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October 2006

Matthew Yglesias on Sheri Berman's "The Primacy of Politics"

He writes:

Matthew Yglesias: O]ne has to see the postwar era as less a triumph of social democracy per se than a coming together of diverse brands of political thought. In particular, Berman seems to badly neglect the existence of divisions within the liberal camp that proved crucial as well.... [W]hich parties would a socialist be tempted to collaborate with? Well, with the more left-wing of the liberals, it would seem, and, indeed, most of the examples Berman discusses bear that prediction out. But then who were these progressive liberals? Why did they disagree with their classical brethren? And what distinguished them from socialist reformers? Why were they interested in collaborating with the right-wing of the socialist movement?

To complain that Berman wrote a book about right-wing socialists when she should have written one about left-wing liberals would be churlish. Rather than do that, let me simply suggest that the timing of the post-war settlement (after the war, obviously) suggests that movement within the liberal camp may have been more causally decisive.... [L]ittle... happened during the fifteen years before the end of the war... to make the left more confident about the possibilities of free markets or democracy....

What the Depression, the war, and the dawning of the Cold War did bolster was the left-hand side of the argument within liberalism. Unmitigated capitalism seemed to risk not only a large dose of human suffering, but the total collapse of the liberal political order and, potentially, the triumph of Soviet Communism. Under the circumstances, a rapprochement with moderate elements within socialism starts to look rather more appealing... a growing sense... that capitalism needed to be compromised... to be saved... la[id] the groundwork for rapid... social reform.... [C]ountries that had never had a strong Marxist presence--England, the United States, Canada--also moved... much more elaborate welfare and regulatory states.... In the American case... entirely by liberals shifting to the left... even without the presence of social democracy on the ground.

This way of looking at things also casts some doubt on the view that a revival of social democracy requires merely a higher level of confidence, creativity, and elan on the part of social democrats.... [S]ocial democracy simply suffers from being redefined as the left pole of the political spectrum rather than as a "third way" in a dynamic where Communism or orthodox Marxism anchors the left.... Pre-war social democracy is an interesting intellectual movement with a story worth telling, but its moment in the sun came not because its arguments became suddenly more persuasive, but because the situation changed to one that was much more favorable to its success. With the passage of time, the situation has changed again and social democracy's position is substantially weakened...

Chris Matthews and Dick Army Are Shrill!

Former Republican Majority Leader Dick Armey and current Republican Cheerleader Chris Matthews are shrill! Welcome guys!

Daily Kos: The John Kerry nonsense: One surprise: just heard Tweety [Chris Matthews] say flat out that reading the full transcript it's clear that Kerry was insulting the president, not the troops. Dick Armey was on at the time and essentially agreed and laughed about how funny it was that the GOP was feigning mock outrage. Ha ha. Ha ha. Funny funny GOP...

Wow. I used to say that everybody who wasn't on the payroll was shrill. I'm guess I'm going to have to rethink that: even people on the Republican establishment gravy train are now joining the Order of the Shrill. It's a remarkable sight.

James Glassman and Kevin Hassett Rear Their Ugly Heads Yet Again `Dow 36,000' optimists unbowed | Chicago Tribune

Ezra Klein directs us to a Bloomberg column in which James Glassman and Kevin Hassett of the American Enterprise Institute continue to defend their claim back in 1999 that the DJIA would reach 36000 "very quickly," "perhaps in "three to five years":

'Dow 36,000' optimists unbowed | Chicago Tribune: James Glassman says his seven-year- old prediction that the Dow Jones Industrial Average will rise to 36,000 wasn't wrong, just early. Two years after Glassman and co-author Kevin Hassett published their theory, the Dow average had sunk 29 percent. Their "Dow 36,000... became metaphors for the investing excesses of the late 1990s.... "Anyone who followed their advice in 2000 got their butts handed to them," said Barry Ritholtz, chief investment officer of Ritholtz Capital Partners in New York, which manages about $100 million. "These guys come out of the woodwork when society is foaming at the mouth and receptive to these things."...

The Dow has since recovered.... The surge has improved some portfolios and may eventually do the same for the reputations of the authors, who stand by their forecasts.... Glassman, 59, defends "Dow 36,000's" original premise as well. The prediction -- that the Dow would triple by 2005 -- is still valid, he says, although he's pushed the deadline out to 2021.... "There's nothing that's occurred over the past few years that's changed our minds about the original thesis," said Glassman, who writes a syndicated investing column and is a resident fellow at the American Enterprise Institute, a Washington-based think tank...

Bloomberg can surely find better people to report this than Demian McLean. You cannot validate Glassman and Hassett's original thesis by pointing to its likely value in 2021 or 2121. The original thesis was not that the Dow would rise to 36000 "someday" but that "the rise will take some time, perhaps three to five years..." (p. 18).

A better reporter than Demian McLean would have had a follow-up question, like:

Mr. Glassman: In your book, on pages 18 and 19, you sneer at one of your American Enterprise Institute colleagues who you say gave a cynical laugh at your title Dow 36000 and said, "As long as you don't say when [the Dow will reach 36000], I suppose it is all right." Your claim in your book was: "we aren't laughing. The case is compelling.... 36000 is a fair value for the Dow today... stocks should rise to such heights very quickly.... [Our readers will] learn to invest in ways that take advantage of [this] remarkable time in financial history..." Don't you owe everybody who bought your book in 1999 and 2000 at least ten times their money back?

But Demian McLean doesn't.

Econ 210a: Fall 2006: Memo Question for November 8

Memo Question for November 8:

Adam Smith's 1776 Inquiry into the Nature and Causes of the Wealth of Nations is not what we would call a work of "economics." What kind of a book is it? Who do you think its intended audience is? Of what is Smith trying to persuade his audience? Which of the conclusions that Smith reaches--and of which he is trying to persuade his audience--would we think of today as conclusions of "economics"?

The Unlikely Chance Victory of Social Democracy

Mark Blyth:

The Primacy of Politics: The Past, Present, and Contested Future of Social Democracy: Posted by mblyth: One of the most interesting aspects of the period discussed in Primacy was how both orthodox Marxists and orthodox liberals... "did nothing" [to try to cure the Great Depression] for different reasons, due to different (but strangely similar) interpretations of the same social reality; and both were destroyed in the maelstrom that followed their passivity.

Those who were not so blinded were a diverse bunch of revisionists.... What united them were those real-world developments that Marxism could only explain away (such as the persistence of small-scale agriculture, the growth of "middle" classes, etc.) and that required an explanation (such as the appeal of nationalism and notions of communal identity independent of supposed class position). Embracing, rather than denying such factors, Italian syndicalism grew into fascism, French reformism fell to nationalism, and German conservatism gave way to a murderous racist variant of the same. Only in Sweden did the democratic reformist project flower....

[T]o say that the failure of Marxist and Liberal ideologies opened the door to reformists who took the same materials and bricolaged them into reformist projects that were more similar than one commonly thinks is not to say that the variation between them disappears. One could see these movements as essentially similar, but to do so would be wrong. The role of race and nation in each movement is the most obvious example here.... [W]hile the embrace of reflationary economics and the primacy of domestic demand over international liquidity marks both experiments, only one of them has autarky and empire as a "built in" part of the project....

[W]hat doesn't come across in the analysis is that with the exception of the Swedish exception, these [social democratic] reformers failed, and failed just as spectacularly as their Marxist forebears. They failed in France, Germany, Spain, all of Eastern Europe.... In contrast, fascism was an astonishing success. It was popular, stable, and if it had not been for one thing, the racial Darwinism of fascist elites leading them to war with powers far stronger than they were, it might have survived.

Social democracy may have been a good idea, but it was also a post-war phenomenon brought about by the devastation fascism brought upon itself. If World War Two hadn't happened, if Strasser had bested Hitler, if the xenophobia had stayed in the bottle, would fascism have fallen?... [I]f the alternative of the Soviet Union had not risen to post-war prominence, would the need to placate the working classes of Europe with welfarism and democracy been so pressing? Would the victory have come about at all, never mind later than advertised...

Hoisted From Comments: Dean Baker on the Auto Sector and Quarterly GDP Estimates

Sounds right to me:

Brad DeLong's Semi-Daily Journal: Now I'm Confused About the Q3 Auto Production Numbers...: Okay, it seems that we have a 3rd quarter problem here. Here's the data for the last 3 years:

2004 Q2 -- -7.1%
2004 Q3 -- 16.6%
2004 Q4 -- 1.9%

2005 Q2 -- -0.7%
2005 Q3 -- 22.6%
2005 Q4 -- -19.1%

2006 Q2 -- -9.4%
2006 Q3 -- 25.7%

So, we seem left with 2 theories. Auto makers have become very pessimistic in the second quarters of the last 3 years, very optimistic in the third, and then very pessimistic again in the 4th, or that BEA has messed up its seasonal adjustment factors. (They assume that automakers will retool in the 3rd quarter and instead they are doing it earlier or later).

I vote for the second theory. The implication is that we overstated growth in the 3rd quarter by somewhere around 0.8 pp (and we did the same last year) and that the BEA numbers will understate true growth in the 4th quarter by perhaps 0.5 pp. Get your recession hats out.

Why Oh Why Can't We Have a Better Press Corps? (An Anne Applebaum/Washington Post Edition)

Why on earth should anybody pay money to read this?

Anne Applebaum:

Supporting Democracy -- Or Not - [N]o one can claim that the 50th anniversary of the 1956 Hungarian Revolution has gone unmarked.... But as the anniversary moves into its second week, I'd like to celebrate in a different way -- by asking what, if anything, we in the West have learned since 1956. As many have observed, the American role in the Hungarian Revolution was hardly admirable. Although American governments had spent much of the previous decade encouraging Hungary and other Soviet satellite states to rebel -- using radio broadcasts, speeches, even balloons carrying anti-communist pamphlets -- no one was prepared for the real thing...

No, no, no, no, no! None of this "much of the previous decade" stuff. The Truman administration's policy was "containment." The Eisenhower administration's policy was also "containment"--but as boob bait for the bubbas Eisenhower, Nixon, Dulles, McCarthy, and company all pretended to be for "rollback."

[T]he initial American reaction was confused.... Only after four days of street fighting did the American secretary of state, John Foster Dulles -- a man who had spoken often of liberating the "captive nations" of Eastern Europe -- finally declare that the U.S. government did not consider the Hungarians "potential allies." The message was clear: The West would not intervene.... [But] Radio Free Europe was explaining to its listeners how to make molotov cocktails and hinting at the American invasion to come.... The result was a bloody mess.The Hungarians kept fighting even after Soviet tanks arrived, believing help was on the way. Hundreds died. And Western policy in the region suffered a setback from which it took nearly 40 years to recover....

Once again we have an American president who speaks openly and no doubt sincerely about human rights and democracy... Congress, the media and even whole fiefdoms of the State Department that dedicate themselves to democracy promotion.... Try to imagine what would happen if an imaginary group of pro-democracy Saudis staged a street rebellion in Riyadh. No one, of course, would be prepared.... By simultaneously supporting democracy and stability, we would anger the rest of the Arab world, make U.S.-Saudi relations impossible however the rebellion was resolved, and probably damage, in multiple unforeseeable ways, U.S. interests all over the world....

[T]he moral? Don't blame George W. Bush: Chaos in U.S. foreign policy is nothing new. But pity those, whether the Hungarians in 1956, or the Shiites in 1991, who take our democracy rhetoric too literally...

Nonsense. Blame Bush. And blame Eisenhower and Dulles too--Eisenhower and Dulles both knew better, but got into bed with Richard Nixon and Joe McCarthy with unseemly enthusiasm.

With writers like Anne Applebaum so eager to whitewash George W. Bush, I don't think the Washington Post will last a decade.

Why Oh Why Can't Berkeley Have Better Law Professors?

Michiko Kakutani thinks that John Yoo is a shoddy and dishonest writer:

War by Other Means By John Yoo - Books - Review - New York Times: What Torture Is and Isn’t: A Hard-Liner’s Argument: By MICHIKO KAKUTANI: Published: October 31, 2006: In the tumultuous days and weeks after 9/11, a young lawyer in the Justice Department’s Office of Legal Counsel named John Yoo became a key architect of the Bush administration’s legal response to the terrorist threat and a strong advocate of its expansive view of presidential power. The controversial opinions he worked on would elicit charges that the administration was subverting the Constitution, tipping the balance of power among the three branches of government, trampling the civil rights of detainees and authorizing coercive interrogation.

Mr. Yoo worked on memos and opinions that determinedly attempted to redefine torture. He also argued that the terrorist attacks created “an emergency situation” in America, and that given this situation, “the government may be justified in taking measures which in less troubled conditions could be seen as infringements of individual liberties.”

Shortly after the terrorist attacks of Sept. 11, Mr. Yoo wrote a memorandum opinion, which declared that “the President may deploy military force preemptively against terrorist organizations or the States that harbor or support them, whether or not they can be linked to the specific terrorist incidents of September 11.” And in January 2002, he was a co-author of a memo arguing that “customary international law has no binding legal effect on either the President or the military” and that “neither the federal War Crimes Act nor the Geneva Conventions would apply to the detention conditions in Guantánamo Bay, Cuba, or to trial by military commission of al Qaeda or Taliban prisoners.”

In his combative new book, “War by Other Means,” Mr. Yoo — who is now a professor at the University of California, Berkeley, School of Law — lays out the thinking behind the Bush White House’s legal maneuvers. While he makes many of the same arguments that other members of the administration have used to defend its aggressive post-9/11 policies, he is more candid than many of his colleagues about his fervent belief in unfettered executive power. And his book makes timely if often disturbing reading, given the Supreme Court’s recent Hamdan ruling (which repudiated the military tribunals created by the administration to put Guantánamo detainees on trial without due process) and Congress’s subsequent passage, in September, of a detainee treatment bill, which gives the president new power over terrorism suspects and deprives foreigners detained in United States military prisons of the right to challenge their imprisonment.

Mr. Yoo suggests in these pages that the war on terror is a new paradigm that calls for new tactics; that the judiciary should defer to the executive branch in wartime; and that those who quarrel with the Bush White House are soft on fighting terrorism. One of his favorite tactics in this book is to create a ridiculous caricature of administration critics’ views and then dismiss them. For instance, he writes: “A Geneva Convention POW camp is supposed to look like the World War II camps seen in movies like ‘Stalag 17’ or ‘The Great Escape.’ But because Gitmo does not look like this, critics automatically declare that detainees’ human rights are being violated.”

In this volume, Mr. Yoo argues that the Constitution grants the president “the leading role in foreign affairs,” and that the Authorization for Use of Military Force, passed by Congress a week after 9/11, gives the president broad powers to wage the war on terror the way he wants to. Indeed, Mr. Yoo says, “We wrote the law as broadly as we did” to “make sure there could be no claim in the future that the President was acting in the war on terrorism without congressional support.”

Major figures in Congress have said repeatedly that this law does not give the president such sweeping powers; Mr. Yoo, meanwhile, contends that the ambiguous wording covers everything from the implicit power “to detain enemy combatants” to the implicit authority “to carry out electronic surveillance to prevent further attacks.”

Mr. Yoo has not used his academic background in the legal aspects of war powers issues and executive authority to make a persuasive case here for the administration’s actions. Instead, he has written a book that reads like a combination of White House talking points and a partisan brief on presidential prerogatives — a book that is strewn with preposterous assertions, contorted reasoning and illogical conclusions. He writes that “because of our aggressive policies post 9/11, al Qaeda is no longer the threat it was.” He suggests that might makes right: “At this moment in world history the United States’ conduct should bear the most weight in defining the customs of war. Our defense budget is greater than the defense spending of the next fifteen nations combined.”

And he contends that President Bush’s decision to secretly authorize the National Security Agency to eavesdrop on Americans in search of evidence of terrorist activity without court-approved warrants “does not signal that we live under a dictator, or that the separation of powers has failed,” because Congress, which “has total control over funding and significant powers of oversight,” could simply decide to “do away with the NSA as a whole.”

Just as the administration cherry-picked intelligence to make the case that Saddam Hussein possessed weapons of mass destruction, so Mr. Yoo cherry-picks information in this volume. Of the Schlesinger report on the Abu Ghraib prison, Mr. Yoo says it found that the abuses there “resulted not from orders out of Washington, but from flagrant disregard of interrogation and detention rules by the guards.” He does not grapple with those portions of the report that found “there is both institutional and personal responsibility at higher levels.”

August 2002 memos worked on by Mr. Yoo addressed the question of what constituted torture and just what might lead to prosecution by the International Criminal Court. In this book he amplifies his views on this subject, quibbling over the meaning of phrases like “severe physical or mental pain or suffering” and “prolonged mental harm.”

In addition, he makes much of wording in the Convention Against Torture (ratified by the United States in 1994), that requires the criminalization of torture and also declares that parties “undertake to prevent ... other acts of cruel, inhuman, or degrading treatment or punishment which do not amount to torture.” He uses these passages to argue that there is an important distinction to be made “between torture on the one hand, and harsh measures characterized as ‘cruel, inhuman, or degrading treatment’ on the other.”

Concerning a 2004 decision by the Justice Department to revise an earlier opinion (which had been widely condemned in Congress and by human rights groups as laying the groundwork for the abuses at Abu Ghraib), Mr. Yoo, intentionally or not, seems to buttress arguments made by critics of the administration, writing that it was an “exercise in political image-making” designed to help ease the confirmation of Alberto Gonzales as attorney general.

He adds that this 2004 opinion “included a footnote to say that all interrogation methods that earlier opinions had said were legal were still legal. In other words, the differences in the opinions were for appearances’ sake. In the real world of interrogation policy nothing had changed. The new opinion just reread the statute to deliberately blur the interpretation of torture as a short-term political maneuver in response to public criticism.”

Mr. Yoo is cavalierly dismissive in this book of critics of administration policy, shrugging off concerns about violations of civil rights and presidential overreaching. “Is the Bush administration using public fear to consolidate political power?” he asks. “If it is, it has only another two years to go, and new security policies generally last only as long as the emergency. Lincoln’s military courts and military justice did not last beyond the Civil War and Reconstruction. FDR’s internments ended after World War II. The President and Congress usually give up their emergency powers voluntarily, and if they don’t, courts step in.”

Never mind that there is no foreseeable end date to the war on terror. Never mind that the judiciary, which Mr. Yoo says in this passage can be counted on to curb any possible overstepping by the Bush White House, may have had its power to review the treatment of detainees sharply curtailed by Congress’s recent passage of the Military Commissions Act of 2006 — the same judiciary Mr. Yoo repeatedly berates in this tendentious book for “pushing into matters where it didn’t belong,” and for impinging upon the powers of the presidency, an office whose function he asserts is “to act forcefully and independently to repel serious threats to the nation.”

If I were Chancellor Birgeneau, I would be scrutinizing Berkeley Law School's tenure-vetting process very, very carefully right now. We have evidence that it doesn't work too well.

Wolf Blitzer Is Unhappy...

Billmon at the Whiskey Bar watches Wolf Blitzer. Wolf Blitzer is upset because Lynne Cheney called him a traitor:

Whiskey Bar: Crying Uncle: BLITZER: I have been covering the Cheneys for many years, including on a day-to-day basis when he was the defense secretary during the first Gulf War and I was CNN's Pentagon correspondent.... I was surprised when she came out swinging on Friday, surprised... at her sniping at my patriotism. [CNN Late Edition: October 29, 2006]

Why was Blitzer surprised? Did he really think that carrying the Cheneys' water for two decades means that the Cheneys owe him something?

Theological Bait-and-Switch

P.Z. Myers on theological bait-and-switch:

Pharyngula: Carroll steps up to the plate...: Category: GodlessnessPosted on: October 30, 2006 6:00 AM, by PZ Myers: The physicist Sean Carroll takes on Eagleton, and also makes a few comments on The God Delusion--key point, I think: Dawkins took on too many issues at once in the book, and opened himself up to criticisms on the weaker parts that are used to dismiss the stronger parts. I agree.

Most of the discussion takes up a weakness in theology, and it parallels the weakness in Dawkins' book: the confusion between different concepts of this god-thingie. Theologians play that one like a harp, though, turning it into a useful strategem. Toss the attractive, personal, loving or vengeful anthropomorphic tribal god to the hoi-polloi to keep them happy, no matter how ridiculous the idea is and how quickly it fails on casual inspection, while holding the abstract, useless, lofty god in reserve to lob at the uppity atheists when they dare to raise questions.

When we complain that the god literally described in the Old Testament is awfully petty and hey, doesn't this business of a trinity and an immortal god being born as a human and dying (sorta) sound silly, they can just retort that our theology is so unsophisticated--Christians don't really believe in that stuff.

It gets annoying. We need two names for these two concepts, I think. How about just plain "God" for the personal, loving, being that most Christians believe in, and "Oom" for the bloodless, fuzzy, impersonal abstraction of the theologians? Not that the theologians will ever go along with it--the last thing they want made obvious is the fact that they're studying a completely different god from the creature most of the culture is worshipping.

You Think Dick Cheney's Going to Slip Up?

Spencer Ackerman:

toohotfortnr: a liar loves to lie: Exhibit A: Dick Cheney to a conservative radio host.

WASHINGTON - Vice President Dick Cheney has confirmed that U.S. interrogators subjected captured senior al-Qaida suspects to a controversial interrogation technique called "water-boarding," which creates a sensation of drowning. Cheney indicated that the Bush administration doesn't regard water-boarding as torture and allows the CIA to use it. "It's a no-brainer for me," Cheney said at one point in an interview.

Exhibit B: Tony Snow at the White House:

"You know as a matter of common sense that the vice president of the United States is not going to be talking about water boarding. Never would, never does, never will," Snow said, according to the Reuters news agency. "You think Dick Cheney's going to slip up on something like this? No, come on."

So: will it be me or your lying eyes? And "as a matter of common sense" Cheney wouldn't be endorsing torture. Oh, no, wait, that's a matter of common decency.

You know as a matter of common sense that the vice president of the United States is not going to shoot somebody in the face while three sheets to the wind either.

Why Oh Why Are We Ruled by This Idiot?

Matthew Yglesias bangs his head against the wall:

Matthew Yglesias / proudly eponymous since 2002: When the going gets tough, George W. Bush digs deeper into the cocoon of ignoramous conservative journalism, hunkering down for a lengthy chat with die-hard administration loyalists from inside the print media universe. As Mike Crowley notes, you can't get this much raw transcript of Bush without a good dose of hilarity. You also can't get this much Bush without noticing that, like Rick Santorum, the President of the United States is conducting national security policy under conditions of truly frightening ignorance and dangerous analytic errors.

Here's Bush on the Israel-Lebanon War:

Iran empowered Hezbollah, Hezbollah takes the attack, and -- which creates an interesting dynamic, and it gives us an opportunity to fashion kind of -- an alliance of reasonable people headed toward a clash -- all kinds of different ways, by the way -- with extremists and radicals.

It's easy to get distracted by the fact that Bush doesn't seem familiar with the English language and miss the fact that beneath the garbled syntax Bush is making a clear -- and utterly incorrect -- factual claim here that the upshot of the war was to cement an alliance between the United States, Israel, and moderate forces in the Arab world.

He calls John Abizaid "one of the great thinkers" and attributes to him

this construct: If we leave, they will follow us here . . . As a matter of fact, they'll be more emboldened to come after us. They will be able to find more recruits to come after us.

He seems unaware that his National Intelligence Council has concluded the reverse (IISS in London, too, along with, I think, just about everyone). In a hilarious reprise of his earlier Lebanon remarks he enjoins the government of Syria:

Do not destabilize Siniora . . . helping the Siniora government is in this country's interests and it's a priority.

We, um, had our local proxy ally strangle the Lebanese economy and launch airstrikes against its basic infrastructure and military facilities, but stabilizing the government there is a priority?

It goes on and on like this. The President, it seems to me, entered office in January 2000 utterly ignorant of foreign affairs and has spent the past six years filling in the blanks with pleasant illusions and straight-up misinformation.

Impeach George W. Bush. Impeach himnow.

Why Is Apple Still Alive?

With 5% of the operating system market share, Apple should be dead--overwhelmed by Microsoft's resources. But it isn't:

Technology News: Commentary: Under IBM's Hood, Oracle's Linux Move, Apple's Vista Surprise: [B]ased on the chatter I'm seeing it appears very likely that Apple is preparing a little surprise for Microsoft at MacWorld which happens at the same time as the Consumer Electronics Show in January. While Microsoft and partners will be talking about Vista in advance of the launch of that product at CES, Apple, along with Intel, will be launching Apple's version of the Media Center with iTV and Leopard. That's right -- Leopard. It looks like this puppy is nearly ready if I'm reading the signs right -- and Apple is clearly setting up for something big.

Now Intel's part goes beyond the chip and appears to contain elements of Viiv, if not all of that platform. Viiv is actually kind of cool, it's just that Intel has not been able to explain effectively what it is and, as a result, the market hasn't been particularly excited about it on Windows. However, Apple knows how to sell and with a problem where the technology is good but the marketing's not, Apple has the skills to make a huge contribution.

Recall how Apple took the MP3 player market by storm by simply looking at what was out there and figuring out how to do it right. Microsoft's Media Center isn't fully cooked, even with Vista, something that Intel actually created Viiv to fix. Now, it appears, the two of them are collaborating to do the Media Center right, and if they hit the target as well as they did with the iPod, which is likely, they could actually have a second massive success on their hands.

So, if you are into technology, particularly if you are into Apple, you'll want to hang around MacWorld in January for the Apple pre-Vista surprise party! Oops. You didn't hear that here...

William Arkin Is Shrill!

William Arkin on the stupidity that is Bush defense budget planning:

A Tale of Two Budgets - Early Warning: William M. Arkin on National and Homeland Security: A Tale of Two Budgets: I rarely have written about the defense budget, seeing it almost as a political side show to policy, with twists and turns requiring constant attention and special expertise to decipher.

The budget, moreover, seems secondary to war itself, the domain solely of battling bureaucrats who have little impact on -- and hardly care about -- what happens in the real world.

Somehow, while we weren't looking, the annual defense budget bloated to a half a trillion.

Congress just administers the madness, adding line items in a behind the scenes ritual: pork mongers and Cunningham's on the take, Democrats trying to prove their martial spirit by arguing for even more, junior secretaries of both parties offering brilliant amendments to show that they care about the troops more still.

Meanwhile, Secretary of Defense Donald Rumsfeld has hit upon a perfect device for both public control and executive autonomy. He has turned crisis into a permanent state of excess. "Emergency" funding has now become the regular state of affairs. We have, in fact, two defense budgets, a regular budget that receives some scrutiny and is somewhat limited, and an emergency supplemental that grows ever larger without much outside oversight.

The budget situation doesn't threaten to bankrupt America. And people seem only too happy to pay to keep the military over there, cowed in an endless post-September 11, 2001, offering.... Since September 11, the defense department and the national security bureaucracy has been submitting two budgets to Congress: a normal authorization and appropriations request and a supplemental or "additional" request for "emergency" funding of the war on terrorism, Iraq and Afghanistan.... For five years now, the Pentagon has been declaring a budget emergency, operating with an annual supplemental... in a Pentagon version of pork barrel spending, it also hides favorite and controversial research, development and procurement programs from regular scrutiny.... The supplemental budget and a set of supplemental budget amendments are submitted to Congress without the detailed written justifications that accompany the regular budget.

It is the absence of a paper trail, a kind of bureaucratic offering to the Congressional purse holders, which has resulted in a growing sense of disquiet on Capitol Hill.... In June, the Senate approved by 98-0 an amendment by Senator John McCain (R-AZ) to require the president to request funding for Iraq in its regular, annual budget submission. The Senate-passed fiscal year 2007 budget resolution put a cap of $90 billion on total emergency funding.

Last week, according to reporting in Inside the Pentagon and by Reuters, Deputy Secretary of Defense Gordon England directed the military services to base their requests for funding of the "longer war against terror" on supplemental budgets. England told the services that such requests should not be limited to Iraq, Afghanistan or other direct operations, but should include as well general modernization programs. England's avoidance of the regular budget is because regular annual defense spending (to the tune of $500 billion) is both under the control of Office of Management and Budget caps and Congressional oversight...

Checks and Balances

Bruce Bartlett votes for gridlock: vote for Gridlock::By Bruce Bartlett: As we move into the campaign homestretch, Republicans and their talk radio friends are doing everything they can to browbeat every last right-leaning voter into pulling the Republican lever one more time. Failure to do so, they tell us over and over again, will bring untold misery -- higher taxes, terrorist attacks, gay marriage, cloning or whatever else gets the yahoos to the polls.

Well, this is one Republican who has never voted for a Democrat in his life who will do so this year for the first time. I will cast my inaugural Democratic vote in the sincere belief that continued Republican control of both houses of Congress and the White House is not in the national interest and is harmful to the conservative agenda I have worked all my life to implement.

It is critical to remember that the Founding Fathers explicitly rejected a parliamentary form of government [in which]... the head of government will necessarily always have a majority in the legislature. The Founding Fathers thought such a system would make it too easy for undesirable legislation with merely transitory popularity to become law. Conversely, it would be too easy to change existing laws when party control reversed. Instead, they favored a system in which it was hard to pass legislation, thus preventing the enactment of bad laws and giving policy changes more permanence...

Unwinding the Current Account

Mark Thoma cites Diego Valderrama of the San Francisco Fed on what happens when large current account deficits are unwound:

Economist's View: Current Account Adjustments and Economic Growth: The San Francisco Fed looks at the likely consequences of a sudden reversal in the current account and concludes that should a "sudden stop" occur, the risks of substantial disruption are low:

What Are the Risks to the United States of a Current Account Reversal?, by Diego Valderrama, FRBSF Economic Letter: The U.S. current account has been in deficit since the beginning of the 1980s, except for a brief period in 1991, and has grown to 6.6% of gross domestic product (GDP) in the second quarter of 2006. The growing deficit has clearly caught the attention of policymakers and analysts....

Economic theory does not offer a robust prediction as to how a current account reversal impacts economic growth, asset prices, or the exchange rate. Indeed, in the simplest models of open economies, countries can run very large current account deficits without much impact at all, as long as they reduce those deficits eventually by repaying old loans. However, other models predict that current account reversals can have a negative impact on economic output, asset prices, and the exchange rate (Mendoza 2006, Obstfeld and Rogoff 2005). Still other models predict that adjustments leading to strong exports and current account surpluses can boost income. Given the lack of a theoretical consensus, this Letter turns to the recent empirical literature to learn more about the potential risks to the U.S. economy of a possible current account reversal and about the factors that are associated with more disruptive corrections....

Not all reversals in developing countries are associated with output contractions. Milesi-Ferretti and Razin (2000) study reversals in a sample of 105 low- and middle-income countries between 1970 and 1996. They find that, for the median country, the current account deficit shrank dramatically--by 7.4% of GDP (going from 10.3% to 2.9%). They also find varying consequences in terms of economic growth after the reversals.... [T]he more closed the country, the greater the relative need to reduce investment and expenditures to close the gap. Another factor is the degree to which the exchange rate has appreciated; specifically, the greater the appreciation, the greater the needed depreciation to induce the transfer of resources into the export sector to boost exports and reduce the current account deficit.

What can we learn from past adjustments in industrialized countries?... Croke, Kamin, and Leduc (2005) study 23 episodes of current account adjustments in industrialized countries. They find that current account adjustments were associated with modest decreases in economic activity about two-thirds of the time.... For contraction episodes... output growth turns slightly negative about one year after the current account reversal.... In the expansion episodes, typically large currency depreciations occurred without an asset price collapse. This latter finding is significantly different from the sudden stop episodes in developing countries, where large currency depreciations are associated with economic slowdowns and asset price collapses....

There have been many instances of disruptive current account adjustments, particularly in developing countries.... However, on average, adjustments have coincided with either small increases in output growth (in developing countries) or very moderate reductions in growth (in industrialized countries). From the experience of industrialized countries we learn that the larger the deficit, the faster and the greater the associated fall in output.

Based on the historical evidence, the likelihood of a rapid and disruptive current account adjustment in the United States remains low...

Economics 210a: Fall 2006: Readings, Revised Schedule


Oct. 11. Organizational Meeting (Short) [DeLong]

Oct. 18. The Malthusian Economy [DeLong]

Oct. 25. Trade and the Industrious Revolution [DeLong]

Nov. 1. Agriculture and Forced Labor in Early Modern Growth [DeLong]

Nov. 8. Catch-Up Week [DeLong]

Nov. 15. The Industrial Revolution in Britain [Eichengreen]

  • Joel Mokyr, "Technological Change, 1700-1830," in Roderick Floud and Donald McCloskey eds., The Economic History of Britain Since 1700, Cambridge: Cambridge University Press, second edition, 1994, pp.12-43. On reserve at Haas.
  • N.F.R. Crafts, British Economic Growth During the Industrial Revolution, Oxford: Clarendon Press, 1986, pp.9-114 (read selectively). On reserve at Haas.
  • Maxine Berg and Pat Hudson, "Rehabilitating the Industrial Revolution," Economic History Review new ser. 45, pp.23-50. Available online:
  • Peter Temin, "Two Views of the British Industrial Revolution," Journal of Economic History 57, pp.63-82.
  • Jeffrey Williamson, "Why Was British Economic Growth So Slow During the Industrial Revolution?" Journal of Economic History 44, pp.687-712

Nov 22. American Exceptionalism [Eichengreen]

  • Paul David (1966), "The Mechanization of Reaping in the Ante-Bellum Midwest," in Henry Rosovsky (ed.), Industrialization in Two Systems, New York: Wiley, pp. 3-28, on reserve at Haas.
  • Peter Temin (1966), "Labor Scarcity and the Problem of American Industrial Efficiency in the 1850s," Journal of Economic History 26, pp. 277-298
  • Kenneth Sokoloff (1984), "Was the Transition from the Artisanal Shop to the Non-Mechanized Factory Associated with Gains in Efficiency?" Explorations in Economic History 21, pp.351-382.
  • Robert Fogel (1962), "A Quantitative Approach to the Study of Railroads in American Economic Growth," Journal of Economic History 22, pp. 163-197,
  • Alfred Chandler (1990), Scale and Scope, Cambridge: Harvard University Press, chapter 3, pp. 51-89, on reserve at Haas.

Nov. 29. The Spread of Industrialization [DeLong]

Dec 6. 19th Century Capital Markets [Eichengreen]

  • Alexander Gerschenkron (1964), Economic Backwardness in Historical Perspective, Cambridge, MA: Harvard University Press, chapter 1, pp. 5-30, on reserve at Haas.
  • Naomi Lamoreaux (1986), "Banks, Kinship, and Economic Development: The New England Case," Journal of Economic History 46, pp.647-667,
  • Hugh Rockoff (1974), "The Free Banking Era: A Reexamination," Journal of Money, Credit and Banking 6, pp. 141-167,
  • Lance Davis (1965), "The Investment Market, 1870-1914: The Evolution of a National Market," Journal of Economic History 25, pp. 355-393,
  • Howard Bodenhorn and Hugh Rockoff (1992), "Regional Interest Rates in Antebellum America," chapter 5 in Claudia Goldin and Hugh Rockoff (eds), Strategic Factors in 19th Century American Economic History, Chicago: University of Chicago Press, pp. 159-187, on reserve at Haas.

Jan 17. 19th Century Labor Markets [Eichengreen]

  • Sanford Jacoby (1984), "The Development of Internal Labor Markets in American Manufacturing Firms," in Paul Osterman (ed.), Internal Labor Markets, Cambridge, Mass.: MIT Press, pp. 23-69, on reserve at Haas.
  • Susan Carter and Elizabeth Savoca (1988), "Labor Mobility and Lengthy Jobs in 19th Century America," Journal of Economic History 50, pp. 1-16, < >
  • John James (1990), "Job Tenure in the Gilded Age," in George Grantham and Mary McKinnon, eds., Labour Market Evolution, London: Routledge, pp.185-204, on reserve at Haas.
  • Joshua Rosenbloom (1990), "One Market or Many? Labor Market Integration in the Late Nineteenth Century United States," Journal of Economic History 50, pp. 85-107,
  • Joshua Rosenbloom (2002), "Employment Agencies and Labor Exchanges: The Impact of Intermediaries in the Market for Labor," in Looking for Work, Searching for Workers: American Labor Markets during Industrialization (Cambridge, MA: Cambridge University Press), chapter 3, pp. 46-79, on reserve at Haas.

Jan. 24. The First Age of Globalization [Eichengreen]

  • Albert Fishlow (1985), (Lessons from the Past: Capital Markets During the 19th Century and the Interwar Period,( International Organization 39, pp. 383-439,
  • Douglas Irwin (1998), "Did Late Nineteen Century U.S. Tariffs Promote Infant Industries? Evidence from the Tinplate Industry," NBER Working paper no. 6835 (December),
  • Arthur Bloomfield (1959), Monetary Policy Under the International Gold Standard, New York: Federal Reserve Bank of New York, on reserve at Haas.
  • Hugh Rockoff (1983), "Some Evidence on the Real Price of Gold, Its Costs of Production, and Commodity Prices," in Michael Bordo and Anna Schwartz (eds), A Retrospective on the Classical Gold Standard, Chicago: University of Chicago Press, pp. 613-651, on reserve at Haas.

Jan. 31. The U.S. Depression [DeLong and Eichengreen]

Feb. 7. The World Depression [Eichengreen]

  • Barry Eichengreen (1992), Golden Fetters: The Gold Standard and the Great Depression 1919-1939 (New York: Oxford University Press), chapter 1, pp. 3-28, on reserve at Haas.
  • Ben Bernanke and Harold James, "The Gold Standard, Deflation and Financial Crisis in the Great Depression: An International Comparison," in Glenn Hubbard (ed), Financial Markets and Financial Crises, University of Chicago Press (1991), pp.33-68. On reserve at Haas.
  • Margaret Weir and Theda Skocpol, "State Structures and Social Keynesianism: Responses to the Great Depression in Sweden and the United States," International Journal of Comparative Sociology 19, pp.4-29. [web link here]

Feb. 14. The Post-World War II Golden Age [Eichengreen]

  • Peter Temin (2002), "The Golden Age of European Growth Reconsidered," European Review of Economic History 6, pp. 33-22.
  • Mancur Olson (1996), "The Varieties of Eurosclerosis: The Rise and Decline of Nations Since 1982," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945, Cambridge, Cambridge University Press, pp.73-94.
  • Barry Eichengreen, "Institutions and Economic Growth: Europe Since 1945," in Nicholas Crafts and Gianni Toniolo (eds), Economic Growth in Europe Since 1945, Cambridge, Cambridge University Press, pp.38-72.

Feb. 21. Combined and Uneven Development [DeLong]

Feb. 28. The Crisis of the Mixed Economy [DeLong]

A Likely Scenario for January

A likely scenario from Same Facts:


  1. The Democrats hold the New Jersey Senate seat, and carry Montana, Ohio, Pennsylvania, Rhode Island, Missouri, and Virginia, but not Tennessee (or Arizona, which is reportedly in play).
  2. Lieberman keeps his commitment to caucus with the Democrats. We organize the Senate, start holding hearings. The White House stonewalls.
  3. The Iraq Study Group reports, says Iraq is a mess, mistakes have been made, and a new strategy is needed.
  4. Rumsfeld resigns.
  5. Bush appoints Lieberman to Defense.
  6. Lieberman acknowledges Bush's bipartisan gesture, accepts "for the good of the country."
  7. Rell appoints a Republican to take Lieberman's seat.
  8. Cheney casts the deciding vote, reorganizing the Senate with the Republicans in the majority...

Meanwhile, Amy Sullivan Attacks Jesus Christ as an Intolerant Secular Liberal...

Matthew Yglesias reads the New Republic and finds Amy Sullivan going offscale on the idiotic dork meter. She performs a strange switcheroo--says that it is "insulting" and "intolerant" to cavil at people who say that all Jews (and Muslims! and Catholics! and Methodists!) go to hell.

In the process, she appears to condemn Jesus Christ himself as just another intolerant secular liberal:

Amy Sullivan: Lawrence O'Donnell--former Democratic Senate aide and the resident liberal commentator at msnbc--dropped the ball. "I think the good news here is that people working in the White House think that Pat Robertson is nuts," he said. "They should. Pat Robertson is nuts." It seemed a little off-message--after all, this was a politically embarrassing book for the Bushies, and here O'Donnell was praising them. True, Robertson does regularly spout off truly nutty and dangerous statements (his call for the assassination of Venezuelan President Hugo Chávez; his prayer for the death of liberal Supreme Court justices; his belief that UPC symbols are the Mark of the Beast as foretold in Revelation). But what rankled O'Donnell the most was Robertson's "insane" belief that Jews are going to burn in hell.

While most of them would put it more delicately than Robertson, it is an article of faith for millions and millions of evangelicals that the only way into heaven is through belief in Jesus Christ. (The good reverend has also said he believes Methodists will burn in hell, but that's not really the point.) By condemning and mocking that doctrine, O'Donnell managed an impressive feat. He took Robertson, a figure widely disliked and discredited throughout the evangelical community, and found a way to criticize him that would also insult and alienate evangelicals. Congratulations, Lawrence O'Donnell--you're the new poster-boy for secular liberal intolerance...

Let us congratulate her. For Jesus Christ himself is another "intolerant" "secular" and "liberal" "poster-boy" in his assertion that all who love their neighbors--even Jews! even Muslims! even Catholics! even Methodists!--can escape eternal hellfire:

Matthew 25:31-40: When the Son of man shall come in his glory, and all the holy angels with him, then shall he sit upon the throne of his glory. And before him shall be gathered all nations: and he shall separate them one from another, as a shepherd divideth his sheep from the goats. And he shall set the sheep on his right hand, but the goats on the left. Then shall the King say unto them on his right hand, "Come, ye blessed of my Father, inherit the kingdom prepared for you from the foundation of the world: For I was an hungred, and ye gave me meat: I was thirsty, and ye gave me drink: I was a stranger, and ye took me in: Naked, and ye clothed me: I was sick, and ye visited me: I was in prison, and ye came unto me."

Then shall the righteous answer him, saying, "Lord, when saw we thee an hungred, and fed thee? or thirsty, and gave thee drink? When saw we thee a stranger, and took thee in? or naked, and clothed thee? Or when saw we thee sick, or in prison, and came unto thee?"

And the King shall answer and say unto them, "Verily I say unto you, Inasmuch as ye have done it unto one of the least of these my brethren, ye have done it unto me"...

By what warrant does Amy Sullivan claim to speak with authority on matters of religion?

Now I'm Confused About the Q3 Auto Production Numbers...

Tim Duy confuses me. He writes:

Economist's View: Tim Duy: Third Quarter GDP, Part II: Third Quarter GDP, Part II, by Tim Duy: A bit of a controversy is simmering with regards to the jump in auto production as reported in 3Q06 GDP report.... I was surprised as well – but I quickly thought to myself “oh, so prices fell.” Didn’t seem like a big deal, so I was caught off guard by the controversy.... Truth be told, the BEA is not helping itself.... [A]s I explain every time I teach principles of macroeconomics, in practice the BEA does not measure output. Instead, the BEA measures demand:

GDP is measured as the sum of personal consumption expenditures, gross private domestic investment (including change in private inventories and before deduction of charges for CFC), net exports of goods and services (exports less imports), and government consumption expenditures and gross investment. GDP excludes intermediate purchases of goods and services by business.

For instance:

Personal consumption expenditures (PCE) (1–15) measures goods and services purchased by U.S. residents. PCE consists mainly of purchases of new goods and of services by individuals from private business.

In the background, the BEA is making use of the “national income equals national output” identity.... The 3Q06 “mismeasurement” of auto production is a perfect example – the supposed automobile “production” component of PCE is a measure of final sales, not production.... In converting from nominal to real, a decline in prices yields a positive increase in real sales, even if nominal sales stay constant (or even fell). As a demand side concept, this is not a problem. If the price of automobiles falls relative to other goods in my basket, I am unambiguously better off as my budget constraint increased. The real quantity of aggregate goods and services I can consume is greater. No mismeasurement. One, however, has to be careful of the supply side interpretations...

Now I am confused. Real GDP is (a) real final demand, plus (b) the change in business inventories. If cars were sold more cheaply in Q3 than anybody expected--and thus if the same flow of money spent on auto purchases resulted in more cars sold--then the extra cars sold must have come out of inventories, right?

Auto companies didn't ramp up production in Q3, did they?

Socialism with German Nationalist Characteristics

I was supposed to contribute to Crooked Timber's seminar on Sheri Berman (2006), The Primacy of Politics: Social Democracy and the Making of Europe's Twentieth Century(Cambridge: Cambridge University Press: 0521521106). But it never happened: I never produced anything I was happy with.

So let me, instead, point you over to the ongoing debate and post my favorite passage from Berman's book, on the debate at the start of the 1930s in Weimar Germany between Wladimir Woytinsky and Rudolf Hilferding:

Sheri Berman (2006), The Primacy of Politics: Social Democracy and the Making of Europe's Twentieth Century(Cambridge: Cambridge University Press: 0521521106), p. 110 ff: Over time... the... S[ocialit ]P[arty of]D[eutschland]'s position became increasingly problematic.... [T]he SPD's support of [the Hooverite plans of Chancellor] Bruening and its failure to put forward any distinctive plans of its own for dealing with the Great Depression elicited storms of protest. At the party's 1931 congress... the most electrifying speech, Fritz Tarnow... summed up the SPD's dilemma:

Are we standing at the sickbed of capitalism not only as doctors who want to heal the patient, but also as prospective heirs who can't wait for the end and would gladly help the process along with a little poison?... We are damned, I think, to be doctors who seriously want to cure, and yet we have to maintain the feeling that we are heirs who wish to receive the entire legacy of the capitalist system today rather than tomorrow. This double role, doctor and heir, is a damned difficult task....

[M]any speakers embraced Tarnow's frontal assault on the [Socialist] Party [of Germany's] immobilism. Others... rejected the idea.... [T]he congress... decided to stay the course.

The sterility of the SPD's position also soured the party's relationship to organized labor. By 1930, the German unions had... decided that fighting unemployment had become the top priority. In 1931... unions began to consider seriously various job-creation proposals, the most important of which was the WTB plan... the brainchild of Wladimir S. Woytinsky... Russian emigre... headed a major union['s]... statistical bureau.... By 1931 he had come to the conclusion that Germany's only way out of the crisis [of the Great Depression] was through stimulating the domestic economy... with Tarnow and Fritz Baade... a prot-Keynesian strategy based on domestic stimulus... 2 billion marks to be spent on work creation.... Deficit financing would be necessary....

Woytinsky argued that the time had come for Social Democrats to surrender their faith in historical development and the "mystical powers of the market" and recognize that improvement would depend on activie intervention in the market... using the levers of power to help improve the lives of the masses... tame the anarchy of the market... showing the way to a more organized and just economy... provide the SPD (and the unions) with a concrete step toward a new economic and social order. The labor movement, he suggested, should begin a frontal assault on deflation and the radical right under the banner "the struggle against the crisis."

The union movement embraced the WTB plan.... The newspaper of the German metalworkers' union, for example, warned: "... We must come forward with a work creation program, regardless of any scientific differences of opinion, otherwise the quacks [i.e., the Nazis] will find increasing support for their views. We can't wait until our theoreticians are united..."

Despite increasing pressure... Bruening stuck to his [Hooverite] course, forcing the SPD into a very difficult position. Never having developed a strategy for working within the capitalist system... the party was divided.... Some on the right argued for work creation, but many of these same "reformers" scorned the idea of deficit financing. Many on the left, meanwhile, argued that the time was ripe for a full-fledged "socialist" strategy....

[T]he party's most important economic theoretician, Rudolf Hilferding... mounted a full-scale campaign against the plan. He began his attacks by stressing that the WTB plan was "un-Marxist" and threatened "the very foundations of our program." The only solution to economic difficulties, he claimed, was to wait for the business cycle to run its course; an "offensive economic policy" had no place because the ultimate arbiter of developments was the "logic of capitalism."

But even Hilferding recognized that his position doomed the SPD to continued sterility. In a letter to Karl Kautsky, he wrote:

[W]orst of all in this situation is that we cannot say anything concrete to the people about how and by what means we would end the crisis. Capitalism has been shaken far beyond our expectations but... a socialist solution is not at hand and that makes the situation unbelievably difficult and allows the Communists and Nazis to continue to grow."

... At the labor movement's "crisis" congress in April, advocates of the WTB plan emphasized the increasing desperation of the masses and pointed out that both the Nazis and the Communists were trumpeting work-creation programs.... In the run-up to the elections that July, it became clear that... the SPD's program "contained no thoughts capable of stimulating the imagination.... One could not find in it ways out of the [problem of] mass unemployment."... [T]he elections were a disaster.... The SPD agreed to discuss the WTB plan yet again.... Hilferding declared that such proposals called into question

the very foundations of our program... Marx's theory of labor value. Our program rests on the conviction that labor, and labor alone, creates value.... Depressions result from the anarchy of the capitalist system. Either they come to an end or they must lead to the collapse of this system. If [Woytinsky and others] think they can mitigate a depression by public works, they are merely showing that they are not Marxists.

Woytinsky responded to this charge with the following argument:

The flood of unemployment is rising, the people are at the end of their patience. The workers, holding us responsible for their misery, are deserting the party to join the Communists and the Nazis. We are losing ground. There is no time to waste. Something must be done before it is too late. Our plan has nothing to do with any particular value theory. Any party can execute it. And it will be executed. The only question is whether we take the initiative or leave it to our enemies.

...[A]ll but one of the SPD representatives of the meeting sided with Hilferding over Woytinsky...

It is hard to avoid the belief that there was a way out of the disaster--a way to beat the Nazis even at the end of 1931--and that if only Rudolf Hilferding and his ilk had been less blinkered ideologues who sought truth from old books rather than new facts, the SPD could have led a German "New Deal" that would have been as great a success as Roosevelt's New Deal in America.

The connection between this historical episode and the American Enterprise Institute and the Project for a New American Century is left as an exercise to the reader.

Why Oh Why Can't We Have a Better Press Corps? (Steno Sue Schmidt of the Washington Post Strikes Again)

I don't read Susan Schmidt--"Steno Sue"--of the Washington Post. But I have a correspondent who does:


In her article on Safavian, Schmidt writes that the prosecutor "asked the judge to add a perjury conviction to Safavian's crimes for his testimony at trial." Does she know so little about the judicial system that she thinks a judge can simply "add" a conviction at sentencing?... [W]hat the prosecutor was likely doing was asking the judge to add "points" to the sentencing guidelines, based on Safavian's obvious lying...

Schmidt also writes: "The 18-month jail sentence was about halfway between the 30 to 36 months sought by government prosecutors and the defense's proposal for alternative sentencing that would avoid any prison time at all." It seems likely that the 30 to 36 months is what was in the sentencing guidelines -- so that the judge gave Safavian a break relative to what the system anticipates.

But we don't really know, do we?

The Post assigns someone who doesn't know what was going on to write the story, doesn't it? I'm not a lawyer, so I have some digging to do to find out.

This "quality" of reporting is the principal reason I don't think the Post will last the decade. Unless you know the reporter and know that they are reliable, the phrase "staff writer for the Washington Post shakes your trust:

Official in Abramoff Case Sentenced to 18 Months - Official in Abramoff Case Sentenced to 18 Months: By Susan Schmidt: Washington Post Staff Writer: Saturday, October 28, 2006; A03A federal judge yesterday sentenced David H. Safavian, a former top Bush administration official, to 18 months in prison for lying and concealing unethical dealings with lobbyist Jack Abramoff.

During an unusual hearing that lasted much of the day, U.S. District Judge Paul L. Friedman wrestled with how to mete out justice to Safavian. He said Safavian was a man who had "pulled himself up by his bootstraps" and had been "a very good person to a lot of people." But, the judge said, Safavian also committed "an abuse of the public trust" in his relationship with the lobbyist. "Did he believe in public service? I guess he did," Friedman said. "But he also wanted someday to join Mr. Abramoff in that lucrative lobbying business." Friedman lamented that Washington has become "more and more corrupt," increasingly a home to greedy lobbyists and politicians on the take.

Safavian, 39, a former chief of staff for the General Services Administration, wept as he told Friedman that he knows now he never should have given Abramoff inside information about government-owned real estate that the lobbyist wanted to acquire. At the time, Safavian said, he thought what he was doing was innocuous. "I didn't see anything wrong in helping Jack," he said.

The 18-month jail sentence was about halfway between the 30 to 36 months sought by government prosecutors and the defense's proposal for alternative sentencing that would avoid any prison time at all. Barbara Van Gelder, Safavian's attorney, urged leniency, telling Friedman that Safavian exhibited an ethical "blind spot" in his dealings with the brazen and flashy Abramoff. "He may have been blinded, dazzled," she said, but his wrongdoing with Abramoff was "isolated, not a man beginning a life of crime." But prosecutor Peter Zeidenberg asked the judge to add a perjury conviction to Safavian's crimes for his testimony at trial. "For the two days he spent on the witness stand, Mr. Safavian lied about virtually everything," Zeidenberg said. "He testified under oath that he never lied, never concealed.... He even went on to say, 'I never gave Jack Abramoff favorable treatment,'" statements the jury rejected in its verdict.

Friedman said he did find some of Safavian's statements from the witness stand "incredible," including the defendant's claim that he believed his payment of $3,100 would cover the cost of a week-long luxury golfing excursion to Scotland with Abramoff. But in the end, the judge decided against the prosecutor's request for a perjury conviction...

The New Republic Clown Show

It publishes Joseph Loconte:

Is liberalism synonymous with secularism? A TNR debate, Day 4: Contrary to the eccentric, embittered attack by ex-White House staffer David Kuo, the president's faith-based initiative has delivered on another Bush promise: to confront the government's animus against religious charities in providing social services. You can't measure the success of this initiative in federal dollars... the standard liberal fallacy...

A previous act of pollution of the stream of debate by Joseph Loconte:

Joseph Loconte on Iraq on National Review Online: There is a tenacity, a resolve, a certain moral seriousness about Nouri Al-Maliki, the Iraqi prime minister, that many politicians here must find unsettling. His determination was on full display Wednesday, when he addressed Congress to discuss the future of Iraq. In a 30-minute speech interrupted 27 times by applause, Al-Maliki poignantly described the existential terrorist threat facing his country...

If the White House has sometimes appeared naive about the “terrible” violence in Baghdad... its critics have an opposite problem: an unflappable fatalism.... We’ve seen this mood before. It is reminiscent of the cynicism of progressives in the 1930s, who viewed the struggle against Nazi Germany in the black light of the First World War....

Al-Maliki’s speech to Congress stands as a reproach to the debunkers of our own day. He was sober, yet not cynical, about America’s and the world’s failure to support Iraq’s stirrings toward freedom, particularly after the first Gulf War. “In 1991, when Iraqis tried to capitalize on the regime’s momentary weakness and rose up, we were alone again,” he said....

The heart of Al-Maliki’s message, though, was that Iraq is center stage in the fight against global terrorism. Here is a confrontation, he warned, that demands the engagement of “every liberal democracy that values freedom.” It is this message — delivered by a man trying to govern his nation at ground zero of the struggle — which offends liberal leaders and intellectuals.... A man who once carried a death sentence on his head and lived in exile for over 20 years, Al-Maliki is no utopian. He knows all about the sectarian divisions in his country, the threat of rogue militias, the security problems in Baghdad, the fears that drain away hope. “The journey has been perilous,” he told Congress, “and the future is not guaranteed.” Yet he remains resolved: “I will not allow terrorists to dictate to us our future.”

The cynics in his audience — the Ted Kennedy wing of the Democratic party — are not the ones to lead America into this future. They remain trapped in the past, it seems, an emotional quagmire of their own making.

That Frank Foer feels that this voice is a good one to put in his corner of the public sphere is a good reason to stay far away.

Ron Brynaert Is Shrill

He writes:

Why Are We Back In Iraq?: Bush Knowz History: President George Bush had this to say on Conservative Print Media Journalists Day:

That's what makes this more difficult -- I don't know what Harry Truman was feeling like, or Franklin Roosevelt. But I do know -- I'm sure there were moments of high frustration for them %u2013 but I do know that at Midway, they were eventually able to say two carriers were sunk and one was damaged. We don't get to say that.

Roosevelt didn't get to say that either, Mr. President, because we sank four Japanese carriers in the battle of Midway.

I learned that in grade school...

And, of course, none of the conservative media journalists learned any WWII history either.


Impeach George W. Bush. Impeach him now. Not after the election. Not after the situation deteriorates further. Impeach George W. Bush for failing to faithfully execute the laws. Impeach George W. Bush now for what he has done to Iraq. Impeach George W. Bush now so that we can have a chance of fixing this total disaster:

Evidence of Marie Colvin
Evidence of Anthony Shadid
Evidence of Steven D.
Evidence of Fareed Zakaria

Impeach George W. Bush Now: Evidence of Anthony Shadid

Impeach George W. Bush. Impeach him now. Not after the election. Not after the situation deteriorates further. Impeach George W. Bush now for what he has done to Iraq. Impeach George W. Bush now so that we can have a chance of fixing this total disaster:

This is Baghdad. What could be worse? - By Anthony ShadidSunday, October 29, 2006; B01: BAGHDAD:

There was an almost forgettable exchange earlier this month in the Iraqi National Assembly, itself on the fringe of relevance in today's disintegrating Iraq. Lawmakers debated whether legislation should be submitted to a committee to determine if it was compatible with Islam. Ideas were put forth, as well as criticism. Why not a committee to determine whether legislation endorses democratic principles? one asked. In stepped Mahmoud Mashadani, the assembly's speaker, to settle the dispute. "Any law or decision that goes against Islam, we'll put it under the kundara!" he thundered.

"God is greatest!" lawmakers shouted back, in a rare moment of agreement between Sunni and Shiite Muslims. Kundara means shoe, and the bit of bluster by Mashadani said a lot about Baghdad today. It had been almost a year since I was in the Iraqi capital, where I worked as a reporter in the days of Saddam Hussein, the U.S.-led invasion in 2003, and the occupation, guerrilla war and religious resurgence that followed. On my return, it was difficult to grasp how atomized and violent the 1,250-year-old city has become. Even on the worst days, I had always found Baghdad's most redeeming quality to be its resilience, a tenacious refusal among people I met over three years to surrender to the chaos unleashed when the Americans arrived. That resilience is gone, overwhelmed by civil war, anarchy or whatever term could possibly fit. Baghdad now is convulsed by hatred, paralyzed by suspicion; fear has forced many to leave. Carnage its rhythm and despair its mantra, the capital, it seems, no longer embraces life.

"A city of ghosts," a friend told me, her tone almost funereal.The commotion in the streets -- goods spilling across sidewalks, traffic snarled under a searing sun -- once prompted the uninitiated to conclude that Baghdad was reviving. Of course, they were seeing the city through a windshield, the often angry voices on the streets inaudible. Today, with traffic dwindling, stores shuttered and streets empty by nightfall, that conceit no longer holds. Even the propaganda, once ubiquitous and often incongruous, is gone. One piece I recalled from two years ago: a map of Iraq divided into three colored bands. In white, it read, "Progress." In red, "Iraq." In white again, "Prosperity." The promises are now more modest: "However strong the wind," reads a new poster of a woman clutching her child, "it will pass." More indicative of the mood, perhaps, was one of the old banners still hanging. Faded and draped over a building scarred with craters from the invasion, it was an ad for the U.S.-funded Iraqi network, al-Iraqiya. In Arabic, its slogan reads, "Prepare your eyes for more."

As I spoke to friends, some for the first time in more than a year, that was their fear: more of the kundara. "When anyone is against you, when anyone has differences with me, I will put a kundara in his mouth, I will shove a kundara down his throat, I will hit him with a kundara, and so on," another friend told me. "We live in a kundara culture today."

I had first met Karima Salman during the U.S. invasion. She was a stout Shiite Muslim matriarch with eight children, living in a three-room apartment in the working-class district of Karrada. Trash was piled at her entrance, a dented, rusted steel gate perched along a sagging brick sidewalk. When I visited last year, the street, still one of the safer ones in Baghdad, exuded a veneer of normalcy. Makeshift markets overflowed with goods piled on rickety stands: socks imported from China, T-shirts from Syria and stacks of shoes, sunglasses and lingerie. Down the street were toys: plastic guns, a Barbie knockoff in a black veil, and a pirate carrying an AK-47 and a grenade. There was a "Super Mega Heavy Metal Fighter" action figure and a doll that, when squeezed, played "It's a Small World."

On this day, the metal stands were empty, as were the streets. "Praise God," Karima said as I asked how she was. In a moment, her smile faded as she realized the absurdity of her words. "Of course, it's not good," she said, shaking her head. "There's nothing that's ever happened like what's happening in Iraq." On June 23, 2005, three car bombs detonated in Karrada, outside her home, wrecking the Abdul-Rasul Ali mosque and spraying shrapnel that sliced into the forearm of one of her five daughters, Hiba. Friends at school nicknamed her "Shrapnel Hiba." Two months ago, yet another bomb hurled glass through their window, cutting the head of Hiba's twin sister, Duaa. Four stitches sealed the wound. Over that time, Karima lost her job as a maid at the Palm Hotel, where she had earned about $33 a month. "People are too scared to come," she said matter of factly.

Next to her sat her son Mohammed. During the invasion, Mohammed, an ex-convict, had joined a motley unit of a dozen men patrolling Baghdad's streets as part of the Baath Party militia. Now he had entered the ranks of the Mahdi Army, a Shiite militia loyal to a young cleric, Moqtada al-Sadr, and blamed for many of today's sectarian killings in Baghdad. Karima's son-in-law Ali had been an officer in the American-equipped police force, earning $300 a month. He quit after receiving a death threat. Now he, too, had joined the Mahdi Army. "Not all of them are good," Karima told me, casting a glance at her son.

Stocky and a little surly, Mohammed smiled. "Who else is going to protect Iraq?" he asked.

They debated the causes of the violence that, these days, is the topic of almost every conversation. Radical Sunnis, the Americans, Iranian agents, other militias. "Even the Egyptians," Karima offered.

"And the Sudanese," Mohammed added."Brothers are killing their brothers," she said. Stories poured forth: a bomb amputating the arm of a 10-year-old neighbor; another killing Marwan, the barber.

"If they brought the Israelis, the Jews, and they ruled Iraq, it would be better," said Karima, her face framed by a black veil. Sunlight bathed the room; electricity, as usual, was cut off. "It would be a million times better than a Sunni, a million times better than a Shiite." Her first grandchild, 2-month-old Fahd, sat next to her. His expression was rare in Baghdad: eyes expectant, fearless. "Is it not a pity to bring a baby in a world like this?" she asked. "It's a shame."

Her eldest daughter, Fatima, looked on. "One-third of us are dying, one-third of us are fleeing and one-third of us will be widows," she said.

"This is Iraq," Karima added.

The last time I had visited Faruq Saad Eddin, he and his wife, Muna, had argued over whether their eldest son should have left the country. We sat in Jihad, a neighborhood so dangerous now that a stranger risks death by entering it. A generator droned in the background; occasional bomb blasts thundered in the distance, probably homemade mines targeting U.S. patrols. An urbane former diplomat, Faruq had been upset. He worried about what would become of his ancient land if its capable fled. "You can't just cut out and run away," he told me. "This is our country and sooner or later our children will come back. The resilience of the people, that's what 11,000 years means," he said. "Someone who has 11,000 years, 100 years to lose here or there is not that much."

On April 17, Faruq and Muna left Iraq at the insistence of their son, who had paid a year's rent for an apartment in Jordan. A month later, a car bomb detonated outside their Baghdad home, shattering the windows in the room where we once had shared bitter coffee.

On a cool morning in the Amman neighborhood of Umm al-Summaq, Faruq shook his head at the arbitrariness of fate. "We would have been killed, no doubt about it," he said. "We are all stranded, here and there, Iraqis," he added. A friend once compared the elderly who are reluctant to leave Baghdad to the blind. Take them away from the familiarity of their home, garden and street, and they become lost and disoriented. Faruq has sought new routines: morning strolls, e-mails to friends, a voracious appetite for news and late-night updates on his favorite baseball team, the St. Louis Cardinals. His apartment overlooked the rolling hills of Amman, glowing in the morning's soft sun; his granddaughter Mayasa played giddily next to him with a stuffed toy. "I should feel happy," he said. He shook his head again, a gesture that meant he wasn't. "We have a heavy heart, really," he said after a few moments of silence. "Just knowing what's happening makes us grieve."

I had come to know Wamidh Nadhme in 2002, before the invasion. A professor of political science at Baghdad University, he was a forthright voice in those tense, uneasy days when Hussein was still in power. He tried to speak with complete honesty despite the possible consequences of doing so in a police state. With an ever-present Dunhill cigarette, he would slowly field questions back then, reasoning out every intricate response, surrounded by his French-style furniture, worn Persian carpets and a framed piece of papyrus from Egypt, where he had spent time in exile as a young activist. But on this visit, reason eluded him, as did explanation."I find myself unable to understand what's going on," he said. Wamidh had settled into what he called "withdrawal." He still visited the university once a week, but Baghdad was simply too dangerous to venture outside. After nightfall, the streets of his neighborhood of Adhamiya look like they might an hour or so before dawn: dark, without traffic, and menacing. As we talked, helicopters rumbled overhead. Gunfire burst almost continuously."You feel like the country is exploding," he said.

We traded stories. One I had heard from a friend: Insurgents stopped a driver at a checkpoint. They opened his trunk. "Why do you have a spare tire?" the insurgent asked solemnly. "You don't have trust in God?" Well into 2005, Wamidh has bristled at the notion of a sectarian divide, even as the very geography of Baghdad began to transform into Shiite and Sunni halves divided by the Tigris River. Like many Iraqis, he blamed the Americans for naively viewing the country solely through that sectarian prism before the war, then forging policies that helped make it that way afterward. He ran through other "awful mistakes": the carnage unleashed by Sunni insurgents affiliated with al-Qaeda, the assassination of a Shiite ayatollah in 2003 who may have bridged differences, the devolution of Sadr's movement today into armed, revenge-minded mobs. As Wamidh finished, he flashed his customary modesty. "Perhaps you could correct me?" he offered.I asked him whether it would become worse if the American military withdrew. He looked at me for a moment without saying anything, as though he were a little confused. "What could be worse?" he asked, knitting his brow.

I saw Wamidh again a week later, and the question had lingered with him. "I sometimes wonder what I would do if I were the Americans," he said over a traditional Ramadan dinner. His answer seemed to hurt him. "I have no idea, really.""It's like a volcano that has erupted. How do you stop that?"

On April 9, 2003, Firdaus Square became the lasting image of the U.S. entry into Baghdad. In its center was a metal statue of Hussein in a suit, his arm outstretched in socialist realist fashion. Like an arena of spectators, columns of descending height encircled him, each bearing the initials "S.H." on their cupolas. By early afternoon that day, hundreds of Iraqis swarmed around the statue with one task in mind: bring it down. It marked the fall. A year later, amid uprisings by Sunni insurgents in Fallujah and Sadr's militia in Baghdad and the south, it spoke of occupation. The square was deserted, guarded by U.S. tanks whose barrels read, "Beastly Boy" and "Bloodlust." Soldiers, edgy, had orders to shoot anyone with a weapon. At times, music blared over speakers on a Humvee. One song: "Ring of Fire," by Johnny Cash.

As I stood in Firdaus Square this day, after invasion, liberation and occupation, I wondered what word described Baghdad. "This is a civil war now," Harith Abdel-Hamid, a psychiatrist, had told me, trying to diagnose the madness. "When you see hundreds of people killed every day, corpses of people tortured in the streets every day, what else does it mean?"

"Call it what you will," he said, "but it is a civil war." Perhaps. But I felt as though I was witnessing something more: the final, frenzied maturity of once-inchoate forces unleashed more than three years ago by the invasion. There was civil war-style sectarian killing, its echoes in Lebanon a generation ago. Alongside it were gangland turf battles over money, power and survival; a raft of political parties and their militias fighting a zero-sum game; a raging insurgency; the collapse of authority; social services a chimera; and no way forward for an Iraqi government ordered to act by Americans who themselves are still seen as the final arbiter and, as a result, still depriving that government of legitimacy.

Civil war was perhaps too easy a term, a little too tidy.

I looked out on the square. On one side were rows of concrete barricades and barbed wire, having faded almost organically into the landscape. In another direction, a billboard read: "Terrorism has no religion." Across the street, a poster portraying Iraqi police pleaded: "We are the heroes fighting for the sake of Baghdad." In the middle of the square, on the stone perch where Hussein's statue once stood, were torn scraps of other posters: "Your voice," "the nation," "patriotism," "dialogue," "building the future." The words were isolated, without context, like fragments of a clay tablet.

Sirens soon pierced the square. Two armed police escorts, headed in opposite directions, rushed along the street. Each frantically waved at the other to pull over. Guns dangling from the window, they fired volleys into the air to intimidate each other.

In time, the one with fewer rifles and fewer men let the other pass. They were playing by the rules of the kundara.

In the square, Salam Ahmed sat with a friend, Saad Nasser, under the statue, looking out at the scene. "They died under Saddam, and they're dying now," Salam said. Unshaven, wearing a baseball cap, Saad looked at the ground. He was grim, angry and dejected. "No one can stop it but God," he said. "Only God has the power."

Impeach George W. Bush: Evidence of Steven D.

Impeach George W. Bush. Impeach him now. Not after the election. Not after the situation deteriorates further. Impeach George W. Bush for failing to faithfully execute the laws. Impeach George W. Bush now for what he has done to Iraq. Impeach George W. Bush now so that we can have a chance of fixing this total disaster:

This is, I think, why Cheney and Bush sent John Negroponte to Iraa as ambassador:

Booman Tribune ~ A Progressive Community: You Get What You Pay For, and in Iraq We Paid for Death Squads: by Steven D: In Iraq, we paid for the training and creation of Death Squads. It was our official policy. So we shouldn't be shocked in the least by news like this:

The message to the Baghdad morgue was simple - they could do what they liked with the plastic handcuffs, but the metal ones were expensive and needed to be returned. Such is the murderous state of affairs in Iraq at the moment that the demand, made by a militia gunman who is also believed to be a member of the Special Police Commandos, hardly caused a stir.

There was a similar lack of shock when a dozen bodies were brought in with identification cards showing that each had the name Omar. The catch here was that Omar is a Sunni name, and this fact was enough to seal their fate at Shia checkpoints. [...]

This is a shadowy struggle, which involves tortured prisoners huddled in dungeons, murder victims mutilated with knives and electric drills, and distraught families searching for relations who have been "disappeared". [...]

Yet, ironically, the death squads are the result of US policy. At the beginning of last year, with no end to the Sunni insurgency in sight, the Pentagon was reported to have decided to train Shia and Kurdish fighters to carry out "irregular missions". The policy, exposed in the US media, was called the "Salvador Option" after the American-backed counter-insurgency in Latin America more than 20 years ago, which led to 70,000 deaths and countless instances of human rights abuse.

Some of the most persistent allegations of abuse have been made against the Wolf Brigade, many of whom were formerly in Saddam's Baathist forces. Their main US adviser until April last year was James Steele, who, in his own biography, states that he commanded the US military group in El Salvador during the height of the guerrilla war and was involved in counter-insurgency training...

Impeach George W. Bush Now: Evidence of Marie Colvin

Impeach George W. Bush. Impeach him now. Not after the election. Not after the situation deteriorates further. Impeach George W. Bush now for what he has done to Iraq. Impeach George W. Bush now so that we can have a chance of fixing this total disaster:

Face to face with death in a 'pacified' Iraqi town - Sunday Times - Times Online: Marie Colvin, Baghdad

A FEW months ago Saab al Bour was a showpiece town where Americans were building schools and fixing the water and electricity supplies. Even the Shi’ites and Sunnis rubbed along. The dusty settlement of sand-coloured brick buildings six miles northwest of Baghdad is now a ghost town, shorn of its residents by Iraq’s relentless sectarian wars. They took to the road when mortars, 15-20 a day, started crashing into the town, fired by Sunni extremists targeting the Shi’ites.

Sunni neighbour turned on Shi’ite neighbour in a struggle that eventually drove out 90% of the original population of 30,000.

Before I set out for Saab al Bour yesterday, I had been assured that it had been “pacified”. Our two UH-60 helicopters flew low out of Baghdad’s fortified green zone, swooping over the capital, its once-crowded arteries devoid of traffic.

We banked over flat stretches of baked earth and a few patches of green and came in low to a wasteland in the middle of the town, guided by grey smoke rising from two armoured cars that had been sent ahead to secure the landing. This did not look like a pacified town.

American soldiers in desert camouflage uniforms leapt out of the helicopters to set up a perimeter, 6ft apart, around us. Crouching, M16s perched on their shoulders pointing out in a circle, they eyed the mud and sand brick houses suspiciously. Only a mangy yellow dog moved.

Within half an hour of my arrival Apache helicopter gunships filled the sky, firing on insurgents just the other side of a canal with loud blasts of their cannons.

In the town’s police station, sandbagged and covered with camouflage netting, Lieutenant-Colonel Dave Thompson sat with two members of the local council. The police were supposed to be there to brief us, but they had been called to an “incident”. Later one policeman told me the incident was an attack on their commander’s home and they had rushed to help.

This is just a microcosm of the problems besetting Iraq. The town of Saab al Bour had been quiet when the American army, backed up by Iraqi soldiers, was based there. It sits on the edge of Anbar province, a Sunni stronghold. Shortly after the soldiers handed over to the Iraqi police at the end of last month, the fighting began.

Khaled Lateef, a councillor who stayed throughout, said the mortars were fired by Sunni extremists from across the canal, aimed mostly at the Shi’ite areas.

The police were outgunned by the insurgents. The Iraqi and American armies had to move back to pick up where they had left off. Thompson tried to be up-beat: “We’re down to one mortar a day,” he said. “We’re back to rebuilding.”

Every time one tiny corner of Iraq is fixed, another chunk falls apart. Take Yarmouk, a wealthy Baghdad neighbourhood famed for its manicured gardens, fashionable boutiques and spacious villas. Living just a mile from the American troops in the green zone, residents have until recently felt far removed from Iraq’s sectarian violence.

They were wrong. A district that for decades was 70% Sunni and 30% Shi’ite, where members of the two different strands of Islam lived side by side, mingled and even married, has been “cleansed” of 90% of its Shi’ite residents. Their choice was to leave or die.

A doctor forced out of Yarmouk by Sunnis described the thugs’ methods. “They kidnapped my son,” he said. “They broke his nose, then they raised a pick-up truck on a jack, turned the truck on and put his legs under the spinning tyres. All the skin was torn off.” After payment of £10,500, he got his son back. The 20-year-old university student wore shoes last week for the first time in months.

“I hired security guards but they fired an RPG (rocket-propelled grenade) at my house. I couldn’t stand it any more. We left Yarmouk.”

Yarmouk is a shocking example of Iraq’s sectarian strife because the Sunni-Shi’ite violence is usually portrayed as a cancer confined to slums run by radical militias. But this area was home to an educated elite who played tennis at the club and went abroad for the summer.

The slaughter consuming Sunni and Shi’ite Muslims in roughly equal measure may appear like anarchy from afar, but a closer look reveals a sinister plot. Starting in the west of the city, Sunni militants have seized district after district, creating their own zone that extends into the heart of Baghdad.

The Shi’ites are not innocent. Since the explosion at a Shi’ite mosque in Samarra in February, their militias have exacted vicious revenge. The morgue classifies victims according to their injuries; if a victim has been beheaded, he is a Shi’ite killed by Sunnis. If he has been killed by a power drill to the head, he is a Sunni murdered by Shi’ites. Most victims have been tortured. Bodies are dumped by the roadside and lie there for hours.

Nouri al-Maliki, the prime minister, vowed last week — not for the first time — to clamp down on the militias. He has made scant progress, partly because he depends on a political party allied to a Shi’ite militia. The US Operation Together Forward launched in August to pacify Baghdad has failed dismally.

While the Shi’ites are fired by blind vengeance, the Sunnis appear to have a plan. They are trying to split Baghdad in half in advance of a proposal to carve Iraq into three federal regions.

Most of the country divides easily. The north is mainly Kurdish, the south Shi’ite, and the central desert region Sunni. Baghdad, too mixed to divide without a massive population transfer, is the sticking point in this plan.

But look at the changing map of Baghdad today. From the western suburb of Abu Ghraib, neighbourhoods have fallen under the control of Sunni radicals, their Shi’ite residents sent fleeing, their homes abandoned or taken by Sunni families, their businesses bombed, shuttered or reopened under Sunni ownership. Baghdad is on its way to becoming two cities, the west Sunni, the east and north Shi’ite.

The militias conducting this ethnic cleansing have a deadly system, described by an Iraqi intelligence officer and former residents of Yarmouk. First they terrorise the area, shooting children selling ice or black-market petrol on the street. Then they go for the shops and businesses.

It worked in Yarmouk. The Amari bakery was run by three brothers; two were killed and one injured. He fled. The bakery is now the Ahmed bakery, run by a Sunni. Abu Allah, also a Shi’ite, ran the grocery. He was shot and survived, but fled Yarmouk.

In the third stage, the Sunni militants go after the police, attacking checkpoints until they pull out. Then they target Shi’ite residents. “You wake up to a bullet in your garden. Or a note saying leave this area in 36 hours. After all the killings, you pack up and go,” said another former resident, who knew of eight people killed near his home.

The Shi’ite houses and shops are considered “ramim”, Arabic for spoils of war, and handed to Sunni families.

There is a police station in Yarmouk but the police are holed up inside, powerless to intervene, because the insurgents are better armed. The best way to bribe a policeman these days is with bullets; they stop expensive cars and where once they demanded money, they now want ammunition. Last week 18 policemen were killed in a Sunni ambush in Khan Bani Sa’ad, 20 miles north of Baghdad, because they had run out of bullets.

Two police officers from the Yarmouk precinct described their predicament. One was a Shi’ite married to a Sunni, the other a Sunni married to a Shi’ite. One had been shot seven times on his doorstep; the other had his car blown up.

When the Sunni officer’s in-laws came to stay, he woke to find a note wrapped around a bullet. It read: “There are Shi’ite in your house. Your future is this bullet if they do not leave.” They left.

There are some signs of social resistance. On Thursday in Mansour, which borders Yarmouk, 3,000 people, mostly families, gathered at the Hunting Club to celebrate Eid, the end of Ramadan. The skirts were low on the girls’ hips, there was barely a hijab in sight, and Abir the DJ spun western and Arabic discs.

“This is our way of fighting the terrorists who are trying to destroy life in Iraq,” said Hasanain Mualla, the manager.

And then there is the bravest ice cream seller in Baghdad, a Sunni. When Sunni militants demanded he close because there had been no ice cream in the time of the prophet Muhammad, he told them: “I’ll stop selling ice cream when you ride up on camels to threaten me. There were no BMWs in the time of prophet Muhammad either.”

Impeach George W. Bush: Evidence of Fareed Zakaria

Impeach George W. Bush. Impeach him now. Not after the election. Not after the situation deteriorates further. Impeach George W. Bush now for what he has done to Iraq. Impeach George W. Bush now so that we can have a chance of fixing this total disaster: Rethinking Iraq: The Way Forward: The drawdown option: It is past time to confront reality. To avoid total defeat, we must reduce and redeploy our troops and nudge the Iraqis toward a deal. Here's how. By Fareed Zakaria: Newsweek: Nov. 6, 2006 issue -

BY 1952, the last year of his presidency, Harry Truman recognized that the victory he had hoped for was no longer possible in Korea. U.S. forces were not losing, but they were not winning, either. Instead they were caught up in a vast, bloody and expensive holding operation. Two thirds of the American public disapproved of the war. Truman had hoped that peace talks, underway since July 1951, would yield results, but his team was negotiating under constraints. Republicans were eager to criticize the Democrats for being soft on the communists. Others, even Democrats, asked how they could justify the deaths of 50,000 U.S. troops without a clear win. Many, including South Korea's President Syngman Rhee, had not given up on the dream of a unified Korea that would be an ally in the war against communism.

Truman's successor, Dwight Eisenhower, as a legendary general, had enormous freedom to maneuver. He used it, ending new military offensives, conceding several key points to the North Koreans and the Chinese. By some accounts, he also threatened to use nuclear weapons. On July 27, 1953, the parties to the war signed a peace treaty—all parties, that is, except the South Koreans, who believed the deal amounted to a sellout.

For Americans, the Korean War was not a defeat—the United States had gathered a coalition to resist aggression—but it was certainly not a victory. After three years of fighting and 4 million dead, Korea remained divided—the North a communist bulwark, the South itself turning into a nasty dictatorship—Asia was bubbling over and the danger of war with the forces of international communism seemed greater than before.

Something like the close of the Korean War is, frankly, the best we can hope for in Iraq now. One could easily imagine worse outcomes—a bloodbath, political fragmentation, a tumultuous flood of refugees and a surge in global terrorist attacks. But with planning, intelligence, execution and luck, it is possible that the American intervention in Iraq could have a gray ending—one that is unsatisfying to all, but that prevents the worst scenarios from unfolding, secures some real achievements and allows the United States to regain its energies and strategic compass for its broader leadership role in the world.

But in order for that to happen, we have to see Iraq as it is now. Not as it once was. Not as it could have been. Not as we hope it will become, but as it is today. There will be ample time to assign blame and debate "what if"s. The urgent task now is ahead of us.

"We're winning," President Bush said last week, and then explained his reasoning: "My view is that the only way we lose in Iraq is if we leave before the job is done." That circular definition of success resembles so much of the administration's Iraq policy, one that seems almost determined not to look at the country itself. Iraq, in this view, is a state of mind. If we lose faith, we lose. But there is a real country out there. And it is one in which events are increasingly moving beyond our control.

In point of fact—and it is a sad fact, but a fact nonetheless—America is not winning in Iraq, which means that it is losing. Iraq has fallen apart both as a nation and as a state. Its capital and lands containing almost 50 percent of

the population remain deeply insecure and plagued by rising internal divisions. Much of the south, which is somewhat stable, is subject to gangsterish, theocratic and thoroughly corrupt local governments. To recognize this reality does not mean that there is no hope for the years to come. There is—but hope is not a policy.

Journalists have a weakness for declaring this moment or that one as "critical." But today, more than three years into the American-led invasion of Iraq, there is little question that we stand at, well, a critical moment. The policy we are pursuing—maintaining 144,000 U.S. troops in Iraq and hoping that things improve—is not sustainable either in Iraq or in America. President Bush has three tools at his disposal that he can (theoretically) apply to the mission at hand—more troops, money and time. At this point, none of these will make much difference.

But the way out of this stalemate is not to pack up and go home. That will surely result in a bloodbath or worse. The United States must redefine its mission, reduce and redeploy its forces and fashion a less intrusive involvement with Iraq, one that both Iraqis and Americans believe is productive and sustainable for the long term.

The most revealing statistic about Iraq is not the spiraling death toll but the unemployment rate, which is conservatively estimated to be around 30 to 40 percent, and has not moved much in the past two years. Given that conditions are almost normal in the Kurdish north, that means the rest of the country has an unemployment rate closer to 50 percent. Whatever we have been doing in Iraq, it is not translating into peace, normalcy and jobs. In parts of the Sunni Triangle, reports suggest that unemployment is more than 70 percent. If you think that Iraq's tumult is a product of its culture, religion and history, ask yourself what the United States would look like after three years of 50 percent unemployment. Would there not be civil strife in Manhattan, Detroit, Los Angeles and New Orleans?

The root cause of Iraqi unemployment is, of course, the lack of security, which is endemic in much of the country. In some places the vacuum has been filled by local forces—most effectively in Kurdistan by the peshmerga. In parts of the south, though—Basra among them—various Shia militias are battling each other for power. In Sunni areas, particularly Anbar province, former Baathist soldiers and a smaller group of Islamic terrorists continue to mount campaigns against U.S. forces and the new Iraqi Army. They intimidate and kill Sunni leaders who help the Iraqi government or work with the United States. Whenever U.S. forces scale back in an area, the attacks begin again. The violence in Iraq is being suppressed but not solved.

The most significant new reality in Iraq—in fact, the country's defining feature—is sectarian violence. By any reasonable definition, Iraq is mired in a low-grade civil war between its Sunni and Shia communities. Communal tensions are high, and rising—everywhere. Violence has been mounting in all areas where these communities are mixed. Ethnic cleansing, either forced or voluntary, is increasing rapidly, with 365,000 people having fled or been forced from their homes since last February's bombing of a Shia mosque in Samarra. In Baghdad alone more than 2,600 Iraqis died in September, most of them as a result of communal attacks.

Virtually everything about Iraq today must now be seen through this sectarian prism. President Bush says that we are building an Iraqi Army and police force and that as their troops stand up, America's will be able to stand down. In fact, we are building a largely Kurdish and Shia force. As its ranks have swelled, Sunnis have felt more threatened, not less, and as a consequence have fought harder. Shia militias, many of whose members are now enlisted in the Army and especially the national police, feel empowered. They have routinely rounded up groups of Sunni men and slaughtered them in gruesome fashion. Even the country's much-lauded elections have not proved an unmitigated good in this context. Last December's vote empowered religious parties with their own militias, such as Moqtada al-Sadr's Mahdi Army, and, as a result, made it more difficult to disband them.

Democratic Sen. Jack Reed of Rhode Island, a former Army paratrooper and one of the most intelligent voices on foreign affairs in the U.S. Senate, just returned from his ninth trip to Iraq, where he saw this tension between politics and progress. Six months ago, he noted, the Sunni town of Tall Afar, near the Syrian border, had been held up as an example of the success of Washington's new "clear, hold and build" strategy. Insurgents had taken over the town. The Third Armored Cavalry Regiment had repelled them, secured the streets and won over the local population. But the Shia-dominated government in Baghdad had since ignored all appeals for money for reconstruction (the "build" phase), which has meant few new jobs. Many Sunni areas complain of similar treatment from Baghdad. Tall Afar is now sliding back into instability. Thus a smart American strategy falls prey to the political realities in Iraq.

From the beginning of the war, the Bush administration has not wanted to think of Iraq in these sectarian terms, preferring instead to believe the country was the place it hoped it would be—united, secular, harmonious, freedom-loving. As a result, Washington massively underestimated the challenge it faced. By unseating Saddam Hussein and introducing democracy, the United States introduced Shia-majority rule to Iraq. It also disbanded the Army, with its largely Sunni officer corps, fired 50,000 mostly Sunni bureaucrats and shut down dozens of state-owned factories (many run by Sunnis). In effect, the United States destroyed both the old Iraqi nation and the old Iraqi state. And yet it had no plan, people or resources to fill the void left behind.

With all the troops in the world, America could not forge a new national compact for Iraq. That is a task for the Iraqi leadership. The outlines of the deal that needs to be made are by now obvious. Iraq would end up a loose confederation, but would divide its oil revenue so that all three regions were invested in the new nation. A broad amnesty would be granted to all those who have waged war, which means mainly the Sunni insurgents, but also members of Shia death squads. Government and state-sector jobs, the largest share of employment in Iraq, would be distributed to all three communities, which would entail a reversal of the postinvasion purges that swept up, for example, schoolteachers who happened to be members of the Baath Party. Finally, and perhaps most urgently, the Shia militias must be disbanded or, if that becomes impossible, incorporated and tamed into national institutions.

What is equally obvious is that such a deal does not seem to be at hand. The Shia leadership remains extremely resistant to any concessions to its former Sunni overlords. The Shia politicians I met when in Baghdad, even the most urbane and educated, seemed dead set against sharing power in any real sense. In an interview with Reuters last week, Prime Minister Nuri al-Maliki also said he believed that if Iraqi troops were left to their own devices, they could establish order in six months in Iraq. It is not difficult to imagine what he means: Shia would crush Sunni, and that would be that. This notion—that military force, rather than political accommodation, could defeat the insurgency—is widely shared among senior Shia leaders. Abdul Aziz al-Hakim, the head of the single largest political party in Parliament, has made similar statements in the past. While they will occasionally say the right things, as Maliki did in his first week in office, their reluctance to fund projects in Sunni areas, or to investigate death squads, suggests they have little appetite for broader national reconciliation.

The Sunnis, for their part, seem consumed by their own anger, radicalism and feuds. They remain so incensed with the United States for their loss of power that they have been, until recently, blind to the reality that if not for U.S. forces, they would be massacred. What political leadership the Sunnis have is weak and does not appear to have much leverage with the insurgents. There is no Sunni with whom to make a deal.

All sides in Iraq are preparing for the day the United States leaves. They are already engaged in a power struggle for control of the post-American Iraq. The Kurds have ensured that their autonomous region is governed essentially as a separate country with its own army. The largest Shia parties want to maintain their militias to bolster their own power base, independent of the state. And the Sunnis do not want to wind down the insurgency, for fear that they will be impoverished or killed in the new Iraq. Nobody believes that, after the Americans, this power struggle will be resolved with ballots. So they are all keeping their bullets.

If the United States were to leave Iraq tomorrow, it is virtually certain that the bloodletting would spread like a virus. American troops are effective at stopping shoot-outs among militias and the worst of the sectarian killings. But if there is no progress toward a lasting political resolution, all that those soldiers are doing is keeping the lid on tensions that will continue to grow. Thus Ramadi is captured by U.S. forces, which then leave, only to have to return and retake the city again. We might be able to pacify Baghdad, but will the calm last after the we leave? Even now, those places from which units have been drawn to control the capital, like Mosul, are reporting many more incidents of violence.

So what should the United States do? First of all, Washington has to make clear to the Iraqi leaders that its continued presence in the country at current troop levels is not sustainable without some significant moves on their part.

Iraqi leaders must above all decide whether they want America there. Perhaps the most urgent need is for them to help build political support for the continued deployment of U.S. forces. Right now the massive U.S. presence is allowing Iraq's leaders a free ride. With the exception of the Kurds, many of them play a nasty game. They publicly denounce the actions of U.S. soldiers to win popularity, and then, more quietly, assent to America's continued involvement. As a result, the proportion of Iraqis who now support attacks on U.S. troops has risen to a breathtaking 61 percent. The Iraqi people's frustration with the occupation is largely the result of its ineffectiveness, the lack of security and jobs, and abuses like Abu Ghraib. But those past errors cannot be undone. Iraqis must also realize that we are where we are, and that they can have either a country with U.S. troops or greater chaos without.

Iraq's Parliament should thus publicly ask American troops to stay. Its leaders should explain to their constituents why the country needs U.S. forces. Without such a public affirmation, the American presence will become politically untenable in both Iraq and the United States.

Next, Iraqis must forge a national compact. The government needs to make swift and high-profile efforts to bring the sectarian tensions to a close and defang the militias, particularly the Mahdi Army. The longer Iraqi leaders wait, the more difficult it will be for all sides to compromise. There are many paths to help Iraq return to normalcy; jobs need to be created, electricity supplied regularly, more oil produced and exported. But none of that is possible without a secure environment, which in turn cannot be achieved without a political solution to Iraq's sectarian strife.

There is one shift that the United States itself needs to make: we must talk to Iraq's neighbors about their common interest in security and stability in Iraq. None of these countries—not even Syria and Iran—would benefit from the breakup of Iraq, which could produce a flood of refugees and stir up their own restive minority populations. Our regional gambit might well lead to nothing. But not trying it, in the face of so few options, reflects a bizarrely insular and ideological obstinacy.

Unfortunately, there's a strong possibility that these changes will not be made in the next few months. At that point the United States should begin taking measures that lead to a much smaller, less intrusive presence in Iraq, geared to a more limited set of goals. Starting in January 2007, we should stop trying to provide basic security in Iraq's cities and villages. U.S. units should instead become a rapid-reaction force to secure certain core interests.

We can explain to the Iraqi leadership that such a force structure will help Iraqis take responsibility for their own security. Currently we have 144,000 troops deployed in Iraq at a cost of more than $90 billion a year. That is simply not sustainable in an open-ended way. I would propose a force structure of 60,000 men at a cost of $30 billion to $35 billion annually—a commitment that could be maintained for several years, and that would give the Iraqis time to come together, in whatever loose form they can, as a nation.

True, as we draw down, violence will increase in many parts of the country. One can only hope that will concentrate the minds of leaders in Iraq. The Shia government will get its chance to try to fight the insurgency its way. The Sunni rebels can attempt to regain control of the country. And perhaps both sides will come more quickly to the conclusion that the only way forward is a political deal. But until there is such a change of heart, the United States should stick to more limited goals.

The core national-security interests of the United States in Iraq are now threefold: first, to prevent Anbar province from being taken over by Qaeda-style jihadist groups that would use it as a base for global terrorism; second, to ensure that the Kurdish region retains its autonomy; third, to prevent or at least contain massive sectarian violence in Iraq, as both a humanitarian and a security issue. Large-scale bloodletting could easily spill over Iraq's borders as traumatized and vengeful refugees flee to countries like Iran, Syria and Saudi Arabia. Historically, such population movements have caused trouble for decades to come.

These interests are achievable with fewer forces. President Bush is fond of warning, "If we leave Iraq, they will follow us home." This makes no sense. Qaeda terrorists from Iraq could have made their way to America at any point in the last three years. In fact, Iraq's borders are more porous today than they have ever been. If a terrorist wanted to inflict harm on U.S. civilians, he could drive across Anbar into Syria, then hop a plane to New York or Washington, D.C. Does the president really believe that because we're in Iraq, terrorists have forgotten that we're also in America? Here's what we really need to worry about doing:

Battle Al Qaeda. In fact, the fight in places like Anbar is largely not a jihadist crusade against America, but a Sunni struggle for control of the country. The chances of Iraq's being taken over by a Qaeda-style group are nonexistent. Some 85 percent of the population (the Shia and Kurds) are violently opposed to such a group. And polls have consistently shown that the vast majority of Sunnis dislike Al Qaeda and Osama bin Laden. The real jihadists in Iraq are a small and unpopular band that relies on terror and violence to gain strength. They do not have heavy weapons—tanks, armored vehicles—and cannot hold territory for long. Were a deal between the Shia and the Sunni to be signed, Al Qaeda would be marginalized within months. In the meantime, U.S. Special Forces could harass and chase Qaeda terrorists just as they do in Afghanistan today.

Secure Kurdistan. The Iraqi Kurdish region is the one unambiguous success story of the Iraq war. It is stable and increasingly prosperous. Its politics are more closed and corrupt than most realize—the place is essentially carved up into two one-party states—but it has aspirations to become more market-oriented and more democratic. Perhaps most crucially, it is a Muslim region in the Arab world that wants to be part of the modern world, not blow it up. The simplest way for the United States to ensure the security of Kurdistan would be to give it a security guarantee.

There are various proposals to redeploy U.S. forces in the region. Beyond a token force, this seems unnecessary. The troops would be far from the problem areas of Iraq. And what would their mission be? To stop Kurdish secession? To get involved in battles between Kurdish separatists and the Turkish Army? Kurdistan can be defended quite easily with a political guarantee. And Kurdish leaders seem to recognize that, as with Taiwan, their de facto independence depends on their not demanding de jure independence.

Prevent a bloodbath. This is the most difficult task. The United States will not be able to stop all sectarian fighting in Iraq. It cannot do so even today. Our goal must be to ensure that any such violence remains localized and limited, and that national institutions like the Army and police work to stop it rather than participate. That will require some ability to control movement along Iraq's roads and highways. It will also require monitoring the Army and police. The strategy of pairing Iraqi Army units with U.S. advisers has worked well thus far. Iraqi forces don't fight superbly in the presence of Americans, but they fight much better and more professionally. Most important, they tend not to commit major human-rights abuses when we are around.

Draw down troops and ramp up advisers. To preserve these interests, the United States should begin drawing down its troop levels, starting in January 2007. In one year, we should shrink from the current 144,000 to a total of 60,000 soldiers, some 44,000 of them stationed in four superbases outside Baghdad, Balad, Mosul and Nasi-riya. This would provide a rapid-reaction force that could intervene to secure any of the core interests of the United States when they are threatened. To preserve the basic security of Iraq and prevent anarchy, U.S. troops must also act as the spine of the new Iraqi Army and police force. American advisers should massively expand their current roles in both organizations, going from the current level of 4,000 Americans to at least 16,000, embedding an American platoon (30 to 40 men) in virtually every Iraqi fighting battalion (600 men).

This plan might not work. And if it does not, the United States will confront the more painful question of what to do in the midst of even greater violence and chaos. The Brookings Institution's Kenneth Pollack is already working on a plan to address just such a worst-case scenario, in which U.S. forces establish "catchment basins" along the borders of Iraq to stop massive refugee flows. But there is also the possibility that Iraq's leaders will begin to face up to their challenges, move the country toward reconciliation and build up the capacities of their state. Civil strife tends not to go on forever. A new nation and a new state might well emerge in Iraq. But its birth will be a slow, gradual process, taking years. The most effective American strategy, at this point, is one that is sustainable for just such a long haul.

The Iraq war has had its achievements. A brutal dictator who tyrannized his people (killing about 500,000 of them), attacked his neighbors and for decades sought dangerous weapons is gone. One part of the country, Kurdistan, is indeed turning into a promising society. The many strains of Arab politics are negotiating for space in Iraq, through political parties and the press, in a way that one sees nowhere else in the region. But these achievements must now be consolidated, or they too will be at risk.

The lesson of Korea, where more than 30,000 U.S. troops are stationed to this day, is not that America should withdraw from Iraq completely. But to have any chance of lasting success, we must give up our illusions, scale back our ambitions, ensure that the worst does not happen. Then perhaps time will work for us for a change.

With Michael Hastings in Baghdad

The Cossacks Work for the Czar, Steve!

Steve Clemons is naive. Very naive:

The Washington Note: We are going to see the implosion of the Bush presidency I think -- and just like Watergate -- there needs to be space for the William Cohen types and Howard Baker types of this Congress to join in a collaborative spirit with Democrats to save this country. The problem... is... how reluctant the White House will be to cooperate -- even if the President wants to tack towards a new and constructive direction.... But Bush will not go quietly -- and more importantly -- the allies for a better direction in foreign policy who actually do exist in hidden corners of the Bush administration are dominated by Cheney's followers throughout the national security bureaucracy.

I think that the Baker-Hamilton report... will call for a new, expansive commitment to regional deal-making.... I think George Bush will find the report compelling -- and I think he will order his team to try and "operationalize" as much of the Baker-Hamilton report as possible. But it won't happen. It will be undermined in the weeds, in the nuts and bolts details, consensus will be derailed, themes reversed after Cheney convinces Bush that parts of the report are politically naive and dangerous to American and Israeli interests. I think it will be slowly torn apart by a thousand cuts....

Cheney doesn't need to tell his followers -- embedded in every significant part of the nation's national security bureaucracy -- what to do... they know what to do.... Cheney's acolytes will see a new equilibrium in the MIddle East as code for selling out Israel's security interests because they do see these issues in zero sum terms, even if the President of the United States does not (by then).

Cheney's people, if not neutralized, will derail any new opportunities or directions. They need to be exposed as part of the broad Cheney network and pushed to the side. That is the only way to let some other policy possibilities to take root in the next two years of the Bush administration.... [W]ithout neutralizing Cheney down to the roots of his power -- policy and political anarchy lie ahead for the country.

Steve believes that the Bush administration is like the Ottoman Empire under Sultan Selim the Sot: a weak, incompetent, and easily-led ruler dominated by evil viziers who are strong, incompetent, evil, and forceful. If only the bad viziers--Cheney and his friends--could be replaced by good viziers, all would be well.

Don't believe it. Stupid, ill-informed, and incompetent as he is, George W. Bush has views. He does not want to change his mind. And, whether or not there once was an opportunity to convince George W. Bush to follow not-insane, not-destructive, not-criminal, and not-stupid policies, that moment has passed.

In the real word, "neutralizing Cheney down to the roots of his power" requires impeaching and removing from office Cheney, Bush, Rumsfeld, Rice, Hadley, and company.

The cossacks work for the Czar, Steve.

When Microsoft Word Attacks!

Fontana Labs screams for help:

Unfogged: Section breaks in Word: Does anyone know how to get rid of these? I accidentally inserted one into a document (I wanted to set aside a block of text by using '*,' which autocorrrect irritatingly turned into a break), and my attempts to delete it just made it reproduce. Now my efforts (I highlight the text on either side of a break, then press 'delete') just move them somewhere else. A little whimsical music in the background and we'd have a charming children's movie about the alienation of modern life...

From Vernor Vinge's A Fire Upon the Deep:

And all the newborn [intelligence's] attention turned upon the fleeing [human] vessels. Microbes, but suddenly advanced. How could this happen? A million schedules were suddenly advanced. An orderly flowering was out of the question now, and so there was no more need for the humans left in the Lab. The change was small for all its cosmic significance. For the humans remaining aground, a moment of horror, staring at their displays, realizing that all their fears were true (not realizing how much worse than true). Five second, ten seconds, more change than ten thousand years of a human civilization. A billion trillion constructions, mold curling out of every wall, rebuilding what had been merely superhuman. This was as powerful as a proper flowering, but not quite so finely tuned...

In order to tame Microsoft Word, you need to know that hexapodia is the key insight--no, you need to know:

  • Control-z undoes whatever abomination Word has just committed.
  • Copy it into WordPerfect, turn on reveal codes, and fix it in a couple of seconds. As a matter of fact, always work in WP and then save as Word.

The last thing heard from Fontana Labs was:

Oh good Lord. Pasting an apparently clean section of text into a new document produces a row of these dots that wasn't in the original. I cannot believe this is happening...

Before the mighty Becks came to the rescue with:

What you're seeing is not a line of characters or even a drawing object. Rather, it's a border. By default, if you enter three or more hyphens (-), underscores (_), equal signs (=), or asterisks (*) followed by a carriage return, Word automatically gives the current paragraph a thin, thick, double, or dotted bottom border. You must have done this accidentally. To get rid of the line, put the cursor directly above it and select Borders and Shading from the Format menu. Click the None box and click OK. To prevent the automatic insertion of borders, select AutoCorrect Options from the Tools menu, click the AutoFormat As You Type tab, and uncheck Border lines. In Word 97, the menu item is AutoCorrect and the check box is labeled simply Borders...

FT: Kate Burgess and Jeremy Grant on U.S. Corporate Governance

Flaws in the legal structure underlying U.S. corporate governance: / Companies / Financial services: Investors "lack basic rights" on US boards By Kate Burgess in London and Jeremy Grant in Washington Published: October 27 2006 22:40 | Last updated: October 27 2006 22:40: Some of the world's largest investment managers have called on US regulators to give shareholders power to change the composition of US boards, claiming shareholders in US companies "lack basic rights which they take for granted in other developed countries%."

The call is a sign that one of the key tenets of US corporate governance -- limited shareholder access to company proxies for board elections -- is coming under attack from non-US investors as foreign ownership of US companies grows. In a letter to Christopher Cox, chairman of the Securities and Exchange Commission, the group calls on the regulator to allow investors to vote on the election of directors to "encourage more responsive and responsible boards" in the US. This might help to prevent recurrences of the "dismaying number of corporate scandals and board-level derelictions of duty in recent years" suffered by shareholders in US companies, it said....

Signatories of the letter... the group manages about $34,000bn in assets.

The move follows the delay this month of a key SEC meeting that was to address whether to allow shareholders more access to company proxies, one of the most sensitive issues on Mr Cox's agenda.The SEC was to have decided whether to let stand a recent US court ruling that had forced the regulator to reconsider its policy that blocked shareholder access to proxies where elections of board directors were concerned.

The issue has become a key battleground in US corporate governance. Shareholder rights activists have intensified efforts to get access to the proxy to have a say in the composition of company boards -- and therefore also in such matters as executive compensation...

America Swings Toward a Parliamentary System...

Michael Kinsley is the latest member of the chorus saying, "Vote the party, not the individual politician":

Guardian Unlimited | Comment is free | The electoral end of piety: In a remarkable editorial on Wednesday, the New York Times endorsed Diane Farrell for Congress from a district in Connecticut. Who is Diane Farrell? I have no idea, and the Times didn't seem to have much of one. After eight years as first selectman of Westport (a position similar to that of a mayor), the paper noted somewhat desperately, "she has a better understanding than most legislators of the impact of federal mandates and tax policy on local government". By contrast her opponent, Christopher Shays, has held the seat for almost 20 years and been endorsed by the Times "in every race in which he has faced a serious opponent" - until now.

Shays is a Republican, but not excessively so. He's moderate in policy and in temperament. In fact he's just the kind of Republican the Times ordinarily likes to dig up and endorse in order to prove that it's not blindly Democratic. Yet the Times decided to "strongly endorse" Shays's opponent entirely because she's a Democrat. Or rather because she is not a Republican: "Mr Shays has been a good congressman, but not good enough to overcome the fact that his re-election would help empower a party that is long overdue for a shakeup."

One of the axioms of democratic piety in the US is that you vote for the person, not the party. People love to say, "I evaluate each candidate on his or her own merits" - even when it's not true.... But this year does seem to be different. You hear people say - though rarely as forthrightly as the Times - that they are voting for the party, not the person. Well, more accurately, they say they are voting against the party, not the person... voting for the Democrat simply out of anger at or frustration with the Republican party.

The pious view is mistaken. There is nothing wrong with voting for the party, not the person. In other democracies, such as Britain, this person-not-the-party piety is unknown and would be hard to comprehend. A candidate for parliament runs on a party platform promising various things, and if that party wins a majority of seats it "forms a government". You would be silly to vote for the person and not the party. The party's views are what counts. The person's own views are almost irrelevant.

Even under the American arrangement there is nothing ignoble about voting the party line. It is an efficient way to minimise your information costs.... A candidate's party affiliation doesn't tell you everything you would like to know, but it tells you something. In fact it tells you a lot - enough so that it makes sense to vote for your party preference even when you know nothing else about a candidate. Or even to vote for a candidate that you actively dislike...

The Current Cinema

Movies worth watching:

DELIVER US FROM EVIL: Documentary, 01:41 minutes, Rated NR: This spellbinding documentary about a notorious pedophile priest deserves to be in the running for an Oscar. Filmmaker Amy Berg makes a strong case for a cover-up of Father Oliver O’Grady’s heinous acts by the Roman Catholic hierarchy in California. When she catches up with him in Ireland, where he was deported after his conviction for sexual abuse, he’s leading the life of Riley. He seems eerily removed from his wrongdoings, as if he were an actor playing a pedophile.

THE DEPARTED: Action/Adventure, 02:30 minutes, Rated R: This is Martin Scorsese’s most enjoyable film in years, and his first in 15 years that isn’t a failed attempt at a masterpiece, but rather a fabulously successful attempt at a good movie. Matt Damon is a police mole, working for a gangster (Jack Nicholson), and Leonardo DiCaprio is a spy working for the police from within the gangster’s crew, in this complicated, irresistible and always entertaining picture.

THE LAST KING OF SCOTLAND: Drama, 02:03 minutes, Rated R: An immediate contender for Oscar consideration and a spot on critics’ top 10 list, this startlingly original drama imagines a fictional relationship between Ugandan dictator Idi Amin and a young Scottish physician who becomes one of his closest confidants. Forest Whitaker gives the performance of his career as the strongman, playing him as a charming seducer who only occasionally shows sides of the madman within. James McAvoy is the doctor who finds the lure of power irresistible.

THE SCIENCE OF SLEEP: Drama, 01:45 minutes, Rated R: Flying solo for the first time as a screenwriter, French director Michel Gondry proves he has more of a sense of humor than was evident in “Human Nature” and “Eternal Sunshine of the Spotless Mind.” Gael García Bernal is both funny and edgy as an aspiring graphic artist in Paris who has trouble distinguishing between his dreams and waking life. This becomes particularly problematic when he falls for his neighbor, played by Charlotte Gainsbourg. The best way to enjoy this mind-bender is to not try to make sense of it. Just let it wash over you.


When We First Saw the Grizzly, It Was Half a Mile Away Across a Meadow...

Nouriel "Grizzly" Roubini (as Andrew Samwick calls him) looks back at his successful forecast of Q3 GDP growth:

RGE - Q3 GDP growth dismal at 1.6%; expect further slowdown in Q4 and recession by 2007: The first estimate of Q3 GDP growth is a dismal 1.6%, sharply lower than the 5.6% of Q1 and the 2.6% of Q2. In July - when I first predicted a US recession in 2007 - I forecasted that Q3 GDP growth would be 1.5% at the time when the market consensus was 3.1%. Given the onslaught of bad macro news in the fall professional forecasters started to cut their Q3 forecasts from 3.1% to 2.5%, down to 2.2% last week and 2% this morning. They were still wrong and overoptimistic as the actual first estimate came as 1.6%, only an epsilon higher than my July forecast of 1.5% (the same forecasters had gotten Q2 wrong too; my spring forecast for Q2 was 2.5% versus a consensus of 3.2%; the actual figure ended up being 2.6%).

The weakness in Q3 growth is widespread: real residential investment fell at an annualized rate of 17.4%, much worse than the 11.1% drop of Q2; the trade balance was a negative drag on growth as the trade deficit widened sharply in Q3 relative to Q2; inventory accumulation was slightly lower in Q3 than in Q2 thus being a small drag on growth as well; non durable consumption grew only at an annualized rate of 1.6%; and while durable consumption grew faster in Q3 than in Q2 you can expect significant slowdown in durable consumption in Q4 as the glut of autos and housing related durables consumption takes a hit on the economy. Even non-residential investment in structures that was growing at an annualized rate of 20.3% in Q2 slowed down its growth to 14% in Q3: you can expect a much sharper slowdown in such non-residential investment in Q4 and 2007 for reasons discussed below. Real investment in software and equipment – that had fallen in Q2 – recovered in Q3 to a 6.4% growth rate; but further weakness in the economy in Q4 and 2007 will lead to a significant slowdown in such investment in the quarters ahead.

What do these Q3 growth figures imply for Q4 and 2007 GDP growth? Expect today the usual spin with the soft-landing optimists – who were altogether wrong on Q2 growth and even more wrong on Q3 growth – having already started to spin the fairy tale of a Q4 rebound.

This Q4 rebound has, so far, no base or data behind it: residential investment will be falling at a faster rate in Q4 than in Q3 given recent data on building permits and housing starts; non-residential investment that was, until now, growing very fast will sharply decelerate in Q4 and much more in 2007: see the lead story in the WSJ today referring to a McGraw Hill Construction study forecasting a rapid fall in construction spending in 2007 (including non residential construction and specifically stores and shopping centers), the first decline of construction spending since 1991. This weakness in residential and non-residential construction will directly affect retail activity where employment has already started to fall. Expect in Q4 and 2007 actual fall in durable consumption (autos, housing related consumption such as furniture and home appliances and other big ticket items) as the housing slowdown, the fall in home prices and the negative wealth effects of falling prices and reset of ARMs take a toll on consumption, especially housing-related durable one. Given the ongoing sharp slowdown in the economy, real investment in software and equipment will be growing less in Q4 and 2007 than in Q3. And both inventories and trade are likely to remain a drag on growth in Q4 as inventory adjustment will continue (with demand growing less than production) while a strong dollar will further widen the trade deficit in spite of the economic slowdown.

The first leading indicator of economic activity for October – the Philly, Richmond and Chicago Fed reports – are all consistent with a further economic slowdown in Q4 relative to Q3. I thus keep my forecast that Q4 growth will be between 0% and 1% and that the economy will enter into an outright recession by Q1 of 2007 or, at the latest, Q2...

Greg Mankiw: For Higher Gas Taxes

Greg Mankiw goes on the offensive against the the letters the Wall Street Journal editorial page chooses to publish:

Greg Mankiw's Blog: Alternatives to the Pigou Club: Today's Wall Street Journal prints various letters in response to my oped on gas taxes.... [L]et me try to spell out more generally the alternatives from which we must choose.... [Y]ou most likely fit into one of these... categories.

  1. You deny the existence of these externalities [from pollution from auto emissions] as a type of market failure. Perhaps you think you live in a Coasian fantasy world where people bargain without transaction costs to reach efficient allocations. (Note: I am not suggesting that Coase himself thought we lived in such a world--he considered it only a useful thought experiment.)
  2. You recognize the externalities but you don't think the government should try to respond to them. You are such a believer in small government that you are willing to live with inferior economic outcomes, such as pollution and congestion.
  3. You recognize the externalities, think the government should try to correct them, but think the current low taxes we put on gasoline are sufficient. In this case, you have weighed and rejected the evidence, such as that of Parry and Small, that higher Pigovian would be optimal. (Parry and Small calculate an optimal tax of $1.01 for the United States in today's dollars. After my proposed phase-in of a $1 hike, the U.S. tax would be $1.40. Assuming 10 years of 3 percent inflation, the tax in real terms would approach almost exactly what Parry and Small recommend. By the way, the published version of Parry and Small was in the American Economic Review, September 2005.)
  4. You recognize the externalities but think the government should try to correct the market failure through regulations (such as CAFE standards) or through market-based solutions that do not raise government revenue (such as cap-and-trade systems). Perhaps you are concerned that government would waste the extra revenue on useless government programs.

Let me respond to group 4, because my guess is that this is the largest group of antipigovians.

The reason I am less concerned that the extra revenue will be spent is that it already has been spent. The federal government has promised benefits to the elderly far in excess of what it can pay. At some point the nation will have to reckon with the looming fiscal gap. The most likely political compromise will involve higher tax revenue. We should, therefore, be ready to increase revenue in a way that does the least damage--or, better yet, the most good. If not Pigovian taxes, then other taxes will be increased.

An optimistic libertarian might hope that we can deal with the looming fiscal gap without raising the ratio of taxes to GDP above its current level. I wish I could believe that this were possible. In a previous oped, I advocated increasing, slowly but substantially, the age of eligibility for Social Security and Medicare. But even if we could scale back government spending in such a radical way, Pigovian taxes would not lose their appeal. Let's use the extra revenue from Pigovian taxes to reduce distortionary taxes, such as income taxes. Politically unrealistic, you say? Surely, if a future government were so libertarian as to manage a radical reduction in entitlement promises to the elderly, it would have no trouble delivering equally radical cuts in income taxes. In fact, the tax cuts would be the easy part of the package....

Let me try to put the issue in terms of a flow chart.

Question: Do you believe consumption of gasoline is free of negative externalities leading to market inefficiency? If YES, you are part of group 1. If NO, continue.

Question: Do you believe that public policy should ignore these externalities? If YES, you are part of group 2. If NO, continue.

Question: Do you believe the current tax on gasoline sufficiently internalizes the negative externalities? If YES, you are part of group 3. If NO, continue.

Question: Do you believe the best remedy for the remaining externalities is a regulatory system rather than a higher tax? If YES, you are part of group 4. If NO, you are a member of the Pigou Club.

I think most most muembers of Group 4 believe that Greg Mankiw's Pigovian taxes on gasoline and other carbon emissions would be a good thing, but don't think that we can get there easily in today's political climate--especially with a Republican Party that doesn't care about balancing the budget at all but has a large fundamentalist wing opposed to all tax increases that might stabilize our fiscal situation and avoid running big risks of future disasters. CAFE is not a way of avoiding "taxing"--it's a way of getting the auto companies to collect the tax (and rebate the revenue to purchasers of fuel-efficient cars). It's an inefficient policy with little pollution-reduction bang for its excess-burden buck, but it is one that Mankiw's political masters might accept--you see, it isn't called a "tax." The same holds for tradeable permit schemes.

Most members of Group 4, I think, aren't opposed to taxing gasoline in a Pigovian way. What they are is opposed to calling the tax a tax, because they believe Republican politicians need a way to save face.

The Wall Street Journal editorial editors' choice of letters is pathetic: two from lobbyists (one of whom falsely and shamelessly claims to be a "policy wonk") who they decide deserve to run free ads, one dork from Carmel denying that demand for gasoline is not price-sensitive at all, one dork from Fort Worth calling Greg Mankiw(!!!) a socialist, and one confused person from Atlanta who doesn't seem to understand that Mankiw's gasoline tax is pro-growth (when growth is properly measured, that is):

October 26, 2006;PageA19

Higher Gas Taxes Will Never Make Americans Abandon Their Cars Missing from N. Gregory Mankiw's interesting proposal to raise the federal gasoline tax by $1 over the next 10 years ("Raise the Gas Tax," editorial page, Oct. 20) is any context or explanation of why the tax is collected in the first place. It generates dedicated revenue for the Highway Trust Fund that is used solely for transportation programs. The federal gas tax finances almost 45% of all public investments in road improvements each year.

Prof. Mankiw says boosting the gas tax would get people out of their cars and force them to live closer to where they work, thereby reducing road congestion. Yet there is no evidence to suggest this would happen based on the most current Census Bureau data. More than 80% of commuters drive to work alone. That trend will continue in the future.

To much fanfare, the U.S. population officially reached 300 million Oct. 17, and is expected to reach 400 million by 2043. America's highways, bridges and transit systems are now crumbling because of years of under-investment by all levels of government. Between now and 2043, based on current trends, highway capacity will grow only 9%, but traffic levels will swell by 135% to more than seven trillion vehicle miles traveled annually. The average motorist can expect to spend 160 hours stuck in traffic delays, or the equivalent of four weeks each year. It's a recipe for a gridlocked nation, absent any new highway and transit investment that adds major new capacity.

Providing and maintaining the transportation infrastructure is a core function of government. Let's increase the federal gasoline tax, but let's make sure it's used for its intended purpose -- maintaining and improving the highway and public transit systems so crucial to America's mobility, national security, economic strength and global competitiveness.

Matthew J. Jeanneret
Senior Vice President
Communications & Marketing
American Road & Transportation Builders Association

Whew! That was dizzying. Tax-cuts convert to the left of me, raise the gas tax to the right! Keep this up and I will need to start wearing a switchable eye patch to prevent vertigo. As regards the gas tax, did Prof. Mankiw see less traffic during the recent price run-up at the pumps? Concerning high fuel taxes in Europe, he would have plenty of time in traffic there to read The Guardian or Le Figaro. On the subject of efficiency, I can hardly wait to watch the Fed spend that tax windfall.

Charles Dusenbury
Carmel, Calif.

Count me in as a policy wonk who thinks Prof. Mankiw's self-described "wacky" idea of raising the gas tax is one that should stay on the dusty shelf of economic theory and not in the practical world of public policy. Giving politicians more gas tax revenues is like giving your car keys and a bottle of gin to a teenager.

Over the past 25 years, governments at all levels have collected twice as much in gas taxes ($1.34 trillion in today's dollars) as the domestic oil companies have earned collectively in profits ($643 billion). In only three of those years (1980, 1981 and 1982) did industry profits exceed government's annual tax take. Add on corporate income tax payments and government's total tax take from the industry rises to $2.2 trillion in today's dollars. Not only has this made no dent in the federal deficit, but it has given Washington the means to fund such boondoggles as the Bridge to Nowhere.

Moreover, our great national experiment of trying to use tax policy to dampen consumption is now the textbook definition of the law of unintended consequences. According to the Congressional Research Service, the 1980 windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil. The French have some of the highest gas taxes in Europe yet remain 100% dependent on foreign oil.

As I'm sure Prof. Mankiw teaches his students, taxes should simply be a means of funding government programs, not a tool for advancing social, political or economic agendas.

Scott A. Hodge
Tax Foundation

Whenever I read an article or listen to someone crow about raising the gas tax, I am reminded of how far removed some people are from the rest of us who have to work for a living. Every point in Prof. Mankiw's commentary boils down to improperly using the tax code to force a certain behavior and enact social change, all in a quest to show us poor folks who have to drive to work, to the store or to pick up the kids that we're just not in line with the professor's progressive thinking. If being in traffic makes Prof. Mankiw wish the rest of us would drive less, reading socialist diatribes like his makes me wish people like him would write less.

Kevin C. Carpenter
Fort Worth, Texas

Prof. Mankiw suggests that federal taxes on gas should be raised to levels of half that of Britain in order to, among other reasons, grow the economy. While his logic of shifting the tax code's focus from punishing productivity to encouraging consumption is right-headed, I must point out that the U.K. is a country in which both consumption and productivity are taxed at high rates, to the detriment of the economy. It is no stretch of the imagination to see Congress imposing the same misguided policies in the U.S. Instead, the entire focus of our tax code should be shifted from punishing productivity to encouraging consumption. Ultimately, Congress and the people would be playing for the same team.

Simon Arpiarian

The Economist Gets a Base Hit

On the other hand, here is the Economist doing what the Economist does well:

Free exchange | IT IS HARD to contemplate the new US GDP figures without a mental image forming of Republican campaign strategists rolling around on the ground, gripping their bellies and moaning "It hurts! It hurts!" Second quarter GDP growth was a lacklustre 2.6% (annualised), well below economists expectations. This morning (this afternoon, here in London) the news came that America's economy had disappointed again, growing by just 1.6% in the third quarter, rather than the 2.2% that economists had been expecting. There has been a tepid attempt to bring up the Dow's record levels, but this has fallen rather flat: the record isn't a record if you adjust for inflation, and anyway, the Dow isn't a very good proxy for economic health, or even investor confidence. It has only thirty companies in it, and these are weighted by cost rather than market capitalisation, which means that it is easily blown about by outsized movements in the prices of a few stocks. The S&P 500, which is much more representative, is still well below its 2000 peak.

In the New York Times on Tuesday, Eduardo Porter wrote This Time, it's Not the Economy:

President Bush, in hopes of winning credit for his party’s stewardship of the economy, is spending two days this week campaigning on the theme that the economy is purring. “No question that a strong economy is going to help our candidates,” Mr. Bush said in a CNBC interview yesterday, “primarily because they have got something to run on, they can say our economy’s good because I voted for tax relief.”

But Republican candidates do not seem to be getting any traction from the glowing economic statistics with midterm elections just two weeks away...

We'd suggest that this is because the statistics, like GDP, are not actually glowing; in fact, they're barely emitting enough light to check your watch by. Even fantastic headline numbers, like 4.6% unemployment, disguise weak wage growth and sagging labour force participation. Perhaps even more problematically for the Republicans, what growth there is isn't being felt by the average voter. Companies are increasing compensation--but they're spending it on benefits like health insurance, which doesn't feel the same as a wage increase even if you're one of the unlucky few who gets a $100,000 cancer treatment out of it. And income growth is concentrated among the wealthy, who are too few to swing an election...

TV: Nightly Business Report Commentary: Monday October 23, 2006: The Pace of Technological Change

Here's an interesting perspective on the global economy in the very long run: the pace of technological progress today--the speed with which we increase our productive capabilities--is roughly one hundred times what it was as recently as four centuries ago.

In the year 1 world population was about 180 million. In the year 1650 it was about 540 million. This tripling of world population was accompanied by very little improvement in standards of living: peasants--and most people were peasants--were as short, as malnourished, as hungry, and as sick in 1650 as in 1500. World real GDP only tripled in 1650 years--a pace of real GDP growth of roughly 0.07% per year, two-thirds of which is due to the fact that each mouth comes with two hands. The improvement in productivity in the pre-industrial world? 0.02% per year.

Compare and contrast that to the more than 2% per year of real productivity growth in the world economy today.

I'm Brad DeLong.

The Soft Bigotry of Low Expectations

The soft bigotry of low expectations. Kevin Drum is excited at a Washington Post

The Washington Monthly: SLEAZY ADVERTISING....Michael Grunwald writes an honest piece today in the Washington Post about the wildly negative campaigning going on in the Republican camp this election cycle. He briefly suggests that "some Democrats are playing rough, too" -- and provides a couple of examples -- but immediately acknowledges that virtually all Democratic ads have focused on policies and performance. Not so on the other side:

The result has been a carnival of ugly, especially on the GOP side, where operatives are trying to counter what polls show is a hostile political environment by casting opponents as fatally flawed characters. The National Republican Campaign Committee is spending more than 90 percent of its advertising budget on negative ads, according to GOP operatives, and the rest of the party seems to be following suit.

See? It's not so hard to simply report the facts, is it?

Very sad.

Mark Spiegel: Did Quantitative Easing by the Bank of Japan Work?

Mark Thoma sends us to Mark Spiegel on the channels of monetary policy:

Economist's View: FRBSF: Did Quantitative Easing by the Bank of Japan Work?: The San Francisco Fed has an Economic Letter assessing of the Bank of Japan's policy of quantitative easing from 2001 to 2006. Here's the introduction and conclusion to the study:

Did Quantitative Easing by the Bank of Japan "Work"?, by Mark M. Spiegel Vice, FRBSF Economic Letter: On March 19, 2001, the Bank of Japan (BOJ) embarked on an unprecedented monetary policy experiment, commonly referred to as "quantitative easing," in an attempt to stimulate the nation's stagnant economy.

Under this policy, the BOJ increased its target for "current account balances" of commercial banks at the BOJ far in excess of their required reserve levels. This had the expected impact of reducing the already low overnight call rate (which is roughly equivalent to ... the federal funds rate) effectively to zero. In addition, the BOJ committed to maintain the policy until the core consumer price index registered "stably" a 0% or a positive increase year on year. The policy was lifted five years later, in March 2006. At the launch of the program, many were skeptical that it would have any impact on the real economy, as overnight interest rates were already close to zero, so flooding Japanese commercial banks with excess reserves would only amount to a swap of two assets with close to zero yields.

Now that the program has been lifted, several studies have attempted to assess its impact through a number of channels. These include a direct effect of increases in current account balances, an impact on the expectations of market participants, increased central bank purchases of long-term Japanese government bonds (JGBs) that would reduce long-term interest rates, and an encouragement of greater risk-tolerance in the Japanese financial system....

Conclusion: The results ... are just now making their way into the literature, but several patterns already have emerged. First, the primary evidence for the real effects of quantitative easing appears to be associated with ... some measurable declines in longer-term interest rates. These have been associated with both changes in agents' expectations of future interest rate levels and with purchases of "nonstandard" assets, such as longer-term JGBs. As these policies often occurred simultaneously, it is difficult to discriminate between the two. Second, there appears to be evidence that the program aided weaker Japanese banks and generally encouraged greater risk-tolerance in the Japanese financial system.

While these outcomes appear to be consistent with the intentions of the program, the magnitudes of these impacts are still very uncertain. Moreover, in strengthening the performance of the weakest Japanese banks, quantitative easing may have had the undesired impact of delaying structural reform...

The idea that direct injections of liquidity into the economy may work to stimulate spending even without having effects on interest rates is an old one, and one that I have always viewed with skepticism. Somebody's behavior has to be changing in order for spending to go up. And it is hard to see how behavior can change without changing some financial market prices and interest rates somehow, somewhere.

Daniel Gross on Dow 12000

Mark Thoma watches as journamalism in the interest of reprinting Republican talking points drives Daniel Gross into shrill unholy madness:

Economist's View: The Real Dow 12,000 Story: Daniel Gross on a new Republican talking point, "Dow 12,000":

How Now, Grown Dow?.... The Dow Jones industrial average first closed above 12,000 on Oct. 19, and has remained above that lofty benchmark ever since.... Dow 12,000 quickly became a Republican talking point.... So far, Republican candidates don't seem to be benefiting from the Dow record, which is less surprising than it seems. For starters, the Dow's success does not mean that stock-market investors in general are thriving, because the Dow... as an overall stock-market proxy and investment tool, it's an also-ran.... The S&P 500... is a much more accurate gauge.... [T]he claim that "the stock market" is at an all-time high simply doesn't match most investors' experiences.... 12,000 doesn't really even represent a record high for the Dow.... In real terms, the Dow is still nowhere near the peak it hit several years ago....

[S]ome of those who are trumpeting the high nominal value of the stock market are urging people to focus on the real, inflation-adjusted value of another asset that has been at record highs recently. Take a gander at George Will's absurd column last week.... Will celebrates the record nominal high in stock prices but urges readers to focus on the real price of oil. By mixing and matching real and nominal, Will could just as easily have argued that oil is more expensive than it has ever been, while the Dow is barely at the level it reached in 1999. If Democrats controlled the levers of power, he'd be making precisely that argument...

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

The Economist blows yet another one:

Corporate crime | Jail time for Jeffrey | : Is the sentence handed to Enron's ex-boss excessive?

The sentence of 24 years and four months handed to the former boss of Enron on October 23rd is slightly less than the record-breaking 25 years in prison being served by Bernie Ebbers, the former boss of WorldCom.... Skilling's lawyers had sought a sentence of just seven to ten years, citing his good works in the community and the fact that his convictions for fraud and insider trading, connected with the collapse of Enron in 2001, were his first....

[T]here are growing worries about the severity of America's white-collar sentences, which treat bosses more harshly than drug dealers and some murderers.... America also treats white-collar offenders more severely than other rich countries. Nick Leeson... who brought down Barings Bank, served just four years of a six-and-a-half-year sentence. And South Korea's courts sentenced Kim Woo Choong, a former boss of Daewoo, to ten years--despite his fleeing the country after the group collapsed.

That Mr Skilling's sentence was so much harsher than that of Andrew Fastow, the former chief financial officer whose role in Enron's collapse was far clearer, has also caused disquiet. Lawyers feel that Mr Fastow, who received a six-year sentence last month, was rewarded for co-operating with prosecutors, while Mr Skilling was punished simply for asserting his constitutional right to go to trial.

His conviction and lengthy sentence highlight America's growing "criminalisation of agency costs", says Larry Ribstein, a law professor at the University of Illinois. To get the benefits of diversified public ownership of firms, shareholders must delegate responsibility to managers, or agents. But agents do not always do the right thing by shareholders. Should such agency costs be handled by means other than criminal prosecutions and jail terms? Mr Ribstein thinks so. Civil litigation against managers and stricter corporate governance might be less costly and less likely to discourage legitimate risk-taking, he says...

What "legitimate risk taking" could possibly be discouraged by sending Mr. Skilling to jail? This makes sense only if telling your CFO to commit fraud in order to push losses off into future years is "legitimate risk taking."

Quality control, people. Quality control. The suggestion that fraud by managers be dealt with only by civil litigation is as stupid and short-sighted as the suggestion that theft and violence be dealt with only by civil litigation.

Dan Bogart on Private vs. Public Ownership of Railroads Economics Faculty: Dan Bogart

A seminar last Monday, October 23, 2006, that I am sorry I missed (I was in a committee meeting). Dan Bogart from UC Irvine:

Dan Bogart (2006), "Private Ownership and the Development of Transport Systems: Cross-country Evidence from the Diffusion of Railroads in the 19th Century"

Railroads played a key role in 19th century economic growth, particularly in middle to low income countries. Despite their high benefits, there were large differences in railroad diffusion across countries. This paper investigates whether the degree of private ownership can explain the cross-country differences in railroad diffusion and investment. It uses a new data set on the number of track miles owned by private companies in over 40 countries, provinces, or colonies between 1840 and 1912. The initial results show that greater private ownership increased railroad miles per capita and railroad investment per capita after controlling for GDP per capita, political institutions, as well as country and year fixed effects. The findings address the historical and contemporary debate about the merits of public versus private ownership. Most countries in the 19th century faced a choice between direct funding through public ownership or private ownership with indirect funding through government subsidies. My findings suggest that countries which had greater private sector participation tended to have higher railroad diffusion and investment.

"Do Men Pay For Fertility?" (May-You-Be-the-Mother-of-a-Hundred-Sons Blogging)

Ted Miguel and I want to sell Raj Arunachalam as high as we can on this year's economics Ph.D. job market:

Raj Arunachalam and Suresh Naidu (2006), "Do Men Pay For Fertility? Marriage Market Effects of a Family Planning Experiment in Bangladesh":

We construct a model of the marriage market in which prospective mates consider the outcome of intrahousehold bargaining over fertility. We show that as the price of controlling fertility falls, brides' families compensate men to attract their daughters into marriage. We test the model using retrospective data from the highly-successful Matlab family-planning experiment in Bangladesh in the 1970s. Our difference-in-differences estimator finds that the Metlab program more than doubled bride family-to-groom family marital transfers (i.e. dowry). Using an instrumental variables approach, we find that each additional expected birth reduced dowry by approximately 45%. Our results suggest that marital institutions may dampen the welfare benefits of family planning for women.

Economic History Lunch, Evans 597, October 27, 2006.

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

The Wall Street Journal editorial page strikes again. Eliot Cohen says that it is time for "Plan B" in Iraq. But then he refuses to tell us what his favored "Plan B" is. Instead he calls for an "honest debate."

What good can possibly come from somebody who demands that somebody else come up with "Plan B"? Particularly since he begins by saying "It will be important in future years to settle whether the Iraq war was the right idea badly executed, an enterprise doomed to disappoint, or simply folly. There will be individuals to be held accountable... and institutions whose shortcomings require not only soul-searching but reform. That's for later"--in other words, "please don't make the people that I and my friends supported for so long come clean now"?


If he wants to play this hand, he needs to ante up--to set out his favored "Plan B":

Plan B - By ELIOT A. COHEN: That the Iraq war is, if not a failure, failing, requires little demonstration. By all measure... things have been getting worse.... [T]he police... are penetrated by militias. Iranian influence spreads, and Iranian-designed and -manufactured improvised explosive devices inflict higher tolls on American troops. With an eye to the forthcoming American elections, the enemy is ratcheting up the violence, and successfully.

It will be important in future years to settle whether the Iraq war was the right idea badly executed, an enterprise doomed to disappoint, or simply folly. There will be individuals to be held accountable (not all of whom have been in the crosshairs of journalists and partisans), and institutions whose shortcomings require not only soul-searching but reform. That's for later. The question now is, what should we do?...

[W]hat are the alternatives?... [1. T]urning to Iran and Syria to, in effect, bail out the U.S.... [2.] Simple withdrawal.... [3.] Double your bets. Conversely, the U.S. could react by reasserting its strength in Iraq -- sending an additional 30,000 or 40,000 troops to secure Baghdad and its environs, and making a far more strenuous effort than it has thus far to take control.... [4.] The U.S. military, at its current strength or something less, could, conceivably, simply retreat to its forward operating bases, do its best to train a neutral and effective military and police force, and allow communal violence to take its course.... Back to counterinsurgency. One school has it that the U.S. should never have engaged directly in combat with Iraqi insurgents. Instead, it should have focused overwhelmingly on the training mission.... [5.] A junta of military modernizers... [6.] Break it up....

All of the options for Plan B are either wretched to contemplate or based on fantasy; the most plausible (the sixth option, a coup which we quietly endorse) would involve a substantial repast of crow that this administration will be deeply unwilling to eat....

An honest debate about Iraq policy will require of all who participate in it to acknowledge some unpleasant facts.... [T]he enemy (or rather, enemies, of us and of one another) exercises a vote.... American prestige has taken a hard knock; it will probably take a harder knock, and in ways that will not be restored without a considerable and successful use of American military power down the road. The tides of Sunni salafism and Iran's distinct combination of messianism and power politics have not crested.... Whether it be the Islamization of the Israeli-Palestinian conflict, the subversion of conservative regimes by salafist movements, or the continuing radicalization of European Muslims, the Long War, as the administration calls it, will be even longer, and more difficult, than anyone might have thought.

It is folly to think we can win in Iraq the way some of us thought possible in 2003. It would be even greater folly to think that by getting out, learning our lessons, and licking our wounds we can save ourselves from considerable danger, expense, effort and loss in what remains a protracted and global conflict with mortal enemies.


I see three options:

  1. Pay the price that Egypt and others will demand for putting 500,000 Arabic speaking military policemen in Iraq to create stability-- that price will probably include a lot of foreign aid and a settler-free Palestine on the West Bank.
  2. Mobilize America: start drafting and train our own million-strong peace-and-security-maintenance force.
  3. Strike whatever deal we can with--get whatever commitments we can from--Iran and Syria to stabilize Iraq, and pull out.

I favor (1), and then (3). (2) is unthinkable, in my view, until after the impeachment and removal from office of Cheney and Bush.

Oil is Rather Expensive

Brad Setser is skeptical:

RGE - Not so big worries for big oil -- even at $60 a barrel, oil is rather expensive: I would be the first to concede that $60 isn't $80. Or even $70, the average price for oil (at least the good sweet light easy to refine stuff) in the second and third quarter. US consumers - at least those in those parts of the income distribution that haven't seen big rises in their nominal-let-alone real wages -- were starting to feel really squeezed with oil at $80. Now, they can afford to fill up their tank and still buy at least a few things at the local Walmart.

But the premise behind Chip Cummins' A2 Wall Street Journal article still seemed a bit off. If you invested in a lot of oil fields that were expected to be profitable if oil averaged $20 a barrel, you will certainly make more money if oil is at $80 -- or even $70 -- than if oil is at $60. But I am pretty sure that you will be making money even if oil is hovering around $60 a barrel.

Equity markets are not my thing. But given the change in the trajectory of oil prices, I cannot imagine that anyone holding an oil companies' stock would expect oil companies to be able to sustain the kind of revenue growth they enjoyed when oil was steadily climbing up now that oil is falling. So, unlike Cummins, I would hardly define a slowdown in oil profits as a "big problem":

"With crude prices falling and oil-field costs on the rise, major oil companies have a big problem: sustaining their phenomenal profit growth."

Oil companies should make less money in q4 than in q3. So what? They will still be making a ton of money.... [I]f someone had told me two years ago that oil at $60 would be widely considered a positive for the US economy (and a negative for oil companies), I wouldn't have believed them.

Then again, if someone had told me two years ago that China could double its reserves, only partially sterilize the resulting reserve increase and still have (CPI) inflation of less than 2%, I wouldn't have believed them either...

Facing the Future with (at least) One Hand Tied

Menzie Chinn thinks about the Federal Reserve's position:

Econbrowser: The U.S. Macroeconomy: Facing the Future with (at least) One Hand Tied: What about monetary policy? It is an economic truism that you cannot hit two separate target variables with one instrument. With fiscal policy hamstrung, monetary policy needs to make tradeoffs in order to hit inflation and output targets. If energy prices continue their slide, it may be that monetary policymakers will have the leeway to drop the Fed Funds rate. But if, for instance, energy prices do not continue their fall, or a decline in the dollar's value leads to a rise in import prices, then the Fed will be forced to choose between inflation stabilization and output stabilization. With Ben Bernanke at the helm, I think I know on which side he would err.

In fact, the choice may be more painful than what I have suggested in this scenario. In the wake of the dot-com collapse, monetary policy was successful in spurring economic recovery by encouraging a massive boom in residential investment. With the stock of housing at the end of last year 45% larger than it was at the end of 2001, it is not clear that a repeat performance is possible.

What I see as one possibility for monetary policy to work is by way of facilitating the shift of labor and capital to the export and import-competing sectors (mostly manufacturing, and some services). Expansionary monetary policy could accelerate the dollar's decline, and lower interest rates might result in stimulating higher investment in plant and equipment in those sectors so that we avoid a recession. How a sharp descent in the dollar will affect economies abroad remains an open question.

Now, several studies have documented the fact that in the past, large current account imbalances in industrial countries have usually been unwound with few serious consequences to either output or asset prices. But I have to stress, these are uncharted territory. The textbook model I laid out above may not apply this time around. By virtue of the fiscal and monetary policies of the last five years, the U.S. is ever more dependent on foreign capital inflows to determine interest rates; and indeed the United States is as dependent as it has ever been (at least in the post-War era) on foreign official or quasi-state -- not private investor -- financing. How all the ties binding the world's single largest economy will be unwound is something nobody can be certain of. What we can be certain of is that the choices made by policy makers in the past five years have circumscribed our ability to manage a downturn.

Andrew Samwick Posts More on Executive Compensation

Andrew Samwick agrees with me. Smart guy:

Vox Baby: More on Executive Compensation: Mark Thoma and Brad DeLong have picked up the theme of this earlier post on executive compensation. Brad makes three points:

First, at-the-money options do not make CEOs "long" their company as much as long the volatility of their company. It's clear that direct ownership of stock--ideally, restricted stock--is a better mechanism for aligning managers' interests with shareholders.

I agree with Brad's conclusion--restricted stock is a better method of aligning the interests of managers and shareholders.

Second, when I looked at the data I thought I saw an important difference between entrepreneurial-CEO-owners (like Bill Gates, with stock) and manager-CEO-nonowners (with options). I think there is an important difference.

True as well--there is an important difference. My point in the original post is that there are very few examples one can find in which, through options, manager-CEO-nonowners accumulated ownership stakes that were large enough so that their compensation was meaningfully different from what Jensen and Murphy were describing in the data. My issue with Krugman's column was that he was implicating J&M in the option mess--I don't think that's warranted.

Third, we do have a big organizational problem here. We need diversity of ownership--both to raise capital on the scale required for modern business organizations and to spread risk. But once you have diversified ownership, monitoring and supervising managers becomes a public good from the shareholders' perspective, and it is very hard to get market or market-like or indeed voting political mechanisms to adequately supply public goods: the difficulties of collective action by dispersed owners of corporations has been one of the institutional flaws of modern capitalism for more than a century.

The fear today is that mechanisms of corporate control and governance that used to constrain the ability of top managers to raid the corporation have broken down even more than in the past. Why and how much and indeed whether this is true is a very hard question. To say that "corporate boards are failing" to do their job is true, but leaves the questions of why they are failing and whether they are failing any more than in the past unanswered.

True again. The problems resulting from the separation of ownership and control in large corporations are the central problem in corporate finance. I did not intend to raise the two questions posed at the end of Brad's post but only to assert that corporate boards are the last line of defense against problems of corporate governance. If the recent use of options is perceived as abusive, hold the Boards that were complicit or clueless to account.