Tuesday, June 08, 2004

Stock options: Lieberman Lobbyists in London and the tax arena

"LONDON--European opponents of stock option expensing said June 7 they are stepping up pressure on United Kingdom officials to win last-minute exemptions from the coming use of an international standard to account for employee share and share option plans in Europe." BNA's Daily Tax Report today

John McCain is right – his buddy Joe Lieberman should step out of FASB’s way and let FASB require that the cost of employee stock options be moved from the footnote to the income statement. IASB is fighting the battle worldwide and it seems there are European versions of the Lieberman lobbyists.

As far as the accounting issue, Warren Buffet et al. are right, options are an expense. At times, the Lieberman lobbyists claim that the expense is recognized, which is true for anyone who knows how to read the footnotes. At other times, the Lieberman lobbyists claim that adopting SFAS 123 on the income statement would lower stock prices. But if agents are as rational as we economists claim they are, these two statements contradict each other.

But my pet peeve goes to the tax/transfer pricing issue. Consider a U.S. multinational with an R&D force that is generating enhancements in the technology used jointly by the parent company and an offshore subsidiary ala Cost Sharing Arrangement. Should not the cost of the ESOs for the R&D personal be part of the cost sharing pool of costs? While the IRS should admit they may be issues involving the anticipated benefits part of their transfer pricing regulations (section 1.482-7, which can be found here), any claim that ESOs are not a cost is something that will hopefully generate another one of those wonderful Buffet opeds.

But aren’t there serious questions as to valuing ESOs? Certainly the restriction that employees cannot sell their options to brokers would cause one to modify the textbook version of the Black-Scholes model. But tax practitioners often rely on some silly arguments, two of which can be found in the writings of Tim Reason of CFO Magazine. His “The Holes in Black-Scholes” writes:

Sibson tested a broad sample of 1,445 companies during six periods between 1972 and 2002. For each period, the average actual gains as a percent of Black-Scholes value ranged from 95 percent to 910 percent. Only 3 to 5 percent of stocks were within 90 to 110 percent of the price estimated by Black-Scholes.


While Reason suggests that such differences show the Black-Scholes model does not properly value ESOs, he is clearly confusing ex post values with some alleged misstatement of the ex ante value. But the fact the options are an inherently risky asset can potentially explain these divergences without any appeal to measurement errors from the Black-Scholes model.

In his “Windows into Valuation”, Reason notes Microsoft ESOs that J. P. Morgan purchased in late 2003 for $2, but were initially valued per SFAS 123 at $10.24 when they were issued in 2002. Reason writes:

Microsoft plans to allow employees to sell existing underwater options to JP Morgan, but so far the investment bank has offered just a fraction of the price Black-Scholes puts on them. Opponents of expensing say the bank's low bids prove that existing pricing models overvalue options.


He then notes a statement from Kim Boylan, counsel to the International Employee Stock Options Coalition, also suggesting this evidence indicates problems with the SFAS 123 estimated value. But does this difference in the estimated value in 2002 versus the market price in late 2003 represent a concern that the SFAS 123 footnote seriously overstated the true value of the ESO or is this simply a reflection of the change in the value of Microsoft’s ESOs over this period? Using reasonable assumptions, a Black-Scholes model would predict a decline in value for these options near 80%.

I’m not sure whether Mr. Reason and Ms. Boylan do not understand the financial economics of ESOs or they are acting as Lieberman lobbyists. Alas, in the tax/transfer pricing arena, the IRS is often said to be outgunned and outmanned. But given how incredibly weak some of the arguments from the Lieberman lobbyists and their counterparts in the tax/transfer pricing arena are, one would hope that a few reinforcements for the IRS as well as FASB and IASB would represent a high bang for the buck.

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Posted by PGL at 10:52 PM | Links to this post

Torture Memo Online

The WSJ has posted the full 3/6/2003 torture memo (with a redaction or two), "Working Group Report on Detainee Interrogations in The Global War on Terrorism: Assessment of Legal, Historical, Policy, and Operational Considerations." Warning: it's a fairly large pdf file.

I haven't had time to read it yet, though I plan to. Perhaps readers with extra time on their hands can take a look and post the highlights in the comments.

AB

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Posted by Angry Bear at 9:05 PM | Links to this post

News from the G8 on Iraq

And not good news either:

Nevertheless, U.S. officials acknowledge that their previous goal of drawing in more foreign troops was all but gone. Bush’s national security adviser, Condoleezza Rice, said the hope now was that the new resolution would persuade those countries with troops already in Iraq to “stay the course.” The administration launched an unprecedented effort here to throw a spotlight on what it views as a good news story, arranging wall-to-wall interviews between journalists and normally invisible White House aides in the National Security Council and from other corners of the White House.

So now we know that the U.S. military will have to shoulder the lion’s share of the burden for some time to come. Only the Bush White House could paint this as a good news story.

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Posted by PGL at 6:45 PM | Links to this post

I'm Back

Did anything interesting or newsworthy happen while I was gone?

AB

P.S. Kidding aside, I'm still loaded with catch-up work for the next few days, so hopefully I can impose upon PGL to continue filling in for a bit. Kash is due back later this week, too.

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Posted by Angry Bear at 6:40 PM | Links to this post

The Neoconomists

Daniel Altman certainly has a catchy title to promote his upcoming book and I like the topic:

Hubbard and Lindsey saw cutting taxes on savings and wealth as a recipe for faster growth. Their plans were consistent with supply-side economics, which had dominated Republican policy for decades, since they targeted the economy's long-run potential to grow… Wealthier people derive more of their income from returns on saving—both in dollar terms and as a proportion of income—than poor people do. When taxes on the return from savings suddenly disappear, the wealthy benefit the most. It may be that people who depend on their jobs for income will benefit, too, in the long run, thanks to an expanding economy and rising wages. But for several years, in all likelihood, the income gap will continue to widen.


Indeed, the plan outlined in Chapter 5 of the Economic Report of the President 2003 (ERP) will impose more of the tax burden on lower income groups even if President Bush pretends he is giving a tax cut to everyone (see this CBPP analysis). But I have two bones to pick what Mr. Altman’s May 10 Slate discussion – both bones related to my premise that he gives the Neoconomists (which may include Greg Mankiw) too much credit. The first bone is economics, while the second bone comes from a political reality with an economic consequence.

ERP’s discussion of the basic idea notes that eliminating taxes on capital income (akin to a Roth IRA) has similar ecnomics features as switching to a consumption tax (akin to a traditional IRA). The latter idea was the subject of “Simulating U.S. Tax Reform”by David Altig, Alan Auerbach, Laurence Kotlifkoff, Kent Summers, and Jan Walliser (NBER Working Paper # 6248, Oct. 1997, with an early version available here). This paper notes that even under ideal conditions that the increase in savings is modest, higher income per capita will require years of postponed consumption, and the winners (those who earned capital income) may reap more than 100% of the dynamic gains so that the losers (those who rely mainly on labor income) see their tax obligations rise by more than their pretax wages. So my first bone is how some Neoconomists sell this idea as something that will make everyone better off.

The second bone comes from how the Republican Party has taken the ideas of Hubbard and Mankiw and turned them into some dishonest free lunch political agenda. In order to sell tax cuts on capital income, George W. Bush has claimed he will give everyone their money back. A careful read of the Altig et al. paper will show an important modeling principle that some Neoconomists gloss over when they join the White House. If government spending is not restrained (never mind the fact that this White House has increased government spending), then a tax cut for one group requires tax increases for another if the principle of fiscal neutrality is to be perserved. And if the politicians do not have the discipline of fiscal neutrality, then giving people their money back so they can consume more necessarily means less saving and investment. We know this is true from the Reagan experiment with tax cuts, which led to less long-term growth.

When Dr. Hubbard was CEA chair, we did not hear much about crowding-out from him even though we know his academic writings admitted this link. Thankfully, Dr. Mankiw has forcefully noted this problem with Reaganomics in his academic writings and hopefully is advising President Bush that his fiscal irresponsibility will hurt long-term growth. Mr. Altman raises important issues and since he is free to write passages that are critical of the free-lunch version of supply-side or voodoo economics, let’s hope he does so when his book is published.

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Posted by PGL at 6:12 PM | Links to this post

Rising Tide and Dooh Nibor Economics

Two interesting pieces on income inequality in the U.S.:

First - “A Rising Tide that Lifts Only Yachts” by Bernard Wasow of The Century Foundation documents the growing disparity between income and wealth for the rich versus the poor in the U.S. from 1981 to 2000. Since his data does not extend beyond 2000, it does not capture the effects of Bush’s economic policies, which have accelerated this widening gap between the rich and the poor.

Second - Paul Krugman spells Robin Hood backwards to emphasize the reverse Robin Hood nature of cutting taxes for the wealthy, which CBPP reminds us must ultimately be paid for by tax increases on low and middle-income groups.


Of course, Don Luskin has to accuse this simple recognition of the long-run budget constraint as somehow being socialististic by seizing on the stated possibility that the Bush Administration might be cutting government spending. But let’s be honest. It is very unlikely that even a conservative government would find sufficient places to cut government spending unless the Social Security benefits that we pay payroll taxes to finance are substantially reduced. And if we were asked to both continue paying these payroll taxes and finance our entire retirement from private funds, this would be in effect increasing employment taxes to finance a cut in taxes levied on capital income. Interestingly, Luskin acts as if the only tax we pay is the Federal income tax.

If he really believes his rhetoric, I have a deal for him even if it means selling my soul. I will vote for Bush-Cheney but only on the condition that Luskin pay my payroll taxes and my state and local taxes for the next 20 years. I’m sure he won’t mind since these taxes do not exist.

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Posted by PGL at 2:13 PM | Links to this post

Reagan may replace Hamilton on the $10 bill

NEW YORK (CNN/Money) - Ronald Reagan's face could one day adorn the $10 bill or half the dimes minted in the country, if fans of the late president get their way.

In a sad way, this may be fitting. After all, Treas. Sec. Hamilton served a President who understood the virtue of fiscal responsibility. Since the Reagan Administration did everything it could to undermine the Hamilton legacy, why not remove Hamilton’s image from the U.S. currency?

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Posted by PGL at 1:00 PM | Links to this post

Lord Stanley hits the beach; Larry Brown goes Hollywood
Congratulations to the Tampa Bay Lightning on winning the Stanley Cup! I really thought the Calgary Flames would take game 6 of the NHL playoffs but the Lightning found a way of beating the Flames in OT and then played a great game to win it all. If the Stanley Cup is to end up in western Canada, it will have to wait until next summer and it will have a nice tan.

Meanwhile here in Southern California on Saturday, Political Animal predicted the Lakers by 10. But the Pistons did what Larry Brown’s Sixers did a couple of years ago. Also picked to be sweeped by the Lakers, the Pistons like the Sixers did a couple of years ago enter Staples Center and shock the basketball world by winning game one. As the ESPN interviewer was reminding Brown of the parallels, the coach laughs and reminds us what the Lakers did in the next four games. Wonder if Political Animal will predict the sweep starts tonight?

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Posted by PGL at 8:59 AM | Links to this post

Monday, June 07, 2004

Moore’s Idol Worship of Reaganomics

Stephen Moore has dusted off some of his silliest claims in his NRO salute to Reagan:

Reagan was truly blessed by the incompetence of his predecessors. The cumulative policies of LBJ, Nixon, Ford, and Carter had atrophied America's economic muscle. Their legacy was big bureaucratic government expansionism, easy money, soaring expenditures on Great Society income-redistribution programs, a regulatory regime with tentacles that invaded every industry, and most insidious of all, confiscatory state-federal tax rates that in some cases exceeded 80 percent…And what exactly were those ideas so scorned by the Left and ridiculed as Reaganomics? The Reagan prescription consisted of tax-rate cuts, free trade, a light hand of regulation, tight money to make the dollar once again as good as gold, and unconditional victory in the Cold War. The jewel of the Reagan economic package was the famous Kemp-Roth 30 percent income-tax cut. Conservative intellectuals — among them Laffer, Robert Bartley, Jude Wanniski, and Jack Kemp — had made the case for supply-side policies; Reagan was the only leader of significance who listened and understood. When the economy hit rock bottom in the summer of 1982, Reagan's adversaries joyously proclaimed Reaganomics a scam. Even many of Reagan's most trusted advisors wanted a reversal of direction. But it was Reagan who insisted that we stay the course. Thankfully we did — Reagan's policies spawned the greatest economic and wealth expansion in the history of the western world…The economy also created 15 million new jobs under Reagan and grew in real terms by 40 percent…Federal tax collections rose from $500 billion in 1980 to $1 trillion in 1990.

In reverse order – if one looks at Federal income taxes (excluding that large increase in payroll contributions from the Greenspan commission plan to make Social Security solvent), real revenues rose by a mere 17% over the decade as long-term economic growth suffered as a result of the Reagan fiscal stimulus. And the Reagan expansion only reversed the 1982 recession. Moore et al. would have you believe Reagan took office on January 20, 1983 instead of in early 1981. Yes – there was a Carter recession but they omit that real GDP grew by almost 4.3% from July 1, 1980 to June 30, 1981. And Paul Volcker run his second dose of tight monetary policy to offset what he saw was the irresponsible fiscal stimulus from the 1981 tax cut. Alas, this macropolicy mix resulted in a very deep recession with employment falling by almost 3 million from July 1981 to December 1982. But bragging about employment gains and forgetting the prior employment losses is something Bush-Cheney ’04 is doing as well.

The simplest way to look at long-term economic growth under Reagan-Bush is to compare the economy when Reagan took office and the economy when Bush41 left office since the state of the business cycle was quite similar when Clinton took office as when Reagan took office. The average annual growth in real GDP over this 12-year period was a mere 2.9% as compared to the 3.5% average annual growth from the late 1940’s through 1980. The claim of “the incompetence of his predecessors” does not hold much weight in light of the historical record.

Then again – it is hard to defend long-term fiscal stimulus which lowers savings and investment as a pro-growth program. And maybe Mr. Moore confused Reagan’s speeches endorsing free trade with his actual policies, which were unfortunately quite protectionist. Some will say that criticizing Reagan’s economic policies with 48 hours of his unfortunate death is cold. But why does Mr. Moore have to so misrepresent the record in his attempt to praise President Reagan?

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Posted by PGL at 3:09 PM | Links to this post

Needed: Abu Ghraib Special Prosecutor

WIDE GAPS SEEN IN U.S. INQUIRIES ON PRISON ABUSE by STEVEN LEE MYERS and ERIC SCHMITT, June 6, 2004, The New York Times begins:

Disparate inquiries into abuses of prisoners in Iraq and Afghanistan have so far left crucial questions of policy and operations unexamined, according to lawmakers from both parties and outside military experts, who say that the accountability of senior officers and Pentagon officials may remain unanswered as a result.

No investigation completely independent of the Pentagon exists to determine what led to the abuses at Abu Ghraib prison, and so far there has been no groundswell in Congress or elsewhere to create one.

But on Capitol Hill, even some Republicans have begun to question whether the Pentagon's inquiries are too narrowly structured to establish the causes of the abuses, as Defense Secretary Donald H. Rumsfeld and others have pledged to do, and then to determine if anyone in the chain of command was responsible for them.


Does anyone believe that Sec. Rumsfeld or his boss want the truth to come out? If there ever was a situation that demanded an independent prosecutor, this one certainly does.

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Posted by PGL at 2:16 PM | Links to this post

PlameGate & the Questioning of Dick Cheney

(CNN) -- Vice President Dick Cheney has been interviewed by federal prosecutors investigating a leak that disclosed the identity of an undercover CIA operative, a Bush administration official told CNN.

John King of CNN also notes that the New York Times broke this news on June 5 in an article by David Johnston who notes:

It is not clear when or where Mr. Cheney was interviewed, but he was not questioned under oath and he has not been asked to appear before the grand jury, people officially informed about the case said.

So why was Mr. Cheney not under oath during this questioning?

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Posted by PGL at 2:02 PM | Links to this post

Reagan’s Legacy

Ronald Reagan had a sense of grace and a way with words that could charm friend and foe alike – something other conservatives might pay more attention to. Conservatives love to say Reagan stuck to his principles and focused on three objectives: (1) ending the Soviet empire; (2) cutting taxes; and (3) reducing the role of the government. The Soviet empire did end but doesn’t seem a stretch that Reagan caused this collapse? Won’t historians record that it collapsed because of its own internal problems?

As far as (3) – what are the conservatives even talking about? Government spending as a share of national income went unchanged under his tenure. And as such, taxes were not cut – only deferred for Bush41 and Clinton to address the massive Reagan deficits. As a pro-growth liberal, Reagan’s “work, save, and invest” were nice words but his fiscal policy lowered saving and investment and hence lowered long-term growth. Alas – Bush43 emulates Reagan and not Bush41.

But the role of government extends beyond its level of spending. For example, Paul Krugman as one of his economic advisors advocated that Reagan stick to free trade principles. Alas, the President did not just as Bush43 talks free trade but practices protectionism. Reagan did continue the liberalization of financial institutions that started in the 1970’s (conservatives often forget that Jimmy Carter was also for less government regulation in many respects) but failed to heed the warnings that the nature of deposit insurance would create a moral hazard problem if it was not addressed before deregulations. And yet Reagan ignored the mounting FSLIC problem leaving this too for Bush41 to clean up.

But Reagan did ask Alan Greenspan to chair a Social Security commission that had the foresight to raise payroll contributions to fund the retirement benefits promised to the Baby Boomers. This part of Reagan’s legacy is rarely mentioned by his conservative fans. But it should be – especially as some today wish to fund Bush43’s tax cuts for capital income by converting the payroll contributions for retirement into payroll taxes to pay down the General Fund deficit. Let’s hope this part of the Reagan legacy is not destroyed by the current President who otherwise emulates Ronald Reagan.

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Posted by PGL at 9:12 AM | Links to this post

Friday, June 04, 2004

Higher Gas Prices are a Good Thing?

One of the benefits of contributing to the Kerry campaign are emails with current news on hot economic topics – often serious and fair&balanced unlike those biased Bush-Cheney cartoons. But last week, the Kerry camp had this silly cartoon called the “Oil House”. It points out how top White House officials – including Bush & Cheney – are friends of the oil industry and then ends with a suggestion that the White House believes “Higher Gas Prices are a Good Thing”. But the email has some useful links. For Californians like me, it informs me that I’m paying $2459 a year for gasoline, which represents a $930 increase.

Andy Serwer on American Morning this week talked about oil stocks as a hedge and I own 200 shares of Conoco-Phillips stock. Yahoo/Finance points out that I’m getting $7.17 in earnings per share. Conoco-Phillips operating profits last quarter alone were $3.11 billion as compared to its annual operating profits of only $2.8 billion for 2002 (profits in 2003 were $9.14 billion for the year). My math tells me that my ownership of 200 shares means my increase in earnings just barely covers my increase in gasoline prices. And I’m lucky enough to have a stock portfolio and an advisor who adviced me to buy this stock. Now if I had only listened to her when she told me to buy more and I had not traded in that subcompact.

But to buy more stock hoping to make a speculative profit assumes oil prices will not go down, which Tom Nugent at NRO says otherwise. But wait Stephen Moore says oil prices are not so high. Let’s see what their colleague Don Luskin has to say. Wait, he is only misrepresenting (once again) what Paul Krugman wrote here. But Dr. Krugman’s article is a very good read. So is the latest (More on Oil) from Political Animal.

Enjoy the weekend.

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Posted by PGL at 4:04 PM | Links to this post

Leisure has increased under Bush-Cheney

At the risk of having some very good labor economist critique this, I’ll put forth a Leisure Index (LI) simply defined as the civilian employment to population ratio (R) times the average weekly hours – total private industries (H). When Bush took office R = 64.4% and H = 34.2. Over the past few months, R has been 62.2% and H has been 33.8. LI has therefore declined from 22.0 to 21.0.

LI is like the Kerry Middle-Class Misery Index (MCMI) in that a fall in LI means we have more leisure time just the fall in MCMI since Bush took office means Middle-Class Misery is higher. With an extra hour of time, a fellow could either sleep more, spend more time helping the kids with the math homework, go for longer runs to shed a few pounds (the wife likes that one), or even spend more time watching the Lakers win another NBA championship. But if the wife takes over the TV, I can always turn to Political Animal for Lakers updates as well as read his coverage of the various and sundry messes surrounding our invasion of Iraq.

Of course, a good labor economist would point out that the 5% reduction in labor hours per adult exceeds the modest increases in real wages, which means those who rely on labor income may have suffered a decline in real before-tax income. And if Bush-Cheney touts its tax cut, recall the recent analysis from CBPP that when deferred tax liabilities are factored in, workers may be facing a tax rate increase around 2% of their income. As Karsten reminded us of the Reagan question as to whether you are better off now versus four years ago, I guess those who derive a lot of capital income can say yes as their before-tax income has risen and their tax liabilities are lower. But for the workers in Southern California, enjoy watching the Lakers win game 1 this weekend (with all due apologies to Piston fans in Detroit).

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Posted by PGL at 1:09 PM | Links to this post

Employment rises by 248,000

That is the Establishment Survey figure. The unemployment rate stayed at 5.6% as the increase in the Household Survey figure rose by 196,000 while this survey reports a 233,000 increase in the civilian force. The employment to population ratio remains at 62.2%.

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Posted by PGL at 9:24 AM | Links to this post

Postcards from Old Europe - Are you better off now than you were four years ago?
You might have noticed that there have been no postcards in the past couple of weeks. The reason is quite simple - your author was off enjoying one of the perks of working in Europe (30 days paid vacation during which I managed to get married!).

Today's title obviously refers to Ronald Reagan's famous question to the electorate during a debate with Jimmy Carter in 1980. The great communicator lived up to his name by getting the question in right at the end of the debate

Next Tuesday is Election Day. Next Tuesday all of you will go to the polls, will stand there in the polling place and make a decision. I think when you make that decision, it might be well if you would ask yourself, are you better off than you were four years ago? Is it easier for you to go and buy things in the stores than it was four years ago? Is there more or less unemployment in the country than there was four years ago? Is America as respected throughout the world as it was? Do you feel that our security is as safe, that we're as strong as we were four years ago?
Now I don't want to go into the latter part of the question but I would like to briefly examine some of the economic aspects raised by the ex President.

Conventional wisdom has it that voters vote their pocketbooks - i.e. that perceptions of economic well-being determine how the electorate votes. This view is summed up nicely by Professor Helmut Norpoth
How universal is economic voting? There are signs that the inclination to vote that way is hard-wired into the brains of citizens in democracies
This makes sense at a very basic level - is it not the epitome of accountability to turf out an incumbent who hasn't delivered on his promises? The problem with this elegant theory of economic voting is that the actual empirical evidence has been rather varied.

One of the most famous economic models of voting is the Fairmodel which was originally proposed by Ray Fair in 1978 and has been revised quite a few times since then. The main economic inputs in Professor Fair's model are inflation and GDP growth. Other factors that are factored into the model are how long a particular party has been in office and to which party the incumbent belongs (Republicans have an edge over Democrats in the model).

If you plug in the current economic data you'll see that President Bush should easily win the election. This is a somewhat surprising result seeing that media opinion polls tell a pretty different story. So what's up with the Fairmodel? The model is based on the assumption that the party holding the presidency has an advantage over the challenger. This advantage tends to diminish over time. These non-economic factors generate the model's baseline which is then modified by looking at economic variables.

The model uses inflation and GDP data because history has shown that high inflation and low growth negatively impact a President's chances of re-election. If we look at current data we can see that inflation is still very low and GDP growth is booming - all factors which should help the sitting President. So why are opinion polls telling us another story?

The current low rate of inflation is pretty much unchanged from the inflation rate experienced by voters during the previous administration. It stands to reason that many voters do not see low price inflation as something which the Bush administration has actually delivered. Even worse: headline-grabbing stories of skyrocketing gasoline and energy prices in general have pumped up the electorate's perception of inflation - all along the lines of "I'll see it when I believe it!". To sum it up: low inflation gives the President points in the model but probably won't help all that much in the wild.

So what does GDP growth tell us? Change in GDP is usually a pretty good proxy for employment (and personal income). Sadly this relationship has partially broken down over the past few quarters. High rates of GDP expansion have failed to deliver a corresponding boom in employment. During the last year the US economy grew while employment fell - surely this can't be positive for a President who wants to be re-elected.

The recent strong gains in payroll employment (we have new data out today) have brightened the picture considerably. Voters tend to have short memories so job gains are most valuable if they occur near election day. Research has shown that job growth in an election year has a pretty strong correlation with the incumbent's share of the vote. If we extrapolate current growth in payroll employment we see that the Bush administration might just manage to recover all the jobs lost during their term in the first three quarters of this year! This should put job growth more in alignment with GDP and thus vindicate the Fairmodel.

But surveys still tell a different story despite the recent strength in employment. I suspect that the reason is that the quality of jobs and jobs losses has changed vs. the past. Temporary layoffs have turned into permanent reductions in employment. Manufacturing employment was hit very hard - a fact that impacted many of the so called battleground states.

In short: running the Fairmodel at the beginning of the year would have yielded a result which didn't at all conform to traditional analysis of the President's chances of re-election. This gap has since become smaller as large gains in payroll employment have brightened the picture.

So what does it all mean? I would opine that it is becoming harder to campaign against the sitting President on economic issues since jobs growth has picked up. The Kerry campaign should probably focus on the latter part of President Reagan's question and ask
Is America as respected throughout the world as it was? Do you feel that our security is as safe, that we're as strong as we were four years ago?
This might then lead to a 1968 template emerging, in which the candidate from the ruling party was not elected because of public dissatisfaction with the handling of a war in a foreign country - this was contrary to what economic models suggested at that time.

Thank you for reading. I invite you to visit my other home on the web over at CurryBlog for more news and views.

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Posted by Karsten at 4:01 AM | Links to this post

Thursday, June 03, 2004

PlameGate: Did Bush know?

Capitol Hill Blue reports:

Witnesses told a federal grand jury President George W. Bush knew about, and took no action to stop, the release of a covert CIA operative's name to a journalist in an attempt to discredit her husband, a critic of administration policy in Iraq. Their damning testimony has prompted Bush to contact an outside lawyer for legal advice because evidence increasingly points to his involvement in the leak of covert CIA operative Valerie Plame's name to syndicated columnist Robert Novak. The move suggests the president anticipates being questioned by prosecutors. Sources say grand jury witnesses have implicated the President and his top advisor, Karl Rove.

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Posted by PGL at 6:16 PM | Links to this post

Stiglitz on employment during recoveries

The Bureau of Labor Statistics will release employment figures for May 2004 tomorrow. If we get good news, expect the White House and many in the press to tout how strong the economy is.

The following passage from page 121 of Joseph Stiglitz’s Globalization and its Discontents may be on point:

On Wall Street, a crisis is over as soon as financial variables begin to turn around… However, to truly measure recovery, stabilization of exhange rates or interest rates is not enough. People do not live off exchange rates or interest rates. Workers care about jobs and wages. Although unemployment may have bottomed out, that is not enough for the worker who remains unemployment or who has seen his income fall by a quarter. There is no true recovery until workers return to their jobs and wages are returned to pre-crisis levels…The very fact that the IMF focuses on financial variables, not on measures of real wages, unemployment, GDP, or broader measures of welfare, is itself telling.


While Stiglitz was referring to the East Asia Crisis, this passage could apply to the current U.S. economy if we replace “IMF” with “RNC” (or even NRO) and substitute profits in place of exchange rates and interest rates. And yet the popular press keeps saying the 2004 economy is very strong. That average annual real GDP growth has been a mere 2% is hardly strong.

And let’s consider that 1.1 million increase in employment since August 2003 in context of two things: (a) the 2.7 million decline from March 2001 to August 2003; and (b) normal growth in labor supply, which may be near 4 million over the 3-year period. 1.6 million jobs lost when we should have seen almost 4 million jobs created is not a record the RNC should be proud of.

Ah but I using the Establish Survey numbers rather than the Household Survey numbers. OK, consider the fact that the civilian employment/population ratio has fallen from 64.4% when Bush took office to its current 62.2%. Multiplying the 2.2% difference times the reported 222.757 million figure for adult population and one sees that even this survey suggest we are almost 5 million jobs short of where we should be.

Has the RNC adopted some “economic malaise” or “soft bigotry of low expectations” philosophy? Let’s hope employment growth exceeds expectations but unless it greatly exceeds expectations, we will still be far from full employment.

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Posted by PGL at 4:00 PM | Links to this post

Oil Prices: give Stephen Moore some credit

Moore rightfully criticized a USA Today headline “Oil Prices Hit Highest Since Sept. 1990” and has been saying that we should look at oil and gasoline prices in inflation adjusted terms. Now I’m not one to praise NRO writers especially when they point out what is often taught in week one of Econ 101, but Tom Nugent, however, plots nominal oil prices over the 1972 to 2004 period as he suggests anyone who would forecast $60/barrel prices is silly. Nugent notes that nominal prices were around $40 per barrel of oil back in 1980 but in real terms, check out this graph.

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Posted by PGL at 2:31 PM | Links to this post

Low & middle income groups bear burden of the tax cuts

William G. Gale, Peter R. Orszag, and Isaac Shapiro have provided an analysis of who gains from the recent tax cuts and who loses in an analysis that respects the long-run government budget constraint. Households with incomes over $1 million have current tax cuts that exceed their deferred tax liabilities under both scenarios put forth by the authors. Most households, however, will tend to pay more taxes over the long-run.

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Posted by PGL at 1:38 PM | Links to this post

Capitalists of America Unite!

Via Brad DeLong, Josh Bivens of EPI notes that most of the “tepid” economic growth over the last couple of years has gone to capital income and not labor income (tepid as in James Carville’s reaction to his wife’s euphoria over this anemic recovery).

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Posted by PGL at 12:47 PM | Links to this post

Plame Investigation Update

Robert Novak tells the world Valerie Plame is a CIA operative 10.5 months ago and George W. Bush finally takes action: consults with his own attorney. Had this occurred under the watch of George H. W. Bush, the informers would have been fired before Labor Day 2003. But George W. Bush lets Karl Rove attack Joseph Wilson while Mr. Novak compounds his mistake as he tries to defend it. But as an ACLU member, I believe even those who let traitors roam the halls of the White House deserve an attorney.

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Posted by PGL at 9:07 AM | Links to this post

Wednesday, June 02, 2004

Cato Institute proposes fiscal responsibity

Well – sort of. Chris Edwards has put forth “Downsizing the Federal Government” with $300 billion in proposed spending cuts by 2009. Highlights:

Eliminating the Dept. of Education and its $62.8 billion budget.

Eliminating HUD and its $46.2 billion budget.

Reducing the USDA by 38% saving $29.7 billion.

Cutting HHS by 11% saving $63 billion.

Cutting DOT by 20% saving $11.6 billion.

Various and sundry other cuts saving $87 billion.

Bold or wishful thinking? Good or bad ideas? Read the details and decide, but note that these spending reductions will only bring the unified budget in balance with the General Fund deficit being cut by less than half. And it would seem the Bush Administration is not exactly following the advice of the Cato Institute these days. But give Mr. Edwards an A for effort.

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Posted by PGL at 7:00 PM | Links to this post

OPEC at 91% capacity

MSNBC is running a story on the current oil price with a table of the production v. production capacity of the OPEC-11 (including Iraq). Total productive capacity per day = 30.77 million barrels with current production at 28.1 million barrels. Eight of the nations are at full capacity according to their table. Those that are not:

Qatar near 90% capacity with excess capacity = 90,000 barrels a day.

UAE near 85% capacity with excess capacity = 380,000 barrels a day.

Saudi Arabia at 80% capacity with excess capacity = 2.2 millio barrels a day.

Consider the impact on world prices if OPEC increased production by 2.67 million barrels per day. And we thought Bandar was trying to help Bush out here.

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Posted by PGL at 5:35 PM | Links to this post

National Review's profit support per new job

National Review's Jerry Bowyer has once again provided professors with another "lies, damn lies, and statistics" classic. To convince NRO readers that the Clinton job growth was a bubble, while the recent job growth is sustainable, he plots the change in profits relative to the increase in employment with really low ratios for the 1996 to 2001 period, a very high ratio for 2002, and a more modest ratio for 2003. Of course, there is a simpler explanation that the ad hoc theory he puts forth. Wasn't job growth high during the late 1990's, while only profit growth has been high over the past couple of years?

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Posted by PGL at 1:13 PM | Links to this post

National Review v. Alice Rivlin on Fiscal Policy

With the CBO projecting gross Federal debt to rise from its $6760 billion level at the end of 2003 to $9920 billion level by the end of 2008 (an average annual increase of $632 billion a year), the comment from Johan Goldberg at The Corner on National Review Online “Why have a silly battle to define the ‘heart and soul’ of the GOP as either tax cuts or spending cuts? Why not define it as both tax cuts and spending cuts?” strikes me as the fuzzy math one gets from his economic colleagues. Kevin Drum has already noted that the politics of the new GOP are for more spending not less.

But if Mr. Goldberg is confused on the numbers, let me suggest Alice Rivlin and Isabel Sawhill’s “Restoring Fiscal Sanity: How to Balance the Budget” who lay out three plans: “The report suggests three ways to balance the budget while simultaneously making room for new priorities. One approach primarily involves spending cuts and smaller government, another relies more heavily on tax increases to support an activist government, and the third suggests a balanced mix of spending cuts and tax increases along with a reallocation of government priorities".

They call the first plan, the “smaller government plan”, which essentially says let a cheap conservative like Phil Graham (I say this was a lot of respect for the fiscally responsible Senator Graham) set spending and then note that even with significant spending cuts, tax increases will be necessary. They call the second plan the “larger government plan”, which likely means spend like George W. Bush and tax like Howard Dean would. Of course, Governor Dean has rightfully criticized the spending increases under President Bush and is simply honest about the long-term tax consequences.

But let me have Rivlin and Sawhill describe their third alternative: “And the final we call the better government plan. It keeps government about the same size as it is now as a share of the economy, but it reallocates spending in ways that the authors of this book think would make a government more effective and, thus, a better government.” Read the details and fiscal responsibility will require more tax revenues not less under any of these plans.

In terms of Senator Kerry’s quest to be the next President, keeping his comittment to maintain the tax cuts for the middle class will mean that Roger Altman & Company will have a very difficult task. Mr. Altman and his colleagues in 1993 did an admirable job for President Clinton in 1993 with no support from the GOP, but the task in 2005 will be even more difficult. I suspect Senators McCain and Voinovich and maybe a few other Republican Senators will assist this time. But are there any fiscally responsible Republicans in the House? And better yet – do we liberal Democrats have any suggestions for reducing government spending?

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Posted by PGL at 12:31 PM | Links to this post

Winning the Senate

Wandering over to Illinois Senate Candidate Barack Obama's campaign blog, I see some very encouraging poll results:

* Overall, Barack leads 52 percent to 30 percent
* Barack leads among independent voters, 46-27 percent
* Among voters who consider themselves "very conservative", 31 percent intend to vote for Barack
* Among white voters, Barack leads 46 to 34 percent
* Among black voters, Barack leads 91 to 4 percent
* In Chicago, Barack leads 74 percent to 15 percent


AB

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Posted by Angry Bear at 7:27 AM | Links to this post

What puts the Angry in Angry Bear?

Stories like this:

The FBI is investigating an intercepted Iranian message that alleges Iraqi exile leader Ahmed Chalabi told Tehran officials that the United States had broken Iran's secret code, U.S. officials said.

The message alleges Chalabi said he had been told about the code-breaking by a drunken U.S. official, one senior Bush administration official said.

The New York Times reported in today's editions that about six weeks ago, Chalabi told the Baghdad station chief of Iran's Ministry of Intelligence and Security that the United States was reading the communications traffic of the Iranian spy service, one of the most sophisticated in the Middle East.


Basically, it looks like we went to Iraq because Chalabi said so. This story raises an additional important question: who is the heavier drinker, Richard Perle or Doug Feith?

Speaking of angry, this story does the trick as well:

Shortly before the Pentagon awarded a division of oil services contactor Halliburton Co. a sole-source contract to help restore Iraqi oil fields last year, an Army Corps of Engineers official wrote an e-mail saying the award had been "coordinated" with the office of Vice President Cheney, Halliburton's former chief executive.

The March 5, 2003, e-mail, disclosed over the weekend by Time magazine, noted that Douglas Feith, a senior Pentagon official, had signed off on the deal "contingent on informing WH [the White House] tomorrow."

"We anticipate no issues since action has been coordinated w VP's office," it continued.


No word yet on whether Feith was drunk when he signed off on the deal.

AB

UPDATE: Mark Kleiman's angry too.

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Posted by Angry Bear at 6:54 AM | Links to this post

Say Hello to PGL

He's the latest guest-blogger, graciously filling in while Kash and I are on vacations -- Kash from now to about the 10th and me from tomorrow to around the 10th. PGL is yet another economist, so his posts should be chock-full of economic goodness.

"PGL" stands for "pro-growth liberal", which I take to mean he's generally in favor of a set of policies that Larry Summers and Robert Rubin could heartily endorse. How PGL punctuates his quotations and parenthetics remains to be seen.

AB

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Posted by Angry Bear at 6:47 AM | Links to this post

$400 billion $540 billion and No Extra Votes?

Sometimes crass politics turns out to be bad politics. Bush first lies about the cost of the Medicare Drug Bill, then rams it down conservatives' throats, having the House Republicans hold the vote open into the wee hours of the night, then bribes and threatens a congressmen, then creates and distributes fake news reports, and now seniors don't even have the decency to be enthusiastic about it:

Local senior citizens say they might have been more excited about the new Medicare discount drug card that rolled out yesterday - if only they knew what they were getting.

"It's too complicated," said Shirley Cox, as she finished a craft project at the Police Athletic Senior Center in Jamaica. "I am interested in getting the card, but I need someone to sit down and explain it. There are too many things that need to be explained in plain terms. It's confusing," said the Medicare client.


It's so unfair. Somehow this must be the liberal media's fault.

AB

P.S. As the graph in this post shows, seniors probably won't be much happier when and if the full benefit rolls out in 2006.

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Posted by Angry Bear at 6:34 AM | Links to this post

Kerry Needs a Catch Phrase

So goes a story on Keith Oberman's Countdown. My suggestion may have been "Just Tell the Truth" but I may have been reacting to Dick Cheney's attack on Kerry's position on the Patriot Act, which Hardball said was all lies. But then, it was Dick Cheney's speech after all. The front runner seems to be "Strong at Home, Respected Abroad". Other suggestions?

BTW - AB and Kash have kindly invited me to fill in while they are on the road. Hopefully, I'll not let them down. - ProGroLib (PGL).

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Posted by PGL at 12:10 AM | Links to this post

Monday, May 31, 2004

The Great Questions of Blogging

Brad DeLong may have stepped into a hornet's nest. No, not in this post on Kerry's health plan, but in this post on punctuation. Brad takes exception to the title of a recent book on punctuation, "Eats, Shoots and Leaves," writing

First of all, there definitely needs to be a comma after "Shoots". Do we, after all, wish to live in a world in which the sentence, "I would like to thank my parents, Ayn Rand and God", [sic] is grammatical?

The final comma in a list before the "and" or "or" is an important banisher of confusion, ambiguity, and general silliness.
(Note that the "sic" is mine and refers to the comma; more on this below.) Now, I happen to agree that a comma belongs before the final "and", precisely because it can never lead the reader astray and is sometimes useful. Having heard the author, Lynne Truss, on Fresh Air a while ago, I know the book title is an intentional punctuation pun. The joke was something along the lines of the difference between a panda bear that walks into a bar, gets angry (an angry bear, if you will), then eats, shoots [a gun], and leaves, as compared to a panda in its natural habitat where for the most part he simply eats [bamboo] shoots and leaves.

But in highlighting one comma-flaw, Brad may have committed another: the placement of the comma outside the quotation mark. This has long been a pet peeve of mine because I think the comma should be outside the closing quote, but after some checking, I became convinced that the rules clearly say it belongs inside the quotation marks. This is counterintuitive, because the quotation is generally a free-standing concept and so should be fully enclosed in quotation marks, and only then offset from the rest of the sentence. I've reached a modest moral compromise in which I stick to my principles, placing the comma outside the quotation marks, when the quoted item is a single word. But when a phrase or sentence is quoted, I follow the rules and put the punctuation inside the quotes.

The logic of this compromise is that in the former case, the quotes are serving in lieu of more complex typography such as italics or bold face, a remnant from the days of yore when word processors were not widely available. For example, were the book title at the end of the first paragraph underlined rather than in quotation marks, then the comma immediately following the title would not also be underlined. So why should it be inside the quotation marks, which are basically used as a substitute for underlining?

Another difficult punctuation issue is the parenthetic: does the period go before or after the closing ")"? (Or should that be ... after the closing ")?"?)+ The unambiguous case is when the parenthetic is a self-contained sentence, separate from any other sentence. Then the sentence endmark belongs inside the parentheses. Unlike with quote marks, this conforms with intution: here's an aside in parentheses and, as the reader can clearly tell from the period located inside the parentheses, it's a full sentence.

More complicated is the sentence-ending parenthetic that is itself a full sentence. I thought that I usually put the period after the final ")", but then I did a quick search of the archives and found this in one of my posts:

I've been pretty busy lately, which explains the dearth of in-depth posts about economics and policy (I made a modest attempt to rectify this in this post.)
Here's an excerpt from one of Kash's posts:

It’s a good list, heavy on the institutional issues that have been increasingly emphasized by development economists over the past decade (though I’m not sure I’ve ever seen “mentality” enumerated as a separate institutional requirement).

So I do not follow, at least not consistently, the rule I thought I followed. Kash, however, apparently does.

Final thought: ending a sentence with a preposition, yea or nea?

AB

+ For fun, try getting the punctuation on this part of the sentence right. There's a parenthetic, and it's a question about quotation markes. The parenthetic question ends with a quoted ")?" but since there's a question there, a question mark is then appended, followed by a closing parenthesis, yielding the extremely awkward string
")?"?).
Moreover, the first four characters of that string are also a quote. I used italics to distinguish the quoted punctuation from the puncuation that is part of the sentence, but that was just a guess. Alternatively, I could use single quotes, but that would lead to even less visually appealing strings like '")?"'?). Yikes.

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Posted by Angry Bear at 11:52 PM | Links to this post

Navel-Gazing at The NYT

Many other blogs are covering the Times' ongoing mea culpa process for basically accepting and reprinting White House spin on WMD in the run-up to the Iraq War. For example, in his latest bit, Editor Daniel Okrent writes

To anyone who read the paper between September 2002 and June 2003, the impression that Saddam Hussein possessed, or was acquiring, a frightening arsenal of W.M.D. seemed unmistakable. Except, of course, it appears to have been mistaken.

... Some of The Times's coverage in the months leading up to the invasion of Iraq was credulous; much of it was inappropriately italicized by lavish front-page display and heavy-breathing headlines; and several fine articles by David Johnston, James Risen and others that provided perspective or challenged information in the faulty stories were played as quietly as a lullaby.

This piece is a follow-up to an earlier unsigned piece by "The Editors." In response to the first piece, many observers pointed out that the editors failed to mention the most egregious spin-recycler by name, Judith "From Chalabi's Mouth to Your Eyes" Miller. For more on Miller, see Franklin Foer's New Yorker New York Magazine story, "The Source of the Trouble.

While they're in a reflective mood, the Times Editors might want to take a look at Elisabeth Bumiller, who today decided to devote an entire story, 900 words, to comparing the bikes that the presidential candidates ride, concluding insightfully that

"... maybe as a sideshow to the presidential debates Mr. Bush and Mr. Kerry should have a bike race, which would add new meaning to political spin."

And yes, that's from the hard news section, not the Style section. While they're taking a look at Bumiller's alleged work, perhaps they should look for a mirror, for it is the editors who agreed to print this triviality. Link to "story" via Pandagon.

AB

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Posted by Angry Bear at 4:58 PM | Links to this post

Friday, May 28, 2004

Kerry's Campaign

Now you don't have to just take my word for it that Kerry's playing it smart. Bill Clinton thinks so too:

May 28, 2004 | New York -- Former President Clinton said Thursday that Democratic presidential candidate John Kerry is smart not to comment daily on every development in Iraq because "he recognizes that he's not the president."

Speaking at his office in Harlem, Clinton said he didn't think the Massachusetts senator was running "too safe a campaign" as some political strategists have suggested. Among the criticism is that Kerry is failing to exploit increasing skepticism about President Bush's handling of the war.


AB

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Posted by Angry Bear at 8:44 PM | Links to this post

Personal Saving

Personal income headed in the right direction in April -- up 0.4% in real terms according to today's BEA report. This is not particularly surprising, since we already know that employment growth was strong in April, but it's good news nonetheless. Interestingly, consumers did not spend all of this increase in income. In fact, they seem to be slowly increasing their saving. The savings rate has crept up to 2.4% from well under 2.0% last year. Is this the long-awaited retrenching of household finances?

Kash

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Posted by Kash at 2:21 PM | Links to this post

Comparing 2004 and 1994

In 1994 two of the three branches of government in the US were led by Democrats. Their position as the minority opposition party united the Republican party like never before, under the leadership of Newt Gingrich. Conservative voters were furious about Democratic initiatives in 1993 and 1994, and mobilized in an unprecedented way to work for the defeat of Democrats. The result was a resounding defeat for the Democratic party.

In 2004 all three branches of government are controled by the Republican party. The position of Democrats as the country's minority party has united them to an unusual degree. Increasing numbers of mainstream voters are angry at the incompentent failures of the worst president ever. Liberal and progressive voters (I'm not sure which of those two groups is to the left of which) are being mobilized in an unprecedented way to work to defeat Republicans at all levels.

Will the result be similar to 1994, except with Republicans on the losing end? House Democratic Whip Steny Hoyer thinks it might be. I hope he's right.

Kash

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Posted by Kash at 2:02 PM | Links to this post

Thursday, May 27, 2004

Poetic

This is why a subscription to Salon.com is not a bad idea. In addition to the article on the media's culpability in the Iraq war that AB mentioned below, Sydney Blumenthal has an excellent piece in Salon.com about the Chalabi story. In it Blumenthal writes some beautiful poetry about the justice slowly being wrought in Washington right now:

Washington, which was just weeks ago in the grip of neoconservative orthodoxy and absolute belief in Bush's inevitability and righteousness, is now in the throes of agonizing events and being ripped apart by investigations. Things fall apart; all that was hidden is revealed; all sacred exposed as profane: the military, loyal and lumbering, betrayed and embittered; the general in the field, Lt. Gen. Sanchez, disgraced and cashiered; and the most respected retired generals training their artillery on those who have ill-used the troops, still dying in the field; the intelligence agencies, a nautilus of chambers, abused and angry, its retired operatives plying their craft with the press corps, seeping dangerous truths; the press, hesitatingly and wobbly, investigating its own falsehoods; the neocons, publicly redoubling their passionate intensity, defending their hero and deceiver Chalabi, privately squabbling, anxiously awaiting the footsteps of FBI agents; Colin Powell, once the most acclaimed man in America, embarked on an endless quest to restore his reputation, damaged above all by his failure of nerve; everyone in the line of fire motioning toward the chain of command, spiraling upward and sideways, until the finger pointing in a phalanx is directed at the hollow crown.
Kash

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Posted by Kash at 5:08 PM | Links to this post

Gmail and Drunken Nixon

I've been using Gmail for about a week and I really like the interface, which is substantially different from Hotmail and Yahoo -- as it needs to be if Google is to induce people to give up their old email addresses. And apparently the free market agrees: Gmail accounts are selling for up to $150 on eBay (they should be free for everybody sometime this summer) and I received one email offering me $40.00 for an account.

As you may have heard, some privacy advocates are upset about Gmail because it uses the same technology that underlies Google Ads to scan emails and place context-sensitive ads next to emails. Personally, I don't care. Yahoo and Hotmail also have robots scan the emails in an effort to filter out spam, so it's really nothing new. And if I have to look at ads then I may as well look at ones related to the things I read and write about.

In any case, I hadn't really noticed the ads, which are much less intrusive than Yahoo's. Realizing that, I decided to take a conscious look. What did I find? An ad from the New Zealand Herald linking to a story on Richard Nixon:

Five days into the 1973 Arab-Israeli War, with the superpowers on the brink of confrontation, US President Richard Nixon was too drunk to discuss the crisis with British Prime Minister Edward Heath, according to transcripts of tape recordings released yesterday.

Henry Kissinger's assessment of the President's condition on the night of October 11, 1973, is contained in more than 20,000 pages of transcripts of Kissinger's phone calls as National Security Adviser and Secretary of State.


I'm guessing that an email I received with the subject heading "worst president ever" triggered this particular ad. I can't say whether the charge is true or not (hey, spreading this meets the standards of the New York Times); I certainly don't remember hearing much about Nixon as a big drinker. But in that era, the press were more discrete about the private lives of presidents (see, e.g., JFK). Anyway, without Gmail's targeted ads, I would never have seen this, and by extension, nor would most of my readers.

No word from the New Zealand Herald yet on whether Nixon choked on snack foods or fell off of sundry personal transportation devices.

AB




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Posted by Angry Bear at 3:24 PM | Links to this post

Worth a Day Pass

James Moore in Salon on the media's eager swallowing of the neocon/Chalabi tale, hook, line, and sinker, with a particular emphasis on the New York Times' extraordinary gullibility:

When the full history of the Iraq war is written, one of its most scandalous chapters will be about how American journalists, in particular those at the New York Times, so easily allowed themselves to be manipulated by both dubious sources and untrustworthy White House officials into running stories that misled the nation about Saddam Hussein's weapons of mass destruction. The Times finally acknowledged its grave errors in an extraordinary and lengthy editors note published Wednesday.

And yes, Judith "From Chalabi's Mouth to Your Eyes" Miller figures prominently, though not flatteringly.

AB

UPDATE: Here's a lovely quote from Ms. Miller, on her being proved a lying pawn:
"You know what," she offered angrily. "I was proved fucking right. That's what happened. People who disagreed with me were saying, 'There she goes again.' But I was proved fucking right."
Perhaps I should have used "culpability" in lieu of "gullibility" to describe Miller's and the Times' role.

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Posted by Angry Bear at 1:05 PM | Links to this post

Declare Victory and Go Home

That seems to be the US's new doctrine in Iraq. First, the US faced a rebellious Falluja, and decided to use force to put the city back under US military control and bring the people responsible for the death and mutilation of the 4 American contractors to justice. After a month-long seige, the US declared victory and left Falluja though the criminals remained free, the center of Falluja remained off-limits to US authority, and Saddam's army was given control of the city.

Now a similar thing seems to be happening in Najaf. An agreement seems to be in the works to end the US's military operations there:

NAJAF, Iraq - The U.S.-led coalition agreed Thursday to suspend offensive operations in Najaf after Iraqi leaders struck a deal with radical cleric Muqtada al-Sadr to end a bloody standoff threatening some of Iraq's holiest Shiite shrines.

...[The agreement] does not require al-Sadr immediately to disband his militia and surrender to authorities to face charges in the April 2003 assassination of a moderate cleric — key U.S. demands to end the standoff.
So can someone tell me xactly what the US has accomplished with its military offensives over the past 2 months?

Kash


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Posted by Kash at 11:24 AM | Links to this post

Stagflation?

Irwin Kellner of CBSMarketwatch.com says stagflation is coming back:

HEMPSTEAD, N.Y. (CBS.MW) -- Don't look now, but just as inflation is speeding up, the economy is slowing down. Can you say stagflation?

...One way to measure inflation psychology is to compare the yield on the regular 10-year Treasury note with the yield on the inflation-indexed note, known as TIPS, for Treasury Inflation Protected Security. The greater the spread, the more worried investors are about inflation. Currently the spread is almost 2.8 percentage points - the most since 1997. Since this is greater than the current rate of inflation, it shows that investors expect price rises to speed up.

...But how can the Fed ignore not only the widespread signs of slowing - but the fact that the economy is once again running into rather fierce headwinds?

As I pointed out two weeks ago, last year's stimulants have been replaced by this year's drags. There's no tax cut this year, rising long-term rates have all but choked off the re-fi boom, housing is slowing, the dollar is up while the stock market is down, and higher energy costs are sapping buying power.
His concerns about a slowing economy, like mine, are mostly theoretical right now. Despite the occasional recent weak bit of economic data (e.g. this week's sharp falls in new home sales and durable orders), I think it's too early to say that we have widespread evidence of a slowdown in the economy. However, I do think that we'll have more convincing confirmation of a slowing economy by the end of the summer. Put that together with the very real phenomenon of rising inflation and inflation expectations, and those who worry about (slightly) higher inflation and lower growth may not be far off. While I think that "staflation" is an overly dramatic term for what we'll probably experience, it captures the right idea.

Kash

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Posted by Kash at 10:07 AM | Links to this post

Greenspan the Partisan

Kenneth Thomas of Wharton has published information that he received under the FOIA confirming what we already suspected: close coordination between the White House and Alan Greenspan. Greenspan has taken to visiting the White House so often that they may be considering giving him a permanent parking spot there. This chart from the Washington Post sums it up:



Note that coordination is not necessarily bad -- sometimes it makes a lot of sense to coordinate monetary policy with the other things that the government is doing, especially during times of turbulence in the financial markets. But in this case I can't help but wonder if this indicates an unhealthily close relationship between Greenspan and the Bush White House. There are sound economic reasons for central bank independence from the government, but those concerns seem to have been pushed aside by this particular central banker -- particularly worrying since in this case the central bank is coordinating with the worst president ever.

Kash

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Posted by Kash at 9:56 AM | Links to this post

Umm, Well, About Those Budget Cuts We Said Wouldn't Happen...

A few months ago the White House denied that they were intending budget cuts across the board for domestic programs over the coming years. Now the Washington Post reports that widespread domestic budget cuts are exactly what they've decided to do:

The White House put government agencies on notice this month that if President Bush is reelected, his budget for 2006 may include spending cuts for virtually all agencies in charge of domestic programs, including education, homeland security and others that the president backed in this campaign year.

Administration officials had dismissed the significance of the proposed cuts when they surfaced in February as part of an internal White House budget office computer printout. At the time, officials said the cuts were based on a formula and did not accurately reflect administration policy. But a May 19 White House budget memorandum obtained by The Washington Post said that agencies should assume the spending levels in that printout when they prepare their fiscal 2006 budgets this summer.
Kash



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Posted by Kash at 9:24 AM | Links to this post

Worst President Update

In a speech I really, really, wish I had seen, Gore makes a strong case for Bush as worst President ever:

George W. Bush promised us a foreign policy with humility. Instead, he has brought us humiliation in the eyes of the world.

He promised to "restore honor and integrity to the White House." Instead, he has brought deep dishonor to our country and built a durable reputation as the most dishonest President since Richard Nixon.

[snip] ...There was then, there is now and there would have been regardless of what Bush did, a threat of terrorism that we would have to deal with. But instead of making it better, he has made it infinitely worse. We are less safe because of his policies. He has created more anger and righteous indignation against us as Americans than any leader of our country in the 228 years of our existence as a nation -- because of his attitude of contempt for any person, institution or nation who disagrees with him.

... The war plan was incompetent in its rejection of the advice from military professionals and the analysis of the intelligence was incompetent in its conclusion that our soldiers would be welcomed with garlands of flowers and cheering crowds. Thus we would not need to respect the so-called Powell doctrine of overwhelming force.

[snip] ... How dare they blame their misdeeds on enlisted personnel from a Reserve unit in upstate New York. President Bush owes more than one apology. On the list of those he let down are the young soldiers who are themselves apparently culpable, but who were clearly put into a moral cesspool. The perpetrators as well as the victims were both placed in their relationship to one another by the policies of George W. Bush.

How dare the incompetent and willful members of this Bush/Cheney Administration humiliate our nation and our people in the eyes of the world and in the conscience of our own people. How dare they subject us to such dishonor and disgrace. How dare they drag the good name of the United States of America through the mud of Saddam Hussein's torture prison.


[snip] ... One of the strengths of democracy is the ability of the people to regularly demand changes in leadership and to fire a failing leader and hire a new one with the promise of hopeful change. That is the real solution to America's quagmire in Iraq. But, I am keenly aware that we have seven months and twenty five days remaining in this president's current term of office and that represents a time of dangerous vulnerability for our country because of the demonstrated incompetence and recklessness of the current administration.

... We simply cannot afford to further increase the risk to our country with more blunders by this team. Donald Rumsfeld, as the chief architect of the war plan, should resign today. His deputies Paul Wolfowitz, Douglas Feith and his intelligence chief Stephen Cambone should also resign. The nation is especially at risk every single day that Rumsfeld remains as Secretary of Defense.

Condoleeza Rice, who has badly mishandled the coordination of national security policy, should also resign immediately.

George Tenet should also resign. I want to offer a special word about George Tenet, because he is a personal friend and I know him to be a good and decent man. It is especially painful to call for his resignation, but I have regretfully concluded that it is extremely important that our country have new leadership at the CIA immediately.

... During Ronald Reagan's Presidency, Secretary of Labor Ray Donovan was accused of corruption, but eventually, after a lot of publicity, the indictment was thrown out by the Judge. Donovan asked the question, "Where do I go to get my reputation back?" President Bush has now placed the United States of America in the same situation. Where do we go to get our good name back?

The answer is, we go where we always go when a dramatic change is needed. We go to the ballot box, and we make it clear to the rest of the world that what's been happening in America for the last four years, and what America has been doing in Iraq for the last two years, really is not who we are. We, as a people, at least the overwhelming majority of us, do not endorse the decision to dishonor the Geneva Convention and the Bill of Rights.

[snip] ...In December of 2000, even though I strongly disagreed with the decision by the U.S. Supreme Court to order a halt to the counting of legally cast ballots, I saw it as my duty to reaffirm my own strong belief that we are a nation of laws and not only accept the decision, but do what I could to prevent efforts to delegitimize George Bush as he took the oath of office as president.

I did not at that moment imagine that Bush would, in the presidency that ensued, demonstrate utter contempt for the rule of law and work at every turn to frustrate accountability...


These excerpts alone are a lot, but there is much more -- every bit worth reading.. Seriously, read it, print it, copy it, hand it out, and use it as a reply the next time your mom forwards you a list of dumb blonde jokes.

Christ, I wish Gore was our president right now.

AB

UPDATE: Digby's got some good comments and his own set of excerpts. Though he provides fairly extensive excerpts, Digby also writes, "A few excerpts follow, but I urge you, again, to read the whole speech." So you don't havt to just take my word for it.

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Posted by Angry Bear at 12:49 AM | Links to this post

Wednesday, May 26, 2004

Worst. President. Ever?

It certainly seems to me that George W. Bush is the worst president in the modern era, if not ever. But I also realize that this impression is shaped by the fact that I have no memories of Nixon or Ford, and my only memories of Carter are peanuts, hostages, gas lines, and Camp David. While my political awareness grew during Reagan's presidency, even then I was younger and more foolish than I am now. At the time, I may well have thought Reagan was a terrible president; certainly, I thought he was a bad president, but I don't recall ever thinking he was the worst ever. Ditto for the elder Bush, who seemed like a well-intentioned but misguided president who didn't accomplish much one way or the other. And I suspect that conservatives never truly thought of Clinton as the worst president ever, though I can imagine that they might have thought so of Lyndon Johnson (who I admire simply by virtue of his Great Society achieving a permanent 4-5% reduction in the poverty rate.)

In any given era, there's almost surely a contemporaneity bias: when the current president is from the other party, he probably seems worse than he actually is, if for no other reason than simple frustration. As time passes, our memories tend to impart some generosity -- we recall the good more than the bad, exacerbating the gap between our perceptions of how bad the opposition president is today relative to opposition presidents of days past. In short, whenever voters are faced with a president of the opposite party, they are almost surely biased towards concluding that the current one is worse than past presidents we disliked.

These and related musings lead me to wonder whether I could come up with a quantitative yardstick: what would it take for George W. Bush, based on a particular objective metric, the popular vote, to be declared the worst president, ever?

As it turns out, this is actually a more complicated question than you might think. America has had ten defeated incumbents, but in two of those cases a credible 3rd party candidate lowered the incumbent's vote total substantially (1912: Wilson v. Taft with Teddy Roosevelt in the mix; 1992: Clinton v. G. H. W. Bush, with Ross Perot in the running). So just looking at the incumbent's percentage of the vote may be misleading. Also, when the third party candidate is ideologically closer to one candidate than the other, as was true in both cited cases, looking at the margins may also be misleading.

Moreover, some of the least popular incumbents choose not to run or were prevented from running by their party. Lyndon Johnson is a notable example of the former and Franklin Pierce is an example of the latter. So the data are censored because the least popular incumbent presidents didn't run; we only observe data conditional on the incumbent believing that he had a chance. Vote totals are also not observed for presidents with failed second terms, such as Nixon. So I haven't quite determined the exact number below which George W. Bush could be declared worst president ever, but I'm working on it.(*)

However, in the course of looking at the least popular presidents, I did come across the following quote from Lyndon Johnson, dated March 31, 1968:

What we won when all our people were united just must not be lost in suspicion, distrust, selfishness, and politics among any of our people.

Believing this as I do, I have concluded that I should not permit the presidency to become involved in the partisan divisions that are developing in this political year. With America's sons in the field far away, with America's future under challenge right here at home, with our hopes and the world's hopes for peace in the balance every day. I do not believe that I should devote an hour or a day of my time to my personal partisan causes or to any duties other than the awesome duties of this office - the presidency of your country.

Accordingly, I shall not seek, and I will not accept the nomination of my party, for another term as your president.


Remind you of anyone?

AB

(*) The preliminary threshold is 39.6%. Bonus mention in the next post on this topic for the first commenter to figure out the source of this number.

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Posted by Angry Bear at 3:06 AM | Links to this post

Angry Population

In yet another new poll, ABC News reports that 57% of respondents are now "angry" about the Iraq war, up from 30% in 3/2003. Additionally,

Anger is up by 26 points among Democrats, and also by 21 points among Republicans (and by 29 points among independents). And it's up by 20 points among war supporters, as well as by 21 points among war opponents.


On the one hand, this could mean that more people are now angry that we went to war. On the other hand it may simply reflect growing polarization: Democrats who were once ambivalent are now angry that we went to war; Republicans (e.g., the execrable Trent Lott) are angry that it's going poorly, not that the war occurred.

AB

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Posted by Angry Bear at 2:19 AM | Links to this post

Tuesday, May 25, 2004

Mission Accomplished

Actually, the exact opposite:

LONDON (AFP) - The US-led war on Iraq (news - web sites), far from countering terrorism, has helped revitalise the Al-Qaeda terror network, the International Institute for Strategic Studies (IISS) think-tank warned.

The London-based body said in its annual Strategic Survey 2003/2004 that the deadly train bombings in Madrid in March, the worst terror strike in Europe for more than a decade, showed that Osama Bin Laden's terror network "had fully reconstituted".

It also predicted the Islamic group would step up its anti-Western attacks, possibly even resorting to weapons of mass destruction and targeting Americans, Europeans and Israelis while continuing to support insurgents opposing the US-led occupation of Iraq.
AB

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Posted by Angry Bear at 2:54 PM | Links to this post

More Polls

The following mostly good news for Kerry is from the latest Washington Post/ABC polls:

How closely are you following the 2004 presidential race: very closely, somewhat closely, not too closely, or not closely at all?


Based on my impression of historical standards, 74% of respondents following the presidential race at this stage presages a high turnout, which is historically bad for Republicans. (Perhaps Ruy T. can verify or refute this.)

The poll also shows Bush ahead 45-44 with Nader in the race, but behind 46-48 with Nader out.

AB

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Posted by Angry Bear at 9:20 AM | Links to this post

Monday, May 24, 2004

The Fundamental Problem

The fundamental problem, or at least the pragmatic problem, with using torture and abrogating civil rights is that the government can never be sure it is torturing the right person, or abrogating the civil rights of the right person. In cases where the government has sufficient evidence to be certain it has the right person, there's no need for extreme measures -- due process will work fine. When the government lacks such evidence, there's no way to be sure it's targeting the right person.

Witness today's news that the charges against Brandon Mayfield, a lawyer and Muslim convert who once represented one of the "Portland Seven" in a custody case, were thrown out. Fortunately, due process is down but not out. After being held for two weeks as a material witness, Mayfield was freed.

The FBI does deserve some credit for issuing an apology, though it appears they are perhaps being less than forthcoming. Their story is that it was a purely random finger print mismatch that lead them to pick up Mayfield, who attends the same Mosque as the Portland Seven. Since the FBI's database has about 40 million fingerprints, the odds of that happening are roughly 0.000000025.(*)

I think I have to side with Belle Waring's very perspicacious mother.

AB

(*) Of course, the odds of any given match from the IAFIS database are 0.000000025; still, it seems more likely that Mayfield was culled from a much shorter list.

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Posted by Angry Bear at 11:59 PM | Links to this post

Swing State Jobs Update

Alert readers may recall that during the height of the Democratic primaries I did a series on the jobs picture in most of the big swing states -- after many years of growth under Clinton, almost every one had a substantial jobs decline under Bush (Florida is an exception, but much of that is explained by above-average population growth.)

In the interest of being fair and balanced, the jobs picture in the swing states appears to be improving at an above average rate:

WASHINGTON — Employment has picked up significantly this year in a number of closely contested states that could decide the outcome of the 2004 presidential election.

The latest Labor Department figures on state jobs show that 10 of the 17 states expected to be the most tightly contested this campaign season were among the fastest-growing job markets in the country in April.

... Employment nationwide grew 0.2% in April, but job growth was more than double that in Wisconsin, West Virginia, Michigan and Missouri.


Still, it's extremely unlikely that the very crucial Ohio will regain all 265,000 of its lost jobs (for comparison, Bush's 2000 margin of victory was 90,000.)

While Bush supporters' trumpeting of the finally-not-bad jobs news is understandable, improving but not even breaking even after four years is a pretty low target, particularly after accounting for population growth. "Bush/Cheney 2004: Not quite as much below where we started as you thought we would be!" is probably not the stuff of which wins are made.

AB

UPDATE: By way of Atrios, the latest CBS numbers show that "Overall, 49 percent of registered voters now say they would vote for Kerry, 41 percent for Bush," which is perhaps Kerry's first statistically significant lead.

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Posted by Angry Bear at 5:34 PM | Links to this post

Bad Poll News

... if you're George W. Bush, that is. His poll numbers are falling like a clumsy mountain bike rider. Ruy T.'s got the details:

Wow! Not only has Bush's approval rating on handling the war on terrorism been dropping like a stone, the Annenberg Election Survey has now measured it in net negative territory: 46 percent approval/50 percent disapproval (May 17-23). That's a first and a very significant first. It means Bush's area of greatest strength is rapidly turning into political liability.

And check out the internals on this question: 41/53 among independents; 41/56 among 18-29 year olds; 41/56 among Hispanics and 40/54 among moderates.


Read the rest for more numbers and analysis.

A thought. I've heard two concerns from liberals in the last few weeks: first, why aren't Kerry's numbers going up?; second, why isn't Kerry speaking up more? I think that Kerry's numbers have in fact gone up, if the appropriate counterfactual is kept in mind. To wit, Bush spent an unprecedented $50m in March and $31m in April, yet Kerry's numbers didn't go down and actually increased modestly in some polls. So, compared to the effect that Bush's unleashing of his campaign war chest was expected to have, Kerry's doing just fine.

Regarding whether Kerry should speak up more at this stage, I think it's clear that he should not. When everything the President touches goes badly, taking any of the media spotlight away from Bush would be a mistake -- if it's not broke, don't fix it. Save your money and bide your time. Savvy.

AB

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Posted by Angry Bear at 4:20 PM | Links to this post

Another Leak Probe?

Josh Marshall notes that a Newsday article about Chalabi contains this very pregnant sentence:

An intelligence source confirmed to Newsday reports in Time and Newsweek that the FBI had launched an investigation into who in the administration had passed the classified material to [Chalabi's] Iraqi National Congress.
Marshall notes, correctly, that the ramifications of this leak may go far beyond those of the Plame investigation. After all, the intelligence leaked this time may have ended up in the hands of Iran.

Kash

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Posted by Kash at 1:05 PM | Links to this post

Oil Prices and Saudi Promises

Last Friday Saudi Arabia promised to increase oil output by about 2 million barrels per day. Nevertheless, after a temporary blip downward, oil prices have continued their climb, today reaching nearly $42 per barrel.

Why does the price of oil keep marching higher, even in the face of gestures from Saudi Arabia that they will start increasing supply? In large part, it seems, because Saudi promises are seen as just that – gestures, rather than actions.

The interesting question is therefore this: why hasn’t Saudi Arabia taken more aggressive steps to try to moderate the price of oil? One could argue that they have some good reasons to try to bring the price of oil down a bit – both political and financial. Politically, the Saudis probably have more to gain from a Bush second term than from a Kerry presidency, in addition to the long-standing close relationship between the Bush family and the Saudi royal family. Bob Woodward reported that there was even an explicit arrangement between the Saudis and Bush about reducing the price of oil this year. Financially, the Saudis know that it would be wise to avoid keeping oil prices high for so long that it would encourage significant movement toward greater energy efficiency.

So the fact that the Saudis aren’t in a hurry to increase production suggests a couple of things. First, they may not think that oil prices are high enough right now to have any serious effects on encouraging energy efficiency. Second, they may believe that the price of oil will moderate on its own over the next year, making increased supply unnecessary. Third, they may now be unable to fulfill their promise to Bush because the resulting political and media spotlight would be too intense. Most likely some combination of these factors is at work – with the result that Saudi Arabia seems unlikely to step in and seriously increases supply any time soon.

Kash

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Posted by Kash at 12:58 PM | Links to this post

Abu Ghraib: Problem Solved

Susan explains, by way of Digby.

AB

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Posted by Angry Bear at 2:36 AM | Links to this post

Chalabi Update Update

Kevin's drafted an excellent run down of Chalabi's career, 1969-present. The whole thing is well worth reading, but here's the exciting conclusion:

Bottom line: practically every group that has ever worked with Chalabi has eventually felt betrayed by him. This includes, at a minimum: (1) the Jordanian government, (2) the CIA, (3) the State Department, (4) Paul Bremer and the CPA, (5) the United Nations, (6) the NSC, and (7) the DIA. Oh — and quite possibly, (8) George W. Bush.


That sounds about right.

AB

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Posted by Angry Bear at 2:28 AM | Links to this post

Sunday, May 23, 2004

Chalabi Update

It's all CIA Director George Tenet's fault:

(CNN) -- Ahmed Chalabi, the former Iraqi exile who worked closely with the White House before the Iraq war, blamed CIA Director George Tenet Sunday for recent allegations that have apparently caused his standing with the Bush administration to plummet.

... "We never provided any classified information from the U.S. to Iran -- neither I nor anyone in the INC [Iraqi National Congress]," he said.

"That is a charge being put out by George Tenet. I say let him bring all his charges, all his documents. We also will bring all our charges and all our documents to the U.S. Congress, and let Congress have hearings and resolve this issue," Chalabi said.

... Chalabi said tension with Tenet goes back to 1994, when Tenet argued that "the way to remove [former Iraqi President Saddam Hussein] was through a coup. We said no; a war of national liberation, assisted by the United States, is the way to move forward.

"And he [Tenet] tried many coups, and we exposed the fact that he was wrong publicly, after he failed, and we sometimes warned the CIA in private about the possibility of failure. ... The feud with Aras [Habib] goes back a long way."


Now, I'm not Tenet's biggest fan, and I certainly believe that he and Chalabi don't get along well. But allow me to join with my right wing brethren, at least the ones who aren't diehard neocons, and defend Tenet: I don't believe he faked this, and I really don't believe anything Chalabi says. More likely, Tenet's case against Chalabi (insofar as it is "Tenet's" rather than a more broad case -- an issue under some debate(*)) is a true "Slam-Dunk."

AB

(*) The debate is over whether (1) Genuinely new information surfaced -- likely from Jordan's King Abdullah -- and so the US acted against Chalabi, or (2) The information always existed and now those who believe it (the CIA) have more power compared to those who don't (the Neocons in general and the Defence Intelligence Agency in particular.) Supporting (1) are the tips possibly received from Abdullah. Supporting (2) is this Newsweek story alleging that the Pentagon was out of the loop on the Chalibi raid:
When Iraqi police, guarded by American GIs, burst into the home and offices of Ahmad Chalabi and his Iraqi National Congress, looking for evidence of kidnapping, embezzlement, torture and theft, the men who run the Pentagon were left asking some uncomfortable questions. "Who signed off on this raid?" wondered one very high-ranking official. "What were U.S. soldiers doing there?" asked another, according to a source who was present in the room.

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Posted by Angry Bear at 5:57 PM | Links to this post

Has Bush Been Working for Iran?

The LA Times offers this explanation for the US's raid of Chalabi's headquarters the other day:

WASHINGTON — Ahmad Chalabi, the onetime White House favorite who has been implicated in an alleged Iranian spy operation, sent Iraqi defectors to at least eight Western spy services before the war in an apparent effort to dupe them about Iraqi President Saddam Hussein's illicit weapons programs, current and former U.S. intelligence officials said.

U.S. investigators are seeking to determine whether the effort — which one U.S. official likened to an attempt to "game the system" — was secretly supported by Iran's intelligence service to help persuade the Bush administration to oust the regime in Baghdad, Tehran's longtime enemy.
If true (Iran is denying the allegations), this would be a tad embarrassing for the Bush administration. No matter how hard they try, I think they'll find it hard to put a good spin on being outsmarted and outmanipulated by the Iranians.

Kash



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Posted by Kash at 11:49 AM | Links to this post

Friday, May 21, 2004

A Blight on My Country

It's a festering tumor wrapped in onion. Peel away another layer and get closer to putrid center.

AB

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Posted by Angry Bear at 5:18 PM | Links to this post

Another on the DisgruntledTM List?

Now it's former commander-in-chief of the U.S. Central Command from 1997 to 2000, Anthony Zinni, who may have to join the ranks of the DisgruntledTM. Okay, maybe he doesn't really qualify, since he never formally worked for George Bush, but he still has a credible perspective on things and seems to be pretty upset with the Bush administration.

Kash

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Posted by Kash at 12:45 PM | Links to this post

Bush and the Financial Press

An interesting tidbit: Bush won’t take questions from his fellow Republicans on Capitol Hill, but he did meet yesterday with selected members of the financial press “for a half-hour chat.” One possible interpretation: he’s going to be trying to change his campaign from running on Iraq and terrorism to running on the economy. Sure, Bush's economic performance has been lousy, but given the steady stream of news out of Iraq I think that such a change in strategy may well be wise on his part.

Kash

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Posted by Kash at 12:36 PM | Links to this post

The Budget Battle

The Bush budget, which would make some of the expiring 2001 and 2003 tax cuts that are set to expire next year, has been put on hold for a while because of the stubbornness of a few moderate Senate Republicans – Collins, Snowe, Chafee, and McCain. Whether the rest of the Bush lapdogs Republicans in Congress will be willing to compromise with those four fiscal conservatives (because compromising with Democrats would be simply beyond the pale) remains to be seen. But in the mean time, good for them for insisting that the Congress regain some semblance of fiscal responsibility.

Kash

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Posted by Kash at 12:24 PM | Links to this post

More Less Chalabi

Not only is Chalabi ambiguous at best about the intelligence he may or may not have provided to the US, now the US is ambiguous about the intelligence it did not get from Chalabi.

Or, as Josh Marshall writes,

Ask not for whom the memory-hole sucks, Ahmed; it sucketh for you ...
AB

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Posted by Angry Bear at 3:45 AM | Links to this post

Thursday, May 20, 2004

No Questions

Apparenlty, no matter how friendly the audience, Bush doesn't feel like answering any questions:

In a 45-minute pep rally in a basement conference room under the West Front of the Capitol, Mr. Bush told more than 200 House and Senate Republicans that the United States was firmly committed to transferring power to the Iraqis on June 30 and insisted that the temporary government would not be under American control. Specifically, Mr. Bush told the group, according to House and Senate members in the meeting, that the new American ambassador to Iraq, John D. Negroponte, would not be a de-facto successor to L. Paul Bremer III, the top American civilian administrator in Iraq who is to step down from his duties on July 1.

Mr. Bush took no questions from the [all Republican] lawmakers...


In the same story, this stands out as stunningly true:
Mr. Santorum said that Mr. Bush told the group that Mr. Negroponte would not be opening schools and hospitals.
Yes, indeed. I am quite sure that John Negroponte (see also, this) will most certainly not be opening any schools or hospitals.(*) I'm just surprised that Santorum and Bush would admit it so readily.

AB

(*) No, death-squad training doesn't count as "schooling."

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Posted by Angry Bear at 5:24 PM | Links to this post

Gmail

Having nearly filled my Yahoo inbox, I'm transitioning to Google's new email service, Gmail (it's still in Beta, but apparently Google decided to let bloggers get in early.) My new email address will be is angrybear@gmail.com, which is much easier to type than angrybearblog@yahoo.com, so I'm expecting lots of mail. I'll keep checking the old account until people stop sending messages to that address.

AB

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Posted by Angry Bear at 5:09 PM | Links to this post

Chalabi

By now, you've all seen the big Chalabi news. There's a post I wanted to write last night but didn't because PRI's The World doesn't publish transcripts. In any case, the reporter (Lisa Mullins?) was interviewing the soon-to-be-raided Chalabi. Since it's rather timely now, I offer the following loose paraphrase of the interview:

Mullins: You're not getting $350,000/month any more. What happened?
Chalabi: We decided we didn't want it anymore. It made us look not independent. [I broke up with her, dammit!].
Mullins: Well, what were you getting the money for before?
Chalabi: For our cooperation. [Seriously, he basically just called it a bribe.] And for intelligence.
Mullins: But much of that intelligence turned out to be wrong. For example, Secretary Powell just said that the defectors fabricating stories.
Chalabi: Defectors? What defectors? We [the INC] never supplied any defectors to anybody.
Mullins: What about the WMD claims?
Chalabi: WMD? Who said anything about that? Not me.


The actual interview lasted five minutes or so, but it was mostly along the lines of Chalabi claiming that he gave valuable information to the US, but denying that he or the INC was the source of any of the information that has turned out to be wrong (i.e., all the information that formed the ex-ante rationale for the war.) You may think I'm paraphrasing for comedic, or perhaps tragic, effect, but I'm not -- well, only slightly. You can listen to last night's The World here (scroll down to "Chalabi interview".)

My thought in real time was, "How does anyone ever believe anything this guy says? He's an obvious and blatant liar."

AB

UPDATE: Atrios has a great picture of Chalabi, surrounded by (former?) friends.
UPDATE 2: Non-evil Roger Ailes has the apt theme song.

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Posted by Angry Bear at 3:11 PM | Links to this post

Tax Cuts = Support the Troops?

Earlier, I wrote about a proposal by House Republicans (which includes Hastert, of course) to extend the income limit for the $1,000 child credit from $110,000 to $250,000. Now, reading the Hastert/McCain exchanges that Kash just posted, I see that Hastert has the gall to basically claim that tax cuts support the troops.

Quick question for Hastert: can you tell me who doesn't make between $110,000 and $250,000? (Hint: they're fighting and dying in Iraq. No, not the private contractors. Nice try, but wrong. Try again.)

AB

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Posted by Angry Bear at 2:42 PM | Links to this post

McCain v. Hastert

Some quotes from their exchanges in recent days, as reported in the Washington Post:

The nasty exchange between McCain and Hastert began with a comment the senator made at a think-tank conference on the budget deficit on Tuesday. "My friends, we are at war. Throughout our history, wartime has been a time of sacrifice," McCain said. "But about the only sacrifice taking place is that by the brave men and women fighting to defend and protect the liberties we hold so dear, and that of their families. It is time for others to step up and start sacrificing."

…Hastert shot back: "If you want to see sacrifice, John McCain ought to visit our young men and women at Walter Reed [Army Medical Center] and Bethesda [Naval Hospital]. There's the sacrifice in this country."

…Hastert questioned whether McCain is really a member of Bush's party. "A Republican?" Hastert said with feigned incredulity. He then criticized McCain's opposition to extending tax cuts in wartime.

"We're trying to make sure that they have the ability to fight this war, that they have the wherewithal to be able to do it," Hastert said. "And at the same time, we have to react to keep this country strong not only militarily but economically."

…McCain retorted: "The speaker is correct in that nothing we are called upon to do comes close to matching the heroism of our troops. All we are called upon to do is to not spend our nation into bankruptcy while our soldiers risk their lives. I fondly remember a time when real Republicans stood for fiscal responsibility."
Makes you almost nostalgic for the fiscally responsible 1980s, doesn’t it, Senator?

Kash

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Posted by Kash at 12:56 PM | Links to this post

Bush Campaign Spending

Wow. They really have been spending their money like crazy. From today's The Note:

ABC News' Karen Travers reports that according to the Bush-Cheney '04's April FEC report, the campaign has officially hit the $200 million mark for total fundraising. As of April 30, BC04 had $71.6 million in cash on hand, putting the campaign's spending at about $128.4 million. In March, BC04 spent nearly $50 million.
Spending $50 million in one month on a campaign must smash all previous monthly records. Looking at their cash on hand, I'd be surprised if they can hit that high water mark again during this election, but you never know...

Kash

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Posted by Kash at 12:35 PM | Links to this post

Economist Running the Show

This week saw a triumph for a practitioner of the dismal science in the world’s second largest country. Singh is actually a very credible and well-respected economist; but running a government is something else entirely. I wish him luck.

Kash

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Posted by Kash at 12:22 PM | Links to this post

The Government as Bush Campaign Tool

We all know that Bush has taken this art form to new levels in the past year. Yesterday the GAO took the first concrete steps to try to curb this practice, finding that the White House’s Medicare propaganda videos are illegal. Of course, whether this finding will make any difference is a different question. As a NY Times story about the GAO ruling says, the GAO “does not have law enforcement powers, but its decisions on federal spending are usually considered authoritative.” I take this to mean that we should expect the Bush administration to simply ignore the GAO’s judgment.

Kash

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Posted by Kash at 12:04 PM | Links to this post

Fiscal Discipline ...

... or rather the lack thereof:

House and Senate Republican negotiators have produced a [pay as you go] measure that is essentially make-believe. It purports to require that tax cuts or spending increases be paid for with offsetting tax increases or spending cuts. It pretends to impose that rule for the next 10 years.

But it then provides, in the very same section, that the rule expires on April 15, setting the stage for a new tax-cutting spree next year. The rule applies only to the Senate. And it exempts $27.5 billion in tax cuts from this year's pay-go requirements.
AB

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Posted by Angry Bear at 2:20 AM | Links to this post

Crediting Wonkette

As I MUST. She's got the right take on Wolfowitz's testimony yesterday:

Paul Wolfowitz fesses up on why Iraq isn't going so well: "We had a plan that assumed we'd have basically more stable security conditions than we've encountered."

Among those assumptions: That Iraq was a magical country, where lollipops grew on trees and the clouds were made of marshmallows! With gumdrop mountains and fruit-punch rivers and houses made of gingerbread!
AB

P.S. Homer Simpson did say, "Oh look at me !!! I'm making people happy! I'm the magical man from happy land, with a gumdrop house on lollipop lane! Oh by the way ... I was being sarcastic." But I don't think Homer every talked about ***-******* (regular Wonkette readers will know what each asterisk stands for. Childless couples unfamiliar with the procreative process should probably not try to figure it out.)

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Posted by Angry Bear at 1:52 AM | Links to this post

Almost Missed This One

Via TBogg, this story from the Washington Post:

The House would not only make permanent the $1,000-per-child tax credit enacted as part of the 2001 tax cut but would dramatically increase the income limits for eligibility. Currently, married families with incomes of up to $110,000 receive the full credit; the bill would more than double the income ceiling, to $250,000. Under existing law, families with two children and incomes up to $149,000 receive a partial tax credit; the bill would make that partial credit available to families with two children and income of between $250,000 and $289,000; families with three children would be entitled to the partial credit up to an income of $309,000.
In 2002, 5% of households (about 5.5 million households) earned more than $150,000/year, so there are somewhere probably around 10 million households earning between $110,000 and $250,0000. In the grand scheme of things, this proposal wouldn't cost all that much, roughly $10 billion (which would only increase the federal deficit by under 2%.)

At the same time, $1,000 really doesn't do much for families earning more than $110,000. Certainly, it would be nice to have even for these relatively wealthy families, but it's not going to really affect them in any significant way. For comparison, ask yourself how you would react to a raise of less than 1%.

So I can only conclude that this proposal is just a matter of principle: we need to take another 8 or 10 billion dollars from everybody (i.e., the people responsible for paying the deficit) and give it to the top 5%. Why? Not to make the economy or the lives of the wealthy better in any meaningful sense, but just because we can. At least, so say House Republicans.

AB

P.S. Technically speaking, of the 5.5 million households in the top 5%, 710,000 have a head of household over 65 and so probably don't have dependant children. And some portion of the under 65 households also lack dependants. So the total number of beneficiaries is probably well under 10 million, so the cost of this proposal is probably under $10b. But the point remains true: it's hard to see this as anything other than a principled transfer of 5 to 10 billion dollars -- from everybody, to the top 5% or so.

In fact, upon inspection, the Post story says the proposal would cost "$69 billion through 2014," which is about $7b per year.


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Posted by Angry Bear at 12:59 AM | Links to this post

RSS, Revisited (yet again)

It was down for a few days, either due to my messing with the template or Google's makeover of Blogger. I think it's fixed now, but if not, let me know in email or comments.

I've also changed the settings so that permalinks point to individual posts, rather than entire pages. I'm hoping that this will make search results more useful. Previously, seaches would always open the page with the relevant post, but would not center on the desired post.

AB

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Posted by Angry Bear at 12:25 AM | Links to this post

Take two Viagras and call me in the morning

Childless couple told to try sex:

The University Clinic of Lubek said they had never heard of a case like it after examining the couple who went to see them last month for fertility tests.

Doctors subjected them to a series of examinations and found they were both apparently fertile, and should have had no trouble conceiving.

A clinic spokesman said: "When we asked them how often they had had sex, they looked blank, and said: "What do you mean?".

"We are not talking retarded people here, but a couple who were brought up in a religious environment who were simply unaware, after eight years of marriage, of the physical requirements necessary to procreate."
Via Pandagon.

AB

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Posted by Angry Bear at 12:22 AM | Links to this post

Wednesday, May 19, 2004

Texas

A few months ago, I wrote this:

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.
Patrick Hayden has now seconded the motion in a post headlined "Via Julia, further evidence (free reg. req.) that Texas should be thrown out of the United States, if not sawed off the mainland and pushed out to sea."

AB

UPDATE: Charles Kuffner was, as is true of most blogging about Texas stories, the original source for the story.

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Posted by Angry Bear at 5:23 PM | Links to this post

Abu Ghraib Summary

Kevin's got a good, but depressing, overview of what we know to date about the events in Abu Ghraib.

AB

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Posted by Angry Bear at 5:18 PM | Links to this post

Alan Greenspan: “The Maestro”?

Yesterday Bush formally nominated Alan Greenspan for his fifth four-year term as chairman of the Federal Reserve Board. In his written statement accompanying the nomination, Bush said that “Alan Greenspan has done a superb job as chairman of the Board of Governors of the Federal Reserve System, and I have great confidence in his economic stewardship.”

Many in the financial world agree; in fact, Greenspan is often referred to as “the Maestro” of economic policy-making in the business press. “Maestro” was even the title of a Bob Woodward book about Greenspan. Is such high praise warranted? My answer is an unambiguous no.

For historical context, the following chart shows the Federal Funds rate (the interest rate most directly controlled by Alan Greenspan) since the year before Greenspan took the helm of US monetary policy in 1987.



How good was Greenspan's management of interest rates during this period? Let's take a look at some important episodes.

October 1987: The stock market crash. Greenspan received widespread credit for quickly injecting liquidity into the US economy, helping to prevent the stock market crash from affecting the economy more generally. He probably did the right thing, though it would have taken an idiot to fail to recognize that increased liquidity was needed immediately after the stock market crash.

1989: The economy was booming. Greenspan tried to engineer a “soft landing” by raising interest rates enough to slow the economy from the heady pace of 1988-89 without sending the economy into recession.

1990-91: Greenspan's "soft landing" clearly failed. He raised interest rates too high to fast, the US economy entered a recession, and he immediately (but too late) had to reverse course and lower interest rates.

1991-93: Greenspan tried to help end the recession by reducing interest rates. He lowered them slowly, however, and arguably not far enough. Though the recession was deeper than the 2001 recession, interest rates never went below 3%, and only reached that level in late 1992 – a full two years after the worst part of the recession.

1994-95: The economy was recovering smartly. Greenspan implemented a sharp increase in interest rates, wreaking havoc in the bond markets. The rise in interest rates was so sharp and fast that the US economy slowed dramatically in 1995, and nearly went into recession. Once again, Greenspan had to reverse course and quickly lower interest rates to undo his overeager increases.

1998: The failure of Long Term Capital Management (LTCM). The collapse of this hedge fund nearly paralyzed the US’s entire financial system. It was a financial disaster narrowly averted by careful Fed action (mainly in the form of coercing major banks to help out LTCM). However, Greenspan had little or nothing to do with this; it was NY Fed chairman William McDonough who orchestrated this narrow escape for the US economy.

1996-2000: The boom of the 1990s. Greenspan did virtually nothing to change monetary policy. The economy did great. However, financial and investment bubbles gathered strength and set the stage for the extremely sharp contraction in both the stock market and business investment in 2001. Many have argued that a tighter monetary policy during this period would have prevented a lot of future economic pain. On the other hand, few have argued that the strong US economy of the late 90s was due to magical monetary policy-making.

In short, I think that Greenspan has done some things correctly (including the sharp reduction in interest rates in 2001-02), but has also done many things clumsily. Far from being a master of monetary policy, I would describe his performance as mediocre.

In addition to his handling of interest rates, one might also judge Greenspan based on the advice and counsel that he has given the president, Congress, and the financial markets over the years. In this category, I would describe his performance as awful. He has talked of financial excess without doing anything about it; advocated tax cuts when the vast majority of economists could see that they were clearly fiscally irresponsible; and used his position to advocate his personal preference for a reduction or elimination of the Social Security program.

Put it all together, and I think that it’s time for a new Fed chairman. But it looks like we’ll have to wait a few more years.

Kash

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Posted by Kash at 12:26 PM | Links to this post

Tuesday, May 18, 2004

Josh Marshall on Kerry’s Strategy

Josh Marshall has a good piece on TPM about Kerry’s strategy of more-or-less lying low while Bush’s popularity falls. The punch line:

Here's the point I'd like to discuss in a bit more detail: the fact that Kerry can't get a lot of attention to himself right now or that he's not seizing the opportunity to make the case against Bush. I don't think this is a bad thing at all. At least not for now.

Let's think of this battle as a prize fight, with both men in the ring. If you're up on points and the seconds are ticking down on the final round, what do you do?

Simple: stay out of his way.

Trying to land punches when he's desperate and going down gives him the opportunity to hit back. And in such a dire moment that may be all he has. Why give him the opportunity?
You can read the whole piece here.

Kash

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Posted by Kash at 5:25 PM | Links to this post

GOP Logic

I understand that the Republicans' campaign strategy is to portray Kerry as inconsistent. But today’s talking point seems pretty weak, even by the low standards of the Bush campaign.

As you probably know, the Bush administration (true to form) is bull-headedly sticking with a plan that was originally devised in 2001 to fill the US's Strategic Petroleum Reserve (SPR). Nevermind the fact that the relevant circumstances have changed dramatically over the past few years.

On the other hand, Kerry has called for some release of oil from the SPR to help moderate the rather high price of oil (in addition to several other policy suggestions). At a minimum, Kerry has suggested that the US government stop buying additional oil for the reserve while prices are so high, since the government’s extra demand can only serve to make things worse.

The GOP’s response? They point out that in 2000, Kerry said that oil should not be released from the oil reserve. Aha! Gotcha, John Kerry!

But wait. I think that the GOP should continue with this logic, and point out that flip-floppers abound in everyday life as well as in politics. In 2000 I said I didn’t want to take a summer vacation in California, yet this summer I’m doing exactly that! Clearly I’m a flip-flopper. In 2000 John McCain said he wanted to be president over George Bush, yet this year he’s not even running! Another flip-flopper. In 2000 lots of people wanted to buy shares in Lucent for $50 per share, while today no one is willing to pay even $4. Flip-floppers, all of them.

Try this logic out on your family and friends. I think you’ll find it a powerful tool.

Kash

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Posted by Kash at 1:31 PM | Links to this post

Do Gas Prices Make a Difference?

A study released today by the Travel Industry Association of America indicates that Americans plan more summer travel than last year. Some media outlets are misinterpreting this as evidence that high gas prices may affect travel less than some people have expected. The reason that it's a faulty inference, of course, is that really one should compare how much people travel this year with high gas prices with how much they would have traveled this year with lower gas prices, not with how much they traveled last year.

Nevertheless, I find it moderately plausible that people’s driving plans have not yet changed much due to higher gas prices. Does this mean that higher oil prices won’t have much of an effect on the economy?

Not necessarily. The main way in which higher oil prices affect the economy is not by shortening summer road trips. More important are the effects of higher oil prices on energy inputs to firms, and the possible broader inflationary effects that this has on the economy. Higher interest rates result, which impose their own drag on the economy. These negative effects on the economy are not nearly as great as they were 20 years ago, but they still exist. (See this nice primer from the Dallas Fed for more about this.)

One interesting theoretical note: if you think about it, it is not immediately clear that higher oil prices should lead to higher inflation in general. In a world of smoothly-adjusting markets and prices, then when the price of one type of good rises, we would expect the prices of other types of goods to fall. In other words, a rise in the price of oil is just a rise in one particular relative price. All we should expect is to see the price of energy-intensive goods rise relative to the price of non-energy-intensive goods. However, we do in fact see a positive relationship between oil prices and inflation more generally. This therefore constitutes indirect evidence that prices do not in fact adjust freely in our economy. As Keynes famously pointed out 70 years ago (and many others less famously), prices are sticky.

The bottom line: while summer travel plans may not be noticeably curtailed, I still expect to see some summer slowdown in the economy as a result of recent oil prices.

Kash

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Posted by Kash at 1:00 PM | Links to this post

Question

Who will be the first conservative blogger to note the horrible prison fire in Honduras and -- as an exculpation -- point out that, as with Saddam, that too is worse than what happened in Abu Ghraib.

AB

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Posted by Angry Bear at 9:32 AM | Links to this post

From the UPI

Yes, from the same UPI that's owned by Reverend Moon (who also owns the Washington Times):

WASHINGTON, May 18 (UPI) -- Efforts at the top level of the Bush administration and the civilian echelon of the Department of Defense to contain the Iraq prison torture scandal and limit the blame to a handful of enlisted soldiers and immediate senior officers have already failed: The scandal continues to metastasize by the day.

Over the past weekend and into this week, devastating new allegations have emerged putting Stephen Cambone, the first Undersecretary of Defense for Intelligence, firmly in the crosshairs and bringing a new wave of allegations cascading down on the head of Defense Secretary Donald Rumsfeld, when he scarcely had time to catch his breath from the previous ones.

Even worse for Rumsfeld and his coterie of neo-conservative true believers who have run the Pentagon for the past 3½ years, three major institutions in the Washington power structure have decided that after almost a full presidential term of being treated with contempt and abuse by them, it's payback time.

Those three institutions are: The United States Army, the Central Intelligence Agency and the old, relatively moderate but highly experienced Republican leadership in the United States Senate.

[snip to conclusion]

... Rumsfeld and his team of top lieutenants have therefore now lost the confidence, trust and respect of both the Army and intelligence establishments. Key elements of the political establishment even of the ruling GOP now recognize this.

Yet Rumsfeld and his lieutenants remain determined to hang on to power, and so far President Bush has shown every sign of wanting to keep them there. The scandal, therefore, is far from over. The revelations will continue. The cost of the abuses to the American people and the U.S. national interest is already incalculable: And there is no end in sight.


The remainder of the article is mostly and overview of the material from The New Yorker and Newsweek pieces, along with a defense of Sy Hersh's credibility.

AB

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Posted by Angry Bear at 9:28 AM | Links to this post

Monday, May 17, 2004

Hersh Denial

If everything Hersh wrote is true, this sounds exactly like what the Pentagon would say. On the other hand, it also sounds exactly like what the Pentagon would say if everything Hersh wrote is false.

AB

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Posted by Angry Bear at 1:27 PM | Links to this post

Where's the Blogroll?

It's to the right, along with the Rumsfeld Wire, hit counter, RSS feed, and the Archives. Now everything that runs a script is in the right panel and will be brought up after the center panel. Everything in the left panel is hosted directly on the Blogger servers and requires no scripts.

AB

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Posted by Angry Bear at 7:01 AM | Links to this post

At Least He's Not Joe Lieberman

I'm still pondering the merits of McCain as a veep choice, though I'm pretty sure that I'm against it. Basically, it still seems so unlikely that it's not worth considering too carefully. Besides, Mark Kleiman's done some of the thinking for me so I don't have too.

But there is one factor weighing strongly in favor of John McCain: he's not Joe Lieberman, who yesterday embraced torture

On CNN's "Late Edition with Wolf Blitzer, Sen. Joseph Lieberman (D-Conn.), a member of the Armed Services Committee, called the allegations serious and said they should be investigated. But, he said, if a special interrogation unit focused on suspected terrorists could have prevented Sept. 11, "I don't think there are many Americans who would say we shouldn't use whatever means are necessary to extract that information."


Great point, you sanctimonious twit. One question: how do you know who to torture? Many of us, including me, will agree that if we (1) Knew something like 9/11 was going to happen, and (2) Knew and had access to those with the information needed to prevent said attack, then we'd endorse applying whatever force is necessary to extract the information (others might choose to draw an absolute moral line and still object.) But in virtually any case where conditions (1) and (2) hold, we would already have the information needed to stop the plot.

So Joe's either engaging in more self-aggrandizement or he's endorsing widespread torture in the hopes of finding a needle in a haystack. If the latter, what's the right yield rate (accurate tips per person tortured) and what's the threshold number of prevented deaths? (The footnote to this old post has some thoughts on acceptable ratios of punishment of the innocent to punishment of the guilty.) Until he can answer the tough questions, Lieberman should stick to complaining about indecent video games and blaming stuff on Hollywood.

Back to the McCain question, not being Joe Lieberman is a major plus for him, but many other viable candidates (I'd venture to say all but one) cross that threshold as well (I like Kleiman's idea of Zinni or Shinseki.) I do, however, like McCain heading State or Defense -- positions where his experience and multilateral appeal could add a lot of value yet he would have little purview over areas where his conservative views would be problematic (e.g., judicial appointments.)

AB

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Posted by Angry Bear at 6:21 AM | Links to this post

In Good Company

The following is a screenshot of the Rumsfeld Wire from Sunday afternoon and evening:



Angry Bear, Atrios, CalPundit, Josh Marshall, and the DCCC's blog: birds of a feather.

AB

P.S. Alert or suspicious readers may note that it appears I pasted two different shots from the Rumsfeld Wire. The break in the image is there because the only way I know how to take screenshots is with Acrobat, which I couldn't get to make one continuous page. Since the page broke right in the middle of the Wire, I had to append the two halves.

UPDATE: Wow, just hit "Prt Scr" and paste the clipboard into your favorite application -- it's that simple! How did I manage never to learn that?

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Posted by Angry Bear at 12:18 AM | Links to this post

Sunday, May 16, 2004

Ambassador Atrios

Atrios is running a pledge drive this week. Meanwhile, by way of Mark Kleiman, I find this in today's Washington Post:

Of the 246 fundraisers identified by The Post as Pioneers in the 2000 campaign, 104 -- or slightly more than 40 percent -- ended up in a job or an appointment. A study by The Washington Post, partly using information compiled by Texans for Public Justice, which is planning to release a separate study of the Pioneers this week, found that 23 Pioneers were named as ambassadors and three were named to the Cabinet: Donald L. Evans at the Commerce Department, Elaine L. Chao at Labor and Tom Ridge at Homeland Security. At least 37 Pioneers were named to postelection transition teams, which helped place political appointees into key regulatory positions affecting industry.

... When Kenneth L. Lay, for example, a 2000 Pioneer and then-chairman of Enron Corp., was a member of the Energy Department transition team, he sent White House personnel director Clay Johnson III a list of eight persons he recommended for appointment to the Federal Energy Regulatory Commission. Two were named to the five-member commission.


Since Atrios has raised $161,705 (and counting) for John Kerry, by the Bush Pioneer standards, he should be entitled to an ambassadorship of Kerry's choosing or a seat on a regulatory committee of his own choosing.

Here at Angry Bear, Kash and I have raised $5,161.78 to date, well on our way to the $10,000 cumulative goal (donate here). If we hit $10,000, Kash or I might be entitled to the unpaid internship of our choice.

AB

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Posted by Angry Bear at 7:31 PM | Links to this post

Rumsfeld Should Go

By now, you've probably read or read about Seymour Hersh's latest for the New Yorker, The Gray Zone, in which he writes that the events in Abu Ghraib were the result of a slippery slope that began with the creation of a hihgly targeted Special Access Program:

Rumsfeld reacted in his usual direct fashion: he authorized the establishment of a highly secret program that was given blanket advance approval to kill or capture and, if possible, interrogate "high value" targets in the Bush Administration’s war on terror. A special-access program, or SAP—subject to the Defense Department’s most stringent level of security—was set up, with an office in a secure area of the Pentagon. The program would recruit operatives and acquire the necessary equipment, including aircraft, and would keep its activities under wraps. America’s most successful intelligence operations during the Cold War had been SAPs, including the Navy’s submarine penetration of underwater cables used by the Soviet high command and construction of the Air Force’s stealth bomber. All the so-called "black" programs had one element in common: the Secretary of Defense, or his deputy, had to conclude that the normal military classification restraints did not provide enough security.
Over time, and spurred by the growing insurgency in Iraq, the program expanded:
Rumsfeld and Cambone went a step further, however: they expanded the scope of the SAP, bringing its unconventional methods to Abu Ghraib. The commandos were to operate in Iraq as they had in Afghanistan. The male prisoners could be treated roughly, and exposed to sexual humiliation.

"They weren’t getting anything substantive from the detainees in Iraq," the former intelligence official told me. "No names. Nothing that they could hang their hat on. Cambone says, I’ve got to crack this thing and I’m tired of working through the normal chain of command. I’ve got this apparatus set up—the black special-access program—and I’m going in hot. So he pulls the switch, and the electricity begins flowing last summer. And it’s working. We’re getting a picture of the insurgency in Iraq and the intelligence is flowing into the white world. We’re getting good stuff. But we’ve got more targets”—prisoners in Iraqi jails—“than people who can handle them."

Cambone then made another crucial decision, the former intelligence official told me: not only would he bring the sap’s rules into the prisons; he would bring some of the Army military-intelligence officers working inside the Iraqi prisons under the sap’sauspices. "So here are fundamentally good soldiers—military-intelligence guys—being told that no rules apply," the former official, who has extensive knowledge of the special-access programs, added. "And, as far as they’re concerned, this is a covert operation, and it’s to be kept within Defense Department channels."

The military-police prison guards, the former official said, included "recycled hillbillies from Cumberland, Maryland." He was referring to members of the 372nd Military Police Company. Seven members of the company are now facing charges for their role in the abuse at Abu Ghraib. "How are these guys from Cumberland going to know anything? The Army Reserve doesn’t know what it’s doing."


There's a lot more in Hersh's piece, most of it casting substantial doubt on the current line that the problems were the results of a few low level MPs gone wild.

The Pentagon, of course, refutes Hersh's account in its entirety and released a statement on Saturday saying in part that

"The abuse evidenced in the videos and photos, and any similar abuse that may come to light in any of the ongoing half dozen investigations into this matter, has no basis in any sanctioned program, training manual, instruction, or order in the Department of Defense."


Now, Newsweek has a story out, The Roots of Turture, that is completely in accord with Hersh's account. Apparently, Newsweek obtained a Jan. 25, 2002 memo from White House Council Gonzales to President Bush, that explains the origins of lax standards [emphasis mine]:

"As you have said, the war against terrorism is a new kind of war," Gonzales wrote to Bush. "The nature of the new war places a high premium on other factors, such as the ability to quickly obtain information from captured terrorists and their sponsors in order to avoid further atrocities against American civilians." Gonzales concluded in stark terms: "In my judgment, this new paradigm renders obsolete Geneva's strict limitations on questioning of enemy prisoners and renders quaint some of its provisions."


Newsweek also goes into some detail on Powell's immediate and continuing, but ultimately fruitless, opposition to the new Geneva-Free protocol.

How did the program devolve from a tight focus on top al Qaeda targets and implementation by seasoned intelligence experts to the generalized debasement in Abu Ghraib? Newsweek also pins the blame on Rumsfeld's frustration with the worsening situation in Iraq:

Rumsfeld was getting impatient about the poor quality of the intelligence coming out of there. He wanted to know: Where was Saddam? Where were the WMD? Most immediately: Why weren't U.S. troops catching or forestalling the gangs planting improvised explosive devices by the roads? Rumsfeld pointed out that Gitmo was producing good intel. So he directed Steve Cambone, his under secretary for intelligence, to send Gitmo commandant Miller to Iraq to improve what they were doing out there. Cambone in turn dispatched his deputy, Lt. Gen. William (Jerry) Boykin—later to gain notoriety for his harsh comments about Islam—down to Gitmo to talk with Miller and organize the trip. In Baghdad in September 2003, Miller delivered a blunt message to Brig. Gen. Janis Karpinski, who was then in charge of the 800th Military Police Brigade running Iraqi detentions. According to Karpinski, Miller told her that the prison would thenceforth be dedicated to gathering intel. (Miller says he simply recommended that detention and intelligence commands be integrated.) On Nov. 19, Abu Ghraib was formally handed over to tactical control of military-intelligence units.(*)


It is increasingly implausible that the torture in Abu Ghraib was just the work of low level MPs actiing without direction from above and, accordingly, it is increasingly unlikely that this will go away soon. Two independent sources -- Hersh and Newsweek -- cite the growing insurgency in Iraq as the impetus for the orders from above to expand and "Gitmo-ize" intelligence gathering in Iraq. The roots of the insurgency lie, in no small part, in Rumsfeld's refusal to follow the advice of his senior advisors and send more troops to Iraq.

That Rumsfeld's judgement is poor can no longer be questioned; the only question at issue is whether his culpability for Abu Ghraib is direct or indirect. I am un-moderating my views: Rumsfeld should go, forthwith.

AB

(*) For some disturbing background on Boykin and Cambone, see this post from Dave Neiwert.

UPDATE: Kevin read the same two stories and notes that "Hersh says abusive interrogation was the Pentagon's idea and CIA resisted," while "Newsweek says the Pentagon and the CIA were on board, but the State Department resisted." Both sources do agree, however, that orders and direction came from above.

UPDATE 2: Matt Yglesias adds this amusing caveat:
Now at this point there's so much interagency ill-will that you could probably find "intelligence officials" willing to say they've witnessed Donald Rumsfeld communing with the devil while someone at State assures you that Colin Powell was against the whole Faustian bargain concept from the beginning.

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Posted by Angry Bear at 5:46 PM | Links to this post

Saturday, May 15, 2004

Wow

Bush’s poll numbers keep sinking. From the latest issue of Newsweek:

May 15 - As his administration grapples with the fallout from the Iraqi prisoner abuse scandal, President George W. Bush’s approval ratings have dropped to 42 percent, according to the latest NEWSWEEK poll, a low for his presidency. Fifty-seven percent say they disapprove of Bush’s handling of the war in Iraq. And 62 percent say they are dissatisfied with the way things are going in the United States, a number that has been steadily increasing since April, 2003, when it was 41 percent.
For some historical context on how these numbers may translate into an election outcome, see this post on The American Street. The Newsweek article goes on to note that Bush’s falling support has not translated into increasing support for Kerry. I’m not quite sure what the explanation for that is, other than the obvious – Kerry hasn’t inspired one-time Bush supporters, who may be disillusioned with the president but are not particularly attracted to Kerry, either. The crucial question is whether the Kerry campaign can change that.

Kash

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Posted by Kash at 10:01 PM | Links to this post

Friday, May 14, 2004

Minor Changes

I've moved most slow-loading scripts (e.g., sitemeter) to the right panel, which should mean that the page will load the center panel before running them (which sometimes causes the page to hang for a while before loading). If this works then you will be able to read the hot fresh content while the rest of the page is loading.

I still need to fix the blogroll, which also hangs sometimes. One plan is to just switch it with the book recommendations (I put the images directly on the site instead of using Amazon to host them.) The other plan is to maintain it manually. Whichever I choose, by Monday slow-loading should be a thing of the past.

Thanks to twh, Wayne B., and Kevin Drum for the tips.

AB

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Posted by Angry Bear at 6:39 PM | Links to this post

New Data: Everything’s Up

The CPI was up in April, with the core rate rising 0.3%. The 12-month change in the core CPI is therefore up 1.8%, another sign that the US inflation rate is still rising. Just a few months ago the 12-month core CPI inflation rate was only 1.25%. (By the way, the reason that I like to use the core CPI is because it's less volatile than the full CPI, and thus better reflects the underlying inflation pressures in the economy. However, the full CPI does a better job of depicting what's happening to real purchasing power.)

Meanwhile the Fed’s monthly estimate of industrial production shows a healthy rise in April, too. The same data release shows that capacity utilization is also up, to its highest level in 3 years. The rise reflects increases in both manufacturing and in other industrial activities.

Finally, interest rates are also up, though they seem to have leveled off over the past week or so at their highest levels in about 2 years. The 10-year bond now yields around 4.8%, and the 5-year bond yields around 4.0%. Both of these interest rates are about 1 full percentage point higher than 2 months ago.

These are all classic signs of solid economic growth. The recovery is indeed in full swing.

The question of sustainability is still an open one, though. Will housing prices peak and start to fall? Will the impetus provided by tax cuts and government spending wane in coming months? Will consumers slow their spending as interest rates rise and house prices fall? (See Karsten's post below for more on this.) Will the price of oil cut into the recovery this summer? I’ve been answering yes to all of these questions for a while, and I don’t see any reason to change my answer yet. I don’t think that anything dramatic will happen, but I do think that all of these forces will have some effect, and that the economy will noticeably cool later this year.

Kash

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Posted by Kash at 10:45 AM | Links to this post

Postcards from Old Europe - In debt we trust

The FOMC's recent change in the wording of their statement has clearly shown that the times of E-Z financing are coming to an end. The recent past has seen the Fed engineer a near-rational bubble in asset prices which has served to push household wealth up past the levels of the stock market bubble. Cheap credit has supported household spending at a time in which incomes have been growing at a snail's pace.

A quick series of (substantial) interest rate hikes could therefore lead to a substantial slowdown in consumption and thereby negatively impact future GDP growth. Consumer credit delinquency rates are already at near record highs while ever more home buyers finance their homes with no money down and use adjustable rate mortgages to squeeze out a larger loan. The reasoning behind this behavior is nicely stated in this NY Times article. Excerpt:

"I'm too young to be scared," he said last week, betting that both the value of the house and his income will keep rising. If the bet fails, he said, it will not be the end of the world, adding: "There is a difference between being poor and being broke. Being broke is more of a temporary condition. Donald Trump has been broke a couple of times."
[...]
Mr. Thompson, who completed the purchase of his townhouse near Denver on Friday, said he would have qualified to borrow $330,000 if he had taken out a traditional fixed-rate mortgage. He qualified for a loan up to $550,000 by taking an adjustable-rate mortgage that will be constant for the first five years and that requires only interest payments.
What I like most about this statement is that the person cited is supposed to be a "management consultant". I'm sure that an optimist like him is much in demand!

This kind of mindset has kept consumers spending all through the recent economic weakness and has also served to boost consumer credit to a level of over $2 trillion. Total household debt is at a level of around 90% of GDP and the average American now spends almost 20% of their disposable income servicing debt. This is in sharp contrast to Euroland where household debt stands at around 60% of GDP.

The picture looks a little different if you look at household debt as a percentage of disposable income. Some European countries - such as Germany or the Netherlands - have a household debt to disposable income ratio which is higher than the US ratio. The Euro-average is around 30% below the US level though.

Another thing to keep in mind is the evolution of the savings rate. While the US savings rate is at a rock bottom 2% the Euro-average stands at around 13%! Europeans have reacted to sluggish economic growth and high unemployment by retrenching and saving more. In sharp contrast US consumers have decided to take a different course and spend more - even if it means taking on more debt.

The US consumer's decision has been vindicated by the behavior of asset prices. Up until the popping of the bubble the stock market did the job of saving for the individual. Rising house prices took up much of the slack after the bubble burst. This asset price inflation with corresponding price disinflation has made many households feel wealthy and consume more.

The only problem is that asset prices are just numbers in a ledger until you liquidate the asset. You need real money to consume and pay down debt. The worst scenario would entail your debt-service costs rising faster than your income - this leads to a sharp curtailing of other expenses to reduce the onerous costs of debt. This scenario isn't that far-fetched. Anyone with an adjustable rate mortgage or sizeable credit card debt should think long and hard about what could happen.

If the Fed really takes the bunch bowl away by raising - say - by 150bp over the next 12 months people with adjustable credit terms will find that E-Z financing can quickly turn into E-Z bankruptcy. While the press tells us that consumers are getting more bang for their (debt service) buck
[...]thanks in part to lower interest rates, monthly debt payments consume a smaller share of monthly income today than in late 2001.
we shouldn't forget that this doesn't mean that people are actually saving money. Consumers have simply adjusted the amount of principal upwards!

To sum it up: while Eurozone consumers are saving more and spending less, US consumers are borrowing more and spending more. The US private sector has kept the economy afloat over past years - albeit at the cost of rising exposure to the vagaries of the financial markets. Households have turned into mini-banks who have to manage their assets and liabilities in such a fashion that they remain solvent. Let us hope that they're up to the task!

Want more? CurryBlog provides you with regular updates on financial markets and related subjects.

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Posted by Karsten at 1:31 AM | Links to this post

Thursday, May 13, 2004

Question

The blog's been taking a long time to open today because blogrolling.com, the site that maintains my blogroll is down (I've removed it for now.) The same thing happens whenever sitemeter is down, too.

Is there some way to make the blog first load the background and the center table where the posts are, and only then run all the scripts? Any tips will be greatly appreciated.

AB

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Posted by Angry Bear at 1:46 PM | Links to this post

PPI Data

Today’s BLS release of PPI data for April show a 12-month increase in producer prices of 5.1%, thanks largely to higher energy prices. That's the fastest annual PPI inflation that we've seen in a long time. (The one-month change in prices was 0.7%.) But I've said before that I think it’s more useful to look at the core inflation rate, excluding food and fuel price changes. The core rate was up just 0.2% last month, which implies a rise of about 1.5% over the past year. The core rate tells us more about the inflation pressures that the economy is generating on its own. The story there is that the core rate is rising, but from a very low level.

However, at some point sharply higher energy prices do become relevant in and of themselves. They do reduce the purchasing power of consumers in a very real way, and they often do eventually filter into other price increases. I’ve said it before and I’ll say it again: if the price of oil doesn’t start falling sometime soon (it’s still holding firm at close to $41 per barrel), it’s going to start having some very real effects on the economy this summer.

Kash

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Posted by Kash at 10:03 AM | Links to this post

Let’s Call It What It Is

Take a look at the following opening sentence from an AP story on the crimes at Abu Ghraib:

WASHINGTON - Fresh photos showing American soldiers brutalizing Iraqi prisoners with snarling dogs or forced sex left members of Congress angry and disgusted...
Why beat around the bush? Why the careful avoidance of the obvious term for “forced sex”? The pictures show soldiers committing rape.

I guess the media is (once again) taking their cue from the administration. On Monday the Pentagon’s spokesperson simply said that the photos showed “inappropriate behavior of a sexual nature.” It doesn’t sound as bad as rape when you put it that way.

By the way, in case you were wondering (as I was) if the media simply tries to avoid using the term rape in general, the answer seems to be no. A quick search of Yahoo news turned up 11,707 recent news articles that use the word rape. But interestingly, almost none of them are about the crimes at Abu Ghraib.

Kash

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Posted by Kash at 9:57 AM | Links to this post

Campaign Fundraising

The FEC is set to rule today on the legality of soft money-funded 527 issue groups that have been working to boost or blast one candidate or the other. Indications are that the FEC will decide to postpone their decision by another 90 days. Of course, that effectively means that they’re making a decision to leave the current rules in place for the bulk of the 2004 election.

Some Republicans are saying that if the FEC does indeed decide to do that, then they are going to start using 527 groups more intensively themselves, to counter lots of ad buys by MoveOn and other such anti-Bush groups. Republicans (and some Democrats) have been surprised by the amount of money that the Kerry campaign has been able to raise, so they have unexpectedly been put slightly on the defensive regarding fundraising.

By the way, Kerry has launched a new $10 million in 10 days fundraising campaign. You know what to do.

Kash

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Posted by Kash at 9:15 AM | Links to this post

The Abu Ghraib Prisoner's Dilemma, Revisited

If you will look to your right, you'll see that I've added The Rumsfeld Wire, an application created by the DCCC that tracks blog posts relating to Abu Ghraib and/or removing Rumsfeld. Now, I think the Abu Ghraib scandal is a true scandal, and deserving of all the abhorrence it has received and probably more, the tragic events surrounding Nick Berg notwithstanding. However, I'm actually not ready to embrace Rumsfeld's removal.

Even as I type that, I'm surprised. Rumsfeld's done little right that I can think of, and if he's been superb then I'm due for the next Nobel Prize in Economics. My primary concerns with Rumsfeld leaving his position in the next six months are the prospect of (1) the gigantic clown circus his successor's confirmation hearings would inevitably create, and (2) Paul Wolfowitz running the show in the interim. So I'm not personally advocating his ouster at this point, but I will certainly not argue with those who do, nor side with Rumsfeld's defenders. The best plan, of course, remains getting rid of the entire lot of them.

By way of contributing to The Rumsfeld Wire, I'm reprinting a post from 5/2 that I think has, sadly, proved true. (The post was no great act of prophecy; the escalation was all too predictable. But it does point to a way out -- as Lindsey Graham said, "When you are the good guys, you've got to act like the good guys.")

*****


The Abu Ghraib Prisoner's Dilemma

Phil Carter's Intel Dump is the place to go for real-time analysis of military issues, from a former Army officer. Reading Phil's thoughts on the Abu Ghraib situation, I was struck by this passage:
What's worse is that other American soldiers may suffer for the brutal excesses of these MPs, interrogators, and OGA ("other government agency" = CIA) employees. Reciprocity is a very real thing where the laws of wars are concerned, and we should be very concerned about retaliation against any Americans captured by Iraqi insurgents in the future. Similarly, reprisals are very real problem in war; they're often fueled by anger over mistreatment of one side's own troops.
Carter is describing a classic Prisoner's Dilemma: a situation in which, when two opposing parties pursue actions in their own best interest, the outcome for each is worse than if they had instead cooperated. Such instances are called prisoner's dilemmas because the canonical example is two prisoners being interrogated in separate rooms. Each suspects the other will confess and so confesses in order to receive a lighter sentence, even though they would both be better off had neither confessed. Attempting to maximize short-run gain results in each party being worse off than if they had followed a cooperative strategy.

If, however, the game is repeated indefinitely, the outcome can change. In repeated interactions, one player can reward cooperation by the other player by cooperating tomorrow. A common outcome involves tit-for-tat strategies: each side pursues the cooperative action; if, however, one side should fail to live up to its side of the deal by taking an opportunistic action, then the other side will respond by also taking the opportunistic action in the next period.

One of the more classic examples of a repeated Prisoner's Dilemma is in John Axelrod's book, The Evolution of Cooperation. There, Axelrod (*) examines accounts of trench warfare in World War I, noting how on a day to day basis, the opposing troops pursued a cooperative strategy that basically entailed not shooting every enemy soldier they could:
A fascinating case of the development of cooperation based on continuing interaction occurred in the trench warfare of World War I. In the midst of this very brutal war there developed between the men facing each other what came to be called the "live and let live system." The troops would attack each other when ordered to do so, but between large battles each side would deliberately avoid doing much harm to the other side -- provided tthat thte other side reciprocated (p. 61).

... the historical situation in the quiet sectors along the Western Front was an iterated Prisoner's Dilemma. In a given locality, the two players can be taken to be the small units facing each other. At any time, the choices are to shoot to kill or deliberately to shoot to avoid causing damage. For both sides, weakening the enemy is an important value because it will promote survival if a major battle is ordered in the sector. Therefore, in the short run it is better to do damage now whether the enemy is shooting back or not ... mutual defection is preferred to unilateral restraint [and] unilateral restraint by the other side is even better than mutual cooperation. In addition, the reward for mutual restraint is preferred by the local units to the outcome of mutual punishment, since mutual punishment would imply that both units would suffer for little or no relative gain (p. 75).
Thus, there is a long history supporting Carter's claim that "reciprocity is a very real thing where the laws of wars are concerned" and we should, therefore, be very concerned about reprisals against captured Americans. Each side can realize some gain by torturing its captives (e.g., intelligence and propaganda); the cost of doing so is that their respective troops are more likely to be tortured in the future. When either side does so, it gains some strategic advantage (we assume -- otherwise they would not use torture), but over the long run, there is little relative strategic advantage when both sides employ extreme measures.

For example, just today [5/2/2004], we received the good news that Halliburton truck driver Tommy Hamill escaped after three weeks in captivity near Baghdad. Part of the reason Hamill was able to escape is that he had not been beaten, tortured, and chained. The likelihood of such restraint in the future is now, sadly, less than it was before Iraqis learned of the abuse at Abu Ghraib.

A paradoxical aspect of this situation is that to avoid the outcome in which both sides use torture, it must be the case that both sides are in fact willing to resort to torture or other vicious measures. Otherwise, the threat to punish the other side tomorrow for resorting to torture today is empty. Returning to the trench analogy, if the Germans never retaliated then the Americans would have no incentive not to shoot. It was the proven willingness of the Germans to strike back that rendered such striking back unnecessary, and vice-versa.

A second implication is that, in order to sustain the "cooperative" outcome in which torture is not used by either side, each side must also be willing to not use torture even when there are short-run benefits to doing so. Both sides have demonstrated their willingness and ability to break the cooperative, reciprocal, tacit agreement (see Fallujah and Abu Ghraib, respectively.) An open issue is whether the situation will spiral into a descending series of reprisals and counter-reprisals or whether reciprocity will emerge.

AB

(*) See Chapter 5, The Live and Let Live System in Trench Warfare in World War I.

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Posted by Angry Bear at 3:12 AM