate Finance Committee, argued the legislation really only extends some parts of the tax code that have expired or would later. ``So I don't want anybody to come over and say we are cutting taxes,'' Grassley said....

The bill's principal provisions involve tax rates on income from dividends and capital gains and the income thresholds at which taxpayers are subject to the alternative minimum tax.... The income thresholds for the AMT have never been adjusted for inflation, so a provision originally intended only to make sure very high income taxpayers didn't escape income taxes altogether is now hitting upper-middle-income households.... Now, they have been extended for one more year, 2006, with an estimated revenue loss of $31 billion.

Low tax rates of 15 percent on stock dividends and capital gains -- and no tax at all in 2008 for taxpayers in the 10- and 15-percent brackets -- were to expire at the end of 2008. Nevertheless, Bush and Republican congressional leaders pushed through a two-year extension, to 2010, at a 10-year revenue loss of $51 billion....

[N]ow all the other major tax cuts passed since Bush became president in 2001 will expire at the end of 2010, two years after he has left the White House. That is going to make fiscal policy a key issue for the presidential candidates of both parties. Are any of them going to tell the truth about the terrible fiscal bind the country is in? Or are they going to pretend, as Bush and more than a few members of Congress have, that tax cuts pay for themselves by generating so much more economic activity that the lower rates yield more revenue that higher rates would have?...

Grassley said former Fed Chairman Alan Greenspan said that the 2003 tax policy ``is responsible for the economic recovery we have had.'' Greenspan approved of the lower rates on dividends and capital gains as a plus for growth. He never came close to saying that the lower rates were responsible for the economic recovery. Careless language on Grassley's part? No, just part of a long-running effort to deceive the American public.


The Bush Clown Show: In Side Ring II

Presidential Press Secretary Tony Snow says he still works for Fox News:

Crooks and Liars: Tony Snow [says]:

MR. SNOW: Well, as I pointed out -- I mentioned this yesterday, and for -- let me see if I can find my quote, because I pulled it out. Chuck Hagel, as you may recall, made a fair amount of news over the weekend when he first said that -- let's see -- "Well, I want to listen to the details and I want to listen to the President," said Senator Hagel -- he said this on "This Week" on a competing network. But I would say this: I think we have to be very careful here. That's not the role of our military, that's not the role of our National Guard." That's what Senator Hagel said on Sunday.


The Bush Economic Policy Clown Show: in Side Ring I

The latest act in the Bush clown show:

IRA Swaps Could Cost U.S. Billions in Tax Revenue - New York Times: By DAVID CAY JOHNSTON: President Bush is scheduled to sign into law on Wednesday an extraordinary deal for high-income people with retirement savings accounts. By paying $1 in income taxes before the taxes are due, these investors may be able to avoid future taxes equivalent to $3.50. The deal is a one-time opportunity in 2010 for anyone to convert a conventional individual retirement account, where taxes are deferred until money is withdrawn, into a Roth IRA, where investment gains are tax-free. Conversions are now limited to people who make less than $100,000 a year....

Those who do not take advantage of the opportunity to roll money into a Roth may think about the deal differently. The tax savings, like all of the Bush tax cuts, would be financed with federal borrowing, adding to the government's interest expense. The estimate comparing how much money the government collects up front versus the taxes it will lose in the future comes from the Tax Policy Center... run by tax experts who served President Ronald Reagan, the first President Bush and President Bill Clinton.

Part of the tax savings arises from rules, set by Congress, that require people to withdraw money from traditional retirement accounts starting the year after the one in which they turn 70. For Roths, mandatory withdrawals apply only to heirs, permitting the magic of compound interest to swell the accounts' value for a much longer time for those willing to leave the money alone. Leonard Burman, co-director of the Tax Policy Center, said the estimated tax savings was based on current income tax rates. The savings would be greater if tax rates rose in the future, as Mr. Burman says they will because the government is spending more than it is taking in.

The Treasury Department made two senior tax policy advisers available on condition that they not be named. Those advisers expressed respect for the care Mr. Burman applies to his work. But they noted that the government makes tax estimates only for 5- and 10-year periods, while Mr. Burman's is for 43 years. Under the 10-year period covered by the Congressional Joint Committee on Taxation's official estimate, the Roth conversions would raise $6.4 billion in taxes in the short run. But because the government will not collect taxes on the future investment gains, the Tax Policy Center estimates that through 2049, the conversions will cost the government $53.3 billion....

Roth IRA's are now available only to couples making less than $160,000 and single people making less than $110,000. But in 2010 anyone, regardless of income, would be permitted to roll over unlimited sums from IRA's into a Roth. Everyone interviewed agreed that the smart strategy would be to pay the taxes from a source outside of the retirement account being converted to a Roth. That would preserve the amount of money available to generate tax-free returns....

Ed Slott, a Long Island accountant who publishes a newsletter about how to get the most out of retirement accounts, said that for savers, this was the best deal from the government in a long time. "You can't beat a zero tax rate," said Mr. Slott, author of "Parlay Your IRA Into a Family Fortune."


The Bush Economic Policy Clown Show: in the Center Ring

Treasury "Secretary" John Snow humiliates himself yet again:

Gotcha!: Treasury Secretary John Snow... boasted... "Average hourly earnings are picking up. We learned from this month's jobs report that average hourly earnings have risen 3.8% over the past 12 months -- their largest increase in nearly five years." But Snow's briefers apparently didn't prepare him for questioning by Rep. Barney Frank....

"Mr. Secretary," Frank said, "I agree with much of your statement, but I confess to some trouble with your citation of the rise in hourly wages. What's the CPI increase over the past 12 months? Do you know?"

Replied Snow: "Well, about 5, I think, 5.1."

To which Frank said: "...[Y]ou would acknowledge that 3.8% increase in wages you're talking about is nominal, not adjusted for inflation, correct?"

Snow, who has a Ph.D. in economics, was a bit flummoxed at first. "I'll have to go back, Congressman, and check these numbers," he said.

"That's not a trick question," Frank insisted.

"I know it's not," replied the Treasury secretary. He then confirmed that the 3.8% was nominal, that is unadjusted for inflation.

"...I think it's misleading to talk about the 3.8% over 12 months when that doesn't take into account inflation.... I'd ask you to submit to us, what's it been over 24 months, 36 months and 48 months, because, in fact, during this recovery... wages have dropped... compared to inflation." Mr. Snow promised to deliver more numbers...


Jawbone of an Ass Department

If this is what Matthew Yglesias is like after he cuts his hair...

TAPPED: LATINO ASSIMILATION FACTS. Along with the fake issue of immigration and national security is the fake concern that Hispanic immigrants don't assimilate. For example, Robert Samuelson earns his bones today as one of those white pundits, employed by white editors, writing for an audience of white people, who has the courage to speak uncomfortable "truths" about how non-white people are bad:

How fast can they assimilate? We cannot know, but we can consult history. It is sobering. In 1972 Hispanics were 5 percent of the U.S. population and their median household income was 74 percent of that of non-Hispanic white households. In 2004 Hispanics were 14 percent of the population, and their median household income was 70 percent of the level of non-Hispanic whites. These numbers suggest that rapid immigration of low-skilled workers and rapid assimilation are at odds.

That's some seriously messed up math. If you want to judge how rapidly people are assimilating, you need to first look at a group of people in some year -- 1972, say -- and then look at how those people and their descendants are doing in 2004. Samuelson is comparing the Hispanic population in 1972 to an entirely different population which, obviously, proves nothing. Via Tyler Cowen, here's some proper longitudinal data. We learn that "In a 2003 study by the RAND Corporation, economist James P. Smith finds that successive generations of Latino men have experienced significant improvements in wages and education relative to native Anglos." As Smith puts it, "Each new Latino generation not only has had higher incomes than their forefathers, but their economic status converged toward the white men with whom they competed."

It's also clear from polls that lots of people are upset that Hispanics in the United States "refuse to learn English," which would be a legitimate concern except that it's not true: "Spanish is the primary language among 72% of first-generation Latinos, but this figure falls to 7% among second-generation Latinos and zero among Latinos who are third generation and higher." The whole idea that this could possibly be a problem is just absurdly ignorant anyway. If you leave the United States, you'll be struck by the fact that huge numbers of people everywhere learn at least some English and would like to learn more. The reason, of course, is that knowing English is a very useful skill. It's even more useful if you actually live in the United States and, what's more, it's obviously much easier for an American-born child of immigrants to learn English than it is for someone growing up in Bangalore or wherever.


Open Letter on Immigration

Alex Tabarrok has an economists' letter on immigration, of which I approve:

Marginal Revolution: Open Letter on Immigration: Dear President George W. Bush and All Members of Congress: People from around the world are drawn to America for its promise of freedom and opportunity. That promise has been fulfilled for the tens of millions of immigrants who came here in the twentieth century.

Throughout our history as an immigrant nation, those who are already here worry about the impact of newcomers. Yet, over time, immigrants have become part of a richer America, richer both economically and culturally. The current debate over immigration is a healthy part of a democratic society, but as economists and other social scientists we are concerned that some of the fundamental economics of immigration are too often obscured by misguided commentary.

Overall, immigration has been a net gain for existing American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy.

Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.

Immigration in recent decades of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to be small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.

While a small percentage of native-born Americans may be harmed by immigration, vastly more Americans benefit from the contributions that immigrants make to our economy, including lower consumer prices. As with trade in goods and services, the gains from immigration outweigh the losses. The effect of all immigration on low-skilled workers is very likely positive as many immigrants bring skills, capital and entrepreneurship to the American economy.

Legitimate concerns about the impact of immigration on the poorest Americans should not be addressed by penalizing even poorer immigrants. Instead, we should promote policies, such as improving our education system that enables Americans to be more productive with high-wage skills.

We must not forget that the gains to immigrants from coming to the United States are immense. Immigration is the greatest anti-poverty program ever devised. The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries--a form of truly effective foreign aid..

America is a generous and open country and these qualities make America a beacon to the world. We should not let exaggerated fears dim that beacon.


An Insurmountable Obstacle...

People say that Nicholas Gvosdev is smart and thoughtful, and that I should read his The Washington Realist. But there is an insurmountable obstacle: Gvosdev is identified as "Senior Fellow at the Nixon Center." I can no more click on such links than I could click on a link to the Henry Wallace Center for the Understanding of Communism, or the Noam Chomsky Center for a Sober Assessment of America's Role in the World, or the Jude Wanniski Center for Econometric Tax Policy Research.


The Bush Clown Show: You Couldn't Make This Stuff Up

President George W. Bush and Homeland Security Secretary Michael Chertoff are the clown show. Bush says he is sending the National Guard to guard the U.S.-Mexico border. Chertoff says that that is a really stupid idea:

TPMmuckraker May 16, 2006 08:35 AM: Chertoff: National Guard on the Border Would Be "Horribly Over-Expensive and Very Difficult" By Justin Rood - May 16, 2006, 8:35 AM: On the occasion of President Bush's announcement he will post the National Guard along the southern U.S. border, CQ's Patrick Yoest finds this gem -- DHS Secretary Michael Chertoff pooh-poohing the idea less than six months earlier on the O'Reilly Factor:

"Why don't you put the National Guard on the border to back up the border patrol and stop the bleeding, and then start to increase the Border Patrol, the high-tech and all of that?" 'Reilly asked. . . .

"Well, the National Guard is really, first of all, not trained for that mission," Chertoff told O'Reilly. "I mean, the fact of the matter is the border is a special place. There are special challenges that are faced there."

Chertoff added that that it would take a huge amount of National Guard troops, that they would need new training. But couldn't the National Guard pull it off, O'Reilly asked? "I think it would be a horribly over-expensive and very difficult way to manage this problem," Chertoff said. "Unless you would be prepared to leave those people in the National Guard day and night for month after month after month, you would eventually have to come to grips with the challenge in a more comprehensive way."

You couldn't make this stuff up.

Nor could you make this up:

TPMmuckraker May 16, 2006 03:10 PM: Is Border Plan Solid? Just Ask The Officials By Justin Rood - May 16, 2006, 3:10 PM: Homeland Security Secretary Michael Chertoff and a clutch of top officials gave a press briefing today on President Bush's new National Guard-infused border security program. Hilarity ensues:

QUESTION: Mr. Secretary, if I've understood everything I've heard, you don't yet know what missions the 6,000 National Guardsmen will do, you don't know who is going to pay for them, you don't know what the rules of engagement will be for them, you don't know what size units there will be or how long -- whether they'll be two-week or six-month deployments, and you don't really know exactly which equipment they're going to have. So my question is, how long have you been working on this?

SECRETARY CHERTOFF: I guess that's what they call a loaded question. And I guess you haven't understood what we've said, so I'm going to try to make it really clear. . .

That's a nice strong opener for his response. But it's downhill from there:

SECRETARY CHERTOFF: [I]t is true that, sitting here right now, I do not have in my head every single mission set. . .

Assistant Secretary of Defense for Homeland Defense Paul McHale jumps in to help:

ASSISTANT SECRETARY McHALE: . . . We don't know how many helicopters we're going to put up, but we know to a near certainty that we'll have helicopters. . . We don't know where we will place censors to detect illegal movement, but it's almost a certainty that we will have censors. . . We don't know how many barriers or roads we're going to build, but clearly, we will be putting new barriers in place, and clearly, we will be building new roads . . . So your question, sir, is a fair one.

The reporter tries again:

QUESTION: What I'm really trying to understand, is this a well-thought-out plan, or is it something that's just been --

ASSISTANT SECRETARY McHALE: Yes, sir, it is.

SECRETARY CHERTOFF: in quite exquisite detail. . .

GENERAL BLUM: This is clearly a well-thought-out plan[.]

Indeed.

Plus there's the bonus hijinx from the transcriber: the assumption that the Bush administration is deploying "censors" rather than "sensers" to the U.S.-Mexico border ices the cake.


Advertising Once Again...

John Quiggin is smart:

John Quiggin: Becker and Murphy on advertising: During the discussion following the death of JK Galbraith, the issue of advertising came up. In the Affluent Society Galbraith dismissed the idea that advertising is informative, and argued instead that it was used to manufacture demand for goods and services people would otherwise not want. The NYT obit suggested that Gary Becker and George Stigler had disproved this, a proposition that attracted some attention, mainly focusing on the work of Becker and Murphy.

Although Becker and Murphy don't present it this way, their model actually supports Galbraith in most respects.... [T]he idea that advertising could be informative is excluded by assumption. In the standard neoclassical model, adopted here consumers are supposed to know their own tastes (and the processes by which tastes may change over time) and to be fully informed. Advertising is simply media content that is complementary with consumption of the goods advertised... [like] salted nuts or pretzels on the counter in a bar. For obvious reasons, salted nuts are complementary with beer. And just as it makes sense for bar owners to make nuts available freely or cheaply, it makes sense for people selling a good to offer ads.

What about consumers? An obvious case of the Becker-Murphy story arises when the ads tell a story that enhances the subjective value of consuming the good in question. A pair of shoes that make you feel like a basketball star is better (for the target market) than a pair of shoes that just covers your feet. Becker and Murphy pay a fair bit of attention to this case, and so do people who comment on them. But this isn't the only way that ads can be complementary. Ads that make you discontented with your existing possessions....

The economic model presented by Becker and Stigler provides a simple and elegant way of distinguishing the two. If advertising is a good, which enhances the package of ad+product, consumers will be willing to pay for it. If advertising is a bad, consumers will have to be paid (or forced) to consume it. An immediate consequence is that most of what we think of as advertising is a bad. We watch TV ads not because we like them, but because we are paid with the programs they accompany.... Given the public good properties of financing broadcast TV, it's possible to make a second-best argument that this social arrangement improves welfare on balance (I still need to work through this one, but for me at least, the price is too high, and I hardly ever watch ad-inclusive TV)...


Losing by Losing

Henry Farrell misunderstands the lessons of the Goldwater campaign. That's OK, the author of the best book on the Goldwater campaign--Rick Perlstein, author of the excellent Before the Storm--misunderstands them as well.

Henry Farrell writes:

The Wager Won by Losing: Firedoglake is running a bookclub on Rick Perlstein's Before the Storm, which I reckon is the best book on American politics that I've read over the last few years. It's very interesting how the book has come to occupy a near canonical position for left of center bloggers. It's not only influenced wonkish types like myself and Kevin Drum, but also netroots people like Kos and Jerome Armstrong (whose recent book, which I liked, is clearly influenced by Perlstein), and Matt Stoller (who describes it in the Firedoglake thread as the "single best book on movement politics" that he's read). But there's a sort-of-disconnect there -- or at least a part of Perlstein's argument that doesn't really fit with the netroots agenda as I understand it.

One of the very clear messages of Before the Storm is that the conservative movement won by failing. That is, when the Barry Goldwater campaign went down in flames, movement conservatives retreated into the wilderness to build up their own alternative infrastructure, and to hammer home unpopular ideas again and again until they became popular. The Goldwater conservatives, as Perlstein depicts them, were strongly committed to an ideological agenda, which was more important to them than winning in the short (or even the medium) term. But when they won, they took the grand prize, because they had effectively reshaped the battlefield of American politics on their terms. Ever since then (to mix in yet another metaphor) they've enjoyed a dealer's edge, a persistent political advantage because the terms of political debate favour them and their supporters' interests.

A political edge, yes. But not a policy edge. Medicare. Medicaid. The EPA. OSHA. Goldwaterism certainly did--in the long run--unmake Republican Party commitment to the New Deal Consensus. But in the short run Goldwaterism had other consequences: the damage it did to Republican congressional power were the only things that made the Great Society possible. The Johnson-era expansions of the social insurance state and the Nixon and post-Nixon-era expansions of the regulatory state were possible only on congressional foundations that had been created by Goldwater's Samson act directed against the Republican establishment.

To make possible the Great Society--and then to cheer when Ronald Reagan rolls back 10% of it--Goldwaterism was the greatest own-goal and act of political delusion by conservatives in the twentieth century.

They didn't win by losing, they lost by losing.


Tax Policy 101

Right-wingers who mislead on issues of public finance: stupid or dishonest?

Matthew Yglesias writes:

Learned Helplessness | TPMCafe: Jon Chait says our disagreement about conservative thinking -- or lack thereof -- on taxes comes down to the classic conundrum of "stupid or dishonest" and he sides with stupid. I like to think I have a more nuanced view -- it's not dishonesty, it's willful ignorance. Or, as Irving Kristol put it in his accounting of the coming-together of the Reagan coalition,

Among the core social scientists around The Public Interest there were no economists. (They came later, as we "matured.") This explains my own rather cavalier attitude toward the budget deficit and other monetary or fiscal problems. The task, as I saw it, was to create a new majority, which evidently would mean a conservative majority, which came to mean, in turn, a Republican majority - so political effectiveness was the priority, not the accounting deficiencies of government."

I think this counts as a kind of deliberate ignorance that exists at the top levels of the conservative movement. There's a desire to avoid looking too closely at some of these tax policy questions. And that trickles down. People who are characterologically inclined to remain ignorant prosper. Charlatans prosper. People who are neither charlatans nor disinclined to look at the question wind up not becoming conservative pundits.

Duncan Black chimes in:

Eschaton: Really. It's not a choice. Conversations with wingers about tax policy and economics generally as well as the output of their various mouthpieces in the media generally begin with a poor comprehension of about two weeks of Econ 101 and end with pure bullshit.

I'm with Duncan: stupid and dishonest.


The Transformation from Feudalism to Capitalism to Attentionalism

The end of Goldhaber's famous "attention economy" essay:

The Attention Economy: The Natural Economy of the Net: At the end of the feudal period, the pomp and display of the nobility reached a level never before attained; the most gorgeous armor, the most magnificent tournaments of knights, the most elaborate ceremonies between rival nobles, the most brilliant marriages, the greatest interest in noble lineage. But by then it had lost all real function or importance. So today, when the stock market goes up and up, when money wealth itself seems a source of fame more than ever, when being number one on Forbes 400 list seems the height of perfection, when every basketball superstar wants a contract that is at least a million more than the last record one, we seem to be more dazzled by money than ever, just as we seem to be more intrigued by material goods than ever. But these interests are superficial and faddish. They are signs of decadence not of a glorious future for the money economy. Even in themselves they speak to the growing desire for attention, the need for it as well. Money is now little more numbers, one number among many, and as a source of lasting attention it can fade in an instant. The attention economy is already here, and more completely so every day...

Goldhaber misses, I think, one important thing. The feudal system was about command and control and fealty but also about money. Fealty to your lord was a two way street: you fought for him and he fed you and give you presents. It's not the "money economy" that will be made obsolete by the "attention economy," it's a particular fraction of today's money economy.


Why Oh Why Can't We Have a Better Press Corps? (The New York Times Is a Public Embarrassment Edition)

In the New York Times, David Brooks pulls the three-year-old excuse for the Bush administration--you know, "the dish got broke somehow." He says that the Bush deficits are an "ungoverned force."

Brad Setser points out that the Bush deficits are a very governed force:

RGE - Not quite sure the federal debt is an "ungoverned force": Despite what David Brooks says. The rising debt seems to be a direct consequence of cutting taxes and raising spending -- decisions the Bush Administration made. The US may not be able to stop Chinese "mercantilism," but Chinese intervention in the foreign exchange market also is a rather direct consequence of a government decision. Brooks list of "ungoverned forces surging out of control" consequently seemed a bit odd.

Gail Collins: raise the quality of your operation. You are an embarrassment.


Ezra Klein Is Bemused

Ezra Klein is bemused by Andrew Sullivan's talking about being "wrong about so much for so long":

Ezra Klein: Wrong About So Much, For So Long: Wrong About So Much, For So Long: Andrew Sullivan thinks that John Kenneth Galbraith "was so wrong about so much for so long and with such disdain for the empirical refutation of his theories that he deserves little in retrospect but our pity." Meanwhile, Andrew thought the Iraq War a spectacular idea, but now isn't so sure; believed Bush a terrific choice for president in 2000, and then, disappointed by his pick's performance, endorsed Kerry; and figured the critics of the president were a domestic "fifth column," before he became one of them. Reaching back into time, he published Elizabeth McCaughey's takedown of the Clinton health care plan, widely regarded as one of the most dishonest and unfortunate pieces of journalism published in recent years. It was an article whose central premise was rendered a lie by the very first paragraph of the legislation. The magazine he edited later apologized...


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

Outsourced to Salon:

War Room - Salon.com: Bumiller and Bush: Amigos!

We thought the New York Times' Elisabeth Bumiller reached some sort of pinnacle of presidential pandering when she wrote nearly 1,000 words on the White House Correspondents' Association dinner without mentioning the existence of Stephen Colbert.

It appears that we misunderestimated her.

Bumiller's report on George W. Bush's immigration speech is a thing to behold, and we commend it to you in its entirety. Read it, savor it, then put it away wherever you hold your most precious memories -- like that report that Harriet Miers once called George W. Bush the "smartest man" she'd ever met.

And if you haven't got time for all that, here's Bumiller on Bush abbreviated:

In substance and tone the address reflected the more subtle approach of a man shaped by Texas border-state politics and longtime personal views ... The real theme of his speech was that the nation can be, as he phrased it, 'a lawful society and a welcoming society at the same time' ... What was remarkable to people who knew Mr. Bush in Texas was how much he still believes in the power of immigration to invigorate the nation ... 'He always spoke well of Mexican nationals and regarded them as hard-working people. So his grace notes on this subject are high' ... 'He understands this community in the way you do when you live in a border state ... Philosophically, he understands why people want to come to the U.S.'

Bumiller says that Bush "first met Mexican immigrants at public school in Midland, Tex.," then employed some as field workers for the small oil company he owned. But never, it seems, did the president love his friends from south of the border as much as he did when some worked for him as ballplayers.

"When he was the managing partner of the Texas Rangers," Bumiller says, Bush "reveled in going into the dugout and joking with the players, many of them Hispanic, in fractured Spanglish."

Funny, that's not how Jose Canseco remembers it. In his New York Times bestseller, "Juiced," Canseco -- who played for Bush's Rangers -- said he "never had any sort of conversation" with the future president. "I shook his hand and met him once, but that was about it," Canseco writes. "Bush did gravitate toward Nolan Ryan a bit, probably because he was a legend, and also closer to his age. He didn't talk to us Latinos much."

New York Times: The Bush administration wouldn't lie about everything if you'd do some factchecking, would it?


None Dare Call It Treason

Would you believe I've never read this? The pile grows:

John Stormer (1964), None Dare Call It Treason

A review of it:

W. D. Moore - See all my reviews. Stormer first wrote this book in 1964, which shows just how prescient he was. This edition was revised in 1990. I just found out about it, but have not read it yet. Judging from the other reviews, he has added a LOT to it; and he might not have arranged this much expanded material as carefully as he organized the less ambitious scope of the first edition. The first one was very tightly reasoned.

As I understand it, State Department Document 7277 was a plan for total global disarmament. President Kennedy presented this global vision in his speech to the United Nations in 1963. All the nations of the world will be gradually disarmed until no state will be able to challenge the progressively strengthened UN Peace Force. Whenever any Congressman expressed concern about this, his colleagues insisted, "They're just talking." In other words, just ignore the frighteneing rhetoric that was written into the founding document of the Arms Control and Disarmament Agency.

To understand some of Stormer's new material better, read "The Naked Capitalist", by W. Cleon Skousen. Read with especial care the section about John Ruskin and the philosophy of Plato. What ties all these disparate movements together is that they all are basically working towards a New World Order based on Plato's Republic. I don't know about Rockefeller being an anti-communist hawk; but Skousen shows that from the beginning, the global communist revolution has been financed by wealthy western capitalists. They are following the dictum of Plato: use any means available to destablize the existing world order, to prepare the way for the new world order. Abraham Lincoln began to understand some of this when he discovered that all the international bankers were financing both sides in the Civil War.

The Bible predicts all of this, and prophesies that it will result in the Battle of Armageddon. It is an irony of world history that those who work towards world peace are driving the world towards its final war. When men refuse to submit to the enlightened rule of the new peace-makers, the rulers will in their self-righteousness resort to extreme repression. The sinful natures of the rulers, unchecked by political accountablity- for all men are sinners- will drive them into all sorts of bloody lusts against the people and against each other. The Bible says it will be the worst tyranny in all of world history- a title which, considering the competition, deserves a lot of respect.

And amazon.com politely asks:

Was this review helpful to you?

In a way, I guess.

I wonder if W. Cleon Skousen is any relation to Mark Skousen, whose Making of Modern Economics is quite good?


A New Literary Form. But It Lacks "Mesothelioma"

Yankee Fog is writing:

Yankee Fog: Poems Based On The Most Desirable Adwords, Part IV: A Limerick On The Theme of "Asbestos Attorney"

A wily asbestos attorney
got a job as an ER intern. He
knew a new client
would prove most compliant,
anesthetized there on the gurney.

But this limerick is unsatisfactory. It needs the word "mesothelioma" in order to be effective.


Joe Klein Does Karl Rove's Dirty Work

Joe Klein does Karl Rove's dirty work by launching the first Rove attack of the 2006 campaign season.

TIME.com: Setting Up Easy Targets for Karl Rove -- Page 1: Three congressmen poised to chair powerful House committees could become a campaign issue:... [O]ne senses a fluttery uncertainty on the Democratic side--induced, I suspect, by the prospect of another nefarious Karl Rove campaign.... Rove has shown a positive genius for organizing campaigns around poisonous trivia.... [H]e will play the race card, as Republicans have ever since they sided against the civil rights movement in the 1960s.

The inevitability of race as a subliminal issue.... Representative John Conyers... chairman of the Judiciary Committee if the Democrats win control of the House in November.... Conyers is a twofer: in addition to being foolishly incendiary, he is an African American of a certain age and ideology, easily stereotyped by Republicans. He is one of the ancient band of left-liberals who grew up in the angry hothouse of inner-city, racial-preference politics in the 1960s....

Nor is Conyers likely to be the only target.... [P]otential African-American committee chairmen.... [Charles] Rangel... well versed in tax and entitlement policies, but he has had an unfortunate tendency to shoot off his mouth in the past. He has questioned interracial adoption, and has compared colleagues who opposed tax breaks for minority broadcasters to Hitler.... [Alcee] Hastings... most problematic of all. He is a former federal judge who was indicted in 1981 for influence peddling, acquitted on all counts, then impeached and removed from his judgeship by the Congress. In 1992 he ran for Congress himself and, improbably, won.... [A] devastating negative ad waiting to happen: "Why do the Democrats want to put an impeached judge in charge of your national security?"

Conyers and Rangel are embarrassments.... [I]t's not too late for Hastings to remove himself from the line of fire and make clear his support for [Jane] Harman as ranking Democrat on the Intelligence Committee.

Klein says that he's just forecasting what Rove will do. He says that Rove "will play the race card, as Republicans have ever since they sided against the civil rights movement in the 1960s."

And then Klein plays the race card.

He characterizes Representative Conyers as "an African American of a certain age and ideology... one of the ancient band of left-liberals who grew up in the angry hothouse of inner-city, racial-preference politics in the 1960s." I.e., he characterizes Representative Conyers as a veteran of the civil rights movement--but in a modern Republican way.


Greg Mankiw's Abstract Is Misleading...

Greg Mankiw writes:

Greg Mankiw's Blog: Dynamic Scoring: In today's Washington Post, columnist Sebastian Mallaby gives my recent work with Matthew Weinzierl on dynamic scoring some free publicity, while using it to beat up my former boss [i.e., George W. Bush]. Here is the abstract of the Mankiw-Weinzierl paper:

This paper uses the neoclassical growth model to examine the extent to which a tax cut pays for itself through higher economic growth. The model yields simple expressions for the steady-state feedback effect of a tax cut. The feedback is surprisingly large: for standard parameter values, half of a capital tax cut is self-financing. The paper considers various generalizations of the basic model, including elastic labor supply, general production technologies, departures from infinite horizons, and non-neoclassical production settings. It also examines how the steady-state results are modified when one considers the transition path to the steady state.

The article is forthcoming in the Journal of Public Economics. A nontechnical summary is available here.

The abstract is misleading. It should read, "The feedback is surprisingly large: in the long run, provided spending is cut to keep the government budget in balance, for standard parameter values, half of a capital tax cut is self-financing."

In Mankiw-Weinzerl's model, you have to cut spending by almost all of the static revenue loss in the short run, and by half of the static revenue loss in the long run. That's not Bush tax policy. Bush tax policy is to cut taxes and boost spending. "[H]alf of a capital tax cut is self-financing" implies that Mankiw-Weinzerl's results are relevant to the capital tax cut bill moving through the system right now. They aren't.

See also:

"Dynamic Scoring: Alternative Financing Schemes": Eric M. Leeper, Shu-Chun Susan Yang NBER Working Paper No. 12103 Issued in March 2006

Abstract: Neoclassical growth models predict positive growth effects over the entire transition path following a reduction in capital or labor tax rates when lump-sum taxes (or transfers) are used to balance the government budget. This paper considers the consequences of bond-financed tax reductions that bring forth adjustments in expected future government consumption, capital tax rates, or labor tax rates. Through the resulting intertemporal distortions, current tax cuts can lower growth. The paper shows that the stronger the response of distorting fiscal policies to debt, the more favorable the growth effects of a tax cut.


International Trade

Amit R. Paley, Washington Post staff writer, should quit his job. The chance that somebody who at "3 a.m.... knew he would flunk his Statistics 52 exam later that day if he didn't call his tutor for help" would then pull an A on said exam after one hour of pre-dawn tutoring is very small. A reporter needs a bullshit detector. Amit R. Paley doesn't have one, and should find another line of work.

That aside, a nice piece about how outsourcing is creeping closer to academe proper:

Homework Help, From a World Away: By Amit R. Paley: Monday, May 15, 2006; Page A01: It was almost 3 a.m., Alex Del Monte recalled, and he was cramming like crazy. He gulped can after can of Red Bull to stay awake, but the George Washington University sophomore knew he would flunk his Statistics 52 exam later that day if he didn't call his tutor for help. But so late at night? Not a problem if your tutor works 8,500 miles away and 9 1/2 hours ahead in Bangalore, India.

In an hour-long session that cost just $18, the Indian tutor, who said his name was Mike, spent an hour walking Del Monte through such esoteric concepts as confidence intervals and alpha divisions, Del Monte recalled. He got an A on the final exam. "Mike helped me unscramble everything in my mind," the 20-year-old said.

Thousands of U.S. students such as Del Monte are increasingly relying on overseas tutors to boost their grades and SAT scores. The tutors, who communicate with students over the Internet, are inexpensive and available around the clock, making education the newest industry to be outsourced to other countries. Tutoring companies figure: If low-paid workers in China and India can sew your clothes, process your medical bills and answer your computer questions, why can't they teach your children, too?

But educational outsourcing has sparked a fierce response from teachers and other critics who argue that some companies are using unqualified overseas tutors to increase their profit margins. "We don't believe that education should become a business of outsourcing," said Rob Weil, deputy director of educational issues at the American Federation of Teachers. "When you start talking about overseas people teaching children, it just doesn't seem right to me."...

"Overseas people." Really nice locution, there, Mr. Weil. Why don't you quit your job and find some honest work as well?