February 2004 ~ Angry Bear

Sunday, March 21, 2004

Richard Clarke

The political fallout from Richard Clarke's 60 Minutes interview should, if there is any justice in the world, be swift and devastating. Clarke came across as someone very well-informed on terrorism in general and al Qaeda in particular. His story is consistent with Paul O'Neil's: from day one, before 9/11, the administration ignored warnings about terrorism and instead focused on the strategic initiatives of the prior Bush administration, Iraq and Nuclear Missile Defense. Clarke:

Frankly," he said, "I find it outrageous that the president is running for re-election on the grounds that he's done such great things about terrorism. He ignored it. He ignored terrorism for months, when maybe we could have done something to stop 9/11. Maybe. We'll never know."

And, based on Clarke's telling, the administration's Iraq focus didn't shift after the attacks:

"The president dragged me into a room with a couple of other people, shut the door, and said, 'I want you to find whether Iraq did this.' Now he never said, 'Make it up.' But the entire conversation left me in absolutely no doubt that George Bush wanted me to come back with a report that said Iraq did this.

"I said, 'Mr. President. We've done this before. We have been looking at this. We looked at it with an open mind. There's no connection.'

"He came back at me and said, "Iraq! Saddam! Find out if there's a connection.' And in a very intimidating way. I mean that we should come back with that answer. We wrote a report."

Clarke continued, "It was a serious look. We got together all the FBI experts, all the CIA experts. We wrote the report. We sent the report out to CIA and found FBI and said, 'Will you sign this report?' They all cleared the report. And we sent it up to the president and it got bounced by the National Security Advisor or Deputy. It got bounced and sent back saying, 'Wrong answer. ... Do it again.'

"I have no idea, to this day, if the president saw it, because after we did it again, it came to the same conclusion. And frankly, I don't think the people around the president show him memos like that. I don't think he sees memos that he doesn't-- wouldn't like the answer."

Worse for the administration, the person chosen to rebut Clarke's charges, Deputy National Security Advisor Stephen Hadley, was entirely unconvincing -- vacillating and issuing non-denial denials. For example,

Hadley asserts Clarke is "just wrong" in saying the administration didn't go to battle stations.

As for the alleged pressure from Mr. Bush to find an Iraq-9/11 link, Hadley says, "We cannot find evidence that this conversation between Mr. Clarke and the president ever occurred."

When told by Stahl that 60 Minutes has two sources who tell us independently of Clarke that the encounter happened, including "an actual witness," Hadley responded, "Look, I stand on what I said."

Clarke's book comes out tomorrow. Clarke will testify before the 9/11 Commission on Tuesday or Wednesday.

AB

Read More on " "

Friday, March 19, 2004

More Signs of Life?

I didn’t have time to mention this yesterday:

Jobless claims hit three-year low
New weekly claims for unemployment benefits come in lower than Wall Street forecasts.

NEW YORK (CNN/Money) - New jobless claims fell last week to the lowest level in more than three years, the government said Thursday, coming in lower than Wall Street analysts had expected.

The Labor Department said 336,000 people filed new claims for state unemployment benefits in the week ended March 13 compared with a revised 342,000 the prior week.

Two thoughts. First, despite my bringing this to your attention, don’t focus to much on the week-to-week unemployment claims figures; they can be rather volatile from one week to the next. If these low levels of claims continue for a few more weeks, then I’d say we’re really onto something.

Second, with the caveat just mentioned, this is another small piece of evidence of a strengthening economy. I’ve thought for a while that the economy would do well in the first half of the year, then sputter out in the second half of the year. So far the economy has done less well this year than I thought it would… but that could be changing.

Kash

p.s. Let me add a hearty welcome to Karsten. I am eagerly looking forward to more of his excellent contributions.

Read More on " "

Postcards from Old Europe - Setting the Stage

Dear readers,
Angry Bear and Kash have invited me to guest blog here on a regular basis. AB and Kash are both economists - I'm not. I work in discretionary portfolio management for high net worth clients in a rather large European financial services company. You can find my regular home on the web here. Please do visit!

My column here is entitled "Postcards from Old Europe" and aims to comment on US-issues from a European perspective with the added bonus of my being able to offer a window into the goings on in the "old world". My perspective is truly local to Europe - I'm German and based in Germany (this should also go far in explaining my mangled syntax and innovative grammar). Economic bloggers can never really complain about a lack of subject matter - every working day will yield at least one little figment of data which can serve as a launchpad for commentary and ranting. I'd like to set the stage for my future columns by looking at (some aspects of) the big picture.

Physics was always one of my worst subjects - I could only grasp most concepts when they were explained to me in the most simple terms. The theory of relativity was especially troublesome in this regard. A friend of mine shed light on the subject by explaining the subject matter in a way even I could understand:

Imagine that you have to sit on a hotplate for 10 minutes - time will stretch into infinity. Now imagine that you have a pretty girl sitting on your lap - time will fly.

The message: everything is relative. This applies to economics as well.

A quick comparison of US and the Eurozone yields the following picture: While US pundits fret over the employment rate hovering around 5.6% Europeans have become used to seeing rates in the double digits. Economists are forecasting that GDP will increase by 4.6% this year in the US while the Eurozone is creeping along with an estimated economic growth of 1.8%. Could there be any more poignant evidence that the US is (relatively speaking) way ahead of old Europe?

The problem is that the US economic powerhouse is founded upon an ever rising pile of debt and a burgeoning trade deficit. The most visible sign of the underlying strain in the US economy is the recent reversal of the formerly espoused strong dollar policy and the subsequent decline in the currency's external value. The peace dividend is being eroded by the ongoing financial strain that the war on terror is placing on the economy while the economy is itself staggering under the load of debt that private and public households have amassed. While consumers are trying to borrow themselves out of debt, politicians are rushing to implement higher barriers to the free movement of goods and labor. The backdrop to this grim situation is provided by a central bank which is pumping raw, unadulterated credit into the system at a frantic pace.

The rest of the world is standing by and running what James Grant of Grants Interest Rate Observer is calling the biggest vendor finance scheme in history. I am referring to the Asian central bank's regime of buttressing the dollar so that the man on the street can afford to buy a new (imported) SUV every two years. Am I being too pessimistic? I might be - but I've learned that it pays to play the devil's advocate and anyway, have you ever positively surprised an optimist?

This view of the US economy is a rough outline of the subjects I'd like to explore in more detail in the following weeks. I hope that you continue to watch this space and I invite you to use the comments to your heart's content.

Read More on " "

Thursday, March 18, 2004

The Ad War

Bush seems to have won the battle for the first half of March. From The National Journal’s Hotline on March 17:

AD SPENDING, 3/3-14
--------------------------------------------------------------------
BUSH-CHENEY
Estimated spending: $8,197,514+
Spots aired: 8,071
States: AR, AZ, CA, FL, IA, ME, MI, MN, MO, NH, NM, NV, OH, OR, PA, WA, WI, WV, nat'l cable
--------------------------------------------------------------------
KERRY
Estimated spending: $310,137+
Spots aired: 415
States: AR, AZ, FL, IA, ME, MI, MN, MO, NH, NM, NV, OH, OR, PA, WI, WV
--------------------------------------------------------------------
Organization: Spots; Spent
MoveOn.org (anti-Bush): 3,651; $3,184,203
The Media Fund (anti-Bush): 2,124; $2,061,101
Log Cabin GOPers (pro-gay marriage): 34; $69,103
Citizens United (anti-Kerry): 34; $25,420
New Dem Network (pro-Dem, Spanish-language ads): 69; $13,294
--------------------------------------------------------------------

Kash

Read More on " "

Globalization Strikes Angry Bear

Exciting details tomorrow ...

AB

Read More on " "

Wednesday, March 17, 2004

Rumsfeld

I just got around to following Kash's earlier link to Rumsfeld on Face the Nation (now a compelling MoveOn.org ad.) If you haven't seen it yet, make sure to check it out the next time you have broadband access.

Now the important question is whether MoveOn can make an equally powerful ad based on the Rumsfeld Fighting Technique. View the entire collection of Rumsfeld Techniques here; here's a small sample, Rumsfeld's dreaded Twin Cobra Fist!

Read More on " "

Bush and Shaggy: It Wasn't Me

From Shaggy's It Wasn't Me:

She even caught me on camera
"It wasn't me"
She saw the marks on my shoulder
"It wasn't me"
Heard the words that I told her
"It wasn't me"
Heard the screamimg getting louder
"It wasn't me"

I think that nicely encapsulates the Bush campaign's ad strategy so far. On body armor, as I explained yesterday, "Congress gives Bush money for the armor, Rumsfeld and the Pentagon are in charge of procuring the armor ... but [they] fail do adequately do so. Fast-forward to 2004 and it's John Kerry's fault!"

Not procuring body armor?
It wasn't me.

I also wrote that "Researching the hypocrisy in the 'higher combat pay' charge is left as an exercise for the reader." I don't think he's a reader, but Josh Marshall has completed said research on combat pay, finding an August 15th, 2003 San Francisco Chronicle article on the subject:

The White House quickly backpedaled Thursday on Pentagon plans to cut the combat pay of the 157,000 U.S. troops in Iraq and Afghanistan after disclosure of the idea quickly became a political embarrassment.

The Pentagon's support for the idea of rolling back "imminent danger pay" by $75 a month and "family separation allowances" for the American forces by $150 a month collapsed after a story in The Chronicle Thursday generated intense criticism from military families, veterans groups and Democratic candidates seeking to unseat President Bush in 2004.

Unfortunately, neither the SF Chronicle nor the Army Times has public archives. However, I did find this blurb for a story in the current issue of Army Times:

White House won’t try to cut special deployment pays

The Bush administration will not repeat its highly publicized -- and ultimately unsuccessful -- attempt last year to cut benefits for deployed troops.

Nice. They can find all the unpopular things they've done and say "Kerry did it. It wasn't me." Even if they're caught on camera, or Googleable archives.

Cutting combat pay?
It wasn't me!

Still left as an exercise for the reader is the third specious (crooked? lying?) charge: Kerry opposed "better health care for reservists and their families" while Bush supported it.

AB

UPDATE: The SF Chronicle (now apparently the SF Gate) does have archives online. See the 8/15/2003 article on combat pay here. Thanks to sashax for the link.

Read More on " "

Rumsfeld on Face the Nation

You may well already have seen this, but if not, this video clip from this past Sunday is amusing. (Courtesy of the Center for American Progress. If that link doesn’t work try this one.)

Kash

Read More on " "

New CPI Data

The danger of deflation seems to be receding. The BLS’s newest CPI data (for February) indicates an increase in the core rate (excluding food and energy) of 0.2%, similar to last month’s increase. The 12 month change in the chained core CPI is 0.8%, up slightly from last month, and the 12 month change in the regular core CPI is 1.25%, also up slightly from last month. I think we can start to feel confident that inflation has stopped falling and has leveled off. Now we just need to see a bit of an increase in inflation to provide a sign of some pricing power, and we’ll have evidence that the economy is really strengthening.

Kash

Read More on " "

CalWashingtonMonthly

Many of you probably know that Kevin Drum's excellent blog, CalPundit, is being incorporated into the Washington Monthly. The transition occured this morning, and if you visit www.washingtonmonthly.com, you'll see that it looks a lot more like CalPundit acquired The Washington Monthly than the reverse. Congrats.

AB

Read More on " "

Revising History Again

The GOP website gives the credit for the creation of the Department of Homeland Security (DHS) to President Bush:

Last year, President Bush proposed and Congress approved a single, unified Department of Homeland Security to improve protection against today’s threats and be flexible enough to help meet the unknown threats of the future. By unifying over 22 agencies and offices, the President has improved the government’s ability to protect our infrastructure, guard our borders and patrol our skies.

Of course, if we rely on our memories (and Google) instead of the GOP’s website, we would know that DHS was originally proposed on Capitol Hill, not by the White House. In fact, Bush actually resisted the creation of the DHS for months, and only agreed to it once it started looking inevitable on Capitol Hill:

White House Press Briefing, March 19, 2002:

Q Ari, on that topic, why does the White House continue to resist the idea of making the Office of Homeland Security a Cabinet-level department with its own budgetary authority and its own responsibility to Congress?

MR. FLEISCHER: The President believes that the Office of Homeland Security, under Governor Ridge, is working extraordinarily well. It is fulfilling the exact mission that the President set out for homeland security when the President announced it in the wake of the attack on our nation... Creating a Cabinet office doesn't solve the problem [of coordinating all the myriad of activities the federal government is involved in].

What did Bush’s top advisor on Homeland Security, Tom Ridge, think of Congressional plans to create a DHS as passage of the DHS bill looked more and more likely? On May 30, 2002 he told us:

Homeland Security Director Tom Ridge said Thursday he would advise President Bush to veto any legislation creating a congressionally authorized Office of Homeland Security if Congress approves a bill this year.

"I'd probably recommend he veto it," Ridge told a National Journal Group editorial board meeting. In the past, Ridge has asked Congress to hold off on the legislation.

However, the momentum for creating a DHS began to look unstoppable. So on June 7, 2002, Bush himself proposed creating a DHS. This is how CNN reported it:

"Tonight, I ask the Congress to join me in creating a single permanent department with an overriding and urgent mission -- securing the American homeland and protecting the American people," Bush said.

Since creating the Office of Homeland Security after the September 11 terrorist attacks, Bush had resisted calls to make it a Cabinet-level agency, rather an executive office within the White House.

…Sen. Ted Kennedy, D-Massachusetts, said the reorganization is "a positive step long awaited by many of us in Congress."

And since that day in June of 2002, the GOP has shamelessly taken credit for creating the DHS, as if it never would have happened without President Bush's leadership. There are so, so many of these attempts to revise history by the Bush campaign. Don’t let them.

Kash

Read More on " "

Illinois Senate Update

I've posted about this race, which doesn't seem to get talked about much despite being a likely pick-up for Democrats, a few times (here and here.) Illinois held its primary last night and the results are in: Barack Obama for the Democrats and Jack Ryan for the Republicans. Obama won with 52%, beating his nearest finisher, Dan Hynes, by 29 points. Ryan beat his nearest rival, Jim Oberweis, 36% to 23.5%.

Finally, if the number voting in each primary predicts the 2004 Senate outcome, then Ryan is in trouble: about 1.3 million voted in the Democratic primary and 650,000 voted in the Republican primary. I wouldn't read too much into that, however. The Democratic primary was more closely contested than the Republican and the Democratic machine in Chicago probably worked harder to get out the vote than the downstate Republican machine (this will change in the general election.)

AB

Read More on " "

Tuesday, March 16, 2004

Note to John Lott

Next time the data fail to support your theory, I recommend that instead of faking the data, lying about a computer failure, and using false identitities to attack critics and self-promote, you simply follow Lucas Kovar's lead (do follow the link and read the paper to the end; it's hilarious.)

AB

Read More on " "

The Latest Pew Global Attitudes Survey

The survey was conducted in February, so some of the number may already be dated as a result of the attacks in Spain. What have we learned?

In every surveyed country except the US, more people believe that the Iraq War hurt the war against terrorism than believe it helped. And a solid majority in every country except Britain and the US thinks that Bush and Blair lied about Iraqi WMD:

Note that in the U.S., 80% responded either "lied" or "misinformed," which means that 20% either "don't know" or still think there are WMD in Iraq.

I'm not sure what this next one means, but it's interesting:

Apparently, 73% of Americans expected the US military to have a harder time invading Iraq than it did. That seems implausible. Perhaps respondents thought "stronger than expected" was the patriotic answer. To clarify, the reason I would not say that the military was stronger than expected is that I thought before hand that it was exceedingly powerful, so my opinion was confirmed -- I'm surprised that only 13% of Americans shared that view. On the other hand, we seem to have impressed Jordanians and Moroccans. Somewhat alarmingly, nearly half of Pakistanis found the US military to be weaker than they expected (that may be the result of general dislike of the US in Pakistan -- the Pew survey also found that Osama bin Laden has a 65% favorable rating in Pakistan.)

And, the exciting conlusion: besides Americans nobody likes George W. Bush (61% favorable in the US is the highest approval rating I've seen for Bush in quite some time):

The full report has many more interesting charts and facts.

For example, Jews, Christians, and Muslims have unfavorable ratings in the US of 8%, 6%, and 32% respectively. Over a third of US citizens now disapprove of the UN, up from around 20% in 2000.

86% of Jordanians think that suicide bombings by Palestinians against Isreal are "justifiable" and 70% think that bomb attacks against Westerners in Iraq are justifiable. However, I think "Justifiable" is a poor word for this question -- if a respondent can imagine a scenario in which a bombing would be justified then bombings are "justifiable," but that's not the same thing as saying that the ongoing bombings are justified. "Able to be justified" and "actually justified" are different things (e.g., I can conceive of justifiable killings, but that's a far cry from a generalized endorsement of killing) and I suspect, or at least hope, that a given actual bombing would have a notably lower approval rating.

Finally, a majority of people in the US, GB, GDR, and FR believe that the Iraqi people will be better off post-Hussein; for Russia, Turkey, Jordan, and Morocco, the number ranges from 25 to 41 percent. In Pakistan, only 8% believe Iraqis will be better off while 61% think they will be worse off.

AB

Read More on " "

Bush: It's not my fault

In the latest ad, Bush is going after Kerry for voting against the $87b for Iraq last year:

The commercial shows clips of soldiers and a military plane taking off. Those images are mixed in with pictures of the U.S. Capitol, the legislative chamber and a shot of Kerry.

"Few votes in Congress are as important as funding our troops at war," the narrator says. "Though John Kerry voted in October of 2002 for military action in Iraq, he later voted against funding our soldiers."

The narrator lists such things as body armor for troops, higher combat pay and "better health care for reservists and their families" and cites Kerry as voting "no" for each of those things.

The ad concludes with the words: "John Kerry: Wrong on defense."

"Body armor" rings a bell -- haven't I heard something about that before? Now I remember, it was in the Washington Times on October 13, 2003:

Nearly one-quarter of the 130,000 U.S. troops in Iraq still have not been issued a new type of ceramic body armor strong enough to protect against bullets fired from assault rifles.

Delays in funding, production and shipping mean it will be December before all troops in Iraq will have the vests, which were introduced four years ago, military officials say.

Congress approved $310 million in April to buy 300,000 bulletproof vests, with 30,000 destined to complete outfitting of the troops in Iraq. Of that money, however, only about $75 million has reached the Army office responsible for overseeing the manufacture and distribution of the vests, said David Nelson, who works at the office.

Angry members of Congress have denounced the Pentagon. They say up to 44,000 troops lack the vests because of sluggish supply chain, a figure significantly higher than that given by the Pentagon. Relatives of some soldiers have resorted to buying the body armor, which costs more than $1,000, and shipping it to Iraq, the lawmakers say.

"I got a letter from a young soldier in Baghdad saying that the men in his group were concerned that they had cheap armor that was incapable of stopping bullets. And they wondered why they could not have the best protection possible under the circumstances," said Rep. Ted Strickland, Ohio Democrat.

The House version of an $86.7 billion supplemental spending request for Iraq's reconstruction passed last week would include $251 million for body armor and for clearing unexploded munitions, although it's not clear whether additional money would speed up the process at this point. President Bush's original request included no additional money for body armor.

I see. Congress gives Bush money for the armor, Rumsfeld and the Pentagon are in charge of procuring the armor (note to Rumsfeld: next time, get the body armor before sending in the troops!) but fail do adequately do so. Fast-forward to 2004 and it's John Kerry's fault! Freakin' amazing. This sounds exactly like what you'd expect from a "crooked, you know, lying group of people."(*)

I only addressed the body armor. Researching the hypocrisy in the "higher combat pay" charge is left as an exercise for the reader.

AB

P.S. I suspect that this ad is related to the Bush campaign hiring long time attack ad producer Alex 'Rats^TM brand Democrats' Castellanos.

(*) The quoted phrase in this context refers to those who produced and approved the latest ad, not all Republicans. Moreover it is only meant to imply that they are acting like a "crooked, you know, lying group of people." Those who express outrage at the use of the phrase, "crooked, you know, lying group of people," should stop associating with people who act like crooks and/or liars.

Read More on " "

Interest Rates Unchanged

As expected, the Fed left the federal funds rate at 1%. Underpinning this is the belief that demand growth will lag behind productivity growth. From Reuters:

RICHARD FRANULOVICH, SENIOR CURRENCY STRATEGIST, WESTPAC BANKING CORP, NEW YORK:

"Looks like the Fed is no longer offering an optimistic outlook on the labor market. Recall that in the last statement the Fed said other indicators are leading to an improvement in the labor market. The Fed has dropped that completely and now all they're saying is that the labor market is lagging. So the Fed is less bullish on the labor market. So this statement is mainly dollar-negative."

Read More on " "

The Cyclically Adjusted Budget Deficit

The CBO has released its estimates of the “cyclically adjusted” budget balance for the US. What does that mean? The CBO explains:

Calculations of cyclically adjusted budget measures attempt to remove the effects of the business cycle on revenues and outlays (that is, the cyclical part of the budget). For example, cyclically adjusted revenues exclude the loss of revenues that automatically occurs during recessions. Likewise, cyclically adjusted outlays exclude the additional spending that follows automatically from a rise in unemployment. The difference between those two measures is the cyclically adjusted balance.

The chart below shows the actual budget balance (in blue) and the cyclically adjusted balance (in orange). Figures for 2004 and 2005 are forecasts.

The conclusion? Any claim by the Bush administration that the budget deficit is substantially due to the state of the economy is complete hogwash. Even if the economy had been humming along at full capacity, the US would have had a budget deficit of over $300 billion in 2003 and over $400 billion in 2004. As we already knew, the budget deficit is the result of intentional, discretionary tax and spending changes, and nothing else.

Kash

Read More on " "

Deficits and Republicans

The blossoming of the Bush budget deficits puts some Republicans in an awkward position. Most Republicans would call themselves “fiscally conservative.” But this can have several different meanings, some of which conflict with each other. Does it mean that you want low taxes, or low deficits? Does it mean that you want to impose limits on spending, or limits on how easy it is to cut taxes when there’s a deficit? Ask two different Republicans and you are likely to get two different answers.

This piece in yesterday’s Chicago Tribune shows that the tensions between different flavors of “fiscally conservative” Republicans are growing. And there’s no easy resolution in sight.

Kash

Read More on " "

Politics Triumphing Over Economics

My latest post is up at The American Street, on how economic policy making under the Bush administration has routinely ignored the advice of economists.

Kash

Read More on " "

Monday, March 15, 2004

The Divine Dynamic Duo

Since I got this from Atrios, who got it from Slate, you've probably already seen it. But just in case you haven't, here's Bush speaking for himself and God, working hand-in-hand (I've also added the spiffy title):

"God loves you, and I love you. And you can count on both of us as a powerful message that people who wonder about their future can hear."—Los Angeles, Calif., March 3, 2004

So if Bush and God are working as a team, who must Kerry be partnered with? Cue Dana Carvey circa 1990 (warning: sound).

AB

Read More on " "

An Obvious, Overdue Point

Finally someone in the mainstream press has made this point. Jonathan Weisman of the Washington Post writes:

When President Bill Clinton raised taxes in 1993, the unemployment rate dropped, from 6.9 to 6.1 percent, and kept falling each of the next seven years. When President Bush cut taxes in 2001, the unemployment rate rose, from 4.7 to 5.8 percent, then drifted to 6 percent last year when taxes were cut again.

It has become conventional wisdom in Washington that rising tax burdens crush labor markets. Bush castigated his political opponents last week for "that old policy of tax and spend" that would be "the enemy of job creation."

Yet an examination of historical tax levels and unemployment rates reveals no obvious correlation.

Okay, it’s a somewhat specious argument – the correct thought experiment to run is really to compare what actually happened to unemployment to what would have happened in the absence of tax policy changes – but at least this simple correlation highlights the fact that the efficacy of tax cuts to help the labor market is not obvious.

Kash

Read More on " "

Bush Proposes Tax Increase!

Last week, the Bush campaign charged that Kerry plans to raise taxes by at least $900b. Of course, Kerry never said that(*); instead, the Bush campaign relied on the logic that if the cost of Kerry's policy proposals add up to $900b (over ten years) then Kerry must be proposing tax increases of $900b. Conveniently and hypocritically, that assumption fails to acknowledge the twin possibilities of economic growth and deficit spending.

On Friday, Kash pointed out that the direct implication of Bush's accusation is that Bush himself favors tax increases:

Bush has also 'said he won't increase the deficit.' That means that, following the new Bush campaign logic, any spending increase that he proposes is also equivalent to a proposal to increase taxes. So according to Bush logic, we can now recognize this proposal to increase defense spending for what it really is: a tax increase!

Today, Ron Brownstein makes the same point in the LA Times:

Whoever wins in November may well find their expectations of higher revenues disappointed -- forcing tough choices they deny today. But based on the logic behind the Bush campaign ad, Kerry would be just as entitled to claim Bush is secretly planning huge tax increases or massive spending cuts.

However, in an effort to be either even-handed or deceptive, the title of Brownstein's piece is "Campaigns Playing Fast and Loose With Facts and Numbers" -- note the plural of campaign. Fine, Brownstein didn't write the headline of his piece. But he did write this:

The Bush campaign's justification for the charge was specious. The Kerry campaign's response was misleading. And the vast press corps covering the campaign almost entirely failed to illuminate the holes in each side's arguments.

Brownstein assigns costs, attributable to Brookings' Peter Orszag, to a number of tax proposals (top marginal rate, estate tax, dividend tax, capital gains tax) that likely fall under the "making over $200,000k" rubric, adds them up, and finds that the "total tab for the tax hikes Kerry has discussed approaches $900 billion over the next decade." In fact, Brownstein's own total is actually $810 billion. Shortly thereafter, Brownstein makes it even more clear that Kerry's camp was correct when it denied Bush's $900b charge:

So was Bush right for the wrong reason? Not exactly.

For one thing, Kerry also has proposed several personal and business tax cuts that would reduce the net effect of his tax increases. Key among them: a tax credit for manufacturers that add new employees; a subsidy for small businesses that provide health insurance for their workers (by itself, cutting taxes by an estimated $63 billion over the next decade); and a credit to subsidize college tuition (which could save taxpayers about $50 billion over a decade, Orszag says).

More important, while the Bush ad implies that Kerry's proposals will hit all Americans, each tax increase the senator has proposed so far will only affect high-income families.

Two of those cuts add up to $113 billion, bringing Kerry's alleged tax increase total down to under $700b (over ten years), and one cut has no dollar amount attached, bringing Kerry's increases down even further.

In his attempt to be even-handed, Brownstein wandered into misleading. He also spent 20 paragraphs before getting to the crux of the issue at hand, that Bush's $900b allegation was not "right for the wrong reason."

Based on Brownstein's account, Bush's campaign made an allegation and Kerry's camp correctly said it wasn't true. However, if Bush's allegation had been some other unmade and lesser allegation that it actually wasn't, then the charge might have been true. But in the real world, not Bizzaro World, Bush's allegation was false. Yet there's Brownstein in paragraph one telling us that, "The Bush campaign's justification for the charge was specious. The Kerry campaign's response was misleading."

Before hitting "submit," Brownstein should remember that he's a member of the very same press that he admonishes in his final paragraph:

That's a debate [whether each campaign's numbers add up] worth having. But it will require a lot more precision and care than anyone involved displayed last week.

AB

(*) Kerry does support rescinding some of the Bush tax cuts, which is in fact a tax increase. Kerry's plan (scroll down to and expand "Restore Fiscal Discipline to Washington") is "... To restore fiscal discipline and strengthen our economy, Kerry will repeal Bush's special tax breaks for Americans who make more than $200,000."

Read More on " "

Sunday, March 14, 2004

Spainish Elections: A Vote Against Bush’s Invasion of Iraq

Today’s election results from Spain are really, really significant. The ruling conservative party lost and the opposition socialist party (which was in power from 1982 to 1996) achieved a major and unexpected victory. Why? The economy in Spain has been doing very well under the center-right government of José Maria Aznar, who has been in power for 8 years. There have been no major scandals or significant charges of corruption. And yet, the conservatives lost the election by a surprisingly large margin.

After talking about this with several of my Spanish friends about today's election results, I've concluded that the reason must be related to Bush’s invasion of Iraq. Spain under the conservatives took a very high-profile stance supporting Bush’s invasion; Aznar was Bush’s second greatest ally last year after Tony Blair, despite the fact that the war was generally unpopular in Spain. Today the Spanish people had their first chance – really the first chance in any major country that supported Bush’s invasion – to register their opinion. And they said that they thought it was a mistake, and that they no longer want to be ruled by those who committed it.

The horrible bombings of last week probably contributed to this defeat. Before the bombings, all polls showed the conservatives leading the socialists. But two things happened with the bombings. The first is that it served as a powerful, emotional reminder of the fact that Aznar took Spain into a war that the majority of Spaniards thought was unwise, in part because people thought that it would increase, rather than reduce, the danger of terrorism.

The second way the bombings influenced the election was through the government’s handling of the investigation. The government continued insisting, until late yesterday, that the bombings were undoubtedly the work of the Basque separatist movement ETA. If the bombings had been the work of ETA, that would have strengthened the conservatives’ hand, since it would have reinforced the popularity of their extremely hard line against Basque separatists. On the other hand, if the bombings had been the work of Islamic terrorists, it would have undermined their support by drawing attention to their choice to help invade Iraq.

The conservative government’s single-minded accusations of ETA during the first 2 days after the bombings increasingly seemed to just be the government playing politics with the bombings. There were large protests on Saturday night of people accusing the government of not revealing the whole truth about the bombings because of the government's fear of the implications for the elections. Today’s results show that such feelings about the government's handling of the bombings were widespread. They also show that playing politics with a terrorist attack is simply not a good idea.

Kash

Read More on " "

Winning The Struggle to Keep Up With Bush's Campaign Spending

As Kash pointed out in the previous post, Bush has a very big financial edge over John Kerry. I don't think that Kerry can, or even needs to, raise more money than Bush. He just needs to raise enough to get his message out and respond rapidly and effectively to attacks. And Howard Dean showed the way for a Democrat to do just that: small donations from a very broad base. In fact, Kerry just raised $10 million in ten days online.

So I am very pleasantly surprised to see that readers' contributions to Kerry's campaign over the weekend far exceeded my expectations. On Friday, I pointed out that Atrios' readers had ponied up $14,000 in one week (and $42,000 cumulative!), did a quick adjustment for the relative traffic of each blog, and asked my readers to pony up $100-$200 per week. Here's what readers have given so far:

Total Donations: 8
Total Dollars: $340
Average Donation: $42.50

Excellent! Adding my first reader-inspired contribution to that number, this blog has now sent $590 Kerry's way. I think $10,000 is a reasonable cumulative contribution goal for this blog, and some larger number may not be out of the question.

An important note on the timing of contributions, from Dick Bell, Kerry's blogmaster:

After the convention, Kerry will be taking public funds, so there will be no more individual contributions after the convention.

So you need to make your contributions between now and early August -- for example, my initial plan to save my donations until October when things really heat up was a bad idea. Of course, if October does roll around and you're flush with cash, I believe you can give to the DNC, which can then spend money on get out the vote drives and the like.

AB

Read More on " "

Saturday, March 13, 2004

The Struggle to Keep Up With Bush’s Campaign Spending

The Kerry campaign launched its own ads in response to Bush’s first negative ads. Unfortunately, I worry that Bush’s strategy of vastly outspending the Kerry campaign, and potentially exhausting Kerry’s resources in this phase of the campaign, may eventually be effective.

WASHINGTON, March 12 — Senator John Kerry moved quickly to respond to a new attack advertisement from President Bush on Friday, immediately producing his own commercial striking back.

...Mr. Kerry's commercial caught strategists from both parties off guard because of the relatively large amount of money, $1.8 million, his campaign was spending to show it in 16 states starting Friday night. [But] the amount pales next to the more than $6 million Mr. Bush is spending this week to show his advertisements on stations in far more markets and on several national cable networks.

Think of it as the Cold War strategy of ad purchases: spend your opponent into the ground and hope that you can outlast them. Given their huge financial advantage, it’s not a bad strategy for the Republicans to try.

Kash

Read More on " "

Bush Proposes Tax Increase!

As Bush’s new negative ads show, the Bush campaign has developed a new way to identify proposed tax increases. The ads say that Kerry plans to raise taxes by $900 billion. Bush’s campaign manager explains how they arrived at this conclusion despite the fact that Kerry has never said he wants to raise taxes by $900 billion:

Bush campaign manager Ken Mehlman told reporters in a conference call that the figure is based on estimates of the cost of the Kerry health-care reform package. Kerry has said health-care reforms would form his first major proposal to Congress.

"He said he won't increase the deficit. That means he's going to have to pay for it somehow and that's by increasing taxes," Mehlman said, adding that Kerry has made other spending proposals as well.

But wait! Look at this!

Bush seeking major increase in missile defense spending

WASHINGTON - The Bush administration is seeking a big increase in spending for missile defense next year, setting the program on course to have a bare-bones system in place by the end of this year and up to 30 interceptors on land and at sea by the end of 2005.

Bush has also “said he won’t increase the deficit.” That means that, following the new Bush campaign logic, any spending increase that he proposes is also equivalent to a proposal to increase taxes. So according to Bush logic, we can now recognize this proposal to increase defense spending for what it really is: a tax increase!

Wow, who knew? I guess I feel a bit relieved, since I've believed for quite a while that we need to increase taxes to restore fiscal responsibility -- and here Bush is proposing exactly that. In fact, using this new way to identify proposals to increase taxes, I would guess that Bush has probably proposed more tax increases than any other president in history. And all this time I was worried that he wanted to gut government revenues.

Kash

Read More on " "

Friday, March 12, 2004

Strippers Against Bush?

Salon has an interesting report on Howard Stern's ongoing anti-Bush campaign:

The pioneering shock jock, "the man who launched the raunch," as the Los Angeles Times once put it, has emerged almost overnight as the most influential Bush critic in all of American broadcasting, as he rails against the president hour after hour, day after day to a weekly audience of 8 million listeners. Never before has a Republican president come under such withering attack from a radio talk-show host with the influence and national reach Stern has.

"The potential impact is huge," says Charles Goyette, talk-show host at KFYI in Phoenix. "And it's not just with the 8 million people who tune it, it's that he breaks the spell. Everybody's been enchanted by Bush, that he's a great wartime leader and to criticize him is unpatriotic. Now Stern pounds him every day and it shatters that illusion that the man is invincible and he shouldn't be criticized."

"He's got one of the biggest audiences in all of radio, and perhaps the most loyal," says Michael Harrison, publisher of Talkers magazine, the nonpartisan monthly that covers radio's news/talk industry. "And that's why he's so dangerous for the White House."

[snip] ... Approximately 8 million listeners tune in each week. And at any given moment during his four-hour program roughly 1.4 million people are tuned in. By way of comparison, that's more than the number of morning viewers at any given time watching Fox News, CNN and MSBNC -- combined.

I might have to find out what station Stern is on and check out the show.

AB

Read More on " "

Support John Kerry

If you'll look to your left, you'll see a John Kerry button surrounded by the crucial word, "Contribute!" So do contribute. The Kerry campaign has set it up so that Kash and I can track how many contributions stem from this blog. Moreover, Kash and I both plan to make sizeable donations to Kerry -- I think I can speak for Kash as well as myself: the more you give the more we give.

In the last week, readers of Atrios' Eschaton contributed $13,944 in one week. Of course, Atrios has about 64 times the traffic that Angry Bear has, so a reasonable weekly contribution goal for this blog is $200. So give. If I can't get at least $100/week from our readers, then I may have to resort to the NPR pledge drive model (annoying ~~listeners~~ readers until they do give.)

AB

Read More on " "

Illinois Senate Update

In this post last week, I asked why the press and bloggers aren't talking about Illinois' Senate race more -- Illinois is a state where a Democratic gain (Peter Fitzgerald's seat) seems rather likely. In any event, The Washington Post has a profile of the leading Democratic contender, Barack Obama:

His father disappeared from his life when Obama was 2; his mother raised him in Hawaii and Indonesia. Obama went to college at Columbia, then moved to Chicago for five years of community organizing in a fusion of civil rights crusading and Saul Alinsky house-to-house plodding. He then went to Harvard Law School, where he became the first black president of the Law Review; returned to Chicago to run a program that registered 100,000 voters in the '92 elections, entered a civil rights law firm and became a senior lecturer in constitutional law at the University of Chicago. (If elected, Obama would be the second liberal Hyde Park academic to represent Illinois in the Senate; New Deal economist Paul Douglas was the first.)

Seven years ago Obama was elected to the state Senate from a district in Chicago's South Side.

Not bad. I'm saving my money for the general election, but if you're inclined to contribute, here's the place.

AB

Read More on " "

The U.S. Current Account Balance in 2003

The BEA just released the figures from the last quarter (and thus the full year) of 2003 for the US current account balance. The grand total for the current account deficit in 2003 is $542 billion, meaning the US as a whole borrowed $542 billion from the rest of the world by consuming more goods and services than it produced.

The following table shows the changes in imports and exports by category over the course of 2003. It looks like US exports really started picking up in the end of 2003. Of course, US imports really picked up then, too.

This current account deficit of $542 billion was paid for by net foreign purchases of US assets totaling $857 billion during 2003, up from $707 billion the year before. (Net US purchases of foreign assets was $278bn.) This $857bn includes a net of $208 billion of US assets purchased by foreign central banks and governments, primarily in the form of US government securities. Most of that happened in the last 2 quarters of 2003, reflecting Asian central bank purchases of dollar assets to keep their currencies from appreciating. But private individuals and firms around the world also purchased a record net $649bn of US assets in 2003. Apparently the rest of the world still likes buying US assets...

Kash

Read More on " "

Global Income Inequality

The new issue of The Economist has a good in-depth examination of global income inequality. A subscription is required to read the whole thing, but the main conclusions of the article are: it’s difficult to know what’s happened to inequality around the world, because data is so poor, and depending on exactly how you measure things you can get completely opposite results; one thing that does seem clear is that an unprecedented number of people around the world have moved out of poverty over the past 20 years, primarily in East Asia and India; and another thing that seems clear is that there are places in the world where poverty seems utterly intractable and hasn’t gotten better at all, primarily in Africa.

Here are a few excerpts:

Is economic inequality around the world getting better or worse?

CRITICS of capitalism are convinced that the gap between rich and poor is widening across the world. For them, the claim amounts almost to an article of faith: worsening inequality is a sure sign of the moral bankruptcy of “the system”. Whether rising inequality should in fact be seen as condemning capitalism in this way is a question worth addressing in its own right. There are reasons to doubt it. But it would also be interesting to know the answer to the narrow factual question. Is the familiar claim that capitalism makes global inequality worse actually true?

Unfortunately, this apparently straightforward question turns out to be harder to answer than one might suppose.

Addressing this point, they quote Angus Deaton, one of the smartest economists I’ve ever met and probably the most knowledgable person in the world regarding the measurement of income and consumption:

Mr Deaton notes that a plethora of new data has so far failed to resolve this issue “because the new sources are mutually contradictory”. Summing up, he states: “If the surveys are wrong, and the national accounts right, either inequality has been widening in ways that our data do not appear to show, or poverty has been falling more rapidly than shown by the dollar-a-day counts. If the surveys are right, there has been less growth in the world in the 1990s than we are used to thinking.”

The following chart from the article illustrates another aspect of the difficulty in answering the question. The top panel shows that, between 1980 and 2000, richer economies (those with higher GDP per capita in 1980, measured along the horizontal axis) grew faster on average than poorer economies. But the bottom panel shows that if you weight countries by population, then you get the opposite result.

One of the conclusions of the piece is something that I feel very strongly about: if we want to help the world’s poor, the best way would be to remove more of the US’s trade barriers:

But what of the fear that global capitalism is making progress at the expense of the poor? The true figures would probably be quite reassuring on this—but even if the more pessimistic official figures were correct, it would be worth questioning the conclusions that the anti-globalists draw from them. If poverty was proving as tenacious in the face of growth as the Bank's estimates say, would it make sense to blame global capitalism for that?

Hardly. On any estimate, poverty is at its most impervious in sub-Saharan Africa. Look again at charts 1 and 2. The countries of sub-Saharan Africa are represented by the white circles. These are not just the poorest countries in the world, but also the slowest-growing. Can it be plausibly claimed that these countries are the victims of globalisation? That would be an odd conclusion, given that sub-Saharan Africa's economies are so comparatively isolated from the rest of the world economy—by force of history, circumstance and, to a large extent, the policies of their own and other governments. Sub-Saharan Africa plainly suffers not from globalisation, but from lack of it. The focus of attention should be on how to extend the benefits of international economic linkages to the region. Removing every rich-country barrier to trade with these countries would be an excellent place to start.

Kash

Read More on " "

And So It Begins…

From today’s Washington Post:

Just one week after launching a wave of positive commercials, President Bush went on the attack with a new ad yesterday, charging that Democratic challenger John F. Kerry would "raise taxes by at least $900 billion" and weaken the country's response to terrorism and ability to go to war.

Of course, the fact tat Kerry has never proposed raising taxes by $900 billion is just a minor detail. Why should Bush let facts get in his way now?

Kash

Read More on " "

Greenspan: Stop Cutting Taxes and Fund Education

Well, actually, he didn't say anything about how to pay for more education. But if it's worth doing, it's worth spending money borrowed from our children to do (because we know funding anything with taxes is evil):

Congress needs to promote both the teaching of basics such as arithmetic, geometry and calculus, Mr. Greenspan said, as well as the abstract reasoning that workers will need to survive in a highly competitive job market.

"Our school systems should be judged on the basis by which they produce a generic learning that enables people to be in several professions or jobs through their life work," he said. "It's so critical that we teach people how to learn."

Silly Greenspan. We're all Intelligently Designed. So whatever we know and to whatever extent we can reason, it's all for the best and according to plan.

AB

Read More on " "

Thursday, March 11, 2004

I Doubt This Ad Will Resonate...

And I rarely give the public at large too much credit. Via Ryan Lizza's Campaign Journal:

The ominous slow-motion footage comes about halfway through the 30-second ad. A female voiceover darkly warns about John Kerry's agenda, charging, "On the war on terror: weaken the Patriot Act used to arrest terrorists and protect America." On the left of the screen flash the words "John Kerry's Plan." On the bottom a red box warns, "Weaken Fight Against Terrorists." If you look closely, on the right side of the screen you can see an airplane taking off.

The center of the screen is filled with three different rectangles of slow-motion video. In the top panel travelers at an airport study the arrivals and departures monitor. In the center panel there is a shadowed image of a person wearing a gas mask. And on the bottom there is a close-up of a swarthy, somewhat sinister-looking man with darting eyes who slowly turns toward the camera. He is clearly the terrorist in this scary montage.

We can call the swarthy man in the commercial Walid Ibn Horton. This commercial must have Ann Coulter wondering how to convey smell in a TV commercial (see also World 'O Crap).

AB

UPDATE: Now that I know who the swarthy fellow is, it all makes sense.

Read More on " "

Bush's 'Manufacturing Czar'

From today’s WaPost:

Bush Choice for Manufacturing Post in Question

Six months after promising to create an office to help the nation's struggling manufacturers, President Bush settled on someone to head it, but the nomination was being reconsidered last night after Democrats revealed that his candidate had opened a factory in China.

...In late afternoon, the administration announced that the new assistant secretary of commerce for manufacturing and services would be named at a ceremony this morning. Industry officials were told that the job would go to Anthony F. Raimondo, chairman and chief executive of a Nebraska company that makes metal buildings and grain silos.

...Seventy-five minutes after the administration announced a news conference with Commerce Secretary Donald L. Evans to name the official, an advisory went out saying the event had been "postponed due to scheduling conflicts."

Given that the Bush administration relies primarily on p.r. when it comes to the economy (rather than actual solutions for the country’s economic problems), it’s telling that they aren’t even able to get the p.r. right anymore.

Kash

Read More on " "

Horrible, Horrible

A series of terrible terrorist attacks has hit Madrid, a city I love, and where my wife has spent several years, and where she and I lived together for over a year. It seems that close to 200 people have been killed.

Now we face the awful task of tracking down all of our friends there who conceivably use those trains to make sure they’re okay. Chances are tiny that anyone we know was hurt, but it’s one of those things that one still feels compelled to do. It’s a sad day.

Kash

Read More on " "

Bush/Cheney 2004

Via Wonkette, georgewbush.com has a nifty custom poster generator. According to Wonkette, you can't make obscene or derogatory Bush/Cheney 2004 signs (my effort at "Dude: Where's my 2.2 million jobs?" failed.) Limited to what I could get past the censors, I came up with these:

Read More on " "

Voting: I'd Like a Receipt, Please

I'm really not a conspiracy theorist, just a subscriber to Murphy's Law (see this post.) Recently, Avi Ruben of Johns Hopkins' Information Security Institute (co-author of this pdf paper criticizing the security of Diebold's electronic voting systems) worked as an election judge in Baltimore County. Charles Kuffner has Rubin's report.

Basically, Rubin says voters liked the system, but it's still not safe. Here's an amusing anectdote from Rubin's day at the polls:

Perhaps the lightest moment in the day came when one voter standing at his machine asked in the most deadpan voice, "What do I do if it says it is rebooting?" Head judge Marie turned white, and Joy's mouth dropped. My heart started to beat quickly, when he laughed and said "just kidding." There was about a two second pause of silence followed by roaring laughter from everyone.

I found the reaction to that joke interesting. Everybody was willing to believe that this had happened, and yet when it became clear that it didn't, we all felt relief. I'm sure that the other judges would have claimed that this was impossible, and yet, for a brief instant, they all thought it had happened.

Read More on " "

GOP.com

Here's a useful tip for bloggers with writer's block: just wander over to GOP.com and you're almost sure to find something that will inspire a post. For example, just now I discovered this:

Under the President?s proposal to speed up tax relief, 92 million taxpayers would receive, on average, a tax cut of $1,083 in 2003.

* 46 million married couples would receive an average tax cut of $1,716.
* 34 million families with children would benefit from an average tax cut of $1,473.
* 6 million single women with children would receive an average tax cut of $541.
* 13 million elderly taxpayers would receive an average tax cut of $1,384.
* 23 million small business owners would receive tax cuts averaging $2,042.

Those numbers are probably technically true, yet based on them the casual reader might conclude that the savings under Bush's latest tax cut proposal range from $541 to $2042. How many families will get less than $200? How many get more than $10,000? What are the median tax cuts?

Because the groups overlap, it's difficult to infer how many people those numbers omit. Still, I can ballpark it. In 2002, there were 57.33 million married couples; the GOP decided to only tell us about the tax benefits that 80% of those families will recieve. For the 80% they do inlclude, the distribution of savings is not mentioned either -- do two million families save $10,000, ten million save $5,000, and the remaining 34 million save only $265 each?

Also not mentioned: where will the money come from? Simple multiplication and addition shows that just the cuts for married couples, single women, and the elderly (three disjoint groups) add up to $100b. But what services will be cut? Mysteriously, that's not included. Perhaps cutting the deficit in half no longer operative?

AB

Read More on " "

Classy Move

Howard Dean, today:

"I will work closely with John Kerry to make sure we beat George Bush in November and turn our country around," Dean said in a statement that did not specifically mention an endorsement. "There is a lot we can do together to rebuild an America that belongs to all of us, and we'll be saying more about what our amazing grass-roots network can do to help with his goal." Dean has set March 18 to announce details of his grass-roots advocacy organization.

Read More on " "

Wednesday, March 10, 2004

Kerry/McCain 2004

I keep seeing this posted and emailed all over the place, probably because McCain didn't exactly ridicule the idea:

"John Kerry is a close friend of mine. We have been friends for years," McCain said Wednesday when pressed to squelch speculation about a Kerry-McCain ticket. "Obviously I would entertain it."

On the other hand, CalPundit reminds us, "... wouldn't McCain first have to give up his position as a leader of Bush's re-election campaign in Arizona....?"

For what it's worth, here's my two cents. I don't particularly like McCain as VP unless he formally and vocally renounces his party -- it's like saying "yhere's only one good Democrat (Kerry) and then we have to go to the Republicans to get a good candidate," which is clearly not true. Plus McCain really is conservative; he simply has the redeeming virtue of being honest. Now McCain in a cabinet spot is another story -- Homeland Security or Defense seem entirely reasonable to me. (However, both of those also have the drawback of being castable in an "only Republicans understand security" light. Still, Dems could reply with talk of bipartisanship and uniting, not dividing.)

AB

Read More on " "

Poor Lou Dobbs

In his commentary for today Lou Dobbs complains about being attacked for his anti-globalization stance:

NEW YORK (CNN) - You may have noticed recently that I'm being attacked for my views on the exporting of American jobs and my calls for a balanced U.S. trade policy... [and] I will tell you it does make a fellow think when attacked so energetically and so personally.

Poor Lou Dobbs. I wonder if Atrios feels bad about this.

Kash

Read More on " "

Day Pass

Reading Salon's lead story today, The new Pentagon papers, is worth the time it takes to watch an ad.

AB

Read More on " "

Question

George Tenet yesterday, before the Senate Armed Services Committee:

I'm not going to sit here and tell you what my interaction was … and what I did and didn't do, except that you have to have confidence to know that when I believed that somebody was misconstruing intelligence, I said something about it. I don't stand up publicly and do it.

I wonder how John Warner (chair) and John McCain, both strong-willed Republicans, like being told that Tenet will pick and choose what interactions he's willing to discuss with the committee? On the other hand, since the statement was in response to a question from Sen. Kennedy, McCain and Warner may not care.

AB

Read More on " "

Stop Digging

I like this line from Kerry today:

He called the president too "stubborn" to admit his policies weren't working and said Bush's economic prescription "begins and ends with tax giveaways."

"When you're ...in the hole, step number one is pretty simple: stop digging."

Being from Massachussets, I suppose Kerry knows something about digging.

AB

Read More on " "

Argentina Avoids IMF Default…

…at least for now:

Argentina agrees to meet IMF debt deadline

FT.com: Argentina on Tuesday agreed to make a $3.1bn payment to the International Monetary Fund, narrowly avoiding what would have been the biggest single default in the fund's history…

Details of how the IMF and Argentina broke the impasse were unclear on Tuesday afternoon. But people close to the negotiations told the Financial Times that Argentina had agreed to several IMF demands over the country's treatment of its private creditors. The most important of these is that Argentina should agree to enter formal negotiations with its private creditors to restructure the country's defaulted sovereign debt. Until now, Argentine authorities have gone out of their way to avoid using the word "negotiation" and, according to creditors, have done everything possible to delay the process.

It’s a messy, messy situation with no easy way out. The choice for the IMF is to: a) let Argentina default, thereby losing the money that they’ve already lent them, but cutting off the risk of losing more money; or b) keep letting Argentina string things along, hoping that things will get better. The choice for Argentina is to: a) default, thus saving billions of dollars in loan repayments but losing the ability to borrow any further, thus potentially making the recovery much, much harder; or b) keep struggling to send payments to the IMF, thereby preserving the ability to borrow further to help get the economy back on its feet. Unless some Good Samaritan comes along with outright gifts of several billion dollars to Argentina, there are no good choices in this situation.

Kash

Read More on " "

The Role of Progressive Blogs

Kos wrote an excellent post yesterday about (arguably) the most important roles that progressive blogs have assumed: fact-checkers for the media, and tactical assets for the Democratic party in the battle to unseat George Bush. If the phenomenon of blogging interests you, take a look at it.

Kash

Read More on " "

Exuberance in the Bond Market

Check out what’s happened to the yield on the 10 year treasury note in recent days:

Ever since last Friday’s weaker-than-expected employment report, the bond market has been going like gangbusters. Yields on 10 year government bonds have plunged from over 4.0% to 3.7% in a matter of just a few days – a truly remarkable drop.

The financial press has mainly been explaining this as due to the fact that the employment report reassured investors that the Fed won’t raise rates any time soon. Perhaps. But were bond market participants really expecting the Fed to increase rates that soon? And do moves in the Fed funds rate really affect the 10-year bond yield so dramatically? I'm not convinced.

Here’s another theory to try on for size: maybe Friday’s employment report convinced some important bond market players that the recovery has already passed its prime, and that the economy won’t be zooming ahead for the rest of this year like many people thought a month or two ago. If the economy fails to strengthen later this year, then the demand for borrowed money that the bond market was expecting won’t materialize, so long rates won’t rise later this year as previously expected…

Kash

Read More on " "

Tuesday, March 09, 2004

From Kash to the NYT in 30 days

Figure accompanying Krugman's editorial in the New York Times today, March 9th, 2004:

Kash at Angry Bear on February 10th, 2004:

Read More on " "

The Sunshine State

The Sunshine State is looking sunny for one presidential candidate, and it's not Bush. This despite Florida's modest (2.8% in 3 years) job growth:

If, as I've argued before, job losses hurt Bush (e.g., in Ohio and Pennsylvania) then why won't job increases help him in Florida? In a nutshell, Florida's working-age and overall population growth has outstripped job growth by far. It would be astounding for a state to add 1 million people, as Florida did, and not see some increase in jobs. Moreover, income growth is stagnant and seniors are not happy with talk about Social Security cuts and they're not thrilled by the prescription drug plan either.

For the details and links, read the full Florida post at The American Street.

AB

Read More on " "

Further Declines in Consumer Confidence

From CNN/Money:

NEW YORK (CNN/Money) - Consumer confidence slid further in early March, according to the results of a relatively new private survey released Tuesday.

The monthly consumer confidence measure compiled by Investor's Business Daily and TechnoMetrica Market Intelligence, a private research firm, slid to 54.5 in March from 56.5 in February. The index had hit a 22-month high of 60.6 in January.

Once again it’s worth reiterating that confidence levels were extremely high in January. Nevertheless, the continued drop in consumer confidence does not bode well for the continued recovery. This goes hand in hand with reports from the IRS that tax refunds are only about $100 more than last year, on average. The Treasury Dept. had forecast that they would be $300 more. With negative income surprises like that, declining consumer confidence seems less of a mystery...

Kash

Read More on " "

Fixing His Own Mistakes?

Last Thursday President Bush talked about the economy while visiting Bakersfield, CA. As usual these days, he used the chance to lobby for making the 2001 tax cuts permanent:

[W]e need to make sure the tax cuts are permanent. See, the tax cuts are set to expire. That's what a lot of people don't understand. This is an important part of the dialogue in Washington, D.C. now, is how to make sure the economy continues to grow. These job creators need certainty in the tax code. You can't have taxes go down one year and up the next. They need certainty when it comes to planning. They need to be able to have certainty when it comes to their investment deductibility. That's what they need. And yet aspects of the tax code are set to expire.

Those dastardly, devious Washington D.C. types! How could they arrange such a terrible tax system where taxes are going down one year and up the next?

In fact, he's right - uncertainty in the tax code really does tend to inhibit business spending. So who is responsible for these down-one-year, up-the-next tax cuts? Of course, Bush did sign these down-and-up tax cuts into law back in 2001 – but at least he must have really chewed them out for setting up such a crazy tax scheme, right?

George Bush, June 7, 2001: Remarks by the President in Tax Cut Bill Signing Ceremony:

This tax relief plan is principled. Today is a great day for America. It is the first major achievement of a new era, an era of steady cooperation. And more achievements are ahead. I thank the members of Congress in both parties who made today possible. Together, we will lead our country to new progress and new possibilities. It is now my honor to sign the first broad tax relief in a generation.

Remember this, whenever you hear Bush talk about how harmful it is for the economy to have taxes changing erratically from year to year: he didn't think it was such a bad idea back in 2001. In fact, he thought the 2001 tax cut plan, with its down-and-up taxes, was a great idea. Why? Because, as has become standard operating procedure in the Bush White House, political expediency trumped economic sensibility. And that is exactly why after three years in office, the Bush White House has been unable to do anything to help the economy.

Kash

Read More on " "

Monday, March 08, 2004

Consumer Debt

I just took a look at last week’s release of the Fed’s Flow of Funds Report for 2003. It shows debt levels, especially among consumers, that have increased very rapidly in recent years. Much of this is due to the famous increase in mortgage debt that consumers took on last year, but other types of consumer debt also grew at a healthy clip. In all, consumer debt grew by 10.4% in 2003.

The odd thing is that such rates of increase in consumer debt are more typical of a year near the peak of the business cycle than a year near the trough. In fact, as this CBS Marketwatch story pointed out, the last time consumer debt grew this fast was back in the boom year of 1988.

I confess to being a bit puzzled. I have never really heard a satisfactory reason for why consumers have recently been willing to increase their debt at such a rapid rate when their incomes have been stagnant. Typically when the economy is slow we see consumers paying down debt, or at least acquiring it more slowly, because they (sensibly) worry about their ability to repay. But not this time.

In my opinion, low interest rates are not a sufficient explanation for the boom in consumer debt. Interest rates are almost always very low at this point in the business cycle. Real interest rates are not lower than usual right now (e.g. they are about the same as in 1993, which was arguably a similar point in the last business cycle – see this post for data). Perhaps people are being fooled by the low nominal rates, even though real interest rates are not low? Is this phenomenon all driven by money illusion? I'd like to think not, but until I hear another convincing story, that's what I'm left with...

Kash

Read More on " "

Blix Book

Former UN Chief Weapons Inspector Hans Blix has a book coming out, Disarming Iraq: the search for weapons of mass destruction. Based on this Blix interview in the Independent, Blix isn't pulling any punches:

"... My gut feelings [at the start of renewed inspections], which I kept to myself, suggested to me that Iraq still engaged in prohibited activities and retained prohibited items, and that it had the documents to prove it" ...

But Mr Blix's doubts set in when the inspectors were allowed back into Iraq at the end of that month, exactly four years after they were pulled out, as the US/UK bombing campaign of Operation Desert Fox started. They inspected suspicious sites, acting on tip-offs from the intelligence agencies, but they found no credible evidence of WMD. " I said, 'If this is the best, what is the rest?'" In fact, he adds: "Considering how misleading much of the intelligence given us eventually proved to be, perhaps it was a blessing we did not get more."

He tells of a conversation with Mr Blair, one month before the war, amid a controversy over the alleged presence of mobile biological weapons production facilities after the inspectors had been unable to confirm the intelligence claims.

"I added that it would prove paradoxical and absurd if 250,000 troops were to invade Iraq and find very little. Blair responded that the intelligence was clear Saddam had reconstituted his weapons of mass destruction programme. Blair clearly relied on the intelligence and was convinced, while my faith in intelligence had been shaken."

[snip] ... On the wall of Mr Blix's study is a framed letter from Bill Clinton, congratulating him after his retirement on his 16 years at the head of the IAEA. "I don't expect I'll be getting one from Bush," Mr Blix says drily.

Read More on " "

That Liberal Media

In the NYT today:

Because that group is patriotic and somewhat fiscally conservative, some experts said Mr. Kerry, a New Englander, would not appeal to them.

The piece is otherwise an informative and interesting analysis of Florida. But seriously, what was the reporter, Abby Goodnough, thinking when she wrote that sentence?

Goodnough does give the latest Florida poll results, and they are encouraging:

In the latest poll here, sponsored by The Miami Herald and The St. Petersburg Times, 49 percent of the 800 registered voters surveyed said they would vote for Mr. Kerry if the election were held now, and 43 percent said they would for Mr. Bush.

Read More on " "

Sunday, March 07, 2004

Winning the Senate?

Josh Marshall links to a CBS News story indicating that Democrats have a shot of taking back the Senate this fall. The CBS story cites Alaska, Colorado, and Pennsylvania as states where Republicans could lose a seat. The American Enterprise Institute's Norm Orstein is even quoted as saying

"Look at the run Bush has had in last month. If Bush has a run of bad luck and missteps in October anything like what he has had lately, then a narrow Democratic Senate is not out of the question."

Well and good. But there's another state where the Democrats have a shot: Illinois. The very conservative Peter Fitzgerald is retiring and there are currently seven Democrats and eight Republicans vying for his seat. Illinois' other senator is Dick Durbin, a center-left senator who, as far as I can tell, is popular in Illinois; moreover, Gore handily carried Illinois in 2000 (55% - 43%). Overall, I think Democrats have a decent shot at another Senate seat in Illinois, perhaps more of a chance than in Pennsylvania.

In Illinois, the Republican candidate will be Jack Ryan. The Democratic primary appears to be a tight race between Barack Obama and Blair Hull, with Obama leading 28% - 23%. I couldn't find any poll results on hypothetical general election matchups, however. Obama is a state senator and Hull's a businessman (he's also having problems stemming from a messy divorce in 1998). Beyond that, I don't know much about either one -- knowledgeable readers are invited to comment.

In the general election, Republican Jack Ryan may suffer somewhat as a result of sharing a last name with the unpopular and corrupt (but death sentence commuting) former governor George Ryan. On the other hand, Jack Ryan can always run ads saying "What rhymes with Obama?"

On a related note, there's not much hope for the House.

AB

UPDATE: See comments by Goldberg and Jeffrey Miller for some local insight into the race for junior senator from IL (thanks!). In a nutshell, the almost-sure Republican candidate, Jack Ryan, looks beatable. Both potential Democratic candidates also look good. Obama because he's extremely smart and qualified; Hull because he's got a very large personal fortune and he's willing to use it (see Corzine, Jon.)

CORRECTION/CLARIFICATION. I've modified this post because Illinois has too many Republican Ryans. There's former Gov. George Ryan, former Illinois Attorney General and 2002 Gubernatorial candidate Jim Ryan, and current Republican US Senate candidate Jack Ryan, who's never held public office before. (Thanks for clarifying, Mark.) On the bright side, this means that candidate Jack Ryan shares a last name with two unpopular Illinoisans: former Gov. George Ryan, and 2002 loser to Blagojevich, Jim Ryan. For more on Jim and George, but not Jack, see Talkleft's post, It's Ryan v. Ryan in Illinois.

Read More on " "

Saturday, March 06, 2004

Relax

Like many of my readers, I was a bit concerned when a poll (pdf) came out showing that Nader has 6% support in a three-way Bush/Kerry/Nader race. But I pretty quickly decided that that was either an anomaly or that it would fade over time. I didn't post on the subject because I didn't have anything other than my gut telling me that Nader would crash and burn.

Ruy Teixeira, however, does know polls:

To which I say: relax everybody. Nader's not going to get that kind of support and he's unlikely to even match the support he received in 2000. In fact, I think his fate is more likely to be like that of Pat Buchanan in 2000, who also drew some early support in polls, but would up with very few votes (.43 percent) because his candidacy had no real constituency or plausible rationale.

Ruy also reports something of more interest from the same poll: "Right now, just 35 percent of Americans say the country is going in the right direction, while 60 percent say it is off on the wrong track."

We now return to our regularly scheduled ignoring of Ralph. On the other hand, if the 6% does hold up, Ezra K. has a plan: make Ralph the Sister Soujah of 2004 ("Make it Kerry against the two zealots and you've got quite an interesting race shaping up.")

AB

Read More on " "

Job Creation and Destruction in Service Industries

Given the continued lousy state of the labor market, I wanted to know which industries are growing (in terms of numbers of workers) and which are shrinking. Here are the results for the past year, using the newest BLS figures (employment figures are in thousands of workers):

My reading of these figures is that they illustrate that the weak labor market is indeed explained by the combination of technologically-based productivity improvements with weak demand. Industries with slow job growth (or job losses) seem to be those that have been intensively adopting lots of labor-saving IT in recent years, such as wholesale and retail trade, transportation, and telecoms.

For obvious reasons, education and health has seen the least replacement of labor with IT, and so seeing lots of job growth in those industries is not surprising. Somewhat less obviously (at least to me), professional and business services (this category includes things like legal, engineering, administrative, advertising, management, consulting, IT and accounting services for businesses) has also been adding jobs at a rapid rate. I guess the workers in those industries also tend to be difficult to replace with IT. Especially when wearing lime helmets.

Kash

Read More on " "

Friday, March 05, 2004

Speaking of Funny Things

What's funnier? A cat wearing a lime helmet or this claim: 'Bush Boom Better than Clinton Economy'? I see via Mike Jones' 18 Minute Gap that the ~~charlatans~~ good folks over at Blogs for Bush have a post with that exact title. No really, they do. Just click here and see for yourself. The Blogs for Bush post is based on this NRO article by J. Edward Carter, Chairman of Economists for Bush.

As Mike explains, "Now, I'm not an economist. I don't even play one on TV. But I understand mathematics, and I'm not an idiot." It's amazing how, armed only with math and non-idiocy, Mike can quickly and entirely dismantle Carter's completely disingenuous claims.

For example, Carter claims -- and Blogs for Bush parrots -- that "compared with the 'exceptional' years of 1993, 1994, and 1995, the first three years of George W. Bush's presidency featured ... lower unemployment." Carter then shows that in Clinton's first three years, unemployment was 6.2%; in Bush's first three years, unemployment was a mere 5.5%. Checkmate! And you thought Bush was a job-destroyer of Hooverian proportions.

But what is the rest of the story? Was perhaps one president creating jobs ("Good") while one was destroying jobs (Bad)? Mike goes to the numbers (As an aid to my pro-Bush readers, I added the arrows and the labels "Good" and "Bad"):

Carter makes a number of other similarly ludicrous claims, so I encourage you to read Mike's full post. Because I promise you, this is how it will work: it starts at NRO, then goes to Blogs for Bush. Soon the Washington Times will be arguing that Bush's first three years were better, economically, than Clinton's. Then conservative columnists in mainstream papers will pick up the line. Soon reporters will say things like "opinions differ on which president had the better economic record in their first term" or perhaps more egregiously, "on a number of measures, the economy was better in Bush's first three years than Clinton's." By that time, some sap in your workplace or local bar will believe and repeat this silly claim. So read and be prepared.

AB

Read More on " "

Friday Cat Blogging

No, you haven't mistakenly wandered over to CalPundit. This is a one-time only feature here at Angry Bear, because it makes me laugh.

What happens when you have...

1) nothing to do

2) a sharp knife

3) a large lime

4) a patient cat

5) too much tequila

6) and it's football season?

[Scroll Down]

No, that's not my cat, nor my invention on its head. Just one of those rare forwarded emails that's actually funny.

AB

Read More on " "

More on Employment

Okay, so maybe it didn’t show much of an increase in jobs. But at least the BLS’s news release shows continued strong growth in the number of people outside of the labor force, i.e. people who aren’t working and who aren’t actively in the job market. Today’s BLS news release indicates that an astonishing 588,000 new people entered the ranks of the non-labor force.

In fact, as the graph shows, the Bush administration can take credit for adding a remarkable 6 million people to the ranks of those who aren’t participating in the labor force -- all in just three years. That’s the strongest record of non-workforce creation in history; before the Bush administration took office, it took 10 full years (from Jan 1991 to Jan 2001) to add 6 million people to the non-workforce in the US.

Kash

p.s. Naturally this reflects the falling labor force participation rate, which in February dropped to 65.9 -- the lowest rate in over 15 years. See this earlier post for more discussion about that phenomenon.

Read More on " "

Bad Employment Figures

The BLS just released its new employment estimates. The unemployment rate in February is estimated to be 5.6%, unchanged from January. The more important statistic, the number of jobs in the US economy, grew by just 21,000 in February. This is a BAD number – average expectations among economists were that payrolls grew by 125,000 in February – and as I mentioned the other day, it seems that expectations were recently getting even more optimistic. But continuing the trend of the past few months, economy-watchers have been overly optimistic about the performance of the labor market, as this table from CNN/Money shows:

This jobless recovery continues to stump many economists. For a reminder of how bleak the jobs picture has been over the past couple of years, here’s the graph showing employment in the US since 1999:

Finally, let’s calculate the new Bush administration job-creation forecast. In order to reach their (admittedly disavowed) forecast for the average level of employment this year, the job creation target for the rest of the year has now gone up from 320,000 new jobs each and every month to about 350,000 for the remaining 10 months of the year. Something tells me that this number will grow even more next month...

Kash

Read More on " "

Seen on The Front Page of CNN.com Today

U.S. to launch 24/7 hunt for bin Laden: "U.S. forces searching for al Qaeda leader Osama bin Laden along the mountainous border between Pakistan and Afghanistan will soon implement high-tech surveillance tactics in the region, enabling them to monitor the area 24 hours a day, seven days a week, CNN has learned."

That seems like a good idea. Maybe we could have started doing that in, say, two thousand and one?
Giuliani defends Bush's use of 9/11 images: "The ads, which began airing Thursday, outline a series of challenges that the United States has faced since Bush became president, including the 9/11 attacks. The tag line is that Bush presents 'strong leadership in times of change.'"

I think The Poor Man has the right take on this: "You were expecting, what, exactly? Commercials featuring the smoldering remains of the Clinton budget surplus?"
Explosions in Baghdad ahead of Iraqi law signing: "BAGHDAD, Iraq (CNN) -- A large explosion has been heard in central Baghdad, coalition officials tell CNN, hours before the planned signing of the country's interim constitution."
Former astronaut Glenn criticizes Bush space plan: "U.S. space pioneer John Glenn said on Thursday that President George W. Bush's space exploration plan 'pulls the rug out from under our scientists' and might waste too much money to ever put astronauts on Mars."

For my Mars plan, see this post.
Gasoline prices state-by-state: "The current average price for regular gasoline in the United States is about $1.71, up from $1.62 a month ago, according to AAA. A year ago, the average price of a gallon of regular gasoline was $1.69."

And they're going to get even higher.
Job boom: only a hope: "On Friday, the Labor Department is scheduled to release its figures for February unemployment and non-farm payrolls growth. Economists, on average, expect that unemployment held steady at 5.6 percent and that payrolls grew by 125,000 jobs, according to Briefing.com.

Such job growth would be nothing to sneeze at. But the labor force grows by about 150,000 people a month, meaning that, even if economists' forecasts are accurate -- no sure thing, of course -- there would still be about 25,000 more people looking for work."

With the possible exception of the ads that briefly feature 9/11 scenes, each of these stories hurt the president's reelection chances. And that's just in one day.

AB

UPDATE: While not yet on the front page of CNN.com, there's also nows on the Valerie Plame investigation. Grand jury seeks records from White House regarding CIA agent: "NEW YORK (AP) _ A federal grand jury that is probing the leak of a CIA officer's identity has subpoenaed the records of telephone calls made from Air Force One the week before the name of the officer was published in a July newspaper column."

Read More on " "

Thursday, March 04, 2004

Not Much To Say

Brad likes Kerry's budget guy. Atrios and CalPundit find more right wing demagoguery and hypocrisy. Howard Stern continues to rip into Bush and the righties. Matt Welch has some questions, inspired by the vapid Elisabeth "Really quick, is God on America's side" Bumiller, that John Kerry still needs to answer (via The Poor Man).

In the meantime, here's food for thought: John Kerry will be the greatest president of the twenty first century (to date.) Discuss.

AB

Read More on " "

Wednesday, March 03, 2004

It's because they're stupid, that's why. That's why everybody does everything

Read. Then laugh or cry as is your wont.

At some point, can we just move Austin and its residents to some other state, give Texas over to the fundamentalists and evangelicals, and then let Texas secede? Maybe we could bring Houston along too, but not Dallas.

AB

P.S. If you don't get the title, just click here.

Read More on " "

Kerry’s Budget

This will contain some interesting information about Kerry, though probably very little that we couldn’t already guess:

WASHINGTON (Reuters) - Amid charges he has over-pledged on the campaign trail, Democratic presidential front-runner John Kerry will detail "sooner rather than later" how he would halve the U.S. budget gap in four years, a top adviser said Tuesday.

"At some point -- I think it will be fairly soon but I'm not sure when -- Senator Kerry will put forward a comprehensive economic plan," said Roger Altman, a top Treasury Department official under President Bill Clinton.

"I'm confident the deficit reduction part of that will be reliable, fully costed and consistent with his pledge to cut the deficit in half over four years," Altman said.

The thing is, it won’t be that difficult to cut the deficit in half over four years, if a good chunk of the tax cuts are reversed. But the details of Kerry’s plan will still be worth taking a close look at, when it comes out.

Kash

Read More on " "

Expecting Incorrect Expectations

What’s wrong with this headline?

Betting on a jobs pop: Traders seem to think Friday's employment number will be better than expected

This must reflect some usage of the word “expected” that I am unclear about.

Kash

Read More on " "

The Costs of Trade Distortions

Yesterday the CBO released its response to a request by Congressman Bill Thomas for an economic analysis of the effect of the US’s current anti-dumping laws, which were modified in 2000. The modification of 2000 required that, if a US firm accuses a foreign firm of dumping, and if that foreign firm is found guilty so that tariffs are levied on it, then the US firms who compete with that foreign firm get the tariff revenue. (The US government used to keep it.)

The CBO report finds that:

Whatever gains might occur in terms of perceptions of the fairness of trade come at a cost of lower output for the economy… The [modification of 2000] increases that cost by providing incentives for more US businesses to pursue more antidumping and subsidy complaints… The law subsidizes the output of some firms at the expense of others, leading to inefficient use of capital, labor, and other resources of the economy.

The reason this caught my eye is because just last week someone was telling me about some US firms producing holiday sparklers which consist of exactly one person a few dollars worth of sparklers out of their garage. Why do they do it? Because if they have positive sales, then they’re entitled to a piece of the tariff revenue that the foreign producers of sparklers must pay as a result of earlier anti-dumping rulings. So increasingly, people are setting up these garage “businesses” in all sorts of industries -- it doesn't matter which, as long as there has been an anti-dumping ruling against them -- and are collecting checks totaling tens or hundreds of thousands of dollars per year from the US government.

Nice work, if you can get it…

Kash

UPDATE: An earlier mistake about the example given above has been fixed. I apologize for the error.

Read More on " "

Tuesday, March 02, 2004

Dude, Where's My New Honda Accord?

It's hard to wrap your mind around $1,800,000,000,000, which is the total additional payroll taxes workers have paid into the Social Security Trust Fund since 1983. There were about 110 million people in the labor force in 1983. This following is just a ballpark, since I'm not compounding the trust fund payments, nor am I factoring in labor market entry and exit. Dividing $1,800,000,000,000 by 110,000,000 gives $16,363.64, which is enough to buy an entry level Honda Accord.

Or with that additional $1,800,000,000,000 in SSI receipts we could instead write every man, woman, and child alive in America today a check for $6,300. Or we ~~could~~ did blow it all on tax cuts heavily skewed in favor of the rich.

AB

Read More on " "

I Always Liked Kerry Best

There you have it, Kerry's the nominee. He wasn't really my early favorite, but the more I hear and see of Kerry the more I like him.

To see how Kerry's likely to do in Minnesota this fall, based on the jobs picture there, see my latest at The American Street.

AB

Read More on " "

The Sucker

You can't play Three-Card Monte without a mark, a patsy, a sucker. Guess who's playing the sucker in Greenspan's shell game?

Since 1983, American workers have been paying more into Social Security than it has paid out in benefits, about $1.8 trillion more, so far. This year Americans will pay about 50 percent more in Social Security taxes than the government will pay out in benefits.

... On Greenspan's recommendation, Social Security was converted from a pay-as-you-go system to one in which taxes are collected in advance. After Congress adopted the plan, Greenspan rose to become chairman of the Fed.

So what has happened to that $1.8 trillion? The advance payments have all been spent.

Congress did not lock away the Social Security surplus, as many Americans believe. Instead, it borrowed the surplus, replacing the cash with Treasury notes, and spent the loan proceeds paying the ordinary expenses of running the federal government.

Only twice, in 1999 and 2000, has Congress balanced the federal budget without borrowing from the surplus.

Thanks to PhillyFilly for alerting me to this story (link).

AB

Read More on " "

Three-Card Monte

Following up on Kash's earlier post about Greenspan, Krugman's op/ed also highlights a fairly bold bait and switch maneuver by Greenspan:

The payroll tax is regressive: it falls much more heavily on middle- and lower-income families than it does on the rich. In fact, according to Congressional Budget Office estimates, families near the middle of the income distribution pay almost twice as much in payroll taxes as in income taxes. Yet people were willing to accept a regressive tax increase to sustain Social Security.

Now the joke's on them. Mr. Greenspan pushed through an increase in taxes on working Americans, generating a Social Security surplus. Then he used that surplus to argue for tax cuts that deliver very little relief to most people, but are worth a lot to those making more than $300,000 a year. And now that those tax cuts have contributed to a soaring deficit, he wants to cut Social Security benefits.

As you can see from this post last week, the 2004 deficit is only brought down to a mere $500,000,000,000 by starting with the non-trustfund deficit of $631,000,000,000 and subtracting from that the $154,000,000,000 surplus created by the payroll tax (money allegedly going into the trust fund/lockbox).

To summarize, here's Greenspan's 20+ year plan to roll back Social Security:

Step 1. Get appointed in early 1980s to committee to protect Social Security.
Step 2. Successfully propose substantial increases in regressive payroll taxes in order to save Social Security. Workers will pay higher payroll taxes but their retirement benefits will be assured.
Step 3. Wait 20 years; to pass the time, become Chairman of the Federal Reserve.
Step 4. Actively support large and regressive cuts in income taxes. Never mention payroll taxes.
Step 5. Repeat step 4.
Step 6. Observe that in 2004, steps 4 and 5 lead to a $631b shortfall; Step 2, however, created a $154b surplus.
Step 7. Reverse Steps 4 and 5.
Step 8. Just kidding about step 7. Seriously, the answer is clear: cut Social Security benefits.

UPDATE: CalPundit had a post on Sunday, THREE CARD MONTE WITH ALAN GREENSPAN, which made the same observation and concluded, "A normal person would at least be embarrassed by all this. But Alan Greenspan has never been a mere mortal, has he?"

Read More on " "

When Will China Overheat?

Today Greenspan (not my favorite person these days – see the preceding post – but anyway...) made some remarks about China:

WASHINGTON (CBS.MW) -- China could be forced to limit its dollar purchases to avoid excessive economic growth, Federal Reserve Board Chairman Alan Greenspan warned Tuesday.

"China's central bank purchases of dollars, unless offset, threaten an excess of so-called high-powered money expansion and a consequent overheating of the Chinese economy," Greenspan said in prepared remarks to the Economic Club of New York.

Yes. This is what we would expect. Continual purchases of US dollars by Asian central banks is causing their money supplies to zoom. And we would normally expect this to have some repercussions on the economy, such as increased inflation.

The mystery is therefore this: why isn’t it happening? How can China be increasing its money supply by 20 or 30 percent per year while inflation remains very, very low? Certainly asset prices have risen, but why aren’t prices for goods and services rising too? Why are our normal economic expectations letting us down? Is this just a good demonstration of why my Fed friends think that the money supply doesn’t matter? Is it just a question of waiting a bit longer for inflation to pick up?

The answers are important, because until we start seeing typical inflation in China, the Chinese central bank will face no pressure to reduce their purchases of US dollars and let the yuan appreciate. And the effects of such a change on the US – both positive and negative – could be significant.

Kash

Read More on " "

Krugman on Greenspan's Remarks

In today's NYTimes column, Paul Krugman has some things to say about Greenspan's shockingly partisan testimony on Capitol Hill last week. The most interesting parts of his column are the three conclusions that Krugman draws:

First, "starving the beast" is no longer a hypothetical scenario -- it's happening as we speak. For decades, conservatives have sought tax cuts, not because they're affordable, but because they aren't. Tax cuts lead to budget deficits, and deficits offer an excuse to squeeze government spending.

Second, squeezing spending doesn't mean cutting back on wasteful programs nobody wants...

Finally, the right-wing corruption of our government system -- the partisan takeover of institutions that are supposed to be nonpolitical -- continues, and even extends to the Federal Reserve.

I have to admit that I found theories about "starving the beast" to be a bit implausible a year or two ago. But now such theories are not just plausible; they describe reality.

Kash

Read More on " "

Monday, March 01, 2004

Haiti

I'm not quite sure what to make of this, but it's definitely weird:

Spokesman Scott McClellan said the allegations have no basis. "It's complete nonsense!" He said Mr. Aristide was not abducted or kidnapped and consulted with the U.S. Embassy in Haiti on the best way to give up power and get out of the country safely. "We took steps to protect Mr. Aristide and his family so they would not be harmed as they left Haiti," he said.

But African-American members of the U.S. Congress who have spoken to Mr. Aristide since his arrival in the Central African Republic say he says he was forced to leave.

Representatives Charles Rangel and Maxine Waters recounted their conversations in broadcast interviews, as did black activist Randall Robertson. They said Jean-Bertrand Aristide told them he was abducted at gunpoint by American soldiers and put aboard a plane.

While definitely strongly on the liberal side, neither Rangel nor Waters is looney. If they say they talked to Aristide, then I believe that either (1) they did, or (2) they talked to someone convincingly pretending to be Aristide (the allegation is that Aristide made the calls from a cell phone smuggled into his room/cell in the CAR, so perhaps it was not actually Aristide.) It's hard to fathom a motive for the US doing this, so that casts some doubt on the accuracy of the Rangel/Waters account.

And to really mix things up, it appears that US and French troops are cooperating in Haiti.

As they say, it's developing.

AB

P.S. Based on a few of the comments to my previous post, an easier way for the US to get rid of Aristide would have been to give Haiti some Diebold electronic voting machines, hack them, and elect whoever the heck we felt like electing.

UPDATE: Via Atrios, put on your tinfoil hat, say Allende three times, and see U.S. political maneuvering behind the ouster:

The departure of Haiti's Jean-Bertrand Aristide is a victory for a Bush administration hard-liner who has been long dedicated to Aristide's ouster, U.S. foreign policy analysts say. ... That official is Roger Noriega, assistant U.S. secretary of state for Western Hemisphere affairs...

... "Roger Noriega has been dedicated to ousting Aristide for many, many years, and now he's in a singularly powerful position to accomplish it," Robert White, a former U.S. ambassador to El Salvador and Paraguay, said last week.

White, now president of the Center for International Policy, a think tank in Washington, said Noriega's ascent largely has been attributed to his ties to North Carolina Republican Jesse Helms, an arch-conservative foe of Aristide who had behind-the-scenes influence over policy toward Latin America and the Caribbean before retiring from the Senate two years ago.

"Helms didn't just dislike Aristide, Helms loathed Aristide because he saw in Aristide another Castro," said Larry Birns, director of the Washington-based Council on Hemispheric Affairs, which has been strongly critical of the Bush administration's policy on Haiti.

Working hand in hand with Noriega on Haiti has been National Security Council envoy Otto Reich, who, like Noriega, is ardently opposed to Cuban leader Fidel Castro, say analysts such as Birns. Washington diplomats have seen Aristide as a leftist who is often fierce in his denunciations of the business class and slow to make recommended changes such as privatizing state-run industries.

"On a day-to-day basis, Roger Noriega [has been] making policy, but with a very strong role played by Otto Reich," Birns said.

Reich is a controversial Cuban-American criticized by some who have lingering concerns about his contacts with opposition figures who plotted a short-lived coup against Venezuela's leftist president, Hugo Chávez, two years ago. Reich also is linked to the Iran-contra scandal of two decades ago that was part of President Ronald Reagan's policy of defeating Marxists in Central America. ...

Read More on " "

Electronic Voting: I'd Like a Receipt, Please

I'm not much of a conspiracy nut. When I hear that the CEO of Diebold, the leading maker of electronic voting machines, said last summer that he's "committed to helping Ohio deliver its electoral votes to the president next year," I believe that he was speaking as a citizen. That is, I seriously doubt that there's a scheme to manipulate the vote-counting software in a way that definitely delivers Ohio's electoral votes, or any other state's, to Bush.

Notwithstanding that, reading about the security flaws and the related controversy over Maryland's Diebold system, I can't for the life of me figure out why these machines do not print out records of the votes. Every IT expert in the world will tell you to always back-up your work. In the context of electronic voting, the only 100% sure way to back-up a vote is to print it out. Moreover, no unhackable system has ever been devised, and by all accounts, the Diebold machines are depressingly far from the state of the art in security.(*)

Voting is certainly no less important -- perhaps even more important, given the whole Democracy thing that we have here in the US -- than a credit card charge or an ATM withdrawal. The answer is simple and inexpensive: I'd like a receipt, please.

AB

(*) For an disturbing analysis of Diebold's security, put on your tin-foil hat and see Analysis of an Electronic Voting System (pdf), by computer scientists at UCSD and Rice, under the auspices of the Johns Hopkins University Information Security Institute. The researchers obtained and then analyzed the source code for Diebold's AccuVote-TS voting machine:

...Our analysis shows that this voting system is far below even the most minimal security standards applicable in other contexts. We identify several problems including unauthorized privilege escalation, incorrect use of cryptography, vulnerabilities to network threats, and poor software development processes. We show that voters, without any insider privileges, can cast unlimited votes without being detected by any mechanism within the voting terminal software. Furthermore, we show that even the most serious of our outsider attacks could have been discovered and executed without access to the source code...outsiders can do the damage. That said, we demonstrate that the insider threat is also quite considerable, showing that not only can an insider, such as a poll worker, modify the votes. ... We conclude that this voting system is unsuitable for use in a general election. Any paperless electronic voting system might suffer similar flaws, despite any "certification" it could have otherwise received. We suggest that the best solutions are voting systems having a "voter-verifiable audit trail," where a computerized voting system might print a paper ballot that can be read and verified by the voter."

Read More on " "

Sunday, February 29, 2004

The Road to Hell is Paved With Good Intentions

Reader Jon H. emailed me Tom Friedman's latest NYT Op/Ed piece, 30 Little Turtles. The editorial is about Indian call centers and what those jobs mean for the Indians who get them. It's definitely worth reading, but that's not the point of this post. In my response to Jon's email, I wrote this (slightly edited for posting):

More generally, I strongly believe that the labor market problems stem from the overall state of the economy, not from outsourcing and free trade. Insofar as protectionism will harm the overall state of economy, and it would, it's more likely to make things worse, not better.

I think I've made this point before, but never so starkly: protectionism will cost, not create, US jobs. This is true irrespective of cross-country asymmetries in labor and social conditions (more to come on this issue).

Now the ubiquitous and important caveat: both trade and technological progress harm specific sectors of the economy while benefiting both the average and the median citizen (and the other deciles too). Thus, it is vitally important to use some of the gains from trade to offset those sectoral losses -- as Paul Krugman recently wrote, "free trade is politically viable only if it's backed by effective job creation measures and a strong domestic social safety net ... there's a reason why the two U.S. presidents who did the most to promote growth in world trade were Franklin Roosevelt and Harry Truman."

AB

P.S. Brad DeLong recently made roughly the same point:

"... I can and do blame Democratic politicians for not resisting temptation: every day that Americans are told that trade destroys jobs--rather than that it shifts jobs from one industry to another, hopefully from lower-paying to higher-paying--is a day that makes it harder to pursue good policies to enrich America. Blame Bush for failing to take out the obvious insurance against a slack job market--for pursuing tax cuts for the upper class rather than fiscal policies that would provide an effective stimulus to demand and employment. But don't you dare imply or state that the U.S. would be a richer, more productive, and faster-growing economy if we turned our back on the world market."

Read More on " "

Saturday, February 28, 2004

The Politicization and Bastardization of Science, Continued

Via CalPundit, this news from the WaPo:

President Bush yesterday dismissed two members of his handpicked Council on Bioethics -- a scientist and a moral philosopher who had been among the more outspoken advocates for research on human embryo cells.

In their places he appointed three new members, including a doctor who has called for more religion in public life, a political scientist who has spoken out precisely against the research that the dismissed members supported, and another who has written about the immorality of abortion and the "threats of biotechnology."

Never adjust policy in response to information. Simply pick and choose scientists so as to adapt the information to policy.

AB

Read More on " "

The Other Danger of Protectionism

Typically, if one country engages in protectionism, others will respond in kind. That's exactly what's about to happen:

Four years after the WTO ruled against the United States, Congress has still failed to repeal export subsidies, known as the extraterritorial income exclusion, that the trade organization determined to be illegal. The WTO gave the Europeans permission to impose sanctions totaling $4 billion a year, and the EU responded last April with a long list of targets politically sensitive to President Bush, including Florida citrus, Carolina textiles, Wisconsin paper products and iron and steel from Ohio, Pennsylvania and West Virginia.

... The tariffs will start at 5 percent of the products' value, or an estimated $16.5 million in March, but will climb a percentage point each month that Congress fails to act, Lamy said. That could bring the sanctions to about $315 million for 2004.

.. [European Union Trade Commissioner] Lamy said that by slowly ratcheting up the pain, the EU will "focus the mind on the necessity to repeal."

With free trade, jobs are lost but the economy overall benefits (however, not every sector benefits -- hence the need for programs like wage insurance); prices are also lower, which benefits consumers. With trade wars jobs are also lost, but GDP falls and consumers get to pay more for the goods they buy.

Thanks to mega mike for the link to the story.

AB

Read More on " "

Even the Well-Off Don't Like Trade These Days

Via Dan Drezner, I see that Tuesday's USA Today reported that

The poll shows that among Americans making more than $100,000 a year, support for actively promoting more free trade collapsed from 57% to less than half that, 28%.

As Dan says, it's not so much the direction of the shift among the well off as the magnitude of that shift.

Speaking of trade, wandering through the grocery store today, I noticed that they were selling tax software. This naturally lead me to wonder why it's viewed as a great thing when people can do their taxes quickly and cheaply using a computer and software, but a bad thing when people can do their taxes quckly and cheaply using Indian accountants. (For more, see Kash's classic Trade with China as Technological Revolution.)

AB

Read More on " "

Debt Mountain

In a post that relates to Kash's Monday post on the current accounts deficit, Karsten, a European blogger who follows finance, explains why massive US deficits haven't lead to soaring interest rates:

As we all know that no saving of note takes place in the US we could assume that most of last years government deficit was financed by foreigners. This assumption is correct - those shifty little foreigners (some of whom even speak foreign languages) bought almost all of the new paper issued by the US Treasury last year. The marketable debt held by the public ... increased by around 325$bn last year. Foreigners bought around 290$bn of that (and most of that was snapped up by foreign central banks)!

... A look into the future can be pretty scary: the huge current account deficit means that foreign countries are selling lots of shiny doodads to US consumers and earning dollars from those sales.

If foreigners keep financing the US deficit with those dollars, then interest rates will stay down; likewise, if foreigners buy more US goods then that will be a good thing as well. But what if they simply decide to start selling those dollars (e.g., in anticipation of inflation)? Read the rest of the story. (More generally, if you like finance and investing, you should probably be reading Karsten's CurryBlog more often.)

AB

Read More on " "

Friday, February 27, 2004

Income Inequality in the US

Following up on AB’s post about how well the wealthiest have done in recent years, here’s a graph showing the share of aggregate income earned by high-income households in the US. Unfortunately we don’t have 2003 data yet (other than Forbes’ data on billionaires), but I think it’s a safe bet that the upward climb has continued in both lines since 2002.

(Source: Census data, available here.)

Of course, the interesting question is what’s the cause of this remarkable upward trend. After a very heated (by economists’ standards) debate throughout most of the 1990s, the consensus seems to have emerged that most of this increase in inequality can be attributed to technological change. Specifically, over the past 20 years we’ve seen technological advances (read computers) that give well-educated workers an increasing advantage over poorly educated workers. Put another way, technology has been more and more able to substitute for low-skill workers. There are other factors as well, but the lion’s share of the blame seems to belong to technology.

What do we do about it? I’m not sure. However, I have a feeling that cutting taxes for people at the top of the income scale is exactly NOT the way to fix the problem.

Kash

Read More on " "

Thursday, February 26, 2004

Make the Tax Cuts Permanent! Now!

Quick, before this trend stops:

All told, it was a fabulous year to be very rich.

[Forbes magazine] counted some 587 billionaires around the world, up from 476 in 2003. Their total net worth jumped to $1.9 trillion from the $1.4 trillion the magazine counted in 2003.

"After two years of significantly falling fortunes, we really saw an uptick for just about everybody on the list," said Luisa Kroll, an associate editor at Forbes who oversaw the project....

... In the United States, billionaires likely gained last year not only from a 20 percent rise in stock prices, but also from reductions in taxes on dividends, capital gains and estate taxes, according to Mark Zandi, chief economist at Economy.com.

"High income, high net-worth households have done very well under the Bush administration," said Zandi, adding that technological advances and trends toward globalization also tend to benefit the rich.

Nice to see that that .000001% of the population is doing quite well.(*) What about the nation's poor? (2003 data not yet available):

But that's just the poor, and there were only about 3 million or so more of them in 12/2002 than in early 2000, so who cares? What about the median household? Surely they are faring well? No, not them either. In 2002 dollars, median household income (Table A-1, p. 17) was $43,915 in 1999; $43,848 in 2000; $42,900 in 2001; and $42,409 in 2002.

Maybe we should just pass an amendment giving everyone the constitutional right to a billion dollars. Except the gays. They can stay poor.

AB

(*) Note: While I don't know any personally, I have nothing against billionaires, and I respect many of them. Indeed, risking the ire of my readers, I'll say Gates, Buffet, Allen, even the Waltons, and surely many others on the Forbes list earned their wealth, created tens and tens of thousands of jobs, helped spur economic growth, and generated wealth for shareholders. But they did so in the 1990s, in the face of both Clinton's tax rates and estate taxes. What I do disapprove of, however, is the administration's using regressive tax cuts to augment that wealth.

Read More on " "

Even More on Greenspan

A staffer at The Century Foundation, about which I know little other than that Ruy T. is affiliated with it, alerts me to a short article by Bernard Wasow on Greenspan. The article concludes with

So Mr. Greenspan would pay for massive tax cuts, about half of which go to the richest one percent of Americans, by reducing Social Security benefits from their current princely level of about $10,000 per beneficiary per year. All retirees would face benefit reductions, but his proposals would particularly burden those who die young and those who die very old. Now we know.

I suspect most of my readers agree with this.

I do have one quibble, however. Wasow says that "[we'll pay for the Bush tax cuts] by reducing spending on one of the lowest income groups in the United States, retirees." That statement is true, but misleading. Retirees, precisely because they are retired, are in fact one of the lowest income groups. But they are also the highest wealth group, so don't pity them too much. Not to say that I don't think SSI is a good program; it is. Nor even to say that all low income retirees have significant wealth; they don't.

However, a reasonable case for means-testing SSI benefits exists. After all, it's insurance, and insurance is generally designed to pay off in the event of a bad outcome (fire, theft, early death, retiring poor, ...) But it would only make sense to means test SSI based on wealth, not income. Given current interest rates, a retiree with $1m in assets would only have income of $30,000-$50,000 (less if a big chunk of that $1m is in their home.)

Means testing based on wealth carries its own risks, however, as it encourages profligate spending just before retirement. A very slow and gradual phase out of the SSI benefit is one possible solution to this problem. In any event, this post is not about means-testing. My point is that wealth and income are different things and, particularly in the context of retired persons, the distinction is important.

AB

CLARIFICATION: Skimming this post, I should clarify that by "A very slow and gradual phase out of the SSI benefit is one possible solution to this problem," I mean phase out the benefit as income rises, not over time. Don't end SSI, just decrease the payment as wealth increases and either use the savings to increase benefits to the remaining retirees, to lower the regressive payroll taxes, or to keep the program solvent.

Read More on " "

More Trouble for Blair

Source: Britain Spied on U.N.'s Annan. Highlights:

LONDON - British intelligence agents spied on U.N. Secretary General Kofi Annan (news - web sites) in the run-up to the Iraq (news - web sites) war, a former member of Prime Minister Tony Blair (news - web sites)'s Cabinet said Thursday.
Short, who resigned her post after the campaign to topple Saddam, said she had read transcripts of Annan's conversations while she was a Cabinet member.

"The U.K. in this time was also getting, spying on Kofi Annan's office and getting reports from him about what was going on," she said in an interview with British Broadcasting Corp. radio.
Asked explicitly whether British spies had been instructed to carry out operations within the United Nations on people such as Annan, she said: "Yes, absolutely."
[Claire Short] resigned in May, complaining the United Nations did not have a large enough role in reconstruction. Since then, she has called for Blair to resign, accusing him of misleading the country about the threat posed by Saddam.
Reacting to the Gun case and Short's allegations, Blair told reporters: "We are going to be in a very dangerous situation as a country if people feel they can simply spill out secrets or details of security operations — whether false or true actually — and get away with it."

Read More on " "

Conservative Economists Write a Letter

A group of economists, including "the presidents of the Progress and Freedom Foundation, the Pacific Research Institute and the Competitive Enterprise Institute as well as scholars at the Hoover Institution and the Manhattan Institute all signed the letter" are annoyed at the pro-regulation position of a certain political strategist:

"Your position on telecommunications deregulation is contrary to the views of the vast majority of free-market economists and policy analysts," the letter states. "Your continuing advocacy of the pro-regulation position is destructive to the cause of limited government. To the extent your efforts are successful, the effect will be to reduce capital formation, slow job creation, impede productivity growth and stifle individual liberty and economic freedom."

Question: To whom is the letter addressed? If you don't already know the answer, you won't guess in ten tries (it's not Greenspan.)

Answer here.

AB

UPDATE: An answer that doesn't require registering for the WaPo site is here.

Read More on " "

Don't Forget to Donate

If you'll look to your left, you'll see a banner supporting Wampum's Mary Beth Williams for Maine state representative (campaign site here). Today, there's an interesting profile of her candidacy, with a lengthy discussion of the role of blogs in campaigns this year, in the Portland Phoenix. (Atrios, Kos, and Stirling are quoted at length in the article.)

At one point, the reporter asks an interesting question:

... the question still bears asking: At what point does the nationalization of local races tip the scales of influence from a candidate’s flesh-and-blood constituents to her readers in the blogosphere? What happens to representative democracy if funding is decentralized to the point of every candidate raising more money from a diffuse virtual constituency than from the actual human beings in his or her district?

Great question. And there's one easy way to learn the answer: click on the Mary Beth Williams banner to the left and donate (via PayPal). Angry Bear (the blog -- Kash and I, that is) are matching up to $100, so don't forget to give. Many small donations are better than a few big ones, so $5 and $10 should do the trick. End your contributions in .89 (e.g., $5.89 or $10.89) so Mary Beth can keep track of donations from Angry Bear readers.

AB

Read More on " "

Another Greenspan Update

Smart conservative Dan Drezner agrees that Greenspan's comments are bad for Bush:

"The more Greenspan clears his throat like this, the more the current occupant of 1600 Pennsylvania Avenue is going to get nervous."

Dan's got a few other examples of Greenspan recently making statements that clearly weren't run by Karl Rove first.

Let's see: Mel Gibson apparently has a new movie out blaming Jews for the death of Christ ... Commerce Secretary Don Evans says Bush believes he was chosen by God to lead the nation at this time (paragraph 12) ... and Greenspan is a, well, you know, he's an Objectivist ... Connect the dots ...

AB

[Updated to facilitate connection of dots]

Read More on " "

Wednesday, February 25, 2004

A Little Logic

Teeing off on an excerpt from Mayor Gavin Newsom's appearance Larry King Live, Slacktivist applies a bit of logic:

Newsom highlights the contradiction embraced by those who want to argue both that same-sex marriages are not constitutional and that the Constitution must be amended in order to make such marriages illegal.

If these marriages are not constitutional, then there is no need for the FMA.

If these marriages are constitutional, then one cannot argue that they are illegal or illegitimate.

Conservatives may want to ponder this. Of course, something can fail to be prohibited by the Constitution yet still be illegal -- speeding and assault are two examples. Still, pursuing a Constitutional amendment against gay marriage is surely an admission by supporters that they believe that a federal law banning gay marriage would be unconstitutional. So to tighten up Slacktivist's point, it's actually an admission that it is [U.S.] constitutional for states to allow gay marriage.

A second issue is whether California's Defense of Marriage Act (CA-DOMA) is [California] constitutional. Take a quick look at the first paragraph of California's Constitution:

All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.

Do life, liberty, happiness, and privacy combine to make the CA-DOMA unconstitional in California? Mayor Newsom thinks they do. Gov. Schwarzenegger disagrees, making it an issue for California's Supreme Court, not the federal government, nor religious zealots in Alabama (via Atrios.)

AB

Read More on " "

Greenspan Update

In a comment to Kash's post, I said

Oddly, however, Greenspan actually saying this [SSI benefits need to be cut] makes his alleged long term goal less likely to come to pass, because it certainly isn't a favor to Bush's reelection odds.

Here's Josh Marshall saying the same thing:

But Greenspan did the White House no favors with this one. McClellan will get asked about this tomorrow and it'll be hanging around their necks for some time.

I'm sure Josh and others will have the transcripts from tomorrow's breifing. Stay tuned.

AB

Read More on " "

Greenspan on Social Security

Greenspan testified before the House Budget Committee today. Much of his talk was devoted to discussing the long-run fiscal implications of the retirement of the baby boomers.

His recommendation for solving the long-term forecast shortfall in the Social Security trust fund is simple: cut benefits.

I believe that a thorough review of our spending commitments--and at least some adjustment in those commitments--is necessary for prudent policy... I certainly agree that the same scrutiny needs to be applied to taxes. However, tax rate increases of sufficient dimension to deal with our looming fiscal problems arguably pose significant risks to economic growth and the revenue base. The exact magnitude of such risks is very difficult to estimate, but they are of enough concern, in my judgment, to warrant aiming to close the fiscal gap primarily, if not wholly, from the outlay side.

He’s wrong. Several studies have demonstrated that relatively small changes in the revenue side of the Social Security program would be sufficient to close most of the long-term SS gap. (See for example policy briefs at Brookings and the EPI.) Once again, Greenspan is single-mindedly pushing his agenda of smaller government, regardless of the underlying economic analysis.

Kash

Read More on " "

Japan Remains Reptilian

It's a great metaphor, and we can thank a Morgan Stanley economist Osamu Tanaka for adding such poetry to the dismal science:

[W]e do not think any full-fledged rebound in personal consumption [in Japan] can be expected, because corporations continue to restrain personnel spending and households' need to restore depleted savings both will weigh heavily on consumption. In this environment, manufacturing and capex activity cannot escape from their dependence on external demand -- [Japan's] economy will remain quintessentially "reptilian," needing the warming sunlight of external demand to maintain its temperature and activity, and therefore subject to the vagaries of global cycles.

What I wonder is where the US economy's "warming sunlight" will come from later this year...

Kash

p.s. note that this reading agrees with the skepticism many commenters expressed last week about the strength of Japan's recovery.

Read More on " "

US Money Supply

Numerous people have commented in recent weeks about the drop in the US money supply over the past few months. The graph below illustrates the concern. “Narrow” money supply (M1) grew more slowly in the end of 2003, but not unusually so. However, the growth in M2 (which includes cash, checking accounts, savings accounts, and money market accounts) took a dramatic tumble toward the end of 2003.

This obviously raises two questions: what caused this fall in M2, and is it a cause for concern? To answer these questions, I talked to a friend who's an economist in the Federal Reserve System, and is probably among the 50 most knowledgeable people in the world on the subject of the US money supply. (The other 49 are probably also Fed economists.)

First, the causes of the drop in M2. There are three.

1. When homes are refinanced, the old mortgage is paid off with a new one. But most mortgages have been bundled together into a mortgage-backed security, which is then held by a large-scale investor (e.g. a bank or insurance company). Due to the accounting procedures necessary to adjust the mortgage-backed security for the early repayment of one of the mortgages that it contains, the balance refinanced is held for a short time in a special type of account. When there are more refinancings, these accounts swell the size of M2; when refi activity falls, these accounts shrink and M2 falls. During the second half of 2003 mortgage refinancing activity slowed considerably, so the size of those accounts fell, reducing M2. This is a technical side-effect of the slowing of refi activity, and has no economic impact whatsoever.

2. Another cause has to do with the effects of cash-out refinancings. People built up large balances in their checking and savings accounts as they took cash out of their house from refinancing. As refi activity has slowed, less cash has been taken out of houses, so that addition to the money supply has tapered off. Additionally, people have been spending the money that they took out of their houses in 2002 and early 2003. So M2 balances have fallen. So in part, the fall in M2 simply tells us that we’ve seen the end of major refi-related spending.

3. The third cause has to do with the stock market. Since the resolution of the uncertainty surrounding the war in Iraq in the spring of 2003, individuals have poured money at an accelerating rate into the stock market. To do that, people take money out of their savings and money market accounts. The result is a fall in M2.

Now the next question: is it a cause for worry? The short answer is no. First of all, some people (such as my monetary expert at the Fed) make the argument that the size of M2 is irrelevant to anything that we care about. The only possible use it may have is if it contains information about other things in the economy that we do care about. But even a sharp, sustained fall in M2 would have no repercussions for the economy in and of itself.

Second, the causes of the fall in M2 in this case are generally not anything we didn’t already know. We already knew that mortgage refi activity slowed in the end of 2003 (though this confirms that people have largely spent all of their refi cash by now), and we already knew that people have been shifting money into the stock market. So in this case, the fall in M2 doesn’t provide us much new information. And anyway, M2 is starting to grow again as these effects peter out. Within a few more months it will probably be growing at its usual healthy clip.

So, to make a long story short, don’t lose any sleep over the wiggles in M2 growth. As I've written about many times before (including yesterday on The American Street), we have plenty of other economic problems to worry about.

Kash

Read More on " "

Tuesday, February 24, 2004

On the Lighter Side ...

This is very funny. (Via Cynical-C.)

And speaking of funny, read this letter from Rep. John Dingell (D-MI) to Council of Economic Advisors Chairman Mankiw. And no, it's not a parody, it's a transcription of the actual letter. Click and see Dingell explain his nomination of the Hon. Mayor McCheese for the Assistant Secretary for Manufacturing position.

AB

Read More on " "

The Triple-X Amendment

Democrats need to highlight the idiocy of Bush's proposed bigotry amendment. I think the best way to do that is to fight to attach bans on turpitude in all its forms: adultery, divorce, fornication, hand-jobs, sodomy, you name it. If it's not missionary with your opposite-gendered spouse, then by God, the XXVIII^th will outlaw it. Even better, if we can pass two other amendments first, we can call this one the "Triple-X" amendment.

AB

Read More on " "

Andy, Meet Light. See the Light

Andrew Sullivan waxes eloquently on Bush's blatant pander to ignorance, fear, and prejudice:

The president launched a war today against the civil rights of gay citizens and their families. And just as importantly, he launched a war to defile the most sacred document in the land. ... Not since the horrifying legacy of Constitutional racial discrimination in this country has such a goal been even thought of, let alone pursued. Those of us who supported this president in 2000, who have backed him whole-heartedly during the war, who have endured scorn from our peers as a result, who trusted that this president was indeed a uniter rather than a divider, now know the truth.

Now, if Andy could manage to start caring when it's other people's rights and interests being harmed by conservatives...

AB

UPDATE: I strongly encourage you to visit this Newsweek/MSNBC page, first look at the top picture, then scroll down to the "Photo Gallery," and look at the photos. As you'll see, they are just people. Really, really, happy people. Now go about your business. Via Josh Marshall.

Read More on " "

Jobs in Ohio

The number of lost jobs in Ohio (265,000 jobs) is about 90,000 more than Bush's margin of victory in 2000 (176,000 votes). I'd say that makes Ohio very likely to swing Democratic in 2004. And as GOP strategist Scott Reed recently pointed out, "No Republican has ever been elected president without carrying Ohio."

Here's the job picture in Ohio. The details are at The American Street, along with a quick look at Minnesota (likely to go Democratic again in 2004, based on the jobs situation.)

Read More on " "

Monday, February 23, 2004

More Context on the Size of the US Government

While I'm at it, here's another picture providing some more context.

Apparently, the US and France also disagree quite a bit about the appropriate size of the government. Rush Limbaugh can add that to the list of reasons why France is evil. This evidence comes not a moment too soon, because Americans' public opinion about France is apparently improving.

Kash

Read More on " "

A Picture Worth 1,000 Words

Sure, many of you have already seen this picture, or something very much like it. But since I was preparing it for a class anyway, I had it handy and thought you might enjoy seeing it one more time. Plus, long-run context is almost always helpful.

Do any features in the graph stand out to you?

Kash

Read More on " "

Roach on Sustainability

Stephen Roach of Morgan Stanley is still worried about the sustainability of the recovery:

This global rebound is unlike any experienced in the past — it has been unusually dependent on policy stimulus. Can this nascent recovery in the world economy wean itself from these life-support measures and make the all-important transition to a self-sustaining upturn?

...Global policy levers are now fully engaged. The forces of private demand are not. To the extent that job creation in the developed world remains much tougher to come by in an increasingly integrated global economy, the conversion of policy stimulus into self-sustaining private consumption could continue to be impaired. Not only does that impede the standard “multiplier” effects that lie at the heart of enduring recoveries, but it leads to a build-up of ever-greater imbalances that ultimately pose the most serious threats of all. You’d never know that from the recent euphoria in world financial markets. That’s just the problem.

Since monetary and fiscal stimulus have both pretty much run their course by now, we'll find out if he's right within about 6-12 months.

Kash

Read More on " "

Is the Current Account Deficit Bad?

A commenter over the weekend posed this important question, so I thought I’d take a stab at answering it. The Current Account (CA) deficit represents the total borrowing that a country is doing from other countries. As with individuals, if a country as a whole is consuming more than it is producing, then it needs to borrow from another country to make up the difference. The way a country borrows from abroad is by importing more than it exports. It pays for those imports by either increasing its debts to the rest of the world or by selling off its assets. Either way, the country’s “net worth” goes down by the amount of the current account deficit every year.

This sounds bad – but it’s not, necessarily. It can be either good or bad, just as it can be good or bad when individuals or firms borrow money. When individuals borrow to buy a car or a house it’s often a good thing. When firms borrow money to expand a profitable business it’s often a good thing. But of course, individuals and businesses can also borrow for frivolous purposes, which we would consider “bad” borrowing. In the same way, a current account deficit is good or bad depending on how it’s spent. The crucial criterion is whether the things being purchased with the borrowed money will make it easier to repay the loan in the future. Wisely spent borrowed money should increase the borrower’s ability to repay debts.

So what’s the US spending its borrowed money on? That’s actually changed significantly over recent years. It’s useful to break down the sources of borrowing into two categories: the private sector and the government sector. The private sector borrows if it spends more than it earns – that is, if the spending done by consumers and businesses is more or less than their income. The government sector borrows if it runs budget deficits. The current account deficit – national borrowing – is the sum of the two.

The following chart sh

Bruce Webb's

Calculated Risk

Economist's View

naked capitalism

EconoSpeak

Commentary

International Connections

Blog Archive

Econ Blogs we also recommend

Friends, non-economic

The Big Guys, non-economic

Ranking econ blogs and blogs of blogs

Sunday, March 21, 2004

Friday, March 19, 2004

Thursday, March 18, 2004

Wednesday, March 17, 2004

Tuesday, March 16, 2004

Monday, March 15, 2004

Sunday, March 14, 2004

Saturday, March 13, 2004

Friday, March 12, 2004

Thursday, March 11, 2004

Wednesday, March 10, 2004

Tuesday, March 09, 2004

Monday, March 08, 2004

Sunday, March 07, 2004

Saturday, March 06, 2004

Friday, March 05, 2004

Thursday, March 04, 2004

Wednesday, March 03, 2004

Tuesday, March 02, 2004

Monday, March 01, 2004

Sunday, February 29, 2004

Saturday, February 28, 2004

Friday, February 27, 2004

Thursday, February 26, 2004

Wednesday, February 25, 2004

Tuesday, February 24, 2004

Monday, February 23, 2004