More on the Options Backdating Fraud

Discourse.net on the options backdating fraud:

Discourse.net: A Resource is a Resource -- Of Course, Of Course: Yesterday, the SEC bought the first criminal charges against a Gregory Reyes, the CEO of Brocade Communications, the company's CFO, and Brocade's VP for human resources for options backdating. This is the first criminal action brought with regard to the growing option backdating scandal. The SEC also indicated that at least 80 companies are under investigation.... [T]his seems like a good time to review what the problems are here....

[T]he lying.: The shareholders' authorization was to grant options at the stock price on the award day, not on an earlier day. Thus, management had to lie ("backdate") for these options to seem valid.... [E]ven under the old rules for accounting for stock options, the discount was accounted for as an expense (prorated from the grant day to the exercise day). Backdating hid this expense, making these companies seem more valuable.... [I]n Brocade's case... proper accounting under the old rule turned the improper, originally-reported $68 million profit into a $951 million loss [for 2002]. (In some cases, the fraud also kept the companies from claiming huge, legitimate tax deductions, while hiding the employees' tax liability.)

And then there is the theft: First, the employees were buying stock at unauthorized discounts. Second... [t]he options could not have incent[iviz]ed the employee to work harder from the backdated day to the real grant day, as the employee did not own the option in this period, yet the employee got to enjoy any stock value run-up in value during this period...

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

Howard Kurtz writes, defensively, about his downward-spiraling newspaper, The Washington Post:

Thunder on the Left: [T]he issue of GOP responsibility was not exactly ignored. Maybe the piece could have been sharper. My only point is that it's our job to give readers the facts, not take sides in partisan warfare...

I take this to be an admission by Kurtz that the Post underplayed the extent to which the current bitterly-partisan political climate is something desire and triggered by the Republican leadership, and that admission is welcome. But if Kurtz thinks that the Post is doing "it's... job to give readers the facts," perhaps he should take a close look at his own newspaper.

The funniest thing I've been able to find in it--and the thing that is least consistent with the idea that the Post is taking the task of informing its readers as job #1--is Michael Abramowitz's sentence:

Conservative Anger Grows Over Bush's Foreign Policy: It has not helped the neoconservative case, perhaps, that the occupation of Iraq has not gone as smoothly as some had predicted...

That sentence sent the Whiskey Bar--and many others--into howls of laughter as they rolled on the floor. In Abromowitz's sentence are unmistakable echoes of Emperor Hirohito's surrender broadcast at the end of World War II:

Whiskey Bar: The Hirohito Effect: "Despite the best that has been done by everyone... the war situation has developed not necessarily to our advantage."

Abramowitz's sentence reads as the sentence of somebody who is pathetically, incompetently, weak: somebody who doesn't dare do more than hint at the truth--that the occupation of Iraq has been a huge, horrible disappointment because of the incompetence, disconnection from reality, malevolence, and mendacity of the Bush administration--because he might be yelled at by somebody from White House media affairs. Somebody who regards avoiding being yelled at by the White House media staff as much more important than informing his readers. Abramowitz will not say that the occupation of Iraq has been a disaster. The most he will say is that the occupation has not gone "smoothly." No, Abramowitz will not even say that: all he'll say it that it has not gone as "smoothly" as "some had predicted." No, Abramowitz will not even say that: he has to add a "perhaps."

That "perhaps" is the true kicker that carries Abramowitz way over the top and well beyond the land of self-parody. "Perhaps" the occupation of Iraq has not gone as "smoothly" as "some had predicted."

But, you may say, surely the echoes of Hirohito are deliberate? Surely Abramowitz intended this as a joke? Surely he is having fun by snarkily poking at Republicans who cannot call a spade a spade? Surely what Abramowitz means by this sentence is that everybody knows the occupation of Iraq has been a total disaster--but that the Republicans who are his subject cannot admit this, even to themselves? Surely nobody writing for the Post today can be as craven and evasive as Hirohito was at the end of World War II?

So I called around. Current Post employees are divided: Six think that the humor was totally unintentional--that Abramowitz had no clue how ridiculous he was when he wrote: "It has not helped the neoconservative case, perhaps, that the occupation of Iraq has not gone as smoothly as some had predicted." Two think that the echoes of Hirohito's surrender broadcast are deliberate, and that Abramowitz is being snarky.

So I wrote Michael Abramowitz and asked him what his intentions were. So far no reply.

Worth Reading 20060621

Worth reading, June 21, 2006:

Hal Varian: In the debate over tax policy, the power of luck shouldn't be overlooked: Those who argue for a more progressive income tax emphasize equity: a tax dollar paid by a rich person causes less pain than a tax dollar paid by a poor person. Those who argue for a less progressive system emphasize efficiency: the most productive people should face lower tax rates to give them strong incentives to work harder and produce more.... This formulation of the optimal income tax problem was first examined by the economist James Mirrlees of Cambridge University, who received a Nobel in economic science for his analysis. In the simplest version of the Mirrlees model... those at the very top of the income scale should face low marginal rates...

Economist.com | Articles by Subject | Cotton: If weather were the only problem facing cotton farmers, things might not be so bad. They are used to nature's whims: Kress lies in the heart of the 1930s Dust Bowl, and even today dirt storms (and sometimes tornadoes) roll through in the spring. Fortunately cotton requires much less water than, say, maize.... Free trade is even more of a threat. The cotton industry exists in America only because of subsidies, and it stands to lose much if the World Trade Organisation's Doha negotiating round succeeds. Cutting trade-distorting farm subsidies is a top priority in the trade round.... The absurdity of America's cotton subsidies is well known. Uncle Sam spends over $4 billion a year propping up cotton farmers, with the bulk of the money going to those whose operations are much larger than Mr Evans's. Cotton receives far more government cash per acre than other crops%u2014in 2001, four or five times that of maize or wheat, according to a recent paper by the National Centre for Policy Analysis, a conservative think-tank. The losers are not just American taxpayers but some of the world's poorest farmers, as America's subsidised production pushes down world prices. Cotton prices have halved since the mid-1990s as America's subsidies have doubled...

NYO - Joe Conason: Our Coarse President Can’t Fix Middle East: Watching the President of the United States try to fulfill his responsibilities at an international summit is a sobering experience these days. To observe George W. Bush talking trash, chewing with his mouth open and demonstrating his ignorance of geography marks still another step down in the continuing decline of U.S. prestige. It’s the diplomatic equivalent of flag burning. While Mr. Bush’s little misadventures make headlines, what they symbolize is a collapse of policy and a vacuum of competence that are far more troubling than mere cloddishness. Preoccupied from the beginning of his Presidency with Iraq, alienated from our traditional allies and the United Nations and neglectful of broader American interests in the Middle East, he and his team now confront a sudden crisis for which they seem woefully unprepared. We are learning what happens when the leadership of “the indispensable nation” takes a mental vacation. We are also beginning to learn why regime change in Iraq, originally sold as the solution to every problem in the region, has proved to be such an enormous liability for us and for our allies. Recall that when the Bush administration decided to invade Iraq—on the pretext of disarming Saddam Hussein—a new era of peace and democracy was supposed to dawn. Making an example of the toppled Saddam would, according to neoconservative theory, persuade other despots in the region to reform and reconcile themselves to co-existence with Israel, and stimulate the “peace process” too. (That same theory, of course, similarly predicted flower-strewn parades in Baghdad and enough oil revenues to finance the whole bloody enterprise.) Indeed, when the weapons of mass destruction didn’t turn up, those anticipated dividends became the retrospective justification for the war...

King of Zembla: How do you tell a pro-lifer? When the lab catches fire, he leaves the live baby and saves the five blastocysts. Mr. Bush did just that yesterday, exercising the first veto of his benighted presidency to deny medical researchers the use of embryonic stem cells that will now wind up in the dumpster instead: 'Bush and his allies say that frozen embryos are tantamount to humans, and therefore are no more appropriate for medical research than are death row inmates. "If this bill were to become law," Bush said yesterday, "American taxpayers would for the first time in our history be compelled to fund the deliberate destruction of human embryos." Others reject that analysis, saying it would make killers of every couple that produces an unused embryo, and every employee and official who allows fertility clinics to produce and store such embryos. "If that's murder, how come the president allows that to continue?" asked Sen. Tom Harkin (D-Iowa). "Where is his outrage?" Harkin called the veto "a shameful display of cruelty, hypocrisy and ignorance."'

They don't call Tom Friedman "Airmiles" for nothing: Order vs. Disorder - New York Times: Too often, assaults like Hezbollah's, which have global implications, have been met with only "a local response," said Gidi Grinstein, who heads Reut, an Israeli defense think tank. "But the only way that these networks can be defeated is if their global assault is met by a global response." Unfortunately, partly because of China, Russia and Europe's traditional resentment and jealousy of the U.S. and partly because of the foolish Bush approach that said unilateral American power was more important than action legitimated by a global consensus, the global forces of order today are not at all united. It is time that The World of Order got its act together. This is not Israel's fight alone -- and if you really want to see a "disproportional" Israeli response, just keep leaving Israel to fight this war alone. Then you will see some real craziness. George Bush and Condi Rice need to realize that Syria on its own is not going to press Hezbollah -- in Mr. Bush's immortal words -- to just "stop doing this shit." The Bush team needs to convene a coalition of The World of Order. If it won't, it should let others more capable do the job. We could start with the elder George Bush and Bill Clinton, whose talents could be used for more than just tsunami relief...

A Sound Marketplace For Recorded Music: A Sound Marketplace For Recorded MusicBy Steven PearlsteinWednesday, July 19, 2006; D01 Here in Washington, there is nothing more amusing than watching business interests work themselves up into a righteous frenzy over a threat to their monopoly profits from a new technology or some upstart with a different business model. Invariably, the monopolists (or their first cousins, the oligopolists) try to present themselves as champions of the consumer, or defenders of a level playing field, as if they hadn't become ridiculously rich by sticking it to consumers and enjoying years in which the playing field was tilted to their advantage. A recent example is the political and legal attack mounted by the music-recording industry against the upstarts of satellite radio.You'd think an industry that has managed to turn out so much mediocre music for so many years, done so much to lower moral standards and lost so much business to illegal file-sharing would have something better to do than attack some of the few distributors that are actually expanding the market and charging for music. But the prospect that the industry might not extract every last penny out of the new satellite radio services and their customers is simply unacceptable to the Recording Industry Association of America...

Republicans: Looking Like We Face Reality

Rep. Patrick T. McHenry (R-N.C.) says: "We can't look like we won't face reality."

I think that sums up the orientation of today's Republican Party. I propose at as a slogan:

We're George W. Bush's Republicans: Our Task: To Look Like We Face Reality"

Waiting for the Pause...

Greg Ip waits for the "pause"... and waits and waits and waits...

Greg Ip: Fed Reality Check: Fed pause coming and this time, we mean it -- right?

Did Bernanke hint at a pause in rate increases in his Congressional testimony this week? The markets certainly think so, but a reality check might be in order. We checked our coverage of the last seven months and concluded that since the Fed started hinting of a pause, it's raised rates four times. Here are The Wall Street Journal's headlines in that period:

• Dec. 14: Neutral Point May Be Near As Statement Leaves Room for a Pause in the Increases
• Jan. 4: Fed Suggests It's Close to Ending Run of Rate Rises
• Feb. 1: Fed Lifts Rate by Quarter Point, Casts Doubt on More Increases
• April 19: Fed Hints Next Rate Increase Could Be the Last for a While
• April 28: Bernanke Hints at a Pause in Rate Increases
• May 11: Central Bank Cites Worries Of Inflation Amid Growth, But Hints of a Possible Pause
• July 20: Dow Surges as Markets Take Fed Chief%u2019s Remarks as Hint Rate Increases Are Near End

To be sure, those were just hints -- the Fed never said when, or whether, it would pause, and some of those hints clearly applied to a period beyond the next meeting. That said, the fact there has been no break in the tightening cycle in spite of all the hints to the contrary serves as a useful ...

I think that the economy is soft enough and that there is enough contractionary pressure still in the pipeline that hasn't affected the economy yet. So I'm surprised that there hasn't been a pause yet. I suspect that the Fed is scared of the "soft on inflation" headlines that a pause would generate, and so finds itself simply putting one foot in front of the other.

Bush Uses NAACP Speech To Promote Estate Tax Repeal

George W. Bush lives down to expectations:

Bush Uses NAACP Speech To Promote Estate Tax Repeal, Doesn’t Utter The Word ‘Poverty’: President Bush addressed the NAACP today for the first time in his presidency. Speaking on behalf of his friend, multi-millionaire conservative BET founder Bob Johnson, Bush used the opportunity to promote the repeal of the estate tax on the ultra-rich:

One of my friends is Bob Johnson, founder of BET. He’s an interesting man. He believes strongly in ownership. He has been a successful owner. He believes strongly, for example, that the death tax will prevent future African-American entrepreneurs from being able to pass their assets from one generation to the next. He and I also understand that the investor class shouldn’t be just confined to the old definition of the investor class.

President Bush’s “death tax” pitch demonstrates his stunning disconnect from the African-American community. According to an American Progress analysis, just 59 African-Americans will pay the estate tax this year, and that number will drop to 33 in 2009. Meanwhile, as of 2004, 24.7 percent of African-Americans lived under the poverty line (up from 22.7 in 2001) — that’s more than 9 million people. The number of times Bush mentioned “poverty” in his speech: 0.

Reporters: Informing Readers vs. Minimizing Risk

Hoisted from comments: Jay Rosen:

Brad DeLong's Semi-Daily Journal: Dana Milbank vs. Helen Thomas: From Brad's Where Are the Heirs of Walter Lippman?: "Note that my examples are budget examples. I'm one of the budget people. But I have peers in other issue areas. They see the same deficiencies. Whether they are bombs-and-bullets people, striped-pants-diplomacy people, welfare-and-social-policy people, science-and-technology-policy people--they all see the same patterns." http://delong.typepad.com/sdj/2006/07/where_are_the_h.html

Brad: Those "patterns" begin to find some explanation when you realize that categories like "hard news" rather than "analytical piece" are simultaneously serving as a reality-reporting system, and a risk-reduction method. Hard news is supposed to be lowest risk, not necessarily harder information. It's lower risk to just say what happened ("Rove said...") without saying what's true. An "analysis" piece means you can speculate about motives and what might happen from here. Slightly higher risk, but not necessarily more "analytical."

Or let's take the classic in press watcher frustration... He said this happened, she said that happened. It tries to inform you in a half-hearted way, but it secures protection from being wrong in a full-throated way. "I'm just telling you what they said." It's not truthtelling but innocence-establishing behavior-- see? no agenda.

Here's the catch: officially, journalists only engage in truthtelling. That they would the choose the more innocent account over the more truthful one contradicts the professional self-image. So it doesn't happen, even though it does. When what journalists are doing makes no sense at all to you on the reality-reporting scale, switch yourself over to the risk-reduction (or "refuge") scale and measure it there.

Why don't journalists work together and coordinate their assaults to get a better answer from the President? Might make sense on the reality-reporting front, but fry the circuits on risk reduction. They'd open themselves to "cabal" charges, or so they think. Why didn't Leonard Downie join with Bill Keller and Dean Baquet in their joint op-ed explaining the need to report on classified programs sometimes? (He was asked.) He didn't want to risk the impression that news organizations act together to "get" something.

For we are dealing not only with the risk of being wrong, but of coming under effective attack in the culture war's politicized theatre of news. Outside actors can influence the news by raising the perception of risk.

Posted by: ay Rosen |July 18, 2006 at 03:26 PM

Cleaning Out the Attic: The Future Is Here

John Hawks writes:

Splicing nerves with nanomatrix: This is too cool:

Scientists partially restored the vision in blinded hamsters by plugging gaps in their injured brains with a synthetic substance that allowed brain cells to reconnect with one another, a new study reports. If it can be applied to humans, the microscopic material could one day help restore sensory and motor function to patients suffering from strokes and injuries of the brain or spinal cord. It could also help mend cuts made in the brain during surgery.

In principle, it seems like reconnecting severed nerves ought to be easy -- all you have to do is splice a long wire. In practice, it's been nearly impossible. The nerve bundles are mostly composed of axons, the long branches of individual nerve cells that conduct impulses. So to fix a severed nerve, you can't just connect the opposite sides of the break, you have to coax new axons to grow across it. So these folks have found a matrix that allows the neurons to grow through it, much as they do in the developing brain.

Within 24 hours, all of the animals treated with SAPNS showed signs of healing; with time, the gaps in their brain tissues closed up completely. In the adult group, vision was functionally restored within six weeks. In one animal, the severed nerve tract was restored to more than 80 percent that of a normal animal. In other studies, the researchers found that nerves needed to be only about 40 percent healed for animals to have functional vision.

This is the simplest task of neural repair, fixing a wire. Fixing brains -- or building them -- will take a bit more, since we don't understand the complex connections that allow things to happen. But this is good, very good.

Department of "Huh?"

Huh?

Greg Mankiw writes:

Greg Mankiw's Blog: Measuring Wages: Measuring Wages: Economist David Altig opines about measures of labor earnings:

If I had my way, appeals to the BLS average hourly earnings series would be banished from commentary about wages and the fortunes of the workers -- unless the the commentator explains why that measure is a truer measure of labor compensation than those that include in-kind payments to employees (that is, benefits).

Good point. I am always surprised when I see economists compare wages and productivity using wage measures that exclude fringe benefits. Theory says that productivity should determine total compensation, not cash earnings.

A the presumed target, I have to ask "why?" I thought that everybody knew that wages and salaries were only one component--albeit the largest component--of total compensation. But I also thought that everybody knew that (except at the very top end) differences between growth rates of wages and salaries and growth rates of real compensation were relatively small.

We have pretty good data on short-run and medium-run movements in average hourly wages and median usual weekly earnings. We have pretty bad data on benefits. We know that average total compensation growss about 0.4% per year faster than average wages and salaries, and that the gap is smaller--0.2%?--at the median.

Yes, it would be very nice, it would be better to have median weekly real compensation. But we don't. So why not use what we have got?

Ze'ev Shiffrin on How Observing the Laws of War Is Good Strategic Practice

Jus in bello:

A strategic mistake - Haaretz - Israel News : By Ze'ev SchiffIn: Things are getting complicated. The best evidence of this is the decision to drive hundreds of Shi'ites from villages in southern Lebanon merely because Hezbollah hid missiles in them. This would be a strategic mistake. If implemented, it would mark the first time that Israel could justifiably be accused of a disproportionate military response. Israel does not need to take this kind of measure as a defensive move against a terrorist organization. The Israel Defense Forces announced at the start of the campaign that this is not a war against the Lebanese people. But if the mass flight of residents continues, the campaign will be seen as a punishment of the Lebanese, and that is a recipe for hatred....

The military difficulty involved in preventing the launching of short-range missiles gave rise to the idea of encouraging large numbers of civilians to flee northward, toward Beirut, to serve as a source of pressure. The problem was that in many places, the roads were impassable, because the Israel Air Force had bombed a large number of bridges to keep Hezbollah from transporting missiles and reinforcements. Hezbollah, for its part, is trying to prevent a massive flight to the north, using roadblocks and other measures.

The IDF has used this technique before, in Operation Accountability in 1993 and in Operation Grapes of Wrath in 1996. Both campaigns began in the wake of Katyusha attacks against Israeli communities. The large numbers of refugees from villages in the south put a great deal of pressure on the Lebanese government, which immediately appealed to Syria and Iran to tell Hezbollah to hold its fire. Both times, this tactic led to cease-fires, but they did not last long, because the Hezbollah leadership does not really care about the suffering masses and may even believe that such suffering helps their organization by increasing hatred of Israel.

More proof of the increasingly complicated situation in Lebanon can be found in the growing number of calls from various quarters, including right-wing politicians and former senior military officials, for launching a large-scale ground campaign. The senior ranks of the IDF oppose this idea. Even though it is clear that the Air Force alone cannot solve the problem of missiles being fired at Israel, there is no real support for a broad, lengthy ground operation in Lebanon...

Why Oh Why Are We Ruled by These Morons?

At least twice a day, I find myself thinking about the Bushies, "They can't be this stupid and this shortsighted."

Yes they can:

Balkinization: Hobbes on the Euphrates: Scott Horton: Back in April, I found myself in Baghdad across the table from one of the nation's most prominent judges. A man with a reputation for integrity and independence, he had resigned from the bench rather than implement a cruel set of directives issued by Saddam Hussein. He suffered and was forced into a marginal existence thereafter. The Coalition forces, noting the respect his name commanded, tapped him for a particularly sensitive role, which he has held ever since. Since judges are killed at the rate of one-per-week in Iraq, however, I am going to refrain from using his name.

In a wide ranging discussion, he came very quickly to talk about the occupation and its shortcomings.

We despised Saddam Hussein, and his overthrow raised such wonderful possibilities for Iraq. But how could a country like the United States behave so stupidly as it did in those first crucial months? Saddam was a nightmare. But our country had a strong state with secular traditions. That needed to be preserved at all costs. Instead the Americans smashed that state. What did they expect Iraqis would do? It sent people scurrying back to the basic building blocks of our society, which are the clans and tribes. People turned to them for basic self-protection, not because of any political conviction. And this has led directly to the social disintegration we have today. The choices that the coalition took had consequences. You destroyed the state and you failed to put order in its place. You created chaos, in other words. And now we have to try to live with the consequences of the coalition's decisions.

These comments dovetailed with a "lessons learned" analysis I understand was done within the Department of Defense. As a part of the review, a "lack of cultural awareness" of Iraqi society was repeatedly cited. A DOD anthropologist notes that many of the most serious mistakes made in the early phase of the occupation relate to a misunderstanding of the consequences of the fall of the state. Just as my interlocutor noted, the people turned immediately to family ties for protection.

Surely political scientists already know this. The first chapters of Thomas Hobbes's Leviathan reflect exactly the points that the Iraqi judge was making. With the collapse of the state and with no new order to replace it, Iraq fell into the war "of all against all." Hobbes wrote,

During the time men live without a common power to keep them all in awe, they are in that conditions called war; and such a war, as if of every man, against every man.... To this war of every man against every man, this also in consequent; that nothing can be unjust. The notions of right and wrong, justice and injustice have there no place. Where there is no common power, there is no law, where no law, no injustice. Force, and fraud, are in war the cardinal virtues. (ch. 13).

Put differently, the occupation heralded by the capture of Baghdad lacked the essential characteristic of an occupation - namely a new order. Hence, in Hobbesian terms, it was that form of war which encompasses the natural state of man.In the August issue of Harper's, Ken Silverstein probes more deeply into this process of social disintegration. He takes as his vehicle the rise of one particularly powerful, but shadowy figure in the current Iraqi Government: Bayan Jabr, the current minister of finance. Silverstein dubs him the "Minister of Civil War." This article is fascinating and it offers an unusual glimpse deep inside the transformative process in Iraq that coincided with the "rule" of the Coalition Provisional Authority. This was a period which combined immense attention to public relations with Western media with an excruciatingly poor grip on the cancer that was developing in Iraq. The article is a must-read.

Dean Baker on Sources of Today's Great Fortunes

Dean Baker on the sources of today's great fortunes: luck, talent, workaholism--but most of all intellectual property protection.

He says:

Brad DeLong's Semi-Daily Journal: Luck vs. Talent vs. Workaholism: Luck, talent, industriousness? Hey, how about good old-fashioned protectionism? How much moey would Bill Gates have if the government didn't arrest people who made and distributed copies of Windows without his permission.

We can call it "copyright," but this word isn't holy water that can turn a monopoly into a competitive market. Copyright is a government granted monopoly that has allowed some people to get very rich. If economics focused on where the money is, we would have alot more people trying to devise more efficient mechanisms to foster innovation and creative work, and fewer people worrying about modest tariffs on imported shirts.

Cleaning Out the Attic: Evaluating Mutual Funds

Evaluating Mutual Funds:

A Fund vs. Its Former Self - New York Times : The idea is to compare each fund's returns with how it would have performed had it simply held, without trading, the stocks it listed in its most recent public disclosure. The study was done by three finance professors: Marcin Kacperczyk of the University of British Columbia and Clemens Sialm and Lu Zheng of the University of Michigan. They focused on what they called the "return gap": the difference between a fund's actual returns and what it would have earned had it stuck with its most recently listed holdings. The S.E.C. requires that funds make such disclosures twice a year; the professors report that nearly half of all funds do so at least quarterly. The study found that, on average, funds with consistently positive return gaps were much better bets for future performance than those that were consistently negative, regardless of the frequency of portfolio disclosures. They analyzed more than 2,500 domestic equity mutual funds over a 20-year period - 1984 through 2003. http://papers.ssrn.com/sol3/papers.cfm?abstract-id=676103

The professors say they believe that their approach works well because it evaluates fund performance more precisely than the customary practice of comparing it with a market benchmark.... The professors' approach sidesteps these problems because it doesn't compare funds with generic benchmarks. Each fund is compared only with itself - or what its performance would have been had it not made changes in its portfolio....

Mark Hulbert is editor of The Hulbert Financial Digest, a service of MarketWatch.

Memo to Self: Time for Another Nanotech Check-in

The last Nanotech check-in:

The Future, Now Available in Stores - New York Times: By BARNABY J. FEDER: One way to grasp all the fuss about nanotechnology -- the billions of dollars invested; the talk of potential breakthrough products in energy, computing and health care; the fears of novel hazards unleashed on an unsuspecting populace -- is to plunge into the underlying science. Another way is to forgo the intellectual heavy lifting and look at what products are available. What is nanotech, anyway? The answer: skis, face creams, paint, toothpaste and consumer electronics, according to a list compiled by the Project on Emerging Nanotechnologies at the Woodrow Wilson International Center for Scholars in Washington.... [T]he 212 items have little to do with the society-changing breakthroughs nanotechnology champions anticipate.... Andrew Maynard, chief science adviser to the project, said that what constitutes nanotechnology is still an open question, beyond the basic concept that whatever it is must be very small (a nanometer is one-billionth of a meter). "When we got people together last summer to study public attitudes toward nanotechnology, we found they were most interested in-- they come into contact with," he said.

Actual nanoscale devices %u2014 molecular machines, perhaps -- are still largely in the dream stage. So instead there is the evolutionary progress of stain-resistant Brooks Brothers ties and Eddie Bauer khakis. And there are the modest environmental and safety benefits of windows and windshields that, thanks to embedded nanoscale structures, are resistant to streaking and dirt. "Nanotechnology is here and now," Mr. Maynard said. "But there is nothing fundamentally different yet."

More Lessons from ENRON

George Mundstock writes:

Discourse.net: Enron's Special Purpose Entities: EMy pet gripe in the whole accounting simplification debate is how business and the accounting industry cite Enron as evidence that we need less detailed rules. They argue that detailed rules provide a roadmap for technical compliance that violates the spirit... [while] simple rules could not be gamed.

In fact, Enron demonstrates the need for detailed rules.

Enron is best known for its use of Special Purpose Entities (SPEs) to manipulate accounting results. Enron would own most of a subsidiary corporation or partnership, but outsiders would have voting control, so that the entity would not be treated as part of Enron on its (consolidated) financial statements. Practice at the time was that outside investors put up at least 3% of the equity capital. In fact, in many of the Fastow/Enron deals, outsiders did not, and would not, put up 3% because the deals were so screwy. Clear rules worked. (Substantive accounting rules cannnot stop fraud.) End of story.

But, argues business, the 3% was so tempting that it encouraged the deals. Rather, if the rules left the separateness decision to the accountant's judgment, she would have stopped these deals. Wrong! Details below.

The 3% rule came from a 1990 pronouncement of an ongoing task force on emerging accounting issues that was formed by the Financial Accounting Standards Board. This pronouncement dealt with SPEs formed to do sale/leaseback transactions. (The SPE would lease debt-laden property to its economic parent in order to get the debt off the parent's financial statements. Tax benefit transfers to the outside 3% usually also were involved.) The exact language of the pronouncement was:

The initial substantive residual equity investment should be comparable to that expected for a substantive business involved in similar... transactions with similar risks and rewards. The SEC staff understands from discussions with Working Group members that those members believe that 3 percent [now 10 percent] is the minimum acceptable investment. The SEC staff believes a greater investment may be necessary depending on the facts and circumstances, including the credit risk associated {with the SPE's activities]...

Enron's SPEs did incredibly risky hedging, not safe sale/leasebacks, and yet nobody even thought about requiring more than 3% outside equity. In other words, the rule applied in Enron had a non-detailed facts and circumstances test in addition to the 3% rocky shoal, and the non-detailed rule failed completely!

Enron's SPEs did no hedging at all. They were ways of having the company bet that its stock price would continue to rise.

Two Notes on the State of the Budget

Two notes on the budget from Stan Collender. Note 1:

BUDGET BATTLES: More Needs To Be Said About The Midsession Review. By Stan Collender: [T]he new fiscal 2008 deficit estimate -- $188 billion -- would be a huge 45-percent drop from the previous year and so should be considered suspect. It is based in part on the assumption that domestic appropriations will stay flat at about $398 billion. Because $398 billion would be less than what was appropriated for 2006, the base is almost certainly too low. An additional $10 billion to $15 billion over what is being assumed should be anticipated. The 2008 deficit is also likely to be higher because expenses related to the wars in Afghanistan and Iraq will be greater than assumed.

In addition, revenues may be far less than projected. It's hard to tell for sure, but it does not appear the administration has assumed that the alternative minimum tax will be fixed in 2008, either permanently or with the same type of one-year "patch" that has been used the past few years. There is virtually no doubt the AMT will be fixed; the tax increase on those who consider themselves middle-class would be far too large a political problem. Therefore, revenues would be between $40 billion and $50 billion less than is forecast.

As much as I would like to see it happen, I have real doubts about the administration's forecast that the economy will grow by between 5 percent and 6 percent every year through 2008....

Note 2:

BUDGET BATTLES: More Needs To Be Said About The Midsession Review. By Stan Collender: [T]he politics of the budget debate were likely changed significantly by the midsession review. It's hard to see, for example, how the lower deficit numbers for 2006 and 2008 and the "problem solved" attitude displayed by the White House will encourage Congress to look more cautiously at spending. Even with a deficit hovering around $300 billion a year and a debt that is at an all-time high, many on Capitol Hill may now think they have a few more dollars to spend this year. It also may make it more difficult for the White House to stand in their way.

Last week's midsession budget rally at the White House will also make it harder for the leadership to get the Senate to adopt the budget process changes it has been pushing, because at least a handful of senators will be able to say they are not needed.

Mirror of Wildernesses

John "Have You Managed Death Squads? I've Managed Death Squads" Negroponte and Zalmay "Happy Birthday, Mr. President! Happy Birthday!" Khalilzad are the only two people I can name whose reputations have--so far--not been damaged by their service in the George W. Bush administration.

Here we have John Negroponte doing... something... perhaps trying to keep Bush out of the Iraq-policy loop for fear that if he gets in the loop something bad will happen... and the CIA doing... something else... I cannot tell what.

[Negroponte Blocks CIA Analysis of Iraq "Civil War" (Harpers.org)](http://harpers.org/sb-sources-negroponte-nei-cia-1153433546.html: The situation has gotten even darker since my initial story--a United Nations report cited in Wednesday's New York Times found that an average of more than 100 Iraqi civilians were killed each day in June--and I've learned from two sources that some senior figures at the CIA, along with a number of Iraq analysts, have been pushing to produce a new NIE. They've been stonewalled, however, by John Negroponte, the administration's Director of National Intelligence, who knows that any honest take on the situation would produce an NIE even more pessimistic than the 2004 version. That could create problems on the Hill and, if it is leaked as the last one was, with the public as well.

"What do you call the situation in Iraq right now?" asked one person familiar with the situation. "The analysts know that it's a civil war, but there's a feeling at the top that [using that term] will complicate matters."

Negroponte, said another source regarding the potential impact of a pessimistic assessment, "doesn't want the president to have to deal with that."

The sources said that forces at the CIA have been lobbying for the new NIE for about six months. Not only is one overdue, but there's also a fear that if the Democrats win control of at least one chamber of Congress this November, the agency is going to get hammered for not having produced an NIE for so long.

When the topic of a new NIE was first raised, the Directorate of National Intelligence agreed to consider the matter, but advocates heard nothing back. They raised the topic again several months ago and were told that Negroponte was still mulling over the matter. Since then, there's been no indication that the DNI intends to authorize a new NIE. "He's not going to allow [analysts] to call the situation warts and all," said one source. "There's real angst about it inside."

Jus in Bello?

Jus in bello?:

Informed Comment: AP says that on Thursday ' Israel warned hundreds of thousands of people to flee southern Lebanon "immediately . . ." ' The Orwellian world into which Olmert and his band of manic bombers have plunged ordinary Lebanese is illustrated by Liz Sly's report for the Trib:

Thousands of Lebanese were trying to flee the south after Israeli warplanes dropped leaflets warning people to leave, stirring fears that an Israeli ground invasion was imminent. But hundreds of thousands more remain stranded in villages and towns across the south, unable to leave their homes because of the intensity of the sustained Israeli bombing campaign....

So let's get this straight. The Israelis warn the small town Shiites of the south to flee their own homes and go hundreds of miles away (and live on what? in what?). But then they intensely bombing them, making it impossible for them to flee. The Lebanese have awoken to find themselves cockroaches. I repeat, this is nothing less than an ethnic cleansing of the Shiites of southern Lebanon... what Saddam Hussein did to the Marsh Arabs of southern Iraq, and the Israelis are doing it for exactly the same sorts of reasons that Saddam did.

The death toll was much, much, much higher in Saddam Hussein's ethnic cleansing of the marsh Arabs.

You Are Naive, Grasshopper

You are naive, Grasshopper. Brendan Nyhan writes:

Brendan Nyhan: Reality triumphs in Iraq debate: The Washington Post notes a sad victory for the reality-based community (via Josh Marshall):

Republican lawmakers acknowledge that it is no longer tenable to say the news media are ignoring the good news in Iraq and painting an unfair picture of the war. In the first half of this year, 4,338 Iraqi civilians died violent deaths, according to a new report by the U.N. Assistance Mission for Iraq. Last month alone, 3,149 civilians were killed -- an average of more than 100 a day.

"It's like after Katrina, when the secretary of homeland security was saying all those people weren't really stranded when we were all watching it on TV," said Rep. Patrick T. McHenry (R-N.C.). "I still hear about that. We can't look like we won't face reality."

Despite my concern about the effectiveness of manipulative PR, facts should still prevail in the long run.

You were not listening to Representative McHenry, Grasshopper. He did not say, "We must face reality." He said, "We can't look like we won't face reality." You are naive, Grasshopper. You need further training before you face the cruel world.

The King of Zembla Gets It Right

The King of Zembla hits the nail on the head:

King of Zembla: How do you tell a pro-lifer? When the lab catches fire, he leaves the live baby and saves the five blastocysts. Mr. Bush did just that yesterday, exercising the first veto of his benighted presidency to deny medical researchers the use of embryonic stem cells that will now wind up in the dumpster instead:

Bush and his allies say that frozen embryos are tantamount to humans, and therefore are no more appropriate for medical research than are death row inmates. "If this bill were to become law," Bush said yesterday, "American taxpayers would for the first time in our history be compelled to fund the deliberate destruction of human embryos." Others reject that analysis, saying it would make killers of every couple that produces an unused embryo, and every employee and official who allows fertility clinics to produce and store such embryos. "If that's murder, how come the president allows that to continue?" asked Sen. Tom Harkin (D-Iowa). "Where is his outrage?" Harkin called the veto "a shameful display of cruelty, hypocrisy and ignorance."

Silly Tom Harkin. Trying to use logic on George W. Bush and company. They are impervious to logic.

Optimal Tax Policy

An old New York Times column by Hal Varian:

Hal Varian: In the debate over tax policy, the power of luck shouldn't be overlooked: Those who argue for a more progressive income tax emphasize equity: a tax dollar paid by a rich person causes less pain than a tax dollar paid by a poor person. Those who argue for a less progressive system emphasize efficiency: the most productive people should face lower tax rates to give them strong incentives to work harder and produce more.... This formulation of the optimal income tax problem was first examined by the economist James Mirrlees of Cambridge University, who received a Nobel in economic science for his analysis. In the simplest version of the Mirrlees model... those at the very top of the income scale should face low marginal rates....

Of course, the fact that it pays to reduce the marginal tax rate for billionaires doesn't say much about what tax rates should be like for mere millionaires.... But the intuitive argument presented above is pretty compelling: if income depends only on ability, those at the very top of the income-ability distribution should face low marginal tax rates.

But perhaps this model is too simple.... So let's consider a different model: one in which differences in income are a result only of luck.... In this case, the optimal income tax may well involve taxing billionaires at very high marginal rates. True, aspiring billionaires won't work quite as hard.... But the chances of becoming a billionaire are pretty low anyway, so taxing billionaires at a high rate won't really discourage much effort by those hoping to become one.... This is about as far as theory can take us, but it highlights the critical question: How much income results from ability and how much from luck?...

Christopher Jencks, and his collaborators pointed out many years ago that income inequality among brothers, who share similar genetic and environmental characteristics, is almost as great as for the population as a whole....

If luck plays a substantial role... it makes sense to have a progressive income tax, creating a form of social insurance in which the lucky subsidize the unlucky. Perhaps the folk singer Phil Ochs had the best answer for why the upper half of the income distribution should pay so much more in taxes than the lower half: ''And there but for fortune, may go you or I.''

A Request for Help...

Perhaps the weirdest of all Washington intellectuals-on-the-make is Marshall Whitman, now of the DLC and the "independent minded progressive" Bull Moose weblog at http://bullmooseblogger.blogspot.com/.

Today we see Roger Ailes's mind explodes as he contemplates Marshall Whitman of the 2000s:

Bull Moose: The Moose and the Donkey are pleased to join hands--or more precisely, hooves--and express gratification that Ralph Reed is not going to become Lieutenant Governor of Georgia. Nor will Brother Reed, whose eyes were on much higher aspirations, hear the strains of "Hail to the Chief."... Once among the highest and the mightiest in Republican councils, Reed could not win a low-turnout Republican primary in his adopted home state; indeed, state senator Casey Cagle wound up routing him by double digits.... The Moose does not fault brother Ralph for having been a leader in the religious right. There are many good and decent folks in the religious conservative movement. What the Moose faults Ralph for is his hypocrisy and crass cynicism as he reportedly exploited the good will of religious folks. Ralph Reed and Jack Abramoff truly deserve each other...

And Marshall Whitman of the 1990s:

Quote Cuisine: In 1988, Marshall Wittmann founded "Jews for George" and sure enough George H.W. Bush was elected president. In 1989, Wittmann was rewarded with a job as deputy assistant secretary of Health and Human Services. The ex-Trotskyite neocon['s]... job was to serve as liaison between HHS and social conservatives who were lobbying the department to tighten restrictions on abortion.... But Bush lost in 1992.... [H]e thought, " Hmmm, a Jew goes to the Christian Coalition, that might be interesting." He was savvy enough to figure that the Christian Coalition might want to hire a Jew just to show it wasn't bigoted. He wrote to Ralph Reed, the group's executive director, and asked for a job. Reed took him to lunch at Bullfeathers and hired him.... [T]he job was fascinating and it put Wittmann in the middle of the Republican revolution that seized control of Congress in 1995. He also got to attend a lot of Christian church services."I kinda liked the speaking in tongues," he says. "I've always wanted to do that in a meeting some day"...

But that's not all. In his time, Marshall Whitman has been a Clean-for-Gene 1968 Democratic liberal, a Young Sparticist, a Yarborough Texas Populist-Democrat, a worker for the Radical Zionist Alliance and then the UFW, an employee of the National Treasury Employees Union, an employee of the National Association of Retired Federal Employees, an anti-affirmative action Cultural Republican, a Jew for George [H. W. Bush], a Republican HHS staffer in charge of liaison with the crazies, a Christian Coalition apparatchik, Heritage Foundation liaison for Congress, a Hudson Institute staffer, a John McCain flack, and now an independent-minded progressive working for the Democratic Leadership Council. It is the zaniest careening ride of ideological chameleonship I have ever seen--far outstripping that of the original "Vicar of Bray."

So I want to ask one and all for help in composing, to the tune of the "Vicar of Bray," the:

Marshall Whitman Political Drinking Song

When good Ralph Yarborough was in Senate,
And Texas populism was in flower;
I worked for him like a loyal tenant , And so hoped to gain some power.

And this is true, I am no fool,
I'll always have the juice, Sir.
That whatsoever Party may rule,
I'm the progressive Bull Moose, Sir!

When Linda Chavez made her move,
To try to win in Maryland.
To her anti-PC message I grooved,
And there I took my stand.

And this is true, I am no fool,
I'll always have the juice, Sir.
That whatsoever Party may rule,
I will still be the Bull Moose, Sir!

When Clinton with Bush played the hob,
And kicked me out of HHS,
I found I badly needed a job,
And Christian Coalition feathered my nest.

And this is true, I am no fool,
I'll always have the juice, Sir.
That whatsoever Party may rule,
I'm the progressive Bull Moose, Sir!

When John McCain made straight talk
And needed a press spokes-man,
I talked the talk and walked the walk,
And always was the yes-man.

And this is true, I am no fool,
I'll always have the juice, Sir.
That whatsoever Party may rule,
I will still be the Bull Moose, Sir!

And now I'm at the DLC,
A Democrat--giving it my best,
Working to empower Nancy Pelosi,
Until I figure out where to jump next.

And this is true, I am no fool,
I'll always have the juice, Sir.
That whatsoever Party may rule,
I'm the progressive Bull Moose, Sir!

---

Still needed are verses for:

Eugene McCarthy
The Young Spartacists
The Radical Zionist Alliance
The United Farm Workers
The National Treasury Employees Union
The National Association of Retired Federal Employees
Jews for George [H.W.] Bush
Republican DAS in Health and Human Services (with the job of keeping anti-abortion crusaders on the reservation)
Heritage Foundation liaison with Congress
Hudson Institute

Not a Good Labor Market

Real wages are still falling:

USUAL WEEKLY EARNINGS OF WAGE AND SALARY WORKERS: SECOND QUARTER 2006: Median weekly earnings of the nation's 105.9 million full-time wage and salary workers were $659 in the second quarter of 2006, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This was 2.5 percent higher than a year earlier, compared with a gain of 4.0 percent in the Consumer Price Index for All Urban Consumers (CPI-U) over the same period.

Data on usual earnings are collected as part of the Current Population Survey, a nationwide sample survey of households in which respondents are asked, among other things, how much each wage and salary worker usually earns...

Robert Samuelson: Bush a Flatulent Cow Engaged in a Public Disinformation Campaign

Mark Thoma finds Robert Samuelson of Newsweek and theWashington Post far gone into total insanity: calling George W. Bush and the Republican Congressional leadership flatulent cows engaged in a campaign of public disinformation--that's a striking image:

Economist's View: Yet Another Robert Samuelson Edition...: No Shame, No Sense and a $296 Billion Bill, by Robert J. Samuelson, Commentary, Washington Post: [U]tterly shameless... President Bush... federal budget... flatulence in cows... the Republicans' orgy of self-approval amounts to a campaign of public disinformation.... [T]he budget should be balanced -- or run a surplus -- when the economy is close to "full employment," as it is now.... Bush doesn't praise... interest payment on the growing federal debt... rise from $184 billion in 2005 to $302 billion in 2011. Some conservatives rationalize their indifference to deficits as "starving the beast"... theory doesn't fit the facts...

Yep. He has been driven into shrill unholy madness by the mendacity, malevolence, incompetence, and disconnection from reality of George W. Bush and his administration.

Too bad we couldn't have had any of this rhetoric from Robert Samuelson six years ago, back when Bush was lowballing the cost of his tax cut by assuming that most of it would be snarfed back by the Alternative Minimum Tax when adding all the numbers up and highballing the "benefits" to the rich by assuming the AMT would be repealed when calculating any individual's tax cut. That was a bigger campaign of public disinformation. And I'm sure Samuelson was hearing the same things I was in 2000 from people who'd been to Crawford and come back shaking their heads at what they found there.

And it's too bad that Robert Samuelson has turned himself into the Noam Chomsky of the budget with his insistance on "moral equivalence" in fiscal policy: that in every column of his he has to make stuff up so that he can claim that "Democrats aren't much better [than Republicans]." You have to very carefully parse Samuelson's words: when Samuelson writes that "budget surpluses from 1998 to 2001... resulted mainly from the end of the Cold War (which lowered defense spending) and the economic boom" he is not denying that Clinton did a huge amount of heavy lifting to improve the fiscal situation--he is only asserting that Clinton's policy changes brought the budget back from the Reagan deficits not into surplus but only into rough balance. (I have dealt with this before.)

Still, flatulent cows engaged in a public disinformation campaign--that's good.

Worth Reading, 20060718

Worth reading, July 18, 2006:

The Horse's Mouth: TIMES CORRECTS FALSE HILLARY STORY. As you know by now, the Times erroneously reported that Hillary "chastised Democrats" for "wasting time" when in fact she was talking about the GOP-controlled Congress. Many of us squawked and screamed. And it looks like it worked. The Times has now posted this editor's note: "An article published on the Web site of The New York Times on Sunday reported on a speech by Senator Hillary Rodham Clinton in Rogers, Ark. The headline and article said that Mrs. Clinton had criticized Democrats on Saturday for "wasting time" by dealing with issues that helped Republicans turn out voters rather than finding consensus on mainstream subjects. The opening sentence of the article and the headline were based on a misinterpretation of a passage in her speech in which she first referred to the Democrats' agenda in the Senate and then went on to criticize the actions of the Republican majority in Congress. She was referring to the Republican-led Congress -- not Democrats -- when she said: "So we do other things, we do things that are controversial, we do things that try to inflame their base so that they can turn people out and vote for their candidates. I think we are wasting time, we are wasting lives, we need to get back to making America work again, in a bipartisan, nonpartisan way." The article used only the phrase "wasting time," not the full quotation."

Daily Kos: Through the Looking Glass: Can the American army rein in the Shiite militias and the Shia Iraqi forces? The very same Iraqi forces that we trained to stand up so we could stand down? Well, now that those forces have stood up, in a manner of speaking, we can't stand down. Iraq is in complete chaos and the Bush administration has no plan. And now we've reached the point where the Sunni seek support from the United States against the American trained and installed Shia forces? We are through the looking glass...

In an About-Face, Sunnis Want U.S. to Remain in Iraq - New York Times: By EDWARD WONG and DEXTER FILKINS: As sectarian violence soars, many Sunni Arab political and religious leaders once staunchly opposed to the American presence here are now saying they need American troops to protect them from the rampages of Shiite militias and Shiite-run government forces. The pleas from the Sunni Arab leaders have been growing in intensity since an eruption of sectarian bloodletting in February, but they have reached a new pitch in recent days as Shiite militiamen have brazenly shot dead groups of Sunni civilians in broad daylight in Baghdad and other mixed areas of central Iraq...

Backreaction: Neutrinos for Beginners: When I started my position at the University of Arizona, Keith suggested an interesting work about neutrinos to me. I didn't know very much about neutrino physics at this time (okay, I didn't know anything at all). However, I could immediately relate to these elusive particles with small masses that interact only weakly, and which have caused not little physicists to scratch their head. During the following year, I learned a lot about neutrinos. Here, I'd like to give you a short and very basic introduction of what turned out to be a very fascinating and lively field of theoretical as well as experimental physics...

Daniel Gross: July 16, 2006 - July 22, 2006 Archives: GREAT MOMENTS IN CREDULITY: From an article by Michael Abramowitz and Chuck Babington in yesterday's Washington Post.... It's amazing to me that two reporters could print that quote from Milburn, even with the two paragraphs that follow. Why? To say that discretionary spending has been kept in check in the Bush years is, lets see, how should I put this, an appalling lie!...

TAPPED: CHUTZPAH. Hartford Courant columnist Kevin Rennie thinks he's picked up on Joe Lieberman's coming message: Heads I win, tails I make you lose. Rennie writes that "[t]he theme of a Saturday conclave of Greater Hartford Democratic town committee chairs was that if Lieberman loses the primary he will hurt all other Democratic candidates by running as an independent in November. The message was clear: help him now or your favorites suffer in November." So vote Lieb, or the Democratic Party gets it!... Lieberman, after all, need not run as an independent. If he loses the primary, he could bow to the will of the voters and simply slink off into a world of corporate boards and speaking engagements. Man has known worse fates.... What's remarkable, though, is that so little attention is paid by Lieberman's supporters to the import of his decision: It is Lieberman, not Lamont, who will create the three-way race. It is Lieberman, not Lamont, who is choosing to render this a Republican pick-up opportunity. It is Lieberman, not Lamont, who has decided his personal ambitions outweigh the Democratic Party's prospects...

The Corner on National Review Online: Hezbollah's Casualties, The Cynical View [Jonah Goldberg]: I should have mentioned this in the original post. But several readers have raised the other possibility that some of the "civilians" are in fact members of Hezbollah and the Western press takes casualty reports at face value. Maybe. It's not like we haven't see that before. Still, most of these casualties must in fact be civilians — the refugee caravan for example — and Israel has not denied as much...

Stockblog: Market Votes No on Recession: What today's 200 point Dow rally makes obvious is that the market is far more afraid of Ben and his Greenspanian minions overshooting than it is of inflation. So we rally huge on the slightest increase in perception that the Fed may be done soon. We've heard it all before. The bond kings been calling for the Fed to pause and even begin lowering rates back into last year...

Stockblg: Most Ignorant Question Ever Asked: I like to watch our Fed Chairmen report to our elected officials, not for the economic information derived from it, but for laughs. Senator Richard Shelby says, "Historically, energy prices have been excluded from the measure of what you call core prices in the consumer price index. If there is a sustained increase in energy prices, would it be more appropriate for policy makers to rely upon an inflation measure, which includes the energy costs. In other words, does the exclusion of energy prices from the definition of core prices pose any problems for our economists trying to understand the health of our economy at the present time?" OH MY GOD!!! Watching our elected officials try and talk about economics, even the very most basic, is better than anything the Comedy channel puts out. He couldn't possibly have come up with a more idiotic and economically ignorant question to ask. There's no way I could take such a question with a straight face. I'd be like, "Who in the hell elected you and why are you a chairman of anything. You're a freakin' moron." An inflation measure including energy prices? It's called the CPI, aka the headline inflation number that hits the front page newspapers across the country and world. If you put energy prices (and food) back into core, then you've got just the original CPI that we took energy and food prices out of in the first place. The purpose of the core CPI is not to measure overall inflation. That's the purpose of the CPI. The use of the core CPI is to isolate out other prices and see what's happening to them. In recent years it has been to determine how higher energy prices are impacting the prices of other goods...

Michael Walzer: There cannot be any direct attacks on civilian targets (even if the enemy doesn't believe in the existence of civilians), and this principle is a major constraint also on attacks on the economic infrastructure. Writing about the first Iraq war, in 1991, I argued that the U.S. decision to attack "communication and transportation systems, electric power grids, government buildings of every sort, water pumping stations and purification plants" was wrong. "Selected infrastructural targets are easy enough to justify: bridges over which supplies are carried to the army in the field provide an obvious example. But power and water ... are very much like food: they are necessary to the survival and everyday activity of soldiers, but they are equally necessary to everyone else. An attack here is an attack on civilian society. ... [I]t is the military effects, if any, that are 'collateral.'" That was and is a general argument; it clearly applies to the Israeli attacks on power stations in Gaza and Lebanon...

ThinkProgress: Defending Bush's Veto, Rove Grossly Distorts Stem Cell Science: Today, Bush is expected to veto a bill that would expand federal funding for embryonic stem cell research.... Last week, Karl Rove... told the Denver Post that "recent studies" show researchers "have far more promise from adult stem cells than from embryonic stem cells." The Chicago Tribune contacted a dozen top stem cell experts about Rove's claim. They all said it was inaccurate. So who wrote the "studies" that Rove was referring to? White House spokesman Ken Lisaius on Tuesday could not provide the name of a stem cell researcher who shares Rove's views on the superior promise of adult stem cells...

The Horse's Mouth: EDITORIALS GIVING A FREE PASS TO KILLING OF CIVILIANS. Don't miss the latest installment of Greg Mitchell's indispensible column in Editor and Publisher. In it, he comes right out and says that the country's editorial boards have been woefully remiss in condemning Israel's killing of civilians in Lebanon: "While it's not surprising that nearly every editorial page in the U.S. has offered support for Israel's right to retaliate against Hamas and Hezbollah, it's a disgrace that few have expressed outrage, or at least condemnation, over the extent of death and destruction in and around Beirut -- and the attacks on the country's infrastructure, which harms most citizens of that country. Hundreds of civilians have been killed in Lebanon, dozens of bridges and part of Beirut's airport destroyed, power stations and ports short-circuited. Latest reports put the number of refugees at half a million, with thousands of Americans waiting for evacuation..."

WSJ.com - Rambus to Restate Results To Fix Options Accounting: Rambus Inc. said it plans to restate financial statements dating back to 2003 and incur "significant" costs to correct errors related to its stock-option accounting. Shares of Rambus plunged on the news. The Los Altos, Calif., maker of memory chip technology joins about a dozen companies that are working on restatements because of errant accounting for their option grants to top executives and other employees. Federal authorities are also investigating more than 50 companies to determine whether options were illegally backdated or otherwise manipulated. Rambus said its audit committee has determined additional stock-based compensation expenses should have been recorded with respect to certain grants and recognized over the vesting period of the options. The company said the committee considers the amount of the additional expenses to be "material," although it hasn't yet completed its work and reached final conclusions...

The Big Picture: Bernanke & the Markets: Let's cut Ben Bernanke a break: the present situation wasn't of his making; he merely inherited a bad economic set up. Slowing growth, rising inflation, high energy costs, a real estate dependent economy, and the longstanding problem of excess liquidity -- none of these rest at the feet of the present Fed Chair. In reality, they are the result of what Tim Iacono charitably describes as The Mess That Greenspan Made.

Uncertain Principles: Excellent Teaching Advice by Chad Orzel: I'd be remiss in my academic-blogging duties if I failed to point out this Inside Higher Ed piece on teaching core courses. Like many articles published in academic magazines, it's aimed directly at English composition, but the main points can be extended to intro classes in other disciplines. In particular: "10. Don't compare students' attitudes to your own. A colleague of mine who taught business at a private university constantly made scathing comments about his students' seeming lack of effort. "I can't believe you guys don't know this stuff!" he would shout at them. Time and time again, he referred to his own college days -- how he went above and beyond what was expected by his professor, excelled in his subject, and earned stellar grades. The dean finally called him into his office and confronted him, saying, "These students are not you. You majored in this subject; of course you were interested in it. They are taking this as a requirement. Lighten up." As my colleague sat there speechless, the dean continued, "And anyway, don't you ever remember taking courses you didn't like? Try to think back to when you were 20." This is not to say that we can't expect students to achieve the goals we set out for them. But it helps to recognize that there are sometimes years -- or even decades of difference in context and values between us and our students."

Kudos to Walter Pincus

Cowardly newsrooms--but kudos to Walter Pincus:

Poynter Online - Forums: From CHRISTOPHER YASIEJKO: I applaud Walter Pincus for his call to refuse the publication or broadcast of government statements that clearly offer no news and are designed as public relations tools. Many times I have listened to or watched a clip of President Bush making a statement that illuminates nothing (and often sounds embarrassingly trite), only to find a headline and story the next morning that lend credibility and even intelligence to the statement.Newspapers and broadcast outlets continue to relay the administration's every word because the administration says so little. Pincus is right to call it courageous to not publish or broadcast clearly empty statements -- anyone making such a decision likely would be isolated in his or her choice. It's akin to the use by sportswriters of quotations from the mouths of athletes -- the players' postgame words, as quoted in most game stories, seldom add depth in lieu of that mathematical mystery known as 110 percent. For those who counter that any statement by the president or by members of his administration is by default newsworthy, it is incumbent upon the press to question the validity and worth of those statements. If enough publications and stations immediately followed a quotation with context that revealed it as misleading, false or a hackneyed talking point, the administration's public relations arm might begin to think twice about inventing or repeating "news." I have no faith that such courage will make itself known anytime soon...

Scott Rosenberg Is Really Shrill

Morally bankrupt Bush:

Boing Boing: Bush's threat to veto stem cell funding is morally bankrupt: Scott Rosenberg of Salon has an excellent blog entry explaining why Bush's threat to veto federal funding of stem cell research is shamefully ridiculous.

Here is why Bush's position is a joke: Thousands and thousands of embryos are destroyed every year in fertility clinics. They are created in petri dishes as part of fertility treatments like IVF; then they are discarded. If Bush and his administration truly believe that destroying an embryo is a kind of murder, they shouldn't be wasting their time arguing about research funding: They should immediately shut down every fertility clinic in the country, arrest the doctors and staff who operate them, and charge all the wannabe parents who have been wantonly slaughtering legions of the unborn. But of course they'll never do such a thing. (Nor, to be absolutely clear, do I think they should.) Bush could not care less about this issue except as far as it helps burnish his pro-life credentials among his "base."

A Condemnation of Israeli Tactics

Michael Walzer condemns Israeli tactics in Gaza and Lebanon:

Why Israel is entitled to act: There cannot be any direct attacks on civilian targets (even if the enemy doesn't believe in the existence of civilians), and this principle is a major constraint also on attacks on the economic infrastructure. Writing about the first Iraq war, in 1991, I argued that the U.S. decision to attack "communication and transportation systems, electric power grids, government buildings of every sort, water pumping stations and purification plants" was wrong. "Selected infrastructural targets are easy enough to justify: bridges over which supplies are carried to the army in the field provide an obvious example. But power and water ... are very much like food: they are necessary to the survival and everyday activity of soldiers, but they are equally necessary to everyone else. An attack here is an attack on civilian society. ... [I]t is the military effects, if any, that are 'collateral.'" That was and is a general argument; it clearly applies to the Israeli attacks on power stations in Gaza and Lebanon.

The argument, in this case, is prudential as well as moral. Reducing the quality of life in Gaza, where it is already low, is intended to put pressure on whoever is politically responsible for the inhabitants of Gaza--and then these responsible people, it is hoped, will take action against the shadowy forces attacking Israel. The same logic has been applied in Lebanon, where the forces are not so shadowy. But no one is responsible in either of these cases, or, better, those people who might take responsibility long ago chose not to. The leaders of the sovereign state of Lebanon insist that they have no control over the southern part of their country--and, more amazingly, no obligation to take control. Still, Palestinian civilians are not likely to hold anyone responsible for their fate except the Israelis, and, while the Lebanese will be more discriminating, Israel will still bear the larger burden of blame. Hamas and Hezbollah feed on the suffering their own activity brings about, and an Israeli response that increases the suffering only intensifies the feeding....

Since Hamas and Hezbollah describe the captures as legitimate military operations--acts of war--they can hardly claim that further acts of war, in response, are illegitimate. The further acts have to be proportional, but Israel's goal is to prevent future raids, as well as to rescue the soldiers, so proportionality must be measured not only against what Hamas and Hezbollah have already done, but also against what they are (and what they say they are) trying to do. The most important Israeli goal in both the north and the south is to prevent rocket attacks on its civilian population, and, here, its response clearly meets the requirements of necessity.... The crucial argument is about the Palestinian use of civilians as shields.... Israeli soldiers... are expected to do everything they can to prevent civilian deaths, and... to fight against an enemy that hides behind civilians....

[T]he Palestinian use of civilian shields, though it is a cruel and immoral way of fighting, is also an effective way of fighting. It works, because it is both morally right and politically intelligent for the Israelis to minimize--and to be seen trying to minimize--civilian casualties...

Why Oh Why Are We Ruled by These Liars?

Liars:

ThinkProgress: Defending Bush's Veto, Rove Grossly Distorts Stem Cell Science: Today, Bush is expected to veto a bill that would expand federal funding for embryonic stem cell research.... Last week, Karl Rove... told the Denver Post that "recent studies" show researchers "have far more promise from adult stem cells than from embryonic stem cells." The Chicago Tribune contacted a dozen top stem cell experts about Rove's claim. They all said it was inaccurate. So who wrote the "studies" that Rove was referring to? White House spokesman Ken Lisaius on Tuesday could not provide the name of a stem cell researcher who shares Rove's views on the superior promise of adult stem cells...

Impeach George W. Bush. Impeach him now.

Why Oh Why Can't We Have a Better Press Corps? (I Give the Washington Post Twenty Years Department)

Daniel Gross is unhappy that the Washington Post employs Michael Abramowitz and Charles Babbington as journalists:

Daniel Gross: July 16, 2006 - July 22, 2006 Archives: GREAT MOMENTS IN CREDULITY: From an article by Michael Abramowitz and Chuck Babington in yesterday's Washington Post.

"By working closely with Congress -- and by threatening vetoes when they were called for -- discretionary spending has been kept in check and there hasn't been a need to veto a spending bill," said Scott Milburn, a spokesman for the Office of Management and Budget.

But some fiscal conservatives complained that the absence of presidential vetoes reflects a lack of interest by Bush in challenging Congress to reduce costs in large spending bills that are outside the regular budget process -- such as highway, energy and agriculture bills that were full of expensive projects. As long as Bush was receiving support for his big agenda items such as tax cuts and the Iraq war, he went along with the bills, they said.

He just decided not to spend the political capital in fighting Congress on spending, and Congress basically agreed to go along with his biggest priorities," said Pat Toomey, president of the Club for Growth. "That's gotten us to the point where spending has gotten out of control."

It's amazing to me that two reporters could print that quote from Milburn, even with the two paragraphs that follow. Why? To say that discretionary spending has been kept in check in the Bush years is, lets see, how should I put this, an appalling lie! Just check out this chart from Cato.

As I have said before, informing its readers about the state of the world is just not something that a young Washington Post reporter these days is taught to care about. And it shows.

But Scott Milburn is happy. Much good may Scott Milburn's happiness with Abramowitz's and Babbington's work do them, because it's the only thing they've got going for them now, isn't it?

Why Oh Why Are We Ruled by These Morons?

Bushes lieutenants:

Think Progress: Energy Secretary in Baghdad: "Far More Stable" Than In 2003: Energy Secretary Samuel Bodman was in Baghdad yesterday.... The New York Times reports, Bodman %u201Chad a rosy view of progress here since his last visit in 2003: "The situation seems far more stable than when I was here two or three years ago," he said in an interview in the fortified Green Zone. "The security seems better, people are more relaxed. There is an optimism, at least among the people I talked to."...

And here's someone not on the direct Bush payroll:

“The condition there is worse than I expected,” according to Rep. Gil Gutknecht (R-MN), who just returned from a visit to Iraq. “Baghdad is worse today than it was three years ago,” he said. Gutknecht was critical of some of the “spin” from Bush administration officials. “We learned it’s not safe to go anywhere outside of the Green Zone any part of the day.” He added, “What I think we need to do more is withdraw more Americans.”...

A Slightly, Slightly Unfavorable CPI Report

The Wall Street Journal writes:

WSJ.com - Consumer Prices Climb 0.2% Despite Drop in Energy Costs: JENNIFER CORBETT DOOREN and JEFF BATER: June consumer prices increased by 0.2%, after climbing 0.4% in May, the Labor Department said Wednesday. Core consumer prices, which exclude food and energy items, grew 0.3% in June for the fourth consecutive month at that pace. The core increase was just above Wall Street expectations while the overall consumer prices were in line with expectations. The median estimate of 22 economists surveyed by Dow Jones Newswires and CNBC had projected a 0.2% gain in the main number and a 0.2% rise in the core....

Markets reacted immediately to the numbers. Stock futures gave up early gains, on the expectation the Fed will be more likely to raise interest rates again in August. The federal-funds futures contract at the Chicago Board of Trade, where traders bet on future Fed policy, priced in a 90% chance of a quarter-point August increase, compared with 68% before the consumer-price release.... The Labor Department's consumer price report showed prices are 4.3% higher than a year ago with core prices rising by 2.6% during the same time frame. During the past three months overall consumer prices have risen 5.1% and have been up by 3.6% when food and energy prices are excluded...

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

CJR Daily really does not need to have Felix Gillette writing for it. He says:

CJR Daily: Where's the Thief? The 'Options Scandal' is a Dud: Remember that era long ago when the term "options" wasn't yet a dirty word? Yeah, neither do we. These days, you can hardly pick up a business section without seeing a provocative headline using some combination of the words "options" and "scandal."... In recent weeks, this supposed national corporate stock options scandal has started to remind us of nothing less than the Duke lacrosse scandal -- perhaps because in both cases the swarm of accusatory press coverage swirling around the developing story seems to have rapidly outpaced any actual proof of criminal wrongdoing.

The current hubbub can be traced to an academic paper that a Norwegian economist in Iowa published last year in a seemingly obscure journal called Management Science. In the study, "On the Timing of CEO Stock Option Awards," Erik Lie, a finance professor at the University of Iowa, examined how and when various companies awarded stock option grants to their executives between 1992 and 2002. "Stock options are generally granted with a fixed exercise price equal to the stock price on the award date," Lie wrote in the paper's introduction. "If executives can influence the timing of a grant, they might therefore time it to occur (i) after an anticipated future stock price decrease, (ii) after a recent price decrease... or (iii) before an anticipated stock price increase. In any of these cases, self-serving behavior by executives should manifest itself in stock price decreases before stock option grants and/or stock price increases afterward."...

From there, the would-be scandal gained momentum this past March, when the Wall Street Journal picked up on Lie's research and published a story entitled, "The Perfect Payday," which would prove to be the first of an ever-expanding series of articles about options backdating. "The Journal's analysis of grant dates and stock movements suggests the problem may be broader," reported the Journal. "It identified several companies with wildly improbable option-grant patterns. While this doesn't prove chicanery, it shows something very odd: Year after year, some companies' top executives received options on unusually propitious dates." Over the past several months, short of actually proving chicanery, the Journal has suggested the possibility of chicanery at a long list of companies. For readers who like their schadenfreude catalogued, the Journal has even published a handy Options Scorecard, listing some 50 or so companies and noting which ones are currently being investigated by the SEC, the justice department, and so on.

But having your books looked over by the SEC no more makes you guilty of corporate malfeasance than having your block patrolled by a beat cop makes you guilty of kicking the tar out of your neighbor. With more than two-thirds of all SEC investigations resulting in clean bills of health, we humbly submit that the nation's greatest business paper should impose some minimum quota on its a priori insinuations of guilt. Indeed, the vast majority of companies on the Journal's most-wanted list haven't been found guilty of anything -- a fact that the editors of the Journal's series themselves admit (albeit in a roundabout manner). "Granting an option at a price below the current market value, while not illegal in itself, could result in false disclosure," reported the Journal.

This is kind of like saying: buying alcohol at the store, while not illegal in itself, could result in drunk driving. What would happen if a powerful paper in a close-knit community published the names of everyone in town who had recently bought alcohol as part of a larger story about a widening drunk driving scandal? Chances are, other people in the community would soon start wagging their tongues and pointing their fingers at the people on the list -- which is exactly what has happened to the companies fingered by the Journal...

No. It's not like that at all.

The key phrase is "could result in false disclosure." A company that issues an in-the-money option has always needed to account for the option as employee compensation. A company that backdates an in-the-money option to make it look like an out-of-the-money option has falsified its income statement--done, on a much smaller scale, what WorldCom did in claiming high profits by classifying operating expenses as investments in capacity.

CJR has limited credibility. It doesn't need to have Felix Gillette burning it this way.

Reclassify Felix Gillette as UNRELIABLE. Reclassify CJR Daily as LACKING QUALITY CONTROL.

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

The New York Times lies again--this time in its "corrections" department:

Corrections - New York Times: A front-page article on Sunday about the re-election campaign of Senator Joseph I. Lieberman misstated the position he took on the nomination of Judge Samuel A. Alito Jr. to the Supreme Court in some copies. Mr. Lieberman opposed a filibuster against Judge Alito's nomination, but did not support the nomination itself.

When the Senate is divided as the Senate is now, to oppose a filibuster is to support the nomination. The two right ways to describe Lieberman's position on Alito are "Lieberman wanted Alito to be confirmed" and "Lieberman wanted Alito to be confirmed, and also wanted to pretend that he opposed Alito."

We're not dumb--or at least not as dumb as the New York Times wants us to think.

A Little Bit of Bad Inflation News...

Good news on the core PPI: up only 0.2%

Wholesale Prices Jump in June - New York Times: By JEREMY W. PETERS: Published: July 18, 2006: The Labor Department said today that the producer price index rose 0.5 percent in June, following a 0.2 percent increase in May. The consensus forecast among economists had been for a 0.3 percent increase in June. A separate calculation of producer prices excluding the food and energy categories, which are subject to volatile monthly swings, showed more modest increases. That figure, known as the core index, rose 0.2 percent in June, in line with economists' expectations; it rose 0.3 percent in May....

There were conflicting signals in today's Labor Department report, leaving analysts to differ over how severe the inflationary pressure now is. "Wholesale price inflation continues at a pace that makes the Federal Reserve uneasy, even as economic growth slows," said Peter Morici, a professor at the University of Maryland School of Business. "Today's producer-price data indicate that another interest rate hike is likely, even if it poses considerable risks to growth." Noting that much of the increase in June related to higher food costs, Kenneth Beauchemin, an economist with Global Insight, said, "Given that these price movements are the consequence of bad luck on the supply side, and not fundamental inflationary pressures, the Fed will be satisfied with the downward move in the core rate."

Nobody has told Jeremy Peters that he needs to look at the market's reaction to the news:

AP Wire | 07/18/2006 | Treasurys down after inflation update: Yields on three-month Treasury bills rose 5.13 percent as the discount rose 0.05 percentage point to 5.00 percent.

More traders with more money took this news as a sign that the Federal Reserve will be more worried about inflation and more likely to raise interest rates. That would have been, perhaps, the most useful thing Jeremy Peters could tell his readers about the PPI number.

The Political Philosophy of Karl Schmitt

John Holbo writes:

John Holbo: here is what Schmitt actually says.... "[I]t would be senseless to wage war for purely religious, purely moral, purely juristic, or purely economic motives. The friend-and-enemy grouping and therefore also war cannot be derived from these specific antitheses of human endeavor. A war need be neither something religious or something morally good nor something lucrative. War today is in all likelihood none of these...."

[Karl Schmitt's] argument is...: since the economic reality does not support war, but it is clear that the possibility of war remains real, therefore the friend-enemy distinction must be fundamental. I have to admit it: that makes a dismal sort of sense to me. And reading the newspaper doesn't make it make less sense, I'm sad to say. I also agree with [John] Quiggin that Schmitt seems weirdly insulated from these facts, even though he more or less lays them out himself. He complains about one sinister, crazy thing -- going to war for profit -- but seems placidly untroubled by the sinister craziness of going to war even though its not profitable, just because you are locked in a friend/enemy thing...

What Holbo fails to grasp, I think, is that to Schmitt harming, enslaving, and killing your enemies is the entire point of human existence. It is not "sinister craziness," it is jolly good fun. Karl Schmitt is a KathederGenghisKhan:

• It is not sufficient that I succeed--all others must fail.
• The Greatest Happiness is to scatter your enemy and drive him before you. To see his cities reduced to ashes. To see those who love him shrouded and in tears. And to gather to your bosom his wives and daughters.

Worth Reading: 20060717

Worth reading, July 17, 2006

normblog: The crisis in the Middle East (updated): If you're looking for any wisdom from me on this, I have none to offer. Here are some reading links to pieces I've found interesting and/or informative...

Thus Blogged Anderson.: Dark Star: Google suggests that I've not mentioned Furst before. Dark Star is apparently considered by many to be his best: pre-WW2 espionage with emphasis on the Soviet side. Best for its rendering of the political atmosphere of the times--but a good espionage read, too...

Nieman Watchdog > Commentary > Twelve things journalists need to remember to be good economic reporters

Discourse.net: Enron's Special Purpose Entities: My pet gripe in the whole accounting simplification debate is how business and the accounting industry citie Enron as evidence that we need less detailed rules. They argue that detailed rules provide a roadmap for technical compliance that violates the spirit of the rules. In contrast, simple rules could not be gamed. In fact, Enron demonstrates the need for detailed rules...

Ron Suskind: Articles: Why Are These Men Laughing? "Why Are These Men Laughing" contained a series of critiques of the Bush administration from an ex-White House official, John DiIlulio. DiIluio, whose thoughts were sent to the author in a polished, elegantly constructed seven-page memo, was the first ranking administration official to publicly criticize his boss. According to DiIulio, the political team at the White House was making every policy decision, ignoring the advice of experts. New York Times columnist Paul Krugman, commening on this article, said it was now clear that the Bush White House had "no interest in the substance of policy, caring only about political payoffs." Shortly after the article appeared in Esquire, the White House went on the offensive, forcing DiIulio to apologize for his assessments that drew a comparison to Stalinist Russia in the Washington Post..

The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O'Neill

Ron Suskind: Articles: Without a Doubt Author Note: Published two weeks before the 2004 election, "Without a Doubt" profiled a president driven by religious certitude. Instead of grappling with the nuance of complicated policy issues, this president often relies on a black-and-white view of the world in which disputes can be cast as good vs. evil. This article was also the first to report that Bush would attempt to make changes to Social Security, a fact his campaign strenuously denied but was soon proved true. The article also coined the term "reality based community," which has since entered the political lexicon...

The One Percent Doctrine

Brendan Nyhan: Bush to Putin: "Just wait" on Iraq democracy: Doesn't Bush's statement deserve some attention? Under Michael Kinsley's classic definition, a gaffe is when a politician tells the truth. In this case, Bush has said what he thinks is the truth -- Iraq is progressing toward full-blown democracy -- at a time when the reality-based community sees the country as rapidly sliding toward civil war. Given this comment and others like it, I think it's increasingly clear that Ron Suskind is the most important journalist in America. He's consistently done the best work on the Bush administration's faith-based approach to public policy...

HOTSOUP.com: HOTSOUP will create a new community of influence among those in government, politics, business and entertainment who make the decisions and those who want to impact them. It will bring the inside world out and the outside world in, and create a richer dialogue and stronger connections among all of these Opinion Drivers...

Fafblog! the whole worlds only source for Fafblog.: George W. Bush has to take this case to the highester court in the land: the court of George W. Bush. It's a tough bench alright, but Bush can win this one as long as he exercises his constitutional right to ignore the Constitution. The legal technicalities are pretty complicated but Giblets believes it involves filing a writ of neener neener according to the precedent of I Can't Hear You v. I'm Not Listening. Only then can the forces of freedom protect America from the hordes of Democrofascists that would menace her with their savage civil liberties!...

Balkinization: Sunday, July 16, 2006 The Letter Scott Horton: Was Leo Strauss democracy's best friend? In a letter written at the time of his emigration, Strauss describes his political principles - Fascist, Authoritarian, Imperialist...

Robert's Stochastic thoughts: Not Seeing the Forest for the Trees. Brad DeLong asks where is my post on the arrest of two high ranking officers of SISMI (Italian military intelligence think CIA with no restiction on domestic spying) I can explain. I know nothing nothing. For one thing we are moving to a new house. For another said new house does not have a telephone or electricity yet hampering my internet access. Thus I am now in Sardinia which involves going on a car ferry with a TV tuned by the crew. If you think that Italians are going to watch the news when they can watch a world cup semi final in which Italy beat Germany, then your grasp of Italian politics is hopelessly weak.... Believe me, "Milanese magistrates investigate SISMI" is a shocker like "Brad DeLong does not plan to vote for Richard Cheney in 2008." It never crossed my mind that the news would be worth a blog post.... In a totally unscientific poll 5 Italian adults stared at me as if I was crazy when I asked them if they were suprised that SISMI officers were breaking Italian law in cooperation with CIA agents. It's like asking someone if they have ever heard of the theory that the earth is round...

Thomas P.M. Barnett :: Weblog: Tom: Angell or not?: Curzon of Coming Anarchy discusses Norman Angell. It caught my eye because Tom is sometimes accused of being Angell in the sense of 'optimistically predicts an end to great power war because of globalization, but tragically wrong'. Tom says the difference is that now we have nukes, which have ended great power war. So Tom says he's Angell, with NUKES! Tom says globalism plus nukes ends great power war. I think this is one of the places where he and the Coming Anarchists (and their patron saint, Robert Kaplan) are in fundamental disagreement...

Paul Kedrosky's Infectious Greed: Option Backdating: Tech is the Worst Offender: A new paper by Eric Lie and Randall Herron on stock option backdating is going to get lots of attention. Among other things, it says that almost 30% of companies have used backdated options. I was particularly fond of the following table showing the worst backdating offenders stratified along various dimensions -- and tech is well out in front...