Milton Friedman's monetary framework--his idea that the nominal money stock growth rate should be pegged, and that the government should either shovel reserves into the banking system at a furious rate or pull them out in order to keep the nominal money growth rate stable--was always clearly a second or even a third-best. Positive or negative shocks to velocity would cause episodes of inflation or depression which Friedman's rule would ignore.
William Poole now thinks that Friedman was wrong, and too pessimistic, and that the Fed has done better over the past quarter century than the Friedman rule would allow. David Wessel blogs:
Economics Blog : Milton Friedman Wasn’t Right About Everything: William Poole, a self-described “card-carrying monetarist” who is now president of the St. Louis Federal Reserve Bank, says the Fed’s track record over the past 25 years is better than it would have been had it followed Milton Friedman’s prescription of maintaining steady growth in the money supply.
[Poole:] “I believe that the Fed’s actual adjustments of its federal funds rate target have yielded superior outcomes since 1982 to what we would have observed under steady money growth,” he said in the prepared text of a speech to delivered today – behind closed doors — at the University of Missouri to mark the 95th anniversary of the late Milton Friedman’s birth. “I also believe that advances in knowledge permit us to say with some confidence that these gains are not just an accident of Alan Greenspan’s special skills and intuition,” Mr. Poole said.
So what’s the secret? Persuading the public, businesses and the markets that the Fed won’t let inflation get out of control or, in the jargon of economists, “anchoring inflationary expectations.”
“Everything Milton argued about money stock control is true,” he added, “but the effect of inflation expectations on the practice of monetary policy itself was, I believe, a missing element in the analysis. The economy functions differently when inflation expectations are firmly anchored. If a central bank allows expectations to become unanchored, then interest-rate control becomes a dangerous and potentially destabilizing policy. But should the practice of monetary policy depend on how well inflation expectations are anchored? I do not recall Milton discussing this question, perhaps because he believed that the best way to maintain well-anchored expectations over time was for the central bank to commit to steady and low money growth under all circumstances.”
Finally, one that makes sense:
Voting map without those ugly state boundaries: Matt Franklin sent in this improved version of this picture:
Outsourced to Matthew Yglesias, who examines Ruth Marcus's special pleading for Alberto Gonzales:
Matthew Yglesias: Ruth Marcus, driving hard for the wanker of the day prize, decides that though Al Gonzalez "dissembled and misled" and he didn't commit perjury and so rather than "trying to incite criminal a prosecution that won't happen of an attorney general who should have been gone long ago," Democrats "need to concentrate on determining what the administration did -- and under what claimed legal authority -- that produced the hospital room showdown. They need to satisfy themselves that the administration has since been operating within the law; to see what changes might guard against a repetition of the early, apparently unlawful activities; and to determine where the foreign intelligence wiretapping statute might need fixes."
The possibility that if the administration continues to dissemble and mislead congress, and is told in advance that it can get off the hook for doing so, it might be difficult to get to the bottom of this matter doesn't seem to have occurred to her. Oh, well.
She can't really be that stupid, can she?
Anybody think that Ruth Marcus and company "should[n't] have been gone long ago"? Anybody? Anybody? Bueller?
A very interesting experiment, on lots of levels:
Whimsley: The Netflix Prize: 300 Days Later: Online DVD rental outfit Netflix caused a real buzz last October when it announced the competition. If anyone can come up with a recommender system for predicting customer DVD preferences that beats its own algorithm (Cinematch) by a certain amount, Netflix will hand over $1million. The prize got a lot of attention because it exemplifies the idea of crowdsourcing. Not only does Netflix rely on crowdsourcing of DVD ratings (user ratings of DVD titles) but the competition itself is an attempt to use crowdsourcing to develop the algorithms to make the most of those ratings. Instead of doing the work itself, or hiring specialists, Netflix lets whoever anyone enter their competition and pays the winner...
As soon as you start looking at the data set it becomes obvious why it is so difficult to get good results. Databases don't have the linear algebra and other mathematical tools for taking a run at the prize but they are convenient for exploring data sets, so I loaded the data into a SQL Anywhere database (The developer edition is a free download, and I'll provide a perl script to load the data if you really want it) and started poking around. Here are a few of the more obvious oddities (all these observations have been posted elsewhere - see the Netflix prize forum for more):
- Customer 2170930 has rated 1963 titles and given each and every one a rating of one (very bad). You would think they would have cancelled their subscription by now.
- Five customers have rated over 10,000 of the 17,770 titles selected - and presumably they also have rated some of the others among the 60,000 or so titles Netflix had available when they released the ratings. Are these real people?
- Customer 305344 had rated 17654 titles. Even though Netflix make it easy to rate titles that you have not rented from them (so they can get a handle on your preferences) can this be real?
- Customer 1664010 rated 5446 titles in a single day (October 12, 2005).
- Customer 2270619 has rated 1975 titles. 1931 were given a 5, 31 were given a 4, 10 given a 3, 2 given a 2 (Grumpy Old Men and Sex In Chains) and a single title was given a 1. That title? Gandhi, which has an average rating of over 4 and which less than 2% of those who watch it give a 1.
- The most often rated movie? Miss Congeniality with ratings by over 232,000 of the 480,000 customers. And which title is most similar to it in terms of ratings (using a slightly weighted Pearson formula)? Bloodfist 5: Human Target.
- Most highly rated - Lord of the Rings: Return of the King (Extended Edition), with 4.7...
So what I get from the Netflix prize is that there are probably significant limits to recommender systems. Even the smartest don't do a whole lot better than the simple approaches, and a lot of work is required to eke out even a little more actual information from the morass of data. It seems surprisingly difficult to get reliable, factual information on this important question of how useful they can be. Part of the reason is that they are new - Amazon has only been in business for about ten years after all - and part of the reason is that the behaviour of these systems is often a closely guarded secret despite the aura of openness that web companies cultivate.
This matters because there is a surprising amount riding on the effectiveness of recommender systems. Silicon Valley's new-economy enthusiasts see them as the key to developing a new level of cultural democracy: they see recommender systems as a trebuchet hurling rocks at the castles of the old elite of mainstream media, big publishers with big marketing departments, big-chain book stores and Hollywood sequels. Recommender systems are claimed to embody the "wisdom of crowds". The idea is that everyone just publishes stuff (blogs, wikipedia entries and so on) and amateur readers or viewers decide what has merit by their actions (rating stories, buying and rating books and DVDs and so on). The work of critics is "crowdsourced" to customers, but it is the recommender system that distills these ratings to yield the aforementioned wisdom.
If faith in recommender systems is misplaced, then the new boss may look much like the old boss only with more computer hardware. There is a danger that recommender systems may simply magnify the popularity of whatever is currently hot - that they may just amplify the voice of marketing machines rather than reveal previously-hidden gems. Even worse, their presence may drive out other sources of cultural diversity (small bookstores, independent music labels, libraries) concentrating the rewards of cultural production in fewer hands than ever and leading us to a more homogeneous, winner-take-all culture.
I'm no futurist, but I see little evidence from the first 300 days of the Netflix Prize that recommender systems are the magic ingredient that will reveal the wisdom of crowds.
James Fallows writes about public trusts and public corporations:
James Fallows: The fundamental problem with today's American press is a mismatch between its economic basis and its public function.... [T]he press has cultural, social, and political effects beyond the purely commercial. But its managers are being forced to make decisions on the same focused quarterly-returns basis that guides choices at Merrill Lynch or General Motors. Sometimes those pressures for maximized return (and rising stock price) make news organizations more efficient. But in general they weaken or destroy the parts of news systems that affect people in any role other than as shareholders - that is, as readers, viewers, voters, citizens.
The point is not to rehash that argument. It is to say that the "two-class" shareholding structure that undergirds America's three best newspapers (the New York Times, the Washington Post, and the Wall Street Journal) was explicitly designed to permit decisions to be made for non-economic reasons. If you want management to concentrate strictly on raising the share price, you don't need any special ownership structure. Financial markets will insist on that anyway. The only justification for "Class B" shares giving special voting power to the Sulzberger family at the Times, the Graham family at the Post, and the Bancroft family at the Journal is the assumption that the families will weigh other factors in deciding how the news operation should be run.
Thus the future of these news organization rests on the hope that the later generations who inherit controlling shares will acknowledge the concept of "enough" money. If they want the most money possible out of their inheritance, they'll eventually view the newspaper as just another asset -- and destroy it. (See the tragedies of the Chandler family of Los Angeles, the Bingham family of Louisville, etc.) If no amount of money can be "enough" -- if, to be plain, people who are already rich are greedy to be richer still -- they debase institutions on which the rest of us depend...
One would think that the Wall Street Journal editorial page since a time before the memory of man, or the Washington Post editorial board since 2000, or the New York Times's Whitewater and Iraq coverage would give Jim a little pause. Freedom from market discipline is not enough; freedom from wingnuttery is needed as well.
In the Wall Street Journal:
Behind Microsoft's Bid To Gain Cutting Edge - WSJ.com: Throughout its history, Microsoft has been slow to grasp some of the computer industry's biggest technology shifts and business changes. When it decides to embrace an innovation, the company has often succeeded in chasing down the leaders, as it did years ago with Lotus Development Corp. on spreadsheets that allow users to organize data, and a decade ago with Netscape Communications Corp. on Web browsers that transformed the experience of using the Internet. For years, this catch-up-and-surpass approach worked well.
Early this decade, however, companies such as Google Inc. and Apple Inc. exposed holes in the approach. Microsoft was slow to see the potential in Web search and online advertising, and despite heavy investments, has so far failed to catch industry leaders Google and Yahoo Inc. It also was late coming to market with its own music player, and despite a push, remains far behind Apple. Today, a host of Web-based software services from Google and others threaten to reduce the importance of Microsoft's personal-computer software.
One year ago, Mr. Gates, the company's chairman, announced that in June 2008 he would give up his post as "chief software architect."... Mr. Mundie got the other half of the job -- charting the company's long-term technology course....
He joined Microsoft in 1992. As head of the consumer group, he helped shepherd such non-PC products as videogames, interactive television and software for cellphones. Later, he took on nettlesome tasks such as fighting piracy in China, pushing Microsoft to develop more secure software, and improving the company's relationships with governments around the world. He developed a reputation as a visionary with start-up projects, but less skilled at managing them as going concerns, he and other Microsoft executives say....
Microsoft's product groups -- business units built around products such as Windows and Office that produce much of the company's cash -- have long had enormous clout in its corporate culture. Star product-group managers, the company's so-called shippers, get the big, profitable products like Windows out the door year after year. For them, meeting deadlines is all-important; longer-term thinking about technology isn't....
Mr. Mundie has been warning his Microsoft colleagues for years about a coming shift in semiconductors that could upset the company's most important businesses. Chip makers such as Intel Corp. have been working on a way to increase semiconductor power without causing the chips to overheat. It involves sticking what amounts to multiple chips -- or "cores" -- onto a single chip, creating "multicore" chips.
Some software experts contend that the change is so radical it will require software for large server computers and PCs to operate differently than it has for decades. It is unclear, however, how quickly the change will come, and what Microsoft, the world's largest software maker, will have to do to navigate it. Mr. Mundie contends it will come sooner than many people think, and it will require new programming languages and techniques...
Atrios tells us that it is Felafel Day, and provides quotes from noted Fox News journalist Bill O'Reilly:
Eschaton: Falafel Day
If any woman ever breathed a word I'll make her pay so dearly that she'll wish she'd never been born. I'll rake her through the mud, bring up things in her life and make her so miserable that she'll be destroyed. And besides, she wouldn't be able to afford the lawyers I can or endure it financially as long as I can. And nobody would believe her, it'd be her word against mine and who are they going to believe? Me or some unstable woman making outrageous accusations. They'd see her as some psycho, someone unstable. Besides, I'd never make the mistake of picking unstable crazy girls like that...
If you cross FOX NEWS CHANNEL, it's not just me, it's [FOX President] Roger Ailes who will go after you. I'm the street guy out front making loud noises about the issues, but Ailes operates behind the scenes, strategizes and makes things happen so that one day BAM! The person gets what's coming to them but never sees it coming. Look at Al Franken, one day he's going to get a knock on his door and life as he's known it will change forever. That day will happen, trust me...
He watches Jim Cramer, and is scared:
Finance Blog - Market Movers by Felix Salmon: Great Moments in Punditry: Jim Cramer on Housing - Portfolio.com: Is it worth responding to this as though it's rational? Is this what passes for informed commentary on TV these days? I can see how it gets ratings, in a train-wreck kind of way – hell, I'm blogging it. But the idea that wealthy people will stop paying their mortgages because their houses are "fungible" (unless we get a 100bp cut in the Fed funds rate, of course) – it's like some kind of incredibly unfunny parody. Nouriel Roubini et al might be shrill, but at least there's coherent logic to their position.
What scares me is that this could be a rare and genuine glimpse into how traders actually think. In which case the Great Moderation and decline in volatility of recent years is doomed to die a sudden and extremely unpleasant death.
Some traders tend to think this way: they add a lot of volatility to the order flow. Do the Cramers have a material effect on price patterns, or do they just create trading opportunities for more sophisticated investors. That is a hard question.
He puts it well:
An Immoral Philosophy - New York Times: When a child is enrolled in the State Children’s Health Insurance Program (Schip), the positive results can be dramatic. For example, after asthmatic children are enrolled in Schip, the frequency of their attacks declines on average by 60 percent, and their likelihood of being hospitalized for the condition declines more than 70 percent.
Regular care, in other words, makes a big difference. That’s why Congressional Democrats, with support from many Republicans, are trying to expand Schip, which already provides essential medical care to millions of children, to cover millions of additional children who would otherwise lack health insurance.
But President Bush... has declared that he’ll veto any Schip expansion on “philosophical” grounds. It must be about philosophy, because it surely isn’t about cost. One of the plans Mr. Bush opposes, the one approved by an overwhelming bipartisan majority in the Senate Finance Committee, would cost less over the next five years than we’ll spend in Iraq in the next four months. And it would be fully paid for by an increase in tobacco taxes....
So what kind of philosophy says that it’s O.K. to subsidize insurance companies, but not to provide health care to children?
Well, here’s what Mr. Bush said after explaining that emergency rooms provide all the health care you need: “They’re going to increase the number of folks eligible through Schip; some want to lower the age for Medicare. And then all of a sudden, you begin to see a — I wouldn’t call it a plot, just a strategy — to get more people to be a part of a federalization of health care.”
Now, why should Mr. Bush fear that insuring uninsured children would lead to a further “federalization” of health care, even though nothing like that is actually in either the Senate plan or the House plan? It’s not because he thinks the plans wouldn’t work. It’s because he’s afraid that they would. That is, he fears that voters, having seen how the government can help children, would ask why it can’t do the same for adults.
And there you have the core of Mr. Bush’s philosophy. He wants the public to believe that government is always the problem, never the solution. But it’s hard to convince people that government is always bad when they see it doing good things. So his philosophy says that the government must be prevented from solving problems, even if it can. In fact, the more good a proposed government program would do, the more fiercely it must be opposed.
This sounds like a caricature, but it isn’t. The truth is that this good-is-bad philosophy has always been at the core of Republican opposition to health care reform. Thus back in 1994, William Kristol warned against passage of the Clinton health care plan “in any form,” because “its success would signal the rebirth of centralized welfare-state policy at the very moment that such policy is being perceived as a failure in other areas.”...
But denying basic health care to children whose parents lack the means to pay for it, simply because you’re afraid that success in insuring children might put big government in a good light, is just morally wrong...
Joe Klein spanks Ken Pollack and Michael O'Hanlon
What's Missing in this Column? - Swampland - TIME: [Y]ou really can't write a piece about the war in Iraq and devote only two sentences to the political situation, which is disastrous and, as Petraeus has said, will determine the success or failure of the overall effort.
It could be argued that what the U.S. military is now accomplishing is clearing the field of foreigners--i.e. the Al Qaeda in Iraq foreign fighters--so that the indigenous Sunnis and Shi'ites can go at each other in a full-blown civil war, complete with Srebrenica style massacres. (Although a precursor to that civil war is the internecine Shi'ite battle between the Hakim and Sadr militias that is about to take place in Basrah. If Sadr wins that fight, he will control Baghdad and the southern oil fields--and will be the de facto leader of Shi'ite Iraq.) I see absolutely no evidence that the majority Shi'ites are willing to concede anything to the minority Sunnis, and there are significant signs that Baghdad is being ethnically cleansed.
Yes, progress has been made in the fight against the most extreme jihadis (AQI), but that should not be extrapolated into anything resembling optimism.... And if we manage to put a major hurt on AQI--which is Bush's (current) rationale for us being there--what rationale remains for us staying there if the Iraqis themselves are intent on slaughtering each other?
Take it a step further, Joe: you can't write such a column, but Ken Pollack and Michael O'Hanlon do. What does that tell you about them?
The president swears to take care that the laws be faithfully executed:
http://www.washingtonpost.com/wp-dyn/content/article/20: A surgeon general's report in 2006 that called on Americans to help tackle global health problems has been kept from the public by a Bush political appointee without any background or expertise in medicine or public health, chiefly because the report did not promote the administration's policy accomplishments, according to current and former public health officials.
The report described the link between poverty and poor health, urged the U.S. government to help combat widespread diseases as a key aim of its foreign policy, and called on corporations to help improve health conditions in the countries where they operate. A copy of the report was obtained by The Washington Post.
Three people directly involved in its preparation said its publication was blocked by William R. Steiger, a specialist in education and a scholar of Latin American history whose family has long ties to President Bush and Vice President Cheney. Since 2001, Steiger has run the Office of Global Health Affairs in the Department of Health and Human Services.
Richard H. Carmona, who commissioned the "Call to Action on Global Health" while serving as surgeon general from 2002 to 2006, recently cited its suppression as an example of the Bush administration's frequent efforts during his tenure to give scientific documents a political twist. At a July 10 House committee hearing, Carmona did not cite Steiger by name or detail the report's contents and its implications for American public health.
Carmona told lawmakers that, as he fought to release the document, he was "called in and again admonished . . . via a senior official who said, 'You don't get it.' " He said a senior official told him that "this will be a political document, or it will not be released"...
He starts out his column with two people who are guilty of cheating--or so the evidence strongly suggests--Michael Rasmussen and Barry Bonds.
By the end of his column he is talking about how "deeply polarized nations that devote... energy to hunting... real villains and convenient scapegoats... descend into.. despair and resentment that inevitably lead to even greater destruction..." and about the "vindictive bloggers... eager to push the mainstream media... off a stage that they want to occupy smash reputations with abandon... contribute to a general deepening of cynicism... at no perceived cost to themselves..."
Is there any way to read this other than that Hoagland regards himself and his peers as cheaters on the same moral level as Rasmussen and Bonds? And is desperately searching for reasons that nobody should make him publicly 'fess up?
Why oh why can't we have a better press corps?
Georgetown Energy Museum
600 Griffith St.
Georgetown, CO 80444
A 1.44 MW hydroelectric polyphase AC generating plant, in service since 1900.
Nikolai Tesla's machines live!
Few things are more mortifying than going to the new graduate student orientation, talking to three students fresh from China, and trying to say the name of the late nineteenth-century Qing statesman "Li Hungchang." There was animated discussion as to what I was trying to say--I suppose I sounded as though I was speaking half-Cantonese, half-duck.
And Chiang Kai-Shek--Jieng Jieshi--don't try to go there. Just don't.
The most interesting thing I learned is that there is as much horror inside as outside the Brookings building that Ken Pollack is still the public face of Brookings Institution foreign policy studies.
The Seventeen-Year-Old is doing his summer reading for AP English: Mary Doria Russell's The Sparrow and Ayn Rand's The Fountainhead.
The Sparrow is the most horrifying thing I have Ras in years: an extraordinarily brutal and powerful novel about alien contact gone wrong. And the Fountainhead is not, whatever the young Nora Ephron may have thought, a big book about an architect.
I wonder what the students will make of them...
Today's preboarding announcement:
Preboarding for this flight will be limited to passengers needing special assistance and children travelling alone under five...
Brad Setser writes:
http://www.rgemonitor.com/blog/setser/207738: The original idea behind all of my efforts to track reserve growth was to get some advance notice if central banks ever decided to turn away from US assets. That hasn't happened; all available data suggests record official demand for US assets.... The markets haven’t seized up because central banks stopped buying dollars, or stopped buying dollar-denominated bonds. Rather, they have seized up because a lot of private investors who had reached for yield over the past few years, in part because central banks drove down the yields on “safe” assets as well as contributing to a fall in market volatility, seem to have reached a bit too far....
Mohammed El-Erian puts it well. For a while, “individual investors' performance was essentially a function of the degree of their exposure to the most illiquid and leveraged asset classes.” That naturally created pressure to take on more leverage to buy more illiquid assets. Things now have changed. Lots of subprime mortgages were bundled into mortgage backed securities and various tranches of different mortgage backed securities in turn were bundled together in often illiquid CDOs. Some of those CDOs were bought with borrowed money. That turned into a problem.... More recently demand for LBO debt disappeared, in part because of concerns that some companies may be taking on more debt than they could service.... [T]o quote PIMCO's Bill Gross, the market resembles a constipated owl.
To be blunt, they seem to be thinking that if Moody’s and Standard & Poor’s have done such a lousy job of rating subprime structures, how can the market have confidence that they’re not repeating the same structural, formulaic, mistake with CLOs and CDOs? That growing lack of confidence – more so than the defaults of two Bear Stearns hedge funds and the threat of more to come – has frozen future lending and backed up the market for high yield new issues such that it resembles a constipated owl: absolutely nothing is moving.
Felix [Salmon] notes that the fact that a lot of the new instruments that emerged to satisfy investors demand for yield back are untested isn’t evidence that they are unsafe. All new instruments by definition haven’t been tested. But it still seems to me that the market for a lot of instruments that hadn’t been tested by a downturn got really big really fast. Right now that worries me more than the risk that central banks will suddenly lose their appetite for all dollar assets...
Worst Corner Post Ever?: I think this is a pretty strong contender. Let's consider that this -- "my own view is that, considering the efforts all candidates go to in creating their image, discussing what they wear and whether they display cleavage at work, or ever, in their quest to make the nation comfortable with the idea of them holding ultimate power is legit" -- isn't even the most ridiculous thing Lisa Shiffren says.
Most ridiculous part: "It also displays just a tiny bit of internal conflict about whether she wishes to be Leader of the Free World or a still attractive woman of a certain age." Gawd help me, but it's so awful that it's kind of awesome. Anyway, "Worst Corner Post" is kind of a cheat. The competition of the moment is "dumbest thing ever written by anyone in any venue." I think Applebaum beats Slaughter by several lengths, but Atrios is right to note that Henley hasn't considered most of the serious contenders. Posted by SomeCallMeTim | July 28, 2007 3:22 PM
I thought I was having an acid flashback reading Shiffren's post. Posted by Ben Cronin | July 28, 2007 3:25 PM
Are we to presume that if the candidates spent no time on grooming and clothing that none of our "serious" pundits would have anything to say? Posted by MikeJ | July 28, 2007 3:31 PM
And the line between right-wing politics and Cosmopolitan blurs just a little bit more. Are we really going to have a second week focused on Hillary's chest? Also--nice touch throwing in the deceased mother-in-law. Posted by danimal | July 28, 2007 3:40 PM
To me the most depressing thing about the post is actually the characteristic reflex reference to the U.S. president "holding ultimate power" which fairly encapsulates the worldview of today's leader-worshiping Right. Posted by Bill | July 28, 2007 4:31 PM
One evasion in Ken Auletta's piece on the Wall Street Journal stands out: his quoting without comment of Norman Pearlstine's claim that Paul Gigot “was a first-rate reporter...”
Here was my first encounter with Gigot's reporting--in this case, reporting on me, one of the heads of Alicia Munnell's staff at the U.S. Treasury in 1993.
Damned if I know what Paul Gigot is talking about when he says of my boss that: "Alicia Munnell is in denial, even though her staff has calculated that Mr. Feldstein is right." I think "Mr. Feldstein is right" might mean "upper-bracket tax collections fell in fiscal 2001 (because of the recession)," rather than what Gigot wants you to think it means--that "the tax-rate hikes of 1990 discouraged work and put us on the far side of the Laffer curve."
If that's not what Gigot means, he's making s--- up: I was there, I was Alicia Munnell's staff, and I know:
Oops! Weren't We Going to Soak The Rich? By Paul A. Gigot 908 words 9 July 1993 The Wall Street Journal: On his way out the door in January, a cheeky Bush official scribbled the same tax phrase again and again on a Treasury blackboard for the new Clinton team: "Low rates, broad base." The incoming Clinton Treasury minions, more rueful than cheeky, erased the phrase each time the new White House requested ever higher tax rates. Mark the rueful down as prophets. The first evidence on income-tax receipts for 1991 is now rolling in from the Internal Revenue Service, and the usual eye-glazing numbers are suddenly eye-popping. To wit, the rich paid less in taxes even though their tax rates went up. The nonrich paid more even though their tax rates stayed the same. President Clinton, meet the Laffer Curve.
This news is the elephant in the room of this year's tax debate, since we keep hearing that the fate of the world hangs on President Clinton's promise to reduce the deficit by "$500 billion." Most of this windfall, Mr. Clinton assures us, will come from "the rich." But what if those tax revenues from the rich turn out to be a mirage? Then isn't the Clinton tax program doomed to fail, even as mere deficit reduction? And shouldn't Democrats think again before they commit tax hari-kari at next week's House-Senate conference? Of course they should, but this year's Democratic theme song seems to be that old "MASH" movie anthem, "Suicide Is Painless."
The 1991 numbers are so striking because they're the first since the Great 1990 Budget Deal, which was more or less the test drive for Clintonomics. Rates had to be raised on "the rich," we were told then, in order to produce a river of new tax revenue. Well, this is one river that didn't run through it. For we now know that total income-tax receipts fell in 1991, the first decline since 1983. And they fell in a strange and revealing way, as the chart below shows. For the rich -- defined as the top 850,000 income-earners in each year (making about $200,000 or more) -- 1991 tax receipts fell by $6.5 billion, or 6.1%. But for everyone else, tax receipts actually rose in 1991 -- by $3.3 billion, or 1%. This odd dichotomy makes it difficult to attribute the revenue decline merely to a slow economy: The rich wouldn't have a bad year if everyone else had a good one. And, in fact, total income rose 3.3% for the year.
So what happened to the rich? It's impossible to know for sure, but the likely answer is that they changed their behavior in response to higher rates. Maybe they sheltered more income. Or stuffed more of it into 1990 to take advantage of that year's lower rates. Or perhaps they worked less. In short, they responded to "incentives," as economists say, and produced less income subject to tax. This reverse-windfall is underscored by other 1991 numbers. Income from businesses fell 5.5% for the rich, but rose 2.2% for the nonrich. For so-called Subchapter S small businesses, which would get slammed again by Mr. Clinton, income dove 10.5% for the rich but rose 6.2% for everyone else. All of which proves what populist, middle-class free-marketeers like me call the paradox of progressivity: To really soak the rich, keep their tax rates low.
Listen to Martin Feldstein, the Harvard economist who has never been mistaken for a wild supply-sider: "The evidence is strong that in 1991 they picked up rates at the top and revenue fell. This should make Democrats think twice about whether the tax rates they're now talking about will raise the revenues they expect." Mr. Feldstein figures they'll get only about a quarter of the $25 billion a year they advertise.
The Clinton administration knows all this, by the way, but wants it kept quiet until the tax bill passes. Treasury economist Alicia Munnell is in denial, even though her staff has calculated that Mr. Feldstein is right. Treasury's Larry Summers knows better, but is preoccupied with Japan and trade. Other Democrats don't even want to hear about it. That's because for them taxing "the rich" is about class-war politics, not revenue. It's about having a foil to run against. But that's no excuse for Republicans, who've been just as silent about all this. Bob Dole's timid Senate Republicans didn't even offer an amendment to strip the higher rates out of the tax bill. Ohio Rep. John Kasich, supposedly the boy wonder of the budget, has made people wonder by endorsing higher rates. Like George Bush and Nicholas Brady, too many Republicans are still afraid James Carville might accuse them of belonging to a country club.
But now is the time to lay down markers for the next economic debate, educating voters about the con job they are about to experience. An optimist said last year that either the Clinton presidency would be successful, or it would be educational. But that assumes someone does the educating.
Life Imitates Art: (That is, economist Art Laffer)
Income tax payments (in $ billions)
"The Rich" $ 99.6 $106.1
Everyone Else $ 348.6 $345.3
Hoisted from comments: Monte Davis writes:
Grasping Reality with Both Hands: Brad DeLong's Semi-Daily Journal: John Keegan notes somewhere that in the War of Independence, when the colonists desperately needed the captured cannon from Ticonderoga and Crown Point, it took three months to get them the ~200 miles to the siege positions around Boston. Land transport was HARD before rails, all-weather roads, and fossil-fueled engines...
Of course, back in 1776 nobody would have moved cannon from Fort Ticonderoga to Boston by land in peacetime: you would have used water as much as possible. Only the fact that it was wartime and the British fleet dominated the seas made them drag the cannon across the hills and mountains of New England.
UPDATE: Monte Davis adds:
Taking your point: Keegan again, in the The Price of Admiralty, does a neat figure-of-merit comparison of the cost "per weight of shot," logistics and all, for Wellington's cannon at Waterloo vs. Nelson's at Trafalgar. The bang/buck was far, far better for the navy (think "no horses, no fodder, no fodder for the horses carrying the fodder for the other horses, etc."). It goes far to explain how a small island nation could exert imperial hegemony at the end of such long levers.
Ezra Klein: Ask the ghost of Gen. Stilwell: We don't need to be psychics to figure where this leads: faced with the choice of backing Petraeus, or backing the nominal Iraqi PM, the US Govt. will find some cushy job for Petraeus to retire to. The number of times the US government has found itself committed to defending a client regime with only a feudal sense of governance, unable to make broad national compromises necessary for it's own survival, really defies comprehension. Similarly, the number of times intelligent, well-meaning American officers have gone up against intransigent puppet regimes and lost is beyond counting...
And here is AP:
Aide: Iraq PM relations with Petraeus poors: Steven R. Hurst and Qassim Abdul-Zahra - The Associated Press: BAGHDAD — A key aide says Prime Minister Nouri al-Maliki’s relations with U.S. commander Gen. David Petraeus are so poor the Iraqi leader may ask Washington the withdraw the well-regarded U.S. military leader from duty here. The Iraqi foreign minister calls the relationship “difficult.” Petraeus says his ties with al-Maliki are “very good” but acknowledges expressing “the full range of emotions” on “a couple of occasions.” U.S. Ambassador Ryan Crocker, who meets together with al-Maliki and Petraeus at least weekly, concedes “sometimes there are sporty exchanges.”
Al-Maliki has spoken sharply — not of Petraeus or Crocker personally — but about their tactic of welcoming Sunni militants into the fight against al-Qaida forces in Anbar and Diyalah provinces. But the reality of how the three men get along likely lies somewhere between the worst and best reports about their relationship — perhaps one of the most important in the world and unquestionably central to the future of Iraq, the larger Middle East and scores, if not hundreds, of political, diplomatic and military careers in the United States. A tangle of issues confront the three men, and none of them present clear or easy solutions:
- Al-Maliki, a Shiite who spent years in exile under Saddam Hussein, hotly objects to U.S. tactic of recruiting men with ties to the Sunni insurgency into the ongoing fight against al-Qaida. He has complained loudly but with little effect except a U.S. pledge to let al-Maliki’s security apparatus vet the recruits before they join the force. He also has spoken bitterly, aides say, about delivery delays of promised U.S. weapons and equipment for his forces.
- Petraeus is confronted with an Iraqi military and police force, nominally under al-Maliki’s control, that has in many cases acted on sectarian — namely Shiite — not national Iraqi interests. He has faced a significant challenge in persuading al-Maliki to shed his ties to radical Shiite cleric Muqtada al-Sadr, who runs the Mahdi Army militia.
- Crocker’s problems with the Iraqi leader are the appearance of foot-dragging or ineffectiveness on the political front — the need to shepherd critical benchmark legislation through parliament. U.S. opponents of the war will undoubtedly demand from Crocker, when he reports to congress in September, an explanation of why U.S. troops are fighting and dying to give al-Maliki political breathing space that the Iraqi leader will not or cannot capitalize on.
First word of strained relations began leaking out with consistency earlier this month. Sami al-Askari, an key aide to al-Maliki and a member of the prime minister’s Dawa Party, said the policy of including one-time Sunni insurgents in the security forces shows Petraeus has a “real bias and it bothers the Shiites. It is possible that we may demand his removal.” Foreign Minister Hoshyar Zebari said in an interview with Newsweek, that the Petraeus-al-Maliki relationship was “difficult.”... A lawmaker from the al-Sadr bloc, who refused use of his name fearing the party would expel him over his continued close ties to al-Maliki, said the prime minister has complained to U.S. President George W. Bush about the policy of arming Sunnis. “He told Bush that if Petraeus continues doing that he would arm Shiite Militias. Bush told al-Maliki to calm down,” according to the lawmaker who said he was told of the exchange by al-Maliki. The lawmaker said al-Maliki once told Petraeus: “I can’t deal with you any more. I will ask for someone else to replace you.”...
Petraeus, a wily, rising star at the Pentagon who is known for holding his cards close to his chest, called his relations with al-Maliki “very good...and that’s the truth,” but acknowledged, “we have not pulled punches with each other.” Here’s why, he said: “We have made an enormous investment here — 3,600-plus soldiers, sailors, airmen and Marines have given their lives. And where we see something that could unhinge the progress that our soldiers and their soldiers are fighting to make ... or jeopardize some of the very hard-fought gains that we have made, I’m going to speak up. And I have on occasion. And on a couple of occasions have demonstrated the full range of emotions.”
All sides spoke with the critical September reports by Crocker and Petraeus to Congress clearly at the front of their minds — the need to make it clear to an increasingly hostile U.S. legislative branch that progress is being made and it would be wrong to start pulling out troops and cutting support now...
Isn't the need to inform the U.S. legislative branch what is really going on? Isn't the need not to claim that "progress is being made" if progress is not being made?
Anonymous Liberal: The case against Gonzales
The Anonymous Liberal: The Case Against Gonzales: But that's beside the point, because even this highly-technical perjury defense doesn't withstand close scrutiny. I've reviewed the entire transcript of Gonzales' February 6, 2006 testimony before the Senate Judiciary Committee, and a strong prima facie case can be made that Gonzales
perjured himselflied to Congress [commenter JaO reminds me that Gonzales wasn't under oath; good call, Senator Specter]. Gonzales then repeated this lie under oath this week.
Here's the key passage that many have quoted from Gonzales' February 6, 2006 testimony:
SCHUMER: It's been reported by multiple news outlets that the former number two man in the Justice Department, the premier terrorism prosecutor, Jim Comey, expressed grave reservations about the NSA program and at least once refused to give it his blessing. Is that true?
GONZALES: Senator, here's the response that I feel that I can give with respect to recent speculation or stories about disagreements. There has not been any serious disagreement -- and I think this is accurate -- there has not been any serious disagreement about the program that the president has confirmed. There have been disagreements about other matters regarding operations which I cannot get into. I will also say...
SCHUMER: But there was some -- I'm sorry to cut you off -- but there was some dissent within the administration. And Jim Comey did express, at some point -- that's all I asked you -- some reservations.
GONZALES: The point I want to make is that, to my knowledge, none of the reservations dealt with the program that we're talking about today. They dealt with operational capabilities that we're not talking about today.
SCHUMER: I want to ask you, again, about -- we have limited time.
GONZALES: Yes, sir.
SCHUMER: It's also been reported that the head of the Office of Legal Counsel, Jack Goldsmith, respected lawyer and professor at Harvard Law School, expressed reservations about the program. Is that true?
GONZALES: Senator, rather than going individual by individual, let me just say that I think the differing views that have been the subject of some of these stories did not deal with the program that I'm here testifying about today.
SCHUMER: But you were telling us that none of these people expressed any reservations about the ultimate program, is that right?
GONZALES: Senator, I want to be very careful here, because, of course, I'm here only testifying about what the president has confirmed. And with respect to what the president has confirmed, I do not believe that these DOJ officials that you're identifying had concerns about this program.
As you can see, Gonzales states not once, but four separate times that the objections James Comey and others within the DOJ raised did not relate to the program Gonzales was testifying about. He even states that he is being "very careful here." If you were to look just at this passage, the National Review defense might hold up (although it would still be very weaselly).
But unfortunately for Gonzales, he said a lot of other things at the hearing as well. For instance, the following exchange took place between Gonzales and Senator Leahy:
LEAHY: So I'm sure you've had time to check for the answer during the lunch hour. So I come to you again with it: When did the Bush administration come to the conclusion that the congressional resolution authorizing the use of military force against Al Qaida also authorized warrantless wiretapping of Americans inside the United States?
GONZALES: Sir, the authorization of this program began...
LEAHY: I can't hear you. Can you pull your mike a little bit...
GONZALES: Pardon me. The authorization regarding the terrorist surveillance program occurred subsequent to the authorization to use military force and prior to the Patriot Act.
Whoops. The Patriot Act was enacted in October 2001. So Gonzales has conceded here that the "terrorist surveillance program" was authorized all the way back in 2001.
At another point in the testimony Gonzales said:
GONZALES: Of course, there were debates, Senator. If I may just finish this thought, think about the issues that are implicated here: a very complicated Foreign Intelligence Surveillance Act -- it's extremely complicated -- the president's inherent authority under the Constitution as commander in chief, the Fourth Amendment, the interpretation of the authorization to use military force. You've got a program that's existed over four years. You have multiple lawyers looking at the legal analysis. Of course, there's -- I mean, this is what lawyers do. We disagree, we debate, we argue.
Here again, Gonzales concedes that "the program" has existed for over four years. So he can't now claim that he was only referring to the program that existed from mid-2004 onward.
And here's the final nail in the coffin. Gonzales testified that "there has not been any serious disagreement about the program that the president has confirmed." He has repeatedly used this construction to hedge his statements.
Fine then, let's look at what the President actually confirmed. President Bush first revealed the existence of the NSA program in his weekly radio address on December 17, 2005. Here's what he said:
In the weeks following the terrorist attacks on our nation, I authorized the National Security Agency, consistent with U.S. law and the Constitution, to intercept the international communications of people with known links to al Qaeda and related terrorist organizations. Before we intercept these communications, the government must have information that establishes a clear link to these terrorist networks.
This is a highly classified program that is crucial to our national security. Its purpose is to detect and prevent terrorist attacks against the United States, our friends and allies. Yesterday the existence of this secret program was revealed in media reports, after being improperly provided to news organizations. . . .
The activities I authorized are reviewed approximately every 45 days. Each review is based on a fresh intelligence assessment of terrorist threats to the continuity of our government and the threat of catastrophic damage to our homeland. During each assessment, previous activities under the authorization are reviewed. The review includes approval by our nation's top legal officials, including the Attorney General and the Counsel to the President. I have reauthorized this program more than 30 times since the September the 11th attacks, and I intend to do so for as long as our nation faces a continuing threat from al Qaeda and related groups.
For those of you who don't want to do the math, 30 times 45 equals almost four years worth of authorizations. Obviously, the "program the president confirmed" was a program that had been in existence since well before 2004. Indeed, according to the president himself, the program began "within weeks" of 9/11.
So Gonzales can't now claim that he was only testifying about the post-2004 version of the program. Both he and the President made it abundantly clear that they were talking about a program that had been in existence since shortly after 9/11. And by all accounts, it is that very program that the entire upper echelon of the Justice Department was prepared to resign over in March 2004. So when Gonzales testified that there had "not been any serious disagreement" about the program and that Comey and Goldsmith's objections related to "other activities," it seems pretty clear that he committed perjury lied to Congress [again, he wasn't under oath]. If you are going to rely on implicit definitional distinctions, you have to at least be consistent with them. When Gonzales' statements are put in the context of his overall testimony and the President's statement (which he incorporated by reference), it's pretty clear that Gonzales intentionally misled Congress. And about a highly relevant fact, i.e., that there had been massive internal dissent over the legality of the program.
The House Judiciary Committee should begin drafting a bill of impeachment immediately.
BONUS: Thought I'd throw in this excellent bit of Gonzales testimony for everyone's amusement:
FEINSTEIN: Let me ask you this: If the president determined that a truthful answer to questions posed by the Congress to you, including the questions I ask here today, would hinder his ability to function as commander in chief, does the authorization for use of military force or his asserted plenary powers authorize you to provide false or misleading answers to such questions?
GONZALES: Absolutely not, Senator. Of course not.
FEINSTEIN: Thank you. I just asked the question. A yes or no...
GONZALES: Nothing would excuse false statements before the Congress.
Tyler Cowen writes:
Marginal Revolution: Underappreciated economists: a continuing series: Today I will pick E. Glen Weyl, a mere Youngling, who is studying at Princeton University. Here is his paper on neural networks, and the abstract:
I consider a potential neural basis of overconfidence, the well-documented tendency of individuals to overestimate the precision of their predictions. I present a simple, classic connectionist model for predicting a binary variable. I show that while the network initially makes weak predictions (in the middle of the probability range) regardless of input, after observing randomly generated data it learns to be overconfident in the sense that when presented with other, unrelated random data it makes strong predictions. The model matches behavioral data in that it shows overconfidence growing with experience and then, eventually, declining. The model shows how overconfidence, far from being a surprising fallacy, can be seen as a natural outgrowth of statistical over-fitting in the brain.
Glen probably won't be underappreciated for long. Here is his seminal paper on two-sided markets (e.g., Match.com). There is already talk he will be a leading economist of the next generation...
It's the Washington Post that has done it: specifically, Princeton Dean Anne-Marie Slaughter:
I Know When I’m Beat § Unqualified Offerings: The only honorable thing to do is admit that Anne-Marie Slaughter’s new oped in the Washington Post beats Anne Applebaum out for the title of dumbest thing ever written by anyone in any venue. If it weren’t print, I’d expect her to break into a rendition of “Fly Away, Lesbian Seagull” like the hippie teacher in the Beavis & Butthead movie.
Anne-Marie, let me put it very simply: People like you are responsible for getting the United States into Iraq, people like you make it much harder for us to get out, and people like you increase the danger of newer, stupider wars in Iran and Syria and wherever else. People like you, frankly, validated the set of policies that fostered the September 11, 2001 atrocities before that. If you get the feeling we hate you for that it’s because we hate you for that. Because you really, really, really messed up. And you couldn’t have messed up that monumentally if you didn’t spend half your time constructing an artificially narrow range of foreign policy outlooks and the other half congratulating yourselves for doing so.
Why is Ken Pollack still the public face of Brookings Institution foreign policy? A lot of us would like to know.
Eschaton: One F.U. ago on Meet the Press, Ken "what the hell is he still doing on my teevee" Pollack had this to say:
MR. POLLACK: Well, the basic point that we’re trying to make is that the president wants this one last shot, it’s obviously very late in the game, there is no guarantee that it’s going to work out. I think that even the administration would say that the likelihood of it working is probably less than 50-50. If it fails, we are going to find Iraq even worse than it is today. It will probably slide into a Bosnia or Lebanon-like all-out civil war. That’s going to be disastrous not just for Iraq and the Iraqi people, but potentially for other countries around it, perhaps even for the entire region...
Herbert Hoover's story on the Kaiping mines appears to have been that he was lied to by his bosses--with whom he remained on excellent terms, however.
From Walter Liggett (1932), The Rise of Herbert Hoover (New York: H.K. Fly), p. 111 ff.:
The action between Chang Yen-mao and the Chinese Engineering and Mining Company of Tientsin, plaintiffs, versus Charles Algernon Moreing, Bewick, Moreing, and Company, and the Chinese Engineering and Mining Company, Limited, of London, defendants, was brought to trial on January 18, 1905, before Justice Joyce in the Chancery Division.... On March 1, 1905, Justice Joyce delivered from the bench a long verbal decision in favor of the plaintiffs....
Chang [Yen-mao] described the circumstances under which he signed the deed.... He said he repeatedly refused to sign... its terms did not agree... with his agreement with [Herbert] Hoover. Upon being told by Hoover that the deed was merely meant for the purpose of registration in England, and that the memorandum would be the ruling instrument, he eventually signed... with reluctance....
Chang told in detail of... threats... by Hoover... that the mines would be confiscated by the [European] Allied governments and that he and the Chinese stockholders would get nothing [if he did not agree to the terms]....
In opening the defense, Counsellor Hughes made a long speech in which he protested against charges of fraud or misrepresentation.... Hughes defended the issuance of 625,000 shares of promoters' stock and added, "Mr. Moreing did not profess to go to China as a philanthropist."...
Mr. Hoover took the stand.... He said that Detring told him that the deed of July 30, 1900, had been approved by Chang. (Both Detring and Chang denied this.)... Hoover declared he had always considered the memorandum binding, and always had insisted that it be carried out. On cross-examination he said that he did not know... that the memorandum's provisions had not been incorporated into the articles of association. He also disclaimed knowledge of the financing.... Under cross-examination he said that he had told Chang and Detring that the provisions of the memorandum were incorporated in the articles of association, and that he had not known differently until he returned to London. He admitted the whole of his negotiations with Chang and Detring when he returned to China had been on an "incorrect basis."...
Counsellor Levitt produced a letter written by Hoover... [in which] he had said that "the China board would have in itself the entire management of the company's property in China, and that H[is] E[xcellency] Chang would be director-general [of the mines] for life." Hoover admitted the statements were not true, but explained that when he wrote the letter he thought them true. Hoover said he... had tried to carry out the terms of the memorandum and as long as he was in China thought he had succeeded. Then he was shown a letter... by himself.. which stated that the changes which he had inaugurated... [were to give] the new manager "complete control immediately upon arrival" in order that "the future administration [of the mine] might be preserved from any interference by the Chinese board."...
[Hoover] admitted reading a letter which de Wouters had written to the board of directors in London.... Hoover admitted that he had not asked de Wouters to alter the letter, or not to send it, but insisted nevertheless tht he was not in accord with de Wouters on this point and that the letter did not correctly represent the situation...
A historical document:
February 19, 1901: Memorandum Relating to the Reorganization of the Chinese Engineering and Mining Company:
In consequence of the disturbances of last summer  and the state of hostilities thereby created, serious danger arose... [the possibility of] the confiscation of the [company's] property on account of the company's semi-official character in connection with the Chinese government... [or] the cession by compulsion of the company's property.... [I]t was thought in the interest of the Imperial government and the company's shareholders to convert the company into an Anglo-Chinese company registered under English laws and protection[s].
Another motive was... [to raise] additional capital by gaining foreign shareholders for the undertaking....
H[is] E[xcellency] Chang [Yen-Mao], Director General of the company, accordingly appointed Mr. Gustav Detring to make the necessary arrangements... with Mr. H.C. Hoover, acting on behalf of Mr. C.A. Moreing... [to draw up] a deed of sale... [so] Mr. Moreing... [could] take the necessary steps with regard to the raising of capital in Europe and registering the company under British laws....
[I]t has today been settled and decided that the company shall in the future be constituted and managed as follows:
(1) The share capital of the company to be one million pounds sterling.
(2) The Chinese shareholders [of the old company] to receive twenty-five shares of one pound each for each original share of one hundred taels each [i.e., total par value of £375,000].
(3) The bona-fide liabilities of the Chinese Engineering and Mining Company... shall be taken over by the new company....
(4) It is especially agreed to honor and repay the loans obtained from the Imperial government. 200,000 taels is to be paid out of the first funds and balance as quickly as possible [i.e., £35,000].
(5) The stockholders whether Chinese or foreign shall have equal votes at all meetings of the shareholders....
(6) The management of the company shall be conducted by two boards of directors, one in China and one in London.
(7) H[is] E[xcellency] Chang [Yen-Mao] will be Director General resident in China as before in general charge of affairs, and as such will have equal powers with foreign directors in China.
(8) The management of the property of the company in China will be in the China Board.
(9) The London Board will be elected by all the shareholders, Chinese and foreign.
(10) ... "limited" means that the shareholders are in no case responsible for more than the nominal amount of their shares.
(11) ... all the legal taxes and duties payable to the Chinese government will be paid by the company as before.
(12) ... the Director General will be the channel of all communication between the Imperial Authorities and the company.
(13) ... the company will be managed... to make Chinese and foreign interests harmonize on a fair basis of equality... [to] enrich the government and the people.
(14) All the unsettled accounts of the company and questions relating to land tenure will be adjusted equitably by mutual consultation.
Herbert C. Hoover
Chev. de Wouters
A historical document: From the Pall Mall Gazette, February 2, 1903:
Chinese Engineering and Mining Company: An Interesting Story from Tientsin: Some Facts that Await Explanation:
The report of the meeting of Chinese shareholders in the great Chinese Engineering and Mining Company... is very interesting reading indeed. To all appearances, the European directors owe the Chinese shareholders... a tardy explanation of their apparent failure to comply with the terms of the memorandum....
Excellency Chang Yen-Mao sketched the events of 1900... thought advisable to register the company under British laws for the dual purpose of protecting the property and opening the doors for... European capital....
The next speaker was Mr. Detring... consulted [in 1900] by his Excellency... as to the best means of securing the property from aggression. It was ultimately decided to admit foreign capital and register the concern as an English company.... Mr. Hoover, as representative and adviser of Messrs. Bewick, Moreing, and Co... undertook a mission to London, where he formed a company of £1,000,000, out of which the Chinese script should rank as £375,000; of the balance, £100,000 was to be called up at once, and the remainder as required....
[N]ow a crowd of employees arrived from Europe without the slightest knowledge of the China board that they were coming.... Two months previously news had casually come to Mr. Detring's notice of a [London company] debenture issue of £500,000 at 6 percent. The debentures carried a bonus of £250,000 in shares standing at 70 to 100 percent premium at the date of issue. "So the reason for the issue," as Mr. Detring truly goes on to say, "was not apparent."
Nothing satisfactory by way of explanation of these strange happenings could be gained....
The Chinese board contend that the £625,000 [in par value of stock] allotted to the promoters is excessive.... [O]n the face of it, a very strong indictment indeed is made out against the European heads of this remarkable company...
If I understand the transaction correctly, the old shareholders of the company received 37.5% of the stock, the promoters--Bewick, Moreing, and Company--took 37.5% of the stock for themselves in return for a capital contribution of £100,000, and a bunch of bond buyers not otherwise identified received 25% of the stock and bonds of £500,000 principal value with coupons of £30,000 per year in exchange for their contribution of £500,000. At the moment of the bond issue, Detring claims, 25% of the stock had a then-current market value of between £425,000 and £500,000.
As I said, Herbert Hoover's testimon at the London Chancery trial appears to have been that he negotiated with Chang Yen-Mao in good faith but that his bosses at Bewick, Moreing misinformed him--but Hoover appears to have remained on excellent terms with them even so.
Mark Thoma reads Rodrigo Rato on "surveillance":
Economist's View: "Strengthening IMF Surveillance": The Managing Director of the International Monetary Fund, Rodrigo de Rato, discusses attempts to and strengthen IMF surveillance over the economic policies of member nations:
For many years, the IMF has engaged its member countries in a process known as "surveillance," in which it monitors, analyzes, and consults on each country's economic policies - both exchange rate policies and relevant domestic policies. These regular checkups help to identify potential vulnerabilities and maintain economic stability. However, the increasingly complex policy challenges of the globalized economy demand a fresh look at this process.
This June, the IMF's Executive Board did just that...
Paul Krugman likes to say that IMF surveillance is (a) tremendously valuable when it serves to strengthen the internal political hand of factions in a country committed to reality-based economic policy, but (b) tremendously harmful when it serves to strengthen the internal political hand of factions in a country committed to pointless deflationary austerity--and that it is hard for outsiders to figure out what effects they are really having.
I think surveillance has the additional important effect of keeping people in the IMF more-or-less current on what is going on, so that if a crisis does develop the staff has a better chance of giving their bosses good advice as to how to deal with it.
It's time for the Dog-Days Fetid-Pond Summer Fete here at Miskatonic University, where the steel-and-glass tower that houses Arcane Sciences and the World Headquarters of the Order of the Shrill looms high above the campus, where the trees have been twisted into eldritch shapes by the strange forms of radiation emanating from the brains of those who have delved too closely into the mendacity, malevolence, disconnection from reality, incompetence, and sheer stupidity of George W. Bush, his administration, and his administration's enablers, and so become Shrill.
At our Summer Fete a special prize will be given to those who have read perhaps too deeply into the O'Hanlon-Pollack chapters of the Krugmanomicron--the ones in which is put forth fantastic visions of life in some fictional or other-dimensional Iraq where secular politicians recognize Israel, where peace reigns along the two rivers, and where people named "Omar" can freely walk down streets in Shia neighborhoods. It is rumored that Scooter Libby has a timeshare in that alternative dimension near the ruins of Ninevah.
so please rememer: clear the weekend of July 37 for this annual Miskatonic University summer event, incuding a conference, barbecue (don't ask), and wine-tasting. Driving directions to picturesque Arkham, Massachusetts will follow. A side-trip to Tanglewood for the concerts is recommended.
Beware Shoggoths on the road near South Campus at moonrise.
And remember: Zuul is the Gatekeeper, Vinz is the Keymaster, and Yog-Sothoth is the Gate!
Phnglui Mglw'nafl Jamison Foster R'lyeh W'gahnagl Fhtagn! Sullivan Fhtagn! Foster Fhtagn!! Foster Fhtagn!!!
Egregious Moderation: The latest week's worth of rotisserie-league discourse and debate on politics and reality. It's for people who want to know what my ideal online one-stop source for punchy liberal analysis and evisceration--especially evisceration--would look like. Guaranteed Betsy McCaughey free! Guaranteed Charles Murray free! No claims that the dinner-party-going "commentariat" is highly qualified because guest lists that cross ideological lines help liberals understand Bush loyalists!
Just smart people thinking hard about the future of the world:
Phil Carter has seen the movie, and thinks it is your duty as a citizen of the United States of America to see it:
INTEL DUMP - Review: "No End in Sight": On Tuesday, I attended a screening of the new Iraq documentary "No End in Sight" in Los Angeles which was co-sponsored by the Center for American Progress and USC's Center for Public Diplomacy. (The movie is reviewed today in the New York Times.) Bottom line up front: go see this movie. It presents the history of the Iraq war in clear, sober, and vivid footage, and makes a compelling argument that we are past the point of "winnability" (whatever that means) today in Iraq...
Sudeep Reddy on the GDP revisions:
Economics Blog : GDP Revised Down for Last Three Years: The changes lowered the average annual growth of real GDP to 3.2% from 2004 to 2006, 0.3 percentage point less than the earlier figures.... The BEA’s annual revisions are made each July to incorporate new and more comprehensive data...
Andrew Sullivan channels Juan Cole. Both are shrill:
The Daily Dish: Juan Cole is in a good mood:
The LA Times reports that Baghdadis are down to one or two hours of electricity a day, but that the Bush administration will no longer be measuring or reporting on that sort of local data. It will give Congress only the general statistic for the entire country. But obviously whether the capital has electricity would help you know whether the current policies are working.
But we're not trying to find out whether current policies are working, are we? The Decider has decided they are. Our job is to give him the money and shut up. More protests about government information black-out on the power black-outs here, here and here...
Why oh why can't we have a better press corps? Peter Beinart on Paul Krugman: October 5, 2003:
Peter Beinart: Krugman tries to harness his columns into one overarching argument about the Bush presidency... [as] a "revolutionary power"... that wants to replace the post-New Deal order.... But to make his case, Krugman has to do more than merely dissect the administration's policies; he has to explain its motives and culture. And here Krugman's unconventional background becomes a liability. He criticizes Washington reporters for being prisoners of their sources, and the dinner-party-going "commentariat" for succumbing to groupthink. But guest lists that cross ideological lines can help liberals understand the conservatives they write about. And many Washington conservatives genuinely don't see the Bush administration as radical: they see it as having ratified a big-spending, culturally-liberal status quo....
Krugman's assumptions about the administration's motives are most problematic on foreign policy. He understands the Iraq war by analogy to the Bush tax cuts, as if rewarding corporate friends with military contracts via the Carlyle Group was a driving force behind the decision to depose Saddam Hussein.... [H]e dismisses suggestions that President Bush's aggressive foreign policy was a genuine reaction to Sept. 11, writing that "we knew there were people out there who wanted to hurt us; it wasn't that much of a surprise when they finally scored a hit."
At one point, Krugman says he has "a vision -- maybe just a hope -- of a great revulsion." Among liberals, that revulsion is now on full display, powering the candidacy of Howard Dean. But most Americans do not consider the Bush administration corrupt, and Paul Krugman cannot convincingly prove it is. He should stick to what he does so well: simply proving, on issue after issue, that the Bush administration is wrong.
Anybody think that Peter Beinart's bipartisan dinner engagements helped him understand the conservatives he wrote about back in 2003? Anybody still think the Bush administration's decision to attack iraq was a genuine reaction to Osama bin Laden's strike against us on September 11, 2001?
Anybody? Anybody? Bueller?
Mark Thoma writes:
Economist's View: Questions for Prominent Economists: A couple of things from Greg Mankiw and George Borjas caught my attention, so I want to make sure I understand what they are saying. First, Greg Mankiw says:
Brooks on the Economy, by Greg Mankiw: A prominent Harvard economist emails me to recommend David Brooks's column from a few days ago. He calls it "truly fantastic and obviously correct." With such a strong recommendation from a colleague, I ... read Brooks. ...[T]he Brooks piece is well worth reading. It is far more informed by cutting-edge economic research than most things you find on the op-ed pages...
[M]y question is if Greg (and "prominent economist") stand behind all the claims in Brooks article (see here for a list of posts questioning the claims)? If not, if this isn't a blanket endorsement, could you please give us more guidance as to where you agree or disagree so we can better evaluate your position?...
Here's the start of Brooks:
Brooks on the Economy: If you've paid attention to the presidential campaign, you've heard the neopopulist story line. C.E.O.'s are seeing their incomes skyrocket while the middle class gets squeezed. The tides of globalization work against average Americans while most of the benefits go to the top 1 percent.
This story is not entirely wrong, but it is incredibly simple-minded. To believe it, you have to suppress a whole string of complicating facts. The first complicating fact is that after a lag, average wages are rising sharply. Real average wages rose by 2 percent in 2006, the second fastest rise in 30 years.
The second complicating fact is that according to the Congressional Budget Office, earnings for the poorest fifth of Americans are also on the increase.... [B]etween 1991 and 2005, "the bottom fifth increased its earnings by 80 percent, compared with around 50 percent for the highest-income group and around 20 percent for each of the other three groups."
The third complicating fact is that despite years of scare stories, income volatility is probably not trending upward. A study by the C.B.O. has found that incomes are no more unstable now than they were in the 1980s and 1990s.
The fourth complicating fact is that recent rises in inequality have less to do with the grinding unfairness of globalization than with the reality that the market increasingly rewards education and hard work...
My reaction is that none of these first four are "obviously correct," let alone "fantastic."
Brooks's first two facts are cherry-picked and unrepresentative--note the limitation of the first "fact" to an average--not a median--number over a very short period, and note the restriction of the second to "earnings" rather than "incomes." Brooks's third "fact" appears to be wrong: at least as I read the studies http://www.cbo.gov/ftpdocs/80xx/doc8007/04-17-EarningsVariability.pdf http://www.cbo.gov/ftpdocs/77xx/doc7777/01-31-Volatility.pdf, individual earnings volatility increase from the 1960s-1970s to the 1980s-1990s-2000s, but shows little change within that latter period, while family earnings volatility rises from the 1980s to the present. But as Peter Orszag says, "the number of studies on the topic is limited, however, so it is too early to reach firm conclusions about the precise timing or magnitude of any [possible] increase."
And Brooks's fourth "fact" is simply incoherent: increased rewards to education and to hard work and to luck and to choosing the right parents is not an alternative to the grinding mills of globalization but is, instead, the channel through which the mills of globalization grind.
I realize that when one says that David Brooks is "far more informed by cutting-edge economic research than most things you find on the op-ed pages," he means to give faint praise: the bar is indeed low. But surely there is at least one other New York Times columnist whom one should praise first for the economic sophistication of his arguments, even if one does find his points politically unpalatable?
Jim Hamilton writes:
Econbrowser: Recession probability index rises to 26.2%: The new GDP numbers also allow us to update our recession probability index. This is a simple pattern-recognition algorithm that looks at whether the recent behavior of GDP looks more like what typically happens in an expansion or a recession. It is not a forecast of what may come next, but rather an assessment of where the economy has been. To do this with sufficient reliability to describe the state of the economy for 2007:Q2, we will want to wait another quarter for the data to be revised and the further very useful signal about 2007:Q2 that will come from the advance 2007:Q3 estimate when it is released in October. With the just-released 2007:Q2 data, we are in a position to make the call for 2007:Q1. The growth rate for that quarter is now reported to have been 0.6%, and it followed a string of weak growth rates in 2006. As a result, the value of the recession probability index for 2006:Q1 turns out to be 26.2%, its highest value since 2001:Q4.
The plotted value for each date is based solely on information as it would have been publicly available and reported as of one quarter after the indicated date. Shaded regions represent dates of NBER recessions, which were not used in any way in constructing the index, and which were sometimes not reported until two years after the date.
Note that this inference does make use of the strong 2007:Q2 advance estimates--had 2007:Q2 growth been weaker, the inference for 2007:Q1 would have been even more pessimistic. All of which is a reminder that the latest GDP numbers do not prove that we're out of the woods yet...
From Dean G. Acheson: "A Democrat Looks at His Party":
At the end of the [nineteenth] century there was a lesser, but serious, missed opportunity for Democratic leadership in President Cleveleand's failure to grasp the significance of the Populist and labor unrest... and in his cautious and unimaginative approach to economic depression. The unrest... did not spring from a radical movement directed against the established order... or the constitutional system. It grew out of conditions increasingly distressing... on the farms and in the factories. Its purposes were the historic purposes of the Democratic party... to keep opportunity open, opportunity not merely to rise from barefoot boy to President but for people to find in their accustomed environments useful, respected, and satisfying lives.... The conditions and popular response had many points of similarity to those of the 1930s.
Grover Cleveland... followed the right as he saw it... through a conservative and conventional cast of mind. The agitation seemed to him... a threat to law and order.... Coxey's Army was met with a barrage of injunctions and... the Capitol police.... The Pullman strike was smashed by federal troops who kept the mails moving, the union leaders imprisoned, and the union crushed. And the financial panic was dealt with through the highly orthodox and [highly] compensated assistance of Mr. Morgan.
The underlying causes... were neither understood nor dealt with... an opportunity was missed.... If, to take one of them, the problems arising out of the concentration of industrial ownership had been tackled when they were still malleable and subject to effective treatment, we might have been spared some aches and pains that are still with us.
But with all this, Grover Cleveland holds an honored place.... When the Congress showed signs... of declaring war on Spain, Cleveland put an end to the business for the duration of his administration by saying... that, if the Congress did declare war, he would refuse to direct it as commander in chief...
Is mentioning the Weimar Republic a Godwin's Law violation?
The Daily Dish: Why the craziness?
Partly, I think, new media hatred of TNR. Partly that Thomas is obviously a liberal Democrat who's also a soldier. But mainly, it seems to me, the conservative blogosphere has taken such an almighty empirical beating this last year that they have an overwhelming psychic need to lash out at those still clinging to sanity on the war. This Scott Thomas story is a godsend for these people, a beautiful distraction from the reality they refuse to face.
It combines all the usual Weimar themes out there: treasonous MSM journalists, treasonous soldiers, stories of atrocities that undermine morale (regardless of whether they're true or not), and blanket ideological denial. We have to understand that some people still do not believe that the U.S. is torturing or has tortured detainees, still do not believe that torture or murder or rape occurred at Abu Ghraib, still believe that everyone at Gitmo is a dangerous terrorist captured by US forces, and still believe we're winning in Iraq. If you believe all this and face the mountains of evidence against you, you have to act ever more decisively and emphatically to refute any evidence that might undermine this worldview...
It's not just the conservative blogosphere: it's Howard Kurtz of the Washington Post, it's National Review, and it's the Weekly Standard.
The New Republic's back page published a diary from a pseudonymous soldier in Iraq--"Scott Thomas"--about how fighting in a war does not take you into Red Badge of Courage territory. Instead, his looking into the abyss by fighting in the war allows the abyss to look into him:
AM I A MONSTER? I have never thought of myself as a cruel person.... I once worked at a summer camp for developmentally disabled childre... helping a student with cerebral palsy perform basic tasks.... Even as I was reveling in the laughter my words had provoked, I was simultaneously horrified and ashamed at what I had just said. In a strange way, though, I found the shame comforting. I was relieved to still be shocked by my own cruelty--to still be able to recognize that the things we soldiers found funny were not, in fact, funny. Not everyone was capable of such distinctions...
This is, of course, what every veteran who has seen combat will say--if you can get them drunk enough. The person I know of who has put it best is science-fiction/fantasy writer David Drake, a good chunk of whose work is best classified as horror and is really about his experiences as an interrogator in the 11th Armored Cavalry Regiment, the "Blackhorse," when it went through the Cambodian market town of Snuol:
I [now] had much more vivid horrors than Lovecraft's nameless ickinesses to write about.... I wrote about troopers doing their jobs the best they could with tanks that broke down, guns that jammed--and no clue about the Big Picture.... I kept the tone unemotional: I didn't tell the reader that something was horrible, because nobod told me.... [T]hose stories... were different. They didn't fit either of the available molds: "Soldiers are spotless heroes," or... "Soldiers are evil monsters"... [...] The... stories were written with a flat aspect, describing cruelty and horror with the detachment of a soldier who's shut down his emotional responses completely in a war zone... as soldiers always do, because otherwise they wouldn't be able to survive. Showing soldiers behaving and thinking as they really do in war was... extremely disquieting to the civilians who were editing magazines...
When the New Republic published Scott Thomas, the right-wing slime machine swung into action:
BLACKFIVE: So how does absolute horse shit like this make it into what should be a respectable magazine? Well first you will notice that this was the New Republic, not National Review, and while this mag has plenty of fabulist issues they are emblematic of the chattering classes as a whole. While the left makes noises that they think mean they support the troops, they don't really, and they do believe the dregs of society theory of military recruiting...
Gateway Pundit: The Weekly Standard Blog has been leading the charge to find the truth behind the disgusting anti-military hit pieces at The New Republic. Today, Multi-National Force Iraq responded to the horrific allegations of war crimes at the liberal magazine. It is more evidence that the writer who goes by the name "Scott Thomas" at The New Republic is slandering the troops in Iraq: "Sir, Our Soldiers our held to the highest standards in all regards to include Standards of Conduct and Rules of War. There has been no operational reporting of the misconduct of Soldiers as reported in the article...
Howard Kurtz, Washington Post: Some of the anecdotes in the soldier's July 13 "Baghdad Diarist" column read like perfect little melodramas.... The magazine's editors recognize that his friends might be covering for him, according to someone with knowledge of the inquiry.... Scott Johnson, a lawyer who blogs at Power Line, wrote that such anecdotes sounded "highly improbable."... Michael Yon, a respected military blogger who spent time with the unit this year, wrote: "That story about American soldiers at FOB Falcon sounds like complete garbage." Other bloggers said military personnel always wear uniforms and could not possibly be confused with contractors...
Michael Goldfarb, Weekly Standard: no such woman was at FOB Falcon in the past 14 months...it'd be good if we could push that back even further, but now one has to wonder how long "Scott Thomas" has been in Iraq that no one has seen or heard of this woman at FOB Falcon over the last 14 months at least...
Michael Goldfarb, Weekly Standard: There is a lot of speculation surrounding the identity of the New Republic's mysterious, pseudonymous "Scott Thomas", aka the Baghdad Diarist. A semiotics-based analysis by John Barnes has poured fuel on the fire with the conclusion that "Thomas" fits the profile of a creative writing program graduate...
OPFOR: Private Beauchamp has just placed himself in an unenviable 'damned if you do, damned if you don't' scenario. If his stories are true, he'll be facing the business end of the UCMJ. If false, he'll be exposed as a fraud and a liar, and will have destroyed that budding writing career that he so confidently promised. So we know he's a soldier. I never doubted that in the first place, he spoke the lingo well enough. But, as Greyhawk noted, the inquiry has really just begun. Now we have to go about fact-checking his stories, which I suspect will turn out to have been grandly embellished. So no doubt wheels are turning over in the 1/18's command staff right now. Wouldn't be surprised if Private Beauchamp was standing tall in front of the man at this very moment, under the scruntity of an aggressively curious CO who is demanding details down to the letter about each of his diary entries. Expect a press release soon. The Army is going to move quick on this, now that they have a face to the name. Either way, today is going to be a very bad day for Private Scott Thomas Beauchamp. As a final thought, I think Uncle Jimbo deserves a fair share of credit here. In this post at Blackfive, Jimbo tore into Beauchamp with the precision of a trained pyschologist, nailing him as a primadonna who brilliance is always unappreciated by the buffoons around him...
Loise Story, New York Times: Doubts Raised on Magazine’s ‘Baghdad Diarist’...
Power Line: It is striking that Beauchamp's statement does not add any facts to support the veracity of "Shock troops."... Beauchamp's concern over the "character" of his "comrades in arms" being "called into question" is touching. I'd had the impression that that was the sole purpose of his articles...
Michael Goldfarb, The Weekly Standard: [A] soldier would sooner drive on the rim, damn the consequences, then change a tire under such conditions. And we suspect "Thomas" and his buddies, lousy soldiers that they are if they exist at all, would sooner abandon the vehicle than get their hands dirty...
Jonah Goldberg, National Review Isn't this just a bit too precious? The guy writes about how his comrades mock disfigured women, slaughter dogs and wear baby skulls as hats, but he's upset that others have called his and his comrades' character into question? Someone explain that to me. In fact, much of the criticism has been that U.S. soldiers would have better characters than those described in his pieces. Sorry: No sale. Scot Thomas Beauchamp may or may not be honest, but he's by no means a victim...
Matthew Yglesias--foolishly, in my opinion--thinks that he should appeal to the right-wing slime machine's sense of honor:
Matthew Yglesias: As you may know, a little while back a soldier serving in Iraq writing under the pseudonym "Scott Thomas" did a piece for TNR detailing the morally deadening aspects of wartime service in Iraq. The Weekly Standard and the conservative blogosphere whipped themselves into a frenzy wherein they convinced themselves that Thomas' story was bogus.... Well, now here he is -- his real name is Scott Thomas Beauchamp, he's a soldier, and as best I can tell nobody has yet brought forward any serious reason to doubt his story. Needless to say, rather than spend some time reflecting on the fact-free zone the conservative press is trying to create, Jonah Goldberg is attacking Beauchamp while Mark Steyn argues that Jonah isn't attacking him viciously enough.
That's just crazy. All these people need to stop. They need to take a deep breath.... [T]hey need to think a bit about the epistemic situation they're creating where information about Iraq that they don't want to hear -- even when published in a pro-war publication -- can just be immediately dismissed as fraudulent even though the misconduct it described was far, far less severe than all sorts of other well-document misconduct in Iraq.
The New Republic would be much stronger if Spencer Ackerman were still writing for it. Just saying:
Dicking Around | The American Prospect: In his fawning new book about Dick Cheney, Stephen Hayes leans heavily on superficial details and explanations, and demonstrates a surprising lack of curiosity about what drives the man he's devoted so much effort to covering...
- How Liberals Can Take Back The Supreme Court by Douglas T. Kendall & James E. Ryan
- Are the Revisionist Takes on the Six Day War Accurate? by Benny Morris
- How Asian Nations Have Taken Advantage of 9/11 by Joshua Kurlantzick
- Does "Neoconservative" Mean Anything Anymore? by Peter Beinart & Jonah Goldberg
- Big Pharma Propaganda And You by Arnold S. Relman...
London-to-Manchester by land in 1750 was like London-to-Sidney by air today in lots of ways. Tyler Cowen sends us to Tim Blanning:
Four or six draught animals were needed to pull a coach and they had to be changed every 6 to 12 miles, depending on the condition of the roads. In England it was calculated that one horse was needed for every mile of a journey on a well-maintained turnpike road. So, for the 185 miles from Manchester to London, 185 horses had to be kept stabled and fed to deal with the seventeen changes required by the stagecoaches which traveled the route. Those horses in turn required an army of coachmen, postillions, guards, grooms, ostlers and stable-boys to keep them running. As a coach could carry no more than ten passengers, fares were correspondingly high and out of reach of the mass of the population. A journey from Augsburg to Innsbruck by stagecoach, although little more than 60 miles as the crow flies, would have cost an unskilled laborer more than a month's wages just for the fare.
That is from new and excellent The Pursuit of Glory, Europe 1648-1815, by historian Tim Blanning. The best parts of this book -- which are very good indeed -- are the early sections on the economic history of transportation.
Mark Stein writes:
News Blog - Daily Brief: Options Scandal Fallout - Portfolio.com: A federal grand jury in Manhattan indicted the former chief financial officer of SafeNet Inc. on charges of securities fraud and conspiracy for her role in the alleged backdating of millions of dollars of employee stock options. The U.S. Attorney's office in Manhattan said Carole Argo "engaged in an illegal scheme to deceive SafeNet's board of directors, shareholders, and auditors, as well as securities analysts, the S.E.C., members of the investing public, and others." Her goal, it asserted, was to facilitate the "systematic backdating of options grants" and to conceal how much those backdated grants were costing the company and its shareholders.
Prosecutors didn't say precisely how much the practice allegedly did cost shareholders of SafeNet, a computer-security firm in Belcamp, Maryland. But Ron Walker, a U.S. postal inspector, said that Argo and several unnamed co-conspirators executed a "carefully planned scheme" that netted them "millions of dollars." Backdating the options let Argo and others buy stock for less than their fair-market value on the day the awards were made. That virtually guaranteed a risk-free gain even if the stock price did not rise after then. At the same time, prosecutors say, they said in public filings that "no gain to the options is possible without stock price appreciation, which will benefit all shareholders."
In a separate case in San Jose, California, the S.E.C. filed a civil lawsuit against the former chief executive of KLA-Tencor Corp.... The commission said Kenneth Schroeder repeatedly backdated options after becoming C.E.O. in 1999... undeterred by a lawyer's written warning in March 2001 that "Any attempt to set a price before such a grant is made raises substantial risks under securities and tax laws."
"Corporate executives who deliberately backdate options grants and skew their books to hide compensation expenses are misleading shareholders and investors about the earnings of the company and painting a false picture of executive pay," U.S. Attorney Michael J. Garcia said in a statement.