Obama is NOT listening to his economic advisors

Hence, the job-killing Patriot Employer Act he is sponsoring:

Mr. Obama's proposal would designate certain companies as "patriot employers" and favor them over other, presumably not so patriotic, businesses.

The legislation takes four pages to define "patriotic" companies as those that: "pay at least 60 percent of each employee's health care premiums"; have a position of "neutrality in employee [union] organizing drives"; "maintain or increase the number of full-time workers in the United States relative to the number of full-time workers outside of the United States"; pay a salary to each employee "not less than an amount equal to the federal poverty level"; and provide a pension plan.

In other words, a patriotic employer is one which fulfills the fondest Big Labor agenda, regardless of the competitive implications. The proposal ignores the marketplace reality that businesses hire a work force they can afford to pay and still make money. Coercing companies into raising wages and benefits above market rates may only lead to fewer workers getting hired in the first place.

Under Mr. Obama's plan, "patriot employers" qualify for a 1% tax credit on their profits. To finance this tax break, American companies with subsidiaries abroad would have to pay the U.S. corporate tax on profits earned abroad, rather than the corporate tax of the host country where they are earned. Since the U.S. corporate tax rate is 35%, while most of the world has a lower rate, this amounts to a big tax increase on earnings owned abroad.

Put another way, U.S. companies would suddenly have to pay a higher tax rate than their Chinese, Japanese and European competitors. According to research by Peter Merrill, an international tax expert at PriceWaterhouseCoopers, this change would "raise the cost of capital of U.S. multinationals and cause them to lose market share to foreign rivals." Apparently Mr. Obama believes that by making U.S. companies less profitable and less competitive world-wide, they will somehow be able to create more jobs in America.

He has it backwards: The offshore activities of U.S. companies tend to increase rather than reduce domestic business. A 2005 National Bureau of Economic Research study by economists from Harvard and the University of Michigan found that more foreign investment by U.S. companies leads to greater domestic investment, and that U.S. firms' hiring of more offshore workers is positively, not negatively, associated with the number of American workers they hire. That's in part because often what is produced overseas by subsidiaries are component parts to final, higher-value-added products manufactured here.

It's all about Ohio in this election; if the Democrats can take this state they will have the election nearly locked up. Bush similarly pandered with his steel tariffs. The distortions of democracy in America (e.g. subsidizing corn ethanol ahead of the Iowa caucuses) lead to job destruction, ironically in the name of job protection.

UPDATE: Greg Mankiw, William Buiter, and Anne Sibert hate it, too.

UPDATE: Don Boudreaux notes Obama's deaf ear to his economic advisors as well, and invokes the concept of Consumer Sovereignty (hear ye, those of you who are "pro-choice"):

There are countless distressing facets of this anti-trade nonsense. One of these is the weaselly "I'm for free trade as long as it's fair trade" refrain. Such a claim (now as familiar in political campaigns as Dunkin' Donuts) is a cowardly attempt by the candidate to stand on both sides of the issue by invoking a word ("fair") loaded with emotion but devoid, in this context, of meaning. No one, as far as I know, favors unfair trade -- but by slapping the label "unfair" on any trade that a candidate's favorite constituents dislike, that candidate can oppose free trade while claiming still to support free trade.

Such a rhetorical gimmick is unfair.

Also distressing is the fact that Austan Goolsbee, the fine economist who is a close adviser to Obama, apparently is ignored by the would-be President of the USA on this front. Of course, I have no knowledge of what Goolsbee says and doesn't say to Obama, but I presume that Goolsbee isn't in the anti-trade camp. Consider that just this past June Goolsbee had this excellent column in the New York Times, with this key passage:

We [Americans] hate experiencing major adjustments and industry transformations that force people to look for new jobs. That experience has made many skeptical about the future of the United States in the world economy. Yet the evidence seems to show that for all our dissatisfaction, we are the most flexible economy around and may be best poised to take advantage of the coming changes on a global scale precisely because we are so good at adjusting.

A related source of distress is Alan Blinder's recent skepticism of trade -- his lending his good name and the prestige of the economics profession to protectionists.

Trade is just one manifestation of consumer sovereignty. Just as there are, by Blinder's calculus, winners and losers from consumers shifting their expenditures from goods made in America to goods made abroad, there are winners and losers from consumers shifting their expenditures from goods made in Illinois to goods made in Arizona - and from consumers shifting their expenditures from donuts, beef, cigarettes, whiskey, and train travel to bagels, fish, yoga lessons, wine, and air travel. Trade plays no unique, or uniquely important, role as an avenue of economic change spurred in part by consumer sovereignty. The only practical way to rid the economy of such "loses" is to try to freeze it, a futile step that will in the long-run only make losers of everyone.

UPDATE: Jagdish Bhagwati supports Obama yet says:

On NAFTA, he is dead wrong.

UPDATE: He needs some constitutional advisors, too. This pretty much takes away my perceived edge that Obama and Clinton each had over McCain. We haven't even voted, and I'm already depressed.

Will Austan Goolsbee help reduce government spending by 10-20%?

If he is an economist who can do basic math, I think he has to:

President Barack Obama’s chief economist said Wall Street has largely recovered from the 2008 crisis and will be strengthened by the White House-backed regulatory overhaul that Congress passed this year.

“In the long run, the financial sector will be significantly stronger because we did this,” Austan Goolsbee, chairman of the Council of Economic Advisers, said yesterday.

While Wall Street may not return to “the go-go days” when it earned “20, 40 percent of all the profits in the entire nation,” the financial industry will benefit from the new regulations because “setting clear rules of the road is going to allow the credit channels to keep flowing to the wider economy,” Goolsbee said.

So if Wall Street earnings are cut by, let's say 46%, then the entire nation needs to tighten its belt because Wall Street can no longer pay the taxes it used to, either.

As I noted this past Tuesday, Wall Street jobs are being destroyed, not created. That's a loss of top income tax bracket revenue, on top of the reduced taxes coming from Wall Street firms.

Perhaps Goolsbee can take a page from here or here.

Austan Goolsbee

Obama's senior economic adviser, could use some prediction markets:

On November 11, 2007, he published a column in the New York Times citing research by an MIT professor to conclude “that the bond market - which, historically, has often been an early indicator of the demise of a political system - was pessimistic about the Iraqi government’s chances for survival.” The evidence for this was the fact that Iraq’s dollar-denominated bonds were trading at a huge discount from their face value.

Goolsbee went on to praise “the prescience of financial markets.” Only in this case they haven’t turned out to be so prescient after all. The surge, as we know, has succeeded spectacularly. As a result the risk premium on Iraq’s bonds has fallen from nearly 7.0% in August 2007 to around 4.8% last month. Citigroup even released a research note in April which, according to Reuters, concluded that “Iraq is proving an oasis for investors battered by global financial turmoil” and that the “cost of insuring Iraq’s bonds against default has fallen so sharply that they now costs less to insure than Venezuelan debt.”

Not surprisingly there has not been a word about the improvement in outlook for Iraq’s bonds from Professor Goolsbee or the New York Times.

So Obama will talk with any dictator

but it doesn't mean that he will be speaking honestly:

The accommodating Canadian Embassy nonetheless tried to smooth things over yesterday with a statement saying that "there was no intention to convey, in any way, that Senator Obama and his campaign team were taking a different position in public from views expressed in private, including about NAFTA." Which is too bad, because the apparent revelation that Mr. Obama doesn't believe his own trade rhetoric is the best news we've heard about the Illinois Senator's economic policy.

In Mr. Goolsbee's defense, we too have recognized a language barrier separating the U.S. and Canada, particularly when we enjoy watching NHL games on television. In their understated manner, Canadian analysts describe blows to the head as "messages" and sticks to the face as "taking liberties." So perhaps Mr. Goolsbee's obligatory nod toward the benefits of trade was interpreted in Canada as a passionate defense of free markets.

Like I said, Barack Obama is starting to remind me of Bill Clinton.

UPDATE: And, as Bret Stephens reminds, Jimmy Carter:

In 1977, Jimmy Carter told Americans to get over their "inordinate fear of communism." This year, expect to be told to get over your "inordinate fear" of terrorism.

Two years after he expressed a merely ordinate fear of communism, the Soviet Union invaded Afghanistan. "History teaches, perhaps, very few clear lessons," Mr. Carter said in his response. "But surely one such lesson learned by the world at great cost is that aggression, unopposed, becomes a contagious disease." Mr. Carter learned that the hard way. Let's hope Mr. Obama won't have to learn the same lesson, the same way.

Oh, yeah.

UPDATE: More cred issues:

"When it came time to make the most important foreign policy decision of our generation the decision to invade Iraq Senator Clinton got it wrong," Obama said.

He said that Sen. Jay Rockefeller, a fellow Democrat from neighboring West Virginia, had read the intelligence estimate as a member of the Senate Intelligence Committee and had voted against the war resolution.

Rockefeller, who is now chairman of that committee, endorsed Obama on Friday and campaigned with him on Saturday.

Just one problem: As blogress Clarice Feldman points out, and as the Senate roll-call confirms, Rockefeller voted for the war. We guess it was too good to check!

The other side of the White House whiteboard

Back on October 1, I posted on my disappointment with Austan Goolsbee's whiteboard presentation.

Now, Keith Hennessey does a thorough job of fisking Goolsbee. It's 14 minutes, but it's 14 minutes of showing the foolishness and vanity of government.  Reminded me of this show, without the girls, of course.

Quotes of the day

When you wallpaper over termites, at first it looks good for awhile.--Rick Santelli, on CNBC a few moments ago, on the European economy and the markets

... she continues screaming, "Oh God, we're going to die." So the people on the plane are looking around. "Nobody's saying we're not going to die; maybe we are going to die." And so finally we land and they come off, and she gets off and she's very shaken. And she was sitting next to this kid who was just staring out the window the whole time, like, oh God, please don't. And so I say to that kid, I said wow that was some flight, huh? And the kid said, "This was my first time on an airplane. Is it always like this?" And I realized after three years in DC, I was that kid.--Austan Goolsbee, on his time as President Obama's chief economist

SAGAL: One last question, before we go to the game. How does it feel to be one of the men that salon dot com named one of the 15 sexiest men of 2010?
Mr. GOOLSBEE: I said at the time I didn't even know Salon was printed in Braille.
SAGAL: Very good.
SAGAL: That may be the funniest thing a government economist has ever said on this show.

Spending money on such boondoggles to create jobs relies on a faith in the fiscal multiplier, and the magic of spending to reduce debt. Bush II spent like a drunken sailor (wars, medicare) and this ended with a disaster even though it should have been no worse than the alien invasion expenditures suggested by Keynesian economists. It should be remembered that after independence India focused on jobs and the poor, as opposed to free trade and property rights, and they stagnated for decades. If governments could boost the economy spending on big top-down projects, countries like India would have done much better than countries that were less hands-on in their management.--Eric Falkenstein

... as Larry Summers famously described it, Keynesian countercyclical policy is "temporary, targeted, and timely." The Reagan tax cut was certainly not temporary. And it wasn't targeted either; it was across the board. And it wasn't timely because it lasted well beyond the recession and the recovery. In fact, it is just the kind of "permanent, pervasive, and predictable" policy that we need now.--John Taylor

One obvious step would be a cut in the taxation of income from corporate capital. According to a 2008 study by the Organization for Economic Cooperation and Development, “Corporate taxes are found to be most harmful for growth.” Tax reform that reduced the burden on capital income and shifted it toward consumption would improve prospects for long-run growth and, in so doing, encourage greater investment today. Yet it would be overly optimistic to think that any single public policy, by itself, could lead to the kind of robust investment spending seen in previous recoveries. Myriad government actions influence the expected future profitability of capital. These include not only policies concerning taxation but also those concerning trade and regulation. For example, passing the free trade agreement with South Korea, which has languished in Congress more than four years after first being negotiated, would be a step in the right direction. So would reining in the National Labor Relations Board; its decision to block Boeing from opening a nonunion plant in South Carolina may have been hailed by organized labor, but it surely did not hearten investors. Economists often rely on the convenient shortcut of separating long-run and short-run issues. Recessions are then viewed as short-run problems that require short-run solutions. That approach, however, may be simplistic. Lack of investment spending is a large part of the economy’s current difficulties, but capital investments are always made with an eye toward the future. The best fix for our short-run problems may be to focus on policies that will foster long-run growth as well.--Greg Mankiw

As I sat in my first Harvard economics lecture, listening to Greg Mankiw introduce himself to his new graduate class, my head was in a spin.  Could he really be a Republican Keynesian? And a Keynesian disciple of Milton Friedman? For a young Brit, just graduated from Oxford, this was revolutionary; what I thought was the conventional economic wisdom was being turned upside down.  ... Keynes himself must be turning in his grave. For – as that Greg Mankiw class highlighted to me, and has now been fully documented in Lord Skidelsky's biography – the real Keynes was no profligate tax-and-spender. His seminal 1930 Treatise on Money was as hawkish on inflation as Friedman decades later. His attitude to irresponsible wage bargaining in the 1920s was as unforgiving as Thatcher in the 1980s.--Ed Balls, Great Britain's shadow chancellor

If you have a luxury sports car, you don't put 87 in it. You put in 93. So why would I put 87 into my body? I want my body to run as efficiently as possible, so let me put good stuff in it and go out here and exercise. That's the key, and it's been working.--Damien Woody

I'm so proud of [Tom Brady] and what he’s done -- and the way that he’s done it. He's not only been one of the very best players in the league now for a long time, but he’s continued to handle himself with class, on and off the field. I’m really just proud of what he’s done and the way he’s led this team.--Drew Bledsoe

It's possible to overthink things. But thinking is what makes life interesting. It's why pure talent isn't necessarily as entertaining as doing more with less. ... We live in a celebrity culture, and that collective ideology drives sport as much as anything else. When we turn on the TV, we want to see famous people. Yet every athletic superstar is just another stand-in (both for the player who came before him and the player who'll come after). Life is a game, and we are the pawns. The only thing that matters is how the pieces move.--Chuck Klosterman

Physical courage is admirable, but in modern society it simply isn't as important as it was when philosophy developed 2500 years ago. Intellectual courage, the readiness to risk humiliation, is much harder, precisely because it is more ambiguous. Only with the virtue of hindsight of generations do we see intellectually courageous stands for what they were, what distinguishes the Churchills from the Maos, the Galileos from the Lysenkos. It is courage combined with prudence, not mere zealotry. Having something terrible happen to you generates instant sympathy. Our culture has moved from from celebrating accomplishment (Eisenhower) to suffering (McCain), where suffering has been expanded to include the indignity of growing up a non-asian minority. Thus, Obama's rather cushy Hawaiian life was transformed in his autobiography into something subtly oppressive because his biological father was African.--Eric Falkenstein

Readers of history may call to mind the Roman Empire, the Russian years under Communism, certain local churches, Christian universities, confessional seminaries, and on and on. They know that human institutions can never be so safely constructed that outcomes are guaranteed. For the heart of the human dilemma is so deeply rooted in personal sin that no structure can finally reform it. The lament for Israel’s princes becomes a lament for the human race, which desperately needs a solution far deeper and more effective than princes, presidents, and structures can ever provide.--Don Carson

Obama not only fires good advisers like Austan Goolsbee

he also hires terrible ones like Eric Holder (via Glenn Reynolds).

UPDATE: Greg Mankiw points out that Goolsbee still represents Obama. But I'm not sure he's such a good adviser anymore.

Austan Goolsbee disappoints on taxes (and being truthful)

Here he is with a nifty populist trick, specifically, talking about how big a tax cut the high income earners get from the GOP proposal.

The sleight of hand here, of course, is that he doesn't show us that those same earners pay even a more out-sized share of taxes, even after the proposed cuts.

And those households earning less than $40,000? If they can claim EITC and Dependent Care credits, they are probably paying negative taxes, i.e. getting money from the government. How do you draw a negative circle? Fortunately, the whiteboard approach for an economist is like mirrors, lighting, and nubile assistants for a magician.

I liked this Goolsbee better. I am not surprised, though, because he's done this type of thing before.

Austan Goolsbee advises for low/middle income tax relief

He says:

But if subprime housing morphs into a credit crunch, it’s not clear that just lowering rates will address the problem.
If you can move quickly enough, I think tax relief for low/middle income mortgage holders would certainly be in order as a way to lessen the credit crunch damage of the housing market–the benefits would multiply up because of the leverage in the same way the losses are getting magnified now. If the economy continues to slow and the housing troubles actually morph into a crisis of consumer confidence, and direct tax relief for middle and working class folks would be the order of the day.

How much more relieved can we get?

Quotes of the day

Complexity is an ally of bureaucracy because anything that the public cannot figure out is effectively autonomous and removed from public scrutiny--John Carney

I diversify widely as an admission of ignorance.--Less Antman

We’re in a government-dependent financial system; I never thought I’d see the day.--Paul Volcker

We have no rule of law in this country. We slammed Russia for years, saying we would not do business there because there was no rule of law. Look what’s happening here. We don’t know what Congress will do next. They’re ignoring all the old rules, and they’re making new rules whenever they want.--Wall Street executive

Dr. Goolsbee: I’ll Stop Impersonating an Economist If You Quit Underwriting Mortgage Loans--Tanta

I am beginning to consider the possibility that [Maxine Waters'] entire career on the House Financial Services Committee is some sort of elaborate performance art.--Megan McArdle

Securities based on risky mortgages are what toppled financial institutions but it was the government that made the mortgages risky in the first place, by making home-ownership statistics the holy grail, for which everything else was to be sacrificed, including commonsense standards for making home loans.--Thomas Sowell

Public Outrage as a Systemic Risk: without bankruptcy, it is hard to avoid rewarding failure.--Philip Levy

[Mark Haines and his CNBC colleagues] want rapid action on money issues when everything works out but condemn the action when it doesn’t.--Stan Collender

Even if it’s a totally different situation, you have to get the financial system in order and in order to do that you have to get confidence. Franklin Roosevelt did it by closing all the banks and reopening the sound ones, we did it with a blanket guarantee to creditors and depositors. And Japan, well, they didn't do anything, to be honest. Now the question is what can be done in the US. You don't need the same techniques, but you need to restore confidence.--Bo Lundgren, architect of the Swedish bank nationalization

Obama comes from the tradition that thinks you can get your way on social justice and economic issues without affecting productivity very much—and that's simply living in a dream world. [Obama and his economics team] are very smart, but the problem is these high-IQ guys always think they can square the circle; they always believe they can beat the system with a cleverer system, and they always fail.--Richard Epstein

Using sex as a basis for charging a person with a felony is a slippery slope to go down. The truth is, currently, boys and men are being punished in our society for their gender as payback by feminists and their enablers, and no one cares except for their families, the men and boys who are harmed by this, and a few good men and women.--Helen Smith

Mixed signals on research and development

This is what President Obama says:

When the Soviet Union launched Sputnik a little more than a half century ago, Americans were stunned. The Russians had beaten us to space. And we had to make a choice: We could accept defeat or we could accept the challenge. And as always, we chose to accept the challenge.

President Eisenhower signed legislation to create NASA and to invest in science and math education, from grade school to graduate school. And just a few years later, a month after his address to the 1961 Annual Meeting of the National Academy of Sciences, President Kennedy boldly declared before a joint session of Congress that the United States would send a man to the moon and return him safely to the Earth.

This is what his senior economic adviser, Austan Goolsbee, says:

... there is a serious problem with such government efforts to increase inventive activity. The majority of R&D spending is actually just salary payments for R&D workers. Their labor supply, however, is quite inelastic so when the government funds R&D, a significant fraction of the increased spending goes directly into higher wages. ... The results also imply that by altering the wages of scientists and engineers even for firms not receiving federal support, government funding directly crowds out private inventive activity.

(Via Greg Mankiw)

That Presdient-elect sure is

a charmer:

KUDLOW OFFERS DETAILS OF OBAMA DINNER
Wed Jan 14 2009 12:15:47 ET

CNBC’s Melissa Francis: I HAVE TO ASK LARRY, I'M DYING TO HEAR ABOUT IT, YOU HAD DINNER LAST NIGHT WITH PRESIDENT-ELECT BARACK OBAMA. WHAT WAS THE TONE LIKE? WAS HE TRYING TO WIN OVER THE CONSERVATIVES? IS THAT WHAT IT WAS?

THERE WERE ABOUT TEN OF YOU THERE, RIGHT?

CNBC’s Larry Kudlow: THIS WAS AN OFF-THE-RECORD DINNER AND I'M GOING TO KEEP IT OFF THE RECORD IN TERMS OF DEEP CONTENT, BUT PEGGY NOONAN WAS THERE, PAUL GIGOT OF THE WALL STREET JOURNAL, BILL KRISTOL, MYSELF, CHARLES KRAUTHAMMER, SOME OTHERS. NINE OR TEN OF US. I DON'T THINK HE'S TRYING TO WIN US OVER, BUT HE'S TRYING TO CONNECT WITH US AND ENGAGE WITH US TO HIT GREAT CREDIT.THIS WAS A VERY CORDIAL DINNER.

Francis: HE IS CHARMING, RIGHT?

Kudlow: HE IS CHARMING, HE IS TERRIBLY SMART, BRIGHT, WELL-INFORMED, HE HAS A GREAT SENSE OF HUMOR. AT THE BEGINNING WHEN HE WALKED INTO THE LIVING ROOM, YOU KNOW, WE'RE ALL WAITING --

Francis: WHERE WERE YOU?

Kudlow: THIS IS AT GEORGE WILL'S HOUSE….HE COMES IN AND HE CAME UP TO ME, I HAD NEVER MET HIM BEFORE. I THINK HE MAY HAVE WATCHED ‘KUDLOW AND COMPANY’ PERIODICALLY. SOMEBODY GAVE HIM A COLUMN I HAD WRITTEN DEFENDING HIS BUSINESS INVESTMENT TAX CUTS. HE LIKED THAT A LOT. I SAID, ‘YOU KNOW, SIR, SINCE BARNEY FRANK AND NANCY PELOSI, JOHN KERRY, ATTACKED HIM I KNEW I MUST BE ON TO SOMETHING GOOD.’ HE LAUGHED A LOT. I SAID ‘YOU TOOK MY BEST PEOPLE FROM THE PROGRAM. YOU TOOK AUSTAN GOOLSBEE.’ HE LAUGHED AND SAID THEY'RE GOOD MEN. I SAID, BUT MR. PRESIDENT, LET ME CAN YOU, WHY DID YOU LEAVE US ROBERT REICH, WHO I ADORE, AND HE LAUGHED AND SAID I WANT SOMEBODY FIGHTING FOR ME, LARRY,

INTERESTING THING. THIS IS JUST GENERALLY SPEAKING, HE IS SO WELL-INFORMED, AND HE LOVES TO DEAL WITH BOTH SIDES OF AN ISSUE, AND I'M NOT GOING TO DIVULGE WHAT WAS SAID THERE AND I'M NOT GOING TO GO INTO ANY OF THE SPECIFICS, BUT HE ENJOYS THE BACK AND FORTH, AND HE IS NOT, YOU KNOW, TOUGH, MEAN, INSULTING, SNARLING, NONE OF THAT STUFF, AND WE WEREN'T EITHER.

THIS WAS A GOOD CONSERVATIVE GROUP AND WE JUST HAD A GREAT BACK AND FORTH, AND HE WANTS TO KEEP THE DIALOGUE GOING WITH CONSERVATIVES. I WOULD SAY I AM HONORED TO BE AT THAT DINNER. I WAS HONORED TO MEET HIM. HE IS A VERY IMPRESSIVE MAN, AND I WISH HIM ALL THE LUCK IN THE WORLD BECAUSE WE'VE GOT SOME ISSUES TO DEAL WITH.

Francis: WHAT DID YOU EAT?

Kudlow: I CAN'T REMEMBER. I WAS SO FOCUSED ON HIM. I WAS SITTING ACROSS FROM HIM --

Francis: YOU PROBABLY DIDN'T EAT. MAYBE YOU DIDN'T TOUCH ANYTHING.

Kudlow: THE FOOD WAS EXCELLENT. I PROBABLY DIDN'T EAT A WHOLE LOT. IT WAS ALL VERY INTERESTING, AND HE'S A GOOD MAN, AND WE WILL SEE

HOW HE DOES. THAT'S ALL I CAN SAY. WE WISH HIM THE BEST.

Obama is the one running for Bush's Third Term

Most Presidential candidates adapt their message after they win their party nomination, but Mr. Obama isn't merely "running to the center." He's fleeing from many of his primary positions so markedly and so rapidly that he's embracing a sizable chunk of President Bush's policy. Who would have thought that a Democrat would rehabilitate the much-maligned Bush agenda?

Take the surveillance of foreign terrorists. Last October, while running with the Democratic pack, the Illinois Senator vowed to "support a filibuster of any bill that includes retroactive immunity for telecommunications companies" that assisted in such eavesdropping after 9/11. As recently as February, still running as the liberal favorite against Hillary Clinton, he was one of 29 Democrats who voted against allowing a bipartisan Senate Intelligence Committee reform of surveillance rules even to come to the floor.

Two weeks ago, however, the House passed a bill that is essentially the same as that Senate version, and Mr. Obama now says he supports it. Apparently legal immunity for the telcos is vital for U.S. national security, just as Mr. Bush has claimed. Apparently, too, the legislation isn't an attempt by Dick Cheney to gut the Constitution. Perhaps it is dawning on Mr. Obama that, if he does become President, he'll be responsible for preventing any new terrorist attack. So now he's happy to throw the New York Times under the bus.

Next up for Mr. Obama's political blessing will be Mr. Bush's Iraq policy. Only weeks ago, the Democrat was calling for an immediate and rapid U.S. withdrawal. When General David Petraeus first testified about the surge in September 2007, Mr. Obama was dismissive and skeptical. But with the surge having worked wonders in Iraq, this week Mr. Obama went out of his way to defend General Petraeus against MoveOn.org's attacks in 2007 that he was "General Betray Us." Perhaps he had a late epiphany.

Mr. Obama has also made ostentatious leaps toward Mr. Bush on domestic issues. While he once bid for labor support by pledging a unilateral rewrite of Nafta, the Democrat now says he favors free trade as long as it works for "everybody." His economic aide, Austan Goolsbee, has been liberated from the five-month purdah he endured for telling Canadians that Mr. Obama's protectionism was merely campaign rhetoric. Now that Mr. Obama is in a general election, he can't scare the business community too much.

Back in the day, the first-term Senator also voted against the Supreme Court nominations of John Roberts and Samuel Alito. But last week he agreed with their majority opinion in the Heller gun rights case, and with their dissent against the liberal majority's ruling to ban the death penalty for rape. Mr. Obama seems to appreciate that getting pegged as a cultural lefty is deadly for national Democrats – at least until November.

This week the great Democratic hope even endorsed spending more money on faith-based charities. Apparently, this core plank of Mr. Bush's "compassionate conservatism" is not the assault on church-state separation that the ACLU and liberals have long claimed. And yesterday, Mr. Obama's campaign unveiled an ad asserting his support for welfare reform that "slashed the rolls by 80 percent." Never mind that Mr. Obama has declared multiple times that he opposed the landmark 1996 welfare reform.

All of which prompts a couple of thoughts. The first is that Mr. Obama doesn't seem to think American political sentiment has moved as far left as most of the media claim. Another is that the next President, whether Democrat or Republican, is going to embrace much of Mr. Bush's foreign and antiterror policy whether he admits it or not. Think Eisenhower endorsing Truman's Cold War architecture.

Most important is the matter of Mr. Obama's political character – and how honest he is being about what he truly believes. His voting record in the Senate and in Illinois, as well as his primary positions, would make him the most liberal Presidential candidate since George McGovern in 1972. But he clearly doesn't want voters to believe that in November. He's still the Obama Americans don't know.

John Kerry didn't flip-flop this much.

Austan Goolsbee on the limits of supply side tax cuts

here (via Greg Mankiw).

I agree that tax cuts do not directly pay for themselves. But I also hypothesize that tax cuts constrain spending, given the balanced budget high ground each party might try to take from the other.

Constrained government spending is part of the formula towards growth, away from poverty.

UPDATE: Arnold Kling and Tyler Cowen agree!

Bimbo of the day

French actress Marion Cotillard has admitted to having doubts about the official version of the September 11 attacks in the US. (via Drudge):

"I think we're lied to about a lot of things," she said during a television programme first broadcast last year which has resurfaced on the Internet.

The actress, who picked up the award for playing Edith Piaf in the French film "La Vie En Rose," cited the attacks on New York and Washington in 2001 as one example, adding: "I tend to believe in the conspiracy theory."

In the video, the 32-year-old Parisian talks about watching films on the internet challenging the official version of the September 11 attacks, saying "its fascinating, even addictive."

She continues: "Did man really walk on the moon? Me, I've seen a fair few documentaries on the subject. That, really, I question. In any case I don't believe everything people tell me, that's for sure."

She's not even blonde.

UPDATE: James Taranto thinks Obama could be more of a bimbo than Angelina Jolie. My wife actually uses the term "manbo" (I speculate that it is a more derogatory term for her than bimbo).

UPDATE: This little kerfuffle fails to die:

News from team Obama:

Despite repeated requests, Barack Obama's campaign is still neither verifying nor denying a CTV report that a senior member of the team made contact with the Canadian government -- via the Chicago consulate general -- regarding comments Obama made about NAFTA....

On Wednesday, CTV reported that a senior member of Obama's campaign called the Canadian government within the last month -- saying that when Senator Obama talks about opting out of the free trade deal, the Canadian government shouldn't worry. The operative said it was just campaign rhetoric not to be taken seriously.

The Obama campaign told CTV late Thursday night that no message was passed to the Canadian government that suggests that Obama does not mean what he says about opting out of NAFTA if it is not renegotiated.

However, the Obama camp did not respond to repeated questions from CTV on reports that a conversation on this matter was held between Obama's senior economic adviser -- Austan Goolsbee -- and the Canadian Consulate General in Chicago.

Quotes of the day

[Larry] Summers doesn't do "dispassionate" and he didn't want to limit himself to fielding others' advice--he had plenty of his own to offer. In other words, he was supposed to be the referee, but he also wanted to play power forward. This rankled other members of the economic team, including Austan Goolsbee, Christina Romer, and Peter Orszag, enough that they're widely presumed to be the sources of many of the leaks. Summers's tendency toward bureaucratic infighting was another problem. As Jonathan Alter lays out in his forthcoming book, "The Promise," Summers maneuvered to sideline people like Paul Volcker, Joe Stiglitz, and even Orszag, behavior more characteristic of the Clinton administration than the Obama administration.--Joshua Green

At a recent White House lunch with President Barack Obama and a handful of other executives, Mr. Dimon, 54 years old, complained to the president that the administration's anti-bank rhetoric "isn't helpful," because it demoralizes businesses and employees, according to a person familiar with his comments. Mr. Dimon's disdain for the process has been crescendoing for some time. Last spring, he showed his irritation over the Treasury's requirement that banks raise fresh funds before they quit TARP. Speaking at a June hospitality industry conference in New York, Mr. Dimon read aloud a fictitious letter to Treasury Secretary Timothy Geithner. "Dear Timmy, we are happy to be able to pay back the $25 billion you lent us. We hope you enjoyed the experience as much as we did." ... With the crisis in full bloom, he also publicly backed TARP, accepting $25 billion in federal funds in October 2008 even though he insisted J.P. Morgan didn't need or ask for the capital. The TARP program was "good for the system, which means it's also good for J.P. Morgan. And we didn't think that J.P. Morgan should be selfish or parochial and stand in the way of doing something that's good for the system," Mr. Dimon explained to investors in November that year. But Mr. Dimon's patience with Washington soon wore thin as political leaders tried to force banks that had taken TARP funds to lend more and slash executive compensation. He was particularly rankled by a new rule putting visa restrictions on TARP recipients who wanted to hire skilled foreign workers. Although the curbs didn't affect many J.P. Morgan employees, Mr. Dimon was infuriated, telling his colleagues the move was "un-American," say people who heard his remarks. On a conference call to discuss the bank's earnings, Mr. Dimon referred to the TARP program as a "scarlet letter." --Robin Sidel and Damian Paletta

At a certain point this season, my Cornell teammates and I realized we weren't being led by your typical college basketball coach. Steve Donahue, formally known as Coach D, came to be known as "Captain D" as the season wore on. It started as an inside joke within the team because of his propensity to stand on top of a rollaway basket on our side courts overseeing practice (like a sea captain posts himself atop his vessel's perch and gazes intently out at sea and the boat's course). Coach's new name gained further steam when he continued to use the phrase "stay the course" at every possible moment: before practice, after practice, after a win, after a loss, etc. It was all to make sure we knew we wouldn't achieve any of our goals if we weren't the hardest-working team in the country that day. And even though the name's still funny, I realized - maybe during our Sweet 16 run this March - the persona of Captain D is what separates him from other college basketball coaches. A coach has to know his Xs and Os, be able to motivate his players, manage game strategy and recruit. While Coach D excels in all of these areas, Captain D inspires extreme self-confidence in his players. Even if we weren't one of the best 16 teams in the country this season, each member of our team was 100 percent certain we were. ... For those who don't know what Cornell basketball was like before Steve Donahue got here, picture the New Jersey Nets trying to compete with the Lakers (Penn) and the Cavs (Princeton) without the promise of free agency and NBA lottery picks (scholarships). Starting from the cellar, he had to shatter the seemingly bulletproof monopoly that the P schools had on the Ivy League.--Jon Jacques

Tax uncertainty

coming from the Obama & McCain camps:

Sen. McCain, who proposes a "refundable tax credit" as the cornerstone of his health-care plan, has described Sen. Obama's proposal to offer a series of refundable tax credits as similar to offering "welfare." The Illinois senator has said 95% of Americans would benefit from some form of tax relief under his economic plan.

Sen. McCain has said his opponent's plan would give tax relief to the 38% of Americans who do not pay any federal income taxes. The Obama campaign says beneficiaries pay payroll taxes.

The McCain campaign said Mr. Goolsbee's comment reflected Sen. Obama's "willingness to say whatever is necessary in the moment." Sen. McCain on Wednesday said Sen. Obama had indicated his preference for redistributing wealth over promoting economic growth.

"It raises a question: What is their philosophy of taxation?" said senior McCain adviser Douglas Holtz-Eakin. "No one would design a tax policy about mortgage interest, but say, 'If you're laid off, you're not going to become eligible anymore.'"

President-Media-Elect Obama, you are a smart man, right? What is the opposite of stimulus? Taxes! So how about lower taxes and spending?

Don Surber is more sanguine on McCain than me

He posits:

Congratulations, John McCain.

The baggage we know well. From the Keating Five scandal to campaign finance deform to immigration amnesty, McCain has a lot of baggage. But he also carries his own luggage, does he not?

There is a lot to be said for humility and he’s been knocked down a few times. I see he has regained his legs each time.

Many conservatives no doubt will freak.

My wise counsel in this is the philosopher who pens under the pseudonym Basil.

Bush was not his first choice in 2000. Dole was not his choice in 1996. Reagan was not his first choice in 1980.

I can do him one better: I voted for Carter. Maybe I should wear a T-shirt: “What do I know? I voted for Carter.”

Basil advises people keep their options open: “So, now that Fred’s out, it looks like I’m going to end up voting for someone who wasn’t my first choice.”

That’s how the game is played. You try your best, you lose, you shake the winner’s hand, and you play again.

You do not take your ball and go home.

Look at Al Gore. Rather than gracefully accept a close defeat in 2000 and come back later, he got all angry and sued. Look at him now. He has all these awards but he knows he’s a fraud. He knows global warming is a myth. If he really believed that crap, he would not burn up 20 times the electricity of mortal men.

But hey, what do I know? I voted for Carter.

History may provide some guidance. In 1932, FDR was all the rage. But 28 years later, JFK did not run as an FDR Democrat. He said it was time for a new generation.

It has been 28 years since Reagan was nominated.

What he stood for as president included being pro-life, pro-gun, limit the government, cut taxes, cut spending, help the truly needed, and stand up to communism. At various times in his life, Ronald Reagan stood at the opposite ends of some of those positions.

But he learned. And by age 70, Ronald Reagan was finally a Reagan Republican.

I'm thinking about voting for Obama. While he could end up like Jimmy Carter (my least favorite president of my so-called life), his oratory sets higher aspirational goals. Plus, Austan Goolsbee is pretty good for an advisor, and I think he understands economic policy better than he lets on (given his voter base).

I'm just worried that, like Carter's appeasement approach to foreign policy, Obama could reflate global threats against democratic nations.

UPDATE: McCain is looking to punish my family and friends? This is the worst thing I've read today:

I think there are some greedy people on Wall Street that perhaps need to be punished.

Obama's economic advisors

Austan Goolsbee is one of Barack Obama's advisors, and a lot of smart yet sane people like him. Today, Tyler Cowen talks about health care mandates and another advisor, David Cutler:

Cutler is very smart, tenured at Harvard, arguably the leading health care economist, and yes he is an advisor to Barack Obama. He says mandates are not the way to go, and no I do not think he is just "falling in line" here. Read the whole thing. Yes, the key is to make insurance cheaper, not more expensive. Yes, mandates are a political loser. Yes, ex post fiddling can make up for a lot of the problems in the "no mandate" approach and there is going to be lots of ex post fiddling anyway.

You know, I might come out for Obama, even in the worst case scenario, if I knew that he actually listened to his economic advisors.

UPDATE: Mickey Kaus worries like I do (via Glenn Reynolds):

Remind me again, what is the evidence--in terms of policies, not affect or attitude or negotiating strategy--that Obama is not an unreconstructed lefty (on the American spectrum--a paleoliberal or a bit further left)? For example, would he roll back welfare reform if he could?

UPDATE: And Shelby Steele, has this, as much as I doubt his doubts (via Ron Paul fan Don Luskin):

Determinism automatically blames and obligates white power for black problems, so it becomes the central faith of the black identity. When a black argues against it, he invokes the Uncle Tom label...

The point is not that Barack Obama is a blind and true-believing follower of this identity. Few blacks are. The point is that he is accountable to it. If, for example, Obama broke with this determinism by saying that blacks themselves were largely responsible for closing the academic achievement gap with whites, he would likely be seen as an Uncle Tom for letting whites "off the hook." So, in order to be black, he must pay tribute to a determinism that makes whites ultimately responsible for black uplift, even when it is obvious that only black responsibility will make a difference.

Quotes of the day

Potential teachers out there- beware! You are blamed for everything and children and parents and administrators get away with murder. Prepare yourself to not be respected or appreciated ever. Teachers are under so much pressure to perform that there is a huge emphasis on test prep. You are lucky if you get to do projects.--former Teach for America teacher

I suppose [congressional representatives yielding significant positive abnormal trading returns] are good at stock investing for the same reason Hillary Clinton was a savvy commodities trader, and Obama was good at playing poker with Illinois lobbyists.  If the guys who set my property taxes want to bet on something, anything, I'm willing to post great odds. Just be sure to remember me, you know, later--Eric Falkenstein

U.S. Transportation Secretary Ray LaHood unveiled new fuel-economy window stickers for cars and trucks, saying "we're not just sitting around waiting for high gasoline prices to come down." His ride of choice to the unveiling: This 12-mpg Chevy Suburban SUV.--Justin Hyde

For months now top economic officials in Washington have been arguing that the Congress should vote to increase the debt limit without any reductions in the growth of spending—in other words a “clean debt limit hike.” Just last Thursday Ben Bernanke compared linking the debt limit and spending reductions to playing a game of chicken with U.S. credit worthiness, adding “I think using the debt limit as a bargaining chip is quite risky.” CEA Chairman Austan Goolsbee and Treasury Secretary Timothy Geithner have been saying much the same thing. But these arguments do not take account of important economic advantages of linking the debt limit to spending reductions. Such a link is good economics in theory and in practice. It is essential to a credible return to sound fiscal policy and an end to the ongoing debt explosion. Here’s why. In the current political and economic environment—where more people than ever in the United States and around the world are aware of, and paying attention to, the country’s debt problem—the decision about the debt limit will be precedent-setting. They also know that government spending has increased rapidly in recent years, rising from 18.2 percent of GDP in 2000 to over 24 percent now. If Washington does not change the budget game now, people will sensibly reason, it will never change the game. If politicians just increase the debt limit now when spending has been growing so rapidly compared to revenues without correcting that rapid growth of spending, then they will be expected to do so in the future. In contrast if they tie any increase in the debt limit to a halt in the explosion of spending, then people will be more likely to expect them to control spending in the future. Linking the debt limit vote with spending establishes a precedent and valuable credibility.--John Taylor

Economies of scale in fonts, as often in the corporate world, do not seem to stand in the way of diversity for long. There have never been so many alternatives to Helvetica, and new fonts are created at an unprecedented rate. There is always demand for the next forward-looking font. Barack Obama used a 21st century font, Gotham, for his 2008 election campaign. Evidently some people think it helped his fortunes: Gotham has now been adopted by Sarah Palin.--Tim Harford 

Asian-American success is typically taken to ratify the American Dream and to prove that minorities can make it in this country without handouts. Still, an undercurrent of racial panic always accompanies the consideration of Asians, and all the more so as China becomes the destination for our industrial base and the banker controlling our burgeoning debt. But if the armies of Chinese factory workers who make our fast fashion and iPads terrify us, and if the collective mass of high-­achieving Asian-American students arouse an anxiety about the laxity of American parenting, what of the Asian-American who obeyed everything his parents told him? Does this person really scare anyone?--Wesley Yang

Photo links here and here.