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March 2006

The Future of Globalization

Harold Myerson reads Alan Blinder:

Will Your Job Survive?: article in the March-April issue of Foreign Affairs by Princeton University economist Alan Blinder.... In the new global order, Blinder writes, not just manufacturing jobs but a large number of service jobs will be performed in cheaper climes. Indeed, only hands-on or face-to-face services look safe. "Janitors and crane operators are probably immune to foreign competition," Blinder writes, "accountants and computer programmers are not."

There follow some back-of-the-envelope calculations as Blinder totes up the number of jobs in tradable and non-tradable sectors. Then comes his (necessarily imprecise) bottom line: "The total number of current U.S. service-sector jobs that will be susceptible to offshoring in the electronic future is two to three times the total number of current manufacturing jobs (which is about 14 million)." As Blinder believes that all those manufacturing jobs are offshorable, too, the grand total of American jobs that could be bound for Bangalore or Bangladesh is somewhere between 42 million and 56 million. That doesn't mean all those jobs are going to be exported. It does mean that the Americans performing them will be in competition with people who will do the same work for a whole lot less.

The threat of globalization and the reality of de-unionization have combined to make the raise, for most Americans, a thing of the past. Between 2001 and 2004, median household income inched up by a meager 1.6 percent, even as productivity was expanding at a robust 11.7 percent. The broadly shared prosperity that characterized our economy in the three decades following World War II is now dead as a dodo.

Also dying, if not yet also kaput, is the comforting notion that a good education is the best defense against the ravages of globalization -- or, as Bill Clinton famously put it: What you earn is the result of what you learn. A study last year by economists J. Bradford Jensen of the Institute for International Economics and Lori Kletzer of the University of California at Santa Cruz demonstrates that it's the more highly skilled service-sector workers who are likely to have tradable jobs. And according to the Bureau of Labor Statistics, the proportion of jobs in the United States that require a college degree will rise by a measly one percentage point -- from 26.9 percent in 2002 to 27.9 percent in 2012 -- during this decade.

Since education as such won't save us, Blinder recommends a kind of particularized vocational ed. We will have to specialize more, he writes, "in the delivery of services where personal presence is either imperative or highly beneficial. Thus, the U.S. workforce of the future will likely have more divorce lawyers and fewer attorneys who write routine contracts." Now, there's a prospect to galvanize a nation.

My own sense (which I develop at greater length in the April issue of the American Prospect) is that nothing short of a radical reordering of our economy will suffice if we're to save our beleaguered middle-class majority. Every other advanced economy -- certainly, those of the Europeans and the Japanese -- has a conscious strategy to keep its most highly skilled jobs at home. We have none; American capitalism, dominated by our financial sector, is uniquely wedded to disaggregating companies, thwarting unionization campaigns and offshoring work in a ceaseless campaign to impress investors that it has found the cheapest labor imaginable.

So, here are three immodest suggestions:

  • We need to entice industry to invest at home by having the government and our public- and union-controlled pension funds upgrade the infrastructure and invest in energy efficiency and worker training.
  • We need to unionize and upgrade the skills of the nearly 50 million private-sector workers in health care, transportation, construction, retail, restaurants and the like whose jobs can't be shipped abroad.
  • And, if America is to survive American capitalism in the age of globalization, we need to alter the composition of our corporate boards so that employee and public representatives can limit the offshoring of our economy.

John Tierney Is Shrill

John Tierney is shrill:

Passing the Dinar - New York Times: Two months before the Iraq war began, David Kay reported to the Pentagon for a job in the agency being formed to run postwar Iraq. Kay, a former Defense Department scientist and weapons inspector in Iraq, was supposed to oversee the police. He assumed this meant preparing for the looting and crime to be expected when any regime collapsed. But those problems didn't seem to be on anyone else's mind, he told me, recalling his first day on the job.

"I said our first priority should be to establish order quickly, but that was considered a peripheral issue," he said. "The attitude was that it's not a problem, and if something happens the military will deal with it. I had one of the worst feelings ever in my gut, that this was going over a cliff."

On his second day on the job, he resigned -- an excellent career move in retrospect, although Kay doesn't believe it took any special clairvoyance. There were tough questions before the war, like figuring out whether Saddam had W.M.D. or forecasting the strength of the insurgency. But the looting and disorder were easily predictable, and Kay wasn't the only one making the predictions, as Michael R. Gordon and Bernard E. Trainor document in their new book on the war, "Cobra II."

Before the war, Dick Mayer, a former policeman working for the Justice Department, came up with a plan to send in thousands of international police officers to maintain order after the invasion. But Pentagon officials bristled at the expense, and the White House rejected the plan.... Some Pentagon officials did warn of civil disorder and crime, but they didn't do anything about it. They passed the buck to Gen. Tommy Franks, even though he didn't have enough troops or money for the job and showed little interest in postwar planning. He simply assured President Bush that there would be a "lord mayor" in each city and large town to deal with civilian problems.

Looting, crime, mayhem -- that was always someone else's department. The buck-passing reached its most absurd level at a briefing in the Situation Room just before the invasion, when Bush heard about the postwar plan to rely on Iraqis for law enforcement. According to Gordon and Trainor, the president was told of an intelligence report concluding that the Iraqi police "appeared to have extensive professional training."

That was like concluding that Inspector Clouseau appeared to be a master detective. During Saddam's era, when his security forces were the prime enforcers of order, the Iraqi police were notorious for corruption and lethargy. Officers waited for citizens to report crimes and expected bribes for investigating them. To the police, preventing crime, or even doing street patrols, was not their job.... That summer, as Iraqis watched looters and criminals taking control, they kept asking why nobody put a stop to the crime. The answer from officials in Washington, it turns out, is the same one that would have been given by the old Iraqi police: not my job.

Impeach George W. Bush. Impeach Richard Cheney. Do it now.

But I Already Have Deep Ken (Rogoff, That Is) Right Here...

Ken Rogoff muses on whaat he sees as the near-singularity to come. Via Mark Thoma:

Economist's View: Rogoff: Artificial Intelligence and Globalization: Ken Rogoff wonders if replacing people with intelligent machines, e.g. pocket economics professors complete with holographic images instead of university professors, will be a bigger factor than globalization and outsourcing in explaining changes in global job and wage patterns in coming decades:

Artificial Intelligence and Globalization by Kenneth Rogoff, Project Syndicate: Today's conventional wisdom is that the rise of India and China will be the single biggest factor driving global jobs and wages over the twenty-first century. High-wage workers in rich countries can expect to see their competitive advantage steadily eroded by competition.... But I wonder whether... another factor will influence our work lives even more: the exponential rise of applications of artificial intelligence.

My portal to the world of artificial intelligence is a narrow one... chess.... Chess has long been the centerpiece of research in artificial intelligence. While in principle, chess is solvable, the game's computational complexity is almost incomprehensible.... For most of the twentieth century, programmers were patently unsuccessful in designing chess computers that could compete with the best humans.... Then, in 1997... IBM's "Deep Blue"... stunned the world.... Proud Kasparov, who was perhaps more stunned than anyone, was sure that the IBM team must have cheated... computer programmers no longer find beating humans a great challenge....

[W]hen I played professional chess 30 years ago... I could tell a lot about someone's personality by seeing a sampling of their games.... I could certainly distinguish a computer from a human opponent. Now everything changed like lightning. The machines can now even be set to imitate famous human players -- including their flaws -- so well that only an expert eye (and sometimes only another computer!) can tell the difference.... From my perspective, today's off-the-shelf computer programs come awfully close to meeting Turing's test. Over the course of a small number of games on the Internet, I could not easily tell the difference....

What's next? I certainly don't feel safe as an economics professor! I have no doubt that sometime later this century, one will be able to buy pocket professors -- perhaps with holographic images -- as easily as one can buy a pocket Kasparov chess computer today....

[T]he vast body of evidence suggests that technological changes were a much bigger driver in global wage patterns than trade. That is, technology, not trade, was the big story of the twentieth-century economy.... Are we so sure that it will be different in this century? Or will artificial intelligence replace the mantra of outsourcing and manufacturing migration? Chess players already know the answer.

From my perspective, Ken Rogoff is wrong. For I already have what is (nearly) a pocket Ken Rogoff in my office. It is called Maurice Obstfeld and Kenneth Rogoff (1996), Foundations of International Macroeconomics (Cambridge: MIT Press). The real near-singularity happened nearly six centuries ago, with Gutenberg.

Colonel Wilkerson Wants His Party Back

Colonel Wilkerson wants his party back:

The Washington Note: A TWN loyal reader in Australia caught this poignant segment about Wilkerson's political party loyalties:

Question: Now, you were, I believe, a Republican for many years, you worked with the Republican administration and the Republican secretary of state. Do you think the Republicans and the Republican President will end up paying the price, the political price, for this war?

Wilkerson: Yes and I'm very concerned about that as a citizen. My mum wrote me a letter the other day and she said, "Son," -- she's 86 years old -- she said, "Son, please don't become a Democrat".

And I told my mum, I called her and I said: "Mum, you know what? I want my party back. I don't want to become a Democrat. I want my party back."

The Republican Party that I knew, that I grew up in, a moderate party, a party that believed in fiscal discipline, a party that believed in small government, a party that had genuine conservative values. This is not a conservative leadership. This is radical leadership. I called them neo-Jacobins. They are radical. They're not conservative. They've stolen my party and I would like my party back.

The political health of the country depends on the restoration of healty competition between the parties. But for that to occur, both parties have to restore their internal health. Dems need to sort out their agenda and probably need a few internal civil wars in order to move a coherent policy framework forward.

From my perspective, the view that "Democrats need to sort out their agenda" presumes a political system we do not have--one with a shadow government. The Democrats will do fine once there is a candidate to make decisions. Until then, there can be no coherent policy framework--and it is foolish to expect one.

The Republicans, of course, are in much more serious trouble. They need to replace their "leader" as soon as possible, and to apologize to America for foisting him upon us.

Corruption, Bush Family Style

From Josh Micah Marshall:

Talking Points Memo: by Joshua Micah Marshall: March 19, 2006 - March 25, 2006 Archives: Great moments in earmarks. The Houston Chronicle reports this morning that the donation Barbara Bush made to the Bush-Clinton Katrina Fund was 'earmarked' for the educational software company Ignite!

As some of you probably know that's the junk company owned by her ne'er-do-well son Neil Bush.

Actually, though, it's way better, or worse, depending on your turn of mind.

Ignite!'s has a unique business model, which works like this. Neil goes around the world finding international statesmen, bigwigs and criminals who want to 'invest' in Ignite! as a way to curry favor with the brother in the White House.

A couple years ago when I was at Salon I wrote about the craze for investment in Ignite! then taking hold among Red Sea oil magnates and progeny of the rulers of the People's Republic of China (See this article as well about the craze for investing in Ignite! in the United Arab Emirates and specifically in Dubai). Now, Russian tycoon Boris Berezovsky has awakened to the wonders of investing in Ignite!

Ben Domenech, Meet Your Dad

Truly the gift that keeps on giving. Yet more on the Washington Post's sekrit plan to discredit the right by giving airtime to Ben Domenech.

Over at, the Washington Post's Ben Domenech writes that Jack Abramoff had no influence on policy at the Interior Department:

Comments || Norton Resigns from Cabinet || RedState: Oh please. By: Augustine. That's bullcrap. Abramoff boasted of being an insider at EVERY agency, not just Interior. Because he lied to his clients, we're supposed to believe that he actually had any effect on policy? Please.

Ben, there's somebody we want you to meet. You can call him "Dad":

Talking Points Memo: by Joshua Micah Marshall: March 19, 2006 - March 25, 2006 Archives: Little did I know this Ben Domenech gambit from the Post was a secret plot to create the grist for more Abramoff blogging. You see, it turns out the Domenech family came in for a number of Bush administration appointments. Not only Ben, but Ben's dad, Doug, who was White House liaison to the Department of Interior. Or to put it more colloquially, White House guy to make sure Jack Abramoff got what he wanted with the Indians and the Pacific Island stuff.

Wayne Smith was the point man for Indian casino policy at the Department of Interior. He ended up having kind of a rough ride over at Interior. And, according to Smith, as reported last year in the Denver Post, Domenech told him "we had to pay attention to [Jack] Abramoff, because otherwise the religious right and (Ralph) Reed are going to come up and bite us, and our whole base will go crazy. They will light up our phones, shut down our phone lines."

According to Smith, Domenech was the conduit for Abramoff operative Italia Federici. Said Smith: "Doug would come down and say, 'Italia called and Jack wants this' That's how it all happened internally."

Perhaps it's from first-hand family experience that Ben writes:

Red America: On the size of government, on immigration and on issues of federal power, Republicans have adopted the same Washington strategies.... They've grown fat and happy on pork contracts, and forgotten why they were sent to this town in the first place.

Ben Domenech, Confedsymp

The Washington Post's sekrit plan to discredit the right by giving airtime to Ben Domenech continues to roll forward.

Today we find that Ben Domenech of the Washington Post is pissed that George W. Bush went to the funeral of that "Communist" Coretta Scott King:

|| RedState: The President visits the funeral of a Communist... and phones in a message to the March for Life. I think we can get a little pissed about this...

And that Ben likes Jefferson Davis a whole lot: June 26, 2005 - July 02, 2005 Archives: Shelby Foote begins his Civil War trilogy with [a chapter on] the story of Jefferson Davis.... This all goes to explain why Foote ended his [entire] trilogy this way:

...Jefferson Davis could never match [Lincoln's] music, or perhaps even catch its tone. His was a different style, though it too had its beauty and its uses: as in his response to a recent Beauvoir visitor, a reporter who hoped to leave with something that would help explain to readers the underlying motivation of those crucial years of bloodshed and division. Davis pondered briefly, then replied. "Tell them--" He paused as if to sort the words. "Tell the world that I only loved America," he said.

Here's how much Jefferson Davis loved America:

From Davis's farewell speech to the U.S. Senate:

Jefferson Davis 1861: Mississippi... has heard proclaimed the theory that all men are created free and equal, and this made the basis of an attack upon her social institutions.... The Declaration of Independence is to be construed by the circumstances and purposes for which it was made. The communities were asserting that no man was born... booted and spurred, to ride over the rest of mankind; that men were created equal, meaning the men of the political community... [that] all stations were equally within the grasp of each member of the body politic. These were the great principles they announced.... They have no reference to the slave...

Jefferson Davis during the debate over the Compromise of 1850:

Jefferson Davis 1850: [S]ir, I have an allegiance to the State which I represent here. I have an allegiance to those who have entrusted their interests to me, which every consideration of faith and of duty, which every feeling of honor, tells me is above all other political considerations. I trust I shall never find my allegiance there and here in conflict. God forbid that the day should ever come when to be true to my constituents is to be hostile to the Union. If, sir, we have reached that hour in the progress of our institutions, it is past the age to which the Union should have lived. If we have got to the point when it is treason to the United States to protect the rights and interests of our constituents, I ask why should they longer be represented here? why longer remain a part of the Union? If there is a dominant party in this Union which can deny to us equality, and the rights we derive through the Constitution; if we are no longer the freemen our fathers left us; if we are to be crushed by the power of an unrestrained majority, this is not the Union for which the blood of the Revolution was shed; this is not the Union I was taught from my cradle to revere; this is not the Union in the service of which a large portion of my life has been passed; this is not the Union for which our fathers pledged their property, their lives, and sacred honor. No, sir, this would be a central Government, raised on the destruction of all the principles of the Constitution, and the first, the highest obligation of every man who has sworn to support that Constitution would be resistance to such usurpation. This is my position.

My colleague has truly represented the people of Mississippi as ardently attached to the Union. I think he has not gone beyond the truth when he has placed Mississippi one of the first, if not the first, of the States of the Confederation in attachment to it. But, sir, even that deep attachment and habitual reverence for the Union, common to us all--even that, it may become necessary to try by the touchstone of reason. It is not impossible that they should unfurl the flag of disunion. It is not impossible that violations of the Constitution and of their rights, should drive them to that dread extremity. I feel well assured that they will never reach it until it has been twice and three times justified. If, when thus fully warranted, they want a standard bearer, in default of a better, I am at their command.

Truly this is a gift that keeps on giving.

The Washington Post's Master Plan Unfolds...

Yesterday we saw the opening act of the Washington Post's master plan to discredit the right by giving airspace to Ben Domenech. Today we see the second act begin, as P.Z. Myers outs Domenech as somebody who (a) lies about the work and views of Stephen Jay Gould, and (b) is an out-and-out creationist who "take[s] Genesis literally" and believes that the "theory of evolution is a total crock":

Pharyngula: Ben Domenech: creationist: [W]e could just assume he's uninformed, and doesn't know what he's talking about--but he goes beyond that to egregious dishonesty, with a fraudulent quote-mine.

Will Saletan['s]... offhand dismissal of the reasons for teaching Intelligent Design in public schools is full of holes.... [N]o less prominent an evolutionist than Stephen Jay Gould has lent weight to the theories of Michael Behe and his brethren....

You read that, and it sounds as if Gould had endorsed Intelligent Design creationism--Mr Domenech is slinging around Gould's credibility and authority to rebut Saletan's dismissal of ID. Follow that link, though, and you won't find Gould saying supportive things about Behe or the work of the Discovery Institute: instead, it's a diatribe by one Robert Wright, against Gould, accusing him of doing such poor science that he is providing aid and comfort to creationists. Wright's article is a rather hacky hit piece, but... there's nothing there to suggest that Gould had anything good to say about [creationists], either. Domenech is blatantly misrepresenting the story.

The rest--the implication that evolution is weak because it "remains a theory", that you cannot see the evidence for evolution, and that ID somehow meets a standard sufficient to be taught in public school--is just traditional creationist stupidity. Falling back on the argument from popularity is a theme common to this guy. Like here, where he also confesses to being a creationist:

Nearly twice as many Americans believe in creationism as in evolution.... I don't necessarily subscribe to all Creationist theories, but I do take Genesis literally. And I believe the commonly taught theory of evolution is a total crock.

It's time to demand that Domenech give answers to the most pressing question of our day: Were there rainbows before Noah's flood?

Ramesh Ponnuru Is Off Message!

Ramesh Ponnuru is off message:

The Corner on National Review Online: SOCIAL SECURITY: Matthew Yglesias accuses me of offering "bad math" in a post the other day. The accusation is a little mystifying. My post criticized Jacob Weisberg for claiming that President Bush had been unwilling to cut Social Security benefits and had instead balanced the books on his reform plan by invoking high stock-market returns. That wasn't true. Bush proposed cuts in future benefits.

Foolish Ramesh! George W. Bush assured us that he never proposed to cut Social Security benefits! He only proposed to slow the rate of growth of benefits!

And Bush never "balanced the books" on his Social Security reform plan. Never. Jason Furman--apparently the only person to go public with any estimates of the budget impact of the Bush plan, such as it was (certainly no Bush appointees ever had any numbers to talk about), says that:

The Impact of The President's Proposal On Social Security Solvency And The Budget, 7/22/05: the President's plan as a whole is found to close only 24 percent of the 75-year [estimated Social Security funding] gap. More than three-quarters of the gap would remain. Additional benefit reductions, new revenues, or large transfers from the rest of the budget would be necessary to fill the substantial remaining gap.

Why Oh Why Are We Ruled by These... Whatever They Ares?

George W. Bush... well, maybe you can call it "speaks"... but maybe not:

Press Conference of the President: Q Mr. President, in the upcoming elections I think many Republicans would tell you one of the big things they're worried about is the national debt, which was $5.7 trillion when you took office, and is now nearly $8.2 trillion, and Congress has just voted to raise it to $8.9 trillion. That would be a 58-percent increase. You've yet to veto a single bill, sir -- I assume that means you're satisfied with this.

THE PRESIDENT: No, I'm not satisfied with the rise of mandatory spending. As you know, the President doesn't have the -- doesn't veto mandatory spending increases. And mandatory spending increases are those increases in the budget caused by increases in spending on Medicare and Social Security. And that's why -- back to this man's question right here -- it's important for -- "this man" being Jim -- (laughter) -- sorry, Jim, I've got a lot on my mind these days. That's why it's important for us to modernize and strengthen Social Security and Medicare, in order to be able to deal with the increases in mandatory spending.

Secondly, in terms of discretionary spending, that part of the budget over which Congress has got some control, and over which the President can make suggestions -- we have suggested that the Congress fully fund the troops in harm's way. And they have, and for that the American people should be grateful.

Secondly, we suggested that Congress fund the reconstruction efforts for Katrina. They have spent now a little more than $100 billion, and I think that's money well-spent, a commitment that needed to be keep [sic]. Thirdly, we have said that other than security discretionary spending, that we ought to, last year, actually reduce the amount of discretionary spending, and were able to do so. Ever since I've been the President we have slowed the rate of growth of non-security discretionary spending and actually cut discretionary spending -- non-security discretionary spending. Last year I submitted a budget to the United States Congress. I would hope they would meet the targets of the budget that I submitted, in order to continue to make a commitment to the American people.

But in terms of the debt, mandatory spending increases is driving a lot of that debt. And that's why it's important to get the reforms done.

Q Thank you, sir. For the first time in years, interest rates are rising in the U.S., Europe and Japan at the same time. Is this a concern for you? And how much strain are higher interest rates placing on consumers and companies?

THE PRESIDENT: First of all, interest rates are set by an independent organization, which --

Q -- still, are you concerned about that?

THE PRESIDENT: Well, I'm not quite through with my answer yet.

Q I'm sorry.

THE PRESIDENT: I'm kind of stalling for time here. (Laughter.) Interest rates are set by the independent organization. I can only tell you that the economy of the United States looks very strong. And the reason I say that is that projections for first-quarter growth of this year look pretty decent. That's just projections, that's a guess by some economists, and until the actual numbers come out we won't know. But no question that the job market is strong. When you have 4.8 percent unemployment -- 4.8 percent nationwide unemployment, that indicates a strong job market, and that's very important.

One of the measures as to whether or not this economy will remain strong is productivity. And our productivity of the American worker and productivity of the American business sector is rising. And that's positive, because productivity increases eventually yield -- eventually yield higher standards of living. Home ownership is at an all-time high. And there has been all kinds of speculation about whether or not home ownership would -- home building would remain strong, and it appears to be steady. And that's important.

In other words -- and so to answer your question, I feel -- without getting into kind of the -- kind of micro-economics, from my perch and my perspective, the economy appears to be strong and getting stronger. And the fundamental question that those of us in Washington have to answer is, what do we do to keep it that way. How do we make sure, one, we don't put bad policies in place that will hurt economic growth? A bad policy is to raise taxes -- which some want to do. There are people in the United States Congress, primarily on the Democrat side, that would be anxious to let some of the tax relief expire. Some of them actually want to raise taxes now. I think raising taxes would be wrong. As a matter of fact, that's why -- and I think it's important for us to have certainty in the tax code. That's why I'd like to see the tax relief made permanent.

You know, it's a myth in Washington, for Washington people to go around the country saying, well, we'll balance the budget, just let us raise taxes. That's not how Washington works. Washington works raising taxes and they figure out new ways to spend. There is a huge appetite for spending here. One way to help cure that appetite is to give me the line-item veto. You mentioned vetoing a bill -- one reason why I haven't vetoed any appropriation bills is because they met the benchmarks we've set. They have -- on the discretionary spending, we've said, here is the budget, we've agreed to a number, and they met those numbers.

Now, sometimes I didn't -- I like the size of the pie, sometimes I didn't particularly like the slices within the pie. And so one way to deal with the slices in the pie is to give the President the line-item veto. And I was heartened the other day when members of both parties came down in the Cabinet Room to talk about passage of a line-item veto. I was particularly pleased that my opponent in the 2004 campaign, Senator Kerry, graciously came down and lent his support to a line-item veto, and also made very constructive suggestions about how to get one out of the United States Congress.

Let's see here. They told me what to say. David.

Interesting that he cannot remember "Federal Reserve" on the fly. Also interesting that he does not know that the Federal Reserve controls the overnight federal funds rate, but does not control--it influences--long-term rates. Interesting that he thinks his power to veto appropriations bills is the power to "make suggestions" about spending levels.

Who is the "they"? And did "they" really tell him to say that?

MarsEdit: Easy weblog editing.

The Washington Post Disses the Right

Back in the 1980s, the Wall Street Journal editorial page's most effective and devastating right-wing columnist was left-wing nut-boy Alexander Cockburn: everyone (well, almost everyone) reading his columns would think, "If that's the left, I belong on the right."

Now comes the Washington Post pulling the same trick: hiring Ben Domenech--a man with no policy or analytic or reportorial qualifications save a couple years as a right-wing speechwriter, an unarmed man in a battle of wits--to be its right-wing weblogger. It's funny:

Red America: Since the election of 1992, the extreme political left has fought a losing battle. Their views on the economy, marriage, abortion, guns, the death penalty, health care, welfare, taxes, and a dozen other major domestic policy issues have been exposed as unpopular, unmarketable and unquestioned losers at the ballot box.... [T]he mainstream media continues to treat red state Americans as pachyderms in the mist - an alien and off-kilter group of suburbanite churchgoers about which little is known, and whose natural habitat is a discomforting place for even the most hardened reporter from the New York Times.

During the discussions about the launch of this new blog, the good folks at spent far too much time in sessions with markers and whiteboard, trying to settle on a name for the column. The suggestions were all over the map - but one suggestion provided a reminder of the sociopolitical divide in this country. "What about 'Red Dawn'?" said one helpful editor.

"Well, only if you want to make people think it was a gun blog," I said, to puzzled faces.

"Red Dawn? You must know it - the greatest pro-gun movie ever? I mean, they actually show the jackbooted communist thugs prying the guns from cold dead hands."

Any red-blooded American conservative, even those who hold a dim view of Patrick Swayze's acting "talent," knows a Red Dawn reference. For all the talk of left wing cultural political correctness, the right has such things, too (DO shop at Wal-Mart, DON'T buy gas from Citgo). But in the progressive halls of the mainstream media, such things prompt little or no recognition. For the MSM, Dan Rather is just another TV anchor, France is just another country and Red Dawn is just another cheesy throwaway Sunday afternoon movie...

Hate to break it to you, Ben, but "Red Dawn" is just another cheesy throwaway Sunday afternoon movie--and one that's not nearly as visually interesting as "Dirty Dancing." "Red Dawn" is currently #2883 with a bullet among amazon DVDs, behind such wonders of the cinematic art as "Don Knotts 4 Movie Reluctant Hero Pack (The Ghost And Mr. Chicken / The Reluctant Astronaut / The Shakiest Gun In The West / The Love God?)," "Simple Life 3 - The Interns," and "Arrested Development--Season 2."

This is going to be fun.

Why Was England First?

New Economist sends us to the latest take on why England was first:

New Economist: Why was England first to industrialise?: Why was England first to enter the Industrial Revolution? Why not France? Belgium? Or even China? So asked Nico Voigtländer and Hans-Joachim Voth from the Universitat Pompeu Fabra, Barcelona, in a recent paper Why England? Demand, Growth and Inequality during the Industrial Revolution (PDF).

The authors conclude that "starting conditions were unusually favorable" in England, which had "higher per capita income" - and hence a ready consumer market for manufactured goods - as soon as favourable agricultural productivity shocks boosted incomes. Government policy, principally through "the relatively generous Poor Law system", played a role in boosting per capita living standards. So did the "low-pressure European marriage pattern", whereby age at first marriage for women was determined by socioeconomic conditions, not age at first menarche. The paper abstract explains their modeling and findings:

Why was England first? And why Europe? We present a probabilistic model that builds on big-push models by Murphy, Shleifer and Vishny (1989), combined with hierarchical preferences. Exogenous demographic factors (in particular the English low-pressure variant of the European marriage pattern) and redistributive institutions – such as the Old Poor Law – combined to make an Industrial Revolution more likely. Industrialization was the result of having a critical mass of consumers that is “rich enough” to afford (potentially) mass-produced goods.

Our model is calibrated to match the main characteristics of the English economy in 1780 and the observed transition until 1850. This allows us to address explicitly one of the key features of the British Industrial Revolution unearthed by economic historians over the last three decades – the slowness of productivity and output change. In our calibration, we find that the probability of Britain industrializing before France and Belgium is above 90 percent. Contrary to recent claims in the literature, 18th century China had only a minimal chance to industrialize at all.

Innumeracy: An Infantile Right-Wing Disorder

Duncan Black's head explodes he contemplates the innumeracy of Andrew Sullivan:

Eschaton: Give That Man a Budget: I know picking on Silly Sully [Andrew Sullivan] is just swatting flies, and the fact that intellectual lightweights like Sully dominate our discourse is truly sad, but this is part of the current conceit of post-Bush conservatives who are just shocked at his spending ways:

So let's recap: I'm in favor of Bush's tax cuts, but want spending cuts to match them; I favor balanced budgets... I want more money for defense, specifically more troops...

What would you cut? Which $350 billion or so would you cut out of the current budget, plus even more cuts to provide for even more defense spending, and even more cuts to pay for the extension to the tax cuts when the whole thing blows up?

It's a nice little fantasy to fetishize "small government" and imagine that liberals fetishize "big government" but that just isn't the reality. Put up or shut up--what would you cut out of this budget? Once you've answered that question, ask yourself if the politicians advocating such cuts will manage to stay in office.

The question one asks of these tax-cut big-defense balanced-budget "conservatives": are you knaves or are you fools? Are you trying to con your readers by not pointing out that two plus two does not equal five? Or do you believe that two plus two equals five yourself?

Davey Hume Is Shrill

But I always thought of Davey Hume as a whig. He's surely no throne-and-altar Tory:

The Reality-Based Community: David Hume is shrill by Mark Kleiman:

A too great disproportion among the citizens weakens any state. Every person, if possible, ought to enjoy the fruits of his labour, in a full possession of all the necessaries, and many of the conveniencies of life. No one can doubt, but such an equality is most suitable to human nature, and diminishes much less from the happiness of the rich than it adds to that of the poor. It also augments the power of the state, and makes any extraordinary taxes or impositions be paid with more chearfulness. Where the riches are engrossed by a few, these must contribute very largely to the supplying of the public necessities. But when the riches are dispersed among multitudes, the burthen feels light on every shoulder, and the taxes make not a very sensible difference on any one's way of living.

Add to this, that, where the riches are in few hands, these must enjoy all the power, and will readily conspire to lay the whole burthen on the poor, and oppress them still farther, to the discouragement of all industry.

From the essay "Of Commerce"

Hume was a close friend of Adam Smith and is usually thought of as a Tory,

MarsEdit: Easy weblog editing.

Covering the Economy: Readings for March 21: Budget Mechanics

A lecture on how the U.S. government decides to spend what it does...

Background readings:

Treasury Secretary John Snow annoys the Wall Street Journal's Greg Ip.

My speech to the National Association of Business Economists last week.

Long-run budget decisions will have to be made:

Budget overview: Gale-Orszag.
Health care funding crisis: Krugman-Wells.

Why Oh Why Are We Ruled by These Liars

Greg Ip is annoyed by John Snow--who isn't a real Treasury Secretary, but occasionally plays one in high school gyms around the country: - Snow Defends President's Handling of Economy: Treasury Chief Says Many Benefit From Expansion; Some Data Show Otherwise By GREG IP March 20, 2006; Page A3

WASHINGTON -- Confronting criticism of the Bush administration's economic record, Treasury Secretary John Snow said the widening gap between high-paid and low-paid Americans reflects a labor market efficiently rewarding more-productive people. But "What's been happening in the United States for about 20 years is [a] long-term trend to differentiate compensation," Mr. Snow said in an interview with The Wall Street Journal last week. "Look at the Harvard economics faculty, look at doctors over here at George Washington University...look at baseball players, look at football players. We've moved into a star system for some reason which is not fully understood. Across virtually all professions, there have been growing gaps."

Mr. Snow said the same phenomenon explains why compensation for corporate chief executive officers has climbed so sharply. "In an aggregate sense, it reflects the marginal productivity of CEOs. Do I trust the market for CEOs to work efficiently? Yes. Until we can find a better way to compensate CEOs, I'm going to trust the marketplace." Since the 1970s, CEO compensation has gone from 40 times to more than 300 times the average worker's salary, according to a study by Carola Frydman of Harvard University and Raven Saks of the Federal Reserve.

Mr. Snow, a former CEO of CSX Corp. who holds a doctorate in economics, said the administration intends to publicly challenge perceptions that typical workers and families haven't benefited much from the economic expansion.... Mr. Snow distributed a fact sheet that showed after-tax income per person, adjusted for inflation, rose 8.2% from January 2001, when George W. Bush took office as president, through January 2006. The sheet also showed that per-person net worth -- total assets minus debt -- rose 24%, unadjusted for inflation, from early 2001 to the end of 2005. "People have more money in their pocket" and in their bank accounts, he said.

Mr. Snow's case relies on averages, which can be skewed by big gains among the wealthiest.... Census Bureau data show median family income -- half of families have income greater than the median, half have less -- fell 3.6% from 2000 through 2004. Incomes for the poorest families fell even further. The only group to gain was the family at the 95th percentile -- that is, richer than 95% of all families.... Alan Krueger... [said] the real median wage rose 3% from 2000 to 2005. Gains were smallest for the lowest-paid workers and largest for the best-paid. "From the standpoint of the work force, it's been a very weak recovery," he said. Wage data don't incorporate the effects of taxes, investment income or government payments.

As for net worth, a triennial Federal Reserve survey found that the net worth of the median family rose 1.5%, after inflation, from 2001 through 2004. That is far less than the 17% increase from 1995 to 1998 and the 10% increase from 1998 to 2001.... Robert Gordon... says the past few years represent the continuation of a 35-year trend in which a growing share of all labor income goes to a small group of "superstars."... On top of this trend, income on capital -- such as interest, dividends, rent and capital gains -- has taken a growing share of national income from labor, and it "goes mainly to a small slice of the population at the very top."...

Mr. Snow argued the administration's tax cuts have made the tax code more progressive, because the rich now pay a larger share of total individual taxes.... The Tax Policy Center, a joint venture of the Brookings Institution and Urban Institute think tanks, estimates that after-tax incomes of the richest 1% of taxpayers were 4.6% higher in 2005 than they would have been without the tax cuts. Incomes of the middle 20% were 2.6% higher, and incomes of the bottom 20% were 0.3% higher.

Still, Greg Ip didn't react *nearly* as strongly when handfed b.s. by John Snow with a spoon as David Wessel had reacted when Paul O'Neill did the same thing.

Why Oh Why Are We Ruled by These Clowns?

Andrew Samwick is disgusted at what Congress has done with pension "reform"--on which he worked while he was in the Executive Office of the President. Once again evidence that Congress is America's only natural criminal class:

Vox Baby: Pass the Spittoon, Pension Reform Edition: For the trouble of having to wade through all of the details of the pension reform bill now being gutted in House-Senate conference, Mary Williams Walsh gets a Voxy. I remember working on the early stages of this reform effort while at CEA. It started out simply enough:

With a strong directive from the Bush administration, Congress set out more than a year ago to fashion legislation that would protect America's private pension system, tightening the rules to make sure companies set aside enough money to make good on their promises to employees.

Enter the Congressional porkfest, and what do we now have?

Then the political horse-trading began, with lawmakers, companies and lobbyists, representing everything from big Wall Street firms to tiny rural electric cooperatives, weighing in on the particulars of the Bush administration's blueprint.

In the end, lawmakers modified many of the proposed rules, allowing companies more time to cover pension shortfalls, to make more forgiving estimates about how much they will owe workers in the future, and even sometimes to assume that their workers will die younger than the rest of the population.

On top of those changes, companies also persuaded lawmakers to add dozens of specific measures, including a multibillion-dollar escape clause for the nation's airlines and a special exemption for the makers of Smithfield Farms hams.

As a result, the bill now being completed in a House-Senate conference committee, rather than strengthening the pension system, would actually weaken it, according to a little-noticed analysis by the government's pension agency. The agency's report projects that the House and Senate bills would lower corporate contributions to the already underfinanced pension system by $140 billion to $160 billion in the next three years.

Two excerpts from the article say it best:

"It takes a better economist than me to understand how reducing contributions by that much is going to protect benefits and put the system on a sounder footing," said Jeremy I. Bulow, an economist at Stanford University.

That's actually funny, since there are no demonstrably better economists than Jeremy Bulow. And then we have the author's own attempt to make sense of this:

Someone must pay for this. Currently, the pension agency finances itself in part through the insurance premiums that companies are required to pay into the system. Raising the premiums to support pilots or help other victims of corporate bankruptcies, some companies in other industries are starting to say, would be unfair.

This is the contemptible legislative impulse to favor the special interest over the general interest. Read the whole thing and be amazed at how unprincipled the House and Senate are being.

The President has been losing credibility on several issues related to finances as of late. He could get some of it back if he would simply VETO this monster and send it back to the sty. If for no other reason, he should do it to show respect for the many people in his administration who worked diligently on a much better blueprint for reform.

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

Ryan Lizza attacks Russ Feingold, saying that it would be bad to censure Bush:

Russ Feingold's selfish move: Bush's long march from honest to incompetent, from approval ratings in the 60s to approval ratings in the 30s, must have seemed for Russ Feingold like the ideal time to stir a national debate about censuring the president. Feingold... restrained himself by limiting it to Bush's domestic spying program, which circumvents the FISA court and, if reading the plain language of legislation is still the best way to interpret a statute, clearly violates the law.... Censure is meaningless. Changing the FISA law is the way to address Bush's overreach...

So Bush (i) breaks the FISA law, (ii) announces that he intends to break any future laws like FISA that constrain him, and yet Ryan says that (iii) modifying FISA is "the way to address Bush's overreach"? How is passing yet another law that Bush has said he will ignore and break "the way to address Bush's overreach"?

Is this profoundly stupid, or what?

General Eaton Is Shrill

Who is General Eaton?

the defeatists!: Hell has just frozen over...: "One week after the president flew to the USS Lincoln in May 2003 to deliver his "Mission Accomplished" speech, the Defense Department ordered Maj. Gen. Paul Eaton to rush from Fort Benning, Ga., to Baghdad. His job: To lead an effort to try to rebuild Iraq's military. "I was very surprised to receive a mission so vital to our exit strategy so late," the now-retired general told The New York Times in an account published Feb. 11...

Here is what he says:

A Top-Down Review for the Pentagon - New York Times: By PAUL D. EATON: DURING World War II, American soldiers en route to Britain before D-Day were given a pamphlet on how to behave while awaiting the invasion. The most important quote in it was this: "It is impolite to criticize your host; it is militarily stupid to criticize your allies."

By that rule, Defense Secretary Donald Rumsfeld is not competent to lead our armed forces. First, his failure to build coalitions with our allies from what he dismissively called "old Europe" has imposed far greater demands and risks on our soldiers in Iraq than necessary. Second, he alienated his allies in our own military, ignoring the advice of seasoned officers and denying subordinates any chance for input.

In sum, he has shown himself incompetent strategically, operationally and tactically, and is far more than anyone else responsible for what has happened to our important mission in Iraq. Mr. Rumsfeld must step down.

In the five years Mr. Rumsfeld has presided over the Pentagon, I have seen a climate of groupthink become dominant and a growing reluctance by experienced military men and civilians to challenge the notions of the senior leadership.

I thought we had a glimmer of hope last November when Gen. Peter Pace, the chairman of the Joint Chiefs of Staff, faced off with Mr. Rumsfeld on the question of how our soldiers should react if they witnessed illegal treatment of prisoners by Iraqi authorities. (General Pace's view was that our soldiers should intervene, while Mr. Rumsfeld's position was that they should simply report the incident to superiors.)

Unfortunately, the general subsequently backed down and supported the secretary's call to have the rules clarified, giving the impression that our senior man in uniform is just as intimidated by Secretary Rumsfeld as was his predecessor, Gen. Richard Myers.

Mr. Rumsfeld has put the Pentagon at the mercy of his ego, his cold warrior's view of the world and his unrealistic confidence in technology to replace manpower. As a result, the Army finds itself severely undermanned %u2014 cut to 10 active divisions but asked by the administration to support a foreign policy that requires at least 12 or 14.

Only Gen. Eric Shinseki, the Army chief of staff when President Bush was elected, had the courage to challenge the downsizing plans. So Mr. Rumsfeld retaliated by naming General Shinseki's successor more than a year before his scheduled retirement, effectively undercutting his authority. The rest of the senior brass got the message, and nobody has complained since.

Now the Pentagon's new Quadrennial Defense Review shows that Mr. Rumsfeld also fails to understand the nature of protracted counterinsurgency warfare in Iraq and the demands it places on ground forces. The document, amazingly, does not call for enlarging the Army; rather, it increases only our Special Operations forces, by a token 15 percent, maybe 1,500 troops.

Mr. Rumsfeld has also failed in terms of operations in Iraq. He rejected the so-called Powell Doctrine of overwhelming force and sent just enough tech-enhanced troops to complete what we called Phase III of the war %u2014 ground combat against the uniformed Iraqis. He ignored competent advisers like Gen. Anthony Zinni and others who predicted that the Iraqi Army and security forces might melt away after the state apparatus self-destructed, leading to chaos.

It is all too clear that General Shinseki was right: several hundred thousand men would have made a big difference then, as we began Phase IV, or country reconstruction. There was never a question that we would make quick work of the Iraqi Army.

The true professional always looks to the "What's next?" phase. Unfortunately, the supreme commander, Gen. Tommy Franks, either didn't heed that rule or succumbed to Secretary Rumsfeld's bullying. We won't know which until some bright historian writes the true story of Mr. Rumsfeld and the generals he took to war, an Iraq version of the Vietnam War classic "Dereliction of Duty" by H. R. McMaster.

Last, you don't expect a secretary of defense to be criticized for tactical ineptness. Normally, tactics are the domain of the soldier on the ground. But in this case we all felt what L. Paul Bremer, the former viceroy in Iraq, has called the "8,000-mile screwdriver" reaching from the Pentagon. Commanders in the field had their discretionary financing for things like rebuilding hospitals and providing police uniforms randomly cut; money to pay Iraqi construction firms to build barracks was withheld; contracts we made for purchasing military equipment for the new Iraqi Army were rewritten back in Washington.

Donald Rumsfeld demands more than loyalty. He wants fealty. And he has hired men who give it. Consider the new secretary of the Army, Francis Harvey, who when faced with the compelling need to increase the service's size has refused to do so. He is instead relying on the shell game of hiring civilians to do jobs that had previously been done by soldiers, and thus keeping the force strength static on paper. This tactic may help for a bit, but it will likely fall apart in the next budget cycle, with those positions swiftly eliminated.

So, what to do?

First, President Bush should accept the offer to resign that Mr. Rumsfeld says he has tendered more than once, and hire a man who will listen to and support the magnificent soldiers on the ground. Perhaps a proven Democrat like Senator Joseph Lieberman could repair fissures that have arisen both between parties and between uniformed men and the Pentagon big shots.

More vital in the longer term, Congress must assert itself. Too much power has shifted to the executive branch, not just in terms of waging war but also in planning the military of the future. Congress should remember it still has the power of the purse; it should call our generals, colonels, captains and sergeants to testify frequently, so that their opinions and needs are known to the men they lead. Then when they are asked if they have enough troops -- and no soldier has ever had enough of anything, more is always better -- the reply is public.

Our most important, and sometimes most severe, judges are our subordinates. That is a fact I discovered early in my military career. It is, unfortunately, a lesson Donald Rumsfeld seems incapable of learning.

Impeach George W. Bush. Impeach Richard Cheney. Impeach Donald Rumsfeld. Do it now.

Trackbacks are Off

Let me join Alex Tabarrok in turning off trackbacks:

Marginal Revolution: Trackbacks are Off: Due to an onslaught of spam, we have stopped accepting trackbacks. If Typepad improves their spam filters we will turn trackbacks back on but at present the ratio of spam to real trackbacks is over 100 to 1. We like trackbacks and regret the inconvenience. Posted by Alex Tabarrok

It is just not possible to police them. I don't have time with comments to keep the spam and the trolls down in any but the most half-a**** fashion. I can't deal with trackback spamming and trolling as well.


MarsEdit: Easy weblog editing.

Tyler Cowen Rejects John Rawls

Tyler writes:

Marginal Revolution: John Rawls, anti-capitalist: John Rawls, anti-capitalist: This is from his correspondence:

The large open market including all of Europe is aim of the large banks and the capitalist business class whose main goal is simply larger profit. The idea of economic growth, with no specific end in sight, fits this class perfectly. If they speak about distribution, it is most always in terms of trickle down. The long-term result of this — which we already have in the United States — is a civil society awash in a meaningless consumerism of some kind. I can’t believe that is what you want.

So you see that I am not happy about globalization as the banks and business class are pushing it. I accept Mill’s idea of the stationary state as described by him in Bk. IV, Ch. 6 of his Principles of Political Economy (1848). (I am adding a footnote in §15 to say this, in case the reader hadn’t noticed it). I am under no illusion that its time will ever come - certainly not soon - but it is possible, and hence it has a place in what I call the idea of realistic utopia.

For more see CrookedTimber. The real question is how much this should cause us to downgrade his moral philosophy. I say "a lot." I used to think there was some deep argument of consilience behind "maximin," [Rawls's claim that deviations from material equality were unjustified unless they redounded to the benefit of the poor,] but now I am ready to classify it as a simple mistake, akin to a person who doesn't understand what drove the flow of traffic across the Berlin Wall in one direction and not the other.

I admit I always had problems with "maximin." In the context of social-contract theory, it seemed to make no sense at all: maximin simply doesn't follow from the thought experiment of choosing rules and institutions for an enterprise without knowing what your place in that enterprise is going to be. An alternative justification of "maximin" is that it creates a society in which the poor have no justified grip: that things are arranged to make them as well off as possible. But this falls to the objections that (a) different people and different kinds of people are the poor in different societies, and (b) by what right do this society's poor claim dictatorial power over rules and institutions?

But Tyler's picking-up of Chris Bertram's noting of Philippe Van Parijs's letters to and from Rawls certainly does get Rawls into trouble at a much deeper, elementary level.

Brad DeLong's Semi-Daily Journal: Memories... and Hard-Disk Space and Processor Speed

Robert Waldmann writes:

Brad DeLong's Semi-Daily Journal: Memories... and Hard-Disk Space and Processor Speed: Brad your conclusion shows that you are a Mac user. I agree that the decrease in the rate utilisation of computing power is as amazing as the increase in computing power, but it is not the only thing.

For us Window's users the worsening in software is as amazing as the improvement in hardware. We own a 2 month old Toshiba Satellite M70-144 with a 1.86 GHz Pentium M, 512 Mb RAM 92 GB Hard Drive running Windows XP and a 22 year old original IBM PC "portable" with an Intel 8086 processor, RAM expanded to 640 kb and a 100 Mb hard drive added running DOS 3.1 and each is equally infuriatingly slow.

The Toshiba is actually portable and has a nice desk top and screen saver, but it takes just as long to wake up, vastly longer to shut down, and bugs me more often because it is too busy doing God knows what to accept input.

If you tell me to shut up, stop whining and buy a Mac, I will send you an e-mail with the svelt slim modern 61.658 Mb file "" as an attachment. Disclaimer: I would of course do no such thing. I am not a cyber terrorist. NSA please take notice.

Yes! But all the wonderful spiffy new things your Toshiba can do! Like surf the web! And surf the web! And run STATA!

It's Time for a Contest! (Why Oh Why Can't We Have a Better Press Corps? Washington Post Edition)

This morning Jim VandeHei writes:

GOP Irritation At Bush Was Long Brewing: By Jim VandeHeiWashington Post Staff Writer Friday, March 17, 2006; A01: President Bush's troubles with congressional Republicans, which erupted during the backlash to the Dubai seaport deal, are rooted in policy frustrations and personal resentments that GOP lawmakers say stretch back to the opening days of the administration. For years, the Bush White House and its allies on Capitol Hill seemed like one of the most unified teams Washington had ever seen, passing most of Bush's agenda with little dissent. Privately, however, many lawmakers felt underappreciated, ignored and sometimes bullied by what they regarded as a White House intent on running government with little input from them. Often it was to pass items -- an expanded federal role in education under the No Child Left Behind law and an expensive prescription drug benefit under Medicare -- that left conservatives deeply uneasy. What Bush is facing now, beyond just election-year jitters by legislators eyeing his depressed approval ratings, is a rebellion that has been brewing since the days when he looked invincible, say many lawmakers and strategists...

Jim VandeHei is correct. Since the earliest days of this administration--in fact, even before this administration first took office--there has been an extraordinarily high degree of resentment and frustration with the substantive policies of the George W. Bush administration. Current and former Bush appointees and allies have discussed their frustrations with me; they have occasionarlly discussed their frustrations with the press (think of John DiIulio and Paul O'Neill); and they have often discussed their frustrations around the VandeHei household kitchen table.

But those frustrations have not--until now--shown up in the coverage of the White House by Jim VandeHei, have they? "Irritation" (a very, very mild word to describe the views of congressional Republicans, which cannot be printed in this family weblog) has "long been brewing," but you would not know it by reading Jim VandeHei over the past several years, would you?

I could be wrong. So: a contest: a free copy of David Frum's The Right Man to the commenter who can find, in the past writings of Jim VandeHei, the closest foreshadowing of his current (true) claim that congressional Republicans' "policy frustrations and personal resentments... [with him] stretch back to the opening days of the administration... [since which] lawmakers [have] felt underappreciated, ignored and sometimes bullied... [legislation] that left conservatives deeply uneasy... a rebellion that has been brewing since the days when he looked invincible, say many lawmakers and strategists..."

Mark Schmitt on Budget Coverage...

Let me elevate a comment by Mark Schmitt:

Brad DeLong's Semi-Daily Journal: Stan Collender and Budget Coverage (Why Oh Why Can't We Have a Better Press Corps?): What a perfect example. If you have access to any other source of information -- Collender's column, or the Center on Budget & Policy Priorities website, for example, you never need to read the Post budget coverage unless you need a reminder of how few reporters really understand it.

This side-by-side shows one reason why: Post reporters, like most people think budget=numbers. Therefore, reporting about the budget means reporting the numbers that are in a given budget document. So Weisman has ten figures before Collender has even one. What Collender knows is that what are called "budgets" are simply moves in a process. That the House Budget Resolution assumes a 20% cut in env/natural resources discretionary spending is not the story, because that cut will never happen and its trivial on the scale of the budget anyway.

I think what sometimes happens is that reporters are intimidated by numbers, and feel they have to fully master the numbers in the budget -- or whatever budget document is at hand -- and so become transfixed by them.

Collender understands that all these actions are just moves in a game, and it's all about the process. He's not intimidated by the numbers in the budget documents, so he can move on to the bigger picture.

And then there's also the factor that American journalists just aren't allowed to write sentences like, "you can't help but get the distinct feeling that more than one person in Washington is fiddling while the budget fire spreads." They might know it, but they need to quote someone to say it.

I would say it's even worse than that. The Post has thirteen numbers, NONE OF WHICH ARE PLACED IN ANY MEANINGFUL INTERPRETIVE CONTEXT!! NONE!!

Excuse me. I'm better now. I think.

Memories... and Hard-Disk Space and Processor Speed

The first computer I ever programmed was like this one:

InfoDog, MB-F Newsletter, October 1992: a Digital Equipment Corporation PDP 1170. It came complete with 128K of memory, 100 megabytes of disk, [15 MHz].... All this great hardware cost a mere $200,000.

Due to the fact that my laptop hard disk started screaming like a Bain Sidhe last week, I now have a $2,000 MacBookPro:

2G of memory, 92GB of hard disk, running at 2 GHz.

How many more computrons? What's the proper formula? A guess: 100 x 30 x 130 = 400,000 times as many computrons in this laptop as in the PDP 1170.... 40,000,000 times as many computrons per dollar.

The only thing as mind-blowing as the increase in computer power and decrease in computer cost is the decrease in the rate of utilization of computer-power...

Stan Collender and Budget Coverage (Why Oh Why Can't We Have a Better Press Corps?)

Susan Rasky and I had Stan Collender--the one-stop shopping center for budget-process analysis--in to talk to our class this week. We took him to Chez Panisse. We both thought he did a truly excellent job, and that inviting him was one of our best ideas this year.

Why did we invite him? To understand why, take a look at the two stories in the two columns below, both published on March 14, 2006, the left one by Stan, the right one the Washington Post's budget story. Stan does his budget columns essentially as a hobby (and as a loss leader). The Post claims to own in-depth Washington reporting.

But take a look at the two stories. From the left--Stan's--you learn a lot about what's going on with the budget. From the right--the Post's--you learn much less, and some of what you learn is not true. GOP leaders don't "insist" they can "bring down the deficit without increasing taxes if lawmakers are willing to make tough decisions." They may say this to Washington Post reporters, but it's not what they think or say in private. The Senate Budget Resolution would not "cap [fiscal 2007] nondefense spending... at $420 billion": a bunch of spending bills are expected to be passed outside of the framework of the budget process--in fact, right now the House is considering a $91 billion "emergency" outside-the-budget-process spending bill. The Post says that Senator Specter denounces the budget resolution as "beyond cutting the fat and beyond the bone," but it doesn't offer a number or an explanation about what he proposes to do instead. The right article is useless--downright misleading--to everyone except budget experts, and they know almost everything in it already.

So here's the question that puzzles me: Why doesn't the Washington Post or the New York Times employ Stan Collender to write their budget articles? Why does he do his work--as a low-paid near-hobby--for a small rather than a large audience? What are the editors of the New York Times thinking?

Stan says that he is a frequent source for the Post and the Times--especially for the late David Rosenbaum. Googling for "collender budget" gets an estimated 34,900 hits. He has a big footprint in the budget analysis game. But his social value added would, I think, be much much greater if he were covering the budget for the Post or the Times. He's very smart. He knows the subject area inside and out. He can produce lots of good copy under tight deadline pressure. His writing is very lively and engaging.

Why isn't he doing so? Beats me.

BUDGET BATTLES: Do You Smell Something Burning? (03/14/2006): By Stan Collender, © National Journal Group Inc. Tuesday, March 14, 2006:

Last week's budget events seem relatively insignificant when you look at them individually. Put them together, however, and you can't help but get the distinct feeling that more than one person in Washington is fiddling while the budget fire spreads.

Start with the House Budget Committee, which postponed its consideration of the fiscal 2007 budget resolution because, according to a variety of reports, Republicans have been unable to come up with a plan that would be approved either in committee or on the floor.

The committee may try to hold the markup this week, but the overwhelming expectation is that the earliest it will happen is after the St. Patrick's Day congressional recess at the end of March. There seems to be a growing concern among budget participants and watchers on Capitol Hill that it won't happen at all.

Next, move to the Senate Budget Committee, which last week adopted a fiscal 2007 budget resolution that, in the words of Chairman Judd Gregg, R-N.H., was totally "vanilla."

The resolution does allow the committee to say it is doing something, or at least something more than its House counterpart. However, it makes almost no policy choices and seems to please no one. It rejects virtually all of the proposals in the Bush budget, transfers $5 billion in spending proposed by the White House for the Pentagon to domestic programs, and has a 2007 deficit that is $5 billion higher than what the president projected.

To make matters worse, the Senate Budget Committee's vanilla budget resolution was adopted on a straight party-line 11 to 10 vote that portends big problems when it is debated by the full Senate this week. In fact, immediately after the resolution agreement was reached, Gregg was telling reporters that the votes might not exist in the Senate to pass what his committee had just adopted. Don't be surprised if the committee-approved resolution is never approved.

Next, move to the Treasury, which late last week reported that the federal government had its highest one-month deficit -- $119.2 billion -- in February.

It is generally unfair to use monthly results as an indication of what will happen through the year. In fact, the total 2006 deficit through the end of February was actually about $5 billion less than last year's deficit through the same period.

In addition, February is typically a month when the government runs a large deficit because individual taxpayers expecting money back generally file their returns early and the IRS issues significant refund checks. Therefore, the fact that there was a large deficit in February is not by itself a cause for alarm.

What is of concern, however, is that the February results were more because of additional spending rather than tax refunds. This is especially the case because spending for Iraq, Afghanistan, Katrina and Medicare will likely accelerate through the rest of the year.

That should plant some doubt in everyone's mind about the administration's claim that the deficit outlook is getting better. Not only is federal spending increasing but, at least judging by what the administration and budget committees are proposing, there doesn't seem to be much interest or ability to do anything about it.

Finally, move to the White House and Congress, where interest in a line-item veto seemed to be gathering bipartisan momentum last week. This happened a week or so after interest in a two-year budget also picked up some steam.

Although I have serious doubts about it being the magic elixir many others in the federal budget world think it will be, I have no problem with a line-item veto.

What is troubling, however, is the sudden interest in budget process changes. That typically happens when policymakers find it impossible to do anything about the budget itself and it's often used as an alternative to making progress. Representatives and senators tell constituents that things may look bad now, but they have taken steps to make sure it will get better in the future.

For the record, neither a line-item veto, a two-year budget, or any other process change that is likely to be enacted anytime soon will have much of an impact on the budget. If a consensus existed in Washington about what to do about the deficit, Congress and the White House wouldn't need a procedural fix to make it happen.

Budget process changes only work when there is a general agreement in advance about what to do, and that simply doesn't currently exist. If it did, the House and Senate Budget Committees this week would have been able to come up with a budget resolution that moved toward that goal.

The same thing can be said about the ongoing discussion about procedural changes that would make earmarks more difficult. Congress doesn't need a procedural fix for earmarks; it has the ability to stop them now just by deciding it wants to do so. The fact that it is considering a process change is a strong indication that it doesn't really want it to happen.

Put all of this together and you get the sound of more than one person in Washington fiddling while the budget is burning. Indeed, you almost start to hear a whole orchestra playing.

Republicans on Hill Resist Party Leaders' Spending Cuts: By Jonathan Weisman Washington Post Staff Writer Tuesday, March 14, 2006; A08:

House and Senate Republicans will seek this week to increase spending on port security, homeland defense, health care and education in a clash with GOP leaders struggling to regain the mantle of fiscal discipline for their party. With the Senate taking up a budget blueprint for 2007 and the House voting on a $91 billion emergency spending bill, lawmakers on both sides of the Capitol will face key tests of their budget-cutting mettle in the coming days.

The federal budget deficit is expected to reach $371 billion this year, despite robust economic growth. But GOP leaders insist they can bring down the deficit without increasing taxes if lawmakers are willing to make tough decisions on federal spending.

To that end, the Senate yesterday began debating a plan that would cap nondefense spending at Congress's discretion at $420 billion for the fiscal year that will begin on Oct. 1, $15 billion lower than the fiscal 2006 level.

Under the budget plan, discretionary spending on environmental and natural resource programs would fall 20 percent. Spending on community and regional development programs would be slashed by 32 percent, and politically sensitive transportation spending would be cut by 17 percent.

In the House, conservatives will push tonight to offset at least part of the emergency spending bill's cost with cuts elsewhere in the budget. Of the $91 billion in emergency spending, $19 billion is for additional hurricane relief for the Gulf Coast, a sum that some Republicans believe should be offset by cuts in other programs.

Those moves correspond with political statements from Republican leaders that the party is getting serious about containing government spending. A gathering of GOP presidential hopefuls in Memphis last weekend featured a stream of prominent Republicans lamenting the growth of government since President Bush took office and vowing to reverse the trend.

Those political statements, however, have not been backed by legislative action. Senate Budget Committee Chairman Judd Gregg (R-N.H.) conceded yesterday that a coalition of moderate Republicans and Democrats may block the adoption of the spending limits in his budget plan. Facing an election-year revolt, Gregg has already dropped the centerpiece of Bush's budget-cutting efforts for 2007, a $37 billion reduction in the growth of Medicare. And he opted against using in the budget resolution parliamentary language that would have helped Bush extend his first-term tax cuts beyond their 2010 expiration date.

"For the great majority in my conference, they'd like to do some aggressive things on spending," he said. "But we need 51 votes. You might have 48 votes, but that's not 51, and it's as simple as that."

Indeed, by week's end, Congress is likely to approve measures that would increase spending rather than decrease it. Rank-and-file lawmakers from both parties are increasingly convinced that budget cutting has gone far enough.

"We're beyond cutting the fat and beyond the bone. We're down to the marrow," said Sen. Arlen Specter (R-Pa.), who plans to introduce an amendment today to raise spending on health care, education and worker safety by billions of dollars above the president's request for next year.

Specter's amendment, co-authored by Sen. Tom Harkin (D-Iowa), is only the beginning. Sen. Joseph I. Lieberman (Conn.), the ranking Democrat on the Senate Homeland Security Committee, said he and Chairman Susan Collins (R-Maine) will introduce an amendment this week to broadly raise spending on homeland defense. Senate Democrats on their own will move to increase spending for homeland security by nearly $3 billion more than Bush's wishes.

Reps. Daniel E. Lungren (R-Calif.) and Jane Harman (D-Calif.) plan to unveil legislation today that would raise spending on port security by $801 million a year. That bill nearly equals a bipartisan Senate legislation that would raise annual port security spending by $835 million. Both bills are scheduled for quick action in the House and Senate homeland security committees in the coming weeks.

Proponents of the measures say the government has avoided such spending for too long under the guise of fiscal restraint. Three times since the Sept. 11, 2001, terrorist attacks, the House has voted against Democratic efforts to raise spending on port security. But in the wake of a Dubai company's effort to take over management responsibilities at six major U.S. ports, such opposition appears to be collapsing.

"There simply is no cheap way to be better prepared," Lieberman said yesterday.

If some Republicans are ready to reverse spending cuts, they are not prepared to reverse their tax cuts. Specter said labor, health and education programs were cut last year by $2.1 billion and lost an additional $5 billion in buying power because of inflation. He hopes to reverse all or most of those cuts. But he said that proposing tax increases to pay for that additional spending would only complicate his spending effort.

Budget experts said that kind of thinking is a ticket to ever-increasing deficits.

"No one is willing to sit down and come to grips with the fundamental problem that you can't run a 21st-century government on a 1950s revenue base," said Urban Institute President Robert D. Reischauer, a former director of the nonpartisan Congressional Budget Office.

Censure Is a Start. But It Does Not Go Far Enough

Senator Feingold's motion to censure George W. Bush does not go far enough. For the sake of the country, for the sake of the constitution, for the sake of the rule of law, Congress needs to do more. Congress needs to impeach George W. Bush, for plain and egregious violations of his duty to faithfully execute the laws.

Hilzoy of Obsidian Wings has details:

Obsidian Wings: Cheat Sheet: The current debates over the Feingold resolution and the NSA surveillance program & the ongoing debate over the torture scandals involve a lot of convoluted legal arguments about executive power. It can get really difficult and frustrating for non-lawyers to sort them all out. (Actually it can be that way for lawyers too, but lawyers get three years of instruction in legalese & then get paid to read and write it for a living, It's a lot worse for everyone else.)

To make this a little easier, I've prepared a handy-dandy little guide for decoding the administration's arguments and reassurances on these topics:

Understanding the Bush Administration's Statements About Executive Power And Treatment of Prisoners in Nine Easy Steps

  1. Cross out the word "battlefield" wherever it occurs and replace it with the word "earth."
  2. Cross out the phrase "length of the war", "duration of the conflict", or similar, and replace it with the phrase "indefinite future."
  3. In front of the terms "enemy combatant", "terrorist", "member of Al Qaeda", "trained killer", "enemy of the United States," "illegal combatant," "member of the enemy" etc., insert the words "anyone the President claims, with or without evidence, is a[n]".
  4. After all reassurances that the President's conduct is "lawful" or "legal" or "complies with the law", add an asterisk. At the bottom of the page, insert this disclaimer: It is legal for the President to secretly violate any treaty, statute, or regulation that limits his commander-in-chief power in any way.
  5. Whenever the word "torture" appears, add two asterisks. At the bottom of the page, insert this disclaimer: Simulated drowning is not torture. Mock burial is not torture. Stripping a detainee naked, and chaining him to the floor of a fifty-degree-Fahrenheit cell, and pouring cold water on him for extended periods is not torture. Prisoners being "forced to stand, handcuffed and with their feet shackled to an eye bolt in the floor for more than 40 hours" is not torture. Threatening detainees with military dogs is not torture. Prolonged sleep deprivation is not torture. Prolonged isolation is not torture. Repeating these techniques again and again, and combining them in creative ways, is not torture.
  6. Whenever a promise to treat detainees "humanely" appears, add three asterisks. At the bottom of the page insert this disclaimer: It is fine to abuse and degrade prisoners as long as you do so humanely. Here are some specific examples of humane treatment.
  7. Whenever a claim that Congress has authorized a presidential action appears, insert four asterisks. At the bottom of the page insert this disclaimer: When Congress authorizes the use of military force, it authorizes the President to secretly violate any other law if he decides it interferes with the war effort. This is true even if Congress has no idea it's authorizing the President to do this, no desire to authorize the President to do this, and would vote down the use of force resolution if they understood that it meant giving the President this power.
  8. Whenever you read any reference to the "U.S. Constitution", remember that they are referring to this U.S. Constitution, not the quaint, outdated one you studied in seventh grade social studies.
  9. Read all restrictions on the President's power as narrowly as it's possible to read them. Read all grants of power to the President as broadly as it's possible to read them. That's "possible", not "plausible". An easier way to remember this one is to ask yourself "W.W.J.Y.D.?"--"What would John Yoo do?". (Or David Addington, but his initials don't work as well).

Anybody who ever has, or ever wishes, to make arguments for the "rule of law" or "limited government" or "checks and balances," be now on notice: get out in front calling for the impeachment of George W. Bush now, or forever hold your peace.

Peggy Noonan Realizes She Has Conned Herself--and Says That She Wouldn't Have Voted for Bush If She'd Known Who He Was

She looks at Bush fiscal policy and joins the Ancient, Occult, and Hermetic Order of the shrill, saying that if she'd known who George W. Bush really was she wouldn't have voted for him:

OpinionJournal - Peggy Noonan: Hey, Big Spender Should we have known that President Bush would bust the budget?: Thursday, March 16, 2006 12:01 a.m. EST: This week's column is a question, a brief one addressed with honest curiosity to Republicans. It is: When George W. Bush first came on the scene in 2000, did you understand him to be a liberal in terms of spending?

The question has been on my mind since the summer of 2005 when, at a gathering of conservatives, the question of Mr. Bush and big spending was raised.... Everyone murmured about... how the president "spends like a drunken sailor except the sailor spends his own money." And then someone, a smart young journalist, said, (I paraphrase), But we always knew what Bush was. He told us when he ran as a compassionate conservative. This left me rubbing my brow in confusion. Is that what Mr. Bush meant by compassionate conservatism?

That's not what I understood him to mean. If I'd thought he was a big-spending Rockefeller Republican.... I wouldn't have voted for him.... I didn't understand Mr. Bush's grand passion to be cutting spending.... But he did present himself as a conservative... conservatism is hostile, for reasons ranging from the abstract and philosophical to the concrete and practical, to high spending and high taxing....

How did this happen? In the years after 9/11 I looked at Mr. Bush's big budgets, and his expansion of entitlements, and assumed he was sacrificing fiscal prudence--interesting that that's the word people used to spoof his father--in order to build and maintain, however tenuously, a feeling of national unity. I assumed he wanted to lessen bipartisan tensions when America was wading into the new world of modern terrorism. I thought: This may be right and it may be wrong, but I understand it.... Mr. Bush will never have to run again, and he is in a position to come forward and make the case, even if only rhetorically, to slow and cut spending. He has not. And there's no sign he will....

Mr. President:

Did you ever hold conservative notions and assumptions on the issue of spending? If so, did you abandon them after the trauma of 9/11? For what reasons, exactly? Did you intend to revert to conservative thinking on spending at some point? Do you still? Were you always a liberal on spending? Were you, or are you, frankly baffled that conservatives assumed you were a conservative on spending? Did you feel they misunderstood you? Did you allow or encourage them to misunderstand you?

What are the implications for our country if spending levels continue to grow at their current pace?

What are the implications for the Republican party if it continues to cede one of the pillars on which it stood?

Did compassionate conservatism always mean big spending?

Now Peggy Noonan and the rest of the plastic Republican chattering teeth did not think back in 2000 that Bush's "compassionate conservatism" meant that he was a spender, they thought it meant that he was a liar--and that they were in on the con. The Bush budget strategy, they thought at the time, had four components:

  1. Highball estimates of future budget surpluses in order to make it look like there's more room for tax cuts than there was.
  2. Lowball the costs of the tax cuts by telling people that the AMT will be repealed when you calculate the magnitude of their tax cut and yet keeping the AMT in effect when calculating the revenue cost of the tax cut.
  3. Call yourself a "compassionate conservative" to convince voters you don't want to make elderly emphysema patients front the money for their oxygen cylinders.
  4. Then, when deficits reemerge, say: "Oh. What a surprise. We have to cut way back on federal services and programs after all."

That's the David Stockman quadrille. They thought Bush was lying to everybody else--that, as Andrew Sullivan liked to put it:

Some... get steamed because Bush has obscured this figure or claimed his tax cut will cost less than it actually will, or because he is using Medicare surplus money today that will be needed tomorrow and beyond.... [T]hey miss the deeper point... Bush has to obfuscate his real goals of reducing spending with the smoke screen of 'compassionate conservatism'.... B.S. is necessary for any vaguely successful retrenchment of government power in an insatiable entitlement state.... I just hope the smoke doesn't clear before the spenders get their hands on our wallets again.

Now they are surprised--and shrill--to learn that George W. Bush was lying to them too.

Larry Kudlow Joins the Ancient, Hermetic, and Occult Order of the Shrill

Yes. He calls for the Democrats to retake control of Congress this year:

The RCP Blog: A Pathetic State of Affairs - By Larry Kudlow: The Senate budget resolution now in play has dropped Bush's entitlement savings according to Budget Chairman Judd Gregg. Plus, Republican senators are trying to front-load new pork into the resolution even though Gregg wants to hold the line (at least on that).

After all the GOP Congressional talk about newfound budget-cutting religion, including earmark transparency and reform, so far they have produced nothing.

People like Arlen Specter, and many others, are still trying to get their pet projects funded. So, what else is new?

Gregg has thrown in the towel on mandatory spending cuts because he says he doesn't have the votes. Well then, I don't think that the American people should "have the votes" to keep the Republicans in charge of the Senate--or the House for that matter.

Larry: I'm sorry, but we've run out of space. You'll have to hot-bunk in with Shub-Ascalatl for a while, as you get used to your new state of shrill unholy madness.

Ben Bernanke Is a Grownup Republican

Deficits aren't the biggest problem facing America today. But they are a problem. And it would be nice--and good, and appropriate, and proper--to have a budget in surplus. It is very heartening that Ben Bernanke is taking the grown-up point of view: - Bernanke Wants Lower Deficits, Doesn't Rule Out Tax Increases: By GREG IP March 15, 2006; Page A2: WASHINGTON -- Federal Reserve Chairman Ben Bernanke told Congress he was "quite concerned" about federal budget deficits and urged lawmakers to act soon to bring them down.... Mr. Bernanke is taking on predecessor Alan Greenspan's role as a leading nag on fiscal matters. Although the new Fed chief declined to endorse any particular way to reduce the deficit, he did suggest that Congress can't ignore the tax side of the budget. "Over time either taxes will have to be raised or the spending increases embedded in current laws will need to be scaled back, or some combination of the two," he wrote.

Mr. Greenspan regularly said he preferred that the deficit be reduced through spending rather than tax increases. Mr. Bernanke expressed the same view when he was chairman of President Bush's Council of Economic Advisers. But in his latest remarks, he reiterated that the way the deficit is reduced represents "political judgments," on which he prefers not to comment.

Deficits Are Not Our Biggest Problem...

Matthew Yglesias sounds puzzled:

Matthew Yglesias | TPMCafe: Deficits Don't Matter: Not to the public, at least. Back in 1993, 17 percent of poll respondents said the deficit was the biggest problem facing the country, today that's way down to two percent. I'll leave it to my betters to hash out the extent to which deficits do, in fact, matter economically even if they don't matter politically.

But why? As long as foreign central banks keep buying what the U.S. Treasury keeps issuing, the deficit has no *immediate* catastrophic effects on America. The people who say that the deficit is not the biggest problem facing the country right now are correct: the biggest problem is what the clown show that is the Bush administration has done to the national security situation. The--few--people who say that the deficit is, currently, our biggest problem seem not to be well-anchored in reality.

Ice Caps

Eric Umansky is scared

Eric Umansky: The Ice Caps: This is scary, scary stuff:

Following two recent studies on changes to Antarctic and Greenland ice sheets, NASA is touting a survey that it says confirms “climate warming is changing how much water remains locked in Earth’s largest storehouses of ice and snow.”

In a press release for the survey, NASA directly tied the changes to warming and described the survey as “the most comprehensive” ever in both regions.That stand can in part be explained by lead author Jay Zwally’s warning....

“We’re seeing the early signs of changes in the ice sheets,” he added. “The climate warming from greenhouse gases has really just started.”

As much as I talk about Iraq and national security, those things are small beans compared with the administration's failure to acknowledge let alone confront global warming. (Not that the White House is alone in fiddle-faddling.) GW, after all, is going to affect the world far more than Iraq--and I suspect it will affect the world far quicker than most of us think. Why? Feedback loops, such as, say, the icesheets melting.

Daniel Gross...

Daniel Gross. Daniel Gross. Daniel Gross. Someday I'll distinguish Daniel Gross from David Gross:

Daniel Gross: March 12, 2006 - March 18, 2006 Archives: It's not quite dropping buckets of dollars out of helicopters, but Washington Mutual is doing its part to fight whatever vestiges of deflationary forces might be running loose in New York. On 23rd St., teams of promoters are handing out $2 bills--encased in a brochure flogging the bank's free checking. I'm sorry to report to all my economist friends that many seemingly rational human beings declined the offer of free money.

DeLong Smackdown Watch! ("Are My Methods Unsound?" Edition)

Matthew Yglesias demonstrates that he is Il Maestro di Color che Sanno as far as quotes from "Apocalypse Now" are concerned:

Health Care as Opportunity | TPMCafe: An interesting perspective from Brad DeLong:

"Even Medicare and Medicaid and the long-run fiscal crises of America's public health-care programs and the employer-funded health-care system... Let me put it this way: it's not a crisis, it's an opportunity. If technological progress in medicine were to stop tomorrow--if what doctors and nurses and druggists and researchers do and how they do it were to freeze--then we wouldn't be looking forward to a health-care funding crisis. We would have no difficulty funding Medicare and Medicaid, as underlying economic growth boosted tax revenue by more than a stagnant health care system could spend, even with the aging of America. It is only because we--rationally--expect that our doctors, nurses, druggists, and researchers will learn how to do new things, marvelous new things, incredibly expensive new things, that we project health-care spending into the future and blanch in terror. And I do blanch in terror. But it is important not to forget that this is an opportunity: how many wonderful, medical things will we as a society decide to purchase, in how egalitarian a fashion will we as a society distribute them--will only the rich be offered clone-eye transplants when macular degeneration sets in in our nineties--and how will we pay for them? We may fail to grasp this opportunity, or fail to grasp it well. And to miss this opportunity would be a catastrophe. But it is an opportunity, not a crisis."

That makes sense when you think about it. Later, Brad steals a page from my book, quoting "Apocalypse Now" to describe the Bush approach to public policy, but he mangles the lines. Willard says, "They told me that you had gone totally insane, and that your methods were unsound." Kurtz asks: "Are my methods unsound?" And Willard replies: "I don't see any method at all, sir." (They're surrounded by deep-jungle tribespeople, decapitated heads on sticks, all sorts of corpses, etc.) I think that about sums it up.

In comments, Robert Waldmann piles on as well. Clearly I need to buy a DVD of "Apocalypse Now" if I'm going to run with big dogs...

Paul Krugman Commands You to Surf to...

Paul Krugman tells you to surf to:

A Few Notes on Income Inequality - Krugman - NYT Web Journal: My Links

  •, Congressional Budget Office: It's not just about the federal budget. CBO is doing a terrific job these days, and its work covers everything from "Macroeconomic and budgetary impacts of Hurricane Katrina" (Sept. 6, 2005) to income distribution, where CBO's estimates are the most comprehensive. I check the CBO site every few days just to see what's new.
  •, Statistical Abstract of the United States: It's amazing how much you can learn from this source, and how many silly arguments it can help you put to rest. The supplements "Statistics in brief" and "Mini historical statistics," which come with downloadable spreadsheets, are especially useful. A related site I find very useful is the Census site on income statistics, where you can learn about trends in income, poverty, health insurance, and more.
  •, Center on Budget and Policy Priorities: CBPP is a progressive think tank, and its political stance dictates the choice of topics. But even conservatives should read the Center's work: the number-crunching is utterly scrupulous, and there's nothing else, on the left or the right, like CBPP for sophisticated, knowledgeable analysis of government programs. I check the center's site every few days to see what they're cooking.

  • Paul Krugman Smackdown Watch

    What Paul Krugman is reading:

    A Few Notes on Income Inequality - Krugman - NYT Web Journal: What I'm Reading

  • "The General Theory of Employment, Interest, and Money," by John Maynard Keynes: An economic classic that I'm rereading for the first time in, I think, 30 years. There's a reason: I've been asked to write the introduction to a new, 70th anniversary edition. And I have to say that this time around I'm finding depths I was too callow to appreciate when younger. This is truly a profound book, one that changed the world for the better.
  • "The Republican War on Science," by Chris Mooney: There's a man who doesn't hide his views. But Mr. Mooney needs to be listened to. Among other things, he wrote a piece for The American Prospect a few months ago titled "Thinking big about hurricanes: It's time to get serious about saving New Orleans." Alas, nobody listened.
  • "The Algebraist," by Iain M. Banks: Hey, it can't be all work and no play. Science fiction - specifically, Isaac Asimov's Foundation - is what got me into economics in the first place. Mr. Banks, a Scot who isn't that well known in the United States, is probably my favorite contemporary science-fiction writer. If you're interested, I'd suggest "Use of Weapons" as an introduction.

  • I have to smack Paul Krugman down. "Use of Weapons" is not a suitable introduction to the fiction of Iain M. Banks. No no no no no no no. "Use of Weapons," with its amazing protagonist--the man known as Cheradenine Zakalwe--and its interesting excursions into furniture design must only be read by trained professionals. I would recommend "The Player of Games" or "Inversions" or "Consider Phlebas" for a neophyte.

    But not "Use of Weapons." No no no no no no no.

    Answering a Simpler but More Tractable Question

    Paul Krugman writes:

    [My] full [introduction to Keynes's General Theory] is up at Bobby Pelgrift's site; some readers might be interested:

    Fwiw, I thought my novel insight was the importance of [John Maynard] Keynes's decision NOT to worry much about the dynamics of the business cycle; it really is interesting to see how [Gottfried] Haberler got bogged down on the wrong question.

    Global Imbalances

    Agathon: Who look tired.

    Kapelikos: Freshly back from the other coast. Airline load factors are just too high.

    Agathon: Who were you talking to?

    Kapelikos: MegaBankCorp--their investors.

    Agathon: What were you talking about?

    Kapelikos: The usual--global imbalances.

    Agathon: And what did you say?

    Kapelikos: That the global economy is unbalanced--that current patterns of trade are unsustainable--that things that are unsustainable eventually, somehow, stop. What else can you say?

    Agathon: And the argument on the other side? I'm not sure I understand it.

    Kapelikos: I know I don't.

    Agathon: Is it roughly this? "U.S. real GDP is growing at about $400 billion a year. At a capital-output ratio of 3.5-to-1, that means $1.4 trillion of new America-located wealth each year. We can sell off $1 trillion of that every year to foreigners in order to finance our import bill. And still be richer than we were last year. What's unsustainable about that?" Is that the argument?

    Kapelikos: Could be. But that's incoherent--it misses the difference between the trade deficit and the current account. Ten years down the road the current-account deficit is not $1 but $1.4 trillion--$1 trillion of net imports and $0.4 trillion of interest, rent, and profits owed on foreign-owned property here. To hold the annual current-account deficit at $1 trillion requires that the trade deficit shrink, which requires that the dollar decline, which means that foreigners investing in America are making bad decisions.

    Agathon: And when do your models predict the dollar will fall?

    Kapelikos: 2003.

    Agathon: Three years ago?

    Kapelikos: Yep.

    Agathon: But as long as people believe the argument on the other side, the dollar doesn't decline, and the argument looks correct?

    Kapelikos: Yep--for one more year.

    Agathon: How many more yars are you going to be saying, "Wait just one more year"?

    Kapelikos: Until I can say, "I told you so."

    Agathon: Can't you be more specific than that?

    Kapelikos: Ok. How about this. International financial crises tend to come--currencies crash--when interest rates rise in the world economy's core. The Bank of Japan has just joined the ECB and the Federal Reserve in raising interest rates.

    Income Inequality and Information Filters

    Paul Krugman muses on calling a spade a spade:

    A Few Notes on Income Inequality - Krugman - NYT Web Journal: growing international trade plays some role in growing inequality, but it is, literally, a fraction of a fraction of the story. That's cold comfort for the factory worker whose plant has just been closed because it couldn't compete with imports from China, or the software engineer whose job has just been outsourced to India-- and unless we can do something to provide more economic security, protectionist forces will become unstoppable. But I still believe that we can increase economic security and reduce inequality without shutting down international trade.

    One of the truly strange features about discussions of inequality is the way people shy away from talking about the extent to which the gains from rising inequality have gone to a tiny, wealthy elite.

    Here's a mild example. A few days ago Steve Pearlstein of the Washington Post -- a good guy, and sensible -- wrote about income inequality. As I did in my column just a few days earlier, "Feeling No Pain," he emphasized the "retrospective income" distribution data released by the I.R.S. (Paper at Tables at

    As he pointed out, those data show that the share of income received by the top 10 percent of taxpayers rose from 33 percent in 1979 to 44 percent in 2003. And for his pains, he was smeared by someone at the Cato Institute who needs help -- technical help. Hint to Alan Reynolds: check which table you're looking at before claiming that Congressional Budget Office data refute a statement you don't like.

    But Pearlstein stops there, leaving the impression that everyone in the top 10 percent was a big winner. In fact, there was hardly any rise in the share of income going to people between the 90th and 95th percentiles: almost all the gain went to the top 5 percent. And most of the gain went to a very small elite. The income share of the top 1 percent went from 9.6 to 17.5 percent, accounting for more than 70 percent of the top decile's gain. The income share of the top 0.25 percent went from 4.9 to 10.5, accounting for a bit more than half the total gain.

    Why stop with data that convey the false impression that the winners from inequality are a fairly large group? Does talking about the reality that a very small elite has gotten the lion's share of the gains sound too, um, shrill?

    We're OK! We're Really OK! Well--Probably

    Tuesday lunchtime:

    2006 Washington Economic Policy Conference: Policies to Boost Economic Growth and Security--What's Needed?March 13-14, 2006. Marriott Crystal City at Reagan National Airport

    The current draft:

    Giving a luncheon talk is always an interesting task, a kind of verbal high-wire act. Normal conference sessions are set up for the speaker's convenience: to try to force you to pay attention: to make everything else in the room as boring as possible, so that you have little choice but to focus your attention on the podium.

    That's not true at meals. The people at your table who you're looking in the eye aren't boring. The coffee isn't boring. There's lots of motion as the waiters work back and forth. And I've tried all my life to convince myself that deserts are boring--and conspicuously failed.

    If this were fifteen or twenty years ago, I would be standing up here ready to give my "Age of Diminished Expectations" talk. I would have talked about the collapse of American productivity growth--that we were, collectively, getting rich at a much slower pace than anyone back in the 1960s would have believed possible. I would have talked about intractable short-run budget deficits, the combination of overoptimism on the part of Reagan administration policymakers and the collision of limited resources with expansive demands for government nurtured in the fast productivity growth first post-WWII generation. I would have talked about how Social Security as we knew it was unsalvageable: that the resources simply would not be there. I would have talked about how Medicare and Medicaid were in even greater long-run trouble. I would have talked about slow growth and rapidly-rising inequality were together political poison.

    I would have, fifteen to twenty years ago, talked about how very, very hard decisions needed to be made about resources and their uses--and how the American political system seemed to be incapable of making them, politicians being eager to tell Americans pleasing lies about how all kinds of benefits and goodies could be provided with "read my lips, no new taxes."

    But then things changed. We were fortunate enough to elect some politicians who understood enough macroeconomics to know that if the government does not set out to raise the revenue to meet its spending commitments, then the market will do it and do it in a way you don't like--witness Argentina in 2001. The government shifted from being a source discouraging investment and productivity growth through the crowding-out of productive investment to being a source encouraging investment through crowding-in. We caught the leading edge of the wave of technological revolution to give us the best macroeconomy seen in a generation--and caught the leading edge of the wave in a way that neither Japan nor western Europe has managed to do.

    Continue reading "We're OK! We're Really OK! Well--Probably" »

    Memo to Self

    The Crystal Gateway Marriott is not the Crystal City Marriott. The Crystal City Marriott is not the Crystal Gateway Marriott.

    That is all.

    Wage Variability and Corporate Churn

    One more via Mark Thoma. How much of wage turbulence is firms' success at laying risk off onto their workers?

    Economist's View: Did the Recent Increase in Creative Destruction also Increase Wage Volatility?: A Staff Report from the Federal Reserve Bank of New York establishes a connection between creative destruction and volatility in wages. One hypothesis is that firms are smoothing profit through increased flexibility in the use of inputs to production thereby shifting the risk of profit variation onto wages:

    "Turbulent Firms, Turbulent Wages?" by Diego Comin, Erica L. Groshen, and Bess Rabin, Federal Reserve Bank of New York Staff Reports, no. 238, February 2006: 1. Introduction: Has more creative destruction among firms raised wage volatility in the U.S.? Gottschalk and Moffitt [1994, 2002] called attention to the recent rise in the variation of transitory earnings for U.S. workers ... [T]hey estimated that this enhanced volatility accounts for one third to one half of the rise in wage inequality during the 1980s. What is the source of this new instability in pay? Despite its importance, little is known about its correlates or origins.

    Most of the... research on the remarkable and well-documented widening of wage inequality in the U.S. over the past three decades focuses on permanent components of workers' earnings, particularly the rising returns to education and ability associated with technological change, trade, and de-unionization. However, this emphasis ignores the less-studied contribution of larger transitory fluctuations.... We conjecture that the recently documented increase in... creative destruction may drive the rise in wage volatility... Ironically, as firm volatility has risen, the same shielding that once protected workers from large macro fluctuations may now work to allow firms to share their idiosyncratic risk. That is, firms may now rely on wage or job fluctuations to smooth profitability in a riskier marketplace...The bottom line? "We conclude that the rise in firm turbulence explains about 60 percent of the recent rise in ... wage volatility."

    Selective Globalization Syndrome

    David Gross tries to start a meme:

    David Gross: If the world is flat, capital, goods and services can go wherever they want. But last week, the process of cross-border economic integration suffered the same fate as foolish mortals who would defy Newtonian physics: it crashed to earth. The furious fight over whether several port terminals in the United States should be owned by a company based in Dubai was resolved uncharacteristically and abruptly on Thursday. DP World, owned by the government of the United Arab Emirates, announced it would transfer the American operations of Peninsular & Oriental Steam Navigation, the British company it is in the process of acquiring.

    During the port debate, opponents warned darkly of the perils of Arab control of vital industry in the United States, and advocates warned, equally darkly, of the perils of alienating foreign investors. But the maelstrom over maritime services is not the first heated exchange on the way globalization appears to pit national economic interests against national security.

    Last summer, anguished protests stopped the Chinese oil company Cnooc from acquiring United States-based Unocal, even though Unocal slakes only a tiny fraction of America's oil thirst. Indeed, the Dubai controversy is merely the latest manifestation of a new condition afflicting politicians, policymakers and ordinary citizens all over the globe. Call it Selective Globalization Syndrome.

    The main symptom: a desire to pick and choose the outcomes of globalization, as if from an à la carte menu. For instance, nobody squawked in 2004 when DP World, then British-owned, bought the port operation of Florida's CSX Corporation for $1.2 billion, or when a company based in Dubai bought the Essex House hotel in New York for $440 million last year....

    Selective Globalization Syndrome drives politicians and government officials to even more seemingly contradictory stances. For instance, a Dubai-based company controlling East Coast ports is an unacceptable security risk, but Chinese companies controlling West Coast ports is fine. The government body that approves such deals, the Committee on Foreign Investments in the United States, had no problem with China's Lenovo controlling I.B.M.'s personal computer business. But it is examining the proposal by Check Point Software Technologies, an Israel-based company, to acquire Sourcefire, a Maryland-based software company that makes security products used by the federal government.... The United States... is... eager to dictate investment terms to non-citizens.

    Buying debt? No problem. Foreign investors own more than half of United States government bonds. The biggest portfolios reside on the ledgers of China's central bank and of various Saudi Arabian and other Persian Gulf government-controlled entities. But equity, which connotes ownership and control, in the same people's hands sparks off Selective Globalization Syndrome.... Selective Globalization Syndrome causes politicians to lash out at symbolic issues they can influence, like the ports deal, because they cannot or don't want to confront the root cause: the propensity of American government and consumers to buy more than they produce, to export more than they import and to borrow more than they save.

    The United States runs a gigantic trade deficit, some $723 billion in 2005, which means it exports huge amounts of capital. But the foreigners who receive all those dollars in exchange for oil or manufactured goods are no longer content to park those greenbacks in government bonds. "Why hold Treasuries that give you a mediocre 4.5 percent return over 30 years when you can instead buy higher return capital such as U.S. corporations, factories, ports and real estate?" asks Nouriel Roubini, an economics professor at New York University's Stern School of Business....

    The International Monetary Fund has noted that the world's fuel-exporting nations will have a $533 billion current account surplus in 2006. That's a half-trillion dollars for foreign countries, specifically foreign countries from the Middle East, to put to work in government bonds, stocks, real estate and, yes, whole companies.

    Geithner: U.S. Monetary Policy in the Global Financial Environment

    Tim Geithner on making global monetary policy without a reliable compass:

    U.S. Monetary Policy in the Global Financial Environment - Federal Reserve Bank of New York: Timothy F. Geithner, President and Chief Executive Officer Remarks at the Japan Society Corporate Luncheon in New York City:

    I will focus on two features of what is happening in the world economy and financial markets today that are among the most interesting and consequential of the many questions we face today in thinking about the changes in the world economy and the task of central banking. These are, first, the behavior of forward interest rates in financial markets, and, second, the pattern of external imbalances....

    When Alan Greenspan first used the term “conundrum” to describe the surprising behavior of forward interest rates, he was reacting to the decline in forward nominal rates over a period in which the Federal Open Market Committee was raising its federal funds target rate. This behavior of forward rates, the counterpart of which is the behavior of the bond yield curve, looked anomalous both in comparison to observations from past tightening cycles and with what seemed to be strong evidence about the fundamental soundness of the outlook for the real economy.

    The source of the relatively low level of nominal rates is still a matter of considerable debate....

    The other surprising feature of the current economic environment is the pattern of global imbalances.... As Alan Greenspan has explained, the greater dispersion in external imbalances can be seen as the inevitable result of fundamentally healthy changes in the world economy. As the world progresses toward increasingly integrated financial and goods markets, other things being equal, one might expect to see an increase in the number of countries with surpluses or deficits, and potentially larger surpluses and deficits, as flows of both financial assets and goods work to equalize desired saving and investment around the world.

    If one were confident that observed imbalances simply reflected a more efficient allocation of the world’s stock of saving to its most productive uses, that relative prices adjust freely in response to changing fundamentals and that economies are flexible and agile in adapting to those changes, then we might also reasonably expect these imbalances to resolve themselves through smooth and gradual adjustments in relative prices and flows of goods and services. These conditions do not fully exist today....

    One feature of present conditions that is not captured by these explanations and that is likely to be playing a significant role in contributing to the combination of these large imbalances and relatively low forward interest rates is the pattern of exchange rate and monetary policy arrangements in the global economy today.... [A] substantial part of the world economy now run monetary policy regimes targeted at limiting the variability in their exchange rate against the dollar, or a basket in which the dollar plays a substantial role. Sustaining that objective in the past several years has required a large accumulation of dollar assets. The scale of this activity has been particularly dramatic in parts of Asia.... These flows add to other sources of private demand for U.S. assets. At the margin, they put downward pressure on U.S. interest rates and upward pressure on other asset prices. Through this effect, the monetary policy regimes that prevail in parts of the world help explain at least part of the persistence of these anomalies. Recognizing that we live in a world where major exchange rates do not move freely against the dollar, means that the dollar is not as flexible as we tend to think. And understanding that the effort to sustain these exchange rate regimes has required more expansionary monetary policy in those countries than would otherwise have been the case helps identify a substantial source of what market participants describe as very ample liquidity in world markets....

    What does this mean for policy?... To the extent that these forces act to put downward pressure on interest rates and upward pressure on other asset prices, they would contribute to more expansionary financial conditions than would otherwise be the case. And, if all else were equal, which of course is unlikely ever to be the case, monetary policy in the affected countries would have to adjust in response; policy would have to act to offset these effects in order to achieve the same impact on the future path of demand and inflation. To do otherwise would run the risk that monetary policy would be too accommodative, pulling resources from the future in a way that would alter the trajectory for the growth of the capital stock, perhaps amplifying the imbalances, and compromising the price stability....

    Let me conclude by observing that a constellation of factors has aligned to produce the current combination of low world interest rates, low risk premia and large global imbalances. Most of these factors are outside the control of U.S. monetary policy, and we do not fully understand their implications for our economy and for policy....


    Suppose there were a mutation that gave its possessor an extra 5% chance of surviving to reproduce (which is an enormous edge), and suppose that mutation were present in 1% of the gene sites 2000 years ago. Then today that mutation would be present in 33% of gene sites.

    Because we have long generations, human evolution happens slowly when compared to historical time. Yet neither Nicholas Wade nor Jonathan Pritchard nor Gregory Cochrane seem capable of doing even the simplest of math. Julius Caesar was only 80 generations ago. The only thing that seems likely to be true in this article is the story of lactose-tolerance:

    The Twists and Turns of History, and of DNA - New York Times: By NICHOLAS WADE: In a study of East Asians, Europeans and Africans, Dr. Pritchard and his colleagues found 700 regions of the genome where genes appear to have been reshaped by natural selection in recent times. In East Asians, the average date of these selection events is 6,600 years ago. Many of the reshaped genes are involved in taste, smell or digestion, suggesting that East Asians experienced some wrenching change in diet. Since the genetic changes occurred around the time that rice farming took hold, they may mark people's adaptation to a historical event, the beginning of the Neolithic revolution as societies switched from wild to cultivated foods.

    Some of the genes are active in the brain and, although their role is not known, may have affected behavior. So perhaps the brain gene changes seen by Dr. Pritchard in East Asians have some connection with the psychological traits described by Dr. Nisbett.

    Some geneticists believe the variations they are seeing in the human genome are so recent that they may help explain historical processes. "Since it looks like there has been significant evolutionary change over historical time, we're going to have to rewrite every history book ever written," said Gregory Cochran, a population geneticist at the University of Utah. "The distribution of genes influencing relevant psychological traits must have been different in Rome than it is today," he added. "The past is not just another country but an entirely different kind of people."

    John McNeill, a historian at Georgetown University, said that "it should be no surprise to anyone that human nature is not a constant" and that selective pressures have probably been stronger in the last 10,000 years than at any other epoch in human evolution. Genetic information could therefore have a lot to contribute, although only a minority of historians might make use of it, he said.

    The political scientist Francis Fukuyama has distinguished between high-trust and low-trust societies, arguing that trust is a basis for prosperity. Since his 1995 book on the subject, researchers have found that oxytocin, a chemical active in the brain, increases the level of trust, at least in psychological experiments. Oxytocin levels are known to be under genetic control in other mammals like voles.

    It is easy to imagine that in societies where trust pays off, generation after generation, the more trusting individuals would have more progeny and the oxytocin-promoting genes would become more common in the population. If conditions should then change, and the society be engulfed by strife and civil warfare for generations, oxytocin levels might fall as the paranoid produced more progeny....

    Since the agricultural revolution, humans have to a large extent created their own environment. But that does not mean the genome has ceased to evolve. The genome can respond to cultural practices as well as to any other kind of change. Northern Europeans, for instance, are known to have responded genetically to the drinking of cow's milk, a practice that began in the Funnel Beaker Culture which thrived 6,000 to 5,000 years ago. They developed lactose tolerance, the unusual ability to digest lactose in adulthood. The gene, which shows up in Dr. Pritchard's test, is almost universal among people of Holland and Sweden who live in the region of the former Funnel Beaker culture.

    The most recent example of a society's possible genetic response to its circumstances is one advanced by Dr. Cochran and Henry Harpending, an anthropologist at the University of Utah. In an article last year they argued that the unusual pattern of genetic diseases found among Ashkenazi Jews (those of Central and Eastern Europe) was a response to the demands for increased intelligence imposed when Jews were largely confined to the intellectually demanding professions of money lending and tax farming. Though this period lasted only from 900 A.D. to about 1700, it was long enough, the two scientists argue, for natural selection to favor any variant gene that enhanced cognitive ability....

    Mark Warner

    Matt Bai on Mark Warner, an unknown southern governor who is thus qualified to win a presidential election in America today:

    The Fallback - New York Times: By MATT BAI: A few weeks before we spoke, Korge had lunch at the Capital Grille in Miami with Mark Warner, who was then in his final weeks as Virginia's governor. Though little known nationally, Warner has emerged in recent months as the bright new star in the constellation of would-be candidates, a source of curiosity among Democrats searching for a charismatic outsider to lead the party. Pundits credit Warner's popularity in Republican-dominated Virginia -- his 80 percent approval rating when he left office made him one of the most adored governors in the state's history %u2014 with enabling his Democratic lieutenant governor, Tim Kaine, to win the election to succeed him last November. Suddenly, Warner is being mentioned near the top of every list of candidates vying for the nomination in 2008.

    Over lunch with Korge and his real-estate partner, Warner made what has become, more or less, his standard pitch. Much as he likes John Kerry and worked hard for him in Virginia, Warner said, the Democratic Party had once again, in 2004, nominated a candidate who could not appeal on a cultural level to white, small-town voters in wide swaths of the country. Warner argued that he was more likely than any of the other potential Democratic candidates to break that cycle. The candidate he was really talking about, of course, was Clinton. It wasn't that she wouldn't do a great job in the White House, necessarily; what Warner was saying, without actually saying it, was that she couldn't get there. Democrats, he liked to say, could not afford to keep trotting out nominees who could expect to win only 16 blue states and then hope, just maybe, for the "triple bank shot" that might deliver Ohio or Florida. They needed a candidate who could compete everywhere....

    Warner's meeting with Korge was an unqualified success. "In my opinion, he's the one to watch as an outsider in this race," Korge told me. "He seems presidential. He's a big guy." (By this he meant, literally, that Warner is well over six feet tall, with a well-coiffed head that requires extra-large baseball caps.) "I think he has a presence. He's very confident. He speaks very well, but he also can speak plainly to people."...

    The negative rap on Warner is a lack of relevant experience; he's a one-term governor (he would still be in office if Virginia allowed its governors to serve consecutive terms), and critics argue that a credible candidate needs to have foreign-policy experience to run in the new, terror-obsessed world. Nonetheless, Warner, on paper, fits the party's most conventional and tested idea of what constitutes an electable candidate. Though he doesn't speak with a drawl (he grew up in Indiana, Illinois and Connecticut and moved to Virginia when he was 32), Warner was the popular centrist governor of a Southern state -- just like the last two Democrats to actually win the White House, Jimmy Carter and Bill Clinton. He's also really, sickeningly wealthy. As a co-founder of the cellular-telephone company that ultimately became Nextel, Warner has access to a personal fortune that is said to approach $200 million, and he has already demonstrated, during an unsuccessful run for the Senate and then in his gubernatorial campaign, that he's willing to use it.

    Because of his previous life as a businessman, Warner is also expected to tap a network of donors in the high-tech and venture-capital fields who are outside the orbit of traditional Democratic fund-raising, just as Bill Bradley did when he ran against Al Gore in 2000.... When a lot of National Democrats first took note of Warner in 2001, they didn't love what they saw. Running for governor in a state where Democrats were in sharp retreat, Warner courted the National Rifle Association and let it be known he'd support parental notification for minors seeking abortions. His outreach to Nascar devotees and bluegrass fans in southern Virginia struck Democrats in the urban North -- as well as many of those across the Potomac River in Washington -- as unseemly pandering.

    Warner was determined, however, not to let Republicans portray him as a cultural elitist. He never made any pretense of being an avid hunter or Nascar fan himself; he's a Presbyterian who wears pressed khakis, and he spends weekends at his private farm and vineyard outside historic Fredericksburg. But Warner, who is 51, grew up mostly in small towns, in a middle-class family, and in the 2001 campaign he made it clear that he genuinely appreciated the cultural pastimes of his rural voters. The respect he showed was reciprocated. Five years ago, I watched voters at the annual fiddlers' festival in Galax, Va., clap Warner on the back and dance along to his campaign song, an impossibly catchy bluegrass tune, while his Republican opponent, the state's former attorney general, milled about uncomfortably. Even after the terrorist attacks that September, which froze the campaign and rallied the country around the president and the Republican Party, Warner won by five points, scoring more support in rural Virginia than any Democrat in recent memory.

    Considering that he has served only four years in government, Warner has plenty to brag about. Relentlessly wooing his Republican Legislature at a time when the two parties in Washington were growing ever more belligerent toward each other, Warner managed to erase a potentially catastrophic $6 billion budget shortfall by working out a bipartisan deal to raise some taxes (on sales and cigarettes) and lower others (on income and food). He passed the plan, in part, by selling it in frequent meetings with voters across the state, earning him a reputation as a nonpartisan deal maker who was willing to deliver unpopular news.

    Warner's constant theme, which a lot of Washington politicians talk about but few seem to actually understand, was the need to modernize for a global economy. The days when you could walk down the street and get a job at the mill were over, Warner would say, and new jobs -- the state gained more than 150,000 of them on his watch -- would require new skills and infrastructure. So Warner, working with Nascar, pushed through an accelerated program that enabled 35,000 more Virginians to get high-school equivalency degrees, and he introduced a program to deliver broadband capacity to 20 Southern counties. "In the 1800's, if the railroad didn't come through your small town, the town shriveled up and went away," he told me once, explaining his rural program. "And if the broadband Internet doesn't come through your town in the next few years, the same thing will happen."

    If he ultimately decides to run for president, Warner will try to build a national campaign around this same technology-driven approach. When I asked Warner to name the issues that would be most important to him, the four domestic issues he ticked off, before he got to terrorism and national security, were fairly standard for a Democratic candidate in the era after Bill Clinton: slashing the federal deficit, improving schools, working with business to reform the health-care system and devising a new energy strategy. What makes Warner, the former entrepreneur, sound more credible than your average Democrat is that he comes at these issues primarily from an economic, rather than a social, standpoint. On health care, for instance, most Washington Democrats will, as a matter of both habit and perspective, talk about the moral imperative of covering workers and the uninsured -- and only then might they add, as an afterthought, that the current morass is an impediment to business too. Warner, on the other hand, begins with the idea that if American businesses can't keep up with spiraling health-care costs, the nation will lose the competition with India and China for jobs. The same principle applies with education and the deficit. His fixation on the global economy brings a coherent framework to issues that otherwise seem disparate and abstract....

    Among the wealthy contributors and liberal activists who have met Warner recently, the most common observation is that he genuinely listens. "I think he will, over time, find a very strong following here," Mark Gorenberg, a San Francisco venture capitalist, told me. An important player in the politics of Silicon Valley and the Bay Area, which has supplanted Los Angeles as the epicenter of Democratic money on the West Coast, Gorenberg was Kerry's top bundler in the last election, and he told me he remains part of Kerry's national "leadership team." But Warner clearly impressed him: "He's a very interesting candidate, especially to the tech industry. He's garnered a lot of interest out here. What he's done differently is that he hasn't raised money. He's the only one who comes out here mostly to meet people."... ..

    Origins of World War I

    From Stefan Zweig (1942), The World of Yesterday (Lincoln, NE: University of Nebraska Press: 0803252242)

    It was a very small episode, but most impressive to me. In the spring of 1914 I had gone with one of my friends... to... Touraine, in order to visit the grave of Leonardo da Vinci... roamed along the mild and sunny banks of the Loire for hours... decided to go to the cinema in the sleepy city of Tours, after first paying respects to Balzac's birthplace.

    It was a small suburban cinema, utterly different from the modern palaces of chromium and glass; a sparsely fitted hall, filled with humble folk, workers, soldiers, market women--the plain people--who chatted comfortably, and in spite of the "no smoking" sign blew thick, blue clouds of Scaferlati and Caporal into the sticky air. First the "News of All the World" appeared on the screen. A boat race in England; the people chattered and laughed. Then there was a French military parade: here also the people paid little attention. The third picture was "Emperor Wilhelm Visits Emperor Franz Josef in Vienna." Suddenly I saw the familiar platform of the ugly West Station in Vienna on the screen, with a few policemen who were awaiting the arrival of the train. Then a signal: the aged Emperor Franz Josef appeared, walking between the guard of honor to receive his guest. When the old emperor appeared on the screen, a bit bent, a bit shaky, walking along the platform, the people of Tours began to laugh heartily at the aged party with the white whiskers. Then the train came on the screen, the first coach, the second, and the third. The door of the compartment was thrown open, and out stepped Wilhelm II in the uniform of an Austrian general, his mustache curled stiffly upwards.

    The moment that Emperor Wilhelm appeared in the picture, a spontaneous wild whistling and stamping of feet began in the dark hall. Everybody yelled and whistled, men, women, and children, as if they had been personally insulted. The good-natured people of Tours, who knew no more about the world and politics than what they had read in their newspapers, had gone mad for an instant. I was frightened. I was frightened to the depths of my heart. For I sensed how deeply the poison of the propaganda of hate must have advanced through the years, when even here in a small provincial city the simple citizens and soldiers had been so greatly incited against the Kaiser.... It only lasted a second, a single second.... It had only been a second, but one that showed me how easily people anywhere could be aroused in a time of crisis, despite all attempts at understanding, despite all efforts....

    A few days later I told my friends.... Most of them did not take it seriously.... Only [Romain] Rolland saw things in a different light. "The more naive a people are, the easier it is to get around them. Things are bad since Poincare was elected. His trip to Petersburg will not be a pleasure jaunt." We spoke at length about the socialist congress that had been called, but here too Rolland was more skeptical than the others. "Who knows how many will remain steadfast once the mobilization order has been nailed up? We live in a time of mass emotion, mass hysteria, whose power in the case of war cannot be estimated."

    But as I have already said, such moments of anxiety were swept away like cobwebs in the wind.... And Paris was too beautiful, and we were too young and too happy.... The city was more carefree than ever and, being carefree ourselves, we loved the city for being carefree.... I accompanied Verhaeren to Rouen.... At night we stood in front of the cathedral... did such gentle wonders belong to only one "fatherland," did they not belong to all?...

    Without a care I took leave of my other friends and of Paris.... My plan... was clear. To retire to the country somewhere in Austria and there to continue my work on Dostoievsky... and thus to complete my book, Drei Meister.... All lay clear and plain before me in this, my thirty-third year. The world offered itself to me.... And I loved it for its present, and for its even greater future.

    Then, on June 29, 1914, in Sarajevo, the shot was fired which in a single second shattered the world of security and creative reason in which we had been educated, grown up, and been at home--shattered it like a hollow vessel of clay.