JustOneMinute

Go, Rafa!

The traditional Sunday morning Australian Open 4th set tiebreaker open thread.

UPDATE:  My, my - trailing 5-3 in the fourth set tiebreak, Nadal takes four straight points to take the tiebreak 7-5 and force a fifth set.  If Nadal derails the Djokovic Express this final will become the classic nobody saw.

HMM:  Djokovic takes the final set 7-5.

Saturday Morning

The new Battlin' Mitt seems to have taken the lead in Florida.

Global Warming Calmism

The WSJ publishes an open letter from sixteen scientists urging politicians and others to cool it on global warming:

...Speaking for many scientists and engineers who have looked carefully and independently at the science of climate, we have a message to any candidate for public office: There is no compelling scientific argument for drastic action to "decarbonize" the world's economy. Even if one accepts the inflated climate forecasts of the IPCC, aggressive greenhouse-gas control policies are not justified economically.

A recent study of a wide variety of policy options by Yale economist William Nordhaus showed that nearly the highest benefit-to-cost ratio is achieved for a policy that allows 50 more years of economic growth unimpeded by greenhouse gas controls. This would be especially beneficial to the less-developed parts of the world that would like to share some of the same advantages of material well-being, health and life expectancy that the fully developed parts of the world enjoy now. Many other policy responses would have a negative return on investment. And it is likely that more CO2 and the modest warming that may come with it will be an overall benefit to the planet.

Here are the signatories:

Claude Allegre, former director of the Institute for the Study of the Earth, University of Paris; J. Scott Armstrong, cofounder of the Journal of Forecasting and the International Journal of Forecasting; Jan Breslow, head of the Laboratory of Biochemical Genetics and Metabolism, Rockefeller University; Roger Cohen, fellow, American Physical Society; Edward David, member, National Academy of Engineering and National Academy of Sciences; William Happer, professor of physics, Princeton; Michael Kelly, professor of technology, University of Cambridge, U.K.; William Kininmonth, former head of climate research at the Australian Bureau of Meteorology; Richard Lindzen, professor of atmospheric sciences, MIT; James McGrath, professor of chemistry, Virginia Technical University; Rodney Nichols, former president and CEO of the New York Academy of Sciences; Burt Rutan, aerospace engineer, designer of Voyager and SpaceShipOne; Harrison H. Schmitt, Apollo 17 astronaut and former U.S. senator; Nir Shaviv, professor of astrophysics, Hebrew University, Jerusalem; Henk Tennekes, former director, Royal Dutch Meteorological Service; Antonio Zichichi, president of the World Federation of Scientists, Geneva.

Opinions will vary but the most impressive blurb to catch my eye is "Richard Lindzen, professor of atmospheric sciences, MIT".

Here is more by and about him:

The Climate Science Isn't Settled, WSJ, Nov 30 2009

MIT's inconvenient scientist, Alex Beam, Globe Columnist, August 30, 2006

And a basher from Think Progress - Shame on Richard Lindzen, MIT’s uber-hypocritical anti-scientific scientist

 

 

 

Here We Go Again

Yet another Debate Night open thread.  8 PM Eastern on CNN.

It's 'Newt To The Moon' Day

With Matt Drudge at quarterback conservatives rise up to derail Newton's Force:

Newt Gingrich better hope voters who lapped up his delicious hits on the “elite media” and liberals don’t read the Drudge Report this morning.

Or the National Review. Or the American Spectator. Or Ann Coulter.

If they do, Gingrich comes off looking like a dangerous, anti-Reagan, Clintonian fraud.

It’s as if the conservative media over the past 24 hours decided Gingrich is for real, and they need to come clean about the man they really know before it’s too late.

I found the Tom DeLay bit especially interesting:

• Tom DeLay, a top deputy to Gingrich during the Republican revolution of the mid-1990s, joined the chorus of other conservative members breaking their silence about Gingrich’s erratic leadership style. In a radio interview with KTRH, DeLay said: “He’s not really a conservative. I mean, he’ll tell you what you want to hear. He has an uncanny ability, sort of like Clinton, to feel your pain and know his audience and speak to his audience and fire them up. But when he was speaker, he was erratic, undisciplined.”

To know him is not to love him, as Congressman Peter King wrote last December.

On another front, John King of CNN wrings from the Gingrich camp a concession that Gingrich was, well misinformed when he aggressivey responded to a King question about his alleged 'open marriage'.

Finally, in a bit of 'space coast' pandering, Newt explained that by 2020 he would have solved the problems of earth and we would have a permanent base on the moon.  I don't know whether the appropriate response is "Are you kidding me?" or "Are you effing kidding me?".

The Battle Of The One Percenters

We have been struggling with Warren Buffet's secretary, the self-described "average citizen" whose tax rate is so famously higher than her boss's.

Per ABC News, Ms. Bosanek pays a tax rate of 35.8% of her income; it is clear from the interview that Mr. Buffet included Social Security and Medicare taxes in that calculation, as he ought to.

What is not clear at all is just how much she is earning to attain that tax rate.  It is also plausible that Mr. Buffet made some unwarranted assumptions in performing his analysis - for example, he claims that Ms. Bosanek and her husband pay Social Security on "slightly over" two hundred thousand of income, but that elides the fact that her share of that is capped at W2 income of $106,800.  Including her husband's Social Security in her tax calculation makes little sense (but that doesn't mean it didn't happen).

So loose the hounds!  With this H&R Block income calculator for 2011 we can *approximate* her possible taxes for 2010.  For example, with income of $190,000 a married woman filing separately with the standard deduction and exemption will have a Federal income tax liability of $49,357.  

To that we should add her *capped* share of Social Security: 6.2% x $106,800 = $6,622.

Medicare is not capped, so let's add 1.45% x her W2 income: 1.45% x $190,000 = $2,755

And let's not forget the employer's share!  Per the Congressional Budget Office, the employers share of payroll taxes is ultimately borne by the worker:

The burden of taxes levied on businesses actually falls on households. In line with most economists, CBO assumes that the employer's share of payroll taxes falls on employees and thus assigns those payments to employees both as income and taxes paid. 

So with these adjustments, let's add those payroll taxes once again for the employer's share.  If we do that, we will calculate total taxes of $68,110.  A casual calculation of her effective tax rate would be:

    $68,110 / $190,000 = 35.8%.

Bingo!  Well, actually, bingo... First, this is only a lower bound for her income.  If Ms. Bosanek has more deductions and exemptions or favored income such as capital gains, her actual income could be higher.  And we are sidelining her hubby here.

Secondly, this casual calculation overlooked a key point of the CBO caveat - if we add the employer share of taxes back to her taxes, we "ought" to add it back to her income as well.  Ooops!  It would not surprise me to learn that Team Buffet did not do that.  With that adjustment, Ms. Bosanek's income (W2 plus imputed payroll taxes) is revised:

    $190,000 + $6,622 + $2,755 = $199,377

This leads to a new effective tax rate of $68,110 / $199,377, or 34.2%.  Hmm - where is our 35.8%?  One wonders whether Team Buffet avoided this mistake and made the imputed income adjustment.  In that case, Ms. Bosanek would need W2 income of $475,000 to get to a 35.8% rate.  Seems high, but literalists would back this number.

And from the other direction, suppose Team Buffett chose to apply a Social Security cap of $213,600, to reflect the combined cap of husband and wife.  That is a plausible, if not really defensible, error.  But if they went with a spousal cap *and* failed to add back the imputed payroll taxes to income, they might have started with W2 income of $115,000 and concluded that her effective rate was 35.8%:

W2 Income:  $115,000

Federal tax:   $23,575   (From H&R Block)

Social Security:  $7,130 x 2 = $14,260 (Includes employer share with the spousal cap).

Medicare:          $1,668 x 2 = $3,366

Total Taxes:    $41,171

Effective Rate:  35.8%  Based on W2 income of $115,000

Revised effective rate:  33.3%  Based on imputed income totalling $123,798.

Well - we could conjugate guesses all day.  If this "average" secretary is earning $475,000 on her own, well, we all want to be average.  On the other hand, she might be earning around $115,000 or (with other possible errors and interpretations) even less.  Release the returns!

OBVIOUSLY SHE HAS GOTTEN SOME PRODUCTIVITY RAISES:  Back in 2007 Warren Buffet spoke at a Hillary fundraiser:

Mr Buffett said that he was taxed at 17.7 per cent on the $46 million he made last year, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent. Mr Buffett told his audience, which included John Mack, the chairman of Morgan Stanley, and Alan Patricof, the founder of the US branch of Apax Partners, that US government policy had accentuated a disparity of wealth that hurt the economy by stifling opportunity and motivation.

Well, let's raise that to $75,000 of W2 income today - with imputed income and taxes that works out to an effective rate of 30.4% on her W2 income and 28.2% with the imputed payroll tax income added back.  35.8% is a long way away.

LOOKS LIKE I SCORED THAT XANAX FOR NOTHING... After all this research, for the first time in my adult life I am excited about diving into my taxes.  Next step - lie down until the feeling passes...

I Hate The Smell Of BS In The Evening... [UPDATE: Even Mine...]

First, I applaud the notion that Warren Buffet's secretary ought to reveal her tax return - if Joe the Plumber can be put under the microscope for asking Obama a question about taxes, a woman who volunteers to serve as a State of the Union prop can answer a few questions.

However, I would treat with great caution this claim that Warren Buffet's secretary is probably making $200,000 to $500,000 a year if her average [Federal income] tax rate is above 15%. [but in a major UPDATE, we learn that she has an effective rate of 35.8%, presumably including her full share of Social Security and Medicare - that suggests an income of $240,000 for a married woman filing separately with the standard deduction and exemption.  Factoring in the AMT brings that income down to $190,000.  Release the returns].

Using the handy-dandy H&R Block tax calculator for 2011, I glean that a single woman taking the standard deduction and personal exemption with income of $62,000 will owe taxes of $9,250, which is an effective tax rate of 14.9%.  That same income/deduction mix for 2010 (the year in question with Romney, with slightly lower brackets) results in a 15% effective rate, if I can trust Excel.  This should represent a plausible minimum for her income if she has an effective rate of 15%.

As to her actual tax situation, who knows?  Depending on deductions, her actual income may be higher, and $62,000 isn't chump change, but there is an excellent chance she isn't knocking on the door of the 1%.

BATTLING SPRAWL:  I have slimmed down the calculations in a follow-up post.  My "most plausible" income is about $200,000.  There is a subtle flaw in the calculation but it is likely to have been made by Team Buffett; the "strictly speaking" result with no errors I can discern (but feel free to pile on!) is $475,000; a low estimate of $115,000 relies on ignoring the Social Security cap.

DEEPLY BAFFLING:  Speaking of BS, how could I overlook the Social Security and Medicare taxes?  Those are 6.2% and 1.45% directly, and many would argue that the worker bears the employers share as well (see CBO, which claims to be following "most economists", as quoted somewhere below).  In that case, her FICA taxes equal 15.3% of her gross wages up to the Social Security cap of $106,800 for 2010; add her federal taxes, and she has an effective tax rate of roughly 30%.  Is it merely conicidence that Obama's "Buffet Rule" minimum tax rate for millionaires is 30%?  Release the returns!

TROUBLING:  Michael Patrick Leahy of Broadside Books relays an ABC News report that Ms. Bosanek, the secretary, claims an effective rate of 35.8%.  That surely includes her imputed share of the full FICA.

But what income level might that represent?  Mr. Leahy heads in the wrong direction:

Since the top marginal rate on taxable income (which kicks in when taxable income exceeds $379,150) is 35%, it’s impossible that Ms. Bosnak’s claim that she pays a tax rate of 35.8 % applies to her taxable income. Since taxable income is always less than total gross income, the claim is even less credible for that measure. 

Well, hmm.  A quick calculation tells me that a gross income of $100,000 with the simple deduction/exemptions and a 15.3% FICA rate yields an effective total tax rate of 34.1%. If her wages are at the Social Security cap of $106,800, her average overall rate is 34.9%.  However, the marginal rate on the next dollar will be 25% Federal income tax and 2.9% for Medicare, so the average rate is going to start falling.  Suddenly 35.8% has receded to the far horizon.  The next bracket change is to 33% at $171,850 for singles, and the 35% bracket kicks in above $373.651.  Add in the 2.9% for the full Medicare, and those are marginal rates barely above her average rate of 35.8%.

On the other hand, she is married.  For married filing separately, the 33% threshold is at $104,626.  Maybe the marriage penalty should be brought into play - let me redo this with the "Married Filing Separately" brackets.

DOES CROW HAVE A PLACE IN A LOW-CARB DIET?  Per my dirty calculations for 2010, which roughly jibe with H&R Block for 2011, a woman married and filing separately with gross income of $240,000 and the standard deduction/exemption would have a Federal income tax liability of $65,829 (using the 2010 brackets, I hope...).  Add in her max imputed Social Security of $13,243 and her uncapped Medicare of $6,960, and her total imputed tax bill is $86,032 for an average effective rate of 35.8%.  Release the returns!

IN A PATHETIC BID FOR REDEMPTION...  I don't get the impression from the ABC clip that Mr. Buffet deployed a team of accountants to survey his office and calculate their taxes.  If in an attempt to keep it simple he got stupid, he may have simply added a 20.5% average Federal income tax rate to a 15.3% FICA rate and mishandled the effect of the Social Security cap (that cap does not enter his thoughts often, I suspect.)

To get an average Federal rate of 20.5% takes an income of $114,000 for a married person filing separately.  Still, this is confusing enough that we ought to see the returns.

THE CBO QUOTE:

The burden of taxes levied on businesses actually falls on households. In line with most economists, CBO assumes that the employer's share of payroll taxes falls on employees and thus assigns those payments to employees both as income and taxes paid. 

Upon booth review, I realize that in addition to neglecting the AMT (which mysteriously appears and disappears) I have added the employer's share to Ms. Bosanek's taxes but not her income.  That is a problem unless Team Buffett made the same error.  Adding back the imputed FICA taxes to her $240,000 raw income drops her average rate from 35.8% to 34.4%. Now to get her back to 35.8% we need an income of $440,000.  Does anyone out there still believe this is not deeply murky?  Release the returns!

We Hear From The Innumerate, or, Who's Laffing Now?

By way of Ezra Klein we glean this Twitter insight from Norh O'Donnell about Obama's proposed "Buffet Rule" creating a 30% tax rate on incomes over $1 million:

@NorahODonnell: Obama Buffett rule would essentially double Mitt Romney's taxes

Do tell.  I'l grant that if the millionaires minimum tax worked as advertised, Mitt Romney's effective tax rate (at the personal level!) would roughly double from 13.9% to 30%.  But a notable portion of his income is capital gains, including the controversial carried interest capital gains held over from his Bain days.  

The decision to sell an asset, take a gain and pay the tax is often entirely voluntary and driven by a number of factors one of which is inevitably the taxes due.  E.g., per the Times we see that Mr. Romney picked up roughly $759,000 in long term gains by selling shares in Goldman Sachs.  That may have been viewed as vital political window-dressing, or it may reflect a dubious view of the outlook for financial sector.  But if Romney's effective tax rate were doubled, the question of selling those Goldman shares may have been decided differently, as would many of the other decisions made by Romney's investment advisors.

Which suggests that doubling Romney's effective rate will prompt him to hold some of his assets and defer gains, thereby reducing his net realized capital gains; this means his total taxes paid will not double.

And will his tax bill rise at all?  Back in 2002 the CBO concluded that informed opinions vary on that question:

The sensitivity of realizations to gains tax rates raises the possibility that a cut in the rate could so increase realizations that revenue from capital gains taxes might rise as a consequence.  Rising gains receipts in response to a rate cut are most likely to occur in the short run. Postponing or advancing realizations by a year is relatively easy compared with doing so over much longer periods.

...

Careful studies have failed to agree on how responsive gains realizations are to changes in tax rates, with estimates of that responsiveness varying widely.

...Estimates of the revenue effects of capital gains tax changes by the Congress's Joint Committee on Taxation (JCT) and the Treasury's Office of Tax Analysis (OTA) also take into account how realizations respond to tax rates.⁽⁶⁾ In 1990, when the Congress considered a 30 percent cut in the rate on gains, OTA estimated that such a cut would increase revenues by $12 billion over five years; the JCT projected a loss of $11 billion. If they had not factored in a realizations response, the two agencies would have estimated revenue costs of $80 billion and $100 billion, respectively--effectively illustrating how large a behavioral response is incorporated in capital gains revenue estimates.

To which I will add - there is an obvious political gaming element to this.  For example, suppose a huge bipartisan majority passed a bill which raised the capital gains rate to 30% immediately and then by 1% every year for the next decade (call it the Dem Dream Act).  Realized capital gains might surge as investors figured that, onerous though it may be, the rate would only go up over time.

Or as an alternative, imagine that by some quirk that dwarfed the legendary Scott Brown/ObamaCare machinations Obama actually managed to receive and sign a bill raising the capital gains rate this year.  Given the history of that rate (Kennedy cut it, Reagan cut and raised it, Clinton cut it, Bush cut it) a reasonable investor might choose to wait Obama out, figuring the rate will be cut soon enough, by Obama or his successor.  Realized capital gains would shrivel and the prophecy of an eventual cut would probably become self-fulfilling.  Romney's effective tax rate of 30%, after being applied to a much lower income figure, might actually result in his tax bill falling.  We can only imagine Ms. O'Donell's surprise.

Obama is aware of these arguments, of course, even if Ms. O'Donnell is not.  Here is our Community Organizer-in-Chief addressing revenue versus fairness back in a 2008 debate: 

GIBSON: All right. You have, however, said you would favor an increase in the capital gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton," which was 28 percent. It's now 15 percent. That's almost a doubling, if you went to 28 percent.

But actually, Bill Clinton, in 1997, signed legislation that dropped the capital gains tax to 20 percent.

OBAMA: Right.

GIBSON: And George Bush has taken it down to 15 percent.

OBAMA: Right.

GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness.

So Obama's drama is not about raising revenue, it's about the appearance of fairness.  Well, if Mitt Romney pays a 30% tax on $7 million of reported income under Obama's plan, appearances will be preserved.  And his taxes will fall.

Too Late To Turn Back Now

The AP flop-checks Obama's speech.

And some of us didn't quite feel the rhythm when Obama threatened us with the news that "we've come too far to turn back now"; in fact, I believe I believe I believe he's falling asleep.

I CAN'T TURN BACK EITHER:  I can't quit Obama's exhortation that we should all be like the military, especially now that he is C-in-C.  But let me highlight this from his Big Finish:

 

No one built this country on their own.  This nation is great because we built it together.  This nation is great because we worked as a team.  This nation is great because we get each other’s backs.   

Grr - the Elizabeth Warren shout-out, the Civil War denialism, and the notion that this nation is founded on collective rather than local or individual effort.  There is an alternative view, that freedom and individual effort and responsibility have been the foundation of our country's success.  Riddle me this - is Apple great because Steve Jobs had Bill Gates back, or because Jobs had Gates back in sight and a knife in his hand?  Just asking.

 

Spreading The Message Of Democracy? Not Exactly

Wow - a Democratic President of the United States opens his State of the Union address by offering well-deserved praise to US troops and then urging the rest of our citizens to embrace their values:

THE PRESIDENT:  Mr. Speaker, Mr. Vice President, members of Congress, distinguished guests, and fellow Americans:

Last month, I went to Andrews Air Force Base and welcomed home some of our last troops to serve in Iraq.  Together, we offered a final, proud salute to the colors under which more than a million of our fellow citizens fought -- and several thousand gave their lives.

We gather tonight knowing that this generation of heroes has made the United States safer and more respected around the world.  (Applause.)  For the first time in nine years, there are no Americans fighting in Iraq.  (Applause.)  For the first time in two decades, Osama bin Laden is not a threat to this country.  (Applause.)  Most of al Qaeda’s top lieutenants have been defeated.  The Taliban’s momentum has been broken, and some troops in Afghanistan have begun to come home.

These achievements are a testament to the courage, selflessness and teamwork of America’s Armed Forces.  At a time when too many of our institutions have let us down, they exceed all expectations.  They’re not consumed with personal ambition.  They don’t obsess over their differences.  They focus on the mission at hand.  They work together. 

Imagine what we could accomplish if we followed their example.  (Applause.)  Think about the America within our reach:  A country that leads the world in educating its people.  An America that attracts a new generation of high-tech manufacturing and high-paying jobs.  A future where we’re in control of our own energy, and our security and prosperity aren’t so tied to unstable parts of the world.  An economy built to last, where hard work pays off, and responsibility is rewarded.

Go, Sparta!  The President closed with the same theme:

...Which brings me back to where I began.  Those of us who’ve been sent here to serve can learn a thing or two from the service of our troops.  When you put on that uniform, it doesn’t matter if you’re black or white; Asian, Latino, Native American; conservative, liberal; rich, poor; gay, straight.  When you’re marching into battle, you look out for the person next to you, or the mission fails.  When you’re in the thick of the fight, you rise or fall as one unit, serving one nation, leaving no one behind.

One of my proudest possessions is the flag that the SEAL Team took with them on the mission to get bin Laden.  On it are each of their names.  Some may be Democrats.  Some may be Republicans.  But that doesn’t matter.  Just like it didn’t matter that day in the Situation Room, when I sat next to Bob Gates -- a man who was George Bush’s defense secretary -- and Hillary Clinton -- a woman who ran against me for president. 

All that mattered that day was the mission.  No one thought about politics.  No one thought about themselves.  One of the young men involved in the raid later told me that he didn’t deserve credit for the mission.  It only succeeded, he said, because every single member of that unit did their job -- the pilot who landed the helicopter that spun out of control; the translator who kept others from entering the compound; the troops who separated the women and children from the fight; the SEALs who charged up the stairs.  More than that, the mission only succeeded because every member of that unit trusted each other -- because you can’t charge up those stairs, into darkness and danger, unless you know that there’s somebody behind you, watching your back.

So it is with America.  Each time I look at that flag, I’m reminded that our destiny is stitched together like those 50 stars and those 13 stripes.  No one built this country on their own.  This nation is great because we built it together.  This nation is great because we worked as a team.  This nation is great because we get each other’s backs.  And if we hold fast to that truth, in this moment of trial, there is no challenge too great; no mission too hard.  As long as we are joined in common purpose, as long as we maintain our common resolve, our journey moves forward, and our future is hopeful, and the state of our Union will always be strong.

Thank you, God bless you, and God bless the United States of America.  (Applause.)

Pardon me, but the military unites behind the mission established by the Commander-in-Chief, as I hope Obama knows.  Is this really how the President of the United States thinks a democracy ought to work?  Is this the way to tell the world that the dictatorships of Cuba Korea and Iran have it wrong and we have it right?

And since Obama is basking in our exit from Iraq (no mention of "victory", but still...), does he consider himself to have had George Bush's back during the surge Bush launched in January 2007?  Did Obama join with Bush in common purpose?  Did he help to promote our common resolve?

I may be wrong, but my impression is that when back when Obama disagreed with a President it was a vital contribution to a robust democratic debate; today, people who disagree with our President lack fundamental American values such as teamwork and shared commitment.  Whatever.

THE EDUCATION OF A PRESIDENT: Back in May 2008 Candidate Obama (pinch hitting for the ill Ted Kennedy)  gave a rousing commencment speech at Wesleyan.  His theme - the importance of public service.  His mentions of the military?  None.

And now that he is Commander-in-Chief he wants all of us to join the army.  His army.

This is not the full speech, but an extended excerpt:

Now each of you will have the chance to make your own discovery in the years to come. And I say “chance” because, as president Roth indicated, you won’t have to take it. There’s no community service requirement in the outside world; no one forcing you to care. You can take your diploma, walk off this stage, and chase only after the big house and the nice suits and the other things that our money culture says you should buy. You can choose to narrow your concerns and live life in a way that tries to keep your story separate from America’s.

But I hope you don’t. Not because you have an obligation to those who are less fortunate, although I believe you do have that obligation. Not because you have a debt to all those who helped you get to where you are today, although I do believe you have that debt to pay.

It’s because you have an obligation to yourself. Because our individual salvation depends on collective salvation. Because thinking only about yourself, fulfilling your immediate wants and needs, betrays a poverty of ambition. Because it’s only when you hitch your wagon to something larger than yourself that you realize your true potential and discover the role that you’ll play in writing the next great chapter in the American story.

There are so many ways to serve and so much that needs to be done at this defining moment in our history. You don’t have to be a community organizer or do something crazy like run for President. Right here at Wesleyan, many of you have already volunteered at local schools and elementary schools, contributed to the United Way, and even started a program that brings fresh produce to needy families in the area. One hundred and sixty-four graduates of this school have joined the Peace Corps since 2001, and I confess a special pride that two of you are about to leave for my father’s homeland of Kenya to bring alternative sources of energy to impoverished areas. I ask you to seek these opportunities when you leave here, because the future of this country – your future, my future, my children’s future – depends on it.

At a time when our security and moral standing depend on winning hearts and minds in the forgotten corners of this world, we need more of you to serve abroad. As President, I intend to grow the Foreign Service, double the Peace Corps over the next few years, and engage young people of other nations in similar programs, so that we work side by side to take on the common challenges that confront all of humanity.

At a time when our ice caps are melting and our oceans are rising, we need you to help lead a green revolution. We still have time to avoid the catastrophic consequences of climate change if we get serious about investing in renewable sources of energy, and if we get a generation of volunteers to work on renewable energy projects, and if we teach people about conservation, and help clean up polluted areas; if we send talented engineers and scientists abroad to help developing countries promote clean energy in a way that’s compatible with economic growth.

At a time when a child in Boston must compete with children in Beijing and Bangalore, we need an army of you to become teachers and principals in schools that this nation cannot afford to give up on. I will pay our educators what they deserve, and give them more support, but I will also ask more of them to be mentors to other teachers, and serve in high-need schools and high-need subject areas like math and science. We will need you.

At a time when there are children in the city of New Orleans who still spend each night in a lonely trailer, we need more of you to take a weekend or a week off from work, and head down South, and help rebuild. If you can’t get the time, volunteer at the local homeless shelter or soup kitchen in your own community, because there is more than enough work to go around. Find an organization that’s fighting poverty, or a candidate who promotes policies you believe in, and find a way to help them. We need you.

At a time of war, we need you to work for peace. At a time of inequality, we need you to work for opportunity. At a time of so much cynicism and so much doubt, we need you to make us believe again. That’s your task, class of 2008.

The closest he comes to the military that I can find is "At a time of war, we need you to work for peace".

SOTU Open Thread

The NY Times has excerpts from the Mitch Daniels response.

The Cato Institute has a cool live blog here.

YOU'RE IN THE ARMY NOW!  (AND IT'S NO LONGER THE ARMY OF GHENGIS KHAN): Did a Democratic President really open (and close!) a State of the Union speech by exhorting the American public to emulate the values of the US military?  Obama has come a long way from his May 2008 commencement speech at Wesleyan, when he exhorted the graduates to consider the many avenues of national service and never mentioned the military.

Taking it from the top:

THE PRESIDENT:  Mr. Speaker, Mr. Vice President, members of Congress, distinguished guests, and fellow Americans:

Last month, I went to Andrews Air Force Base and welcomed home some of our last troops to serve in Iraq.  Together, we offered a final, proud salute to the colors under which more than a million of our fellow citizens fought -- and several thousand gave their lives.

We gather tonight knowing that this generation of heroes has made the United States safer and more respected around the world.  (Applause.)  For the first time in nine years, there are no Americans fighting in Iraq.  (Applause.)  For the first time in two decades, Osama bin Laden is not a threat to this country.  (Applause.)  Most of al Qaeda’s top lieutenants have been defeated.  The Taliban’s momentum has been broken, and some troops in Afghanistan have begun to come home.

These achievements are a testament to the courage, selflessness and teamwork of America’s Armed Forces.  At a time when too many of our institutions have let us down, they exceed all expectations.  They’re not consumed with personal ambition.  They don’t obsess over their differences.  They focus on the mission at hand.  They work together. 

Imagine what we could accomplish if we followed their example.  (Applause.)  Think about the America within our reach:  A country that leads the world in educating its people.  An America that attracts a new generation of high-tech manufacturing and high-paying jobs.  A future where we’re in control of our own energy, and our security and prosperity aren’t so tied to unstable parts of the world [ed. - like Canada?].  An economy built to last, where hard work pays off, and responsibility is rewarded.

Just to stay with Obama's examples, if the mission is educating our people, shouldn't the democratic process include some debate about how to accomplish that?  Or are we really meant to just pipe down and unite behind the Commander-in-Chief and his public sector union allies?  If the mission is "control of our own energy" shouldn't we embracing allies such as Canada rather than encouraging them to sell their oil to China?  Or should we just pipe down and accept the orders of our Commander-in-Chief?

Panic Sets In

Following last night's debate, Bret Stephens of the WSJ throws in the towel on the current Republican offerings:

The GOP Deserves to Lose

That's what happens when you run with losers.

...Above all, it doesn't matter that Americans are generally eager to send Mr. Obama packing. All they need is to be reasonably sure that the alternative won't be another fiasco. But they can't be reasonably sure, so it's going to be four more years of the disappointment you already know.

As for the current GOP field, it's like confronting a terminal diagnosis. There may be an apparent range of treatments: conventional (Romney), experimental (Gingrich), homeopathic (Paul) or prayerful (Santorum). But none will avail you in the end. Just try to exit laughing.

Ross Douthat lauds William Kristol's indefatigabe efforts for a better candidate:

For months now, even as the rest of the conservative commentariat has gradually resigned itself to the existing presidential field, the Weekly Standard’s Bill Kristol has continued to pine — publicly, unstintingly, immune to either embarrassment or fatigue— for another candidate to jump into the race....

And do you know what? He’s been right all along. Right that the decisions by various capable Republicans to forgo a presidential run this year have been a collective disgrace; right that Republican primary voters deserve a better choice than the one being presented to them; and right, as well, that even now it isn’t too late for one of the non-candidates to change their mind and run.

...Contrary to what some of my more excitable colleagues in the press corps have been claiming, the weekend’s results didn’t demonstrate that Newt Gingrich could actually win the Republican nomination, or prove that Mitt Romney could actually lose to him. (Yes, I’m still on the “against this field, Mitt’s inevitable” bandwagon: More on that anon.) But the last week was a reminder, after months in which the incompetence of his rivals made him look better than he is, that Romney remains a tremendously weak frontrunner, whose strengths don’t compensate for a style that leaves conservatives cold and a background that will leave him open to attacks across a variety of Democratic-friendly fronts in the general election. I don’t think he can lose the primary, and I still give him decent odds of winning in November. But those judgments have everything to do with his political environment, and very little to do with the man himself. And under such circumstances, it seems absurd and pathetic that both the party and the country won’t have the chance to consider another option besides Newt the Great and Terrible.

 

 

The Big Show

Yet another Republican debate,this time on NBC at 9PM.  Will Brian Williams ask Newt to elaborate on some of his big ideas?

We Hear From The Paul The Persecuted Prognosticator

Right on schedule Paul Krugman commences to cheerlead for the Obama recovery.

I happen to agree with the mainstream view that a US recovery seems to be underway.  But this from the Persecuted Prognosticator drew my eye:

On housing: as everyone now knows (but oh, the abuse heaped on anyone pointing it out while it was happening!), we had a monstrous housing bubble between 2000 and 2006. Home prices soared, and there was clearly a lot of overbuilding. When the bubble burst, construction — which had been the economy’s main driver during the alleged “Bush boom” — plunged.

First, let's pause a moment and imagine the plight of a persecuted Times pundit who spent the Bush years, well, bashing Bush.  It must have gotten lonely.

And let's replay (yet again!) his Nostradamus-like insight into the housing bubble, offered in May of 2006:

Ben Bernanke, the chairman of the Federal Reserve, contends that what's happening in the housing market is "a very orderly and moderate kind of cooling." Maybe he's right. But if he isn't, the stock market drop of the last two days will be remembered as the start of a serious economic slowdown.

Maybe the bubble will end with "a serious slowdown", or maybe not.  Golly, I bet he did get abused for that.  Of course, I don't see his predictions of a trillion dollar Federal bail-out of Fannie, Freddie and the US financial system, but maybe that is par for a "serious slowdown."

And while we're here, let's pick up on his admission that "Home prices soared, and there was clearly a lot of overbuilding".  This seems to represent backtracking from what Krugman described as "one of the best pure-economic pieces I’ve done in my tenure at the Times".  As Krugman explained in the referenced 2005 piece, in areas where lots of building is possible, home prices don't tend to rise - instead, new construction meets the new demand.  Fair enough, but... Krugman then went off the rails, for example in this 2010 column, by arguing thusly:

To appreciate Georgia’s specialness, you need to realize that the housing bubble was a geographically uneven affair. Basically, prices rose sharply only where zoning restrictions and other factors limited the construction of new houses. In the rest of the country — what I once dubbed Flatland — permissive zoning and abundant land make it easy to increase the housing supply, a situation that prevented big price increases and therefore prevented a serious bubble.

Most of the post-bubble hangover is concentrated in states where home prices soared, then fell back to earth, leaving many homeowners with negative equity — houses worth less than their mortgages. It’s no accident that Florida, Nevada and Arizona lead the nation in both negative equity and mortgage delinquencies; prices more than doubled in Miami, Las Vegas and Phoenix, and have subsequently suffered some of the biggest declines.

As I pointed out at the time, Krugman's notion that price collapses couldn't follow an era of high construction failed to recognize that decreases in housing supply are not nearly as easily managed as increases.  Typically, developers cut prices rather than bulldoze new construction (or any other existing housing stock), so the supply curve is quite inelastic on the way down.

Now, one might have thought that Las Vegas, cited above, was an example of a city that saw a lot of new construction yet experienced price collapses.  Not so fast!  In a 2006 post, Krugman explained that land use restraints limited construction there.  Hmm - the numbers I dredged up (p. 9) showed that total housing units in Las Vegas rose from 559,799 to 819,600 from 2008 to 2009, an increase of 46%; by way of comparson, the housing stock in New York and Los Angeles rose by 4.7 and 3.1% over a similar period.  And this report tells us about the Atlanta region:

The vast majority of housing available in the Atlanta region has been constructed over the past 40 years. In fact more than 20 percent of the housing stock in the Atlanta region was built between 2000 and 2007.

So Las Vegas had notably more new construction than Atlanta (on a percentage basis), yet to preserve his "best" effort Krugman wants to imagine that his model correctly places Las Vegas with LA and New York as tightly zoned areas distinct from places like Atlanta, where construction is easy.  This is reality-based?

Well, we do have his current admission that overbuilding can be a problem, so we see him toddling towards the truth.

WHAT WERE ONCE VICES ARE NOW VIRTUES:  I love to death Krugman's explanation of how the Obama recovery might take hold:

And after a protracted slump in housing starts, America now looks seriously underprovided with houses, at least by historical standards.

...

So why aren’t people going out and buying? Because the depressed state of the economy leaves many people who would normally be buying homes either unable to afford them or too worried about job prospects to take the risk.

But the economy is depressed, in large part, because of the housing bust, which immediately suggests the possibility of a virtuous circle: an improving economy leads to a surge in home purchases, which leads to more construction, which strengthens the economy further, and so on. And if you squint hard at recent data, it looks as if something like that may be starting: home sales are up, unemployment claims are down, and builders’ confidence is rising.

Now, this notion that the US economy could ride the housing market to recovery until other horses took over was the strategy employed in the 2002-2006 bubble era, and in fact, was the strategy advocated by Paul Krugman in 2001.  But since we are now, by some uncited standard, "seriously underprovided" with housing, well, away we go again. And this time, unlike the 80's or the 00's, a real estate boom won't be followed by a real estate crash.  No, I don't know why not either - perhaps because geniuses like Krugman will warn us in time that things may end badly, unless they don't.