Deinonychus antirrhopus

Kevin Brancato on Recall Elections

In the comments to this post Kevin says:

I like recalls because they "feel undemocratic" to the politicians and political chattering class. I like recalls because they make politicans nervous. If politicians do not like the pressure of a recall, they should find other lines of work, or at least govern more wisely.

Excellent. This is precisely how I veiw it, but for some reason couldn't quite find a way to summarize it so well. Thanks Kevin.

(By the way, if you aren't reading Kevin's blog, Truck and Barter, you should be.)

What the Fuck?

James V. DeLong has gotten it wrong. DeLong has a long essay on why those who oppose intellectual property and those producing intellectual property getting the appropriate return on their property is wrong.

Unfortunately DeLong misses the point completely and totally.

This lever is a syllogism that I have now heard to the screaming point: It starts with the proposition, "Economics teaches us that in a competitive market prices equal marginal cost -- the extra costs incurred by producing an additional unit." It goes on to note that the marginal cost of an additional pill, or an additional copy of a movie or song, is close to zero. Therefore, the argument concludes triumphantly, "economics teaches us" that such products should be priced at zero. Any other condition demonstrates that undue "market power" exists, and is immoral.

Immoral? What the Hell is he talking about. Inefficient, less than optimal, the "second best" outcome, yeah, but immoral. What this lawyer doesn't realize is that economists don't use that kind of language (generally speaking). The conventional wisdom in economics with regards to intellectual property goes like this:

1. Intellecutal property has properties similar to public goods.
2. Given this it is almost impossible for the creator of intellectual property to fully recover his costs, let alone any of the "profits" of his efforts.
3. Hence an institutional framework is need in which the creator of intellectual property can assert his property rights.
4. Typically this framework grants a temporary monopoly to the creator of intellectual property.
5. This is sub-optimal, but is widely considered to be better than not having the amount of intellecutal property we do now.

So where does this nitwit get the idea that economists are clamoring for price being equal to marginal cost?

If one demurs to the logic, on the ground that it costs about $800 million dollars to produce the first pill, or $100 million to produce the first print of the movie and this initial investment -- not just the marginal cost of the second pill or the second print -- must be recovered from somewhere, the perpetrators of this logic usually shrug and talk about the need for new business models.

Wrong again (can this guy get anything right?). The new business model actually has the creator of intellectual property being paid up front the discounted value of his intellectual property and from that point on the "good" is priced at marginal cost. So not only would you get your money back, but you'd get something over and above it.¹

The pioneers of this research are David Levine and Michele Boldrin. Their initial paper on this does not support DeLong's strawman in the least.

Why then do we argue a “case against intellectual property?” Are we arguing that, while stealing potatoes is bad, stealing ideas is good? We are not. Economic efficiency, and common sense, argue that ideas should be protected and available for sale, just like any other commodity. But “intellectual property” has come to mean not only the right to own and sell ideas, but also the right to regulate their use. This creates a socially inefficient monopoly, and what is commonly called intellectual property might be better called “intellectual monopoly.” When you buy a potato you can eat it, throw it away, plant it or make it into a sculpture. Current law allows producers of a CDs and books to take this freedom away from you. When you buy a potato you can use the “idea” of a potato embodied in it to make better potatoes or to invent french fries. Current law allows producers of computer software or medical drugs to take this freedom away from you. It is against this distorted extension of intellectual property rights that we argue.

The idea is: can you get closer to the optimum outcome and still ensure that intellectual property is produced and the creators of such property are rewarded for their efforts? Boldrin and Levine argue that you can.

Back to DeLong:

If you doubt the power of the "price should equal marginal cost" mantra, or the moral component that has been infused into it, check out speeches by officials of the Antitrust Division, such as William Kolasky, former Deputy AG: "An economist would say that a market is perfectly competitive when firms price their output at marginal cost." Or a statement by Lawrence Summers, former Secretary of the Treasury and current President of Harvard: "[T]he most basic condition for economic efficiency [is] that price equal marginal cost." Or go look at almost any textbook, complete with diagrams.

I see the problem, this guy has conflated economic efficiency with moral goodness or something. Nothing could be further from the truth. It is quite possible to have an efficient outcome the is highly "immoral", for example it is entirely possible (theoretically) for an economy where one very small group (even an individual) owns 99.9% of the goods/resources. Is this a "morally good" outcome? I think most people would have a hard time saying it is.²

To be fair to these two gentlemen, they immediately move on to note that of course this principle creates problems in an investment-intensive context because it does not allow for the recovery of capital cost.

Wrong, the problem is sunk costs. What is a sunk cost? A cost that once you incur it is gone forever. Here is an example:

Suppose you are going on a trip. You had to put $100 down (via credit card) to reserve the hotel room. You get 5 miles down the road and realize, you'd just rather stay home. Now, what about the $100 dollars? Its gone no matter what you do. If you go, its spent. If you stay home, its still spent. The $100 is gone, unrecoverable, and hence should not influence your decision making.

The problem is that sunk costs are not sunk until you make them. If you fear your return will not justify making the sunk cost you wont make it. From a societal perspective, good investments might be missed out on and that imposes an opportunity cost on society.

The money spent on drug research is largely a sunk cost.

Capital on the other hand (i.e., plant and equipment) are not sunk costs, but fixed costs (i.e., fixed over a given period of time, but variable over a longer period of time). You can always sell your plant and equipment and get some if not all of the money back (you might have to factor in depreciation here).

This guy is so clueless on the issue it is almost painful for me to read the rest.

The bottom line is no economist that I know of is advocating stripping those who produce intellectual property of their property rights, but just changing the institution so that a socially more desirable outcome can result.

Ironically, in one of his examples, the creators of intellectual property rarely see all the benefits: Music. The benefits accrue not to the creators, but to the recording industry by and large. All that money you pay for a CD...almost all of it goes to the recording industry. Clearly this indicates that in that industry, the price is socially inefficient, i.e., it can come down and we can still have the same amount of music we currently do if not more.

(Via Catallarchy)
_____
¹Also, it should be noted that many who are looking at this issue are not sure it would apply to pharmacueticals. The costs are quite large and the current approach might be best.
²To see this go to any intermediate microeconomics text and look up a diagram of an Edgeworth Box. There will be a line connecting diameterically opposing corners, this is called the contract curve. Everypoint along that curve is efficient, clearly neither individual wants a point close to their "origin" (i.e., they have very little).

Finally

A telecom company with some backbone. SBC is going to fight the RIAA on its plan to issue subpeonas filed by the RIAA were done so improperly.

PBIS claims that more than 200 subpoenas seeking file-sharers' e-mail addresses were issued from the wrong jurisdiction. And the recording industry's demand for information on multiple file-sharers cannot be grouped under one subpoena, and that the demands themselves are overly broad, PBIS said.

They are even taking a swipe at the Digital Millennium Copyright Act as well.

(Via Robin Roberts)

Roger Simon On Bush's Gary Gay Marriage Statements

Its pretty good. Basically my view is one of indifference. I don't think it is the government's business to be telling who can and cannot marry. I know others disagree (and with well reasoned arguments and not simple homophobia), and it isn't a hot button issue for me.

Read the comments as well, its a good discussion. Roger's final conclusion

...between the Republican's domestic policy and the Democrat's foreign policy we are in a helluva bind.

Yep. I'm not a big fan of Bush's domestic policies. But the foreign policy of the Democrats leaves me cold.

(Note to Robin: You're just jealous of Gary.)

The Staggering Stupidity of DU

This time it is Social Security. Some DU dimwit posts that Social Security benefits will have to be cut by 1/3rd or the payroll tax raised 46% (or various combinations thereof) to keep the Ponzi scheme afloat.

Gee, who posted something similar there years ago? Oh yeah, I did. I posted a link to this paper by Laurence Kotlikoff on the same subject who made very similar projections.

Even with the projected off-budget surpluses, the Social Security and Medicare programs are underfunded by roughly 40 percent. Closing that funding gap requires an immediate and permanent increase in the combined employer-employee FICA payroll tax from 15.3 percent to roughly 25 percent. Another option is immediately and permanently cutting the benefits of these programs by roughly one quarter.

Of course, I posted it so I got banned. Go figure...freaking morons.

Better Late than Never: Terrorism Futures

By now many of you have problaby heard about the Futures Market for Terrorism, and how it has been killed. Frankly I think it is another example of the idiots winning another hand. The idea is that markets work well at ferreting out disperse information and aggregating it up into an index. Typically most of us call this index "a price". The idea behind the Terrorism Futures Market (TFM) was to let people bet on terrorist attacks and then use the resulting information (from the price, or odds) to get an idea of likely terrorist attacks/targets.

So contrary to the idiotic posturing by the Moron Storm, it was not simply about betting on terrorist attacks and making money off of death. It was about saving lives.

Was it a perfect idea? No. The idea rested on a theory called the Efficient Market Theory. This theory holds that whatever information some investor has in the mareket is avialable to everyone via the price. Thus, you can't "beat the market" by picking stocks. The problem is that this theory can't explain bubbles. So it has its problems.

So yes, this idea could be a failure. Or not. In any event we wont know now, and with the additional commentary by the Moron Storm it is unlikely that people will want to put forward other creative ideas for combating terrorism.

Frankly, this pisses me off. These idiots, Byron Dorgan, (pictured on right) and Ron Wyden (pictured on left), don't realize that killing this project comes with a potential cost. It is the same cost the F.D.A. imposes on society. Imagine you are dying from a disease. With certainty you know this disease will kill you. Now a new drug treatment comes along. The drug could cure you (or prolong your life) or it could kill you. The F.D.A., not knowing which will not let you take the drug. Basically, they have decided to let you die with certainty than to take a risk on living (longer).

And it isn't just these morons either. Senator Frist decided to get in on the action too. My guess is because it was politically expedient. Jump on the band wagon vs. being run over by it, and who gives a shit if there was any validy to the idea anyways.

Comments such as this from the Kansas City Star are amazingly idiotic:

Betting on potential acts of terrorism was a despicable idea that couldn't survive once the American public found out about it.

Insurance companies bet on such horrendous things. They bet on when disasters strike, how severe they will be, etc. Is this immoral? No, it is smart. Par for the course for journalists: too stupid to be sucking wind, IMO.

Update I: Kevin Drum thinks he's smart, but he's not.

The problem with Kevin's analysis is that the only way for terrorist to make money off this is to nickel and dime it, i.e., not bet big and not make big money. If the terrorists were planning on say killing Prime Minister X, and they bet big on it. Guess what happens, the odds on Prime Minister X change and it looks more likely. So now, those fighting terrorism are alerted to be extra careful and pay more attention to threats against Prime Minister X.

Remember, there are some things that are bad ideas even if it turns out that they work well for their ostensible purpose. It's the law of unintended consequences, something that Paul Wolfowitz apparently understands better than the blogosphere.

No. What Wolfowitz understands is that politically this is now a dead duck and there is nothing to be gained from trying to save it.

Kevin does point to Brad DeLong who has done some research on efficiency and markets. That at least is worht a read.

Kevin should take a note from Prof. DeLong. DeLong is not poo-pooing this idea outright (at least not in that post). Maybe, possible because Brad DeLong knows that sometimes markets gets the job done really, really well.

Arianna Huffington on the Recall

It seems that Arianna thinks the recall is a bad thing. She thinks it is undemocratic. After all, Davis won the last election so he should be allowed to ride out the rest of his term. Nevermind that he has made a shambles of the state (yes, the Republicans share some of that blame too). Nope, a process that actually relies on registered voters, and sets up another special election in which voters can once again say if Davis should stay or go is somehow undemocratic. Further, Arianna thinks taht Davis shouldn't be subject to the recall well because Bush's deficit is larger, and because it looks like cheating which is what Bush did in Florida.

If you are thinking that Arianna is a kook, you aren't alone. I think she slipped a few gears somewhere in her brain there. For example, the lame excuse that Bush has a large deficit, therefore Davis shouldn't be held (partially) accountable for the state's deficit smacks of the six year old defense.

But Moooooommmmm, Sally did it toooooo.

Simply because Bush has a deficit and is increasing spending at a surprising rate does not mean Davis should simply be allowed to as well. And that is precisely what Davis and the state legislators did in this state. Spend like drunken sailors looking for hookers. Not only that, but they have kept right on spending as the economy was heading into the tank. Further, what did we get for all this spending? Surely we must have gotten something. Hmmm...new and better freeways? Nope, they are even more crowded and in disrepair than ever before. Better mass transit. Nope, prices are going up and service being cut. New schools? Maybe, but I don't know where they are. Frankly, I don't know what the Hell we got for all those billions pissed away by the pols in Sacramento.

The Democratic establishment's response has been to circle the wagons and attack the recall effort as a right wing ploy. Which, of course, it is. There is no doubt that the campaign to remove Davis doesn't pass the sniff test.

Arianna dear, when you have 1.7 million people signing petitions and a governor with an approval rating lower than Yassir Arafat's, it doesn't take a genius to know what you are smelling: Davis is a piece of shit and that is one of the things stinking this state up. Now personally, I think the entire legislature is full of sewer trout and if I had my way, I'd press the handle on the lot of them and flush them all into the sewer. Still, lets start with the biggest turd of them all: Gray Davis.

Arianna gives us a display of her mastery of understatement:

But even given all this, it's time for California Democrats to step back, take a deep breath and admit to themselves that there is more going on here than an underhanded power grab by disgruntled Republicans with too much time and money on their hands.

Gee...ya think Arianna? Can't get one past her. She's as sharp as a tack that one.

A new poll released last week by the Los Angeles Times found that 51 percent of California voters now support the removal of Davis -- up from 39 percent in March. Perhaps even more meaningful is the fact that 33 percent of Democratic voters back the proposed recall.

Those kinds of numbers speak of a voter discontent that goes way beyond the ambitions of Issa and the GOP.

Which shows that Arianna's earlier comment about it not passing the sniff test are stupid and deceptive. Every governor for the past...I don't know 20...30 years has faced a recall. Generally speaking they don't go anywhere at all. This one went somewhere because the state is so messed up it is amazing. To give you an idea, California's budget shortfall is larger than the sum of all the other state's with budget deficts.

So, eight months ago, Davis gamed the system -- and now the system is about to strike back.

But the election 8 months ago was democratic and this upcoming special election is not.

So, however corrupt the parentage of the recall, it offers Californians a golden opportunity to send a historic message: that it's time to reorder our policy priorities and get back to serving the people. It can also be used as a cudgel with which to attack the Bush administration -- hammering home how its tax cuts uber alles economic policies, to say nothing of its way-too-cozy relationship with crooked energy companies like Enron, have led California to the brink of financial disaster.

Arianna is also rather shakey on history as well. California's energy disaster started in 2000. Maybe she should have her citizenship revoked since she is not aware that Bush didn't take office till 2001, and the energy crisis ended a few months after that. Bush's role was limited, and so was Clinton's. Both the current and past President did a bad job on that one.

Arianna is a whack job, a limousine liberal who chides those in SUVs while she scurries around in her limo and jets around the country. You see, those people in SUVs support terrorists, but Arianna supports...who the Hell knows what she supports she's so whacky. And the truly amazing thing...Arianna announced this morning that she is considering running for governor in the special election. Go figure...apparently undemocratic isn't something she is that picky about. What a kook.

Update I: Looks like Arianna isn't considering running...but is going to run for governor. So is her ex-husband.

Thanks to CalPundit for the links.

Stupid Republicans

I found this over at Catallarchy. It is simply amazing. In the past some have argued that tariffs will help the economy. In practice though they tend to have just the opposite effect. Driving up prices and restricting the amount of goods people can purchase. Overall, people are worse off. President Bush has a weak economy where unemployment has yet to show signs of going down. Further, the election is only 16 months away. Instead of doing things to help the economy grow faster (thereby reducing unemployment) he is doing the opposite. Apparently he didn't learn anything from his father's defeat at the hands of Bill Clinton. The economy is still one area that Bush could be vulnerable on. If unemployment does not start going down, and going down soon he could be looking at trying to win re-election with high (relatively speaking) unemployment, and he just might fail.

The moral aspect of the post is also quite good as well. Imagine you want to buy something. You and the seller agree on the price. Now, you are happy and so is the seller (otherwise you'd have not agreed on the price), but along comes the government to tell you not to make the deal unless you give them money first. If you or I were to do this as private citizens we'd be arrested and tossed in jail for extortion.

Steve Kangas: Wrong Again

Yeah I know, bit surprise there. Anyhow, Kangas has decided to take on the "Chicago School of economics". The errors are numerous and many. So lets roll up our sleves and get started.

First there is the gaff here in the introduction. Kangas gives his version of history of economic thought, but makes a big mistake.

Neoclassical School: This school of thought has been an attempt to restore credibility to the laissez-faire policies of the classical school, by rebutting the schools that overtook it: Keynesianism, institutionalism and Marxism. And, in the 70s and early 80s, they came tantalizingly close to succeeding.

First off, the Neoclassical school is older than Kangas suggests. It was a direct outgrowth of the marginal school he discusses further up the page. The work of Stanely Jevons, Leon Walras, John Bates Clark, Irving Fisher, Carl Menger and Alfred Marshall eventually gave rise to what is known today as neoclassical economics, or more generally as microeconomics.

This is taught not just at the University of Chicago, but at just about every university out there. Even if the economics department is hostile to the neoclassical method chances are they still teach it so their students wont be cut off from the rest of the profession.

There is nothing that is right wing or overtly conservative about the neoclassical economics. You can be quite liberal and subscribe to the views of neoclassical economics. Neoclassical economics provides more than enough theoretical justification for government intervention in the economy.

Although its conservative tradition extends back before World War II, it was only after the war that the school gained fame and emerged as a highly political and ideological force in right-wing economics. Milton Friedman started the trend with his attack on Keynesianism, and his promotion of an alternate policy: monetarism.

You don't have to be a monetarist if you subscribe to the neoclassical paradigm. Either Kangas is woefully ignorant of economics or he is being purposefully deceptive here.

In the 1970s, Robert Lucas would advance the theory of Rational Expectations, which purported to show how businessmen could anticipate Keynesian policy and therefore render it ineffective or even harmful. Others, like Ronald Coase, would show how the market could solve even pollution if only society would adopt strong property rights.

And here we see the full extent of the problem. Kangas is conflating several schools of thought into one. Friedman is one of the founders of Monetarism, Lucas is the founders of the New Classical shool of thought. And the work of Ronald Coase is the foundation for the area of economics known as the Law and Economics.

Now each of these three schools of thought are related. They are related because much of economics is built on neoclassical economics. That is they take as their basic building block the notions that firms maximize profits and that individuals maximize utility (i.e., their indiviual welfare).

But so does modern day Kenyesianism. The work of Robert Solow for instance relies on precisely these assumptions as well. One of the problems with Keynesianism prior to the 1970's was that it violated some of the assumptions of microeconomcis (a.k.a. neoclassical economics). Namely the notion that individuals do not suffer from money illusion. That is if I double your income and double all prices you are not any better off (or worse off). The reason for this is simple, it follows from the linearity of the budget constraint.

p_xx + p_yy = I

Now if I double both the prices and income we get:

2p_xx + 2p_yy = 2I

2*[p_xx + p_yy] = 2I

Clearly the 2 on each side of the equation cancel returning the original budget constraint. This is something like 5th grade math. Unfortunately the Keynesians relied on the Philips Curve which rested implicitly on an assumption that people could be fooled as above. That is, if you doubled prices and their income they'd feel they were better off and spend more.

This is not conservative nor liberal, it is common sense and some simple algebraic manipulations.

But most of these theoretical advances were due to the use of an unrealistic methodology. The Chicago School's emphasis has been on mathematical models based on perfect starting assumptions, such as the assumption that people have perfect knowledge and are perfectly rational.

All economics models these days are very mathematical, even the New Keynsian stuff. Further, the notion of perfect information was typical of the day and is something everybody is working on (try a google search on the key words: economics bounded rationality). As for rationality, provide a model for irrationality. As soon as you model irrationality you have made it rational, i.e., systematic and capable of being studied.

Even the New Keynsian school of thought relies on rational actors. Where they differ from the New Classical school is in their use of things like menu costs to explain sticky prices. They use efficiency wages to explain sticky wages. All the explanations for these things are rational.

These models also show an economy in static equilibrium.

This is patently false of the models developed by Lucas and others. These models are dynamic equilibrium models. This is why all the models have little tiny subscript t's. Now I have to wonder...has Kangas even read any of the papers by these researchers? My guess is no, and he is speaking out of his nether most orafice due to ignorance.

New Keynesians, for example, operate on George Akerlof's key assumption that human beings are not perfectly rational, but nearly rational.

Amazing...simply amazing. Akerlof made no such assertion. At least not with his lemon model paper, which is why he won the Nobel Prize. Akerlof's research showed that in a situation of imperfect information markets can fail to come into existence and people are worse off. He used one of the basic tools that all good neoclassical economists use, game theory. Basically he posited a game between used car sellers and buyers and when information was incomplete the only market that existed was the lemon market. The "peach" market failed to come into existence.

To be sure, math is an important tool in economics. Thanks to the existence of prices, economics is one human activity that can be measured more mathematically than others. And on some occasions, math models have proven tremendously helpful in explaining economic events. But math should be only one tool among many in the economist's toolbox. The problem with the Chicago School can be found in Abraham Maslow's famous quip: "When the only tool you own is a hammer, every problem begins to resemble a nail."

Utterly astonishing. It is amazing that somebody this ignorant isn't dead due to forgetting to breath. Even emprical methods in economics use...gasp mathematics! What does this nitwit think statistics and econometrics are? Some sort of physical education? No, they are branches of applied mathematics and economics respectively.

The economy is like the ecosystem -- it is nonlinear, chaotic, messy and unpredictable.

Not quite. First as to chaotic, if this bumpkin is referring to non-linear dynamical systems he is mistaken. After years of research most have given up on it. However, contrary to his ignorant assertions physics does have problems with chaos. And while in some ways economics is messier than physics it isn't impossible to make predictions, or to test the predictive value of a theory. One reason why all of economics use the neoclassical paradigm is that it has good predictive power. Demand curves are downward sloping with regards to price. Supply curves are upward slopping with regards to price. I bet if you asked Kangas what would happen if supply was contracted he'd work with the neoclassical supply and demand framework and give you a prediction.

What makes it even more complicated is that it is a distinctly human activity, meaning that it is impossible to understand the economy without first understanding the human animal. True, people are rational, calculating and self-interested, but they are also unselfish, irrational, mistaken, self-destructive, ignorant and swept up by herd instincts.

There are so many problems here it is hard to know where to start. Herd instincts. Watch a herd or a school of fish. What happens with a predator appears? Do the members of the herd or school move around pell-mell in unfathomable ways, or do they behave quite predictably, i.e., away from the predator?

Kangas speaks as if he knows what he is talking about, but he doesn't. He is even worse than an ignorant person. He knows a little bit about a few things and then runs off making asinine comments about things for which he doesn't even have the faintest glimmerings. The rest of the pages in that screed are so erroneous it is just simply amazing. Amazing that somebody could be so anxious to display their ignorance in such an overbearing and arrogant manner.

Bingo

They get it right, IMO. Currently the situation is this:

• American pharmacuetical companies develop and produce drugs in the U.S.
• They recoup much of their costs in the U.S. market.
• Sell overseas below marginal cost.
• Americans are subsidizing the consumption of pharmacueticals in other countries.

Sure if things don't change people will re-import the drugs at a lower price and the drug companies will lose money. So, they will do one of two things.

• Raise their prices in other countries.
• Stop selling in other countries.

Either way the American consumer will no longer have to subsidize foreign consumption of drugs. Prices will in all likelihood drop, and even if they don't the U.S. consumer is no worse off. So the outcome is that the U.S. consumer will be no worse off or quite possibly even better off.

The only possible economic rationale for subsidizing consumption of drugs is the external effects of various diseases. Still I don't see why developed countries such as Canada should be subsidized. So at best one can say poor countries should be subsidized and even then, doing it through such a ham fisted policy is stupid.

Consumer Confidence Down

The Consumer Confidence Index fell 7 points last month. The cause is the increase in unemployment.

Steve Kangas: Armchair Economist

Steve Kangas is somebody who studies political science, but likes to dabble in econoimcs. Unfortunately he usually does a very bad job at it. He often takes a single issue and looks at it in very simplistic terms. Here is one example.

In that webpage Kangas supposedly takes on the "conservative myth" that cutting taxes spur growth. There is only one problem. All of his empirical work is bi-variate. That is he looks at two variables for what is probably a multi-variate process. The result is bogus junk.

First, lets look at the "theory" here. Taxes take your money. That's pretty much it. Now, what happens when you have less money? You have less to spend, so....you spend less. Seems pretty simple. Now, if the government is raising taxes and not spending the money then it seems to me that taxes are not going to help the economy but hurt it. Again this is pretty simple and straight forward.

The only dicey area is what happens when the government spends your money. Thus, your reduction in demand (broadly speaking here, demand for goods and services) could be just be offset by the increase in government demand.

Now there is the problem. Lets suppose that the government expenditures exactly offsets the expenditures by those taxed. We wouldn't expect to see any change in economic output at an aggregate level (although we might very well see changes in that the government might buy things individuals wont--e.g., an aircraft carrier). So at best we'd expect for taxes to do nothing to economic growth and quite possibly reduce economic growth.

In an attempt to show that taxes have no effect Steve looks at data on economic growth and taxes. He decides to test this against output data from the Great Depression. Why that time frame I don't know.

Right off the bat Kangas makes several mistakes. First, the Great Depression lasted from the end of 1929 to the begining of 1933¹. Why he looks at the entire 1930's is beyond me. Anyhow lets continue.

Kangas writes:

As you can see, the Depression worsened under Hoover's watch, and recovered during Roosevelt's. By the beginning of Hoover's presidency, the bottom 80 percent of all American income-earners were off the tax rolls entirely, and the rich were taxed at a record low 25 percent. By the end of 1932 this top rate was raised to 63 percent, and by 1936 it was 79 percent. Roosevelt instituted a vast new array of taxes, including corporate taxes, inheritance taxes, dividend taxes, gift taxes and excise taxes. And he raised them at a faster rate than any president in U.S. history:

Lets be clear here. Hoover was focused on the deficit. He seemed to have a squirrely notion that if the budget was balanced things would be good. Roosevelt seemed to echo those sentiments as well during his campaign to become President.²

This is why Hoover was raising taxes and Roosevelt continued it. Further, the U.S. was running a deficit at the time.

Deficit Spending During the 1930’s

Year	Dollars	% of GDP
1929	734	N/A
1930	738	0.8
1931	-462	-0.6
1932	-2,735	-4.0
1933	-2,602	-4.5
1934	-3,586	-5.9
1935	-2,803	-4.0
1936	-4,304	-5.5
1937	-2,193	-2.5
1938	-89	-0.1
1939	-2,846	-3.2

Source

So not only do we have taxes going up, but the government spdding more than it takes in. So now it isn't just a question of why are taxes not conducive to growth, but why isn't the economy growing during the Depression years? Well this leads me to the crux of my problem with Kangas and his half-baked analyses. There is more than one variable that drives economy gorwth.

For example, monetary policy is very important and during the early years of the Depression the Federal Reserve was pursuing an tight (contractionary) monetary policy. Robert Samuelson has a nice essay on this.

The depression is best understood as the final chapter of the breakdown of the worldwide economic order. The breakdown started with World War I and ended in the thirties with the collapse of the gold standard. As the depression deepened, governments tried to protect their reserves of gold by keeping interest rates high and credit tight for too long. This had a devastating impact on credit, spending, and prices, and an ordinary business slump became a calamity. What ultimately ended the depression was World War II. Military spending and mobilization reduced the U.S. unemployment rate to 1.9 percent by 1943.

So what do we see, taxes were going up as the economy was getting weaker. Monetary policy was going in the wrong direction. Lets also throw in deflation. Prices were going down, so if you did have money it actually made sense to hold onto it in the hope that the price of what you were planning on buying would go even lower.

Kangas does look at later years, but in a sloppy manner:

The U.S. emerged from World War II as the world's only economic superpower. From 1947 to 1973, it experienced phenomenally high growth; the GDP grew at an average of 3.4 percent a year. The top tax rate remained between 88 and 91 percent until 1964; afterwards, the rate was reduced to 70 percent, still stratospheric by today's standards.

Yes, but it is more accurate to say that growth was high despite high marginal tax rates. One reason why there was high growth in the Post-WWII years was high worker productivity. Kangas himself even notes this, but fails to see the significance!

Individual worker productivity has taken an even more severe hit, dropping from 2.8 percent in the postwar years to about 1 percent after 1973.

But nevermind that, says Kangas, focus just on taxes!

Then regarding the Reagan tax cuts Kangas has this lame and deceptive response:

Some point to the Reagan expansion (that is, the upturn in the business cycle that occurred between 1983 and 1989) as proof that low taxes result in boom times, but this claim is easily disproven. Reagan's expansion averaged 3.6 percent annual growth; earlier postwar expansions averaged 4.5 percent. Correlation is not causation, of course, but the point is that lower top rates on the rich have done nothing to revive the extraordinary growth of the postwar years.

I can see it now, Kangas was sitting there at his computer and said, "Whoops, looks like the Reagan tax cuts prove me wrong. I know I'll change the condition from lower taxes increase economic growth to lower taxes wont give us growth like we had in the years between 1945 to 1973." Kangas has changed the bar without explicitly stating it has. In other words, Kangas' own data says, that the lower top tax rates under Regan coincided with higher growth, but since it isn't high enough it doesn't really count.

So, noting that government officials made the wrong policy decision means that taxes have no impact on growth is completely laughable given his choice of years in which to do his "analysis" and that there are clearly other factors at work here.

So when we pull back and look at the larger picture we can see that Kangas has absolutely nothing on which to base his claim that taxes are neutral to growth. Not only that, but we see how deceptive Kangas is to hold onto his world view that taxes are neutral towards growth. Yet, despite this deceptivness, the poor use of data, and bad reasoning, many on the left side of the spectrum love Kangas because what he writes fits with their ideology.

The Berkeley Study on Conservatism--Redux

I was driving into work and heard this study (pdf of full article) being discussed on the radio. One thing most people discussing this article are unaware of is what kind of study it was. The study is a meta-analysis. A meta-analysis is where the researcher(s) look at previous studies to try and get an idea of what the research on a given topic is saying. For example, a crude method would be to find 100 of the most cited articles on an issue and then count which way the results go. Suppose for simplicity it is a simple result either yes/no, true/false, etc. If say 55 of the studies say, "Yes," then you could say the overall research supports the yes position.

Now there are some caveats here. First, simply because the research says one thing (predominantly) doesn't mean it is true. History is repleate with counter examples. One such example was the notion of the atom. An Austrian phsyicist, Ludwig Boltzman, showed that the assumption of the existence of the atom led to many natural explanations for various things that previously were troublesome¹. However at the time the positivist agenda was king and if you could see something or at least shows it exists then it must not exist. So the notion of the atom was kept out of physics journal for years.

This brings up another form or bias that can be present in the literature. Papers that deal with whatever is the pet theory of the day will probably find an easier time getting into the peer reviewed literature than it otherwise would.

Another problem is that sometimes a new research idea depends critically on how it is used before it gains widespread influence. One example of this is rational expectations in the economics literature. Rational expectations posits that people use all available information when forming their expectations of future events. This is quite similar to how economists view homo-economicus in a static environment (i.e., the consumer knows all prices). The idea of rational expectations caught on after some papers by Robert Lucas and Leonard Rapping, however, the notion of rational expectations was not new. It had seen publication before in the work of John Muth. However, Muth's work was in agricultural futures markets (i.e., pretty boring) whereas Lucas and Rapping were working in macroeconomic theory (i.e., pretty exciting--well for economics). So Lucas goes on to become famous and Muth is basically a footnote.

Another problem with meta-analyses is publication bias. Publication bias results from the simple fact that a positive result is more interesting than a negative result. Suppose you are studying a link between X and Y and find that there is a link (according to your data and your analysis) and that your results are quite significant (statistically speaking). Also, suppose another person is working in the same area and finds no link. The first research is has a good chance of getting published, while the second will probably spend eternity at the bottom of the researchers file cabinet.

Now in looking the "research" by the Berkeley "scientists" there is no mention of any attempts to identify let alone correct for these problems. Now typically when doing a study and you think there might be a problem with your data you look to see if the data has such a problem. Yet there is nothing indicating these "researchers" did not even make the attempt. Now, this doesn't mean they didn't, but if you do take the time to conduct the necessary tests on your data you at least mention it, lest a reveiwer asks about it and then you have to go back and revise your paper (i.e., delaying publication time or even risking outright rejection).

In my opinion given these possible sources of bias, and the lack of any indication that these possible sources of bias were addressed, this article should never have been published. Its junk.

Update I: John Ray has more, here and here.

Here is a nice part from the first link:

For a start, let me translate the jargon: That conservatives have “motivated social cognition” means that conservatives only see what they want to see. That is really rich coming from the Left when we consider how huge numbers of Western Leftists refused for decades to give any heed to all the reports of the horrors of Stalin’s Russia. THEY undoubtedly had huge talent for seeing only what they wanted to see.

Let me also direct the interested reader to this post of mine from a few days ago. I note that somebody posted that the recession is over at Democratic Underground and by the replies it is pretty clear these people are denying it. In fact, most are completely clueless of current and historical data and pointing it out to them just angers them. Indeed, the liberals/lefties at DU seem quite capable of "seeing only what they want to see."

Sad, Pathetic and Disturbing

Here is a poster at DU who is honestly confused about why her mother wont consider her whacked out world view.

Awhile back, I decided I couldn't stand watching the news anymore. I'm quite sure that the Bush Administration is the worst thing that has befallen America since the Civil War. My family and friends won't listen. Period. When I tried to talk to my mother about it this morning, she told me the subject was closed.

I learned through her that Hussein's sons had been captured and obliterated.

I said, "Now if we could only do the same to the Bush Administration."

She didn't find that funny at all. She (and most of the people in this county) are religious right-wingers.

"Mom, Bush is a liar and a murderer. He should be on trial right now."

"Well, there was some stuff that came out today that proved he didn't lie."

"Where did you hear that? Fox News?"

She seemed honestly perplexed. "What's wrong with Fox News? It's the most accurate newscast there is."

Oh my god. How do you deal with such ignorance? When I tried to tell her that Fox News was the equivalent of Pravda during the Cold War she interrupted me and refused to listen to more.

I doubt there's any reasoning with her or any of the other religious reichers.

Is there a good site that lists the many lies and misdirections of Fox News? Even if it could be proven to her beyond a shadow of a doubt, I don't think she would change her sickening right-wing views.

First off, my question is why should this posters mother change her mind or even be willing to listen to Ladyhawk? Ladyhawk belongs to a BB that openly admits it does not want other viewpoints expressed there. So complaining that one's mother watches Fox News is...startlingly pathetic.

Then consider her entire attitude: I'm right and my mother is an ignorant right wing religious nut, who should revise her world view to fit mine. Why can't it be: My daughter is a left wing kook who can't think straight and should change her world view?

Basically dear old mom has to be open to new information, must consider changing her idea, but loving daughter on the other hand can be a dogmatic belittling whiner.

Instead of trying to engage in an honest discussion it has to be a one of trying to convince the mom of the error of her ways. Did the thought of doing something like exchaning some sources and reading them, then discussing these two sources to try and understand where the other is coming from even occur to this twit? Nope. She is whining about how to cure her mother of ignorance all the while feeling certain they she is not ignorant. At the very least she'd probably learn something about her mother. Apparently it is just easier to assume mom is an uninformed buffoon.

I have seen enough of DU to know that they can be woefully ignorant, at least on economic issues. Yet they sit there smugly confident that they are the enlightened ones and that everybody else is either a moron, in league with evil, or ignorant. What a sad and pathetic world view, and it is disturbing that these people consider themselves compassionate and that their ideas would make the world a better place.

Reuters Gets Caught Making Stuff Up

Unbelievable...well maybe not. So lets see, we have had a couple of scandals at the N.Y. Times, a photo tampering instance at the L.A. Times, and now we have this as well. Maybe we should just switch to the National Enquirer at least we know they aren't pretending to be somthing other than a tabloid.

If I were a journalist right now, I'd be extremely embarassed of telling anybody I was a journalist. This also reminds me of that old joke:

Economists: They know the price of everything, but the value of nothing.

Now for journalists we can have:

Journalists: They know the facts about everything, but couldn't tell you the truth about anything.

(Via InstaPundit)

U.C. Berkeley "Research"

Some "researchers" at U.C. Berkeley have decided they would outline the psychology of a conservative.

Here are some of the traits of conservatives:

• Fear and aggression
• Dogmatism and intolerance of ambiguity
• Uncertainty avoidance
• Need for cognitive closure
• Terror management

Also, conservatives are more tolerant on inequality and resistant to change. So who, historically are defined as conservatives?

• Stalin
• Castro
• Hitler
• Mussolini
• Reagan

Nevermind that they have diametrically opposed views on various subjects, they are all right wingers. Nevermind that Hitler shared many ideas of todays "Left" such as the following:

Furthermore, as Robert Proctor showed in "Racial Hygiene: Medicine Under the Nazis" (1988), the Nazis were health fanatics who banned cigarette smoking, promoted vegetarianism and organic gardening, engaged in abortion and euthanasia, frowned on all capitalist excess, and even promoted animal rights. They were environmentalists who locked up land from development to promote paganism. (link)

But Hitler, Stalin, and Reagan are ideological bretheren. Right.

(Thanks to Debunkers for the link.)

Update I: Jonah Goldberg has more on this. He also has a link to the full PDF version of the full study.

He also has this hysterically funny quip about these researchers:

I'm sorry, but not since Professor Peter Singer explained that we should give as good as we get from dogs who hump our legs, have I been so exasperated with the way some academics think they can use their head for a colonoscopy and then crab-walk around expecting all the world to think their new hats make them look smart.

And Mr. Goldberg was worried he couldn't come up with anything good to write.

Prof. Volokh on the Deaths of Uday and Qusay

This is a nice post that explains why all those who think the killing of Uday and Qusay was an assassination are idiots. Of course, Prof. Volokh is far too polite to put it this bluntly, but that is what it is; if you think this was an assassination your are probably an idiot.

Pejman Praises President Clinton

President Clinton has defended President Bush over the uranium dust up, and Pejman thinks this reflects well on President Clinton. I can't disagree with him, and I think his assessment of why Clinton is doing this is probably correct. Also, as Andrew Sullivan has noted Clinton is very shrewd politically...maybe other Democrats should consider this (thanks to InstaPundit for the link to Sullivan).

Jesus...

I found this thread as well at DU while swimming in the gutter there.

Plaid Adder

I really don't care that much about the Hussein boys. Do I need help?

It just seems to me like with all the atrocities we've committed since we started this war, and all the people we killed who had done nothing but get in our way, the assassination of Hussein's family members is really the least of the crimes for which the Bush cabal will be paying when they are finally called to account for all this. Yes, it's bad that we are acting like the Corleone family (the new, mean, Michael's-generation Corleone family, at that); yes, it's bad that this was illegal; yes, it's disgusting that we're going to violate the Geneva convention by broadcasting photos (why don't we just do it the old fashioned way, and cut their heads off and stick them on spikes at the city gates?). But you know what, a few days after we started this war our soldiers massacred a family of 13 who were trying to cross at a checkpoint because they thought that one of our leaflets had advised them to do that. Once something like that's happened, well, how much worse can it get?

We've been in hell for so long I don't even notice the pitchforks any more.

C ya,

The Plaid Adder

The replies are equally disturbing. They are basically equating the U.S. and U.S. soldiers to monsters such as Uday and Qusay.

Democratic Underground: Living in Denial

Somebody finally posted that the recession is over and check out the replies.

It is hilarious. Clearly they are in complete denial.

The Power of Markets

An interesting post at Catallarchy about how mobile-phone service is not now (damn typos) available in Baghdad.

"Look out, free market coming through!"

Indeed.

Republicans for Smaller Government?

That was the question asked in an e-mail from brmic.

Here is my response:

Well on spending I think that the Repbulicans have "lost their way" so to speak. Under Reagan spending did not rise that rapidly, but under Bush I and Bush II it went up. In fact, under Bush II the Cato Institute notes that spending went up dramatically under Bush II, more than it did under Cliton in his first two years in office (link 1, link 2).

Then there are things like the steel tariffs (not directly related to
big government), the new health care entitlements (prescription drugs
is, IMO, going to be a budget buster once the baby boomers start to
retire en masse), are just two examples where Bush and Republicans
have sort of lost their way.

Then there is the whole issue of the airline/airport safety. It looks
more like something that is designed to look like it is doing
something and expanding the size of the Federal Bureaucracy at the
same time. Then you have the issue of the Dept. of Homeland Security
which I have blogged about here

So I think there is some truth to the charge.

Of course if there is more information to look at on this, I'm willing
to consider revising my view on this.

Let me also add, that there are some hope though. Larry Elder who had previously left the Republican party to register independent was the keynote speaker at the last Republican Convention for the last election (Larry has also recently re-joined the Republican party and is intent on bringing the smaller government philosophy back to a dominant place in the party platform). Larry's views are decidely libertarian (i.e., small government) and I think there is still a good many rank and file Republicans who share these views.

Democartic Underground Delusions

This thread points to this article about possibly both Clinton and Bush testifying before the investigative commission on 9/11 and the intelligence failures.

Needless to say the denizens at DU think this will result in the demise of Bush's Presidency. They have some sort of bizarre view that Clinton is going to get up there and say,

He did it.

Here are some interesing quotes:

bamademo I don't think they'll find that at all I lost the link to the article but there was one a couple a weeks back about the predator drones Clinton was sending to Afghanistan. When Chimp was selected he elected not to send any more drones even though he was given specific intelligence on Bin Ladens location. The Clinton administration repeatedly warned * about the terror threat and * wanted to concentrate on missle defense. I think the Big Dog will be fine.

Nottingham
Well of course they are gonna try to Blame Clinton
He's the most dangerous Democrat that the Republicans
fear.
and rightly so

Bring It On Republicans

Big Dog brought ya to your knees before

He can do it again

Maybe Clinton can write his OWN Book on 9/11

Demobrat
Am I the only one who thinks this is good news?
I have wanted to hear what Clinton knew from day one. I can hardly believe they would let him speak, much less make him.

On edit: He himself says that when he got the news, his first thought was "Bin Laden has done this". The difference is that he didn't want it to happen and Bush did. I think if Clinton talks, Bush is toast.

Yep, Clinton is going to get up there and reveal the secret evidence he has been gathering showing Bush not only knew about the attack, but he was one of the pilots!

Cripes, but these guys are really sad in a pathetic way.

Media Bias on Iraq?

According to StrategyPage.com that is precisely the problem.

Much of the current reporting on Iraq warps the public perception of the past, as well as the present. The media plays down the fact that resistance from Sunni Arabs was widely discussed in the Pentagon before the war. But that wasn't a sexy story then, even though it is now. The coalition policing efforts have taken nearly a quarter million AK-47s off the streets, as well as huge quantities of RPGs, explosives and other weapons. Again, not interesting enough for prime time. Hundreds of Baath Party members have been arrested, including many senior people. Again, this is considered minor stuff. Every day, more neighborhoods get police and other services. But the reporting still tends to distort in favor of potential disasters that never seem to arrive. For example, power outages in Baghdad are an easy story on a slow news day. Rarely is it pointed out that Baghdad never had enough locally generated power to keep the lights on all the time. But as long as Saddam was in power, other parts of the country had their juice diverted to keep Baghdad lit. This meant Shiites and Kurds were left in the darkness so that Baghdad could sparkle. No more. Each part of Iraq is expected to take care of its own electrical needs now. Imagine the firestorm of protest if the old policies were continued in order to deprive the media of "Baghdad is dark" stories.

Not surprising, IMO. Everynight the local news reports the U.S. troop death count for the day (almost in ghoulish fashion). Yet we here nothing about the deaths and casualties of those doing the attacking. The impression? That the U.S. is getting hit by geurrillas that are inflicting casualties and are taking none. Is this accurate? I don't know, given all the crap we have learned that has gone I don't think the news should be taken at face value anymore.

An intrepid reporter could have discovered that the Pentagon knew all about the political, ethnic and religious complexities of Iraq. Numerous PowerPoint briefings on the subject have circulated in Washington for over a decade. SOCOM (Special Operations Command) has more Civil Affairs troops than it does Special Forces. And that's no accident. Special Forces has been practicing, for over half a century, to deal with what is happening in Iraq today. If you could get one to talk, they would tell you that they knew what was going to happen and they are on top of it.

Wait a minute. We have been told that the Pentagon and everybody was unprepared for this.

Now we have today's events which one has to admit are pretty significant. Are we to believe it was simply luck that somebody strolled into wherever the 101st are camped and spilled the beans. Seems unlikely to me.

(Via Instapundit.)

This is Just too Good to Sit in the Comments

In commenting to this post Dean writes:

IF this story is correct (big if), it will have enormous implications for the war in Iraq, the post-war situation and, yes, the political situation here.

The deaths of Uday and Qusay means:

1. Saddam has no immediate heirs.
2. There is no one to rally around if Saddam buys it.
3. The Americans are very, very serious about regime-change.

I believe that many of the attackers are folks who believe that, if the price is high enough, the US will leave---and Saddam will be able to return. Short of killing off Saddam and his sons (the true power in the Ba'ath party), they will continue to fight.

Not because they are necessarily true believers (they may or may not be), but b/c the alternative of surrender is so much worse than the possibility of watching Saddam return (and they would be rewarded).

Conversely, many scientists, etc., will be hesitant to cooperate for the same fear. Why risk cooperating, if the Americans might leave and Saddam might return (and extract a few genitalia in the process)?

But killing off the kids AND SADDAM means that there's no clear line of succession. Which means Ba'ath party survivors will have to deal w/ each other, as well as the Americans. And the scientists and others in the WMD program will be more likely to deal w/ us. The deaths of the Hussein al-Tikriti will be the tipping point of when it is better to work towards a new Iraq than pine (or insure against) the old one.

And for our politics? The obvious boost, of course, is that it's a short-term gain, a sign of efficacy. But if scientists provide more insight into WMD, if attacks decline, then the war no longer looks like a meaningless quagmire.

What then, for the Dems?

The Recession is Over

According to NBER. The Business Cycle Dating Committee dated the last trough at November of 2001.

CAMBRIDGE July 17 -- The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in November 2001. The trough marks the end of the recession that began in March 2001 and the beginning of an expansion. The recession lasted 8 months, which is slightly less than average for recessions since World War II.

Sorry Dems, all you can hope for now is that unemployment takes a while to start decreasing. Kind of misanthropic wishful thinking though, eh?

Paid Family and Medical Leave Act: Davis' Smoot-Hawley?

Last year Davis signed into law the Paid Family and Medical Leave Act. The law basically forces corporations to pay a partial wage/salary to employees who are taking leave to attend to family illness/medical care.

Basically what this law does is make it more expensive to hire employees. This report looks at the act and breaks down some of the cost and benefits.¹

The cost section I find rather misleading. In terms of benefits they give a total dollar figures:

• California companies could save $89 million under a paid family leave program due to increased employee retention and decreased turn-over;

• The State of California could save $25 million annually, due to decreased reliance on assistance programs, including TANF and Food Stamps. Many individuals currently turn to these programs when taking unpaid leave causes them financial hardship.
  

Sounds great. But when putting up the costs they break it down to a per-worker cost. Why?

• SB 1661 would cost California employees an average of $2.10 per month, or $2.33 per month for 2003;

• SB 1661 would cost employers an average of $2.10 a month per employee.

• The total cost per employee is an average of $50 a year, and in 2003, $56 a
  year.
  

How about because if they gave you a bottom line cost to employers it would be quite appalling. In California right now, according to the Bureau of Labor Statistics there are 16.452,800 workers. So taking $2.10 per month per worker and the total cost to employers is a whopping:

$414,610,560.00

An intentional omission?

Plus the cost to employees is the same amount due to the fact that this payroll tax is shared by the employee and employer. In other words, the cost assuming no change in the work force (a heroic assumption) is just under $830 million dollars. The projected savings is about $118 million. Or another way of looking at it is that this will cost seven times what it saves.

Further, employment decisions by firms are made on the margin. That is a firm will higher workers up to the point where the marginal benefit of hiring an additional worker is equal to the marginal cost. This will shift the marginal cost curve up, thereby reducing employment.

Now if you are thinking that this is good in that it will reduce the costs, think again. There are several things to consider:

1. What is the relationship between the number of people in the work force and the number of people taking paid leave?
2. What is the cost of those lost incomes?
3. What is going to happen to the number of paid leaves once the law goes into effect?

The first one will determine the total cost of the law. If the number of leaves is invariant to the number of people employed (or the number of people taking leaves decreases at a rate less than the decrease in employment) then the costs will not go down (or go down as much).

The second one means that with an increase in unemployment means that people lose out for a period of time in wages and/or salary. This is most definitely a cost.²

As for the third, basic economics tells us that as the cost/price of something decreases the more of that something we demand. This would be true of paid family/medical leave just like anything else.

Now some economic dimwits might think, "Well corporations could just lower wages." Well, not if the labor market is competitive, and for the labor market to be non-competitive would mean that there would have to be few firms hiring. Since this isn't typically the case, the idea of lowering wages is unlikely.

So in the end, this law could result in increasing unemployment in California and prolonging the recession, much like the Smoot-Hawley tariff during the Great Depression.
_____
¹Lest you think this is a report that takes a hostile tone to the act, think again. The authors seem quite enthusiastic about the bill.
²This "study" does not factor this effect in simply claiming it is a small factor.

The Games Those Democrats Play

This story is disgusting. Basically in a "hush-hush" meeting the CA Assembly Democrats were discussing how they wanted the budget deadlock in the state to continue so that the pain of curtailed services would make it easier in the end to raise taxes.

Unfortunately (or fortunately, depending on your view point) the gab-fest on how to screw tax payers even more (besides tripling the vehicle registration fee) was broadcast across the capitol building since as the broadcast system was left on.

Goldberg also said, according to the excerpts, that the budget crisis would illustrate what she called damaging effects of Proposition 13, which limited the growth of property taxes.

"Some of us are thinking that maybe people should see the pain up close and personal, right now," said Goldberg, who could not be reached for comment Monday night.

Here is the San Francisco Chronicle article on this.

Members of the Assembly Democrats' progressive caucus were heard making candid, if not intemperate, statements such as one by Los Angeles Assemblyman Fabian Nunez that they may want to "precipitate a crisis" over the budget this year. That might persuade voters to lower the two-thirds vote threshold needed to pass a spending plan, he reasoned.

Then there is this bit too.

Legislators have been unable to reach agreement on how to pay for a bond to cover $10.7 billion of the shortfall. Democrats want to see a temporary half- cent sales tax increase, but the GOP has refused to consider any tax increase.

Nice, the compassionate Democrats want to increase one of the more regressive taxes. What happened to the compassion these Democrats are always blathering about and excoriating the Republicans for not having any?

Saddam's Sons Killed?

That is the story coming out of Iraq this morning; that both Uday and Qusay may have been killed in a firefight with U.S. forces.

Update I: According to this WaPo story five Iraqi's were killed in the firefight and that four of them were of very high interest:

"Individuals of very high interest to the coalition forces were hiding out in the building," Lt. Col. William Bishop told Reuters.

Five other Iraqi's were wounded so it is possible that one or both sons were captured alive (Nope, in re-reading the story it seems only the dead Iraqis are the "high-value" individuals).

Update II: Here is a picture of the scene.

Update III: It has been confirmed. Uday and Quesay have been confirmed dead.

Securing the Gulf

This is an interesting article over at Foreign Affairs by Kenneth Pollack. It looks at the problems facing the U.S. and making sure that the region is secure and as stable as possible.

First off Pollack provides a very nice reason as to why the U.S. cares about that regions. Its the oil.

America's primary interest in the Persian Gulf lies in ensuring the free and stable flow of oil from the region to the world at large. This fact has nothing to do with the conspiracy theories leveled against the Bush administration during the run-up to the recent war. U.S. interests do not center on whether gas is $2 or $3 at the pump, or whether Exxon gets contracts instead of Lukoil or Total. Nor do they depend on the amount of oil that the United States itself imports from the Persian Gulf or anywhere else. The reason the United States has a legitimate and critical interest in seeing that Persian Gulf oil continues to flow copiously and relatively cheaply is simply that the global economy built over the last 50 years rests on a foundation of inexpensive, plentiful oil, and if that foundation were removed, the global economy would collapse.

The ninnies on the left who insist that Bush is there only for the oil and to enrich is oil business buddies are wrong. That region is economically important and thus even Democratic presidents have kept a close eye on the region.

Pollack also points out that there are other reasons as well. Such as the fact that the region is geographically very important. It provides access to Central Asia, East Africa, and even South Asia. Also, it is one of the areas that is the current breeding ground for terrorists.

So there are a number of reasons for an American presence there, but to be sure oil is by far the biggest reason.

Pollack also looks at the problem with stability in the Persian Gulf region. In the past, to contain Iran a strong Iraq was necessary. However, a strong Iraq could easily invade Saudi Arabia or Kuwait (or both).

Iran is moving quickly towards posessing nuclear weapons which is make it a significant force in that region. The problem here though is that Iran might very well be on the brink of a major shift in terms of how the country is run. The population is young and are unhappey with the way the mullahs have run things. Further, there are indications that many of the younger people would want a more friendly relationship with the West and the U.S.

However, this could be used by the hard liners if the U.S. makes dumb moves (makes threats about using force, continued diplomatic and economic isolation, etc. The hard liners could point to these things as signs that the U.S. wants to control the country.

The problem is that no one can be certain that the reformers will triumph in Iran or, if so, when. In particular, it is not clear that the hard-liners will fall before Iran has obtained nuclear weapons. It is thus only prudent to assume that Iran will acquire nuclear weapons while its hard-line clerics are still in power, and so the United States must be prepared for that contingency. But the very actions that might be indicated in such circumstances -- continued diplomatic and economic pressure, an aggressive military posture on Iran's borders, even threats to use force -- could easily backfire in the maelstrom of Iranian domestic politics in ways that undermine or forestall the prospects for a "velvet revolution" in Tehran. Iran's hard-liners maintain power in part by stoking popular fears that the United States seeks to rule the country and control its policies, and so aggressive containment or active counterproliferation measures could play right into their hands. The Iranian paradox, in other words, is that preparing to deal with the worst-case scenario of Iranian hard-liners possessing nuclear weapons might very well make that scenario more likely.

Then there is the problem of stationing large numbers of U.S. troops in the region. This could be further destabilizing to the entire region. It adds fuel to the terrorists propaganda. While this is not the source of the problem (the source being bad economies with rotten policies, and the feelings of helplessness and powerlessness due to having despotic regimes).

Pollack suggests that the best strategy might actually be one that is the most counter-intuitive. Reducing the military presence to a bare minimum.

Of course Pollack is not blind to the fact that historically nations in this region are loathe to address their problems.

On the other hand, the mere fact that the Persian Gulf states are so enamored of this strategy ought to give American planners pause. With the exception of Kuwait after the Iraqi invasion, most of these countries have shown a distressing determination over the years to ignore their problems -- both external and internal -- rather than confront them. Although returning to a mostly over-the-horizon presence could provide the Persian Gulf states with the leeway they need to push through reforms, it is equally likely that they will see the withdrawal of U.S. forces as a panacea for all their problems and decide that internal reforms are therefore unnecessary. A reduced U.S. military and political presence, in turn, would weaken Washington's ability to press its local allies to make the tough choices they need to for their own long-term well-being.

I recommend reading the whole thing.

Is it just me...

Or is Hesiod implying the President planned 9/11 or at least let it happen so that he could get his poll numbers up?

POLL BEARING: New Zogby Poll out.

Job approval: 53%.

That's the lowest job approval rating Bush has had in the Zogby poll since the one taken at the end of August, 2001.

And we all know what happened in early September of that year, don't we.

Does this mean the Hesiod is now officially a LIHOPper (Let It Happen On Purpose)?

Wow DU Notices Deinonychus antirrhopus

This thread here links to this website. Although I should note that technically, I am not a DU troll as I am not posting my entries here there at DU. One big reason is I'd be banned in a second if I posted stuff like this there.

Another thing to those of you coming in from DU I am not a neo-con, nor a right winger. My political views are more accurately described as libertarian. Here are some of my positions:

• Decriminalize drugs
• Decriminalize prostitution
• Keep abortion legal
• I don't care about gay marriage (i.e., if gays want to marry fine by me, I don't care)
• I am absolutely opposed to teaching creationism in public schools (and for that matter I think creationism is crock of crap).

The problem with DU is that anybody who deviates to the center too much on any issue has his account tombstoned. Of course, they love guys like the racist Barney Gumble.

I love this post by wtmusic.

Advice for the Democratic party, re: uranium flap:

"The Democrats should approach it as a lets fix it, as opposed to the divisive approaching of assigning blame andn (sic) finger pointing."

translation:

"I've committed a crime, but assigning blame and finger pointing is not helpful here."

Tee hee.

Exactly what crime was broken even if Bush lied? Maybe there is one, but I don't see it.

Oh well, nice to see they still can't formulate a cogent thought over there.

Update: Oh yeah, they have noticed Democratic Underground Monitoring Blog (D.U.M.B.) as well. DaveL must be doing something right.

Shift in Intelligence Focus Criticized

I found this article which notes that there has been a shift in the way intelligence is reported by the CIA (and presumably other intelligence agencies) under Bush.

During the Clinton administration, the CIA's annual reports to Congress on the global proliferation of weapons of mass destruction routinely cast Iraq as a problematic footnote--a country worth keeping an eye on but not an alarming threat.

But the tone changed dramatically after George W. Bush became president, with increasingly longer narratives suggesting that Iraq was determined to acquire nuclear weapons.

The question seems to me is the time frame. Did the intelligence estimates and reports change as soon as Bush got into office (i.e., what some are suggesting is that Bush wanted to invade Iraq all along, simply for the oil). But in reading the article this is not so clear:

In 1997, the first year of the congressionally mandated reports, the CIA devoted just three paragraphs to Iraq, noting that Baghdad possessed dual-use equipment that could be used for biological or chemical programs. There was no mention of a nuclear weapons program.

Last year, the section on Iraq ran seven times longer. It warned that "all intelligence experts agree that Iraq is seeking nuclear weapons" and could produce a bomb "within a year" if the country acquired weapons-grade material.

Defense Secretary Donald Rumsfeld told Congress last week that no significant new evidence about Iraq's alleged weapons of mass destruction had been uncovered during the current administration. Intelligence sources agreed.--emphasis added

In other words, the shift in the reports is post 9/11. One of the things that has periodically popped up from the left is that there was intelligence that there was an imminent attack planned and that the Bush Administration ignored it or didn't give it enough weight.

Lets dwell on this for a minute. Back in 2001 let assume for the sack of argument that there was intelligence of an imminent attack on the U.S. Lets further assume that like the uranium intelligence it is of questionable value. That is, the intelligence is about a handful of terrorists from an ass-backwards country (Afghanistan) planning something against the U.S. Its of dubious quality and nobody is sure exactly what the attack will be, if there is one, etc. So most people don't do much of anything different. The result, 9/11.

Now, come forward a few years and now intelligence reports are looking at threats much more closely and providing more information. Intelligence which several years earlier would have hardly raised an eyebrow is given more weight. Some of this intelligence involves a country that is more advanced than Afghanistan (there are some highly educated scientists in Iraq), further, there is some pretty strong proof that the ruler of that country has used chemical and biological weapons in the past. Moreover, there is intelligence that said ruler is still pursuing such weapons programs. Seems to be a far more of a threat than the group behind 9/11.

Yet what do critics say? "Oh, they hyped the intelligence. There was nothing to worry about. Bush lied, so impeach him." Seems to me these people are quite willing to forget an important lesson of 9/11, that intelligence is critical to keeping the people of this country (and to varying extents people in other countries) safe from terrorist attacks. I think this conclusion is supported by these two sections of the report:

In the 2000 report, the last one issued by the Clinton administration, the CIA makes only a passing reference to Iraq's alleged nuclear program, saying it believed that Baghdad had "probably continued low-level theoretical" research and development. It said "most significant obstacle" for Iraq to produce a bomb was that it did not have fissile material.

That is the pre-9/11 focus was more sanguine.

The next year, the Bush administration's report said that the intelligence community was "concerned" about "a reconstituted nuclear weapons program" and warned that Baghdad "may be attempting to acquire materials" to make a bomb.

In 2002, it reported that Iraq was seeking to buy aluminum tubes that could be used in centrifuges--an analysis later refuted by United Nations inspectors and nuclear specialists--and, for the first time, said that Iraq "could produce a nuclear weapon within a year if it were able to procure weapons-grade fissile material."

This is post-9/11. Do I find this troubling? Not in the least.

Complaining about an intelligence failure, then complaining again that too much credit is given to doubtful intelligence seems contradictory to me. To expect intelligence to be pristine and unfettered by uncertainty is unrealisitic. To act only when intelligence is pristine and certain is a recipe for disaster.

This approach by the Democrats could very well come back and bite them on the ass. If they run with this, "Bush lied, people died," approach it could set them up for a very nasty November in 2004. Bush and his advisors are not idiots, thinking they are stupid is what has hampered the Democrats for sometime now. I can easily see a situation where the Republicans start pointing out that what the Democrats are saying is that we should ignore intelligence indicating threats if the intelligence is not perfect...which is what happened with 9/11.

This would be devastating to the Democrats. What is the response to that? "See I told you they lied!"? I don't think that will sit well with the public.

Instead of going straight for the jugular with this the Democrats need to pause and think. It seems pretty obvious that Bush is going to be hard to beat in 2004. So quit wasting so much time, resources and credibility attacking him over issues that might end up coming back on the Democrats. Focus on Congressional races. Taking back either the Senate or the House or both would be a serious blow to the Republicans. Also, the Democrats can still focus on intelligence, but just do it in a more adult and sane fashion, at least for now. If something worse more damaging to Bush comes out then run with it, otherwise act like statesmen and leaders and not squabbling children.

The Democrats need to start thinking long term vs. the short term when it comes to White House. The economy is likely to improve quite soon, and harping on the intelligence has a very real possibility of coming back to hurt the Democrats. Scandals didn't hurt Clinton's re-election and it is unlikely even if the Democrats can turn it into something bigger than it is, to damage Bush. Taking control of the House and/or Senate would make Bush's job much harder and give the Democrats a way of getting some of their agenda into policy which could help them in 2008.

Of course, I don't think the Democrats have the ability to come together and formulate a strategy like this.

Update: Robert Crawford writes in comments

It will be interesting to see how far, if at all, the Donk presidential candidate moves to the center once he's nominated. He'll have, at best, six months after the decisive primary wins to divorce himself from the loony wing. Also, he'll have to be careful not to distance himself too forcefully, or that loony wing will desert him for his "betrayal".

Which is absolutely right. Typically for both parties the candidate must run to either the left or right to win the nomination then the center to capture the center/cross over voters.

Democratic Underground

Here is an interesting thread where the psychos and kooks at DU think that Kobe Bryant's arrest was actually timed so that nobody would pay attention to the death of the British weapons inspector and the release of V.P. Cheney's energy documents.

jono Weapons of mass distraction I guess we probably won't be hearing about Dr. David Kelly's mysterious death on CNN tonight....

seekthetruth
the cheney energy docs too
interesting timing, eh?

The level of paranoia is simply staggering.

Speaking of the British weapons inspector, here is a fun filled thread on that.

ward919 Very, very "chilling." Sending a message to anyone who dare speak truth to power!

Loonman
I betcha MI6 or MI5 had him "neutralized"
...and that ain't "tinfoil hat" musings.

Remember Jim Hatfield?

austinboy
He wrote a book about dubya...
..then was found conviently "suicided" later.

CO Liberal
Sounds Like Another Victim of the Bush Family Evil Empire
[no text in the message]

The whole thread is basically like this. Post after post of accusing, George W. Bush, Tony Blair, or both of them of murdering this poor fellow.

Croooow Blog has Moved

Breaking free of the chains that we know as blogspot/blogger, Henry Hanks has moved! His new home is here (and a big thanks to Ricky West who has made the move possible).

Political Strategy Contest

Jay Caruso is running a contest over at the Daily Rant, where you come up with a strategy for winning the Presidency. The trick though is that you have to come up with a plan for the opposing candidate.

To participate in the contest you have to e-mail your strategy to Jay (jay -at- jaycaruso.com).

ECRI's Weekly Leading Indicator

Is up from last week to 126.8. Here is the press release that notes that the Weekly Leading Index' growth rate is at a 16 year high now.

Update I: According the Census Bureau, Housing starts for June are also up 3.7% over May. Manufacturing, trade inventories and sales are unchanged from last month.

AIM on the Uranium Flap

Accuracy in Media has a report on hte uranium controversy. They point out what the rest of the media seems to be missing. That one should be careful not to rely solely on the forged Niger documents. Last weekend Condoleezza Rice and Donald Rumsfeld were all over the Sunday morning talk shows saying that it wasn't those documents. That is was other evidence that they relied upon. Further, that the evidence was not as good enough to justify it being in a Presidential address. Note however, that this lack of quality does not make the claim untrue.

Lets work through a simple example. I have a deck of cards and I put one card in front of you face down. You do not know what is on the card. It could be any card with a probability of 1/52. Hence your initial guess would have a 51/52 probability of being wrong. Now suppose I take a card from my deck and turn it over. You see the 2 of clubs. Now you know with certainty that your card is not the two of clubs. Further, whatever remaining "value" you assign to your card now has a 50/51 probability of being wrong (or a 1/51 probability of being right, or in other words, whatever guess you now make your guess is more likely of being right). Now suppose I turn over another 25 cards from my deck. What happens?

• Probability of being wrong: 1/2
• Probability of being right: 1/2
• You are now more confident of any guess you make.

Now, how does this relate to the uranium claim. You can assign a probability to it being true. Now if you are thinking, "What kind of bullshit is Steve pulling here," let me refer you to the definitions of probability.

• Logical or Necessary: Let κ denote the body of knowledge, experience, or information accumulated about the situation of concern, and let A denote an uncertain event (not necessarily repetitive). Then the probability of A afforded by κ is the "rational degree of belief" or "credibility" of A in the face of κ.

• Subjective of Personal: Let κ denote the body of knowledge, experience, or information that an individal has accumulated about the situation of concern, and let A denote an uncertain event (not necessarily repetitive). Then the probability of A afforded by κ is the "degree of belief" in A held by the individual in the face of κ.¹--emphasis in the orignal

Both of these definitions allow the analyst to assign probabilities to events other than boring things like coin tosses, drawing colored balls from urns, and rolling dice. They are perfectly valid (i.e., they yeild mathematically tractible probabilities), and they allow for objective mathematical analysis. So we can assign a probability to the claims that Saddam was seeking uranium from some country in Africa. Now, for a Presidential address I'd like for the probability assessment to rest on a solid body of knowledge, evidence and information, and for the probability to be pretty damn high. In that regard the Bush administration dropped the ball. However, it does not translate into a lie (nor does it mean it is true also).

Lets return to the card example above. Suppose after I have shown you 26 cards from the deck in front of my you guess you have the ace of spades (it wasn't in the 26 I showed you) and upon flipping the card over it is the eight of harts. Are you a liar, or was your initial guess just wrong?

Now, this isn't perfectly analogous to the uranium statement situation. For one thing, there might be evidence that suggests the whole thing is false. All though I consider this to be somewhat unlikely since evidence that something didn't happen is rather hard to come by (prove I didn't go to the grocery store yesterday!).

Now you don't need all this silly probability stuff to see this. However, it does put it in much easier to understand terms (at least for me). Here is what AIM has written:

Wilson, in his July 6 New York Times column, "What I Didn’t Find in Africa," didn’t discuss that overture. Instead, he emphasized that he couldn’t confirm a uranium deal was made, and that he regarded the documents about such a transaction as being dubious. He concluded that the Bush administration had "twisted" the data and exaggerated the Iraqi nuclear threat.

It’s difficult to see how Wilson came to this striking conclusion based on the limited results of his own mission, which consisted of talking to a few officials. Whether Iraq concluded such a deal or not, the President’s statement in the State of the Union appears to be entirely true, except possibly for his use of the word "recently." And this may be true as well, depending on the credibility of the other reports and information available to the British and perhaps the CIA.

Nevada Supreme Court

My respect for state supreme courts is continuing to plummet. First we had the shenanigans in Florida during the 2000 election, then similar monkey-business in New Jersey during the 2002 election. Now the Nevada Supreme Court has ruled that the state legislature only needs a simple majority instead of a 2/3 majority to pass tax increases.

Nevada's Supreme Court sent a rocket through capitols nationwide by striking down a constitutional mandate of a two-thirds vote on raising taxes. At the behest of Republican Gov. Kenny Guinn, the Nevada court effectively legislated choice between two parts of the State Constitution - ruling the article mandating a system of public education trumped the one requiring two-thirds on tax bills.

First of all, how on earth can a supreme court strike down part of their constitution? It can't possibly be "unconstitutional" since it's actually part of the document.

Second, there is no conflict between the two phrases. The Nevada Supreme Court could ruled that the budget passed by the legislature didn't meet the constitutional requirement for fully funding education, so it needed to be revisited.

A federal judge has issued a temporary restraining order to prevent the legislature from acting on this order to raise taxes. It looks like the federal court might duck the issue, telling the Republican representatives who filed for the TRO to take it to either the Nevada SC or the USSC.

Update: Eugene Volokh has some good comments about this.

Rather, as I've suggested before, the proper remedy is political rather than judicial. The Nevada Supreme Court has nullified the will of the Nevada voters. I'm sorry that most of the voters' representatives seem to be unwilling to put up a fight. I hope that the Nevada voters do better: To trigger a recall election, they'd need about 130,000 signatures

Glenn Reynold's Advice to Democrats

Glenn points out that the current strategy by the Democrats is not a winning strategy. Basically it is stop all the "Bush lied criticism." It doesn't offer a viable alternative. It makes the Democrats look like complainers with nothing to offer that is better. Further, the way people are conflating this issue of was the intelligence of Saddam's regime trying to obtain uranium somewhere in Africa with forged documents makes the Democrats look dishonest.

Glenn also points to several areas that the Bush Administration is weak on and where criticism is justified. One area is Homeland Security. That department and what they have been doing certainly doesn't strike me as being particularly effective. I agree completely with Glenn's assessment that it is more about grabbing power for bureaucrats than it is about improving security.¹

Other areas that Glenn points to are

• Communications/FCC
• The Saudi connection
• Intelligence failurs.

With regards to the last one the Democrats should approach it as a lets fix it, as opposed to the divisive approach of assigning blame and finger pointing.²

Another thing the Democrats could do that Glenn doesn't mention is to actually take the deficit seriously, and along with that the notion of bigger and bigger government. The Democrats talk alot about the deficit but to me, I just see it as pure political spin (i.e., complete and utter bullshit on their part). I don't think they really care about the deficit or the size of government. In fact, I think that they'd engage in deficit spending if they were in the control right now instead of Bush. Further, there are people out there who aren't happy with both how Bush is spending and the fact that Bush is spending even more than Clinton.

The Democrats have gotten stuck in this rut that the answer to just about everything is government, and not just any old government, but federal, one-size-fits-all government. We'll enact a national plan/policy and jam everybody into it. Be it health care, the environment, regulating prescription drugs, etc.

Perhaps it is time to try an approach of, there is a role for the federal government, but that it isn't always the answer. That different states and different localities might want to do things a little bit or a lot different on many issues and that this is okay (or at least isn't always wrong).

I doubt the Democrats can break out of this mindset of tearing down Bush and bigger and bigger government vs. offering a viable alternative to the Republicans.
______
¹I'm not talking about the ridiculous notion that we are losing freedoms here under the Patriot Act either. We aren't, but powers is moving from the local/state level to the federal level and I don't see how or why that should improve security.
²This will make the Democrats look like leaders as opposed to whiney crybabies. It will also have the salutary effect of improving our intelligence gathering. Further, the Democrats might find the blame-game embarassing as their track record on defunding intelligence agencies is pretty bad.

The Furor Continues

There are now two conflicting stories about what C.I.A. Director George Tenet said in his closed door meeting with various Senators (link and link).

According to the earlier story Senator Durbin has claimed that a White House official insisted on the phrase and that Tenet has named the official. The second account is from the White House which denies these claims.

Watch the first claim to become the new meme for the left side of the blogosphere.

Looking for the Smoking Gun

Tom Brokaw interviews David Kay a former weapons inspector. Kay is in charge of finding Saddam's weapons of mass destruction and is looking through a mountain of documents to find evidence that Saddam was had a WMD program, and hopefully where the weapons are located.

I’m confident that we will get all three of those and be able to explain exactly what the nuclear, biological and chemical program was of Saddam Hussein. I don’t know what the truth is yet. But we’ve got a process that will get us there.

In the interview Kay states that in 6 months he expects to have a great deal more information on Saddam's weapons programs. He thinks it'll take longer to find most of the stuff, and that much of it is hidden, but by six months there should be a "substantial body of evidence."

This part is quite interesting:

Kay: Well, he was certainly hiding and moving things around. He’s been doing that for twelve years. There was a tremendous amount of destruction and moving of things immediately and during the war. And some of this actually continued after the war. We’ve seen targeted looting in which you’ll go into a building and the only thing that’s destroyed are the documents in the file cabinets that are ashes. That’s why these documents right here are so important to us.

Seems reasonable to me. Some people are starting to conclude that there never were any WMDs prior to the war. Maybe they are right and Kay will find nothing, but I think I'll wait and see.