The Anderson Papers

On Sonia Sotomayor

2009-05-28T07:57:00.007-04:00

My thoughts regarding the nomination of Sonia Sotomayor are summed up nicely by Jefferson:

"It has long, however, been my opinion, and I have never shrunk from its expression ... that the germ of dissolution of our federal government is in the constitution of the federal Judiciary; ... working like gravity by night and by day, gaining a little today and a little tomorrow, and advancing its noiseless step like a thief, over the field of jurisdiction, until all shall be usurped."
--Thomas Jefferson, letter to Charles Hammond, August 18, 1821

From today's 'Founder's Quote Daily' courtesy of The Patriot Post.

Poverty and Capitalism

2009-05-24T07:48:00.003-04:00

From an excellent treatise in The Claremont Review of Books, Up From Poverty, some clarity about growth and the eradication of poverty comes forth:

In the touchstone year of 1820, 84% of the world's population lived in what would today be judged "extreme poverty." Today, only 16% do. That is such an astounding achievement that it is difficult even to comprehend. According to the World Bank, in the last 30 years alone-a time of rapid globalization-the number of people living in extreme poverty fell by 25%, or 500 million people. The outbreak of entrepreneurial capitalism within the Communist political system of the People's Republic of China accounts for most of this achievement, but almost every region of the world has seen a decline in the share of its population living in extreme poverty. Bright spots such as Israel and Mauritius, moreover, have proven that growth can occur in regions previously thought allergic to it.

All this appears to have happened in the absence of, or even in spite of, those infusions of foreign aid once presumed to have been poor countries' only hope. In fact, the one factor we can say with certainty is a force behind global growth is capitalism-a reality stubbornly resisted by those who seem blinded either by the now fashionable resistance to growth, often dressed as anti-globalism, or by their unbreakable embrace of planning as the predicate for economic success, or both.

And the marvelous conclusion, at least to my way of thinking, comes this:

The principles of liberal democracy have made sustainable economic development a possibility for the whole world going forward. The application of creative talent by the individual in the context of commerce-once found only in liberal democracies-is now seen as necessary even inside socialist regimes. The rediscovered insight that entrepreneurs bring forth expanding welfare for all is so powerful that growth has regained its rightful place as a legitimate goal of economic theory....an enduring truth often forgotten (or ignored) by proponents of state-led development: economic growth owes more to the forbearance of the state than to its intervention. Governments do not, indeed cannot, make wealth-only their citizens can. And when government protects their freedom, the world's growing population of entrepreneurs, in the bargain, expands human dignity and establishes the foundation of ongoing growth on which civil society ultimately depends.

Please read it all so you can help eradicate the so wrong notions about the evils of globalisation and the tragedy of capitalism.

"The Truth About Cars and Trucks"

2009-04-29T16:43:00.004-04:00

Here is more evidence to support my remarks in a previous post concerning the UAW as the WSJ's Holman C. Jenkins, Jr. tells "The Truth About Cars and Trucks":

For more than 40 years, a 25% tariff has kept out foreign-built pickup trucks even as a studied loophole was created in fuel-economy regulations to let the Big Three develop a lucrative, protected niche in the "passenger truck" business.
This became the long-running unwritten deal. This was Washington's real auto policy.

For three decades, the Big Three were able to survive precisely because they skimped on quality and features in the money-losing sedans they were required under Congress's fuel economy rules to build in high-cost UAW factories. In return, Washington compensated them with the hothouse, politically protected opportunity to profit from pickups and SUVs.
...the muddled, covert bailout continues: Washington's latest fuel-economy rules actually reward manufacturers for increasing the size and weight of some vehicles. The truck tariff remains in place. The fuel-mileage rules continue to protect the UAW monopoly by discouraging the Big Three from shipping small-car production offshore.
Lately some have doted, with wonderment and admiration, on the Obama administration's apparent willingness to drive a hard bargain with the UAW as it tries to impose a stage-managed replica of bankruptcy on GM and Chrysler. Please.

In a real bankruptcy, which is the natural fate of companies unable to meet their obligations, Chrysler and GM would be run (or liquidated) for the benefit of their creditors, not their workers. But, here, "pattern bargaining" will remain the law of the Detroit jungle. The UAW will continue to use its unnaturally augmented clout to extract uncompetitive pay and benefits (it can do no other given its internal incentives). As it has for 40 years, Washington will pitch in with one improvisation after another, disguised as energy policy, trade policy, health-care policy or environmental policy, to stop the rivets from popping off. Politics, especially Democratic electoral politics, will play a more dominant role than ever.

Look closely and the hidden subsidies to keep the dismal beast alive have already started flowing -- tax credits for UAW retirees to make up for reduced health-care benefits, loans to help Detroit "invest in green cars." And plenty more will be needed to sustain Obama Motors on life support, at least through the 2012 election.

The Obama strategy does nothing to change the basic dynamics of the homegrown auto sector -- a labor monopoly combined with endless finagles in Washington to help the Big Three survive competition from Japanese, German and Korean auto makers. But maybe the shock of seeing GM nationalized will at least cause some in politics and the press finally to think about how we got here.

The travesty is how long this will continue to play out to the detriment of the US auto industry and especially to the US taxpayer.

Contrary to Too Big to Fail

2009-04-23T11:51:00.005-04:00

The following quote is from John Tamny in Real Clear Markets. Dr. Thurow, who is quoted, spent a day with one of my senior year undergraduate macroeconomics classes and I have been a 'fan' of his ever since.

MIT economist Lester Thurow once observed that, “One man’s security [protection] is another man’s lack of opportunity.” Thurow’s words take on greater relevance today given the seeming reluctance on the part of Treasury secretary Tim Geithner and other administration officials to let banks pay back the protective loans foisted upon them through TARP....

...within capitalist economies new substitutes regularly reveal themselves such that industries as we define them regularly take new shapes. Schumpeter was writing about the retail sector, but as he observed, “the competition that matters arises not from additional shops of the same type, but from the department store, the chain store, the mail-order house and the supermarket which are bound to destroy those pyramids sooner or later.”

Indeed, Blockbuster Video was not crushed by a like competitor along the lines of Movie Gallery, but instead by Netflix. When we consider finance, for years retailer Wal-Mart has been panting to get into banking only to be thwarted by many of the same banks presently on life support. Quicken began as a company peddling personal finance software, and ETrade low-cost stock trades, but now both are very much in the loan business. Most in the U.S. think of British retailer Tesco as a retail behemoth, but its lending arm is growing by leaps and bounds.

Looked at from the perspective of banks, it’s quite simply not true that finance would have dried up had one or many big U.S. banks failed. Instead, and as Thurow made clear, their failure would have created an opportunity for substitutes to fill in where their predecessors failed. So while it’s seemingly settled “logic” on both sides of the political aisle that we must empower to an even greater degree the very regulators who proved so unequal to the crises before us, and that occurred on their watch, it seems the better answer is less regulation so that well-run companies inside and outside the financial sector can do what gasping banks could not.

Thurow concluded long ago that “demands for protection” arise due to the abandonment of “belief in the virtues of a competitive, unplanned economy.” His words describe today’s economic environment very well, and as long our federal minders keep offering us false security, the alleged economic recovery will be stillborn thanks to a bipartisan lurch away from the very competitive economic principles that made us so prosperous to begin with.

The above passage perhaps applies even more aptly to the automotive sector as great substitutes currently exist without lingering union problems nor closed plant locations with environmental clean-up legacies. And these substitutes have US plants employing large numbers of US workers. Consumers have already proven the demand for Mercedes from Alabama, BMW's from SC and Honda's and Toyota's from the mid-west. It also troubles me that the US Government is giving financial support to the "big three" (of which two of the three should have filed for bankruptcy already) and not support to the domestic producers with 'foreign' ownership. Is that fair, I ask rhetorically? Did not the Honda Prius represent what the US government wants US citizens to drive?

No doubt the huge support of labor unions for the Democrat party has influenced the decisions of the executive and legislative branches. Perhaps what is too big to fail is political support not certain formerly private companies.

Gitmo, Bagram and Obama

2009-04-21T07:01:00.005-04:00

President Obama, contrary to the vocal left, is beginning to deal with the real world. Cheney has called for a declassification of memos detailing what was derived from the treatment (not torture) of a few people who have admitted and been proud of 9-11. According to Cheney (see here) other attacks were prevented due to the information. Bill McGurn in today's WSJ:

In an impassioned 2006 speech on the Senate floor on the right to habeas corpus, Mr. Obama declared, "I do not want to hear that this is a new world and we face a new kind of enemy." During the campaign, his language implied that all we needed to settle the detainee issue once and for all was to shut down Gitmo.
As president, he is finding out that this very much is a new world, that we do face a new enemy, and that the problems posed by Guantanamo have less to do with the place than the people we detain there.

Put simply, the U.S. needs the ability to detain people we know to be dangerous without the evidence that might stand up in a federal criminal court. Because we can't say when this war will end, moreover, we also need to be able to detain them indefinitely. This is what makes the war on terror different, and why our policies will never fit neatly into a legal approach that is either purely criminal or purely military.

The good news is that Mr. Obama is smart enough to know that the relative obscurity of Bagram, not to mention the approval he has received on Guantanamo, enables him to do the right thing here without, as Mr. Greenwald notes, worrying too much that he will be called to account for a substantive about-face.

The bad news is that we seem to have reached the point where our best hope for sensible war policy now depends largely on presidential cynicism.

Popularity Surveys

2009-04-20T14:40:00.003-04:00

American Thinker:

...Walter Isaacson’s “Einstein”: Einstein had moved to Princeton in 1933 and remained there until his death in 1955. During the 30’s, he was world famous, beloved, quirky and kind. To my surprise, in a section called Prewar Politics, the author writes the following on page 445.

“A survey of incoming freshmen in 1938 produced a result that is now astonishing, and should have been back then as well; Adolf Hitler polled highest as the “greatest living person.” Albert Einstein was second.”

This passage had a footnote which I followed to the back of the book. Here is the footnote:

“Hitler Is ‘Greatest’ in Princton Poll: Freshmen Put Einstein Second and Chamberlain Third,” New York Times, Nov 28, 1939. The story reports that this was for the second year in a row.”

Simply food for thought and a possible worthwhile rejoinder when discussion turns to the perceptions held by our best and our brightest of the ‘coolest’ Politician of the day."

Back for More

2009-04-20T14:35:00.000-04:00

I am ready to resume blogging. I have taken a nice leave and have done some new things - some successful and some not. I will be posting as before and publish whatever suits my eye and mood. I hope you find something new and enjoy the experience as much as I enjoy the thinking, the writing and the sharing.

Welcome back,
Sincerely,
Bill

9/11 Attitudes Revealing

2007-09-14T12:29:00.000-04:00

The present day attitudes toward the tragedy of September 11, 2001 reveal magnitudes about the full world view of groups and individuals as to so many issues.

Recall statements from John Edwards that the global war on terror was just a bumper sticker, John Kerry recently reverting to the law enforcement theory of dealing with terrorist incidents and the Democrat's now politically correct dictum to separate, wherever possible, Iraq from any association with a fight against terrorism?

How about The New York Times effort to distinguish Al-Qaeda Mesopotamia? Here's the WSJ's James Taranto pointing out the humor in this September 12 post in Best of the Web Today:

In an item yesterday, we noted the following hilariously awkward sentence from a New York Times report on the Petraeus testimony: "When Representative Gary L. Ackerman, Democrat of New York, suggested the war was not integral to the anti-terror effort since members of Al Qaeda in Mesopotamia, sometimes called Al Qaeda in Iraq, the homegrown Sunni Arab extremist group that American intelligence agencies have concluded is foreign-led, is not part of the Qaeda network behind the Sept. 11 attacks, the general offered a quick retort. "

What we didn't catch is that the sentence isn't even grammatical: The subject of the dependent clause that begins the sentence, members, does not match the verb, is, which is understandable since the two words are separated by a participial phrase and another dependent clause.

We also missed this equally riotous passage, from a "news analysis" in yesterday's Times by Michael Gordon: "The National Intelligence Estimate issued last month made a similar point--and General Petraeus quoted from it in his testimony. 'We assess that changing the mission of coalition forces from a primarily counterinsurgency and stabilization role to a primary combat support role for Iraqi forces and counterterrorist operations to prevent A.Q.I. from establishing a safe haven would erode security gains achieved thus far,' the estimate noted. A.Q.I. is the abbreviation the intelligence agencies use to refer to Al Qaeda of Mesopotamia, a predominantly Iraqi organization with foreign leadership."

Hmm, if AQI an an abbreviation for "Al Qaeda in Mesopotamia," what does the I stand for? We suspect this is another case of an NYT* reporter protesting the Times's policy of forced editorializing in stories about al Qaeda in Iraq.
* An abbreviation for Nieuw Amsterdam Times.

The notion that there is no "Global War on Terror" is actually very common.

Tony Blankley offers this analysis in "The War On Terror Six Years On":

Overwhelmingly in Europe, and to a lesser but still large extent in the United States, the vastly unpopular Iraq war has been conflated with the broader war against radical Islam. This regrettable fact has been compounded by the intense hatred of President Bush, who has prosecuted the war with such personal determination and whose own rhetoric has contributed to the confusion.

As a result, six years after 9/11, there is little consensus in the United States or Europe as to the nature and magnitude of the threat, and many -- including government officials, experts and the general public -- still believe there is little to fear from radical Islam and its terrorists. These people -- perhaps two-thirds of Europeans and 30-40 percent of Americans -- believe the terrorists can be dealt with merely with law enforcement, as previous 20th-century European terrorists had been. Those who hold this view are likely to wrongly see President Bush, former British Prime Minister Tony Blair and others, such as me, who agree with them as exploiting the fear of Muslim terrorists for crass political advantage.

Thus, much of the ferocious controversy over electronic intercepts, Guantanamo, CIA renditions, semi-secret foreign-based CIA prisons, coerced interrogation methods, and the Patriot Act provisions is a product of not seeing a sufficient threat to national security to justify tough wartime intrusions into civil liberties.

If we in the United States can't agree on the nature and magnitude of the threat, we aren't likely to agree on the means of protecting ourselves from it. Until a majority can be convinced that we face real danger from radical Islam, virulent political strife in Washington will continue to delay the design and implementation of an effective, united national defense.

He concludes:

In the days following Sept. 11, I realized we were in for a test of our strength, will and capacity to persist for decades in a harrowing task. But I never imagined that six years into the ordeal, we would remain so utterly divided in the face of a unique and little understood enemy. That constitutes a collective act of abdication of duty without parallel in our long history. We live in greater jeopardy because of it.

To prove Blankley's thesis, here is a portion of my local paper's lead editorial on 9/11 - the Asheville Citizen-Times and "6 Years Later, Time to Take Stock, Correct Mistakes". Here are some paragraph headings and their conclusion:

Initially, our invasion of Afghanistan weakened and displaced the Taliban, but our distraction in Iraq has enabled the Taliban to regroup.

Our invasion of Iraq was not related to the “War on Terror,” despite what the Bush government would have us believe.

With the Patriot Act, we have undermined our Constitution and civil rights.

By pursuing torture in Guantanamo Bay and Iraq, we have violated the Geneva Convention and many of the human rights principles we hold so dearly.

By over-committing our military, we have placed personal hardships on many military families, run up tremendous amounts of debt and reduced our ability to fund many of the infrastructure and social needs at home.

It’s time to turn back from our mistakes and head in a different direction.
This involves:
• Significantly reducing our forces in Iraq, redeploying some of them to Afghanistan and the Pakistani border to go after real terrorists and bringing large numbers of them home....
• Actively pursuing diplomacy and dialogue with all parties who can contribute to a solution in Iraq including Iran and Syria....
• Reaching out without arrogance to moderate Muslims around the world diplomatically and with economic aid where appropriate....
• Closing the prison at Guantanamo Bay, charging in court or releasing to their home countries all prisoners housed there and recommitting the United States to the Geneva Convention.
• Scaling back our military-industrial complex to the size needed to defend our country and pursue real terrorists. This involves a retreat from the role of the world’s policeman and a reinvestment of some of our military spending into debt reduction, infrastructure, health insurance and social programs for the American people.

During the past six years we have expended vast amounts of money, driving the nation deeply into debt, undermined our Constitution and exhausted our military, and yet Osama bin Laden is still running a terrorist network. Invading Afghanistan, where the terrorists found safe haven, avenged the attack on our nation. We had the moral high ground and an opportunity to destroy the heart of the terrorist threat. But that objective was neglected when we took our eye off the ball and went into Iraq, and the broader problem has been dramatically exacerbated by that move. The fact Osama is still releasing tapes is inexcusable.

As the arch terrorist tries to ratchet up our fear, we need to remember this: Terrorists can hit us, they can hurt us, but they can’t take the country from us. Only we can do that.

I always think when my paper is late that the Democratic National Committee must have been late with the day's talking points email and so the lead editorial in the Citizen-Times wasn't ready on time.

Seriously, these two points of view on the war on terror certainly serve as frames of reference and a clear predictor of the world view and specifically the political views of the opinion holders for almost any issue. Think about that.

America Is No Roman Empire

2007-09-14T10:52:00.000-04:00

These days I cannot think of politics or economics without an over-hanging and omnipresent context of the war in Iraq. In the next several posts, I will highlight several recent opinions that helped me clarify my thinking on the broader issues of where we actually are in the Global War on Terror and in Iraq, and how those two issues shape not only my thinking but most thinking of the engaged citizenry of the United States.

In some sense, these posts are all the same in that they are more contextual rather than strategic or tactical in nature. I am an optimist about where we are and what we have done --which certainly seems to be a contrarian opinion held by a very few people. Perhaps some of the following may make you slightly more optimistic too or you may conclude I am delusional. Either way it will impact your thinking at least a nudge in spite of any opinions you bring with you to the arena.

Gerard Baker, whom I enjoy reading, has a piece in The Times (London) today, A Quick History: America Is No Rome - The Tired Analogy of Imperial Decline and Fall. Here are some cuts:

...Gibbon himself noted in The Decline and Fall of the Roman Empire: “There exists in human nature a strong propensity to depreciate the advantages, and to magnify the evils, of the present times.” Which brings us back neatly to General Petraeus and the Iraq war.

...You can argue about the surge. The evidence is encouraging that the increased US military effort, together with a change in tactics, has reduced the violence in Iraq. On the other hand there are legitimate questions about the long-term viability of the strategy. But if America is to emerge from Iraq with a renewed sense of its global role, you shouldn’t really debase the motives of those who lead US forces there. Because in the end what they are doing is deeply honourable – fighting to destroy an enemy that delights in killing women and children; rebuilding a nation ruined by rapine and savagery; trying to bridge sectarian divides that have caused more misery in the world than the US could manage if it lasted a thousand years.

It is helpful to think about Iraq this way. Imagine if the US had never been there; and that this sectarian strife had broken out in any case – as, one day it surely would, given the hatreds engendered by a thousand years of Muslim history and the efforts of Saddam Hussein.

What would we in the West think about it? What would we think of as our responsibilities? There would be some who would want to wash their hands of it. There would be others who would think that UN resolutions and diplomatic initiatives would be enough to salve our consciences if not to stop the slaughter.

But many of us surely would think we should do something about it – as we did in the Balkans more than a decade ago – and as, infamously, we failed to do in Africa at the same time. And we would know that, for all our high ideals and our soaring rhetoric, there would be only one country with the historical commitment to make massive sacrifices in the defence of the lives and liberty of others, the leadership to mobilise efforts to relieve the suffering and, above all, the economic and military wherewithal to make it happen.

That’s the only really workable analogy between the US and Rome. When Rome fell, the world went dark for the best part of a millennium. America may not be an empire. But whatever it is, for the sake of humanity, pray it lasts at least as long as Rome.

Posts follow giving more context and will, as always, reveal my present thinking from the choices of articles I post.

Thoughts on My Return

2007-09-12T10:00:00.000-04:00

I have been away from posting for about four weeks but now I am re-energized and ready to go again. I had to travel and I dealt with some family health issues - I still managed to read even more than usual and I had a great deal of time to think which surprisingly none of us seem to take the time to do anymore as we should.

I think getting away gave me me time to calm down from the rhetoric we hear and read so much of everyday and to get a better grip on the drivers behind the opinions, false statements and deluded lies so frequent in our discourse. I am also incredibly amused at how we "modern" Americans like to believe that past Americans, particularly our Founding Fathers (and Mothers, no pun intended) as well as our past Presidents and legendary political leaders, were more civil and less prone to mistakes and blunders than we are today. That certainly is not the case. I am also amused at all the issues over which we are said today to be in a "constitutional crisis" when the constitutional crisises of the past were much more serious and absolute threats to the Constitution and the Bill of Rights than anything we see today.

One real Constitutional crisis of our early days was the passage of the Alien Friends Act and the Sedition Act which resulted in the deportation or arrest of journalists, leaders of political parties and even members of Congress. From the excellent book "Union 1812: The Americans Who Fought the Second War of Independence" by A. J. Langguth (not on the web):

To Madison and Jefferson, the [Sedition] act was clearly designed to silence the press and intimidate Republican leaders through the elections of 1798 and 1800.

Prominent examples of arrests under the act included John Daly Burk, a Republican editor of the New York Time Price and Congressman Matthew Lyon (R - Vermont). Here is A.J. Langguth again:

Lyon had accused [President] Adams of avarice and a lust for power and adulation. During the [U.S. House] debate, he further outraged Federalists by spitting in the face of an opponent. Lyon was convicted of sedition, fined one thousand dollars, and sentenced to serve four months in an unheated jail cell usually occupied by runaway slaves.

[See note below.]

Other egregious examples of a real Constitutional crisis in our history would have to include Lincoln's treatment of the Constitution during the Civil War (which I think was justified) especially the suspension of habeas corpus as President Lincoln pleased and Roosevelt's internment policies of Japanese Americans during World War II.

Wonder what our current press geniuses would think about those days? Wire tapping a foreign originated telephone call under FISA might not seem such a big deal compared the past reality of going to jail for writing bad things about the President.

Special thanks to those who missed me.

***************
Note: A $1000 fine in 1800 using a basis of the unskilled wage rate calculates to be in today's dollars approximately $266,300.

Candidates Mislead on Economics

2007-08-09T15:49:00.000-04:00

In an earlier post today, I noted how important it is to check facts and assumptions anytime economic issues are involved, not only by the media but also from politicians. Now I read this from James Pethokoukis and his blog Capital Commerce, "Democratic Debate Spawns Weird Economics":

The Democratic presidential contenders went at it again last night in a debate (or "forum" if you prefer) sponsored by the AFL-CIO. For once, economic issues—especially trade—shared equal importance with the war in Iraq. Here are a few statements from the various candidates —including front-runners Hillary Clinton and Barack Obama—that struck me as kind of strange:

1) "You know, six and a half years ago, we had a balanced budget and a surplus; now we are in deep debt with a rising deficit, and it is absolutely true that George Bush has put it on the credit card, expecting our children and grandchildren to pay for it." -- Sen. Hillary Clinton. Hey, the last time I checked, the budget deficit for this year was forecast to be $207 billion, half of what it was in 2004. (The budget might actually be back in the black when the next president takes office.) And while Bush did inherit a balanced budget and surplus from Team Clinton, neither administration successfully fixed the $100 trillion unfunded liability problem with Social Security and Medicare.

2 ) "For every $1 billion we spend [on infrastructure], 40,000 jobs can be created in the United States of America." -- Sen. Christopher Dodd. I have no doubt that jobs can be created through government spending. But those billions must be taken from the private sector. Will those billions be used more wisely and efficiently and productively by federal bureaucrats than by private managers? If so, maybe the feds should guarantee a job for everyone who wants one. Using the Dodd formula, it would cost a mere $175 billion a year to employ all 7 million unemployed Americans.

3) "Well, look, people don't want a cheaper T-shirt if they're losing a job [from free trade] in the process." -- Sen. Barack Obama. Inexpensive T-shirts vs. outsourced jobs isn' t really the debate. According to research from the International Institute for Economics, Americans are $7,000 to $13,000 richer because of trade, and removing all trade barriers would permanently increase our wealth by $4,000 to $13,000 per household. And since the North American Free Trade Agreement took effect in 1994, America has added nearly 30 million net new jobs.

4) "What we need to do is say that from now on, America will adhere to all international labor standards in any trade agreement—no child labor, no slave labor, freedom of association, collective bargaining—that is critically important—making sure that no wage disparity exists." -- Gov. Bill Richardson. If what Richardson was saying is that American trade negotiators should demand foreign workers make the same as American workers or no trade deals, then what he is saying is no trade with India or China. Incomes in those countries are rising thanks to globalization, but there is a long way to go.

5)"It means that we are also not running up deficits and asking China to bail us out and finance them, because it's pretty hard to have a tough negotiation when the Chinese are our banker." -- Sen. Barack Obama. This is the myth that "China holds all the cards." Look, the Chinese government needs fast growth to hold down social unrest and justify the continued dominance of the Communist Party there. And the most likely cause of a slowdown there would be a slowdown here first. The last thing China wants to do is start dumping U.S. bonds and cause a recession here.

Perhaps I have been assigning too much blame to the media and not enough to pandering politicians. I am sure many of the Republician candidates will be as bad and when I get those misleading remarks I will pass those on as well. It is not by any means a one party problem.

Maybe Sen. Clinton doesn't know the deficit is very low at present, or Sen. Obama doesn't know know that counties buy our treasury bonds because of the strength of our economy not our weakness, or that Sen. Dodd's doesn't remember that government spending originates from the taxes paid by citizens not thin air? Or that Gov. Richardson thinks all wage disparities can be eliminated if the US says so, or Sen. Obama (again) sees no benefit in trade to the US consumer?

Is it possible that people can reach a point of being a US Senator or a state governor, let alone running for president, and either know almost nothing about basic economics or not telling the truth due to an obsessive desire to win elections?

Fixing Broken Government

2007-08-09T14:41:00.000-04:00

Cal Thomas is out today with "Competence Above Ideology". Here are some highlights:

We pour increasing amounts of time, attention and money into giving children, especially underprivileged children, a chance to succeed. Do the candidates really believe the problem is not enough money, or is it too much money and not enough choice as to which school -- public or private -- best serves the needs of children? Ending the education monopoly would help those languishing in substandard schools. Are the candidates -- especially Democrats -- so beholden to the teachers unions that they care more about winning their approval than they do about educating children? The answer for Democrats is "yes." Why don't the overpaid interrogators/moderators ask the question this way?

H. George Frederickson, a professor in the Department of Public Administration at the University of Kansas, has written a compelling essay on "Repairing Broken Government." It addresses the need to focus on competence more than ideology. Noting the familiar list most people make on the reasons for broken government -- the pervasive influence of money in politics, the power of interest groups and lobbyists, legislative gridlock and more -- Frederickson touches on something of perhaps even greater importance: "bureaucracy, ineffective management, or poor policy implementation are central elements of a broken national government."

Instead of "sound-byting," character assassination and sloganeering, Frederickson calls for "substantive competence (think Katrina)" in government. He wants more competent people running things and he suggests the way to make that happen is to amend the Civil Service Reform Act of 1978.

That law, he writes, "added a thick layer of political appointees to the upper ranks of federal agencies" while the ranks of merit-based civil servants were reduced from almost 3 million to about 1.8 million. "From the standpoint of government effectiveness, this has been a deadly combination," he says.

Where are the voices of the presidential candidates promising to clean house of political appointees and replace them, not with political appointees from their party and persuasion, but with people who know what they are doing?

I care about social issues and the eroding morality of the country, but I care more about competent government. We are spending more on government than ever and getting less for our money...

Let's have a little less ideology from the presidential candidates of both parties and a lot more talk of how to repair broken government.

These remarks fits perfectly with my recent post on school failure, see here.

I also think in a way that a focus on competence in managing government fits into points being made repeatedly by Giuliani and Romney as to the importance of managerial experience in the presidential election campaign. I hope that the public and candidates from all sides see this not however as a party issue but that a real need exists for America to fix our schools and to fix the inability of government to carry out basic duties.

By the way, The New Republic has a funny parody out today, listed on the web site as "The Absurd Comedy of the Dems' Labor Suck Up". I hope this writer does one on the next Republican debate as well.

Public Opinion & US Economy

2007-08-09T13:39:00.000-04:00

One blog that I really like and admire is Back Talk written by an anonymous person who describes himself (or herself) as "a professor at a research university, a registered Democrat, a liberal by some measures, but a radical conservative relative to the large majority of my colleagues." The author is an economist of talent given the analysis and manner of thinking exhibited in Back Talk.

The following is an introduction to a couple of excellent posts about the actual state of the US economy as opposed to public perceptions that I recalled from early June of this year that serves as an excellent introduction to an article from today's Wall Street Journal that I will get to shortly. Here from Back Talk, "What Americans Think About Their Economy":

Americans are not happy with the state of their economy, which either means that they are insane or that the media is so negative that Americans do not realize how good they have it. It's definitely the latter.

The health of an economy is measured by such things as GDP growth, GDP per capita, unemployment, inflation, budget deficit and cumulative debt. Additional issues include income inequality (we aren't doing that well if only the rich are getting better off), the trade deficit, and the exchange rate for the dollar.

People need some perspective before forming an opinion about the economy, but they never get that from the news media. There are two kinds of perspective that are needed: perspective over time and perspective over place. That is, on all of these measures, how do the current numbers compare to prior years in which we were much happier with the state of economy? In addition, on each of these measures, how does the American economy stack up against the other major industrialized nations of the world (i.e., the G7)?

After the professor goes through all the data he concludes:

...Americans fail to appreciate the strength of their fabulous economy. Our economy is not only as good as it has ever been (unless you count the bubble economy years), it is better than any large economy on the planet (as I'll show again tomorrow). Perhaps that's not good enough for you, but, if not, you should consider having your head examined, because that's where the problem lies.

Now let's turn to the WSJ piece today, "Fair But Unbalanced: How the Media Promote False Pessimism about the Economy":

...[T]he most recent Wall Street Journal economic forecasting survey, from July, shows that 49 out of 60 forecasters expect real GDP to grow at an average annual rate of 2%, or faster, in 2007. Of the remaining 11 forecasters, only two expect growth of less than 1%, and only one expects a recession. For 2008, the forecasters are even more optimistic, with none expecting recession.

There are at least a half-dozen other institutions publishing surveys, and all of them report very similar results among the 100 or so active professional forecasters. Except for two well-known economists (Nouriel Roubini at New York University, and Gary Shilling of A. Gary Shilling & Co.), who are not in many surveys, a super-duper majority of professional forecasting economists believe the economy will continue to expand during the next year and have believed so for the past four or five years.

Despite this, an NBC News/Wall Street Journal poll taken in late July found that 68% of Americans thought that the economy either was in recession already, or would experience a recession sometime during the next 12 months. Interestingly, this is not much of a change from the past. This same survey question has been polled at least five times since September 2002. Each time a robust majority of between 65% and 85% of respondents thought a recession either was under way or would occur within the year. Americans have been bearish on the economy for quite some time.

In short, over the past five years, forecasting economists from academia, consulting shops, financial services and industry have a perfect 5-0 record against a random sample of American citizens. It's important to understand that economists are not always right. Some even say that economists were put on earth to make weathermen look good.

In fact, some suggest that the experts don't know what they are talking about. They say that economists make the mistake of looking at aggregate data, for GDP or overall income, which hides serious dislocations for the middle class and those with lower incomes. Those who argue this point believe that unfair foreign competition and unfair distribution of income are leaving many Americans behind.

But this is hard to believe. The economy moderated last year, but the unemployment rate is still just 4.6%, almost a full percentage point below its 20-year average of 5.5%. Since the jobless rate first fell below 5% in December 2005, average hourly earnings have expanded at a 4.1% annualized rate--as good as any year during the late 1990s. And recent research shows that incomes for the bottom fifth of wage earners have risen faster in the past few decades than incomes at the top, hard work is being rewarded more by performance pay, and income volatility is no worse today than it was in the 1980s and 1990s.

Stranger still is a July poll by the American Research Group (ARG) in which 68% of respondents rated their own personal financial situation as "good, very good or excellent." This is a huge improvement from March 2003, when another ARG poll found only 46% of Americans were either "hopeful or happy" about their personal financial situation, while 46% were "worried or angry."

This begs the question: If the actual economic data, the views of professional economists and the self-proclaimed personal financial situation of a majority of Americans have improved this much, why are people so worried about the economy? Why do people assume they are the exception rather than the rule?

One answer is that people gather knowledge about the rest of the economy, the part they cannot see, from watching news. As a result, it could be that the format behind most business journalism skews perceptions and creates pessimism. To be very clear, I am not arguing that business news is purposefully biased. But what seems clear is that in the name of producing an entertaining product, and in an attempt to provide contrasting views, the true consensus of experts is rarely reported.

...The global economy may never have been as strong as it is today. The pace of technological achievement has boosted living standards for billions of people, and promises to do even more in the years to come. It's sad, really, that so many people can't enjoy it because they fret so much about the future.

Let me suggest fully reading the two posts in Back Talk that provide an exceptional review of where the US economy does stand now compared to the past and compared to other world economies. These posts are from June 5 and 6: What Americans Think About Their Economy, which provides a perspective of the US economy over time, and then read Perspective Over Place.

I also highly recommend the blog for insightful analysis on current topics with a bent toward what I call the economic way of thinking.

I further suggest that anytime you read or hear references to the economy in newspaper articles, news magazines, blogs, blog comments and, most especially editorials, letters to the editor, and campaign speeches and promises you turn a keen ear and eye to the assumptions made and the facts involved as most often than not both will be wrong.

I get particularly incensed when I read letters and comments about the terrible spending deficits in the US right now - typically quoting the amount and never in the context of a percentage of GDP or in any historical context of past numbers, or the growth of the economy overall compared to actual deficit trends. The same is true in almost all negative descriptions of the economy because right now the negatives are very hard to find and be honest at the same time.

I have no doubt when the occupant of the White House changes then suddenly the economy will turn excellent in every way in the eyes of the mainstream media. No doubt at all.

Gingrich on School Failure

2007-08-08T13:25:00.000-04:00

Newt Gingrich may be grating to a lot of people as reflected in his high negative polling numbers (like Sen. Clinton.) I suspect that in the case of the former Speaker those numbers are primarily because he is right so often and tells everybody that he is right so often too.

In any event, he is absolutely correct in the opinions he is expressing about Detroit city schools utter failure and what that fact reveals about all of our government's inability to accomplish goals and its structural incompetence. In today's issue of The Detroit News we find "Gingrich: Will Detroit Save Its Kids or Bureaucracy?". Gingrich explains that according to the Gates Foundation that Detroit schools are dead last in its independent study and noted that "the Detroit school system graduates only one-fourth of its entering freshmen on time, placing Detroit dead last on its list." Now here's more from Newt:

But this failure is not just Detroit's failure. It is an American failure. When American children are being cheated out of the education needed to succeed and an American city is allowed to decline while its leaders refuse to confront the failure, it should concern every American.

This human tragedy extends well beyond the schools. The New York Times reported that an African-American male who drops out of high school faces a 72 percent unemployment rate in his 20s and a 60 percent possibility of going to jail by his mid-30s. The Detroit bureaucracy now presides over a school system whose black male students are more likely to go to jail than go to college.

...This bureaucracy is so focused on protecting its monopoly, it turned down a $200 million offer from a Metro Detroit philanthropist to help high school students learn. Faced with such appalling failure, why would the Detroit bureaucracy be so aggressive in defending itself? And why would it be so unwilling to adopt bold changes to improve its performance?

It could be that the Detroit school system is the single largest employer in the city, followed by the city government. Of Detroit's 25 largest employers, state, county and city governments provide 40 percent of the jobs.

These numbers raise a critical question: What is the purpose of our government bureaucracies? Clearly, we have a fundamental disagreement about how to measure success, and it goes right to the heart of the issue.

If the purpose of the Detroit school system is to provide jobs for members of a unionized bureaucracy, pay them well and pay them on time, then Detroit's school system is a stunning success. If this is the primary purpose of the bureaucracy, Detroit may very well be the most successful school district in the nation.

If, however, the purpose of the school system is to provide Detroit's children with an education, the knowledge, the tools and the motivation to succeed in the real world, a prerequisite to prosperous, productive communities, then Detroit's bureaucratic schools are an abysmal failure.

There is ample evidence of what works in education, but the bureaucracy has systematically ignored all of it. The innovations include merit-based pay; increasing teacher-to-student ratios; revamping union rules to reward the best teachers; bonuses and incentives for new teachers; charter schools; and offering parents a coupon that allows them to send their children to the school that works best for their children and not the bureaucracies.

...[R]eal change requires real change, not new rhetoric while doing more of the same old thing. Propping up the failed past at the expense of future generations leads to prison and poverty vouchers for too many of our children.

The time for excuses is over. The crisis is not about money. The crisis is a failure of responsibility, accountability, honesty, transparency and determination to protect the children from the bureaucracies that are crippling their lives. Who will the people of Detroit save -- their failing bureaucracies or our American children?

Here is what I asked in a post at the end of July, from "Big Labor & Presidential Politics":

"Can you draw any obvious correlation between the fact that education and our government is widely perceived to be dysfunctional despite the amount of money devoted to those undertakings and the fact that those employees are almost completely unionized and have almost zero turnover? Dysfunctional and employed for life does not a good combination for performance make."

Beer Prices and Ethanol

2007-08-07T14:50:00.000-04:00

Recalling all the problems with ethanol that was discussed earlier in my post "The Ethanol Scam", including the increase of world-wide cost of food which is a life and death matter in the Third World countries, is --- an increase in beer prices. From "Biofuel Brews Up Higher German Beer Prices":

Like most Germans, brewer Helmut Erdmann is all for the fight against global warming. Unless, that is, it drives up the price of his beer.

And that is exactly what is happening to Erdmann and other German brewers as farmers abandon barley — the raw material for the national beverage — to plant other, subsidized crops for sale as environmentally friendly biofuels.

"Beer prices are a very emotional issue in Germany — people expect it to be as inexpensive as other basic staples like eggs, bread and milk," said Erdmann, director of the family-owned Ayinger brewery in Aying, an idyllic village nestled between Bavaria's rolling hills and dark forests with the towering Alps on the far horizon....

Already, at the annual brewery festival in Aying this week, prices for Erdmann's Ayinger beer were up at $8.60, or 6.40 euros, from last year's 6.10 euros for a 34-ounce mug. That's no small matter for Bavarians, who are among the world's heaviest beer drinkers. They put away about 42 gallons of beer a year _ well above the already high German average of 30.38 gallons per person.

And organizers of the world-famous Oktoberfest in Munich have announced a 5.5 percent price increase: A one-liter mug will cost up to $10.70 at this year's autumn beer festival _ the highest price ever.

...[I]in its first major report on bioenergy, the United Nations tried to temper enthusiasm over biofuels last week, warning that the diversion of land to grow crops for fuel will increase prices for basic food commodities.

That is what happened in Mexico, when increased demand for corn to make ethanol in the United States pushed up the price of tortillas.

...Germany leads in the consumption of bioenergy in Europe with an annual usage of 4.3 percent of overall fuel consumption, according to figures by the Agency of Renewable Energies. Germany also is among the leaders in producing wind energy and recycling garbage.

Beer prices are serious business in Bavaria, which has some 615 breweries and gave Germany its famed beer purity law, which dates back to 1516 and in its current form permits only four ingredients: malted grain, hops, yeast and water.

This does, in a somewhat lighthearted way (even though beer is a serious matter,) point out that all government actions do have unintended consequences. I am of the opinion that the best approach to restraining the use of oil in the West for environmental reasons and national security reasons (which for me the latter reason is an even stronger argument) is imposing a gasoline tax (maybe a carbon tax) with some method (perhaps like the fair tax ideas) to make the tax less regressive (both to the poor and to rural consumers) and to devote a good portion of those taxes to dedicated spending on mass transportation and energy efficient infrastructure modernization. The tax is probably the best method to reduce all the unintended consequences and, directly and clearly, accomplish the desired goal of decreased fossil fuel dependence. Also note most serious economists endorse the tax opposed to other methods, particularly the slippery carbon offset fads, as well as the boondoggle subsidies addressed before.

Two Views of Populism

2007-08-06T19:38:00.000-04:00

I could summarize the following by writing the American Enterprise Institute versus the Center for American Progress and you might have a good clue where this is going.

First, in one corner, from yesterday in The Financial Times we have Matt Miller and "Phoney Fears Grip America":

A spectre is apparently haunting America – the spectre of “populism”. “New populism spurs Democrats on the economy,” cried the front page headline in The New York Times the other day. Republicans rail against unseemly “class warfare”, while centrist Democrats fret that hard-edged populist appeals will spook suburban voters.

“It is not unusual,” The New York Times explained, “for candidates seeking the Democratic presidential nomination to move left in the primary season.” However, rhetoric aside, there is little reason to view today’s supposedly wild-eyed Democrats as “populist” or “leftwing” at all.

Consider John Edwards, who the press and Republicans have cast as the heartthrob of the resurgent “left”....

The fact that a Thatcher-Cameron-Buffet agenda can be hyped as “populist” says more about propaganda success and media norms than anything else. Over three decades, America’s conservative movement has so deftly shifted the boundaries of debate to the right that even modest adjustments to the market system can be cast as the second coming of Marx without anyone blushing. Today’s phony populist fears also remind us that the real problem with the media is not ideology but stenography. If official sources call something “populist” often enough, it is.

More depressing is that many Democrats fall into the same trap, worrying that a Thatcher-Cameron agenda in America will frighten suburban swing voters, rather than asking themselves how they might win the argument over the direction America needs to take. At this rate, Americans will be lucky to catch up a decade from now to today’s social policy consensus in the UK. Meanwhile, Brits and others will have moved forward on a new generation of ideas to help citizens find security and opportunity in a global economy.

So as Miller praises the European system and demands America follow suit, we turn to the opposite corner where we find that Europe is recognizing the problems inherent in their social policies, moving toward American policies and that following Europe's mistake would be a travesty. In a recent Wall Street Journal article (which was a re-print of an article originally on TCSDaily) by Jurgen Reinhoudt, we see "Wrong Turn: Even as European leftists move right, American ones move further left":

In Europe, reforms are in vogue. Though many special interests are fiercely resisting change, it is striking to see just how many European Social Democrats have come to recognize the need for structural reforms to welfare states....

In many countries the left has been willing to discard or, at the very least, publicly reconsider old big-government approaches in order to reinvigorate economic growth and general prosperity.

In the United States, by contrast, those most committed to the welfare state tend to talk about trimming entitlements the least. This is particularly true of politicians aspiring to the highest office of the land....

Far from tackling the looming fiscal crisis, presidential candidates are busy marketing expensive new plans to voters. The health-care plan of John Edwards would "cost the federal government some $120 billion a year," $1.2 trillion over a 10-year period, for the foreseeable future. And that's not including $15 billion a year in proposed antipoverty measures. No word on how the existing entitlement shortfall will be dealt with....

While proposals for new entitlements may be politically easy, they are fiscally reckless. Candidates who promise expansive new entitlement spending are effectively writing checks the American economy cannot cash. They will take us to the place where Europe is today: a place where existing entitlements are unaffordable. Yet what matters is not so much the specific measures being considered, but the broader mindset from which they originate. It is in this context that comparing the European political mindset to the American political mindset is useful.

In 2005, the liberal Washington Post columnist Sebastian Mallaby criticized the opposition of many Democrats to the possibility of investing in private Social Security accounts by saying that "a party that refuses to acknowledge the urgency of entitlement reform is a party of ostriches." He's right--and the label applies to many leaders in both parties.

Presidential candidates ought to learn from Europe's lessons. Even if it is politically painful, we should not race to the place that Europe is trying to get away from.

So which opinion is correct? I will let you look at the articles, research the facts and you can decide.

In case you have any doubt, my money is on Mr. Reinhoudt with Mr. Miller suffering a KO both in terms of economics and in what is the best policy for the citizens of Europe and America.

A Corporate Speak Glossary

2007-08-06T16:33:00.000-04:00

To provide some relief from all the recent long serious posts, here is something fun; from Conde Nast's Portfolio magazine comes this "Corporate Speak Glossary". Here are a few of my favorites for you to enjoy:

action item - An urgent task requiring immediate action—from someone else.
assign ownership - To dump responsibility on someone else as quickly as possible.
branded - Pre-DCE (dotcom era), this described the status of a steer after a rancher burned his symbol of ownership into the animal’s backside; now connotes how the public perceives a company’s image. In the company’s mind, though, that poor steer will always be you.
core competency - Depending on your company’s stock price at the time, your shareholders describe this as either your ability to run a company or to play a low-scoring round of golf.
deliverables - Stuff you owe your customers before they owe you a lawsuit.
dress-down Friday - The day your boss pulls out a sweater that cost more than your suit.
driver - The key factor in getting something done; what you can afford when you get enough things done.
empower - The process by which the powerful dribble out bits of power to the powerless.
fast track - A type of professional advancement that leads most quickly to divorce and personal despair.
first mover - A nice epitaph for a company that goes bankrupt for being two years ahead of its time.
low-hanging fruit - The part of a project your boss completes before handing it over to you.
outside the box - Ironically, an expression used most often by people who will never understand it.
overhead - The fixed costs of running a business (such as rent, heat, and electricity) that must be paid, making them very different from your salary.
paradigm shift - What you want your foot to give the V.P. of marketing when he overuses this term.
take it offline - The “let’s take this outside” of the business world; often thrown around when people begin to disagree too openly in a large meeting.

team player - An enthusiastic co-worker who some say can’t get hired anywhere else.

upsell - To peddle expensive add-ons to an otherwise useful but inexpensive product.

OK, you get the idea, read them all and start thinking of the ones you could add.

Iraq: A Need for Wisdom

2007-08-05T19:58:00.000-04:00

This past fortnight has been very interesting regarding some perspective over the entire issue of the Iraq war and on-going foreign policy.

It seems to me that recently, given the context of a way too early presidential campaign and the pressure from the main stream media and the far left on the panic to "end the war" that we have lost all perspective and wisdom on where we stand and what we should do. Good decisions are never made in great haste, panic or hysteria. Our founding fathers wisely structured the government to avoid the wide swings in popular opinion and manage policy from a perspective of contemplation and wisdom; hence, the nature of the Senate, the Judiciary and the Executive branch to have longer tenure and less responsiveness to the "will of the people" than the House or local politics. Unfortunately, given all the Senators who wish to be President and the nature of political parties to place elections over all other considerations we have been poorly served lately in the nature of comments from our Senate leaders and all the pandering politicians who seem to be so much more reactive than reflective on important situations and problems.

So many issues both in the press and in the campaigns seem directed toward saying what is good based on polls and not saying what is right or good for the country without regard to polls. I know this is an over-simplification as politicians always want to please the voters and get re-elected but there often comes along times that call for more statesmanship and leadership and this seems to be one of those critical times. I am reminded of Dick Morris and his columns which always look at every issue in terms of its polling strength and popularity and never any remarks about what is right or wrong -- and we see the same thing out of so many of our politicians and Senators on a day to day basis.

From The Federalist Papers here is James Madison in The Federalist No. 63:

As the cool and deliberate sense of the community ought in all governments, and actually will in all free governments ultimately prevail over the views of its rulers; so there are particular moments in public affairs, when the people stimulated by some irregular passion, or some illicit advantage, to mislead by the artful misrepresentations of interested men, may call for measures which they themselves will afterwards be most ready to lament and condemn. In these critical moments, how salutary will be the interference of some temperate and respectable body of citizens, in order to check the misguided career, and to suspend the blow meditated by the people against themselves, until reason, justice and truth, can regain their authority over the public mind? What bitter anguish would not the people of Athens have often escaped, if their government had contained so provident a safeguard against the tyranny of their own passions? Popular liberty might then have escaped the indelible reproach of decreeing to the same citizens, the hemlock on one day, and statues on the next.

In The Federalist No. 10, Madison uses similar reasoning in explaining the many reasons to favor a Republic over a pure Democracy:

The two great points of difference between a Democracy and a Republic are, first, the delegation of the Government, in the latter, to a small number of citizens elected by the rest: secondly, the greater number of citizens, and greater sphere of country, over which the latter may be extended.

The effect of this first difference is, on the one hand to refine and enlarge the public views, by passing them through the medium of a chosen body of citizens, whose wisdom may best discern the true interest of their country, and whose patriotism and love of justice, will be least likely to sacrifice to temporary or partial considerations. Under such a regulation, it may well happen that the public voice pronounced by the representatives of the people, will be more consonant to the public good, than if pronounced by the people themselves convened for the purpose.

Now to the present. We have great disparity of opinion at present over: 1) what is happening and will happen on the ground in Iraq; 2) the consequences of withdrawal from Iraq; and, most importantly, 3) the long term strategic nature of Iraq and the Middle East as it concerns the well-being of the United States.

Several important pieces and occurrences that touch on these three vital questions have been appearing along with the detritus noise we get frequently. The perfect answers may indeed be unknowable but the decisions to be made require the best analysis and information obtainable. I have pointed out the importance of recognizing sunk costs in our decision making (here) so let's begin by not rehashing the past and make our decisions based only on the situation at present.

The pieces that stick most in my mind include the O'Hanlon and Pollack's Op-Ed in the NYT "A War We Might Just Win" which I discussed earlier (here) and two more pieces that really have my attention.

The first is a short commentary from Victor Davis Hanson in which he reviews all the frankly horrible mismanagement of the Middle East situation by all the recent Presidential administrations and surveys the Middle East situation in "Back to the Future?"; a large portion:

...[B]efore the United States abandons its present policies in Iraq and Afghanistan, we should at least recall the past record — which may be best summed up as the ying of Democratic appeasement and the yang of Republican cynicism.

Jimmy Carter now writes books damning our present policies. He should keep quiet. When the Iranians stormed the American embassy in Tehran and inaugurated this era of Islamic terrorism, his U.N. ambassador, Andrew Young, announced that the murderous Ayatollah Khomeini was “a 20th-century saint.” Moralist Carter himself also tried to send hardcore leftist Ramsey Clark over to Tehran to beg the mullahs to release the hostages — in exchange for arms sales.

Next came Ronald Reagan, who, to put it kindly, was bewildered by Islamic extremism. He pulled out American troops from Lebanon after Hezbollah murdered 241 Marines and thereby helped to energize a new terrorist movement that has spread havoc ever since. The Lebanon retreat was followed by the disgrace of the Iran-contra affair, when American agents sold the hostage-taking theocracy missiles and then used the receipts illegally to fund the Contras. Few now remember that Oliver North purportedly flew to Iran to seal the deal, bearing gifts for the ayatollah. No need to mention the intelligence the Reagan administration gave to Saddam Hussein during the savage Iran-Iraq war, or the way it continued Carter’s policy of arming jihadists in Afghanistan.

There were just as many cynical realists in George Bush Sr.’s foreign policy team. In the debate leading up to the first Gulf War, Secretary of State James Baker justified attacking oil-rich Saddam Hussein for the sake of “jobs, jobs, jobs.” And when our coalition partner, the even oil-richer House of Saud, objected to removing the murderous Hussein regime after its retreat from Kuwait, we complied — to the point of watching Saddam butcher thousands of Kurds and Shiites.

Bill Clinton also often weighs in with ideas on the Middle East. But during his two terms he passed up an offer from Sudan to hand over bin Laden. Shortly afterwards, the terrorist openly threatened us: “To kill the Americans and their allies — civilians and military — is an individual duty for every Muslim.” The Clinton administration also didn’t do much about eight years of serial terrorist attacks on the World Trade Center, American servicemen in Saudi Arabia, the East African embassies or the USS Cole. The $50 billion U.N. Oil-for-Food scandal did not reflect well on Clinton’s multilateral model of dealing with Saddam Hussein.

The point of reviewing prior American naivete and cynicism is not to excuse the real mistakes in stabilizing Iraq. Instead, these past blunders remind us that we have had few good choices in dealing with the terrorism, theocracy, and authoritarian madness of an oil-rich Middle East. And we have had none after the murder of 3,000 Americans on September 11.

After four years of effort in Iraq, Americans may well tire of that cost and bring Gen. Petraeus and the troops home. We can then go back to the shorter-term remedies of the past. Well and good.

But at least remember what that past policy was: Democratic appeasement of terrorists, interrupted by cynical Republican business with terrorist-sponsoring regimes.

Then came September 11, and we determined to get tougher than the Democrats by taking out the savage Taliban and Saddam Hussein — and more principled than the Republicans by staying on after our victories to foster something better.

The jihadists are now fighting a desperate war against the new stick of American military power and carrot of American-inspired political reform.

They want us, in defeat, to go back to turning a blind eye to both terrorism and corrupt dictatorships.

That’s the only way they got power in the first place and now desperately count on keeping it.

The second major piece that is a must read is an interview of John Burns who I regard as the best foreign correspondent writing today. He has been with the New York Times for many years yet still maintains his personal integrity and strives to report the facts. My problem with the NYT is twofold, of course, the editorial side (making the above Op-Ed even more startling) and secondly, the growing tendency to have analysis and opinion creeping into the news at the NYT.

The interview is with Hugh Hewitt who is certainly conservative but here shows he can just ask questions and we hear/see the answer. Please read it all. Here are some cuts from that interview, "New York Times Pulitzer Prize winner John Burns on Iraq, Iran and How the Surge is Working.":

[These are selections from the transcript of comments by John Burns.]

David Petraeus is a man who’s had a remarkably distinguished military career, and he is very clear that he thinks his responsibilities lie not to the White House alone, but to the White House and the Congress conjointly, and through them to the American people. I don’t think that this is just a profession, a claim. I think he really intends that, and he’s been very careful not to make commitments at the moment as to what he’s going to say, though we may guess it. And I think he’s going to say that the surge is having its effects, it hasn’t turned the tide of the war, there’s been too little time for it, and I think he and Ambassador Crocker, who will be his partner in that September report, are going to say one thing very clearly, and that is a quick, early withdrawal of American troops of the kind that is being argued by Nancy Pelosi, for example, would very likely lead to catastrophic levels of violence here. And in that, General Petraeus and Ambassador Crocker will be saying something which is pretty broadly shared by people who live and work here, I have to say. The removal of American troops would very likely, we believe from all indications, lead to much higher, and indeed potentially cataclysmic levels of violence, beyond anything we’ve seen to date....

The plan is that with the surge, aimed primarily at al Qaeda, who are responsible for most of the spectacular attacks, the major suicide bombings, for example, that have driven the sectarian warfare here, the belief is, or the hope is, that with the surge, they can knock al Qaeda back, they can clear areas which have been virtually sanctuaries for al Qaeda, northeast, south, west and northwest of Baghdad, and in Baghdad itself, and then have Iraqi troops move in behind them. The problem here is time. How much time does the U.S. military have now, according to the American political timetable, to accomplish this? I think most generals would say, indeed have said, most serving current generals here have said that a drawdown, which took American troops from the 160,00 level they’re at now quickly down to 100,000 or 80,000 over the next, shall we say, year to eighteen months, that’s too fast. If you do that, I think they would say, though they don’t put it quite this frankly, that this war will be lost for sure. Given a little bit more time, they think that it is realistic to think that the Iraqi forces can move in behind them, and can take over the principal responsibilities for the war. The problem is, of course, that American generals have been saying this now for four years, and as we know, the Congress is beginning to run out of patience with that. But I think that they have a good plan now, at least if there is any plan that could save the situation here, any plan that could bring a reasonably successful end to the American enterprise here, it’s probably the plan they have right now....

I think it’s probably fair to say that the Iraqi political leaders, Sunni, Shiia, Kurd in the main, are somewhat further apart now than they were six months ago. In other words, the Bush administration’s hope that the military surge would be accompanied by what they called a political surge, a movement towards some sort of national reconciliation, uniting around a kind of national compact, that has simply not occurred. Indeed, the gulf between the Shiite and Sunni leaders in the government is probably wider than it has ever been. There’s a great deal of recrimination. There’s hardly a day when the Sunnis do not, as they did again today, threaten to withdraw from the government altogether. There’s virtually no progress on the key benchmarks, as the Bush administration calls them, matters like a comprehensive oil law that will settle the issue of how oil revenues, which account for 90% of government revenues here, will in future be divided and spent between the various communities, and many other issues, eighteen of them, benchmarks identified by the Congress, there’s very little progress on those benchmarks. Where there is some progress is at the grass roots level, some progress, though we’re beginning to see tribal leaders, in particular, in some of the most heavily congested war areas, beginning to stand up and say they’ve had enough of it, and to volunteer to put forth their young men, either to join the Iraqi police or army, or to join in tribal auxiliaries, or levees if you will. That’s probably the most encouraging political sign. But at the Baghdad level, unfortunately, the United States still does not have an effective political partner....

...[Y]ou would think it would be so, wouldn’t you, that the threat of withdrawal of American troops, and the risk of a slide into catastrophic levels of violence, much higher than we’ve already seen, would impel the Iraqi leadership to move forward. But there’s a conundrum here. There’s a paradox. That’s to say the more that the Democrats in the Congress lead the push for an early withdrawal, the more Iraqi political leaders, particularly the Shiite political leaders, but the Sunnis as well, and the Kurds, are inclined to think that this is going to be settled, eventually, in an outright civil war, in consequence of which they are very, very unlikely or reluctant, at present, to make major concessions. They’re much more inclined to kind of hunker down. So in effect, the threats from Washington about a withdrawal, which we might have hoped would have brought about greater political cooperation in face of the threat that would ensue from that to the entire political establishment here, has had, as best we can gauge it, much more the opposite effect, of an effect that persuading people well, if the Americans are going, there’s absolutely no…and we’re going to have to settle this by a civil war, why should we make concessions on that matter right now? For example, to give you only one isolated exception, why should the Shiite leadership, in their view, make major concessions about widening the entry point for former Baathists into the government, into the senior levels of the military leadership, that’s to say bringing in high ranking Sunnis into the government and the army and the police, who themselves, the Sunnis, are in the main former stalwarts of Saddam’s regime. Why would the Shiites do that if they believe that in the end, they’re going to have to fight a civil war? This is not to reprove people in the Congress who think that the United States has spent enough blood and treasure here. It’s just a reality that that’s the way this debate seems to be being read by many Iraqi politicians....

I think the war is close to lost, but I don’t think that all hope is extinguished, and I do think, as do many of my colleagues in the media here, that an accelerated early withdrawal, something which reduced American troops, even if they were placed in large bases out in the desert to, say, something like 60-80,000 over a period of six to nine months, and in effect, leaving the fighting in the cities and the approaches to the cities to the Iraqis, I think the result of that would, in effect, be a rapid, a rapid progress towards an all-out civil war. And the people who are urging that kind of a drawdown, I think, have to take that into account. That’s not to say, I have to say, that that should be enough to inhibit those politicians who make that argument, because they could very well ask if that’s true, can those who argue for a continued high level of American military involvement here assure us that we wouldn’t come to the same point three or four years, and perhaps four or five thousand American soldiers killed later? In other words, we might only be putting off the evil day. It seems to me that’s where this discussion really has to focus. Can those who argue for staying here, can they offer any reasonable hope that three, two, three, four years out, the risk of a decline into cataclysmic civil war would be any less? If the answer is no they can’t, then it seems to me that strengthens the argument of those who say well, we might as well withdraw fairly quickly now....

Whatever we may make of the original intent of coming here, if the United States did not have a problem with Islamic extremism in Iraq before 2003, it certainly does now. You only have to look at the pronouncements of Mr. bin Laden and Mr. Zawahiri, his deputy, to see that they regard Iraq now as being, if you will, the front line of the Islamic militant battle against the West. And so if American troops were withdrawn, I think that there would be a very serious risk that large parts of this country will fall under the sway of al Qaeda linked groups. Now we could debate what that exactly means. Al Qaeda’s a holding company. Does that mean that Mr. bin Laden would be able to direct affairs in Afghanistan? No, I don’t think he would. I don’t think he does now. But it would mean that Islamic extremists who bear the worst intent towards the United States would have a base similar to the base they had in Afghanistan before 9/11 from which to operate, and I think it’s very likely that they would then begin to want to expatriate their hatred of the United States in some way or another. In fact, it’s already the case, that there are parts of Iraq which are under the sway of groups that swear allegiance to al Qaeda. And just to speak of one of them, the city of Sumarra, where I was yesterday, it’s about sixty miles north
of Baghdad, is definitely under the sway of al Qaeda right now. And that would likely get very much worse in the event of an accelerated withdrawal. So I don’t think it’s purely propaganda, political propaganda on the part of the Bush administration to say that there would be a major al Qaeda problem here. It seems to me it’s absolutely self-evident that there would be....

This a long and very important interview, well worth your valuable time to read it all.

I will have many other comments later but my focus is to stick to real analysis that is food for thought and not all the sound bites from all the players in the politics of it all including the inane comments from Senators and the Presidential candidates; while those comments make the news and are interesting from an entertainment and political perspective those biased and self-serving comments often offer little insight into the depths and complexities of the situations involved.

I think the Iraq war will be the defining issue of the 2008 presidential election with the Democratic nominee determined to withdraw and the Republican candidate determined to stay. In reality an exit cannot practically be quick and easy regardless of the intent to "end the war." The issue is how soon we draw down, by how much and what carnage do we cause and foment in the drawdown/withdrawal/retreat/cut and run.

The second most important issue will be health care with both sides agreeing to a goal of universal coverage relatively quickly but with Democrats in a favor of a single-payer government solution and the Republicans for a multi-payer, portable and tax driven solution for coverage.

I also predict, contrary to what the polls suggest, it will again be a very close election but the issues will be more clearly defined than in a long time: Hawk v. dove, big government v. less-big government. An exciting, sometimes bitter, and close election is again on the horizon.

Income Equality v. Opportunity

2007-08-01T14:00:00.000-04:00

In a fascinating piece by Arthur C. Brooks in the Summer 2007 issue of City Journal the issue of income inequality is explored in terms of what people really want and a review of some numbers and polls on the issue. The article is "What Really Buys Happiness? - Not Income Equality but Mobility and Opportunity":

The United States is a rich nation getting richer....

Reason to celebrate? Not according to those who worry about rising income inequality—the fact that the rich are getting richer faster than the poor are getting richer....

Rising inequality makes for good political fodder...liberal politicians, policymakers, and social activists who want to reduce economic inequality through greater taxation and redistribution of wealth. And their plan draws inspiration from a particular academic theory: that inequality is socially destructive because it makes people miserable. As a scholar working in the field of public policy, I have long witnessed hand-wringing about the alleged connection between inequality and unhappiness. What first made me doubt this prevailing view was not some new scholarly study but rather that when I questioned actual human beings about it, few expressed any shock and outrage at the enormous wealth of software moguls and CEOs. On the contrary, they tended to hope that their kids might become the next Bill Gates.

Were these people somehow unrepresentative of America? Or was the academic consensus wrong? I set out to discover which it was. What I found was that economic inequality doesn’t frustrate Americans at all. It is, rather, the perceived lack of economic opportunity that makes us unhappy. To focus our policies on inequality, instead of opportunity, is to make a grave error—one that will worsen the very problem we seek to solve and make us generally unhappier to boot....

...the arguments linking economic inequality to unhappiness are mistaken. If the egalitarians are right, then average happiness levels should be falling. But they aren’t. The GSS shows that in 1972, 30 percent of the population said that they were “very happy” with their lives; in 1982, 31 percent; in 1993, 32 percent; in 2004, 31 percent. In other words, no significant change in reported happiness occurred—even as income inequality increased...

Believing in mobility helps make people happy, then. But does mobility actually exist in the United States? The Left doesn’t think so. Liberals, including rich liberals, are far less likely than conservatives to see a better future for people who work hard. Just 26 percent of liberals with incomes above the national average believe that there’s a lot of upward income mobility in America, versus 48 percent of conservatives with below-average incomes. And 90 percent of the poorer conservatives said that hard work and perseverance could overcome disadvantage, versus 65 percent of the richer liberals. If a liberal and a conservative are exactly identical in income, education, sex, family situation, and race, the liberal will still be 20 percentage points less likely than the conservative to say that hard work leads to success for the disadvantaged.

It is small wonder, then, that conservatives tend to be happier than liberals today. The 2004 GSS showed that 44 percent of people who identified themselves as “conservative” or “extremely conservative” were “very happy” about their lives; only 25 percent of self-identified liberals or extreme liberals gave that response. Conservatives believe that they live in a more promising country than liberals do, and that makes them happier.

And those left behind, it’s important to note, will almost certainly not become happier if we redistribute more income. Indeed, they will probably become less happy. Policies designed to lower economic inequality tend to change the incentives of both the haves and the have-nots in a way that particularly harms the have-nots. Reductions in the incentives to prosper mean fewer jobs created, less economic growth, less in tax revenues, and less charitable giving—all to the detriment of those left behind. And redistribution can, as the American welfare system has shown, turn beneficiaries into demoralized long-term dependents. As Irving Kristol put it three years before the federal welfare reform of 1996, “The problem with our current welfare programs is not that they are costly—which they are—but that they have such perverse consequences for people they are supposed to benefit.”

Further, policies to redress economic inequality hardly affect true inequality at all. Policymakers and economists rarely denounce the scandal of inequality in work effort, creativity, talent, or enthusiasm. We almost never hear about the outrage that is America’s inequality in leisure time, love, faith, or fun—even though these are things that most of us value more than money. To believe that we can redress inequality in our society by moving cash around is to have a materialistic, mechanistic, and totally unrealistic understanding of the resources that we truly care about.

Finally, arguments against inequality legitimize envy. Americans may indeed have strong concerns about their relative incomes and may seek status as reflected in their economic circumstances. But to base our policies on the anxieties of those at the back of the status race is to bow before Invidia. A deadly sin is not, in my view, a smart blueprint for policymaking.

A more accurate vision of America sees a land of both inequality and opportunity, in which hard work and perseverance are the keys to jumping from the ranks of the have-nots to those of the haves. If we can solve problems of absolute deprivation, such as hunger and homelessness, then rewarding hard work will continue to serve as a positive stimulant to achievement.

Redistribution and taxation, beyond what’s necessary to pay for key services, weaken America’s willingness and ability to thrive.

This vision promotes policies focused not on wiping out economic inequality, but rather on enhancing economic mobility. They include improving educational opportunities, aggressively addressing cultural impediments to success, enhancing the fluidity of labor markets, searching for ways to include all citizens in America’s investing revolution, and protecting the climate of American entrepreneurship.

Placidity about income inequality, and opposition to income redistribution, are evidence of a light heart, not a hard one. If happiness is our goal, those who promote opportunity over economic equality have no apologies to make.

The Ethanol Scam

2007-08-01T12:53:00.000-04:00

From a post by Larry Kudlow over at The Corner comes this article from Rolling Stone, clearly not one of my regular sources, but a fascinating article that proves what some of us have all been thinking for some time. Some snippets from "Ethanol Scam: Ethanol Hurts the Environment And Is One of America's Biggest Political Boondoggles":

...Ethanol doesn't burn cleaner than gasoline, nor is it cheaper. Our current ethanol production represents only 3.5 percent of our gasoline consumption -- yet it consumes twenty percent of the entire U.S. corn crop, causing the price of corn to double in the last two years and raising the threat of hunger in the Third World. And the increasing acreage devoted to corn for ethanol means less land for other staple crops, giving farmers in South America an incentive to carve fields out of tropical forests that help to cool the planet and stave off global warming.

So why bother? Because the whole point of corn ethanol is not to solve America's energy crisis, but to generate one of the great political boondoggles of our time. Corn is already the most subsidized crop in America, raking in a total of $51 billion in federal handouts between 1995 and 2005 -- twice as much as wheat subsidies and four times as much as soybeans. Ethanol itself is propped up by hefty subsidies, including a fifty-one-cent-per-gallon tax allowance for refiners. And a study by the International Institute for Sustainable Development found that ethanol subsidies amount to as much as $1.38 per gallon -- about half of ethanol's wholesale market price.

Three factors are driving the ethanol hype. The first is panic: Many energy experts believe that the world's oil supplies have already peaked or will peak within the next decade. The second is election-year politics. With the first vote to be held in Iowa, the largest corn-producing state in the nation, former skeptics like Sens. Hillary Clinton and John McCain now pay tribute to the wonders of ethanol. Earlier this year, Sen. Barack Obama pleased his agricultural backers in Illinois by co-authoring legislation to raise production of biofuels to 60 billion gallons by 2030. A few weeks later, rival Democrat John Edwards, who is staking his campaign on a victory in the Iowa caucus, upped the ante to 65 billion gallons by 2025.

The third factor stoking the ethanol frenzy is the war in Iraq, which has made energy independence a universal political slogan. Unlike coal, another heavily subsidized energy source, ethanol has the added political benefit of elevating the American farmer to national hero. As former CIA director James Woolsey, an outspoken ethanol evangelist, puts it, "American farmers, by making the commitment to grow more corn for ethanol, are at the top of the spear on the war against terrorism." If you love America, how can you not love ethanol?

Ethanol is nothing more than 180-proof grain alcohol....

But as a gasoline substitute, ethanol has big problems: Its energy density is one-third less than gasoline, which means you have to burn more of it to get the same amount of power. It also has a nasty tendency to absorb water, so it can't be transported in existing pipelines and must be distributed by truck or rail, which is tremendously inefficient.

Nor is all ethanol created equal. In Brazil, ethanol made from sugar cane has an energy balance of 8-to-1 -- that is, when you add up the fossil fuels used to irrigate, fertilize, grow, transport and refine sugar cane into ethanol, the energy output is eight times higher than the energy inputs. That's a better deal than gasoline, which has an energy balance of 5-to-1. In contrast, the energy balance of corn ethanol is only 1.3-to-1 - making it practically worthless as an energy source. "Corn ethanol is essentially a way of recycling natural gas," says Robert Rapier, an oil-industry engineer who runs the R-Squared Energy Blog.

The ethanol boondoggle is largely a tribute to the political muscle of a single company: agribusiness giant Archer Daniels Midland....

Today, ADM is the leading producer of ethanol, supplying more than 1 billion gallons of the fuel additive last year. Ethanol is propped up by more than 200 tax breaks and subsidies worth at least $5.5 billion a year. And ADM continues to give back: Since 2000, the company has contributed $3.7 million to state and federal politicians.

The Iraq War has also been a boon for ADM and other ethanol producers. The Energy Policy Act of 2005, which was pushed by Corn Belt politicians, mandated the consumption of 7.5 billion gallons of biofuels by 2012. After Democrats took over Congress last year, they too vowed to "do something" about America's addiction to foreign oil. By the time Sen. Jeff Bingaman, chair of the Committee on Energy and Natural Resources, proposed new energy legislation this spring, the only real question was how big the ethanol mandate would be. According to one lobbyist, 36 billion gallons became "the Goldilocks number -- not too big to be impractical, not too small to satisfy corn growers."

Under the Senate bill, only 15 billion gallons of ethanol will come from corn, in part because even corn growers admit that turning more grain into fuel would disrupt global food supplies. The remaining 21 billion gallons will have to come from advanced biofuels, most of which are currently brewed only in small-scale lab experiments. "It's like trying to solve a traffic problem by mandating hovercraft," says Dave Juday, an independent commodities consultant. "Except we don't have hovercraft."

The most seductive myth about ethanol is that it will free us from our dependence on foreign oil. But even if ethanol producers manage to hit the mandate of 36 billion gallons of ethanol by 2022, that will replace a paltry 1.5 million barrels of oil per day -- only seven percent of current oil needs. Even if the entire U.S. corn crop were used to make ethanol, the fuel would replace only twelve percent of current gasoline use.

Another misconception is that ethanol is green. In fact, corn production depends on huge amounts of fossil fuel -- not just the diesel needed to plow fields and transport crops, but also the vast quantities of natural gas used to produce fertilizers. Runoff from industrial-scale cornfields also silts up the Mississippi River and creates a vast dead zone in the Gulf of Mexico every summer. What's more, when corn ethanol is burned in vehicles, it is as dirty as conventional gasoline and does little to solve global warming: E85 reduces carbon dioxide emissions by a modest fifteen percent at best, while fueling the destruction of tropical forests.

But the biggest problem with ethanol is that it steals vast swaths of land that might be better used for growing food. In a recent article in Foreign Affairs titled "How Biofuels Could Starve the Poor," University of Minnesota economists C. Ford Runge and Benjamin Senauer point out that filling the gas tank of an SUV with pure ethanol requires more than 450 pounds of corn -- roughly enough calories to feed one person for a year.

Thanks in large part to the ethanol craze, the price of beef, poultry and pork in the United States rose more than three percent during the first five months of this year. In some parts of the country, hog farmers now find it cheaper to fatten their animals on trail mix, french fries and chocolate bars. And since America provides two-thirds of all global corn exports, the impact is being felt around the world. In Mexico, tortilla prices have jumped sixty percent, leading to food riots. In Europe, butter prices have spiked forty percent, and pork prices in China are up twenty percent. By 2025, according to Runge and Senauer, rising food prices caused by the demand for ethanol and other biofuels could cause as many as 600 million more people to go hungry worldwide.

If you can, the entire thing is worth reading to get the passion the author puts into his opinion. Again, this isn't surprising to me but is good to see my suspicions in print. Corporate subsidies remain a huge problem in this country and so often violate my rules about how free trade is a good thing. And besides "Big Corn" my other favorite egregious example is "Big Sugar" and the subsidies for that industry that have caused many of our candy manufacturers to move offshore, particularly Canada, to escape the ridiculous sugar prices in America due to propping up "Big Sugar" to the detriment of industry and the consumer.

Sunk Costs, Decision Making & Iraq

2007-08-01T10:47:00.000-04:00

Walter Williams in a nice article today describes one of the most misunderstood and most important concepts in economics and in decision making in "Economic Thinking":

Historical costs, sometimes called sunk costs, are irrelevant to decision-making because they are costs that have already been incurred. That's something that's not intuitively obvious, even for some trained economists....

Today's debate over the Iraq War is so often discussed in terms of whether it should have been initiated in the first place, our faulty intelligence about Hussein's possession of weapons of mass destruction, and whether the Bush administration lied to the American people. Whether these observations and charges are true or false should in no way be a part of today's decision-making, for history is one of those immutable facts of life. We can change the future, but we cannot change the past, though we can learn from it.

The only costs relevant to decision-making are what economists call marginal or incremental cost; that's the change in costs as a result of doing something. That cost should be compared to the expected benefit. Think about pollution. Getting rid of pollution is a no-brainer. All that the authorities of, say, Los Angeles would have to do is to mandate that all pollution-emitting sources shut down. That would mean no driving, no manufacturing, no airplanes, no power generation and no lawn mowing. Angelenos would have perfectly clean air, but I doubt whether they'd agree that it's worth the costs. That means perfectly clean air is non-optimal, and so is perfectly dirty air. The question is, how much clean air do we want and at what cost? In other words, we should compare the additional benefit of cleaner air to the additional costs of getting it.

The idea of weighing the costs of doing something against its benefits are part and parcel of intelligent decision-making. If we only look to benefits, we'll do darn near anything because everything has some kind of benefit.

NYT: "A War We Just Might Win"

2007-08-01T10:22:00.000-04:00

In a surprising Op-Ed printed in the New York Times, of all places given the paper's constant criticism of the war in Iraq and of President Bush, positive news from the battle front is actually printed. This report may indeed be a very significant part of our future debates about the right course of action in Iraq. Two analysts from the liberal Brookings Institution, Michael O'Hannon and Kenneth Pollack, present their findings from a recent visit to Iraq in "A War We Just Might Win":

We are finally getting somewhere in Iraq, at least in military terms. As two analysts who have harshly criticized the Bush administration’s miserable handling of Iraq, we were surprised by the gains we saw and the potential to produce not necessarily “victory” but a sustainable stability that both we and the Iraqis could live with.

After the furnace-like heat, the first thing you notice when you land in Baghdad is the morale of our troops. In previous trips to Iraq we often found American troops angry and frustrated — many sensed they had the wrong strategy, were using the wrong tactics and were risking their lives in pursuit of an approach that could not work.

Today, morale is high. The soldiers and marines told us they feel that they now have a superb commander in Gen. David Petraeus; they are confident in his strategy, they see real results, and they feel now they have the numbers needed to make a real difference.

Everywhere, Army and Marine units were focused on securing the Iraqi population, working with Iraqi security units, creating new political and economic arrangements at the local level and providing basic services — electricity, fuel, clean water and sanitation — to the people. Yet in each place, operations had been appropriately tailored to the specific needs of the community. As a result, civilian fatality rates are down roughly a third since the surge began — though they remain very high, underscoring how much more still needs to be done....

But for now, things look much better than before. American advisers told us that many of the corrupt and sectarian Iraqi commanders who once infested the force have been removed. The American high command assesses that more than three-quarters of the Iraqi Army battalion commanders in Baghdad are now reliable partners (at least for as long as American forces remain in Iraq).

In addition, far more Iraqi units are well integrated in terms of ethnicity and religion. The Iraqi Army’s highly effective Third Infantry Division started out as overwhelmingly Kurdish in 2005. Today, it is 45 percent Shiite, 28 percent Kurdish, and 27 percent Sunni Arab.

In the past, few Iraqi units could do more than provide a few “jundis” (soldiers) to put a thin Iraqi face on largely American operations. Today, in only a few sectors did we find American commanders complaining that their Iraqi formations were useless — something that was the rule, not the exception, on a previous trip to Iraq in late 2005.

The additional American military formations brought in as part of the surge, General Petraeus’s determination to hold areas until they are truly secure before redeploying units, and the increasing competence of the Iraqis has had another critical effect: no more whack-a-mole, with insurgents popping back up after the Americans leave.

In war, sometimes it’s important to pick the right adversary, and in Iraq we seem to have done so. A major factor in the sudden change in American fortunes has been the outpouring of popular animus against Al Qaeda and other Salafist groups, as well as (to a lesser extent) against Moktada al-Sadr’s Mahdi Army.

These groups have tried to impose Shariah law, brutalized average Iraqis to keep them in line, killed important local leaders and seized young women to marry off to their loyalists. The result has been that in the last six months Iraqis have begun to turn on the extremists and turn to the Americans for security and help. The most important and best-known example of this is in Anbar Province, which in less than six months has gone from the worst part of Iraq to the best (outside the Kurdish areas). Today the Sunni sheiks there are close to crippling Al Qaeda and its Salafist allies. Just a few months ago, American marines were fighting for every yard of Ramadi; last week we strolled down its streets without body armor.

Another surprise was how well the coalition’s new Embedded Provincial Reconstruction Teams are working. Wherever we found a fully staffed team, we also found local Iraqi leaders and businessmen cooperating with it to revive the local economy and build new political structures. Although much more needs to be done to create jobs, a new emphasis on microloans and small-scale projects was having some success where the previous aid programs often built white elephants.

In some places where we have failed to provide the civilian manpower to fill out the reconstruction teams, the surge has still allowed the military to fashion its own advisory groups from battalion, brigade and division staffs. We talked to dozens of military officers who before the war had known little about governance or business but were now ably immersing themselves in projects to provide the average Iraqi with a decent life.

Outside Baghdad, one of the biggest factors in the progress so far has been the efforts to decentralize power to the provinces and local governments. But more must be done. For example, the Iraqi National Police, which are controlled by the Interior Ministry, remain mostly a disaster. In response, many towns and neighborhoods are standing up local police forces, which generally prove more effective, less corrupt and less sectarian. The coalition has to force the warlords in Baghdad to allow the creation of neutral security forces beyond their control.

In the end, the situation in Iraq remains grave. In particular, we still face huge hurdles on the political front. Iraqi politicians of all stripes continue to dawdle and maneuver for position against one another when major steps towards reconciliation — or at least accommodation — are needed. This cannot continue indefinitely. Otherwise, once we begin to downsize, important communities may not feel committed to the status quo, and Iraqi security forces may splinter along ethnic and religious lines.

How much longer should American troops keep fighting and dying to build a new Iraq while Iraqi leaders fail to do their part? And how much longer can we wear down our forces in this mission? These haunting questions underscore the reality that the surge cannot go on forever. But there is enough good happening on the battlefields of Iraq today that Congress should plan on sustaining the effort at least into 2008.

[Michael E. O’Hanlon is a senior fellow at the Brookings Institution. Kenneth M. Pollack is the director of research at the Saban Center for Middle East Policy at Brookings.]

Lieberman on Terrorism

2007-07-31T11:39:00.000-04:00

I find Senator Lieberman's position on Iraq, terrorism, the anti-war influence and his relationship with the Democratic leadership most interesting these days especially given his position as being the Democrats' nominee for Vice President only two presidential elections ago.

Here is a portion of a summary of an interview the Senator did with The Hill, "Lieberman escalates attack on Iraq critics":

Ever since Connecticut Democrats refused to back him for a fourth term in Congress, Joe Lieberman has been burnishing his independent credentials in the narrowly divided Senate while becoming increasingly critical of the Democratic Party on the war in Iraq.

Lieberman, the Democrats’ 2000 vice presidential nominee, insists he is not actively considering joining the Republican Party. But he is keeping that possibility wide open as his disenchantment grows with Democratic leaders. The main sticking points are their attempts to end the war in Iraq and their hesitation to take a harder line against Iran.

“I think either [Democrats] are, in my opinion, respectfully, naïve in thinking we can somehow defeat this enemy with talk, or they’re simply hesitant to use American power, including military power,” Lieberman said in a wide-ranging interview with The Hill.

“There is a very strong group within the party that I think doesn’t take the threat of Islamist terrorism seriously enough.”

...As Lieberman sees it, however, the Democratic Party has slipped away from its “most important and successful times” of the middle of last century, where it was tough on Communism and progressive on domestic policy.

...He has no plans to endorse a Democrat for president, including the senior senator from his home state, Christopher Dodd, and is open to backing a Republican candidate for president. Lieberman also startled Democrats when he lent his support to the re-election bid of Republican Sen. Susan Collins of Maine, a top target of the Democratic Senatorial Campaign Committee.

During this month’s Iraq debate, Lieberman was working behind the scenes strategizing with Republicans and was front-and-center in several GOP press conferences denouncing Democratic tactics to push for an end to the war.

Lieberman was the lone non-Republican to vote against Majority Leader Harry Reid’s (D-Nev.) efforts to shut down debate on an amendment to bring troops home by next April. (Reid voted against the cloture motion to file a similar motion at a later time.) Lieberman was also alone when he joined 40 Republicans in voting to kill an amendment by Sen. Jim Webb (D-Va.) to extend the time between troop deployments in Iraq.

“I’m disappointed that I am in so small a minority among Senate Democrats in taking the position that I have,” Lieberman said.

But even as he has played a key role on some of their top domestic initiatives, Democrats have at times kept their distance from Lieberman. Last week, for instance, Reid held a press conference with several Democrats to tout their efforts to pass the 9/11 Commission bill and a homeland-security spending plan. Lieberman, the lead Senate negotiator on the measure and chairman of the Homeland Security and Governmental Affairs Committee, was conspicuously absent.

Reid said it was not intentional to leave Lieberman out of the press conference, but Lieberman said not being invited was “surprising.”

The distance that Democratic leaders appear to be keeping from Lieberman could result from the animosity that the Democrats’ anti-war base has directed toward him. That criticism intensified even more last month, when he suggested military intervention against the Iranian government.

...Lieberman is unfazed and says he has no intention of formally rejoining the Democratic Party.

“For now, I find being an independent more fun,” Lieberman said. “The partisanship in this place is out of control. As an independent I’ve got the opportunity to speak out against that.”

Might Lieberman consider a run for Vice President as an Independent with a Republican nominee?

Big Labor & Presidential Politics

2007-07-31T09:57:00.000-04:00

As individuals most union members are great people while unions as organizations, to speak politely, are not great. I say this not lightly and with feeling. From my Labor Economics professor in undergraduate school who was an avowed socialist who never appeared in public without his peace symbol button firmly affixed to his tie, to my first lead role as a management negotiator versus the Teamsters ( the only time I have, coincidentally of course, been shot at - twice), and now seeing how the automotive unions have decimated the American automobile manufacturers, worked to kill Social Security reform, oppose free trade and every other sensible economic reform that is good for this country and the world, to teacher's unions opposing student measurements and school choice, and on and on -- I do not like unions.

So I give you this New York Times 'editorial', "Democrats' Field Creates Pleasant Predicament for Unions":

Union leaders say they are so happy with the Democratic presidential aspirants, though unsure of whom to support, that they are unlikely to endorse any of them before the primaries next year....

“There’s a pretty strong sentiment across the labor movement for Edwards,” Steve Rosenthal, a former political director of the A.F.L.-C.I.O., said. “But I think some unions are a little leery of endorsing him without more evidence that he can win.”

Another reason many unions are hesitating to endorse a candidate is their overall happiness with the eight hopefuls. Several back universal health coverage, a major union goal. All have endorsed labor’s main legislative priority, a bill that would make it easier to unionize workers.

“This is a pro-worker field of dreams,” said Bruce Raynor, president of Unite Here, which represents hotel, restaurant and apparel workers. “The field is much better from a worker’s standpoint than it was four years ago.” [Note: You should recall Mr. Raynor driving the textile industry out of North Carolina and much of the South and the jobs that went with the firms.]

Mrs. Clinton and Mr. Obama are wooing unions partly to prevent Mr. Edwards’s securing the A.F.L.-C.I.O. endorsement and partly to pick up individual union endorsements for themselves. Mr. Obama has repeatedly campaigned on behalf of a unionization drive at Resurrection Health Care’s nine facilities around Chicago.

The A.F.L.-C.I.O. endorsement is prized because it opens the door to major union contributions and to support from the federation’s political program, which contacted 13 million members of unions and union households in the 2006 campaign.

The political director of the federation, Karen Ackerman, said that thanks largely to the A.F.L.-C.I.O. efforts, 74 percent of union members voted for union-backed candidates in the Congressional elections last year.

Mr. Edwards has been by far the most aggressive in wooing labor. He spent a day in April working alongside a nursing home worker at the behest of the Service Employees International Union, and he has marched alongside striking Goodyear workers.

“If our board voted today, it would be leaning toward Edwards,” Leo Gerard, president of the United Steelworkers, said. “He showed up at a Goodyear picket line. He just called and said, ‘I’ll be there.’ That kind of stuff really rings home with our members.”

Mr. Gerard said his union would respect the A.F.L.-C.I.O. policy that its 55 member unions not endorse anyone until the federation decided whether it would make an overall endorsement. The Democratic candidates are scheduled to participate in an A.F.L.-C.I.O.-sponsored debate on Aug. 7 in Chicago. The federation said it was expecting 15,000 union members to attend the debate, at Soldier Field.

The president of the federation, John J. Sweeney, said the earliest it would endorse anyone would be late October. Mr. Sweeney said he doubted that any candidate could muster the requisite two-thirds support.

He cautioned against any rush, saying many unions acted too hastily in endorsing Howard Dean and Richard A. Gephardt in 2004, only to see those candidacies flounder early in the primaries. “There’s merit to delaying, because there are so many good candidates,” Mr. Sweeney said. “We’re seeing a very different attitude this time around. We learned from the last time that we had better be sure that when we endorse we’re supporting the candidate our members want to support. And there’s also an interest in backing a candidate who can win.”

Gerry McEntee, president of the American Federation of State, County and Municipal Employees, acknowledges having learned a lesson in endorsing Mr. Dean.

“We made a big error,” Mr. McEntee said. “The error was that to a large extent it was a leadership decision made without a deep enough effort to see how our members really felt.” Mr. Edwards and the other candidates are also seeking the endorsement of Change to Win, a rival federation made up of the service employees, the Teamsters and five other unions that left the A.F.L.-C.I.O.

The president of Change to Win, Anna Burger, said her group would probably not make a pre-primary endorsement. Ms. Burger also counseled against any rush to endorse a particular candidate, saying it might discourage other candidates from speaking out on workers’ issues. “We should give them space” she said.

Andrew L. Stern, the service employees’ president, also suggested that his group was in no hurry to endorse.

“This time, Edwards has done the most to win our support, but Senators Clinton and Obama, they’re not going to let Edwards sneak by them,” Mr. Stern said. “It’s like Roller Derby. We’re waiting for someone to break from the pack. We’re getting closer, but there’s no particular clarity.”

If neither labor federation endorses, that would open the door to individual unions’ endorsements. Union leaders said that the American Federation of Teachers and the Office and Professional Employees International Union were leaning toward Mrs. Clinton and that Unite Here, the Teamsters and the steelworkers were leaning toward Mr. Edwards. A Unite Here endorsement would be a boon in Nevada, because its Las Vegas local has 40,000 members and could dominate that state’s Democratic caucuses.

Two big unions, the service employees and the state, county and municipal employees, might be too torn to endorse anyone. Their locals in Illinois are enthusiastic about Mr. Obama. Several of their locals in New York favor Mrs. Clinton.

“There’s a certain amount of rooting for the home team,” Ms. Burger said.

Just a couple of footnotes here:
Can you draw any obvious correlation between the fact that education and our government is widely perceived to be dysfunctional despite the amount of money devoted to those undertakings and the fact that those employees are almost completely unionized and have almost zero turnover? Dysfunctional and employed for life does not a good combination for performance make.

And right or wrong, when President Reagan broke the air traffic controller's union did not the Republican Party cement and make unmistakable its honest opinion of unions, not union workers as individuals but union tactics?

And see my post "Labor's Impact on Free Trade: Bad Economics, Bad Foreign Policy, Bad for America" here.

What is Wealth?

2007-07-30T12:26:00.000-04:00

I have had the good fortune to hear Alan Weiss speak a few times and have greatly enjoyed some of his books. Dr. Weiss is a successful consultant and is even better at teaching how to be a person that provides true honest value to clients and how to maintain those relationships. In speaking with him in person one also senses that he really really enjoys what he does and even more communicating that skill and joy to others. Dr. Weiss puts out a free monthly newsletter, "Balancing Act: The Newsletter", that is more about life than about consulting and I enjoy reading it each month. Here is a tidbit from this month's newsletter that gave me some thinking moments and perhaps it will you:

Wealth, to me, is the creation of discretionary time. You can always make more money, but it's impossible to create more time. You have 24 hours in the day, and that's it. Money is just means to an end. Riches are not wealth. A bank account is not a lifestyle.

But, the time to do what you choose when you choose constitutes inestimable wealth. Watching your kids play soccer or dance at a recital, going to a spontaneous lunch with your spouse or a special friend, engaging in charity work without feeling it's "robbing you" of time otherwise needed elsewhere, are all displays of great wealth.

If you drive a 10-year old car and haven't purchased new clothes in ages because you have no money to do so, I'm concerned about your wellbeing. If you've denied yourself those items because you're using your money to sit in vaults, then I'm concerned about your wellness. I'm not suggesting we need lavish houses, large yachts, and legendary cars, but I do think that the ability to engage in activities with families, support good causes, and nourish your soul are legitimate investments.

"There is only one class in the community that thinks more about money than the rich," observed Oscar Wilde, "and that is the poor." A poverty mentality is not related to how much money one owns, but rather to one's view of how money should be used.

I continue to be amazed, not only at how stupid I was two weeks ago, but also at how many people I find myself coaching to whom I have to say, "You're approach to money is subconscious and your approach to time is unconscious." No one, not even people truly in poverty, should have a poverty mentality, which is akin to a victim mentality.

As Cher said in "Moonstruck" as she slapped her ardent suitor, "Snap out of it!"

Check the links above to read past newsletters, subscribe to the newsletter which I encourage you to do, or to find his main web site.

The Dark Cloud of Entitlements

2007-07-30T10:16:00.001-04:00

The US does not at present have a deficit spending problem contrary to some public pronouncements by pandering politicians and doom-saying, tax-seeking, big government types. As a percentage of GDP our deficit spending is now quite low and continues to decrease given present tax rates, on-going GDP growth rates and the amazing increase in our nation's wealth.

We do, however, have a large dark cloud hanging over us, the amount of entitlement spending we are committed to in the future. Government accounting practice does not require the reporting of future commitments in dollars as does GAAP for corporate and business life.

President Bush touched this third rail of politics when he had the courage to embrace Social Security reform. Bush was hammered by, it seemed, every special interest group from big labour protecting future contributions to union pension funds to AARP protecting, I suppose, their future life and health insurance business. By the way, I recommend to my older friends to renounce, resign from or refuse to join AARP just for the group's massive PR campaign against Social Security reform. Recall also that the proposal was for a voluntary system to opt out of a portion of the required system and contribute some portion to an individually owned account. The opposition feared that so many people would choose to have a real self-owned account the over-all system would be hurt even though guaranteed by the US government. What a denial of the rights of the individual that the opposition to reform endorsed! And my thanks to President Bush for being willing to speak the truth no matter how unpopular and contentious he knew it would be. I hope at least some Republican running for higher office will show this courage on the privatization of Social Security during the campaign.

Robert Samuelson in this week's Newsweek discusses the fear and loathing of current politicians, especially those campaigning for the White House, to broach the issue and presents the scary projections in "When Silence Isn't Golden"; some excerpts:

If you haven't noticed, the major presidential candidates—Republican and Democratic—are dodging one of the thorniest problems they'd face if elected: the huge budget costs of aging baby boomers. In last week's CNN/YouTube debate, New
Mexico Gov. Bill Richardson cleverly deflected the issue. "The best solution," he said, "is a bipartisan effort to fix it." Brilliant. There's already a bipartisan consensus: do nothing....
The aging of America is not just a population change or, as a budget problem, an accounting exercise. It involves a profound transformation of the nature of government: commitments to the older population are slowly overwhelming other
public goals; the national government is becoming mainly an income-transfer mechanism from younger workers to older retirees.

Consider the outlook. From 2005 to 2030, the 65-and-over population will nearly double to 71 million; its share of the population will rise to 20 percent from 12 percent. Social Security, Medicare and Medicaid—programs that serve older people—already exceed 40 percent of the $2.7 trillion federal budget. By 2030, their share could hit 75 percent of the present budget, projects the Congressional Budget Office. The result: a political impasse.

The 2030 projections are daunting. To keep federal spending stable as a share of the economy would mean eliminating all defense spending and most other domestic programs (for research, homeland security, the environment, etc.). To balance the budget with existing programs at their present economic shares would require, depending on assumptions, tax increases of 30 percent to 50 percent—or budget deficits could quadruple. A final possibility: cut retirement benefits by increasing eligibility ages, being less generous to wealthier retirees or trimming all payments.

Little wonder politicians stay silent.

Frankly, Social Security is the easy one to fix by instituting voluntary private accounts for a portion of contributions, gradually raising the retirement age, and probably a slight increase in the tax to cover the unfunded liability and the problem would be solved.

Medicare and Medicaid are tougher due to the terribly fast rising cost of medical care and the demographics of the aging population. The problem is exacerbated by the trend to put more and people under the programs to provide more coverage to the uninsured.

I believe the US is well on its way toward the adoption of universal health coverage as I believe we should be doing. This is evident by both the campaign promises of all Democrat contenders for the White House and most Republicans striving to, at minimum, seek cover on the issue. To me, Obama's plan seems the least worrisome followed by Hillary's plan and worst, as usual, is the Edwards plan. It is also interesting to note that Gingrich is the most articulate on the R side of the aisle in discussing health care and that he and Sen. Clinton have worked jointly together on the health care care issue very recently. Also of note, although unnoticed, was President Bush's proposal to begin to achieve portability of health care by reforming the tax code to essentially move the burden and responsibility from the employer to the employee for the tax benefits and deductions. Also, in the Senate last week, Senators Richard Burr (R-NC) and Bob Corker (R-TN) with four co-sponsors introduced the "Every American Insured Act"; legislation which doesn't exactly do what the name suggests, but does move toward further portability with tax code changes including a refundable and advanceable flat tax credit for health care costs and coverage.

My point is that as we move toward universal coverage, which I support, we should not move toward a one-payer system, that being the US government. It seems to me the only way to retain quality and reduce the rate of cost increases is through competition coupled with some regulation of coverage. Some regulation does mean imposed rationing, unfortunately, but not to the weakness of service, the lack of innovation, and the over-bearing power of stringent rationing and control of a one-payer government controlled system.

As we move to universal coverage, the goal should be to control costs, provide coverage for all, avoid the weaknesses of a one-payer government system, and, if we get lucky, help to manage the all ready looming liabilities of Medicare and Medicaid. Social Security should be reformed to allow options for private accounts and the retirement age should be gradually and carefully raised.

Schwab on Capital Gains Hikes

2007-07-29T09:45:00.000-04:00

Stephen Moore, now of course with the Wall Street Journal, does a "weekend interview" with Charles Schwab in "Talking to Chuck." Here is the fabled investment trendsetter on taxes:

Mr. Schwab describes the Bush administration's capital gains and dividend tax cuts as exactly the right prescription for the ailing stock market after the dot-com crash in 2000-2001. Those tax cuts, of course, are under constant assault by Democratic presidential hopefuls and the Democratic majorities in Congress.

What would be the stock market response to repealing them? "Oh, I think it would probably cost the market 5% to 10%," he predicts. "That may not happen on a single day. But it will certainly suppress prices. And the market is already anticipating these higher tax rates," he assures me, which means stock prices are already being suppressed by tax uncertainty.

"I would say we're probably in the neighborhood of $10 trillion of unrealized capital gains" Mr. Schwab says of the present economic situation. "If you put a 100% tax on it, of course, the government's going to get none of that. If you're at zero, you would get none. With the 15% rate for capital gains, we're probably at the optimum rate."

Then he adds something that House Ways and Means Committee chairman Charlie Rangel should take to heart: "Bear in mind that the higher [capital gains] tax is principally directed toward individual investors. Not foundations or pension funds. It will be the individual who takes the hit."

The Folly of Luxury Taxes

2007-07-27T16:17:00.000-04:00

Opinion Journal had a "fun" piece this week, originally from The American Spectator, written by David Hogberg, entitled "Emptying the Humidor" and sub-headed "Congressmen push a cigar tax, proving they've learned nothing from history." Here's some portions for you to smoke over:

Last week members of the Senate Finance Committee including chairman Max Baucus (D., Mont.), Jay Rockefeller (D., W.Va.), Chuck Grassley (R., Iowa), and Orrin Hatch (R., Utah) cut a deal to increase the funding for the State Children's Health Insurance Program to the tune of $35 billion over five years. To generate this money, the deal imposes a new luxury tax on cigars.

To understand why the luxury tax on cigars is a terrible idea, we need to revisit the history of the luxury tax of the early 1990s--a history that congressional members' severe amnesia is preventing them from remembering. Class-warfare thinking infected the luxury tax of 1990. Think of the multimillionaire whose wife was wearing a gold-and-diamond necklace and a fur coat. They were getting into their limousine to drive to their 100-foot yacht on which they would spend their weekend. How was it possibly fair that the rich spend so lavishly on such unnecessary items when Joe Six-Pack struggled just to put food on the table? Imposing a luxury tax on those items was a proper way to even things out, to make the rich pay their "fair share" to fund the government programs that helped Joe Six-Pack.

Unfortunately, Congress never bothered to consider that increasing the tax on these items, and thereby increasing the price of those items, might change the behavior of said rich people. (Indeed, many members of Congress stubbornly refuse ever to acknowledge that taxes ever affect behavior.) But said rich people had other ideas. If the price of jewelry, furs and yachts suddenly increased, then maybe purchasing a winter home in Florida seemed like a much better deal. Or maybe those rich people would take a shopping trip to other parts of the world, where the prices of jewelry, furs and yachts were now much more competitive thanks to the U.S. Congress.

And if members of Congress never considered that the luxury tax would discourage rich people from buying luxury items in the U.S., then they surely never considered that such an effect might not be so good for the Joe Six-Packs who worked in the industries producing luxury items. A Joint Economic Committee study later found that 330 jobs in the jewelry industry and 7,600 jobs in the yacht industry were lost thanks to the luxury tax. Perhaps the greatest irony was that in 1991 the federal government paid out over $7 million more in unemployment benefits to those workers than it collected in luxury tax revenues....

Fast forward to 2007. The current tax on cigars is a maximum 4.8 cents a cigar. The new proposed luxury tax on cigars is 53.13%, up to a maximum tax of $10 a cigar. Thus, if you like cigars worth $20, you'd be facing a staggering tax increase of 20,733%. By comparison, the luxury tax of 1990 was an increase of only 10%...

Of course, about as many people are going to shed tears for the person buying a $20 cigar as did for the rich person buying a yacht. But they might feel a lot of sympathy for the Joe Six-Packs who work in the cigar industry. Exact numbers about how many people work in the cigar industry today are hard to come by since the federal government stopped collecting data on cigar producers a few years ago. In 1999, the Census Bureau reported that 3,845 people worked in the cigar industry. Norm Sharp, president of the Cigar Association of America, guesstimates that the industry now employs between 7,500 and 10,000 workers, a plausible number given the growth in the industry in recent years. Whatever the number, what is clear is thousands of cigar employees face a fate similar to workers in the yacht and jewelry industries in 1990.

That is what Congress's severe case of historical amnesia yields--an astronomical tax increase leading to workers losing their jobs. But try to look at the bright side. If those cigar workers lose their jobs, the resulting decline in their incomes will mean that their kids will have no trouble qualifying for the State Children's Health Insurance Program.

I was with a glass and mirror company that was a supplier to a famous yacht manufacturer at the time of that tax on high-end goods and I saw first hand the effect of the luxury tax on workers who had no idea a "luxury tax" could hurt them.

Bottom line: All taxes have consequences and often the unintended consequences are the harshest.

Pope Benedict on Environmentalism & Evolution

2007-07-27T15:40:00.000-04:00

John L. Allen in his weekly All Things Catholic reports on Pope Benedict regarding the environment and on evolution:

One could say that summer 2007 is when the Vatican decided to go green. First came an announcement in June that more than 1,000 photovoltaic panels will be installed atop the Paul VI Audience Hall, allowing the building to utilize solar energy for light, heating and cooling. A month later, the Vatican became the first state in Europe to go completely carbon-neutral, signing an agreement with a Hungarian firm to reforest a sufficiently large swath of Hungary's Bükk National Park to offset its annual CO2 emissions.

To some, these may seem curiously cutting edge moves from a pope whose recent decisions to revive the pre-Vatican II Mass and to reaffirm claims that Catholicism is the lone true church have cemented his reputation as the ultimate "retro" figure. He sometimes brings to mind the famous quip that rolling back the clock is a perfectly reasonable thing to do if it's keeping bad time.

So what gives?

..."Everyone can see today that humanity could destroy the foundation of its own existence, its earth, and therefore we can't simply do whatever we want with this earth that has been entrusted to us, what seems to us in a given moment useful or promising, but we have to respect the inner laws of creation, of this earth, we have to learn these laws and obey them if we want to survive," Benedict said. "This obedience to the voice of the earth is more important for our future happiness than the voices of the moment, the desires of the moment. … Existence itself, our earth, speaks to us, and we have to learn to listen."

From there, Benedict said, we may also learn anew to listen to the voice of human nature as well, discovering in other people and in human communities moral laws that stand above our own ego. In that regard, the pope said, we can draw upon the great moral experience of humanity. Doing so teaches that human liberty never exists in isolation from others; it works only if it's rooted in a sense of common values....

And given some rather confusing statements from a number of sources on where the Vatican and Catholicism in general stands on evolution, here is what the Pope said:

"Presently I see in Germany, and also in the United States, a fairly bitter debate between so-called creationism and evolutionism, presented as if they were mutually exclusive alternatives: whoever believes in a Creator cannot believe in evolution, and likewise whoever believes in evolution has to exclude God," Benedict said. "This opposition is an absurdity, because on the one hand, there are many scientific proofs in favor of an evolution that seems to be a reality that we have to see, and that enriches our understanding of life and of existence as such. But the doctrine of evolution does not respond to all questions, above all to the great philosophical questions: Where does everything come from? How did everything start on the path that finally arrived at humanity?"

...To put this into a sound-bite, Benedict believes in both evolution and creation, each understood on its own terms. Speaking later in the session on a different topic, Benedict XVI said that this passion for synthesis is the spirit of Catholicism, always seeking both/and solutions.

And one more unrelated tidbit from the pontiff that I liked while he was discussing change in the Church and in society:

"Yet," Benedict said, "while falling trees make noise, growing ones are silent."

If you have some time the entire article is interesting both in fact and tone.

Globalization, Free Trade and Income Inequality

2007-07-26T16:11:00.000-04:00

So many misconceptions abound as to globalization, free trade and inequality of incomes, even among so many "educated" and well informed people. The facts are very different from the perceptions and we see that so often today in our populist politicians clamoring to spread the notion that free trade/globalization is bad and that, I suppose, government welfare and high taxes are good.

I tend to think of Edwards who seems to be running his campaign on this notion and of course supported by any politician seeking union contributions. Other politicians, such as Obama, tend toward the same use of politically popular and incorrect statements on economics but since Edwards is from North Carolina I find him especially interesting to watch. [An aside, I am glad he is playing on the national stage and not a Senator wanna-be in NC right now.] The reality is that union workers are more middle class than poor and see free trade as a threat to their jobs - which in some sense is true especially for the UAW stuck with the misguided leadership of Detroit compared to the innovation of the Far East (Toyota, Honda, Kia) and the poor leadership of the textile and furniture industries of the United States.

I will expand on these thoughts later and present from facts at hand and especially refer to serious economic analysis for you to wade through but for now how about some summary from a recent IBD editorial, "The Backlash Against Globalization":

A Financial Times-Harris poll of more than a thousand people found that those in the U.S., Britain and France were three times more likely to think globalization hurts their country than helps it.

And "in response to fears of globalization and rising inequality," wrote Financial Times reporter Chris Giles, "the public in all the rich countries surveyed . . . want their governments to increase taxation on those with the highest incomes."

...Those who see the world "worse off" because of globalization must explain why, as global trade has surged over the last 30 years or so, the rate of poverty around the world has plunged.

As Surjit Bhalla, an economist affiliated with the Institute for International Economics, recently wrote: "World poverty fell from 44% of the global population in 1980 to 13% in 2000, its fastest decline in history. Global income inequality has dropped over this period and is at its lowest level since 1910."

But what about workers in rich countries like the U.S. who worry about inequality? Will higher taxes correct their so-called inequities? Not at all. U.S. economic inequality has virtually nothing to do with globalization or free trade, per se. It has everything to do with education and skills.

A recent study for the National Bureau of Economic Research found that those with a bachelor's degree can expect to earn $51,000 or so a year. Those with just a high school diploma earn $28,000.So the "income gap" is really an education and skills gap. And it's quantifiable: $23,000 a year, or nearly $1 million over a career spanning 40 years. Taking more money from people who did the right thing — went to school or pursued more high-level training — isn't the way to run an economy. That is, unless you want to run it into the ground.

Even so, globalization is a boon to all Americans. From 1980 to 2006, our total trade in goods and services soared 543%, from a mere $575 billion, or 20.6% of GDP, to $3.69 trillion, or 28%of GDP.

Has that huge swing decimated our economy? Hardly. We've created 46 million new jobs over that time. And personal disposable income after inflation has surged 64% to $27,770 from $16,938.

In a study released just last month, economists Matthew Slaughter, Grant Aldonas and Robert Lawrence found that American families gain as much as $15,000 a year due to globalization — that is, freer trade. The benefits are not illusory. They're real.

By the way, countries that raise taxes to punish the rich end up punishing only themselves. At least that's the growing economic consensus. The largest recent study, by economists at the 26-nation Organization of Economic Cooperation and Development, found "tax rates negatively correlated with economic growth." A large number of earlier studies bolster their findings.

In other words, higher taxes mean lower growth. And vice versa. Higher taxes aren't a solution to inequality. Nor is protectionism.

Globalization isn't without its problems, of course, but overall it has made all of us a lot better off. We should be talking about how to improve it — not how to kill it off by erecting trade barriers and raising taxes.

I will follow up on this constantly to try to erase the myths about free trade, freedom from regulation, and the power of free markets to find the right solutions to problems, and may I dare say, usually the most moral solutions to problems rather than a government or societal solution.

Two reflections on free trade theory or the theory of comparative advantage:

First, I strongly believe that the government does have a role and duty to step in and help financially and re-train those individuals and families who suffered from the consequences of rapid changes in their workplaces and industry environments due to the lack of foresight or the greediness of managers and owners who were unwilling to adjust in time to the realities of new market places.

Second, I believe that the theory of comparative advantage as postulated by David Ricardo, a contemporary of Adam Smith in the late 1700s-early 1800s, which explains why free trade is always the best solution is irrefutable. In lay terms, when two parties specializing in what they do best and then trade then they are both better off even if one side is better at all tasks. I will devote a full post to this one day as it is absolutely true without question. Look it up if you have doubts in the meantime.

And question all you hear and read about economics and business with a keen ear.

Wind Farms in WNC

2007-07-26T10:02:00.000-04:00

The saga on the wind farm situation continues. To catch up just read below here. Here's part of the latest story:

An Ashe County man trying to build a commercial wind farm in Creston said yesterday that he doesn’t have the money to continue to do studies requested by the N.C. Utilities Commission.

Richard Calhoun of Northwest Wind Developers is asking for conditional permission to move forward with the project, but he said that his application could be dismissed before an Aug. 8 hearing.

The public staff of the utilities commission is recommending that the project be denied because Calhoun hasn’t submitted the requested information and because it believes that wind turbines violate the state’s Ridge Law, which prohibits tall buildings or structures on protected ridges.

“I thought early on that an individual could make a difference, but to do all the studies before you can get the certificate granted, you have to have such deep pockets,” Calhoun said. “You’d have to be a Duke Power or a Progress Energy.… it’s unfortunate.”

...Calhoun said yesterday that a wind study, site assessment, engineering studies, endangered-species studies and other work would require much more than $100,000.

“For a private individual to fund that and still be denied the ability to do a project, it’s throwing good money away,” he said. “I’m not willing to take that risk.”

Calhoun, a farmer, physician and former Ashe County commissioner, applied a year ago to build 25 to 28 wind turbines on land he owns in Creston. The project is being closely watched because it would be the state’s first commercial wind farm.

The issue has sparked passionate debate in the mountains. Supporters have said the wind turbines provide clean energy that could help solve the nation’s energy problems. Opponents say that the turbines, which can be 300 or more feet tall, would ruin the scenery and harm tourism and housing markets.

Although wind power in Western North Carolina figures prominently in the state’s goals to develop alternate sources of energy, it’s still unclear whether the Ridge Law would allow wind turbines in the mountains. Calhoun said he thinks that it does.

His family has lived in the mountains since the 1840s, and grows Christmas trees and hay, and he raises cattle. Property values have risen dramatically because Ashe County’s beauty has made it a desirable destination for tourists and second-home owners.

Some mountain families struggle now to pay taxes on land that has been in the families for generations. Calhoun said that his proposal is the right thing to do to create clean energy and to give farmers a way to make money and preserve family land.

He said he knew from the beginning that his application faced long odds. Even if the utilities commission would grant permission, he expected a challenge from the N.C. Attorney General’s Office about the Ridge Law.“I understood it from the start that this was a David vs. Goliath issue, but somebody has to make some noise somewhere to make people start thinking,” Calhoun said.

His biggest disappointment has been with people who have said they want clean energy but don’t want it in their backyards. “One of these days the lights will go dark, and we will wonder what happened,” he said.

I will keep up this story as it has broader implications than one wind farm.

Life Span of Oil

2007-07-20T15:25:00.000-04:00

James Petholoukis in his Capital Commerce blog reviews the varying opinions on the life span of oil as a energy resource and offers his opinion that is will become an important political and economic debate in "Are the Democrats the Peak-Oil Party?" Some excerpts follow:

"We have to understand how weak [Iran] is," explained Sen. Joe Biden last month at the Democratic presidential debate in Nashua, N.H. "They import almost all of their refined oil. By 2014, they are going to be importing their crude oil." If Biden really meant to say what he said, that places him firmly in the camp of those analysts who believe in "peak oil" and predict that global oil production will soon decline even as demand continues to rise, with the results being ever higher oil prices and shortages.

Peak oilers contend that the Middle East oil reserves are vastly overstated. Some, the minority to be sure, even think that global oil production will fall so far, so fast, that western civilization will have to return to some sort of pre-industrial way of life. Here are some choice predictions from one well-known proponent of the theory, James Howard Kunstler:

"One huge implication of the oil peak is that industrial societies will never again enjoy the 2 to 7 percent annual economic growth that has been considered healthy for over 100 years. This amounts to the industrialized nations of the world finding themselves in a permanent depression...The future is therefore telling us very loudly that we will have to change the way we live in this country. The implications are clear: We will have to downscale and rescale virtually everything we do...All indications are that American life will have to be reconstituted along the lines of traditional towns, villages, and cities much reduced in their current scale. These will be the most successful places once we are gripped by the profound challenge of a permanent reduced
energy supply."

Clearly, the members of the National Petroleum Council, a federal advisory group representing the oil industry, are not believers in peak oil. "Fortunately, the world is not running out of energy resources," concludes a new report. "Coal, oil, and natural gas will remain indispensable to meeting total projected energy demand growth. "But the report does advocate that the United States [make many clean and green changes.]

My [Pethokoukis] take: Between fears of global warming and higher energy prices, energy looks certain to be a major issue for the first time in a presidential election since 1980. Democrats already seem to have realized and are formulating specific plans, like Hillary Clinton's idea of a $50 billion
energy research fund, or a similar $10 billion "New Energy Economy" fund that John Edwards is proposing.

The GOP isn't quite there yet as far as addressing this as an issue with specifics. Rudy Giuliani, as part of his website's "12 commitments," merely says, "I will lead America towards energy independence." Mitt Romney advocates spending "more research dollars in power generation, fuel technology, and materials science. It is in new technologies that we will find solutions to our environmental and energy needs."

I strongly agree this will become a much larger issue. I know that Giuliani has promised to flush out in detail each of his "12 Commitments" over the course of the campaign as I suppose they will all. I also know that most energy stock analyst are on the "non-peak" side and watch the energy estimates of the oil companies very carefully, and that watchfulness lead to a shake-up in BP's management not too long ago.

Changing Demographics

2007-07-20T14:57:00.000-04:00

My last post touched our lack of of focus on South American countries to our detriment which is primarily due to the focus on the Middle East and Iraq in particular. The following is a bit of an analysis about the relationship of Catholicism and Europe but does highlight how the demographics of the world is both so important and so rapidly changing. By the way, it is from a weekly email from John L. Allen, Jr., who in his work in covering the Vatican for the National Catholic Reporter, ends up covering the world. Here is a portion of his regular column All Thing's Catholic in "The Vatican's Changing Relationship with Europe":

Mega-Trends

1. World Catholicism
A church long dominated by Europe and the United States is becoming steadily more global. The most important bit of data is this: In 1900, just 66 million Catholics, representing 25 percent of the global Catholic total, lived in Africa, Asia and Latin America. Today 720 million of the 1.1 billion
Catholics in the world live in those regions, representing 66 percent, or two-thirds, of all Catholics alive. That's an enormously rapid shift, and it implies a rising Southern tide in Catholicism over the 21st century. Mumbai, Nairobi and São Paulo will be to the 21st century what Paris and Milan were to the Counter-Reformation era in the 16th century, meaning the places where new energy first begins to stir. This will drive a far-reaching transformation of Catholic faith and practice.

2. Secularism and Catholic Identity
In response to runaway secularization in Europe and other pockets of the West, Catholicism today is practicing what sociologists call a "politics of identity," aggressively reinforcing its traditional doctrines, rites, and devotional practices. It's a 21st century Catholic version of how Judaism
responded to the destruction of the Temple and the reality of living in diaspora: "building a fence around the law." Just last week has seen two classic examples, with decisions from Pope Benedict XVI to widen use of the pre-Vatican II Latin Mass, and a declaration from the Vatican that Catholicism is the lone true church willed by Christ.

3. Multipolarism
While the economic and military superiority of the United States will not vanish in the 21st century, the rise of a number of other states and non-state actors is creating a more "multi-polar" world with multiple centers of power and influence. Two clusters seem poised to be especially consequential: what Goldman Sachs calls the "BRIC" nations of Brazil, Russia, India and China, who together
represent 40 percent of the world's population, and whose combined economies by 2040 are projected to be larger than those of the United States or Europe; and an emerging "Shi'a axis" from the Mediterranean to Central Asia, in which Iran will play a leadership role.

Labor's Impact on Free Trade: Bad Economics, Bad Foreign Policy, Bad for America

2007-07-20T14:09:00.000-04:00

It seems that only a few strong sources report on the trade shenanigans of the US Congress. Bob Novak is one of the most clear which he continues in "How Labor Rules." Read it all to belueve it. This is bad economics, bad foreign policy, very bad for all Americans including, I believe, big labor, and bad for America.

Ignoring pleas from outraged South American governments, Democratic leadership of the House this week was adamant about Congress going into its August recess without taking action on free trade agreements with Peru and Panama as promised....

Why did House Speaker Nancy Pelosi renege on her previous commitment? She dances to the tune of AFL-CIO President John Sweeney, who preaches outright protectionism. Hostility toward not only the Peru and Panama pacts but also a vital agreement with Colombia can be traced to influence on U.S. unions by South America's leftist labor leaders, originating in Hugo Chavez's Venezuela.

Beyond U.S. unpopularity in the Western Hemisphere, this exposes deeper problems for the new Democratic majority in Congress. While the AFL-CIO's authority is diminished in the labor movement and among the nation's workers, its chief rules in Congress. Democrats bowed to Sweeney's wishes in voting to end secret ballots in union recognition elections, but the more audacious demonstration of labor's influence on Capitol Hill was getting the House leadership to renege on a bipartisan deal affecting world trade.

Democratic leaders are impervious to the reality that Colombia, Peru and Panama now enjoy one-way trade access to the United States, whereas the agreements would open their markets to U.S. goods. Nor do the Democrats show concern about alienating Uribe and Garcia as Hugo Chavez's menace spreads through the hemisphere.

Sweeney's marching orders are not limited to Latin America. He dismisses the negotiated agreement that finally would open South Korea to U.S. autos as "a losing, one-sided agreement." Obediently, House Democratic leaders declared the Korean pact dead on arrival.

Earmarks: McHenry, Murtha & The House

2007-07-19T14:41:00.000-04:00

Two stories that say a lot about the US House Of Representatives:

From The Crypt's Blog at Politico.com entitled "What's In Your Wallet?":

Republican Rep. Jeff Flake of Arizona, the fiscal crusader who's never met an earmark he likes, questioned Democratic Rep. Peter J. Visclosky of Indiana on the House floor Tuesday about whether the Center for Instrumented Critical Infrastructure actually exists - since, hey, it's getting like a million bucks or something.

Visclosky, who chairs the spending subcommittee responsible for the project, had to admit that, well, he didn't have a clue.

After a lengthy back-and-forth, Flake, complaining that his staff couldn't find a website for the center, asked Visclosky, "Does the center currently exist?"

"At this time, I do not know," the Indiana Democrat replied. "But if it does not exist, the monies could not go to it."

And who could possibly be the sponsor of such an earmark? Yes, you guessed it, the man Republicans love to hate, Pennsylvania Democrat John P. Murtha. Despite the money's uncertain destination, the House rejected Flake's measure to strike the funds, 326-98. And the Visclosky bill also sailed through, 312-112.

And this update now in the article:

UPDATE: I failed to report last night that a certificate filed with the requested funds says the money is actually earmarked to Concurrent Technologies Corporation, a nonprofit technological consulting firm. A brief search of campaign finance records shows CTC President and CEO Daniel R. DeVos, of alternately Central City and Johnstown, Pa. has contributed $7,000 to Murtha's reelection campaign since April 2002.

Now, story number two concerning my own Representative from North Carolina, from the Winston-Salem Journal, "House Axes Perfect Christmas Tree":

The House killed The Perfect Christmas Tree.

When U.S. Rep. Patrick McHenry, R-10th, asked for federal tax money to expand a commercial development in rural Western North Carolina known as the Home of the Perfect Christmas Tree, the House turned him down flat.

So far this year, the House had not voted to reject a single earmark request - until this one.

McHenry had angered so many House members with attacks on earmarked spending that when he put in a request of his own, the long knives came out.

By a 249-174 vote, the House voted on June 28 to eliminate $129,000 from a spending bill that would have expanded a Christmas-crafts store in economically depressed Mitchell County.

...Two weeks before the vote, McHenry helped tie up the House for more than three days by criticizing the secrecy of special projects other House members wanted. He said he wanted to “hold the Democrats accountable for their slush fund, their secret earmarks and their pork-barrel projects.”

McHenry insisted that he was not fighting earmarked projects but the secrecy. The Democratic leadership did not want to disclose the earmarks until just before a final vote.

“I fought against keeping earmarks secret,” McHenry said in an interview. “I’m proud to say we won that battle.”

...In 2003, the Mitchell County Development Foundation started the Home of the Perfect Christmas Tree in Spruce Pine with money from the federal Appalachian Regional Commission and private investors. McHenry said he should have requested the earmark for the foundation, an
economic-development organization, instead of the Home of the Perfect Christmas Tree.

But he defended spending federal money to help a local economy devastated by international trade. Over the last five years, the county has lost a third of its manufacturing jobs to overseas furniture and textile competition.

The craft center’s name came from a popular children’s book, The Year of the Perfect Christmas Tree by Gloria Houston.

Last Christmas, first lady Laura Bush picked the store’s hand-blown ornaments and Carolina Snowflake woven-reed ornaments for two White House Christmas trees. She lauded the people of Spruce Pine for working together “to figure out a new industry for themselves.”

You will find an earlier post of mine on McHenry's tough relationship with the other side of the aisle and earmarks a few weeks ago. That post is here.

Green Energy Contentious in NC Mountains

2007-07-19T11:03:00.000-04:00

Does anyone remember the "windmills" (high profile, neat-looking, slender blade contraptions) going into Boone years ago? I thought they looked good and the wave of the future. They are gone now but I hope they come back. I personally would rather see clean wind power and solar panels rather than substations and supplemental generators in my view.

News on green energy disputes in the Winston-Salem Journal in a couple of recent stories. First, here's a bit of "Mountain Counties Show Resistance to Green Energy":

The mountain counties of Northwest North Carolina would probably generate a large part of the state’s renewable energy.

But residents in Ashe and Wilkes counties have already shown this year that reaching the proposed green-energy goals won’t come easily.

A proposal to build a wind farm on a ridge in Ashe County set off a storm of protest this year, with opponents saying that the giant turbines would ruin sweeping mountain vistas, killing tourism and housing markets. And a proposal to build a poultry-litter plant in a northwest county - Wilkes, Surry or Alexander - faces opposition.

It has the support of farmers, who want an alternative to spreading manure and bedding on fields, but environmentalists say that burning the litter would produce too much air pollution.

...Public outrage over Sugar Top, an Avery County resort on top of a mountain, led to the 1983 passage of North Carolina’s Ridge Law, which protects certain ridges from tall structures.

Among other issues, the Utilities Commission is looking at whether the ridge law bans large-scale wind turbines. Last month, Blowing Rock became the first local government to ban windmills. Town leaders said they support renewable energy but want to protect views and the town’s tourist-based economy.

Worth reading the article and also a partial update on the status is here in "Ashe Commissioners Adopt Wind-Energy Ordinance":

The Ashe County Board of Commissioners adopted a wind-energy ordinance yesterday that limits wind-turbine heights to 199 feet as measured to the tip of the turbine’s blade.

The new rules replace those that commissioners adopted in February as they hurried to get county-wide regulations in place before the first N.C. Utilities Commission hearing on a proposed commercial wind farm of 25 to 28 turbines in Creston.

The utilities commission’s hearings are scheduled in August, and the commissioners have been reviewing the ordinance.

The regulations are effective immediately because the commissioners voted unanimously on the matter. Their 5-0 vote followed a short public hearing.

The other major change reduces setback requirements for large wind-turbine systems from 1,700 feet to 1,000 feet from a property line. The change was made on the advice of an attorney hired by the county.He told commissioners that it was important to make the regulations consistent with
other county rules in case the issue is challenged in court.

Despite the reduced setback, about twelve members of a citizens group fighting the wind farm applauded commissioners when the rules were adopted.

Maria Whaley, a spokeswoman for Friends of Ashe County, said she was a little disappointed in the setback change, but she appreciates the process that commissioners have been through. Commissioners visited wind farms in West Virginia and Pennsylvania.She said she is pleased with the new height limits. “That was significant,” she said. “It went from basically unlimited to 199 feet.”

The 199-foot limit means that the turbines will not require aviation warning lights, as they would if a turbine were 200 feet or higher. Opponents of the project had objected to having flashing beacons in the night sky on ridge tops.

I think the height restrictions are reasonable and I hope to see non-obtrusive, fast turning, wind farms providing energy in our mountains. I lived in Wilkes and Ashe counties for some time and sitting here in Mitchell County I wish we had those initiatives and innovations under development here.

[Personal note: I have been away for many days traveling and getting needed things done but am happily back.]

"Blissfully Uneducated"

2007-07-10T10:03:00.000-04:00

The always superb Victor Davis Hanson in a piece in America.com, "Blissfully Uneducated," explores the state of higher education in this country and he does not like what he sees:

Americans increasingly cannot seem to answer questions like these adequately because they are blissfully uneducated. They have not acquired a broad knowledge of language, literature, philosophy, and history.

...[T]he aim of traditional education was to prepare a student in two very different ways. First, classes offered information drawn from the ages—the significance of Gettysburg, the characters in a Shakespeare play, or the nature of the subjunctive mood. Integral to this acquisition were key dates, facts, names, and terms by which students, in a focused manner in conversation and
speech, could refer to the broad knowledge that they had gathered.

Second, traditional education taught a method of inductive inquiry. Vocabulary, grammar, syntax, logic, and rhetoric were tools to be used by a student, drawing on an accumulated storehouse of information, to present well-reasoned opinions—the ideology of which was largely irrelevant to
professors and the university.

Sometime in the 1960s—perhaps due to frustration over the Vietnam War, perhaps as a manifestation of the cultural transformations of the age—the university jettisoned the classical approach and adopted the therapeutic.

In the end, education is the ability to make sense of the chaotic present through the prism of the absolute and eternal truths of the ages. But if there are no prisms—no absolutes, no eternals, no truths, no ages past—then the present will appear only as nonsense.

As always read all of Hanson's writing.

NYT: Dems on China "Wrongheaded"

2007-07-08T19:40:00.000-04:00

Even the New York Times sees trade wars with China as a "wrongheaded prescription," and "misguided." From an editorial, "Politics and the Yuan", here's the NYT:

Just in time for the presidential campaign, Barack Obama has joined Hillary Clinton on the misguided bandwagon of those seeking to penalize China for manipulating its currency. Last week, the two senators and Democratic candidates signed up as co-sponsors to a punish-China bill that would mandate retaliation against countries that keep their currencies cheap to boost their exports....

Still, the prescription is wrongheaded. There is no guarantee that a rise in the value of the yuan would, on its own, boost American workers’ wages or the economy in any significant way. Many of the things China exports to the United States have not been made in America for a long time. Forcing China to revalue the yuan would likely also lead to higher prices for goods in the United States and to a rise in interest rates if China decides to stop buying American Treasury bonds.

And it will complicate the management of a long list of nonfinancial issues the two nations urgently need to address....

Starting a trade war is not likely to change Beijing’s mind. And it will make it harder to persuade and pressure China to become a more responsible exporter and a more responsible international player.

So make a note, I agree with the New York Times on this issue.

Protectionism US Recession Trigger?

2007-07-08T19:15:00.000-04:00

Let me help put 2 + 2 together for us all here. Why am I harping on protectionism and China in particular? To answer the question some context is required.

First let's look at some positive economic numbers along with what Wall Street fears in terms of a significant downturn scanario. From the Capital Commerce blog by James Pethotoukis, "Economy Booming, So What Might Start the Next Recession?" where we find:

More good news came from the June income numbers: Real wages for workers—not managers—increased by 3.9 percent, year over year. Deflate by the core May inflation rate of 2.3 percent—the latest numbers available—and you get real wage growth of 1.6 percent. Not too shabby. Right now, Wall Street recession expectations are pretty low. "The threat of recession has abated, as job and income gains provide the wherewithal to support consumer spending," is the analysis of former Federal Reserve governor Lyle Gramley. In fact, the Big Money Crowd is more worried about China than U.S. housing as a source of future trouble. Case in point: this missive "What Would the Next Recession Look Like" that Goldman Sachs just sent me:

"So, what constitutes a recession in modern times, and when do they occur?...We suspect it would almost certainly involve a major economic slowdown in China. On almost any criteria (and topic), it is impossible to underestimate China's positive impact on the buoyancy of world growth this decade. That said, ourproprietary indicators show no sign of an imminent slowdown. In addition, our various proprietary indices suggest that the underlying global macro environment remains favorable...Moreover, if we and the consensus are correct, then the period 2003-2008 will have been one of the most powerful periods of economic growth globally since accurate data has been collectable for much of the world."

So if a slowdown in China is our biggest economic pitfall, then why on God's green earth would anyone want to start a trade war with China that would nehatively impact our relationship with China, the Chinese economy, and hence our economy? Ask the Democratic leadership in Congress, some pandering fear-mongering Republicans, and the Lou Dobbs of the world for an answer.

NC Senate 2008

2007-07-07T09:18:00.000-04:00

From Bob Novak's column today:

Sen. Elizabeth Dole of North Carolina, viewed as one of the most vulnerable incumbent Republican senators seeking re-election in 2008, has made a comeback with successful fund-raising and a boost in approval ratings.Dole's private polls put her favorability level at 59 percent, compared with President Bush's 42 percent.

Republican insiders attribute that mostly to her opposing the immigration bill backed by Bush. Thanks to effective second quarter fund-raising (at a level not yet announced), Dole is sitting on an estimated $2 million. She previously had been criticized as an ineffective first-term senator, mainly because of her national chairmanship of the failed 2006 Senate campaign.

Gov. Michael Easley, the strongest potential Democratic challenger so far, has resisted pleas that he run. Dole's war chest may discourage lesser-known Democrats. But State Rep. Grier Martin, an Iraq war veteran, has family money for a possible candidacy.

Movement to Protectionism Continued

2007-07-06T23:36:00.000-04:00

The last post on protectionism featured the movement in the US Senate against free trade. The US House is doing the same thing. In today's Washington Post, hardly a bastion of right-wing thinking, is a featured editorial, "Same Old Protectionism: House Democrats Put Up Roadblocks to a Balanced Approach to Free Trade":

TRYING TO salvage an American trade policy, the Bush administration took the unusual step of embracing bipartisanship. Unfortunately, the overture hasn't been reciprocated.

In May, the administration accepted Democratic demands for tougher labor and environmental standards in return for Democratic approval of free-trade agreements with Peru and Panama -- and the possibility of more. "Today marks a new day in trade policy," House Speaker Nancy Pelosi (D-Calif.) said. But last week, the speaker, along with House Majority Leader Steny H. Hoyer (D-Md.), Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) and Ways and Means trade subcommittee Chairman Sander M. Levin (D-Mich.), dashed those hopes. There will be no more "fast-track" authority for the administration to negotiate trade deals, they declared, until that glorious day when we "expand the benefits of globalization to all Americans." The Panama and Peru deals may still sneak through, although Mr. Rangel will be going to Lima and Panama City soon to discuss how those sovereign nations can change their laws to suit the U.S. Congress. Much bigger proposed agreements with Colombia and South Korea are dead, the Democrats say....

It would be nice if South Korea and other trading partners accepted every item on every U.S. industry's wish list. But that is not the nature of trade negotiations. In the real world, officials must weigh the costs and benefits to the country as a whole -- not to mention the legitimate interests of the other side. One union and the two smaller U.S. automakers should not be allowed to sink a deal that would improve relations with a strategic ally in Northeast Asia and deliver real gains to U.S. agriculture and industry -- not to mention American consumers. The Democrats' partisan embrace of rationalizations served up by labor and (part of) the auto lobby is not "a new day in trade policy." It's protectionism as usual.

Saturday's editorial in Investor's Business Daily is even more clear with "Congress Holds Columbia Hostage":

Congressional Democrats justify scrapping a U.S. trade pact with our best ally in the hemisphere on vague claims its government violates human rights. Last week, Colombia's people saw a different enemy.

It was couched in syrupy language, but it was as bad a blow to Colombia as any dealt by its enemies. The U.S. House Committee on Ways and Means, in a statement by Democrats Nancy Pelosi, Charles Rangel and Sander Levin declared the Democratic Party would deny free trade indefinitely to 46 million Colombians over a few dozen unsolved murders of union activists in the last year.

...Congress was looking for excuses to halt free trade. Why? For the sake of its own union backers, of course, and to curry favor with the leftist think tanks which are enraged about the success of Colombia's popular — and conservative — President Alvaro Uribe.

...[T]he real story of Colombia — [is] a nation struggling against the odds to forge a better future through free trade and democracy. Maybe Democrats ought to start thinking about what they really oppose when they try to paint Colombia as a banana republic and deny it the free trade it's earned.

The ways to kill an economy are not large in number and protectionism by any name is one of the greatest, most dishonest as it can be hidden in the disguise of helping workers and fairness while in reality it is the opposite. Protectionism may help temporarily a few favored industries and a few favored unions at the burden of the consumer, the taxpayer, and the harm done to non-favored industries and those workers. In the long run, everybody loses with protectionist policies.

Democrats Move to Protectionism

2007-07-06T09:30:00.000-04:00

More signs of protectionism are blowing in the wind this day. From the New York Sun, "Clinton Signs Gephardt as Key Advisor: Collapse of Support Seen for Free Trade":

Signaling the collapse of support for free trade in the Democratic Party, Senator Clinton's presidential campaign has signed up as an economic adviser a former House leader who staunchly opposed major trade deals, Richard Gephardt of Missouri.

Mrs. Clinton's decision to make Mr. Gephardt an official member of her economic team is a blunt repudiation of her husband's strategy from 1992, when he won the White House in part by distancing himself from unions and protectionist elements in the Democratic base.

"I think there's a large coming together within the Democratic Party in the last few years on the trade issue," Mr. Gephardt told reporters yesterday as he announced his endorsement of Mrs. Clinton and his new role with her campaign. "Senator Clinton has been at the center of that coming together. We've now defined a position that is for trade, that is for free trade treaties, but also requiring that there be a proper observance and a concern about labor and environmental rights in those treaties. We're in a time where there's much more agreement in the party."

While Mr. Gephardt put Mrs. Clinton at "the center" of the Democrats' new approach, the prevailing orthodoxy in the party now is nearly identical to what he was advocating in the 1990s when he led opposition to the North American Free Trade Agreement, which President Clinton championed.

And we read in the Financial Times, "Clinton and Obama Back China Crackdown":

Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides.

The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.

A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues.

The bill, introduced by Senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency and calls for a trade case to be brought by the US at the World Trade Organisation.

Analysts said the sponsorship of the bill by the two leading candidates made it more likely the US would take a more aggressive stance towards Beijing on trade issues if the Democrats took the White House.

In a separate letter sent recently to Hank Paulson, US Treasury secretary, Mr Obama warned that the “administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval” for free trade agreements.

The legislation could be voted on as early as the autumn and has been presented by its advocates as a WTO-compliant version of a more radical bill introduced in the last Congress by Senators Schumer and Graham that would have applied 27.5 per cent tariffs on Chinese goods and violated international trade rules.

Protectionism remains in my list of real concerns in our present environment. The ability of politicians to pander to the fears and hopes of voters in spite of the truth never ceases to amaze me. The theory of comparative advantage, developed late in the 1700's by David Ricardo, a contemporary of Adam Smith, apparently hasn't made its way to the halls of Congress as yet. All we need in the upcoming years is another Smoot-Hawley Act which was one of the major drivers of the Great Depression.

Scholars Speak

2007-07-05T15:56:00.000-04:00

Some leading scholars respond to MarketWatch at mid-year 2007, "exactly three quarters of the way through the first decade of the 21st Century," in "At Mid-Year: The Scholars Speak Up" and more than half of the responses were typical nonsense. Here's the worst one and the best one in my opinion. Read them all for some amusement and examples of academics totally cocooned in dream-world.

The worst:

A turn away from acquisitiveness

Barry Schwartz, 60, professor of psychology at Swarthmore College in Pennsylvania and author of the 2004 book "The Paradox of Choice."

Schwartz, who studies the intersection of economics and psychology, bemoans what he perceives as the antisocial, money-hungry turn that U.S. culture has taken over the past several decades.

He believes: "We're living in a society in which people basically think, nobody is going to take care of you but yourself." This drives greed, Schwartz reasons, because people feel the need to acquire more and more resources to protect themselves against disaster.

"We would have a more community-minded outlook if some of our basic needs, like health care, were taken care of," Schwartz says.

He hopes the next decade will mark a turn away from acquisitiveness and bring an increased interest in promoting well-being.

Says he: "I'm hoping to see serious progress made on shifting our focus in terms of policy away from increasing national wealth and towards increasing national welfare. We've been so intent on building wealth that we've neglected all kinds of other things: Health insurance, education, strong community ties, the opportunity to engage in meaningful work -- things that are much more important in terms of well-being than money once you've crossed the subsistence level."

I wonder how he intends to pay for all the health and welfare without any wealth.

The best:

Four ways the developed world can vastly improve human welfare

Bjorn Lomborg, 42, Danish economist, author of the "Cool It," a book on climate change to be published in September by Knopf.

One: "AIDS. It's something we could diminish dramatically by spending a relatively small amount of money. For about $28 billion, we could probably keep 28 million people from dying over the next 4-8 years. For every $1,000 you spend you can actually save a human life."

Two: Malaria. There is a quick and cheap fix, according to Lomborg. The solution? Investing in mosquito nets. "Also, we could do a lot to eliminate malaria by giving people Artemisinin as opposed Chloroquine. It's a slightly more expensive drug, but highly effective."

Four: Free trade. "If you really want to make a difference, make sure that that third world countries can actually participate in the market."

What are we focusing on to our detriment? Climate change, says Lomborg.

"Yes, it's a problem, but it's not one where we can do very much good right now. If the Kyoto Protocol was instituted, it would save only 1,000 people per year over the century. If you invest in research and development, it would be much more likely that our kids would be able to significantly reduce carbon emissions in the future."

The Fourth of July

2007-07-04T16:04:00.000-04:00

From today's Wall Street Journal :

Adams wrote Jefferson that the future would "depend on the Union" and asked how that Union was to be preserved. "The Union is still to me an Object of as much Anxiety as ever Independence was," he confided.

He was right to worry. The union has always been difficult, from the first fears that the 13 separate states would behave as competing countries or bickering groups, through a brutal and painful civil war whose wounds have yet to entirely heal, to a vast, modern land whose residents, taking for granted the blessings bestowed upon them, are deeply divided and quick to vilify each other.

More tragically, some seem to enjoy vilifying America, everything it has been and stands for, seeking and finding fatal shortcomings. Adams and Jefferson were not blind to those shortcomings. "We think ourselves possessed or at least we boast that we are so of Liberty of conscience on all subjects and of the right of free inquiry and private judgment, in all cases and yet," Adams admitted, "how far are we from these exalted privileges in fact." Recent moments of real unity after 9/11, when members of Congress stood together on the steps of the Capitol and sang "God Bless America," have been fleeting.

In 1825 Jefferson wrote to congratulate Adams on the election of his son John Quincy to the presidency--an election so close it was decided in the House of Representatives. "So deeply are the principles of order, and of obedience to law impressed on the minds of our citizens generally that I am persuaded there will be as immediate an acquiescence in the will of the majority," Jefferson assured him, "as if Mr. Adams had been the choice of every man." He closed: "Nights of rest to you and days of tranquility are the wishes I tender you with my affect[iona]te respects."

On July 4 the following year, as the nation celebrated the 50th anniversary of the Declaration of Independence, its two frail signers died within hours of each other. Their cause, "struggling for what is most valuable to man, his right of self-government," continues in the nation they launched,
still fraught with aspirations and anxieties, flaws and divisions but, one hopes, with the ability to reconcile as they did, to work together for the joint venture.

I recommend reading all of this piece and the one cited a few days ago from Bill Bennett in my post "The Neglect of US History."

Please take time out this holiday for a few minutes alone to really think about these United States of America, its history, how we are today, and our future.

Google Cars

2007-07-03T17:30:00.000-04:00

Finally, a smooth transition from one post to another which happens so rarely; from Honda Jets to Google Cars.

This started as a minor post from a quick blurb in the magazine "eWeek" which I still get in the print edition. I still like hard copy to flip through when I have no destination or purpose in mind unlike browsing where I am always going for something. And there was this:

Google.org is the philanthropic arm of the Google mother ship, with about $1 billion in startup funding from company founders Larry Page and Sergey Brin. One of the first efforts by Google.org—let's just call it Gorg for short—is a hybrid electric car that recharges itself using power produced by solar panels.

If you think of a typical hybrid with an outside plug and extra batteries for using stored electricity as the primary power source, you have the basic idea.

And then there was a reference to the Official Google Blog and "A Clean Energy Update":

Google.org is launching an exciting project that offers a glimpse of a smarter energy future: cars that plug into an electric grid powered by solar energy. Plug-in hybrid electric vehicles (plug-in hybrids”) can achieve 70 -100 miles per gallon, quadrupling the fuel economy of the average car on the road today (~20 mpg). As we demonstrated at today's event, plug-in hybrids can sell power back to the electric grid when it's needed most through vehicle-to-grid (V2G) technology.

As you may know, one of Google.org's core missions is to address climate change. In the U.S., transportation contributes about one-third of all greenhouse gas emissions –- with more than 60 percent of those emissions coming from personal vehicles. By accelerating the adoption of plug-in hybrids and vehicle-to-grid ("V2G") technologies, this new project, RechargeIT.org , aims to reduce emissions and dependence on oil while promoting clean energy technologies and increasing consumer choice. Linking the U.S. transportation system to the electricity grid maximizes the efficiency of our energy system. From these efforts, we believe the environment will benefit -- and consumers will have more choices to fuel their cars.

We've been working with Google engineers and Hymotion /A123Systems to build a small fleet of
plug-in hybrids, adding an external plug and additional batteries to a regular hybrid car so that it runs on electricity with gasoline (or even better, biofuels) to extend the driving range for longer trips.

Since most Americans drive less than 35 miles per day, you easily could drive mostly on electricity with the gas tank as a "safety net." Our goal is to demonstrate the plug-in hybrid and V2G technology, get people excited about having their own plug-in hybrid, and encourage car companies to start building them soon.

In the preliminary results from our test fleet, on average the plug-in hybrid gas mileage was 30+ mpg higher than that of the regular hybrids. In conjunction with Pacific Gas and Electric, we also demonstrated the bidirectional flow of electricity through V2G technology, and have awarded $1
million in grants and announced plans for a $10 million request for proposals (RFP) to fund development, adoption and commercialization of plug-ins, fully electric cars and related vehicle-to-grid (V2G) technology.

For even more details about the entire car project on grant amounts, the companies involved and more, here is the full press release, which is actually interesting.

It strikes me a company, not wedded to old technology and without billions invested in property, old plants, wrong equipment and high cost human capital, and that has tons of cash, can do amazing things.

A Google Car, who could have imagined?

Honda Jets

2007-07-02T10:37:00.000-04:00

I would think that this story would make the NC news but no. This is from Canadian Driver, June 28, 2007:

Greensboro, North Carolina - Honda Aircraft Company Inc. has broken ground for its new headquarters and manufacturing facility at Piedmont Triad International Airport in Greensboro, North Carolina. The company will produce the new HondaJet advanced light jet.
Honda will manage the research, development, sales, marketing and manufacturing of the HondaJet at the new facility, which will replace the company's existing hangar and office complex at the airport. The first phase of construction will be completed in spring 2008 and will consist of office space, research facilities and an airplane hangar.
The company plans to begin deliveries of the airplanes to customers in 2010. The total investment is expected to be about US$100 million, including equipment. The company says that its workforce will increase to approximately 350 people once the plant reaches full production, and that about 90 per cent of the plane's component parts will be supplied by companies in Canada and the U.S.

GWOT Just a Bumper Sticker

2007-07-01T23:57:00.000-04:00

A political cartoon from IBD's Pulitzer Prize Winner, Michael Ramirez for Monday, July 2, 2007.

The Neglect of US History

2007-07-01T19:59:00.000-04:00

Bill Bennett has an important piece out on the tragedy of the twin failure of our schools to teach and our children not possessing the knowledge of the events and people that have shaped these United States. In "Our National Alienation & Amnesia" he makes many good points and recalls a few highlights of some of our great personalities from our past. A portion to get the flavor:

Two years ago, the Pulitzer Prize-winning historian David McCullough told the U.S. Senate that American History was our nation’s worst subject in school...Our children do worse in American history than they do in reading or math. McCullough testified we were facing the prospect of national amnesia, saying, “Amnesia of society is just as detrimental as amnesia for the individual. We are running a terrible risk. Our very freedom depends on education, and we are failing our children in not providing that education.”

McCullough is right, and it is a double tragedy: a) our children no longer know their country’s history and b) the story they do not know is the greatest political story ever told...

In his farewell address to the nation, the large-minded amateur historian President Ronald Reagan warned of what we see in our nation’s report card today, saying “If we forget what we did, we won't know who we are. I'm warning of an eradication of the American memory that could result, ultimately, in an erosion of the American spirit.”

Our history is full of controversy, suffering, struggling, overcoming, and winning. There is no reason to elevate its failings at the expense of its successes, nor is there reason to ignore its failings or, worse, turn it into a snooze-fest....

The great adventurer Bernard DeVoto once wrote to Catherine Drinker Bowen about why her task as a historian was so important:
"If the mad, impossible voyage of Columbus or Cartier or La Salle or Coronado or John Ledyard is not romantic, if the stars did not dance in the sky when our Constitutional Convention met, if Atlantis has any landscape stranger or the other side of the moon any lights or colors or shapes more unearthly than the customary homespun of Lincoln and the morning coat of Jackson, well, I don’t know what is."
Indeed. Our history is all that and more, much more. America was, is, and — we hope — will continue to be the place where, more than anyplace else, dreams actually do come. It is, as Abraham Lincoln described it, “the last best hope of earth.” But to live that dream, to know what hope we convey, and to teach it from generation to generation, we must describe it, appreciate it, and learn to fall in love with it all over again.

Bill Bennett has produced a reminder of what many of us missed unless we struck out on our own to really read our exciting history. This would be a good column to pass along to friends for excellent Fourth of July reading and a reminder of what all of wonderful national holiday really means.

Strategic Difference In Puzzles and Mysteries

2007-07-01T10:03:00.000-04:00

In unexpected places we often find unexpected ways of thinking and hence new ways to solve problems. In an article in the Smithsonian, where one usually finds pretty pictures of nature and discussions of historic objects, I found some commentary from the director of the Rand Corporation's Center for Global Risk and Security. I am not sure why this was in the magazine in which it was in but it fit into the magazine's heading of "Presence of Mind." Nevertheless, the author, a Gregory F. Treverton, who sounds like a very proper security analyst indeed, gives us "Risks and Riddles," with a very teasing subheading of "The Soviet Union was a puzzle. Al Qaeda is a mystery. Why we need to know the difference.":

Puzzles can be solved; they have answers.

But a mystery offers no such comfort. It poses a question that has no definitive answer because the answer is contingent; it depends on a future interaction of many factors, known and unknown. A mystery cannot be answered; it can only be framed, by identifying the critical factors and applying some sense of how they have interacted in the past and might interact in the future. A mystery is an attempt to define ambiguities.

Puzzles may be more satisfying, but the world increasingly offers us mysteries. Treating them as puzzles is like trying to solve the unsolvable—an impossible challenge. But approaching them as mysteries may make us more comfortable with the uncertainties of our age....

Puzzle-solving is frustrated by a lack of information. Given Washington's need to find out how many warheads Moscow's missiles carried, the United States billions of dollars on satellites and other data-collection systems. But puzzles are relatively stable. If a critical piece is missing one day, it
usually remains valuable the next.

By contrast, mysteries often grow out of too much information. Until the 9/11 hijackers actually boarded their airplanes, their plan was a mystery, the clues to which were buried in too much "noise"—too many threat scenarios. So warnings from FBI agents in Minneapolis and Phoenix went unexplored. The hijackers were able to hide in plain sight. After the attacks, they became a puzzle: it was easy to pick up their trail.

Solving puzzles is useful for detection. But framing mysteries is necessary for prevention.

For the mysteries of intelligence, measures of effectiveness are elusive. The goal of prevention is...nothing—an absence of attacks. But if no major terrorist attack occurs, does that represent the effectiveness of prevention, simple good luck or the fact that the threat was overstated in the first
place?

That's one uncertainty we'll have to learn to live with. There are others that framing mysteries can help us understand.

The author uses the above to illustrate, besides the difference in the Cold War and 911, the trials and tribulations of medicine to prevent disease, the Enron scandal, and discussions of energy; rightly pointing out that most energy analysis, particularly future oil supply and prices, treats the problem as a puzzle while it too is rightly a mystery, as least as he defines a mystery.

I think this distinction is useful in framing many situations such our discussions of global warming (definitely a mystery), proper public policy on taxes, trade, deficits and even onto how certain of our friends and family may react to given or predictable circumstances.

The entire article is a good, quick read.

SRI and Greenwashing

2007-07-01T09:39:00.000-04:00

Socially Responsible Investing is indeed a growing trend as is the environmental movement. In "The Green in Hedge Funds Isn't All About Money" I found a term new to me that describes a phenomenon that I have been suspecting recently - "greenwashing." Here's the idea:

The popularity of the environment and all things "green" has not escaped hedge funds: At least three dozen hedge funds are already applying environmental and social screens to the investment process, with more on the way according to industry reports.

The strategy is to get a piece of the socially responsible investing market, estimated at approximately $2 trillion, according to the Social Investment Forum, specifically the environmental sector, which is growing rapidly.

...hedge funds jumping on board with their specific opportunity lust is sure to buttress more environmental consideration elsewhere in the investment markets, if only for one reason: activity. Hedge funds trade heavily and that activity will surely spawn other investors to seek opportunities in the green sector as well.

This hunt for higher returns, or alpha in investment jargon, may prop up prices even more in environmental stocks, shares of companies that operate in the waste-management or alternative-energy sectors, for example. Activity breeds interest and interest in investing usually brings with it investment dollars. And those dollars usually push up share prices....

"The function of a hedge fund is to create alpha, and anything that gets in the way of that is unwanted," Phillip Goldstein, a manager of Opportunity Partners LP, a hedge fund based in Pleasantville, N.Y., told Investment News. "It sounds like a marketing gimmick, and I don't know that any individuals would invest in something like that."

That marketing gimmick is called "greenwashing" in environmental circles, and it is when a company pays lip service to the environment but doesn't really put into practice anything tangible to back up its environmentally friendly claims.

Home Depot recently offered to include "green" product suppliers in its Eco Options program for customers. Of its 176,000 products, 60,000 product suppliers applied for inclusion. Yet only 2,500 made the official green-label cut. Many were simply rebranding and spinning their existing products "green."

It's the turnout and activity that is interesting. Hedge funds are apparently seeing that too. But they will have to carefully vet their picks to make sure their "green" investments are indeed green and will produce returns of the same color.

So be aware of greenwashing as you will see more and more of the practice in advertising and in investment funds.

Barron's Ranks the Candidates

2007-06-30T22:59:00.000-04:00

In the new Barron's, the cover story ranks the leading candidates by party and since the article is titled "The Mitt and Bill Show" guess who won:

Democrat Bill Richardson, the garrulous governor of New Mexico, has bloviated himself from near the front of his party's field to the back. Yet Romney would be the best Republican candidate for stocks, bonds and the economy, and Richardson, hands down, would be the best Democrat.

Those are among the findings of a Barron's analysis of the nine major candidates from the two parties. We based our judgments on the candidates' responses to a detailed questionnaire on taxes, spending, health care, energy and other issues. We also considered their records as governors, senators and holders of other offices. Romney, formerly governor of Massachusetts and once a top private-equity investor, garnered 3.8 points out of a possible 4, edging out Republican rival Rudolph Giuliani, with 3.7. John McCain was third, with 3.5. a On the Democratic side, Richardson scored a 3.0, handily topping the field. Perhaps surprisingly, Barack Obama, finished second, with 2.0. Despite his strong support from the party's traditional base, he displayed more free-market thinking than Hillary Clinton, who scored 1.8. He showed a healthy skepticism for big government in his approaches to both health care and energy....

In arriving at the scores, we consistently favored market-driven points of view.... While our points of view may sound more Republican than Democratic, our guiding principle is the power of markets. We are aware that the stock market often does best with a Democrat in the White House. From the beginning of the 20th century, the Dow Jones industrials have climbed an average of 7.19% a year when Democrats were president, versus 4% under Republicans, according to Ned Davis Research. Bonds, on the other hand, have done better under Republicans.

We don't know if history is set to repeat itself. But right now, the Republicans are clearly exhibiting more market-friendly tendencies.

The article seems to go out of the way to be fair and explores the big topics in some depth for each candidate. It really is interesting enough to deserve a full read.

Note & HT: MarketWatch provided the free link to the Barron's story.And MarketWatch remains my favorite source for financial news and I keep it up whenever I'm online. I even liked when it was CBS MarketWatch but it is even better as a Dow Jones product.

Obama on Religion

2007-06-29T22:39:00.000-04:00

Michael Gerson in today's Washington Post had a great opening to a rather bland column about Senator Obama's attempt to address religiosity, the Democrat Party and Obama's own positioning in "The Gospel of Obama":

When British author Hilaire Belloc ran for Parliament in 1906, his speech on religion and politics, given to a packed public meeting, went as follows: "Gentlemen, I am a Catholic. As far as possible, I go to Mass every day. This is a rosary. As far as possible, I kneel down and tell these beadsevery day. If you reject me on account of my religion, I shall thank God that he has spared me the indignity of being your representative."

Just a great quote.

TNR on Dem's Debate

2007-06-29T22:14:00.000-04:00

Michael Crowley from The New Republic's blog The Plank on last night's Democrat Presidential debate:

I found myself thinking that Hillary Clinton is on track to be the next president, and that Barack Obama is always slightly unsatisfying in the shadow of his amazing 2004 Democratic convention speech. There were some decently substantive conversations, and lots of "we need" to do this and "we must" do that--but virtually nothing new or surprising was said. One of the few things that sticks with me, in fact, was Mike Gravel's very interesting outrage over racial disparities in the war on drugs--and how little interest the other candidates had in siding with him.

By the way, in a first ever, I agree with Mike Gravel (what?) on this one observation of his regarding racial disparities in drug convictions and I would add income to that situation also.

College Rankings

2007-06-28T22:50:00.000-04:00

According to Robert Samuelson "Universities Teach Lesson in Cynicism" by refusing to participate in US News & World Report's college rankings:

...[P]residents of 46 liberal arts colleges have said they will refuse to participate in part of the U.S. News annual survey. The list includes such well-known schools as Barnard and Kenyon. The presidents say the rankings are "misleading" and "do not serve well the interests of prospective
students."

Superficially, this seems a sensible blow against the increasingly frenzied, stress-ridden college admissions process. It isn't.

...First, where students go matters much less than popular wisdom holds.

...Second, the cutthroat competition to get into elite schools is as much among parents as the students.

...Third, the U.S. News rankings actually relieve the stress slightly by enlarging the pool of "elite" schools. Everyone knows that Williams (rank: 1) and Swarthmore (3) are top liberal arts colleges. But the first 10 also include Carleton College (6) in Minnesota, Pomona College (7) in California and Davidson College (10) in North Carolina. The use of semi-objective standards dilutes raw snobbery.

What's so shameful about this campaign against the rankings is its anti-intellectualism. Much information is in some way incomplete or imperfect. The proper response to evidence that you dislike or dispute is to supplement it or discredit it with better evidence. The wrong response is to suppress it. And yet, that's the agenda of these college presidents.

By not cooperating with some or all of the U.S. News survey, they hope to sabotage the rankings. They say they'll provide superior information. But they want to control what parents and students see. This is soft censorship.

What their students will learn, if they're paying attention, is a life lesson in cynicism: how eminent authorities cloak their self-interest in high-sounding, deceptive rhetoric.

Full disclosure: This post is shamelessly driven by the fact my undergraduate degree in Economics is from Davidson College.

My Immigration Overview

2007-06-27T17:06:00.000-04:00

First, let me briefly explain where I stand generally on "immigration" and discuss why I, like many others, have experiences and leanings that influence my position. I am against the current bill for many reasons but foremost is the obvious problem with the bill that the stated enforcement provisions are like wisps of smoke that will vanish in the air.

I do support real enforcement, and secure borders first then bills to specifically address the assimilation of existing illegal aliens and how better to control and allow necessary and favorable immigration to occur on an ongoing fair basis. I am not hung up necessarily on a fence but more border controls coupled with enforcement of proper hiring by business is a must and now. I also am in favor of ID cards, sadly including all Americans, to control our borders, our jobs, and our national security. I say sadly because it is against the nature of this country and the design of our founders but this isn't the wild old west anymore where we know who the bad guys (and girls) are nor do we live in a time where the very notion of suicide bombers seeking to kill hundreds of thousands of people is unimaginable.

I am sympathetic to illegal immigrants especially Hispanics because of two main experiences:

1) My oversight of manufacturing plants in Texas with a majority of Hispanic workers that were legal as far as we could determine as to paperwork and government reporting (although I doubt that all were legal and doubt that the government would report back a bad social security number) and the fact our Hispanic workers were tremendous employees, and

2) My experience in the Catholic Church where our new Hispanic neighbors and church goers were more enthusiastic, pious, willing to give and work for the good of the Church and often more commendable than we "native" Americans.

So I am very sympathetic and many would call me soft on immigration, and I am, but not to go so far as the current bill goes.

I have three articles that I recommend to everyone to read as of today. First is a piece in the WSJ by Pete Du Pont which explains better than I can my own feeling on this bill, entitled "Security First." Here is an excerpt:

America's illegal immigrant admission has accelerated over time. Congress and President Reagan granted amnesty to three million illegal aliens in 1986; and the current President Bush wants to legalize another 12 million now, which sends an arithmetic signal to other immigrants who want to slip into America that 20 years from now whoever is president will perhaps grant amnesty to 48 million illegal immigrants.

We do need to secure our borders, issue legal ID cards to immigrants, and admit people skilled in the jobs we need to fill. But experience shows that our government lacks the political will to enforce such an immigration policy. Georgia state employee Reagan W. Dean was recently quoted in the New York Times: "Maybe it is possible to secure the border. Maybe it is possible to establish an employee identification system. But I don't have any confidence it will be done."

Many Americans agree with him, so a serious and substantive bill that would restore the people's confidence is the Senate's task this week.

Next is a piece from the May 2007 edition of City Journal detailing some of the worrisome sociology behind the assimilation of immigrants. This is by John Leo and here is a touch of "Bowling with Our Own":

Harvard political scientist Robert Putnam, author of Bowling Alone, is very nervous about releasing his new research, and understandably so. His five-year study shows that immigration and ethnic diversity have a devastating short- and medium-term influence on the social capital, fabric of associations, trust, and neighborliness that create and sustain communities. He fears that his work on the surprisingly negative effects of diversity will become part of the immigration debate, even though he finds that in the long run, people do forge new communities and new ties.

Putnam’s study reveals that immigration and diversity not only reduce social capital between ethnic groups, but also within the groups themselves. Trust, even for members of one’s own race, is lower, altruism and community cooperation rarer, friendships fewer. The problem isn’t ethnic conflict or troubled racial relations, but withdrawal and isolation. Putnam writes: “In colloquial language, people living in ethnically diverse settings appear to ‘hunker down’—that is, to pull in like a turtle.”

And last is a long piece from Commentary that I wish our Senators and our President had read and understood before embarking on this very poorly written and frankly bad immigration bill. The key point here is that we have two large immigration problems not one. The two problems are illegal immigration and legal immigration both of which are the result of a broken and unaddressed systems of our government on many levels. A brief cut form this excellent analysis from Yuval Levin, "Fixing Immigration":

Getting legal immigration right will be more complex than addressing the illegal inflow from Mexico. It is not a yes-or-no question but a matter of deciding how a nation of immigrants should regard those wishing to make America their home, and of translating that attitude into policy and practice at a dangerous moment in history. But if it is more complex, it is also more important. How we choose new immigrants, and how we help them to become , will determine whether we can remain what we are: a nation uniquely welcoming of outsiders yet also united around a set of ideas and ideals, a nation with a special place and purpose. That is another of the many ways in which immigration has been and can continue to be good for America.

I hope you read all three articles, form your own opinion, and influence your neighbors and legislators.

Steve Forbes on Protectionism

2007-06-27T15:48:00.000-04:00

Here is Steve Forbes on Protectionism, and appropriate to the last post on Vietnam and Carter's foreign policy advisor, some on Carter's economic policies in, you guessed it, Forbes:

The current concern about inflation sadly confirms the staying power of bad ideas, in this case the notion that economic growth creates inflation. The Phillips curve, which posits that there is a tradeoff between inflation and unemployment, has long been discredited by events and academic research.
Since Ronald Reagan became President in 1981, for example, the U.S. has had a fantastic expansion, and inflation virtually disappeared until recently. Yet the media are full of stories and pundit head shaking that global capacity for producing goods could soon run out.

There is still astonishing confusion between price changes that reflect normal supply and demand and those that reflect monetary blunders. Moore's Law says that the real price of computing power decreases 50% every 18 months. That's productivity, not deflation. When prices for a hot rock concert soar, that's not inflation, it's demand. However, when the cost of living in the U.S. and elsewhere sharply rose in the 1970s, it was, as the late Milton Friedman never tired of pointing out, the result of excess money creation.
Central bankers finally began to grasp that inflation was indeed a monetary phenomenon, but the lesson still hasn't stuck. Investors need to realize that monetary misfires have political consequences, usually bad.
The 1970s led to a malaise in the U.S., which paved the way for Jimmy Carter's election as President. He gutted our military; undermined the shah of Iran, which led to the current hideous Iranian regime; and engendered a passivity that emboldened the Soviet Union to invade Afghanistan, which in turn fueled the rise of the Taliban and al Qaeda. Interest rates rocketed, and the stock market tanked. The only good to come out of that period of inflation was a push for the deregulation of our trucking, railroad and airline industries.

This inflation, thankfully, is very mild compared with the last one, but it could well lead to political mischief in the form of protectionism and higher taxes.

Iraq Exit Like Vietnam?

2007-06-27T15:13:00.000-04:00

In the Washington Post, Michael Gerson in An Exit to Disaster has this:

In 1974, a weary Congress cut off funds for Cambodia and South Vietnam, leading to the swift fall of both allies. In his memoir, "Years of Renewal," Henry Kissinger tells the story of former Cambodian prime minister Sirik Matak, who refused to leave his country.

"I thank you very sincerely," Matak wrote in response, "for your offer to transport me towards freedom. I cannot, alas, leave in such a cowardly fashion. As for you, and in particular for your great country, I never believed for a moment that you would have this sentiment of abandoning a people which has chosen liberty. You have refused us your protection, and we can do nothing about it. You leave, and my wish is that you and your country will find happiness under this sky. But, mark it well, that if I shall die here on the spot and in my country that I love, it is no matter, because we are all born and must die. I have only committed this mistake of believing in you [the Americans]."

Eventually, between 1 million and 2 million Cambodians were murdered by theKhmer Rouge when "peace" came to Indochina. Matak, Kissinger recounts, was shot in the stomach and died three days later.

Sometimes peace for America can produce ghosts of its own.

Sometimes facts speak for themselves as above.

On the other hand there's this:

Remember Zbigniew Brzezinski from the Carter years; well here is what he said at Duke this spring, from the Durham Herald-Sun:

Brzezinski said there's no reason to think a bloodbath would necessarily follow a U.S. withdrawal.
"We expected that the U.S. leaving Vietnam would result in massive killings and genocide and so forth, and collapse of the dominoes in Southeast Asia," he said. "It didn't happen. How certain are we of the horror scenarios that have been mentioned in what will take place in Iraq?"

Again, I am not making this quote up although it does strike me as unbelieveable. I suppose forgeting about losing millions of lives is something we would all like to forget

Top Domestic Concerns: Protectionism

2007-06-25T11:07:00.000-04:00

I see many signs of protectionism creeping into current politics and public opinion. I regard protectionism as being close to the top of issues that are on my list of domestic concerns. My worry list goes something like this:

Anderson Top Ten Domestic Concerns

Global War on Terror / fear of reversion to pre-9/11 mindset and appeasement of declared enemies
Protectionism / bad tariff and trade policies reversing important gains, and total misunderstanding of trade deficits and rationale behind foreign holders of US Treasury instruments
Global Warming / fear of adopting bad and overly aggressive and expensive programs based on bad economic models, i.e., global warming trends are real, significance of economic impact way overstated
Energy Independence / need movement on issue from national security, environmental and economic perspectives to firmly and realistically reach independence with environmental sustainability factors
Deficits / not current deficits which are very much under control but looming Social Security and Medicare, Medicaid liabilities
Health Care / need market based universal coverage now with strategies to slow medical cost inflation
Taxes / fear of higher taxes slowing economic growth; fear of myths about income inequality and state of our economy; need to simplify and overhaul tax code
Education / need to move toward school choice and voucher system, improve accountability and transparency of results to consumers at all levels of education; emphasize basic US history and basic economics for all citizens
Broken Government Bureaucracy / bloated and poorly agencies are the norm, need accountability, ability to fire employees; need to regulate down power of government worker union for federal, state, and local workers particularly in federal agencies and schools; need line item veto
Immigration / enforce non-hiring of illegals by businesses, secure borders, national IDs, adopt realistic and needed immigration policies from all countries based on skills and less on families, only then assimilate and integrate existing aliens in fair manner

Issues that will not probably not adopt my solutions:

War on Drugs / Phase out WoD outside of the United States (just give aid to South American counties outstipulations about drugs) by legalizing possession of some drugs and regulating where feasible (particularly marijuana to liquor stores, etc.) and continue control other drugs with reasonable quantity limitations, and continue criminalization of some drugs; as products more available price goes to nothing and economics for gangs and organized crime disappears, money spent for enforcement goes to hugely increased, accessible, well funded, professional treatment programs resulting in lower prison populations
Revamp Legal System / Eliminate hate laws and return to equal justice under the law; eliminate affirmative action; concentrate on reducing minority inmates that make up majority of prison population; institute "drug court" concept; examine and fight disparity in sentences and punishment due to income, race, drug and alcohol addiction (need rehabilitation and programs to maintain employment where possible); make Sixth Amendment right to speedy trial a reality again
Voting Rights / Add constitutional amendment: 1) to require all citizens to pass same test of knowledge of US history and government as required of applicants for citizenship in order to acquire right to vote just as a driver's license is based upon required standards, and 2) that guarantees and stipulates enforcement that no applicant for the license and right to vote shall be denied due to race, handicap, or any disability other than inability to comprehend, location, or education (any basic classes provide free of charge and accessible to all.

Now back to protectionism which is what I had intended this post to be all about:

[Protectionism]...is likely to become an increasing concern for the market in the months ahead,'' says Jens Nordvig, an economist at Goldman Sachs Group Inc. in New York.

A poll for NBC News and the Wall Street Journal in March found only 28 percent of Americans viewed free trade deals as beneficial, compared with 46 percent who said they were harmful. When the same question was asked in December 1999, 39 percent were positive about free trade, 30 percent negative.

``We who believe in open economies are swimming against a strong protectionist tide these days,'' U.S. Treasury Secretary Henry Paulson said June 5.

Congressman McHenry and Earmarks

2007-06-23T23:02:00.000-04:00

Conressman Patrick McHenry represents NC District which includes Mitchell County where I now sit typing. McHenry was recently featured in The Crypt's Blog from The Politico for pushing hard against David Obey (D-Wis.), who as Chairman of the House Appropriations Committee, has been reluctant to make earmarks transparent to the public. Here is a portiion:

Rep. Patrick McHenry (R-N.C.) was all over the House floor last week, bashingAppropriations Committee Chairman David Obey (D-Wis.) and other Democratic leaders for not doing enough to disclose member earmarks early in the appropriations process, as Democrats had promised when they took over the House in January. Republicans eventually got Democrats to back down and release
the earmark requests -- read "pork" -- earlier than Obey had planned, so McHenry got what he wanted. And now McHenry will be forced to defend his $129,000 earmark, via the Small Business Administration, for Christmas trees.

Actually, the $129K is to go to the The Mitchell County Development Foundation, "a nonprofit organization dedicated to creating jobs and strengthening the educational system, as well as
promoting tourism in Mitchell County." The "Perfect Christmas Tree" part comes in because in 2003, author Gloria Houston donated the rights to her children's book, "The Perfect Christmas Tree" to the town of Spruce Pine, N.C. Spruce Pine and Mitchell Country have thousands of textile and manufacturing jobs over the last several years to foreign competition. Mitchell County used the money to fund some small business jobs for woodworkers and other craftsman.

"Look, the important thing is transparency and openness," McHenry said when asked about the earmark, which he confirmed that he had inserted into the bill. "I have never been opposed to directed
spending."

McHenry added: "I just think that it's critical for members to know what they are voting on when a [spending] bill comes to the floor."

Update - This isn't going to make McHenry happy. Courtesy of the Democratic Congressional Campaign Committee comes this little ditty. McHenry has been unofficially nominated as the "Republican That
Democrats Most Dislike," so it's no surprise this came out. The song is sung to the tune of "Oh Christmas Tree." Here you go:

"O' McHenry,
O' McHenry,
How steadfast your hypocrisy!

You pitch a fit on the House floor,
But Christmas trees you do adore.

All politics are local and this enforces that fact for me. Unemployment in Mitchell County for the first five months of 2007 averaged 7.9%, almost double the national average. As to me, McHenry just got a three base hit by:

Fighting David Obey on earmarks
Fighting NC District 10 and Mitchell County unemployment
Being named "Republican that Democrats Most Dislike"

Update: A reader comments that I made false statements concerning unemployment numbers. As cited in the post my source was the NC Employment Commission and the numbers for Mitchell County (not Avery as the commenter used) were for Jan - May 2007 respectively: 9.1, 8.7, 7.3, 7.5, 6.8. Total 39.4/5 = 7.88 which I rounded to 7.9%. No intention to mislead on my part. Thanks to the reader for the comments.

NYT Exposes Edwards: Poverty Center's Main Beneficiary Was Edwards

2007-06-23T09:48:00.000-04:00

The New York Times, violating a rule not to hurt one's own, ran a article that revealed the truth behind John Edwards "poverty center" at UNC Chapel Hill. While the NYT had a glossed over title of "In Aiding Poor, Building a Bridge to 2008" clearly the bridge was using a non-profit to fund his campaign, travel, and broaden his exposure while he held no official office by claiming he was fighting poverty; he was certainly ensuring that poverty would never touch his own doorstep.

Directly from the horses mouth, the NYT:

Mr. Edwards, who reported this year that he had assets of nearly $30 million, came up with a novel solution, creating a nonprofit organization with the stated mission of fighting poverty. The organization, the Center for Promise and Opportunity, raised $1.3 million in 2005, and — unlike a sister charity he created to raise scholarship money for poor students — the main beneficiary of the center’s fund-raising was Mr. Edwards himself, tax filings show.

...Mr. Edwards, a former North Carolina senator, set out to keep his political options open by promoting issues he cared about, like poverty.

“He wanted to learn, travel and be in a position to be a viable candidate,” said J. Edwin Turlington, a Raleigh lawyer who was the manager of Mr. Edward’s 2003 presidential exploratory committee. “He had the ability to raise money to fund his activities. He had a vision, and he knew it would take money.”
Mr. Edwards mixed policy and politics in a way that allowed his supporters to donate to the causes he believed in — and to the organizations he had set up. He also set up two political action committees, something commonly done by politicians thinking of running for president.

But it was his use of a tax-exempt organization to finance his travel and employ people connected to his past and current campaigns that went beyond what most other prospective candidates have done before pursuing national office.

Now, besides the hefty fees he charged for giving speeches against poverty, recall the hedge fund Edwards went to work for that Edwards remarked was a 'way for him to learn more about poverty' -- from which he collect a hefty $500,000 consulting fee:

He was hired by the Fortress Investment Group, a New York hedge fund, to “develop investment opportunities,” according to a 2005 Fortress news release.

...“Fortress became a vehicle for foreign travel,” Mr. Turlington said, “but it was also a way to spend more time with sophisticated financial people.”

The "Poverty Center's" ...directors included Mr. Turlington, the Raleigh lawyer; Miles Lackey, Mr. Edwards’s former chief of staff; Alexis Bar, his former political scheduler; and David Ginsberg, Mr. Edwards’s current deputy campaign manager.

The Edwards campaign declined to disclose the amounts raised or spent by the two similarly-named nonprofit agencies — the Center for Promise and Opportunity and the Center for Promise and Opportunity Foundation — since their 2005 tax filings, which are the most recent to have been filed.

...Of the explicitly political entities, Mr. Edwards’ OneAmerica Committee 527 organization allowed donors to give without limitations. The money was transferred to his leadership political action committee. Leadership committees were initially created to allow prominent politicians to raise money for distribution to needy office-seekers. But Mr. Edwards spent the entire $2.7 million he raised for OneAmerica, including $532,000 raised by the 527, on himself, an increasingly common trend among politicians.

And this fianl last opinion quoted by the NYT: Nonprofit groups can engage in political activities and not endanger their tax-exempt status so long as those activities are not its primary purpose. But the line between a bona fide charity and a political campaign is often fuzzy, said Marcus S. Owens, a Washington lawyer who headed the Internal Revenue Service division that oversees nonprofit agencies.

“I can’t say that what Mr. Edwards did was wrong,” Mr. Owens said. “But he was working right up to the line. Who knows whether he stepped or stumbled over it. But he was close enough that if a wind was blowing hard, he’d fall over it.”

Does Religion Encourage Families or Do Families Want Religion?

2007-06-23T09:05:00.000-04:00

In a fascinating and insightful analysis in the June/July 2007 Policy Review, Mary Eberstadt tackles key presumptions and beliefs about our belief systems in How the West Lost God. The article goes to heart of the common axiom that the great religions command having families as opposed to Eberstadt's proposition that family life leads to a desire for religiosity.

She makes many import points a few blurbed here: ...if 9/11 drove to church for weeks on end millions of Americans who had not darkened that doorstep in years — as it did — imagine the even deeper impact on ordinary mothers and fathers of a sick child or the similarly powerful desire of a devoted spouse on the brink of losing the other. Just as there are no atheists in a foxhole, so too would there appear to be few in the nursery or critical care unit, at least most of the time.

In sum, because it treats belief as an atomistic decision taken piecemeal by individuals rather than a holistic response to family life, Nietzsche’s madman and his offspring, secularization theory, appear to present an incomplete version of how some considerable portion of human beings actually come to think and behave about things religious — not one by one and all on their own, but rather mediated through the elemental connections of husband, wife, child, aunt, great-grandfather, and the rest.

And later she goes on: To argue by analogy, it appears that the natural family as a whole has been the human symphony through which God has historically been heard by many people — not the prophets, not the philosophers, but a great many of the rest. That is why the conventional story of secularization seems to be missing something: because it makes its cases by and to atomized individuals without reference to the totality of family and children through which many people derive their deepest opinions and impressions of life — including religious opinions and impressions.

In sum, and given what we know now about the religious and familial situation in Western Europe some 125 years later, Nietzsche was right to declare that the great Christian cathedrals of Europe had become tombs. But he may have been wrong about what exactly had been buried in them. It was not so much God as the European natural family that has been largely laid to rest — an interment already well underway in some countries long before his madman entered the square and one that is surely an overlooked and critical part of the full story of how Christian Europe went secular.

The article has totally changed my thinking and my mistaken acceptance of the common theory of why large families and religion go hand in hand. I also think that both theories are correct but as to which one is quantitatively more correct is still, perhaps ironically, open to one's own beliefs. Eberstadt discusses the influence of community in her analysis and I also think that community and tradition perhaps compose the third leg of the discussion; hence the inherent interrelatedness of family, community, and God.

Quotes From Our Enemies

2007-06-19T10:21:00.001-04:00

From Cal Thomas today: Those still in doubt or denial about what Israel's (and America's) enemies are planning might benefit from reading Jed Babbin's new book, "In the Words of Our Enemies" (Regnery Publishing). In it, Babbin assembles what the Islamic terrorists, Chinese and North Korean communists and Venezuelan president Hugo Chavez are saying they want to do to us. This quote from the al-Qaida training manual leaves no room for diplomacy: "The confrontation that Islam calls for with these godless and apostate regimes, does not know Socratic debates, Platonic ideals nor Aristotelian diplomacy. But it knows the dialogue of bullets, the ideals of assassination, bombing and destruction, and the diplomacy of the cannon and machine-gun."

Anyone who questions the sincerity of such a statement is a fool. Apparently enough fools remain in leadership in Israel, the United States and Europe to encourage the killers to fight on until victory is attained.

When Rules Trump Common Sense

2007-06-18T23:00:00.000-04:00

Zero tolerance strikes again in California: "A fifth-grade promotion ceremony in Rancho Palos Verdes turned into a free-speech battleground Thursday, when students were asked to remove weapons from toys that had been placed on mortarboard caps because of the school's zero-tolerance policy for weapons on campus....

"Each year, students decorate wide caps with princesses, football goal posts, zebras, guitars and other items to express their personalities and career goals. Cornerstone at Pedregal School is the only Palos Verdes Peninsula public school to practice the tradition.

"On Thursday, before the ceremony, one boy was told he couldn't participate unless he agreed to clip off the tips of the plastic guns carried by the minuscule GIs on his cap. Ten others complied with the order before the event.

"In enforcing the decision, the district cited its Safe Schools policy and the federal Gun Free Schools Act of 1994, a federal law designed to remove firearms from schools.

"Susan Liberati, an assistant superintendent, said she believes 'the principal has interpreted district policy accurately, and we support her in that.'

"A copy of the district's Safe Schools policy obtained by the Daily Breeze includes no mention of toy army men. Students found to be "possessing, selling or otherwise furnishing a firearm" are expelled for one year, the policy states.

"Weapons are also mentioned in the board's "weapons and dangerous instruments" policy that allows only authorized law enforcement or security personnel to possess "weapons, imitation firearms or dangerous instruments of any kind" on school grounds."

We have all read many cases like this where minimal judgment is thrown out the window based on one policy or another. And given the quality of the decisions made by these teachers of America's children is it any wonder results are so under par.

I am also reminded of the fact that even our judges are so hand-cuffed by mandatory sentence statutes that judgement is taken away from good judges. Onerous sentences are imposed for offensives committed under varying circumstances that often require and demand creative, and yes, sometimes lenient, sentences. Drug cases clearly fall into this trap many times given the number of incarcerations for minor drug offenses.

Andy McCarthy referred to this in a recent post in The Corner:

"With lots of support from conservatives, Congress several years ago was determined to make sure convicted felons were taken off the street. (Based on similar concerns that weak liberal judges were not cracking down hard enough on crooks, law-and-order conservatives similarly supported the very same draconian sentencing guidelines that resulted in Libby's 30-month sentence.) Basically, congress — with broad public support — has removed judicial discretion because we no longer trust judges to be judges.

I hate this new system (which came into being in 1984 and has gotten worse since). Yes, judges occasionally make outrageous rulings (those are the small percentage of rulings we hear about). But, most of the time, left to their own judgment, they act pretty reasonably. Our statutes, however, no longer leave them to their own judgment. "

I'm Back

2007-06-18T19:15:00.000-04:00

After being away from blogging for a nice long while doing totally different things, I am now back to blogging and will resume some posting. I missed the catharsis of blogging and I was beginning to drive my friends crazy sending out random opinions and saying read this please. I intend to focus more at present on economics and business with my own twists on how current politics and cultural trends are impacting our world both today and in the future. I look forward to meeting new friends and hearing again from old friends and foes alike in this space.

China Unpegs Yuan

2005-07-21T09:28:00.000-04:00

Yuan Unpegged - 072105

China drops yuan-dollar peg, to price vs. basket : "The Chinese government on Thursday announced its long-awaited reform of its currency, saying it's dropping its yuan-dollar peg in favor of one vs. a basket of currencies. The government also lifted the value of the currency by more than 2%.

'The People's Bank of China will make adjustment of the renminbi exchange rate band when necessary according to market development as well as the economic and financial situation. The renminbi exchange rate will be more flexible based on market condition with reference to a basket of currencies,' it said.

China said it's adjusting the exchange rate to 8.11 yuan per dollar; overnight, the dollar traded at 8.2765 yuan overnight.

The move gave a boost to Asian currencies, with the Japanese yen soaring 1.7% against the dollar. One dollar was last worth 110.89 yen.

The Korean won appreciated 0.9% against its U.S. counterpart.

The daily trading price of the dollar vs. the yuan will continue to be allowed to float within a band of 0.3%, while the trading prices of non-U.S. dollar currencies will be allowed to move in yet-to-be announced bands, it said in a statement released on its Web site.

The Bush administration and the U.S. Congress have long complained that an artificially low yuan has boosted Chinese exports."

Best Comment on Judge Roberts So Far

2005-07-20T23:15:00.000-04:00

Forget the NYT's pre-written snide remarks and the preety good Washington Post piece and all the email I'm getting, I liked this the best Instapundit.com: "The Insta-Daughter's take: 'He looks pretty good for 50.'"
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I'll give you my opinion on Roberts after I do my homework on him. Me liking the above might have something to do with my own mid-40's...No of course not.

Remembering Srebrenica

2005-07-19T07:08:00.000-04:00

SREBRENICA, BOSNIA - HERZEGOVINA - JULY 11: The 610 coffins of the Srebrenica massacre victims are seen prior to the funeral attended by their family members at the Srebrenica Memorial site during the 10th anniversary of the Srebrenica Massacre on July 11, 2005 in Srebrenica, Bosnia Herzegovina. Srebrenica marked the 10th anniversary of the massacre with a massive funeral of about 610 victims who were identified after being exhumed and who will be buried at the memorial site. Some 8,000 Muslims, mostly boys and men, were slaughtered at Srebrenica in July 1995 by Bosnian Serb soldiers who had overrun the eastern town. The killings, in what was then a U.N.-protected zone, came shortly before the end of the country's 1992-95 war. (Photo by Marco Di Lauro/Getty Images)

Please click and read the article from Richard Holbrooke as he shows clarity, honesty and bi-partisanship, all of which we could use more of in these days - Was Bosnia Worth It?: "If you wonder whether the 1995 American intervention in Bosnia was the right decision, go to a really horrible place, one whose name has become synonymous with genocide and Western failure. Go to Srebrenica."
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Read it all, please.

FX Speculators: Yuan Boat Ready to Float

2005-07-19T06:26:00.000-04:00

Yuan Headed for Controlled Float

China's Currency May Float a Little: "Sixty percent of China's state economists think the government should allow the country's currency to increase in value sometime this year, according to a survey compiled Monday by the National Bureau of Statistics.
The survey of 60 economists -- an internal study confirmed by two participants -- reinforced a growing consensus that sometime this summer China will adjust slightly upward the value of its currency, the renminbi, also known as the yuan, which has been pegged at about 8.28 to the dollar for about a decade.

...Predicting a Chinese currency move has become a perilous if popular game, with some of the world's largest investment banks making bold forecasts of imminent moves in recent months only to see the old regime prevail. The last such outbreak came in May, when some predicted China would use a national holiday week to try to sneak in a change, assuming that markets would be relatively quiet.

In recent weeks, anticipation has been building anew, with many predicting that a move will come sometime in August, ahead of a visit to Washington by President Hu Jintao in September."
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I wish I could play in this game....

America's Drug Laws Are So Wrong

2005-07-19T06:13:00.000-04:00

Tierney today with Punishing Pain : "...Mr. Paey is merely the most outrageous example of the problem as he contemplates spending the rest of his life on a three-inch foam mattress on a steel prison bed. He told me he tried not to do anything to aggravate his condition because going to the emergency room required an excruciating four-hour trip sitting in a wheelchair with his arms and legs in chains.

The odd thing, he said, is that he's actually getting better medication than he did at the time of his arrest because the State of Florida is now supplying him with a morphine pump, which gives him more pain relief than the pills that triggered so much suspicion. The illogic struck him as utterly normal.

'We've become mad in our pursuit of drug-law violations,' he said. 'Generations to come will look back and scarcely believe what we've done to sick people.' "

Nicklaus Says Goodbye

2005-07-16T14:00:00.000-04:00

Jack Nicklaus Waves Farewell at St. Andrews

Nicklaus Exits The Open
Nicklaus Completes Bittersweet Farewell : "After a record 18 major titles in five decades of professional golf, Jack Nicklaus [age 65] made an emotional exit today at the British Open.

St. Andrews gave him two of his three British Open titles, endearing him to Scottish golf fans forever.

But Nicklaus's prime has passed, and he acknowledged that. He said his family was prepared to return to Florida on Saturday rather than stay at St. Andrews through the weekend, when Woods will try to win his second major of the season and 10th over all of his career, compared with 18 for Nicklaus.

When Nicklaus exited the tent this evening, the sky he left was still bright. Golfers who had spent their lives looking up to him were finishing their rounds.

In Scottish summers, the sun stays out a little longer."

Tierney on Wilson and Rove

2005-07-16T13:53:00.000-04:00

John Tierney on the Joe Wilson, Valerie Wilson, Karl Rove, Judith Miller, Matt Cooper, Bob Novak story with Where's the Newt? : "this scandal is about a spy who was not endangered, a whistle-blower who did not blow the whistle and was not smeared, and a White House official who has not been fired for a felony that he did not commit. And so far the only victim is a reporter who did not write a story about it.

It would be logical to name it the Not-a-gate scandal, but I prefer a bilingual variation. It may someday make a good trivia question: What do you call a scandal that's not scandalous? Nadagate. "
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Tierney is becoming a star with his clarity, brevity, and his citation of other readings at the end of his columns for further sources on his current subject - he is the professional that Krugman is not.
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(And with apologies to my friend Nada.)

VDH Explores the Left's View of the GWOT

2005-07-16T13:44:00.000-04:00

Victor Davis Hanson on the War on Terror : "Ever since September 11, there has been an alternative narrative about this war embraced by the Left. In this mythology, the attack on September 11 had in some vague way something to do with American culpability...

...That is the dominant narrative of the Western Left and at times it finds its way into mainstream Democratic-party thinking. Yet every element of it is false.

...Why does this false narrative, then, persist — other than that it had a certain political utility in the 2002 and 2004 elections?

In a word, this version of events brings spiritual calm for millions of troubled though affluent and blessed Westerners...

These tenets in various forms are not merely found in the womb of the universities, but filter down into our popular culture, grade schools, and national political discourse — and make it hard to fight a war against stealthy enemies who proclaim constant and shifting grievances. If at times these doctrines are proven bankrupt by the evidence it matters little, because such beliefs are near religious in nature — a secular creed that will brook no empirical challenge.

These articles of faith apparently fill a deep psychological need for millions of Westerners, guilty over their privilege, free to do anything without constraints or repercussions, and convinced that their own culture has made them spectacularly rich and leisured only at the expense of others.

So it is not true to say that Western civilization is at war against Dark Age Islamism. Properly speaking, only about half of the West is involved, the shrinking segment that still sees human nature as unchanging and history as therefore replete with a rich heritage of tragic lessons.

...we are divided over two antithetical views of the evolving West — Europe at odds with America, red and blue states in intellectual and spiritual divergence, the tragic view resisting the creeping therapeutic mindset.

These interior splits largely explain why creepy killers from the Dark Ages, parasitic on the West from their weapons to communications, are still plaguing us four years after their initial surprise attack.

'The fault, dear Brutus, is not in our stars/But in ourselves, that we are underlings.' "
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Always read all Victor Davis Hanson you can find, please.

Two Looks at Muslim Suicide Bombers

2005-07-16T13:41:00.000-04:00

First, Tom Friedman writes in A Poverty of Dignity and a Wealth of Rage : "...Why are young Sunni Muslim males, from London to Riyadh and Bali to Baghdad, so willing to blow up themselves and others in the name of their religion? Of course, not all Muslims are suicide bombers; it would be ludicrous to suggest that. But virtually all suicide bombers, of late, have been Sunni Muslims.

There are a lot of angry people in the world. Angry Mexicans. Angry Africans. Angry Norwegians. But the only ones who seem to feel entitled and motivated to kill themselves and totally innocent people, including other Muslims, over their anger are young Sunni radicals. What is going on?

Neither we nor the Muslim world can run away from this question any longer...

'Some of these young Muslim men are tempted by a civilization they consider morally inferior, and they are humiliated by the fact that, while having been taught their faith is supreme, other civilizations seem to be doing much better,' said Raymond Stock, the Cairo-based biographer and translator of Naguib Mahfouz. 'When the inner conflict becomes too great, some are turned by recruiters to seek the sick prestige of 'martyrdom' by fighting the allegedly unjust occupation of Muslim lands and the 'decadence' in our own.' This is not about the poverty of money. This is about the poverty of dignity and the rage it can trigger. How does that happen?

Britain's Independent newspaper described one of the bombers, Hasib Hussain, as having recently undergone a sudden conversion 'from a British Asian who dressed in Western clothes to a religious teenager who wore Islamic garb and only stopped to say salaam to fellow Muslims.' The secret of this story is in that conversion - and so is the crisis in Islam. The people and ideas that brought about that sudden conversion of Hasib Hussain and his pals - if not stopped by other Muslims - will end up converting every Muslim into a suspect and one of the world's great religions into a cult of death. "

Then we have William F. Buckley Jr. on the 7/7 London Bombings and the War on Terror : "The first thought, surely, has to be that not all young Muslims at large in Europe have a viral compulsion to put bombs in London subways or to shoot and stab provocative filmmakers. So having arrived at that thought, what is our next thought?

It is not highly developed, but it focuses necessarily on acute security measures. They mount aggression, we mount a defense. This is bitter medicine in that the countermeasures signal a victory for terrorism.

London withstood years of bombings organized by a sovereign madman who came to control Germany.

That threat, on reflection, seems simple: Cope with it by waging a world war. We know how to do that. We don't know how to abort the evolution of young Muslims into murderers."

Measurement and Accountability in Schools Fix Problems

2005-07-16T13:32:00.000-04:00

Younger Students Show Gains in Math and Reading : "America's elementary school students made solid gains in both reading and math in the first years of this decade, while middle school students made less progress and older teenagers hardly any, according to test results issued today that are considered the best measure of the nation's long-term education trends.

Nine-year-old minority students made the most gains on the test, administered by the United States Department of Education. In particular, young black students significantly narrowed the historic gap between their math and reading scores and those of higher-achieving whites, who also made significant gains.

Older minority teenagers, however, scored about as far behind whites as in previous decades, and scores for all groups pointed to a deepening crisis in the nation's high schools.

Nine year old students born in the mid-1990's, on average, earned the highest scores in three decades, in both subjects.

Education Secretary Margaret Spellings attributed the gains among elementary students to President Bush's school reform law, No Child Left Behind. Sounding jubilant, she also credited the nation's teachers, principals and state and national policymakers, including Democrats who have supported the federal law.

"I'm really excited, it shows that we're on the right track, that N.C.L.B. is working, that all our attention to the early grades and to minority kids - now we've got some good results to show for it," Ms. Spellings said. "As a country we're headed in the right direction.

Several groups that have criticized the federal law, including both national teachers' unions, said that increased teacher training and efforts to reduce class sizes as well as a proliferation of early childhood and kindergarten programs should also be credited for the gains.

No Child Left Behind, which has required states to test students grades three through eight in English and math every year, and to report minority scores separately from student averages, first took effect in fall 2002."

Wie's Masters Debut 2007?

2005-07-16T13:20:00.000-04:00

Michelle Wie at US Am Public Links in Ohio

A Defeated Wie Puts Her Masters Dream on Hold - New York Times: " Michelle Wie's run at the men's United States Amateur Public Links championship came to an end... when she was beaten by Clay Ogden, 5 and 4, in the quarterfinals.

The golf world usually sets its sights exclusively on the British Open at this time of year. But Wie's play this week, and her pursuit of a spot in the Masters tournament next year, managed to transform a sleepy Ohio town into a center of attention among the news media and fans.

The 15-year-old from Honolulu was attempting to become the first woman to compete at Augusta National. Every Public Links champion since 1989 has been invited to the next year's Masters.

"Obviously I am very disappointed, but it is not the end of the world," Wie said.

Wie fell behind early as Ogden, who will be a junior at Brigham Young University this fall, birdied four of the first five holes."

Rosett: "Saddam and al Qaeda"

2005-07-16T13:05:00.000-04:00

Claudia Rosett, our nation's star reporter in my opinion, (the NYT's John Burns is a close second) discussing the abundance of evidence connecting two forces against Western civilization in OpinionJournal - The Real World: "Any conclusions or even inferences about contacts between Saddam's regime and al Qaeda are subjected these days to the kind of metaphysical test in which existence itself becomes a highly dubious philosophical problem, mired in the difficulty of ever really being certain about anything at all.
Certainty is then imposed in the form of assurances that there was no connection. This notion that there was no Saddam-al Qaeda connection is invoked as an argument against the decision to go to war in Iraq, and enjoined as part of the case that we were safer with Saddam in power, and that, even now, the U.S. and its allies should simply cut and run.

Actually, there were many connections, as Stephen Hayes, writing in the current issue of the Weekly Standard, spells out under the headline "The Mother of All Connections."

...By the time Mr. Hayes is done tabulating the cross-connections, meetings, Iraqi Intelligence memos unearthed after the fall of Saddam, and information obtained from detained terrorist suspects, you have to believe there was significant collaboration between Iraq and al Qaeda. Or you have to inhabit a universe in which there will never be a demonstrable connection between any of the terrorist attacks the world has suffered over the past dozen years, or any tyrant and any aspiring terrorist. In that fantasyland, all such phenomena are independent events.

Mr. Bush, in calling attention to the Iraq-al Qaeda connection in the first place, did the right thing. For the U.S. president to confirm that clearly and directly at this stage, with some of the abundant supporting evidence now available, might seem highly controversial. But reviving that controversy would help settle it more squarely in line with the truth. "

WSJ: "Karl Rove, Whistleblower"

2005-07-16T13:03:00.000-04:00

OpinionJournal :"... In short, Mr. Rove provided important background so Americans could understand that Mr. Wilson wasn't a whistleblower but was a partisan trying to discredit the Iraq War in an election campaign. Thank you, Mr. Rove.

...If there's any scandal at all here, it is that this entire episode has been allowed to waste so much government time and media attention, not to mention inspire a 'special counsel' probe. The Bush Administration is also guilty on this count, since it went along with the appointment of prosecutor Patrick Fitzgerald in an election year in order to punt the issue down the road. But now Mr. Fitzgerald has become an unguided missile, holding reporters in contempt for not disclosing their sources even as it becomes clearer all the time that no underlying crime was at issue.

As for the press corps, rather than calling for Mr. Rove to be fired, they ought to be grateful to him for telling the truth. "

May Trade Deficit Improves

2005-07-16T13:01:00.000-04:00

May Trade Deficit Shows Slight Improvement : "The Commerce Department reported that America's trade deficit fell by 2.7 percent in May to $55.3 billion, the best showing since March. The bulk of the improvement came from a big drop in oil prices which pushed petroleum imports down by 6.8 percent. However, the trade improvement was likely to be temporary because prices of crude oil have soared to record levels above $60 per barrel since May. The trade performance in May was also helped by strong export sales, which edged up 0.1 percent to a new all-time high of $106.9 billion. Sales of agricultural products, industrial supplies and consumer goods all set records."

"Barbarity and Civility"

2005-07-16T12:59:00.000-04:00

The Union Leader- Barbarity and civility: Eyeing the terror war with clarity"IMMEDIATELY after Thursday's bombings in London, some on the far left blamed Prime Minister Tony Blair, saying it was his fault for sending troops to Iraq. This is the same poisoned thinking that blamed America for the 9/11 attacks and equated the treatment of prisoners at Abu Ghraib and Guantanamo Bay with the acts of terrorists and totalitarian regimes...

As we debate whether glovelessly handling a Koran is a violation of the Geneva Conventions, terrorists plot the destruction of all Western civilization, or at least as many "infidel" non-believers as they can possibly wipe out.

The CIA reportedly kidnaps Osama Mustafa Hassan Nasr, a radical cleric, in Milan, and ships him to Saudi Arabia, and there is widespread outrage. Meanwhile, al-Qaida kidnaps and executes Egyptian envoy Ihab al-Sherif, and there is only a murmur of mild indignation.

That the fundamental differences between the actions of Western governments and the actions of the Islamist terrorists have to be continually pointed out is one of life's absurd realities. That many of the people who need to have it pointed out are Westerners themselves is doubly absurd."

Krugman Says Good News on Deficit a "Temporary Blip"

2005-07-16T12:48:00.000-04:00

Un-Spin the Budget : "The usual suspects on the right are already declaring victory over the deficit, and proclaiming vindication for the Laffer Curve - the claim that tax cuts pay for themselves, because they have such a miraculous effect on the economy that revenue actually goes up.

But the fact is that revenue remains far lower than anyone would have predicted before the tax cuts began. In January 2001 the budget office forecast revenues of $2.57 trillion in fiscal 2005. Even with the recent increase in receipts, the actual number will be at least $400 billion less. [me: Krugman ignores impact of 9-11-01]

A close look at the tax data explains why these experts believe that we're seeing a temporary uptick in revenues, not a sustained change in the trend. Taxes that are closely tied to the number of jobs and the average wage, such as payroll taxes and income taxes automatically withheld from paychecks, aren't showing any big pickup. [me: Krugman ignores the steady growth and that employment has now reached the same level as September 2001]This confirms other data showing that the economy as a whole is, if anything, doing worse than one would expect at this stage of an economic recovery.

It turns out that all of the upside surprise in tax receipts is coming from two sources. One is tax payments from corporations, up both because last year corporate profits grew much more rapidly than the rest of the economy and because the effective tax rate on corporations went up when a temporary tax break, introduced in 2002, expired. [me: Krugman likes to think corporate profits aren't related to consumers being able to buy more goods with less personal taxes and the notion that an expired corporate tax provision in 2002 resulted in a surge of revenues last quarter 2005.]Both are one-time events

The other source of increased revenue is nonwithheld income taxes - taxes that aren't deducted from paychecks but are instead paid by people receiving additional, nonsalary income. The bounce in nonwithheld taxes probably reflects mainly capital gains on stocks and real estate, together with bonuses paid in the finance and real estate industries. [me: Krugman hates to think people are more entrepreneurial and make a lot more money to spend and invest as non-withheld taxpayers with lower tax rates; also note they do usually pay nice quarterly estimates of taxes owed, but to Krugman that means Wall Street bonuses not any economic success caused by reduced taxes]Again, this revenue boost looks like a temporary blip driven by rising stocks and the housing bubble.

In other words, we're still deep in the fiscal quagmire, with federal revenues far below what's needed to pay for federal programs. And we won't get out of that quagmire until a future president admits that the Bush tax cuts were a mistake, and must be reversed." [me: Krugman would solve every situation with taxes so burdensome the US would have unemployment at the 11.7% rate like Germany in June and France at 10.2%, and growth rates of 0.3% to 0.5% for France and Germany respectively.]
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Bernard Goldberg in his book about the 100 people ruining America only has Krugman at the number 8th worst - I would rank him at least in the top 5 - and very sad he has any influence at all.

CBO: US Deficit To Be 24% Below Forecast

2005-07-16T12:22:00.000-04:00

Bloomberg.com: U.S.: " 'Rising tax payments and a growing economy may push the U.S. federal deficit down to $325 billion or lower, a 24 percent decline from the previous estimate,' the Congressional Budget Office said. The agency, in a monthly snapshot for fiscal 2005 that ends on Sept. 30, said tax payments and spending were running ahead of the year-ago pace. As a result this year's deficit 'will be significantly less than $350 billion, perhaps below $325 billion.' The White House is scheduled to issue its revised estimates on tax collections, spending and the deficit on July 13. In February, White House budget director Joshua Bolten forecast a deficit of $427 billion, about 3.5 percent of the nation's gross domestic product.

``Treasury receipts have been skyrocketing since April,'' and in June ``corporate receipts will lead this boon,'' said Ellen M. Beeson, an economist at the Bank of Tokyo-Mitsubishi Ltd. in New York, in an interview before the report. Her firm expects the July 13 report to forecast a 2005 deficit of $315 billion to $330 billion. 'The stock market will certainly like the lower-than- expected deficit as it will mean less financing will be needed to cover U.S. debt,' Beeson said.

In its monthly report, the nonpartisan Congressional Budget Office said federal tax collections from people and corporations are up about 15 percent from the same period a year ago, and spending is up about 7 percent."
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China's Political Economy

2005-07-12T18:49:00.000-04:00

Rural Poor Aren't Sharing In Spoils of China's Changes: "A recent study conducted by the World Bank found that incomes among rural Chinese -- about three-fourths of the total population -- have declined slightly in the years since China entered the WTO, while urban residents have enjoyed modest gains...

...Last month, China's government announced that the income gap had widened in the first three months of the year, with the richest 10 percent of the population controlling 45 percent of the country's wealth and the poorest 10th holding little more than 1 percent, according to the official New China News Agency.

In Beijing, concern mounts that the rural poor are falling so far behind as to challenge the legitimacy of the party. Demonstrations have become near-daily occurrences as farmers protest loss of land to development and excessive taxation. In response, the central government has rolled back taxes on peasants.

...Throughout China, more than 200 million farmers have supplemented incomes by heading to coastal provinces to do construction or factory work. Typically, one or two people go, sending money back to relatives who remain at home to tend land.

All of Wang's hopes rest on his youngest son, now in Jingyuan in high school. He is the first in his family to attain that level of education. The costs of keeping him in school are monumental, about $250 per year.

Every year, Wang borrows that amount from the local credit cooperative, and every year he cobbles together about $100 from friends to keep up with the interest payments so he can draw another loan.

His total debt exceeds $1,250 -- about what the average person lives on here in a decade. Still, his may be a rational strategy for the times: He hopes his son will test into a university, get a white-collar job in a city, and lift his family out of the poverty that still defines reality in most of rural China."

The Freakonomics Guys: Seat Belts vs. Car Seats

2005-07-11T07:37:00.000-04:00

From Stephen J. Dubner and Steven D. Levitt, the authors of "Freakonomics: A Rogue Economist Explores the Hidden Side of Everything" with The Seat-Belt Solution : "...one question about car seats is rarely even asked: How well do they actually work?

They certainly have the hallmarks of an effective piece of safety equipment: big and bulky, federally regulated, hard to install and expensive. (You can easily spend $200 on a car seat.) And NHTSA data seem to show that car seats are indeed a remarkable lifesaver. Although motor-vehicle crashes are still the top killer among children from 2 to 14, fatality rates have fallen steadily in recent decades -- a drop that coincides with the rise of car-seat use. Perhaps the single most compelling statistic about car seats in the NHTSA manual was this one: 'They are 54 percent effective in reducing deaths for children ages 1 to 4 in passenger cars.'

But 54 percent effective compared with what? The answer, it turns out, is this: Compared with a child's riding completely unrestrained. There is another mode of restraint, meanwhile, that doesn't cost $200 or require a four-day course to master: seat belts.

...For children younger than roughly 24 months, seat belts plainly won't do... Even a quick look at the FARS data reveals a striking result: among children 2 and older, the death rate is no lower for those traveling in any kind of car seat than for those wearing seat belts.

So if car seats and booster seats aren't the safety miracle that parents have been taught to believe, what should they do? The most important thing, certainly, is to make sure that children always ride with some kind of restraint...

It may be that the ultimate benefit of car seats and booster seats is that they force children to sit still in the back seat. If so, perhaps there is a different contraption that could help accomplish the same goal for roughly the same price: a back-seat DVD player. "

WSJ: "Lessons of Srebrenica"

2005-07-11T07:17:00.000-04:00

OpinionJournal : "If American policy makers want to avoid facing another Srebrenica on their watch, they must never let the U.N. determine the mission. Allowing the Europeans to 'take the lead' is also a bad idea. Above all, Srebrenica is what happens when Western policy makers reject taking pre-emptive measures against gathering dangers, so that by the time the dangers are obvious it is too late to do something.

It has become trendy in certain circles to speak of 'No More Srebrenicas,' as well as 'No More Rwandas' and 'No More Darfurs.' If these people really believe the slogan, then the policy to make it work already has a name. It's called the Bush Doctrine. "

Democrats Stand FOR... What?

2005-07-10T08:39:00.000-04:00

In today's Washington Post and yesterday's Washington Times two very different editorials address the problem summarized by my post title - we know Democrats oppose anything George Bush wants (whether it makes sense or not) but who knows (especially Democrats themselves) what Democrats are for - what is the Democrat Party 's agenda?

First, let's look at David Broder, usually a stable voice for the Democrats, in his column Democrats In Need Of Stances: "Because Republicans control the congressional agenda, the Democratic leaders cannot bring forward their own initiatives with any hope of success. The best they can do is block GOP efforts or criticize their policies. But that strategy simply strengthens Republican accusations of negativism. The tactic of not offering an alternative on a subject as vital as Social Security -- which makes sense in the legislative context -- does nothing to enhance the Democrats' reputation with the public.

When I interviewed Dean recently, he readily acknowledged that 'people think they know what the Republicans stand for, and they can't say that about the Democrats.'

...There's a better model available, should Dean have the courage to follow it. In the late 1950s, after Adlai Stevenson had lost to President Eisenhower for the second time, DNC Chairman Paul Butler created the Democratic Advisory Council as a policy voice for the party.

...Once again, the Democrats need a vehicle for speaking to the country about the changes they would bring if entrusted with governing. They can find that vehicle in their archives."
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Next look at Victor Davis Hanson, now one of the most respected voices on the right, with Who are the reactionaries: "...an understandably frustrated opposition seeks some sort of countermove. But instead of the hard, necessary work of winning the public over to a systematic alternative vision, the Democratic leadership seems to hope a quickie scandal, a noisy filibuster or a slip overseas will tip a few million voters and thus return the Democrats to power. ...Can't the Democrats find spokesmen other than a calcified Mr. Kerry, Joe Biden, Mr. Kennedy or Al Gore -- who all crashed in past general presidential elections or primaries and now drip bitterness? How do you politely tell your leadership that it, not just George W. Bush, is the problem?

...The Democrats should focus on new issues and faces and promote national optimism and an overdue return to a more inclusive broader-based populism. Instead, the leading members of the party -- who have become the new reactionaries in American political life -- choose to fixate on John Bolton and try to ankle-bite a wartime president working to bring democracy to the Middle East. Apparently, the liberal opposition thinks sarcasm and negativism can reverse the larger political tide of the last three decades. Good luck."
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This is not just a political problem for Democrats. This problem is disturbing to America because I believe our country is better facing choices and making decisions as to how we move forward rather than attempts from either party to just block progress. We need to deal with the future with our heads up high and firm in this ever-changing world. I happen to trust the people to make the right choices when they understand the questions and the choices of answers. I happen to think that is why George Bush is president of the United States right now. Let's trust the people and give choices not a move forward in one direction or a roadblock.

Morgan's Mack Turns Down $25 mln Yr Base For More Pay for Performance

2005-07-09T10:30:00.000-04:00

Bloomberg.com: U.S.: "Morgan Stanley Chairman and Chief Executive Officer John Mack said he's changing his employment agreement with the firm and no longer will accept a guarantee of $25 million a year in pay. Mack's pay will be based on the firm's performance, instead of being pegged to the compensation received by his four Wall Street counterparts, he said in a letter to employees today. He would have received a minimum of $25 million this year and again in 2006 provided the CEOs of Goldman Sachs Group Inc., Merrill Lynch & Co., Bear Stearns Cos. and Lehman Brothers Holdings Inc. made an average of at least that much.

'I don't want anyone to think that I am entitled to something that others are not,' Mack said in the letter, a copy of which was sent to Bloomberg. 'This is a business built on trust.'

His reversal highlights the pressure Mack is under to rebuild morale and restore Morgan Stanley's reputation after a public battle to oust his predecessor. Morgan Stanley said yesterday that former Chairman and CEO Philip Purcell, 61, will receive a cash retirement bonus of $44 million and co-President Stephen Crawford, 41, can collect $32 million should he resign for any reason by Aug. 4.

Purcell's package has drawn fire from some investors as being too high for someone who presided over a 50 percent decline in the New York-based firm's shares during his last five years in charge.

Mack said certain decisions were made by others at the firm 'in good faith' and he's not going to 'second-guess' them.

'Even if the previous contract seemed technically reasonable, Mack seems to be saying he'll leave it up to the board to reward him as he tries to enhance shareholder value and increase the performance of the business,' said Michael McKeon, head of financial-services consulting at Booz Allen Hamilton Inc. in New York."
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Nice move - it reassures all stakeholders that Mack is fair and willing to bet on himself as he obviously is doing. I would bet with him that he will make even more with this "generous and fair" move on his part given how Morgan Stanley compensated CEO failure. Also note Mack certainly accepted his signing bonus as detailed in my post a few days ago. Mack was very wealthy before his return to Morgan and now he's betting house money - and it is good for the firm too.

"Democrats and CAFTA"

2005-07-09T09:42:00.000-04:00

OpinionJournal : "The Central American Free Trade Agreement passed the Senate last week, as everyone expected, but the more interesting news is who voted against it. Hint: This isn't Bill Clinton's Democratic Party anymore. Nafta was one of the former President's signature achievements, and free trade one of the issues he used to define himself as a New Democrat...

Why this protectionist turn by Democrats?

...Perhaps Mrs. Clinton, Mr. Biden and the rest are all eyeing each other as they maneuver for 2008 and want to make sure no one can get to their left with Big Labor. Or perhaps they all believe they have no choice but to march to the orders of MoveOn.org, the Daily Kos and other liberals who are threatening primary challenges for any Democrat who supports Mr. Bush on anything. The latter theory is supported by Ron Brownstein's article in the latest National Journal about the rise of this Bush-hating, but rich and mobilized, Internet-based left.

Whatever the explanation, this Democratic turn against free trade is bad for the country. The U.S. hasn't had a protectionist President since Herbert Hoover, and we all remember how that turned out. "

Tom Friedman on Muslim Extremism

2005-07-08T23:48:00.000-04:00

If It's a Muslim Problem, It Needs a Muslim Solution : "The Muslim village has been derelict in condemning the madness of jihadist attacks. When Salman Rushdie wrote a controversial novel involving the prophet Muhammad, he was sentenced to death by the leader of Iran. To this day - to this day - no major Muslim cleric or religious body has ever issued a fatwa condemning Osama bin Laden.

Some Muslim leaders have taken up this challenge. This past week in Jordan, King Abdullah II hosted an impressive conference in Amman for moderate Muslim thinkers and clerics who want to take back their faith from those who have tried to hijack it. But this has to go further and wider.

The double-decker buses of London and the subways of Paris, as well as the covered markets of Riyadh, Bali and Cairo, will never be secure as long as the Muslim village and elders do not take on, delegitimize, condemn and isolate the extremists in their midst. "

US Jobless Rate at 5% Lowest Since September 2001

2005-07-08T09:04:00.000-04:00

U.S. June jobless rate falls to 4-year low of 5% : "The U.S. unemployment rate fell to 4-year low of 5% in June as the economy added 146,000 payroll jobs, the Labor Department said Friday. Payroll growth was 48,000 under the 194,000 expected by economists, but April and May hiring were revised up by a total of 44,000. May's payrolls were revised to 104,000 from 78,000 previously. Economists had expected the jobless rate to remain at 5.1%. The unemployment rate was last at 5% in September 2001.

Average hourly earnings rose 3 cents, or 0.2%, to $16.06 in June, as expected. Earnings are up 2.7% in the past year. The average workweek was unchanged at 33.7 hours in June. The factory workweek was also unchanged at 40.4 hours. Total hours worked in the economy rose 0.2%. Among 278 industries, 55% were hiring in June, down from 57% in May. The report shows continued improvement in the labor market.

It is not likely to have much impact on the Federal Reserve's deliberations about whether to keep raising interest rates. The Federal Open Market Committee will have the July employment report in hand when it next meets on Aug. 9."
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For the negative spin on the same news the NYT's report.

"Our Politics Fiddles While London Burns"

2005-07-08T08:10:00.000-04:00

London Bus 7-7-5

Daniel Henninger in a piece titled " 'Close Guantanamo'? " echoes my sentiments in my previous post - OpinionJournal - Wonder Land: "The U.S. seems to have experienced a post-9/11 fall from seriousness. As the reality fades of a September 11 in America, a resort in Bali or a train station in Madrid, it somehow seems 'safe' to propose setting a deadline to remove our troops from Iraq, to close Guantanamo, to dump the Patriot Act. We in America can do any of these things, and it will still be OK. We can believe that Islamic terrorism is less than it is, and get away with it.

One more time? Should one assume that July 7 in London--the ripped-open double-decker buses, the stunned, bloody faces of those who lived--will in time fall in the queue of concerns to make it safe to argue, again, that all of this will go away if George Bush goes away?

...The standard response to all this is that if George Bush and Tony Blair hadn't done Iraq, we'd all be as one in the war on terror. The standard response before September 11, was that if we weren't so close to terror-beset Israel, none of this would ever happen. For 30 years, the standard response to this terror has gotten many of us killed. "

WSJ 0n 7/7/5

2005-07-08T07:40:00.000-04:00

OpinionJournal : "Will yesterday's savagery reunite the West against its common enemy?

That was an impressive sight yesterday, in Gleneagles, Scotland, of British Prime Minister Tony Blair responding to the London terror attacks flanked in solidarity by all the world's major leaders. Now let's hope those leaders react with the resolve President Bush showed after 9/11, rather than retreat the way Spain did after the Madrid bombings last year.

...The best response would be for G-8 leaders to immediately expand their commitments to both countries [Iraq and Afganistan]. Islamists are most dangerous when they sense weakness. And they can be forgiven for detecting it as they've watched debates in Europe and the U.S. in recent months. The calls to close Guantanamo, the recriminations over rendition of terror suspects, the demands for a "date certain" to withdraw from Iraq: In the mind of al Qaeda these are all signs of the West's flagging will to prevail...

...For months the debate in Washington hasn't been over how best to fight terrorists but how harshly we treat them. Rather than strengthen the Patriot Act, Congress wants to weaken it by creating a library loophole. The press corps has wallowed in Abu Ghraib as the defining event of the entire Iraq War.

...Perhaps the London bombings will inspire a new shared determination. Yesterday Mr. Blair read a joint statement of the leaders present, including France's Jacques Chirac and Germany's Gerhard Schroeder: 'Today's bombings will not weaken in any way our resolve to uphold the most deeply held principles of our societies and to defeat those who would impose their fanaticism and extremism on all of us. We shall prevail and they shall not.' More than what they say, the world will be watching what those leaders now do, al Qaeda most of all. "
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As unfortunate as yesterday certainly was, perhaps the event will wake up many Americans who have quickly forgotten what 9/12/01 felt like and the resolve that our country shared, however briefly. It appears now to have faded in the stink of partisan politics, the creep of pacificism and protectionism, the great waving of the Downing Street Memo as something it certainly is not, the disconnect of some that Operation Iraqi Freedom is indeed part of the Global War on Terror, and an impression to the world that Osama bin Laden may have been right after all when he wrote and proclaimed that the West and especially America is too weak to fight a hard long war against Islamic jihad.

Will the geart voice of the American and British people push our leaders to fight and show our resolve or show weakness until we have another catastrophe greater than our 9/11/01 and 7/77/05? What does it take for Westerners to realize this is indeed a war we are fighting whether we want to or not?

Thinking About a New Computer? Google Earth - System Requirements

2005-07-07T10:57:00.000-04:00

A great new free application from Google - Google Earth which provides remarkable satellite pictures, mapping and other features gives us a clue what we will all need in computer capabilites in the not so distant future: Google Earth - System Requirements:
"Recommended configuration:
Operating system: Windows XP
CPU speed: Intel Pentium P4 2.4GHz+ or AMD 2400xp+
System memory (RAM): 512MB
2GB hard-disk space
3D graphics card: 3D-capable video card with 32MB VRAM or greater
1280x1024, 32-bit true color screen
Network speed: 128 kbps ('Broadband/Cable Internet') "

Insecure Home Wi-Fi Users

2005-07-07T10:53:00.000-04:00

Man Charged With Stealing Wi-Fi Signal : "ST. PETERSBURG, Fla. - Police have arrested a man for using someone else's wireless Internet network in one of the first criminal cases involving this fairly common practice. Benjamin Smith III, 41, faces a pretrial hearing this month following his April arrest on charges of unauthorized access to a computer network, a third-degree felony.

Police say Smith admitted using the Wi-Fi signal from the home of Richard Dinon, who had noticed Smith sitting in an SUV outside Dinon's house using a laptop computer. The practice is so new that the Florida Department of Law Enforcement doesn't even keep statistics, according to the St. Petersburg Times, which reported Smith's arrest this week.

Innocuous use of other people's unsecured Wi-Fi networks is common, though experts say that plenty of illegal use also goes undetected: such as people sneaking on others' networks to traffic in child pornography, steal credit card information and send death threats. Security experts say people can prevent such access by turning on encryption or requiring passwords, but few bother or are unsure how to do so. Wi-Fi, short for Wireless Fidelity, has enjoyed prolific growth since 2000. Millions of households have set up wireless home networks that give people like Dinon the ability to use the Web from their backyards but also reach the house next door or down the street."
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How secure is your network right now?

Mack Scores $25 mln Payday at Morgan Stanley

2005-07-05T22:34:00.000-04:00

Financial Services - Company Announcements : "John Mack, who returned last week from a four-year exile to become chief executive of Morgan Stanley, will earn a minimum of $25 million a year in total compensation, according to a regulatory filing made late Tuesday.

Mack, whose contract runs through 2010, will receive no less than the lowest-paid among the CEOs of Goldman Sachs, Lehman Bros., Bear Stearns & Co. and Merrill Lynch & Co., the filing said.

Morgan Stanley is also giving Mack 500,000 shares of restricted stock. A fifth of those shares are vested, and another 20% will vest annually through the final year of his contract.

Under terms of the deal, Mack will also receive retirement benefits as if he had not been ousted in 2001. That year Mack lost a power struggle with Philip Purcell, the CEO he replaced last week."
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I looked for you: MWD (Morgan Stanley) closed at $53.77 today, so Mack's signing bonus in the vested stock gift was worth $5.377 mln, if he gets all 500,000 shares in today's dollars that is worth $26.885 mln. before any stock appreciation. So the five year deal is worth approximately $157 million. Nice work if you can get it...

A Mother Who Lost Her Son in Iraq Writes...

2005-07-05T08:23:00.000-04:00

Beth Houck is a resident of Mount Ulla, NC and wrote a letter last week, a portion of which follows Son's death should not be in vain: "As a gold star mother - that means I lost a son in combat - I was very much interested in the Salisbury Post's article dated June 13 regarding the altered position of Congressman Walter B. Jones on the War on Terror.

You may remember that this man coined the phrase "freedom fries" to show support of our military and disdain for France's lack of help in the War on Terror in Iraq. You may also remember the genuine concern the Post showed in reporting the loss of our son, Lance Cpl. David Houck on 26 November 2004 at the Battle for Fallujah. I have since returned Congressman Jones' letter of condolence with a personal letter expressing my concern for his change of position. I've also talked to several combat veterans and seasoned veterans from World War II who share my same sentiments. I'll explain...

...If Congress gets involved in telling the military what to do, such as demanding a timetable for a pullout from Iraq, then my son WILL HAVE DIED IN VAIN. I will have to tell his daughter that he died only to have the insurgents who hate freedom take over Fallujah again.

Germany never attacked us; yet FDR led us into Europe to free them from a mad man. Truman finished that war and started one in Korea when North Korea never attacked us. John F. Kennedy led us into the Vietnamese conflict in 1962 when Vietnam never attacked us. Clinton sent troops to Bosnia without U.N. or French consent when Bosnia never attacked us. Ask Iranians and the Kurds in northern Iraq about chemical weapons. They bear the scars today.

I will close with a quote from Gen. R.A. Huck, presently commanding Marines in Iraq:

"We are finding that most Iraqis want to live in peace. We are giving them the opportunity to take hold of their own future and build a better Iraq for their children. Your family's great sacrifice has helped to make that possible. Thank you for your courage. You continue to be in our prayers."

Therefore, will you join me in asking Congress to leave the military alone to do bravely, professionally and effectively what they are trained to do? "
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Please read all of her letter; it is claer and from her heart. I am sure President hears this over and over during his unpublicized meetings with the families of lost loved ones.

July 4, 1776 - July 4, 2005: 229 Years Ago

2005-07-04T23:45:00.000-04:00

The Declaration of Independence

The Declaration of Independence:

Action of Second Continental Congress, July 4, 1776, The unanimous Declaration of the thirteen united States of America

"IN CONGRESS, July 4, 1776.

The unanimous Declaration of the thirteen united States of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.--Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world....

...In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor. "

(Emphasis added is mine. The full documaent available at the link. Note: All Fourth Of July pieces will stay top of the fold today.)