Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Saturday, May 20, 2006


Backup. Backup. Backup:

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

We seem to have reached an understanding.

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

Zero Tolerance for Grahams!

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

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

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

Give me an Armstrong, a Dodd, or a Carey any day. Those we can tolerate. All right-thinking people agree that zero tolerance is the only sensible Graham policy.

Feel the Power of the Competitive Enterprise Institute...

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

From ThinkProgress:

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

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

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

Friday, May 19, 2006

How to Improve Journalism

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

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

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

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

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

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

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

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

Bob Barde writes:

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

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

Sticky Information

Mankiw and Reis write:

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

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

Unequal Effects of Liberalization in India

A point for the neoliberals:

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

Should Bush Abandon His Tax Cuts?

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

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

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

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

Thursday, May 18, 2006

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Brad DeLong

John Berry on the Bush Tax Policy Clown Show

John Berry writes:

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

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

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

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

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

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

Wednesday, May 17, 2006

The Bush Clown Show: In Side Ring II

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

Crooks and Liars: Tony Snow [says]:

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

The Bush Economic Policy Clown Show: in the Center Ring

Treasury "Secretary" John Snow humiliates himself yet again:

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

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

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

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

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

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

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

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

The Bush Economic Policy Clown Show: in Side Ring I

The latest act in the Bush clown show:

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

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

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

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

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

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

Jawbone of an Ass Department

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

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

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

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

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

Open Letter on Immigration

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

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

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

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

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

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

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

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

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

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

Tuesday, May 16, 2006

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

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

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

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

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

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

You couldn't make this stuff up.

Nor could you make this up:

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

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

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

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

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

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

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

The reporter tries again:

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


SECRETARY CHERTOFF: in quite exquisite detail. . .

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


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

Advertising Once Again...

John Quiggin is smart:

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

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

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

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

Losing by Losing

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

Henry Farrell writes:

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

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

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

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

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

Tax Policy 101

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

Matthew Yglesias writes:

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

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

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

Duncan Black chimes in:

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

I'm with Duncan: stupid and dishonest.

The Transformation from Feudalism to Capitalism to Attentionalism

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

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

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

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

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

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

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

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

Ezra Klein Is Bemused

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

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

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

Outsourced to Salon:

War Room - Bumiller and Bush: Amigos!

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

It appears that we misunderestimated her.

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

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

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

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

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

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

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

Monday, May 15, 2006


Profgrrrl is puzzled:

Playing School, Irreverently: Things that puzzle me, #429: A journal that asks for 4 electronic copies of a manuscript be submitted via email. I mean, do I send 4 emails, each identical? Or one email with the same file attached four times?

None Dare Call It Treason

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

John Stormer (1964), None Dare Call It Treason

A review of it:

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

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

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

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

And politely asks:

Was this review helpful to you?

In a way, I guess.

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

A New Literary Form. But It Lacks "Mesothelemia"

Yankee Fog is writing:

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

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

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

Joe Klein Does Karl Rove's Dirty Work

Joe Klein does Karl Rove's dirty work by launching the first Rove attack of the 2006 campaign season. Setting Up Easy Targets for Karl Rove -- Page 1: Three congressmen poised to chair powerful House committees could become a campaign issue:... [O]ne senses a fluttery uncertainty on the Democratic side--induced, I suspect, by the prospect of another nefarious Karl Rove campaign.... Rove has shown a positive genius for organizing campaigns around poisonous trivia.... [H]e will play the race card, as Republicans have ever since they sided against the civil rights movement in the 1960s.

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

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

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

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

And then Klein plays the race card.

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

Greg Mankiw's Abstract Is Wrong...

Greg Mankiw writes:

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

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

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

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

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

Sunday, May 14, 2006

International Trade

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

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

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

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

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

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

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

The Return Of Voodoo Economics

Sebastian Mallaby writes:

The Return Of Voodoo Economics: Nobody serious believes that tax cuts pay for themselves, as I noted last week. But most senior Republicans flunk this test of seriousness.... George W. Bush... told a New Hampshire audience, "You cut taxes and the tax revenues increase."... Dick Cheney... asserted in February that the "tax cuts have translated into higher federal revenues." Bill Frist.... "Many people in Washington have long known a dirty little secret about tax-cut measures: When done right, they actually result in more money for the government." Chuck Grassley... mouths the following nonsense: "There is a mindset in both branches of government that if you reduce taxes you have a net loss, if you increase taxes you have a net gain, and history does not show that relationship."...

Okay, so let's review this issue with the help of some experts.... N. Gregory Mankiw of Harvard... who chaired the Council of Economic Advisers in the Bush White House. Mankiw is a top-notch economist hired by Bush and Cheney to advise them. And last year he published a paper on how far tax cuts pay for themselves, reporting enthusiastically that this self-financing effect is "surprisingly large."... [O]ver the long run (the long run being generous to his argument), cuts on capital taxes generate enough extra growth to pay for half of the lost revenue. Hello, Mr. President, that means that the other half of the lost revenue translates into bigger deficits. Mankiw also calculates that the comparable figure for cuts in taxes on wages is 17 percent. Yes, Mr. President, that means every $1 trillion in tax cuts is going to add $830 billion to the national debt....

Mankiw isn't with them. Holtz-Eakin isn't with them. Which raises a question: When top Republicans go around claiming that tax cuts pay for themselves, which economic authorities are they relying on? None, is the answer. These people's approach to government is to make economics up....

Politicians are always speechifying about how the United States must lead the world in research to maintain its edge. But having the world's best economics research isn't particularly helpful if those same politicians are silly enough to tune it out...

Fine until the last paragraph. Then Mr. Mallaby stops saying "Republican politicians" and starts saying "politicians." You can say it, Mr. Mallaby: There's an obvious way to fix the problem you see: simply stop electing Republicans.

Why Oh Why Can't We Have a Better Press Corps? (Adam Nagourney/New York Times Edition)

Outsourced to Sisyphus Shrugged:

Sisyphus Shrugged - uh-huh.: when I read the execrable Adam Nagourney's piece about Democratic prospects in today's Times (shorter AdNags, as ever ready with an upside spin for the party he supports: Being a loser is the new black) I was struck by what he didn't say.... [W]e don't have the views of Democrats. We have Adam Nagourney telling us that his thumb tastes better than any other thumb in the whole world and we wish we could suck Adam Nagourney's thumb in the New York Times, but we can't, because he's Adam Nagourney and we're not, which is why, parenthetically, he has access to that shadowy but powerful group within the Democratic party, the "some" Democrats:

Indeed, some Democrats worry that the worst-case scenario may be winning control of Congress by a slim margin, giving them responsibility without real authority....

Then, at long last... a name... "Tony Coelho, a former House Democratic whip."

Tony Coelho.... Tony the guy who was tossed out of the Gore campaign because he was under criminal investigation.... Tony didn't reappear in politics until they needed a "Democratic insider" to trash Kerry Coelho.... [P]retty much everyone who was willing to talk to Nagourney on the record in terms that even vaguely suggested support for some portion of the putative reasoning behind this vaporous groundswell of strategic loss planning is someone who either jumped or was pushed out of Democratic politics....

[H]e did get this guy, who according to his HuffPo bio has a blog because his brother is Mickey Kaus: "Even though Ms. Pelosi enjoys notable support in her party, her performance was panned even by fellow Democrats. 'I was screaming at the TV as if it were Bush being interviewed'," wrote Stephen Kaus, a lawyer and contributor to, a liberal blog....

I can't see any internal evidence in this remarkable bit of special pleading suggesting that anyone who even has access to our leadership gave Adam Nagourney any information on the yummy goodness of his thumb that he didn't already have.

And, of course, "some" Democrats do agree. I'm guessing maybe not so much the ones who vote [Democratic]...

Morning Coffee Videocast: Immigration Is a Good Thing

In which I drink my morning coffee, use up Google's bandwidth, and muse about immigration:

4 min 43 sec - May 14, 2006. Brad DeLong's Morning Coffee. We should be open to immigration--for lots of reasons.

Immigration Is a Good Thing