Friday, May 30, 2008

Fenway security working with Patriots minicamp?

Ouch (via FanHouse).

More than one visible higher tax advcoate

doesn't pay them (via Glenn Reynolds).

The ghost of Jimmy Carter

haunts us today (via Glenn Reynolds).

I sensed the same apparition back in February.

Like a man, baby

... if all these awful things were happening, and perhaps some may have been, you should have spoken up publicly like a man, or quit your cushy, high profile job. That would have taken integrity and courage but then you would have had credibility and your complaints could have been aired objectively. You’re a hot ticket now but don’t you, deep down, feel like a total ingrate?--Bob Dole, to Scott McClellan
I can't help but wonder if Dole is pulling for Hillary or Barack.

Epoch discovery of the day

If you reduce someone's tax burden, their income rises:
Incomes grew 0.2 percent, bolstered in part by the government's tax rebates.

Quote of the day

But in gearing up to elect a new president, we are left to wonder how, in spite of numerous failed policies and poor judgement, President Bush's greatest achievement was denied to him by people who ungratefully availed themselves of the protection that his administration provided.--Thane Rosenbaum

Wal-Mart reduces hunger

by reducing carbon emissions, increasing local suppliers, reducing corporate middlemen, and increasing truth-in-advertising (by reducing empty air in packages).

Why are they a target of populists and environmentalists?

(Tip to Drudge)

Can one simultaneously subscribe to Darwin and partial-birth abortion

Yes he can:
On this issue, I will not yield.

Thursday, May 29, 2008

Reality of policy (vs. audacity of hope)

over at Arnold Kling's:
The plan makes Medicare and Medicaid more like vouchers, which plugs the big leak in future budgets. It includes some personal accounts for Social Security, but it also trims benefits and eventually raises the retirement age. It also includes some interesting tax reforms, including a simpler, flatter income tax, reduced taxes on capital, and replacing the corporate income tax with something called a "border-adjustable business consumption tax." I have no idea what that is.

Those of us who worry about fiscal sustainability should encourage these sorts of plans, rather than the audacity of hope being offered by the two parties' candidates for President.

One should not under-estimate the radical nature of these proposals. But if you want to take this country off the path of a fiscal train wreck, you have to propose real change.

Quotes of the day

In terms of inflation, the last 25 years since 1983 has been the most stable period in the last 200 years.--Mark Perry
After two years of work by the commission of 21 world leaders and experts, an 11- member working group, 300 academic experts, 12 workshops, 13 consultations, and a budget of $4m, the experts’ answer to the question of how to attain high growth was roughly: we do not know, but trust experts to figure it out.--Bill Easterly
If people have to choose between something that's cheap, heavily marketed, and appealing in the short term, and something that's expensive, obscure, and appealing in the long term, which do you think most will choose?--Paul Graham
Practically everyone thinks that someone who went to MIT or Harvard or Stanford must be smart. Even people who hate you for it believe it. But when you think about what it means to have gone to an elite college, how could this be true? We're talking about a decision made by admissions officers—basically, HR people—based on a cursory examination of a huge pile of depressingly similar applications submitted by seventeen year olds. And what do they have to go on? An easily gamed standardized test; a short essay telling you what the kid thinks you want to hear; an interview with a random alum; a high school record that's largely an index of obedience. Who would rely on such a test?--Paul Graham

Gasoline prices: the latest case for more limited government

[Congress] has made it impossible for U.S. producers of crude oil to tap significant domestic reserves of oil and gas, and it has foreclosed economically viable alternative sources of energy in favor of unfeasible alternatives such as wind and solar. In addition, Congress has slapped substantial taxes on gasoline. Indeed, as oil industry executives reiterated in their appearance before the Senate Judiciary Committee on May 21, 15% of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits.

If Congress really cared about the economic well-being of American citizens, it would stop fulminating against IOCs and reverse current policies that discourage, indeed prohibit, the production of domestic oil and natural gas. Even the announcement that Congress was opening the way for domestic production would lead to downward pressure on oil prices.

There is an historical precedent for such a step: Ronald Reagan's deregulation of domestic crude oil prices at the beginning of his first term. At the time, thanks to the decision by the Organization of Petroleum Exporting Countries (OPEC) to curtail output, the price of oil was at a level that in real terms is only now being matched. Domestic price controls ensured that the OPEC cartel would face little or no competition in the production of oil.

Price controls were exacerbated by other wrongheaded policies stimulated by the two "energy crises" of the 1970s. One of the most egregious was the infamous "windfall profits" tax, designed to punish oil companies for alleged profiteering. But since it applied to even newly discovered oil, its main impact was to discourage the exploration and drilling that would have increased oil supplies.

Although the energy problems of the 1970s were traceable to government policies, Reagan's decision to deregulate oil prices was ridiculed by policy makers, especially those who had served in the previous administration. For instance, Frank Zarb, who had been Jimmy Carter's "energy czar," predicted that decontrolling the price of crude oil would lead to gasoline prices of $10 a gallon. Instead, the world price of oil plummeted, helping to fuel the extraordinary economic growth of the 1980s.

Reagan's deregulation of crude oil prices created incentives for domestic producers to invest in exploration and to increase production. The threat of increased output by non-OPEC producers destroyed the discipline among OPEC members necessary to restrict production to maintain high prices. Facing the likelihood that an increase in supply would lead to lower future prices, OPEC producers increased output in the hopes of maximizing profits before prices fell. The cascading effect caused oil prices to tumble.

As in the 1970s, U.S. energy policies have essentially restricted the exploitation of domestic sources of energy. Curtailed supplies have combined with rapid, world-wide energy demand to increase the price of oil and other sources of energy. This provides leverage to foreign producers and threatens U.S. energy security. Freeing up domestic energy resources will do today what President Reagan's decision to deregulate oil prices in 1981 did then: cause oil prices to fall, thereby enhancing U.S. energy security.

Don't get sick in NJ (unless Jay Webber succeeds)

The average national cost for a family health plan is $5,799, according to America's Health Insurance Plans, but in New Jersey that same plan costs $10,398 on average. The state's politicians have driven up these costs by forcing insurers to provide gold-plated coverage – even for such voluntary medical services as in vitro fertilization. New Jersey also follows New York and Massachusetts – two other high-cost states – in requiring so-called "guaranteed issue." That allows New Jersey residents to avoid buying health insurance until they get sick, which means they can avoid paying premiums until they need someone to pick up the bill.

This one-policy-fits-all system tends to cause the young and healthy to drop insurance, which only raises the cost of insurance for the sick, which in turn makes coverage unaffordable for ever more families. It's no accident that about 1.2 million people – one of every eight residents – is uninsured in the state.

Under Mr. Webber's choice proposal, New Jersey residents could buy policies chartered in more enlightened states. For example, a healthy 25-year-old male could buy a basic health plan in Kentucky that now sells for $960 a year, about one-sixth of the $5,880 it would cost him in New Jersey. Residents of Pennsylvania pay health premiums that are one-half to one-third as high as do Garden State policy-holders. A new study by the National Center for Policy Analysis estimates that the availability of lower cost plans would reduce by 25% the number of uninsured.

Opponents of interstate insurance say families would be pushed into bare-bones health plans. Not so. Families could still buy the more extensive coverage, but those with modest incomes would have options other than going uninsured. The goal of public policy shouldn't be to cover every medical procedure or doctor's visit, but to prevent families from catastrophic expenses due to a health problem that is no fault of their own.

New Jersey is turning into a microcosm of the national debate on health care. Democrats in Trenton are rallying behind a plan to require that every uninsured individual in New Jersey purchase health insurance from a new state-administered program. So a state that is already so broke that its politicians are contemplating mortgaging its highways might now add a $1.7 billion health subsidy.

The Webber proposal offers lower costs and more choices for consumers, while the Democratic plan mandates public coverage and no choice, while putting a new burden on taxpayers. This is the kind of debate the country should have this election year.

Let us eat cake

Are these the fruits of democracy:
McClellan says the book’s “larger message” is the problems with the “permanent campaign culture.” He said that’s the opposite of what he expected when he came to Washington after serving then-Gov. Bush in Texas.

“I had all this great hope that we were going to come to Washington and change it,” McClellan recalled. “He talked about being a uniter, not a divider. … And then we got to Washington and I think we got caught up in playing the Washington game the way it’s played today.”
Regardless of Bush's alleged missteps (and McClellan's apparent lack of steps before his book payday), I think that the voters are Marie Antoinette, at least a cobbled up majority of us*--we want what we want and we want it now (even though no one can deliver it to us).

*based on the discrete math of electoral college votes.

U.S. economy moves further from risk of recession in 2008

Shobhana Chandra reports:
The U.S. economy grew more than previously estimated in the first quarter as the trade deficit shrank to a five-year low.

The 0.9 percent gain in gross domestic product from January through March compares with the government's advance estimate of 0.6 percent issued in April, according to revised figures from the Commerce Department today in Washington.
I am still short these:

Wednesday, May 28, 2008

Absence of evidence is not evidence of Absence

A review of Antony Flew's "There Is a God: How the World's Most Notorious Atheist Changed His Mind".

Are we safer now than 9/11 and before?

John Hinderaker thinks so, and provides data (via Glenn Reynolds).

The United Nations increases child abuse


Obama channels Quayle

On this Memorial Day, as our nation honors its unbroken line of fallen heroesand I see many of them in the audience here today — our sense of patriotism is particularly strong.
UPDATE: Kerry, too: Seared, SEARED.

Quote of the day

A hero to my wife. A traitor to my sex. A thoroughly modern American guy.--Michael Lewis
The college idealists who fill the ranks of the environmental movement seem willing to do absolutely anything to save the biosphere, except take science courses and learn something about it.--P. J. O'Rourke

BCWUW4: Hospitals do not quote prices

It's really not a good thing (via Bryan Caplan).

Be Careful What You Wish For.

Calling the housing bottom?

A rent-over-buy evangelist capitulates and buys.

No free lunch

especially with tax hikes:

Officials in Lansing reported this month that the state faces a revenue shortfall between $350 million and $550 million next budget year. This is a major embarrassment for Governor Jennifer Granholm, the second-term Democrat who shut down the state government last year until the Legislature approved Michigan's biggest tax hike in a generation. Her tax plan raised the state income tax rate to 4.35% from 3.9%, and increased the state's tax on gross business receipts by 22%. Ms. Granholm argued that these new taxes would raise some $1.3 billion in new revenue that could be "invested" in social spending and new businesses and lead to a Michigan renaissance.

Not quite. Six months later one-third of the expected revenues have vanished as the state's economy continues to struggle. Income tax collections are falling behind estimates, as are property tax receipts and those from the state's transaction tax on home sales.

Michigan is now in the 18th month of a state-wide recession, and the unemployment rate of 6.9% remains far above the national rate of 5%. Ms. Granholm blames the nationwide mortgage meltdown and higher energy prices for the job losses and disappearing revenues, but this Great Lakes state is in its own unique hole. Nearby Illinois (5.4% jobless rate) and even Ohio (5.6%) are doing better.

Leon Drolet, the head of the Michigan Taxpayers Alliance, complains that "we are witnessing the Detroit-ification of Michigan." By that he means that the same high tax and spend policies that have hollowed out the Motor City are now infecting many other areas of the state.

The tax hikes have done nothing but accelerate the departures of families and businesses. Michigan ranks fourth of the 50 states in declining home values, and these days about two families leave for every family that moves in. Making matters worse is that property taxes are continuing to rise by the rate of overall inflation, while home values fall. Michigan natives grumble that the only reason more people aren't blazing a path out of the state is they can't sell their homes. Research by former Comerica economist David Littmann finds that about the only industry still growing in Michigan is government. Ms. Granholm's $44.8 billion budget this year further fattened agency payrolls.

David Boaz on collectivist presidential candidates

The people Mr. Obama is sneering at are the ones who built America – the traders and entrepreneurs and manufacturers who gave us railroads and airplanes, housing and appliances, steam engines, electricity, telephones, computers and Starbucks. Ignored here is the work most Americans do, the work that gives us food, clothing, shelter and increasing comfort. It's an attitude you would expect from a Democrat.

Or this year's Republican nominee. John McCain also denounces "self-indulgence" and insists that Americans serve "a national purpose that is greater than our individual interests." During a Republican debate at the Reagan Library on May 3, 2007, Sen. McCain derided Mitt Romney's leadership ability, saying, "I led . . . out of patriotism, not for profit." Challenged on his statement, Mr. McCain elaborated that Mr. Romney "managed companies, and he bought, and he sold, and sometimes people lost their jobs. That's the nature of that business." He could have been channeling Barack Obama.

"A greater cause," "community service" – to many of us, these gauzy phrases sound warm and comforting. But their purpose is to disparage and denigrate our own lives, to belittle our own pursuit of happiness. They're concepts better suited to a more collectivist country than to one founded in libertarian revolution – a revolution intended to defend our rights to "life, liberty and the pursuit of happiness."

There is a whiff of hypocrisy here. Mr. Obama, who made $4.2 million last year and lives in a $1.65 million house bought with the help of the indicted Tony Rezko – and whose "elegant suits" and "impeccable ties" made him one of Esquire's Best-Dressed Men in the World – disdains college students who might want to "chase after the big house and the nice suits." Mr. McCain, who with his wife earned more than $6 million last year and who owns at least seven homes, ridicules Mr. Romney for having built businesses.

But hypocrisy is not the biggest issue. The real issue is that Messrs. Obama and McCain are telling us Americans that our normal lives are not good enough, that pursuing our own happiness is "self-indulgence," that building a business is "chasing after our money culture," that working to provide a better life for our families is a "narrow concern."

They're wrong. Every human life counts. Your life counts. You have a right to live it as you choose, to follow your bliss. You have a right to seek satisfaction in accomplishment. And if you chase after the almighty dollar, you just might find that you are led, as if by an invisible hand, to do things that improve the lives of others.

UPDATE: Arnold Kling says:
The way I see it, in November I will have a choice between two Spitzers.

Friday, May 23, 2008

Culture and corruption

The Diplomat-Parking-Violation Corruption Index (via Chris Blattman).

Hillary as VP

The Intrade contract has appreciated 600% in the last 4 months, but even though Hillary leads the pack, she is currently pricing around a 1-in-6 chance.

I think that Obama should seriously think about choosing her, as much as she annoys him. It will force a lot of the people who support her to vote for him; otherwise, quite a few of them will end up staying home, or pulling for McCain or Nader. I think JFK and LBJ probably disliked each other even more, so maybe they can both suck it up. McCain is well behind, but could come on strong once they start debating. Obama will win on style, but then again, Gore had that advantage over Dubya, too.

Quotes of the day

Democracy is the art of running the circus from the monkey cage.--H.L. Mencken

At work, you think of the children you've left at home. At home you think of the work you've left unfinished. . . . Your heart is rent.--Golda Meir

And because the charge of sexism is all of the above [insulting, manipulative, untrue, prissy, and sissy], it is, ultimately, undermining of the position of women.--Peggy Noonan, link same as above

The concept of the "teeth-to-tail ratio" needs to be revisited. For the past generation, military reformers looked at the support, headquarters and institutional base of the armed services, especially the Army, as overhead fat to be trimmed ruthlessly. But in an irregular warfare environment, the old tail – military police, engineers, civil affairs units, intelligence analysts, command-and-control nodes, military education and so on – are the new teeth.--THOMAS DONNELLY and FREDERICK W. KAGAN, italics mine

Important exceptions notwithstanding, the overall trend toward greater regulation of consumer choices is disturbing. Consumers make worse decisions when they are not responsible for their decisions, or when they can sue or otherwise get compensated when they make bad decisions. Consumers make mistakes, but they learn from them when they have to bear the consequences of their decisions. They are generally far more competent to make decisions in their own interests than are regulators or lawmakers as long as consumers are the ones who benefit from good choices and are hurt by bad choices. This is why I continue to be a minimalist on government regulation, and greatly prefer the controls over behavior that stem from consumer responsibility and the discipline of competition.--Gary Becker
Climate change will create problems but how clueless do you have to be not to understand that a large fraction of the world's people would love to live long enough to die from obesity and other diseases of wealth?--Alex Tabbarok

Uh oh

Boston Celtics looking into an abyss?


Thursday, May 22, 2008

I don't think Wii Fit sales are going to pop much

I just set up Wii Fit last night, and while it is an impressive combination of hardware and software, I can't see folks who are spending double on gasoline over a few years ago emptying retail shelves so that they can be told they should lose 20 lbs in the next few weeks.

How about a prediction market for this?

Wednesday, May 21, 2008

Senate succession irony

also in Massachusetts:
When John F. Kennedy left the Senate after being elected president in 1960, Gov. Foster Furcolo appointed a college roommate of JFK's, Ben Smith, as a "seat warmer" for Teddy, who was born on the 200th anniversary of George Washington's birth and would not be old enough to serve in the Senate until 1962. That year Ted Kennedy ran in a special election for the final two years of his elder brother's term.

In 2004, Massachusetts Democrats anticipated another Senate vacancy, when one of their own--a haughty, French-looking one, who by the way served in Vietnam--received a presidential nomination. The governor at the time, Mitt Romney, was a Republican, and Democrats, including Sen. Kennedy, wanted to keep the seat in Democratic hands. So, as the New York Times reported at the time:
The State Senate voted, almost entirely on party lines, to change the nearly century-old electoral rules and call for a special election to a Senate seat that would take place from 145 to 160 days after an incumbent senator decides to step down. In Mr. Kerry's case, should he win the presidency, that would mean an election would be held for his seat in March or April 2005, instead of in November 2006 under the current system. Mr. Kerry's term actually expires in 2008.
The Senate also voted that the governor could not make an interim appointment. . . .
''That's not an election--that's a sweetheart deal,'' Mr. Romney protested at a news conference on Wednesday. He said he would veto the bill if, as expected, it passes in the House next week, but legislators are likely to overturn any veto. ''You're creating a special deal for a friend,'' he said, adding, ''It's robbing the citizens of the right to a free election.'' . . .
There is also the irony that Senator Kennedy, who urged state legislators to approve the special election bill, was himself once an indirect beneficiary of the state's appointment system.
The Legislature did override Romney's veto, as the Globe reported. The result is that although Kerry still holds his seat, the current governor, Deval Patrick, will be unable to fill Kennedy's should it become vacant anytime in the next 2½ years.

Another failed attempt at universal healthcare

The showpiece of RomneyCare was its individual mandate, a requirement that all Massachusetts residents obtain health insurance by July of last year or else pay penalties. The idea was that getting everyone into the insurance system would eliminate the "free-rider" problem of those who refuse to buy insurance but then go to emergency rooms when they're sick; thus costs would fall. "Will it work? I'm optimistic, but time will tell," Mr. Romney wrote in these pages in 2006.

Well, the returns are rolling in, and the critics look prescient. First, the plan isn't "universal" at all: About 350,000 more people are now insured in Massachusetts since the reform passed. Federal estimates put the prior number of uninsured at more than 657,000, so there was a reduction. But it was not secured through the market reforms that Governor Romney promised. Instead, Massachusetts also created a new state entitlement that is already trembling on the verge of bankruptcy inside of a year.

Some two-thirds of the growth in coverage owes to a low- or no-cost public insurance option. Called Commonwealth Care, it uses a sliding income scale to subsidize coverage for everyone under 300% of the federal poverty level, or about $63,000 for a family of four. Commonwealth Care also accounts for 60% of statewide growth in individual insurance over the last year, and the trend is expected to accelerate, perhaps double.

One lesson here is that while pledging "universal" coverage is easy, the harder problem is paying for it. This year's appropriation for Commonwealth Care was $472 million, but officials have asked for an add-on that will bring it to $625 million. For 2009, Governor Deval Patrick requested $869 million but has already conceded that even that huge figure is too low. Over the coming decade, the expected overruns float in as much as $4 billion over budget. It's too early to tell how much is new coverage or if state programs are displacing private insurance.

The "new Big Dig" moniker refers to the legendary cost overruns when Boston rebuilt its traffic system. Now state legislators are pushing new schemes to offset RomneyCare's runaway expenses, including reductions in state payments to doctors and hospitals, enlarged business penalties, an increase in the state tobacco tax, and more restrictions on drug companies and insurers.

Mr. Romney's fundamental mistake was focusing on making health insurance "universal" without first reforming the private insurance market. The "connector" that was supposed to link individuals to private insurance options has barely been used, as lower-income workers flood to the public option. Meanwhile, low-cost private insurers continue to avoid the state because it imposes multiple and costly mandates on all policies.

Hailed at first as a new national model, the Massachusetts nonmiracle ought to be a warning to Washington. Barack Obama and Hillary Clinton are both proposing versions of RomneyCare on a national scale, with similar promises that covering everyone under a government plan will reduce costs. Mr. Obama at least argues that more people would be covered were insurance more affordable. But his solution is Massachusetts on steroids – make insurance less expensive for policyholders by transferring the extra costs onto the government. Mrs. Clinton likes that but also wants the individual mandate, despite the mediocre results so far.

The real problem in health care is the way the tax code and third-party payment system distort incentives. That's where John McCain has been focusing his reform efforts – because that really does have the potential to reduce costs while covering more of the uninsured – and Republicans ought to follow his lead.

In this respect paradoxically, we can be thankful that Massachusetts ignored the cost problems that doomed other recent liberal health insurance overhauls in California, Pennsylvania, Wisconsin and Illinois. The Bay State is showing everyone how not to reform health care.

Tuesday, May 20, 2008

Kling points out the problem with cap-and-trade carbon limits

From a political economy perspective one important disadvantage of cap-and-trade relative to a carbon tax is that cap-and-trade will develop a long-term constituency. People talk about the irreversibility of the alleged climate change due to CO2 emissions. If you want to see irreversibility, watch what you happens once companies have a stake in pollution permits. Five years from now, if all the scientific evidence turns out to be that global warming is not an issue, any cap-and-trade program will be all but impossible to unwind.

We can't even unwind our counterproductive ethanol subsidies.

Arnold also makes a case for eliminating macroeconomics. He's on a roll, lately.

One reason why Obama is trading so much stronger over McCain

Ray Fair's model.

The Willie Sutton Theory

from Russell Roberts:
Those of us who favor smaller government tend to think of Milton Friedman's observation that you spend your own money on yourself pretty carefully. But you're pretty careless when you spend other people's money on other people. So even if politicians are motivated to correct market imperfections, they will tend to do it poorly. But in the Willie Sutton theory, politicians are really spending other people's money to benefit themselves--using that money to buy love, attention, campaign contributions and votes.

Hauser's Law

No matter what the tax rates have been, in postwar America tax revenues have remained at about 19.5% of GDP.
David Ranson observes:

What happens if we instead raise tax rates? Economists of all persuasions accept that a tax rate hike will reduce GDP, in which case Hauser's Law says it will also lower tax revenue. That's a highly inconvenient truth for redistributive tax policy, and it flies in the face of deeply felt beliefs about social justice. It would surely be unpopular today with those presidential candidates who plan to raise tax rates on the rich – if they knew about it.

Although Hauser's Law sounds like a restatement of the Laffer Curve (and Mr. Hauser did cite Arthur Laffer in his original article), it has independent validity. Because Mr. Laffer's curve is a theoretical insight, theoreticians find it easy to quibble with. Test cases, where the economy responds to a tax change, always lend themselves to many alternative explanations. Conventional economists, despite immense publicity, have yet to swallow the Laffer Curve. When it is mentioned at all by critics, it is often as an object of scorn.

Because Mr. Hauser's horizontal straight line is a simple fact, it is ultimately far more compelling. It also presents a major opportunity. It seems likely that the tax system could maintain a 19.5% yield with a top bracket even lower than 35%.

What makes Hauser's Law work? For supply-siders there is no mystery. As Mr. Hauser said: "Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation."

Putting it a different way, capital migrates away from regimes in which it is treated harshly, and toward regimes in which it is free to be invested profitably and safely. In this regard, the capital controlled by our richest citizens is especially tax-intolerant.

The economics of taxation will be moribund until economists accept and explain Hauser's Law. For progress to be made, they will have to face up to it, reconcile it with other facts, and incorporate it within the body of accepted knowledge. And if this requires overturning existing doctrine, then so be it.

Monday, May 19, 2008

Credit market writedowns not over yet

according to Yalman Onaran (via Eddy Elfenbein):
Banks and securities firms, reeling from record losses resulting from the collapse of the mortgage securities market, are failing to acknowledge in their income statements at least $35 billion of additional writedowns included in their balance sheets, regulatory filings show.

Citigroup Inc. subtracted $2 billion from equity for the declining value of home-loan bonds in its quarterly report to the Securities and Exchange Commission on May 2 without mentioning the deduction in the earnings statement or conference call with investors that followed.

The balance-sheet adjustments are in addition to $344 billion of writedowns and credit losses already reported on the income statements of more than 100 banks. These companies have raised $263 billion from sovereign wealth funds, their own governments and public investors to shore up capital. The balance-sheet writedowns also reduce equity, which needs to be replenished. Adding the $35 billion leaves the banks with a $116 billion mountain of losses to climb.

"The smart people are the ones who've identified the problems, put them out there in full transparency, and addressed them by raising more capital," said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. "There is still billions of dollars of crap out there that hasn't worked itself through the system. Banks need more capital to work that all out."

Sounds like seventh inning to me.

Quote of the day

Negotiation is not a policy. It is a technique. Saying that one favors negotiation with, say, Iran, has no more intellectual content than saying one favors using a spoon.--John Bolton

Beggar thy neighbor (of carbon emission)

States and cities like California that haven't met the clean air guidelines have been losing factories and new businesses to places that can. So one way for greens and their political allies to create a "level playing field" is to make the clean air standards so unachievable that virtually all U.S. cities can't comply. It's a classic beggar-thy-neighbor political strategy.

And it punishes all of those cities that worked hard over the years to reach attainment, most of them far less affluent than Mr. Waxman's tony environs. That's the real story behind the phony ozone outrage he is staging on Tuesday. The Congressman from Beverly Hills is all for cleaning up the air – except in his own backyard.

Expanding educational freedom in Florida

When Florida passed a law in 2001 creating the Corporate Tax Credit Scholarship Program for underprivileged students, all but one Democrat in the state legislature voted against it. Earlier this month, lawmakers extended the program – this time with the help of a full third of Democrats in the Legislature, including 13 of 25 members of the state's black caucus and every member of the Hispanic caucus. What changed?

Our guess is that low-income parents in Florida have gotten a taste of the same school choice privileges that middle- and upper-income families have always enjoyed. And they've found they like this new educational freedom. Under the scholarship program, which is means-tested, companies get a 100% tax credit for donations to state-approved nonprofits that provide private-school vouchers for low-income families.

The program already serves some 20,000 students. The expansion will allow it to assist an additional 6,000. It's no surprise that poor families would embrace educational options, given that their government-assigned schools are clearly failing their children. The high school graduation rate for black students in Florida is 45% overall, 38% for black males. The 52% graduation rate for Hispanics is also nothing to brag about.

What's encouraging is that these parents have managed to convey their pro-choice sentiments to their representatives, who are responding even though voucher programs infuriate powerful liberal special interest groups like the teachers unions. Given that 70% of the program participants are black or Hispanic, you'd think Democrats would be taking the lead on a measure that mostly benefits their traditional constituency. Apparently they needed a little prodding, but we're glad to see they did the right thing.

Let freedom ring! And school vouchers, too.

Land-Ocean year-to-date temperatures 0.35 Celsius over baseline

according to GISS. Assuming the Intrade "Top 5" global warming contract expires according to the Land Ocean Index, May - Dec 2008 temperatures will need to average 0.65 Celsius over baseline. The record was set back in 2005, 0.62 Celsius over baseline.

Intrade needs to specify the expiry conditions more precisely.

Still, I remain short the contract:

Latest case for more limited government: Medicaid money laundering

The swindle works like this: A state overpays state-run health-care providers, such as county hospitals or nursing homes, for Medicaid benefits far in excess of its typical rates. Then the federal government reimburses the state for "half" of the inflated bills. Once the state bags the extra matching funds, the hospital is required to rebate the extra money it received at the scam's outset. Cash thus makes a round trip from states to providers and back to the states – all to dupe Washington.

The Government Accountability Office and other federal inspectors have copiously documented these "creative financing schemes" going back to the Clinton Administration. New York deposited its proceeds in a Medicaid account, recycling federal dollars to decrease its overall contribution. So did Michigan. States like Wisconsin and Pennsylvania fattened their political priorities. Oregon funded K-12 education during a budget shortfall.

The right word for this is fraud. A corporation caught in this kind of self-dealing – faking payments to extract billions, then laundering the money – would be indicted. In fact, a new industry of contingency-fee consultants has sprung up to help states find and exploit the "ambiguities" in Medicaid's regulatory wasteland. All the feds can do is notice loopholes when they get too expensive and close them, whereupon the cycle starts over.

Sunday, May 18, 2008

The Middle Class lives on

if only in the minds of 53% of households:
On key measures of well-being--income, wealth, health, optimism about the future – they tend to fall between those who identify with classes above and below them. But within this self-defined middle class, there are notable economic and demographic differences. For example, four-in-ten Americans with incomes below $20,000 say they are middle class, as do a third of those with incomes above $150,000. And about the same percentages of blacks (50%), Hispanics (54%) and whites (53%) self-identify as middle class, even though members of minority groups who say they are middle class have far less income and wealth than do whites who say they are middle class.

Celtics' turnaround traced back to a blind son

beautifully written by Greg Garber.

Freedom of the press

but not of the press's undesired speech.

Quote of the day

A Veteran - whether active duty, retired, National Guard, or someone who, at one point in his or her life, wrote a check payable to "The United States of America" for an amount of "up to and including my life".--Author Unknown

Friday, May 16, 2008

Megan McArdle stands by her men (B. Obama & C.S. Lewis)

This excerpt starts with her quoting of Lewis:

For a long time I used to think this a silly, straw-splitting distinction: how could you hate what a man did and not hate the man? But years later it occurred to me that there was one man to whom I had been doing this all of my life--namely myself. However much I might dislike my own cowardice or conceit or greed, I went on loving myself. There had never been the slightest difficulty about it. In fact the very reason why I hated the things was that I loved the man. Just because I loved myself, I was sorry to find that I was the sort of man who did those things. Consequently, Christianity does not want us to reduce by one atom the hatred we feel for cruelty and treachery. We ought to hate them. Not one word of what we have said about them needs to be unsaid. But it does want us to hate them in the same way in which we hate things in ourselves: being sorry that the man should have done such things, and hoping, if it is anyway possible, that somehow, sometime, somewhere he can be cured and made human again.

Things have gotten better, and continue to do so. But even though most blacks and whites do not consider themselves enemies, the two communities often do not consider each other as being part of the same "self". If a white clerk is rude to you, maybe it's racism; if a black clerk does it, she's just having a bad day. If a black kid sells drugs, he's a dangerous felon; if a middle class white kid does it, he's a good kid going through a phase.

The truth, which is hardly original to me, is that we are all racist, in that we still think of race as an important difference. Which of course, it is, if only by virtue of the fact that we all think so. But I don't think that Obama meant to be insulting, and I don't even think he is elitist in the way that his critics believed. The fact is that Obama does know more about race than most of us, because he actually knows what it's like to be inside, and outside, of both communities. That's worth listening to even if it doesn't always come out quite right.

Bubbles and natural selection

Great WSJ article on bubbles:
One who believes a stock is too high can short it, borrowing shares and selling them in hopes of replacing them when they're cheaper. But this can be costly, both in the fees and in the risk of huge losses if the stock keeps rising. Many big investors rarely short stocks. When differences between bullish investors and bearish ones are extreme, many of the bears simply move to the sidelines. Then, with only optimists playing, prices go higher and higher.

So investors who spot the bubble attack only if each is confident that other skeptics are on board. In work done with Mr. Abreu, Mr. Brunnermeier concluded that if all the rational investors could agree to bet against the bubble, they could make big profits. But if they can't coordinate, it's risky for any one of them to bet against a bubble. So it makes sense to ride it up and then get out quickly as soon as the bubble's existence becomes common knowledge.
We can even see these in prediction markets:


Mankiw judges Farm Bill Idol

The winner here.

Quote of the week

Some seem to believe that we should negotiate with the terrorists and radicals, as if some ingenious argument will persuade them they have been wrong all along. We have heard this foolish delusion before. As Nazi tanks crossed into Poland in 1939, an American senator declared: “Lord, if I could only have talked to Hitler, all this might have been avoided.” We have an obligation to call this what it is — the false comfort of appeasement, which has been repeatedly discredited by history.--George W. Bush

Thursday, May 15, 2008

Nice price/earnings graphs

from Bespoke:

Bank writedown game still just in the 7th inning

according to Fitch (via DealBreaker).

I thought we were in the 6th inning six weeks ago.

Quote of the day

Democracies don't let people die--Daniel Henninger

No fruit allowed in there. They're afraid people will throw it.--Security guard at Citigroup shareholders meeting


If there is such a thing as a useful election defeat, then Tuesday's Republican loss in a special House election in Mississippi would qualify. Maybe this thumping in a heretofore safe GOP seat will finally scare the Members straight, or at least less crooked.

Democrats won with 54% of the vote in a district that a Republican won with 66% in 2006 and that President Bush carried in 2004 by 25 points. It was the GOP's third special election loss this year, and it has Democrats predicting that November will be another rout of 2006 proportions. Oklahoma's Tom Cole, who runs the National Republican Congressional Committee, captured the GOP reaction when he declared that "There is no district that is safe for Republican candidates."

This is the lesson Republicans should have learned in 2006, but the Members preferred to blame their failure on President Bush and Iraq. House Republicans pooh-poohed their own earmarking scandals, spending excesses and overall wallowing in the Beltway status quo. Rather than rethink their habits, they re-elected the same party leaders and even kept Jerry Lewis as their chief Appropriator. Congressman John Shadegg of Arizona is right when he says that "Since the 2006 elections, Republicans have done absolutely nothing to redefine themselves. We can't even get behind an earmark moratorium bill."

In the Mississippi race, the national GOP tried to link Democratic candidate Travis Childers to Barack Obama and Reverend Jeremiah Wright. One TV ad declared: "Travis Childers: He took Obama's endorsement over our conservative values." But Mr. Childers was well known as a cultural conservative who favors gun rights and opposes abortion. In a year when Americans are mad as hell, such a negative attack strategy merely reminds voters that Republicans have run out of ideas.

Democrats have settled on a formula of running as cultural conservatives in GOP districts, and as economic populists on "fiscal discipline," trade protection, corporate bashing, and "middle-class tax cuts" paid for by taxes on the rich. If Republicans can't trump that message with an agenda of low taxes, health-care affordability and portability, jobs and stable prices, they will be routed again in November.

Wednesday, May 14, 2008

Quote of the day

Anyone who is capable of getting themselves made President should on no account be allowed to do the job. - Douglas Adams

Word of the day


Vice-president markets up at Intrade!

Interestingly, to-be-determined (or FIELD) contracts are pricing higher than any individuals, the following rounding out the higher values:

Dem: Jim Webb, Hillary Clinton

GOP: Tim Pawlenty, Mitt Romney

Justin Wolfers' case for prediction markets

from John Authers:
Prediction markets in sport get the results right – almost spookily so. In the 3,791 NFL football games played from 1984 to 2000, regression results showed that the spread in the spread betting line could explain 99.7 per cent of the winning margin. Over a big enough sample, in other words, spread betters’ collective judgment was virtually flawless. Moving to basketball, the spread available in Las Vegas spread explained 97.3 per cent of winning margins, in a sample of more than 9,000 games from 1994 to 2001.

They also work well for the Hollywood Stock Exchange: a market predicting movies’ opening weekend box office take is almost as uncannily accurate as the sports betters.

Economic prediction markets work better than consensus forecasts of economists. During the brief history of an economic prediction market run by Goldman Sachs and Deutsche Bank, the market came closer to predicting ISM business confidence surveys, initial unemployment claims, non-farm payrolls and retail sales than economic forecasters did.

Prediction markets can help track political risk. and the Iowa Electronic Markets have gained a lot of coverage during the protracted campaign for the Democrats’ nomination. They deserve it: in the 2004 presidential election they called the winner of the electoral college vote correctly in all 50 states.

More to the point, over history they perform better than the Gallup poll, which is much more expensive to compile. Their average error on presidential elections is 1.4 per cent: the equivalent number for Gallup is more than 2 per cent.

They have a much longer history than polls. There are records of election betting in Wall Street going back to 1884. The average betting turnover per election, in 2002 dollars, is $37m, equivalent to 54 per cent of campaign spending.

They appear to be hard to manipulate. When the long-shot presidential contender Pat Buchanan encouraged his supporters to buy Buchanan futures on the Iowa markets, they failed to move the markets for more than a few hours – once the price was obviously too high, sellers emerged and pushed it back down again.

Arbitrage opportunities are few. In 2003, when Arnold Schwarzenegger ran for the California governorship, two rival markets offered futures on the race. They were based in Ireland and the Caribbean. But arbitrage opportunities never emerged, despite a wild race with many twists and turns. The bid price in one market was never above the ask price in the other.

One surprising result is that it does not seem too matter (on the basis of some unscientific comparisons) whether the money invested in the market is real or just a toy currency. Economics would predict otherwise, but in an experiment covering a full season French soccer, a prediction market using toy money did just as well as a market where real money was at risk.

There are weaknesses: they are only as good as the information that is made available to them. The market in futures for the chances of discovering weapons of mass destruction in Iraq was as wide of the mark as everyone else.

And like other markets, they are subject to behavioural biases. One is representational – when asked to picture a great baseball player, most people imagine Babe Ruth, who was white. When Wolfers tested the theory that the market would persistently underrate teams with a large proportion of African-American players (who look nothing like Ruth), it was confirmed. The average return on teams with three white players or less is 97 cents for a $1 bet. For teams with seven white players or more, the return is little over 92 cents. Thus the market as a whole overestimated the chances of predominantly white teams.

In stock markets, Wolfers found a similar bias related to gender: analysts persistently underestimated the earnings of companies with female CEOs. (He also found that male analysts were particularly likely to underestimate the earnings potential of female-led companies).

But these failings are not unique to prediction markets. All markets are prone to the behavioural biases of their participants, and to lack of adequate information.

Bernanke strikes back

I doubt a week has gone by since last summer during which I haven't seen some pundit or other trot out Walter Bagehot's dictum that in the event of a credit crunch, the central bank should lend freely at a penalty rate. More often than not, this is contrasted with the actions of the Federal Reserve, which seems to be lending freely at very low interest rates.

Ben Bernanke, in a speech today, addressed this criticism directly:

What are the terms at which the central bank should lend freely? Bagehot argues that "these loans should only be made at a very high rate of interest". Some modern commentators have rationalized Bagehot's dictum to lend at a high or "penalty" rate as a way to mitigate moral hazard--that is, to help maintain incentives for private-sector banks to provide for adequate liquidity in advance of any crisis. I will return to the issue of moral hazard later. But it is worth pointing out briefly that, in fact, the risk of moral hazard did not appear to be Bagehot's principal motivation for recommending a high rate; rather, he saw it as a tool to dissuade unnecessary borrowing and thus to help protect the Bank of England's own finite store of liquid assets. Today, potential limitations on the central bank's lending capacity are not nearly so pressing an issue as in Bagehot's time, when the central bank's ability to provide liquidity was far more tenuous.

Do I stand corrected here? Or here?

Tuesday, May 13, 2008

Dale Franks calls it for McCain


I caught a little bit of Obamania in 2004

but 2008 is for Jindalmania.

Scorcese's "Taxi Driver" is the film that has created the most wealth

according to Robert Mundell.

Altruistic inequalities

at Freakonomics:

1. Asian Tsunami (Dec. 2004)
220,000 deaths
$1.92 billion

2. Hurricane Katrina (Aug. 2005)
1,577 deaths
$5.3 billion

3. Pakistan Earthquake (Oct. 2005)
73,000 deaths
$0.15 billion ($150 million)

Americans gave nearly three times as much money after Hurricane Katrina as they did after the Asian tsunami, even though the tsunami killed many, many more people. But this makes sense, right? Katrina was an American disaster.

Then along comes a terrible earthquake in Pakistan, killing 73,000 people, and U.S. contributions are only $150 million, making the $1.92 billion given after the tsunami look very, very generous. That’s only about $2,054 per fatality in Pakistan, versus an approximate $8,727 per fatality for the tsunami. Two far-away disasters both with huge loss of life — but with a huge disparity in U.S. giving.

All Don is saying is

give peace a chance.

Mark Gongloff is skeptical of prediction market traders


Economists have touted for years the idea that markets -- whether on political futures or oil futures -- can be used broadly to get a better read on the uncertain future.

This election season is a reminder of the limits of the idea.

"What you're doing is collecting bits and pieces of information and aggregating it so we can watch it and understand what people know," says California Institute of Technology economist Charles Plott, a leading light in experimental economics. "People picked this up and called it the 'wisdom of crowds' and other things, but a lot of that is just hype."

The problem with these markets, Mr. Plott says, isn't that they are thinly traded, a common complaint, but that they are often plagued by bad information. That leads to bubbles, head-fakes and manipulation -- just like in the stock markets.

I concede that no trader can predict the future all the time, and also that prediction markets have a success rate of less than 100%.

However, do traders in other markets do significantly better? (Um, no). And prediction markets do better than polls.

I'm surprised that the WSJ spotted him the space for this column. Let's not make Perfect the enemy of Good.

Quotes of the day

China's average annual growth of roughly 9% over the past 20 years has led to an absolute tenfold increase in per-capita GNP and 21-fold increase in purchasing-power-parity military expenditure. Though it could do more, it prudently limits defense spending, with an eye to both social stability – the compass of the Chinese leadership – and assimilable military modernization.--Mark Helprin
Supply and demand is not too "complex." It is just not very emotionally satisfying.--Thomas Sowell, via Greg Mankiw
But here's a data point: New Orleans smashes it's teachers union; test scores rise dramatically, even though it's still ministering to poor kids testing substantially below grade level.--Megan McArdle
Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.--Jim Manzi

Long primary victory may precede short general defeat

June Kronholz reports:

Monday, May 12, 2008

Jake Tapper rounds up Obama's staff missteps

When does this cross from coincidence to pattern?

Monopoly has its privileges

(via Mark Perry)

Quotes of the day

The fact that money doesn’t buy happiness is no indictment of capitalism. On the contrary, capitalism is the best system to allow people to succeed on their merits in the economy—and we know that it is success that truly does bring happiness. Capitalism, moored in proper values of honesty and fairness, is a key to our gross national happiness, and we should defend it vigorously.--Arthur Brooks, via Larry Ribstein
You simply can’t pay committed employees commensurately. So treat them like they’re doing you a favor, not like they owe you something.--Abraham Piper
You can say, we’ll never invade a sovereign country. Then you have Rwanda. A million people were killed. Probably 5,000 U.S. troops could have stopped the whole thing. So you can have the strict rule that the U.S. will never attack a sovereign country except in self-defense, but there’s a cost to it. Ever since World War II there’s been a consensus that the U.S. had to do that.--John Yoo

Is the stock market overvalued?

Maybe, at least in for the next quarter or two. But I think earnings is the main driver of prices.

Black swans notwithstanding, I'm fully expecting the S&P 500 to trade 5% lower, and would be very surprised if it traded 3% higher.

Cartoon of the day

(via Andrew Samwick)

How about futures contracts

for these:
The world is far more peaceful today than it was 15 years ago. There were 17 major civil wars -- with "major" meaning the kind that kill more than a thousand people a year -- going on at the end of the Cold War; by 2006, there were just five. During that period, the number of smaller conflicts also fell, from 33 to 27.

Government throwing money to the wind (and sun)

An even better way to tell the story is by how much taxpayer money is dispensed per unit of energy, so the costs are standardized. For electricity generation, the EIA concludes that solar energy is subsidized to the tune of $24.34 per megawatt hour, wind $23.37 and "clean coal" $29.81. By contrast, normal coal receives 44 cents, natural gas a mere quarter, hydroelectric about 67 cents and nuclear power $1.59.

The wind and solar lobbies are currently moaning that they don't get their fair share of the subsidy pie. They also argue that subsidies per unit of energy are always higher at an early stage of development, before innovation makes large-scale production possible. But wind and solar have been on the subsidy take for years, and they still account for less than 1% of total net electricity generation. Would it make any difference if the federal subsidy for wind were $50 per megawatt hour, or even $100? Almost certainly not without a technological breakthrough.

By contrast, nuclear power provides 20% of U.S. base electricity production, yet it is subsidized about 15 times less than wind. We prefer an energy policy that lets markets determine which energy source dominates. But if you believe in subsidies, then nuclear power gets a lot more power for the buck than other "alternatives."

The same study also looked at federal subsidies for non-electrical energy production, such as for fuel. It found that ethanol and biofuels receive $5.72 per British thermal unit of energy produced. That compares to $2.82 for solar and $1.35 for refined coal, but only three cents per BTU for natural gas and other petroleum liquids.

All of this shows that there is a reason fossil fuels continue to dominate American energy production: They are extremely cost-effective. That's a reality to keep in mind the next time you hear a politician talk about creating millions of "green jobs." Those jobs won't come cheap, and you'll be paying for them.

Friday, May 09, 2008

ABC's 20/20 will be featuring Intrade on tonight's program

scheduled airing at 10:00pm ET:

In the fall, John McCain's presidential campaign was running out of money and pundits were saying he'd drop out of the race. His share price on Intrade plummeted to less than 5 cents. If McCain somehow got the nomination, those same McCain shares would be worth a dollar. As Bethan and Jonathan watched a Republican debate in September, they saw a "new confidence" in McCain, and an opportunity to make money.

"Everyone was unloading their shares of McCain on Intrade. But we saw something else in the debate," said Bethan.

They decided to bet that McCain would make a comeback, and of course they were right. Today the McCain shares they bought for around 5 cents are worth 19 times that. The value of Bethan and Jonathan's Intrade account has increased by about $250,000, mostly from betting on McCain.

Now Intrade is more than just a place where people win or lose money making bets. It turns out that the share prices on Intrade can be accurate predictors of the future. Intrade attracts a large and diverse crowd of bettors, and because each participant puts their money on the line, they may be more likely to make careful decisions.

As a result of the collective intelligence of more than 77,000 bettors on Intrade, the prices on the site may be a good way to predict the outcome of current events -- more accurate than some polls and pundits.

In 2004, the market odds on Intrade predicted the presidential vote of every state but Alaska. In 2006, the odds correctly indicated the outcome of every Senate race.

The Navy learned about this principle 40 years ago when the nuclear attack submarine Scorpion became lost somewhere in the North Atlantic. The search went on fruitlessly until a Navy man named John Craven assembled a large group of people, from deckhands to captains, and asked them many different questions that would help predict the location of the lost submarine. He didn't just ask them what they thought, he asked to them to bet on it.

"He took all those bets, and put 'em all together, and what he finished with was this kind of map of the ocean floor," Surowiecki said. "And on this map there was this one spot where his team said, 'This is where we think the submarine is most likely to be.' It wasn't anywhere near where the Navy had been looking … and they found it."

The submarine was just 220 yards away from where the bets said it would be.

John Delaney, the founder of Intrade, pointed out that his Web site's data, which predicts the likelihood of such things as earthquakes and bird flu outbreaks, still proves a very powerful predictive tool for a wide range of people.

"The Intrade market data is used by the Navy, it's used by the Federal Reserve, it's used by 50 or 100 universities," he said. "All of these people see a benefit to Intrade and a benefit to the Intrade market data, but still there's confusion as to how -- how your government would treat Intrade."

Bethan and Jonathan said they're pretty sure that what they're doing is legal, but the law is vague. They understand why prediction markets might have a negative connotation.

"It sounds dirty," Bethan said. "It's politics and money. … It's very taboo."

ABC News contacted the U.S. Department of Justice, but it did not provide a clear answer as to whether Intrade or its users are breaking the law.

Unusual cooling in April

according to the National Climactic Data Center (via Don Surber).


Markets in everything: Rich men

... if I wanted to be a kept woman I would not start my quest in Minneapolis. High density, as you find in Manhattan, means lots of fun things to do in your copious free time as a kept woman and also a higher degree of income inequality and thus the hope of snaring a rich man. There's a reason why they didn't set Sex in the City in Paramus and most of the women there will be working even when the traffic gets worse.

Why CEO pay really should approximate athlete, movie star, and other free agent wage markets

at Larry Ribstein's.

Greg Mankiw, Tax Arbitrageur

I have often wondered what the efficient scale of a university is and, in particular, whether it would be better to create a second Harvard with the university's wealth than to expand the first one. Maybe the Massachusetts state legislature will give the powers-that-be at Harvard an incentive to consider more radical expansion plans.

Quote of the day

Some 56 percent of parents anticipated that their children would want more time with their parents and for their parents to spend less time at work, yet only 10 percent of the children actually wanted more time with their mothers and only 16 percent wanted more time with their fathers. A far larger proportion, 34 percent, wished that their mothers would be less stressed and less tired, and 28 percent wished this about their fathers.--Bianchi, Robinson, et Milkie

All that is gold does not glitter

From James Hamilton:

A 1991 research paper by Ben Bernanke and Harold James noted the very strong correlation between when a country abandoned the gold standard and when it began to recover from the Great Depression. The top panel above [Cav: not shown here] shows their calculations of the average annual growth of industrial production for the 14 countries that decided to abandon their currencies' gold parity in 1931-- they experienced positive growth in every year from 1932 on. Countries that stayed on gold, by contrast, experienced an average output decline of 15% in 1932. The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began. The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935. On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth.

As I pointed out in an article published in 1988, gold-standard advocates think in terms of an institution whose continued operation, once adopted, would never again be doubted. But the problem is, if you can go on a gold standard, then you can go off a gold standard. And uncertainty about if and when the latter will occur can make the system itself a very destabilizing force.

Maybe she's never worked hard, Dan

Hillary's inexcusable bigotry.

Personally, I thought her Freudian slip about the "white Americans" was less excusable. Forget about s.p.e.a.k.i.n.g..i.n..c.o.d.e; we are seeing the Empress in her New Clothes.

Boudreaux's Theory of Employment

Underpaid workers will not be fired.

His point was that an employer would not part with someone who creates more value than (s)he costs, so if you are offended by layoffs, then you must love lower wages (or vice versa). Pick a side and stick with it, please.

I can attest--I've neither been overpaid nor fired since washing dishes in a buffet restaurant back in the 80s.

Alan Jacobs exegetes the Evangelical Manifesto

At the bottom of page 15, these words appear: "The Evangelical soul is not for sale." This is what is called "burying the lead." Had the Evangelical Manifesto begun with this affirmation, it could have been a manifesto indeed -- a declaration of political, cultural and intellectual independence. "We're fed up with being the Republicans' lapdogs, but don't think we're joining the Democratic kennel" -- if only the document had spoken so clearly, so forcefully! If only it had given us some sense of whom it is speaking to, and why; if only it had been as bold as DADA, or Marx and Engels. Moderation is all well and good, I guess; but for my money, the fearless spirit of the true manifesto is just what an increasingly somnolent evangelical movement needs.

The Sixteen Year Breakup

The party's progressives never did like Bill Clinton's New Democrat ways, but after Walter Mondale and Michael Dukakis they needed his epic political gifts to win back the White House. They hated him for their loss of Congress in 1994, but they tolerated Dick Morris and welfare reform to keep the presidency in 1996.

The price was that they had to put their ethics in a blind Clinton trust. Whitewater and the missing billing records, Webb Hubbell, cattle futures and "Red" Bone, the Lincoln Bedroom, Johnny Chung and the overseas fund-raising scandals, Paula Jones and lying under oath, Monica and the meaning of "is." Democrats, or all of them this side of Joe Lieberman and Pat Moynihan, defended the Clintons through it all. Everything was dismissed as a product of the "Republican attack machine," an invention of the "Clinton haters," or "just about sex."

Then something astonishing happened. A new star emerged in Barack Obama, a man who had Bill Clinton's political talent but Hillary's liberal convictions. He had charisma, a flair for raising money, and he held out the chance of a 2008 Democratic landslide. Something more than a return to the trench warfare of the 1990s seemed possible – perhaps the revival of a liberal majority, circa 1965.

More remarkable still, Democrats supporting Mr. Obama had a revelation about Clintonian mores. David Geffen, channeling William Safire, declared that "everybody in politics lies," but the Clintons "do it with such ease, it's troubling." Ted Kennedy was shocked to see the Clintons play the race card in South Carolina. The media discovered their secrecy over tax records and Clinton Foundation donors, while columnists were appalled to hear her assail Mr. Obama for his associations with radical bomber William Ayers. Listen closely and you could almost hear Bob Dole asking, "Where's the outrage?"

By the time Mrs. Clinton made her famous claim about dodging Bosnian sniper fire, Democrats and their media friends no longer called it a mere gaffe, as they once might have. This time the remark was said to be emblematic of her entire political career. The same folks who had believed her about Whitewater and the rest now claimed she never tells the truth about anything.

If the Clintons play to their historic form, they will ignore all this for as long as they can. They will fight on, hoping that something else turns up about Mr. Obama before the convention. Or they'll try to play the Michigan and Florida cards. Or they'll unleash Harold Ickes on the superdelegates and suggest that if Mr. Obama loses in November she'll be back in 2012 and her revenge will be, well, Clintonian.

The difference between now and the 1990s, however, is that this time the Clinton foes aren't the "vast right-wing conspiracy." This time the conspirators are fellow Democrats. It took 10 years, but you might say Democrats have finally voted to impeach.

Judy Bachrach spans the distance between laughter and tears

in Everything I Hate About Myself I See in Hillary (via Drudge):
The point is what happened after I got dumped. There was no stopping me. I wrote the guy letters. Long ones. I wrote articles, nominally on other topics, but really about him and the way he dumped me. These, unfortunately, got published. I phoned him in the pathetic hope of raising my stock by trashing his new girlfriend, along with the caliber of the movies in which she very, very briefly appeared. This was, as you will likely surmise, amazingly easy to do and also totally ineffective. I didn’t – couldn’t — let go of a guy who exchanged me for a moron, and I can’t believe these many years later that I’m telling you all this because the memory of my mortifying, excruciating almost erotic attachment to stone-cold failure haunts me to this day.

I was, in other words, simply a younger version of Hillary Rodham Clinton. I simply could not get out of the race, even though, let’s face it, the race was over.

What kills me is the way Hillary deals with men other than her husband, especially powerful men. Whenever Hillary thinks Obama is onto something – a phrase, say, or even a piece of rhetoric, however tedious – she doesn’t do what most politicians do: which is to, say, challenge it. No, what Hillary does is fiddle with a syllable or two and then appropriate the last thing that pops out of her rival’s mouth as though it were her own (Yes we WILL!!).

Whenever Hillary hears a new idea, however stupid – ‘Let’s suspend the federal gas tax for the entire summer, and to hell with the laws of supply and demand! Let’s authorize Bush to take military action in Iraq and sit back and see what happens!’ – she grabs it, devours it, and calls it her own.

Then, if some new powerful guy comes along and disputes the very strategy she’s adopted from a previous powerful guy – like, oh, let’s say, maybe Obama might come along and dispute the wisdom of our military presence in Iraq — Hillary will turn around and repudiate every previous position in order to espouse that one too. In fact she’ll say she completely regrets “the way the president used the authority.” Like she never gave it up, panting and groaning.

I know I’m not supposed to talk about her that way, as though she were a groupie groveling before a rock star. I’m supposed to, as a close friend recently suggested, “understand that Hillary has to pander.” But you know what? One of the wonderful things about getting older is that you can actually stop pandering, and make your decisions clear-eyed, without reference to gender.

Busted coverup of the day: Greenspan's censored Ph.D thesis

Jim McTague has the scoop:

WE'VE FOUND IT -- A COPY OF ALAN Greenspan's long-lost Ph.D. thesis! Or, more accurately, a rare copy of the elusive document, in Lassie-Come-Home-fashion, found us.

The dissertation, written in 1977 when Greenspan received his coveted degree from New York University, had been tucked away on a professor's sagging bookshelf for 31 years.

There are only two known copies: the Maestro's own and the one we viewed. As far as we can tell, Barron's is the only news organization ever to have seen the thesis since a third and now missing copy was removed from the public shelves of NYU's Bobst library at Greenspan's request in 1987, the year that Ronald Reagan appointed him chairman of the Federal Reserve Board. Glancing at the document, we momentarily felt like Indiana Jones at the dramatic moment in which he discovers the Lost Ark of the Covenant.

Greenspan purportedly was trying to deter news coverage of his personal life when he ordered the thesis into hiding. His anti-paparazzi subterfuge backfired: The stealth thesis became red meat for his critics, who smelled a cover-up. Magazine articles and a new book, Deception and Abuse at the Fed (reviewed here on March 31), have suggested that his degree was largely honorary and that the thesis was a cut-and-paste job, comprised of previously published, non-academic articles wrapped in a flimsy introduction.

Greenspan ... didn't foresee a housing mania spilling into the general economy, toppling banks and brokerage houses and paralyzing key portions of the credit system. The worst he could anticipate was that a sharp "break in prices of existing homes would pull down the prices of new homes to the level of construction costs or below, inducing a sharp contraction in building." Back then, there were no home-equity lines of credit, derivatives or subprime mortgages. Mortgages were largely concentrated at savings and loans. Credit was harder to come by, too, because conventional mortgage rates were about 8.5% and headed significantly higher. Still, the thesis shows that the former Fed boss was focused on housing very early in his career. Thus, it casts doubt on his recent assertions about being surprised by the Mesozoic-era-size impact of this decade's housing mania.

We were tickled to find that the work's introduction includes a discussion of soaring housing prices and their effect on consumer spending; it even anticipates a bursting housing bubble. Writes Greenspan: "There is no perpetual motion machine which generates an ever-rising path for the prices of homes."

Sure to draw snickers from snarky critics is chapter five on economic policy and outlook -- part of 1977's unsigned Economic Report of the President. Greenspan claims to have authored it as CEA chairman. The general policy principles discussed in the chapter include the following: "Stimulus should be provided by tax reduction rather than by increases in government spending; tax reduction should be permanent rather than in the form of a temporary rebate; economic initiatives should be balanced between measures to stimulate consumption and those designed to increase business investment."

Greenspan also broke new ground in the introduction to his thesis, where he noted that homeowners were refinancing for larger amounts than their original mortgage, in essence monetizing increases in their home's market value and spending the excess cash on goods and services or putting it into savings. Economic models at the time had missed the trend.