JustOneMinute

How About That Mitt?

I didn't see Mitt's victory speech tonight.  Newt seemed flat; Ron Paul is fired up, as always, which makes me wonder yet again if the country is ready for a 76 year young Vice President (and would he take the job and bring votes to the ticket).

Snakes v. Warmbloods

In the Florida Everglades the snakes are winning.  Presumably there is a portent for the Republican primary lurking metaphorically.

WEST PALM BEACH, Fla. (AP) — A burgeoning population of huge pythons — many of them pets that were turned loose by their owners when they got too big — appears to be wiping out large numbers of raccoons, opossums, bobcats and other mammals in the Everglades, a study says.

 

Armageddon Watch

The NY Times Magazine had this grim bit of reporting in their cover story "Will Israel Attack Iran?":

[Israeli Defense Minister Barak] warned that no more than one year remains to stop Iran from obtaining nuclear weaponry. This is because it is close to entering its “immunity zone” — a term coined by Barak that refers to the point when Iran’s accumulated know-how, raw materials, experience and equipment (as well as the distribution of materials among its underground facilities) — will be such that an attack could not derail the nuclear project. Israel estimates that Iran’s nuclear program is about nine months away from being able to withstand an Israeli attack; America, with its superior firepower, has a time frame of 15 months.

So Israel will have to do their thing by September or October, which is just before the US election.  Or, if they choose to defer to the US, then either Romney, Newt or the First Ditherer will have to make a decision within about ten weeks of their inauguration in 2013.

A few weeks back the Times described a different facet of the problems this creates for Candidate Obama:

Sanctions against Iran’s oil exports that the president signed into law on New Year’s Eve started a fateful clock ticking. In late June, when the campaign is in full swing, Mr. Obama will have to decide whether to take action against countries, including some staunch allies, if they continue to buy Iranian oil through its central bank.

After fierce lobbying by the White House, which opposed this hardening in the sanctions that have been its main tool in pressuring Tehran, Congress agreed to modify the legislation to give Mr. Obama leeway to delay action if he concludes the clampdown would disrupt the oil market. He may also invoke a waiver to exempt any country from sanctions based on national security considerations.

But using either of those escape hatches could open the president to charges that he is weak on Iran, which is viewed by Western powers as determined to achieve a nuclear weapons capability and which has drawn a tough response from Europe as well.

Republican candidates, led by Mitt Romney, have threatened to use military action to prevent Tehran from building a bomb, and have criticized Mr. Obama for not doing enough to stop it from joining the nuclear club.

“If we re-elect Barack Obama, Iran will have a nuclear weapon,” Mr. Romney declared in South Carolina in November. “And if we elect Mitt Romney, they will not have a nuclear weapon.”

But... but... but... Obama got Osama!  Personally.

Polarized Pictures

Chris Cilizza and Aaron Blake of the WaPo report Gallup statistics showing Obama is the most polarizing President ever and promptly blame America:

For 2011, Obama’s third year in office, an average of 80 percent of Democrats approved of the job he was doing in Gallup tracking polls, as compared to 12 percent of Republicans who felt the same way. That’s a 68-point partisan gap, the highest for any president’s third year in office — ever. (The previous high was George W. Bush in 2007, when he had a 59 percent difference in job approval ratings.)

In 2010, the partisan gap between how Obama was viewed by Democrats versus Republicans stood at 68 percent; in 2009, it was 65 percent. Both were the highest marks ever for a president’s second and first years in office, respectively.

What do those numbers tell us? Put simply: that the country is hardening along more and more strict partisan lines.

While it’s easy to look at the numbers cited above and conclude that Obama has failed at his mission of bringing the country together, a deeper dig into the numbers in the Gallup poll suggests that the idea of erasing the partisan gap is simply impossible, as political polarization is rising rapidly.

Well, George Bush ran as a uniter, not a divider, and how did that work out?

Out of the ten most partisan years in terms of presidential job approval in Gallup data, seven — yes, seven — have come since 2004. Bush had a run between 2004 and 2007 in which the partisan disparity of his job approval was at 70 points or higher.

In explanation I will offer two long term trends and a cheap shot.

First, we have had the realignments of the South and New England.  Conservative Southern Democrats became Republicans and fiscally conservative/socially moderate New Englanders are drifting to the Dems (but not at this blog!).  Each party has greater purity within its own ranks, leading to more reported partisanship.

Secondly, the fundraising rules have required agitation and activation of the base in a way that was not true in the era of smoke-filled rooms.  Now, each election is one step from the Apocalypse and each issue will determine the fate of humanity As We Know It.  Moderation in the pursuit of campaign cash is no virtue.

And the cheap shot - Obama, who ran as a uniter in 2008, also routinely denounced the war in Iraq, wouldn't credit the surge he opposed as a success, called Guantanamo a stain on our national character, and argued that Bush was routinely shredding the Constitution.  His rhetoric on those topics surley contributed to our partisan divide and aided his own election effort.

Yet today Obama has had his own surge in Afghanistan, ignored the War Powers Act in Libya, hasn't closed Gitmo (but has expanded Bagram), assassinates Americans he can't arrest, and generally seesm to have embraced the Bush-era framework for the War on Terror.  Dare we suggest that Obama is reaping what he sowed?

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, winning the longest Grand Slam men's singles final ever:

The longest Grand Slam final in history until this one was the 1988 final at the United States Openl in which Mats Wilander defeated Ivan Lendl in 4 hours and 54 minutes. This one went for very nearly an hour longer and the winner never seemed clear until Djokovic’s final shot, an inside-out forehand, bounced twice for a winner.

...

After a 10-minute delay to close the arena’s retractable roof , the two rivals resumed the baseline hostilities indoors, and Nadal eventually prevailed in a tiebreaker to force a fifth set, the first fifth set in their 30 matches against each other.

It would transform an already exceptional match into something rarer, and there will be ample debate in various time zones about where this final ranks in the historical pecking order, which includes mutual masterpieces like Bjorn Borg’s five-set victory over John McEnroe in the 1980 Wimbledon final or Nadal’s five-set victory over Federer on the same patch of grass in the 2008 final.

The fifth set of this marathon did not require quite as many games to resolve as either of those epics, but the intensity and tension was extraordinary. Djokovic, who has been struggling with breathing problems in the latter stages of this tournament, staggered after returns in the fifth game and actually collapsed to the blue court after his errant backhand put a brutal end to a 31-shot rally on the first point of the ninth game.

“That’s the first knockdown I’ve ever seen in tennis,” said Jim Courier, the United States Davis Cup captain who was commenting on the match for Australian television.

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.

I Absolutely Cannot Wait

Per the Daily Beast, TeamObama is about to launch a defense of their national security credentials.  As part of this effort, Eric Holder will take poit in rationalizing the al-Awlaki drone strike:

Now the administration is poised to take its case directly to the American people. In the coming weeks, according to four participants in the debate, Attorney General Eric Holder Jr. is planning to make a major address on the administration’s national-security record. Embedded in the speech will be a carefully worded but firm defense of its right to target U.S. citizens. Holder’s remarks will draw heavily on a secret Justice Department legal opinion that provided the justification for the Awlaki killing. The legal memorandum, portions of which were described to The New York Times last October, asserted that it would be lawful to kill Awlaki as long as it was not feasible to capture him alive—and if it could be demonstrated that he represented a real threat to the American people. Further, administration officials contend, Awlaki was covered under the congressional grant of authority to wage war against al Qaeda in the wake of 9/11.

Excellent.  The same chap who thought that waterboarding Khalid Sheikh Mohammed (as we do routinely with US soldiers and airmen in training) represented a loss of America's soul will now explain why whacking disagreeable Americans on a one-off basis is acceptable.  Maybe in the same speech he will explain his plans to close Gitmo (another blot on our national character) while preserving all of its capabilites at Bagram.  The Niemann media watchdogs just can't figure out why this is being ignored by Big Media, although any righty could explain it.

Cue. The. Laughtrack.

YET IT SEEMS LIKE ONLY YESTERDAY: It was a year ago that Glenn Greenwald was bemoaning Obama's embrace of the Bush/Cheney war on terror; my Evil Excerpter stuck on this:

Aside from the repressiveness of the policies themselves, there are three highly significant and enduring harms from Obama's behavior.  First, it creates the impression that Republicans were right all along in the Bush-era War on Terror debates and Democratic critics were wrong.

...

Dick Cheney is not only free of ignominy, but can run around claiming vindication from Obama's actions because he's right.  The American Right constantly said during the Bush years that any President who knew what Bush knew and was faced with the duty of keeping the country safe would do the same thing.  Obama has provided the best possible evidence imaginable to prove those claims true.

...Obama has won the War on Terror debate -- for the American Right.  And as Dick Cheney's interview last night demonstrates, they're every bit as appreciative as they should be.

We were, we did, we do, we are.

How 'Bout Them Giants!?!

Let's have a traditional "How Bout Them Giants?  How 'Bout Them Patriots?" pre-Super Bowl open thread.

Sunday Morning

It's Sunday in Net's world and Ross Douthat is poised on a window ledge.  Let me extract his kind words (and others) for Rick Santorum:

By contrast, Rick Santorum has actually run an ideas-driven campaign. Time and again, in debate after debate, he’s circled back to a few core issues that set him apart from the rest of the field: His focus on reviving U.S. manufacturing; his emphasis on the links between poverty, opportunity and family breakdown; his record of ideological consistency on the issues (health care, climate change, the Wall Street bailout etc.) that are supposedly most important to Republican voters in the Obama era. I wouldn’t want to see him rewarded with the White House: Some of his policy prescriptions are half-baked, and many of views — particularly on foreign policy — are alarmist, foolish and extreme. But he’s been more doggedly substantive throughout the debates than Gingrich, he’s done far more to raise issues that don’t always get aired in the national debate, and he’s drawn contrasts primarily on policy grounds rather than relying on media-bashing and boasts about his own intellectual prowess.

And on the topic of poverty, opportunity and family breakdown (the Douthat link to a John McWhorter piece lauding Santorum is well worth pursuing), let's toss in Charles Murray's WSJ essay on the impending collapse of white working class culture.

 

And exit polls tell me that

UPDATE:  Hmm, cryptic ending.  My computer has gone dark and now, hours later, I am not sure myself where that train of thought might have been headed.

Newtmentum

Seriously?

 

Yogi For President!

You can observe a lot at these Republican debates just by watching.  As a follow-up to last night's performance Team Romney released a compenduium of Newt's Grandiose Thoughts.  Apparently, we have a new candidate - Yogi Berra is running for President.  Here we go, from Newt Berra, on his political deaths and re-births:

.... [I]f you don’t leave, you can’t come back, because you’ve never left.’”

He'll be here all week. 

GETTING AHEAD OF OURSELVES:  Prof. Althouse captures Mitt stumbling all over the grandiosity theme during the live debate.  I am struck by his kind words for Ron Paul, which gets me thinking - does a Romney-Paul ticket make any sense at all? 

I don't think the Ron Paul newsletters can be overcome in a general election and although Paul brings an energized following I am not sure how broad his national appeal really is.  I also think that, if we are limiting ourselves to the three non-Romneys for a runnng mate, Rick Santorum goes the furthest to helping in a big swing state and appealing to the evangelicals and social conservatives who are cool to Romney.  But still - does Ron Paul make any sense at all for VP, or is this just another symptom of my ill-advised switch to decaf?

Tax Brawl

Gregory Mankiw tries to bring Paul Krugman up to speed on the incidence of taxation, arguing that looking at Mitt Romney's low capital gains rate and ignoring any imputed corporate taxes paid by his underlyig investments is not accurate.  Regrettably, Mankiw is violating an old, established rule of blogging - don't come between a man and his tirade. Krugman is going to beat to death the horse he rode in on, and delivers howlers like this in the process:

If capital gains and other investment income didn’t receive special treatment, we’d be getting substantially more revenue.

Do tell.  In most cases the decision to incur a capital gains tax is entirely voluntary and is based on the decision to hold or sell an appreciated asset.  The CBO tackled this in a 2002 paper, noting that higher capital gains rates seemed to reduce the realization of capital gains, particularly in the short ru (so who's Laffing now?):

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. In addition, a stock of accumulated gains may be realized shortly after the rate is cut, but once that accumulation is "unlocked," the stock of accrued gains is smaller and realizations cannot continue at as fast a rate as they did initially. Thus, even though the responsiveness of realizations to a tax cut may not be enough to produce additional receipts over a long period, it may do so over a few years.

...In projecting realizations beyond the current year, CBO gradually moves them to their historical level relative to output, adjusted for the tax rate on gains. That latter adjustment recognizes that with lower tax rates--even in the long run--realizations should be higher relative to GDP than they would be with higher tax rates.

Of course, higher realizations at a lower rate may or may not increase long-term revenue.

They also admit that the evidence on both sides is murky:

Because of the other influences on realizations, the relationship between them and tax rates can be hard to detect and easy to confuse with other phenomena. For example, a number of observers have attributed the rapid rise in realizations in the late 1990s to the 1997 cut in capital gains tax rates. But the 45 percent increase in realizations in 1996--before the cut--exceeded the 40 percent and 25 percent increases in 1997 and 1998 that followed it. 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.

What the CBO did not find was unambiguous evidence that "If capital gains... didn’t receive special treatment, we’d be getting substantially more revenue".  It looks like Krugman's personal pipeline to the truth is wide open.  And delivering Kool-aid.

SO TEN YEARS AGO... Surely we can do better than a ten year old CBO study?  Hey, be my guest, and stop calling me Shirley.  This table shows realized capital gains through 2008; the Tax Foundation tells me that the top long term gains rate was cut to 20% in 1997 and then to 15% in 2003.  Realized gains under Bush eclipsed the Clinton boom years by 2006; my quick calculation (applying the relevant top rate to all realized gains each year) is that capital gains tax revenue rose from 2001 through 2007 even with the lower rate, although obviously that is conflated with an improving economy. 2008, of course, was memorably not an example of an improving economy.

Since the lower gains rate is (casually if not causally) associated with higher revenues I don't think that data will update the CBO effort and provide conclusive evidence that raising the capital gains rate brings in substantially more revenue.

PLEASE MIND MY DELICATELY POISED BLOOD PRESSURE:  Somewhere a Krugman acoylyte is teeing up a response along the lines of "Krugman didn't say that raising the capital gains rate would raise revenue; he said that raising the capital gains rate and taxes on other investment income would raise revenue". 

Uh huh.  And if the Yakees could just sign me and Cliff Lee by next April they would be locks foe the World Series.

In Progress

Let's join the Republican debate in progress.

Opportunity Knocks (But On Whose Door?)

The NY Times has a new poll out showing challenges for both parties.  Let's warm up with the Obama-bashing:

As Mr. Obama moves toward a full-throated campaign, delivering a State of the Union address on Tuesday and inching closer to directly confronting his Republican challenger, a majority of independent voters have soured on his presidency, disapprove of how he has dealt with the economy and do not have a clear idea of what he hopes to accomplish if re-elected.

The swing voters who will play a pivotal role in determining his political fate are up for grabs, the poll found, with just 31 percent expressing a favorable opinion of Mr. Obama. Two-thirds of independent voters say he has not made real progress fixing the economy.

...

“I trusted Obama would bring fresh ideas to the country and improve the economy, even though he was not experienced. It didn’t happen,” said Jay Hernandez, 54, a credit manager from Miami who said that he is not aligned with either party, in a follow-up interview. “If there were another Democratic candidate I might reconsider, but I won’t vote for Barack Obama.”

But on the Republican side, angst:

While Republican primary voters say Mitt Romney stands the best chance of defeating Mr. Obama, nearly half of independents say they have yet to form an opinion of him, creating a considerable opening for Democrats to try to quickly define him if he becomes the nominee.

As Mr. Romney and his rivals fight to win the South Carolina primary on Saturday, the poll suggests that Republicans have grown less satisfied with their choices. Nearly 7 in 10 Republican voters across the country said they now want more options, a probable reflection of conservative unease about Mr. Romney and the remaining candidates.

 Republicans are rightly worried that they are about to complete a Massachusetts trifecta by nominating a rich, out of touch technocrat who melds the worst of Kerry and The Duke.

Drill, Baby Drill

The President's Council on Jobs and Competitiveness has a new report on how to get this country moving again.  The Hill summarizes the energy section:

President Obama’s jobs council called Tuesday for an “all-in approach” to energy policy that includes expanded oil-and-gas drilling as well as expediting energy projects like pipelines.

“[W]e should allow more access to oil, natural gas and coal opportunities on federal lands,” states the year-end report released Tuesday by the President’s Council on Jobs and Competitiveness.

The report does not specifically mention the Keystone XL oil pipeline, but it endorses moving forward quickly with projects that “deliver electricity and fuel,” including pipelines.

“The Council recognizes the important safety and environmental concerns surrounding these types of projects, but now more than ever, the jobs and economic and energy security benefits of these energy projects require us to tackle the issues head-on and to expeditiously, though cautiously, move forward on projects that can support hundreds of thousands of jobs,” the report says.

Jobs and energy independence for Americans - the greens will never get behind this.

The new report also takes on tax reform.  Perhaps because the council chair was Mr. Immelt of GE, we get the approach favored by Big Corporations - lower the corporate tax rate and expand the R&D tax credit (as proposed by that current Administration).

Not much here for the small (and "small") businesses that operate under the personal tax rates.

 

I Know The Feeling

The NY Times never published my letters, and the cat got bored listening to my tirades, so I started this blog lo these many years ago.  Somewhere out there I sense a bored cat and a future blogger.  From a reader, straight to the NY Times round file and my blog:

To the Editor: According to “Among the Wealthiest One Percent, Many Variations,” published in the NYT on January 14, “there is no doubt that the troubled economy has focused anger on the fact that the rich have grown richer and the middle class, over the last decade, has lost ground.” 

The notion that income inequality is on the rise is pervasive, reinforced by the recent Congressional Budget Office report on income distribution. Former chair of the Council of Economic Advisers Laura D’Andrea Tyson summarized the CBO’s findings as follows: “Rising income inequality is a long-term trend that began in the late 1970s and strengthened during the last two decades.” (http://economix.blogs.nytimes.com/2011/11/18/tackling-income-inequality/)

 

Inconvenient truth: the distribution of income in the U.S. is basically the same as it was a quarter-century ago—and the middle class has gained ground over the last decade.

 

The CBO report only goes through 2007, despite the fact that it was released in late 2011. It tracks income distribution using a Gini index, which ranges from 0 to 1, with higher values signaling a more unequal distribution. The index indeed rose from 1979 to 2007, although almost all of the increase occurred over the periods 1979–1986 and 2002–2007.

 

But a Gini index calculated on the basis of IRS data, which extends through 2009 and which closely tracks the CBO Gini index (the average yearly difference over the period 2000–2007 is only .0023), shows that almost all of the increase from 2002 to 2007 was wiped out in 2008 and 2009, the years of the Great Recession—which the CBO report does not address. (See “Slamming Income Inequality: Not a Slam Dunk,” by Ronald Schmidt of the University of Rochester’s Simon School of Business.) (http://kudlowsmoneypolitics.blogspot.com/2011/12/slamming-economic-inequality-not-slam.html)

 

In other words, most of the reported rise in income disparity since 1979 had already occurred by 1986, and there has been no significant trend since then.

 

There’s more. From 2000 to 2009, tax filers with adjusted gross income of at least $500,000, who represented the top 0.5 percent of all returns in both years (similar in spirit to the CBO report, which looks at the top 1 percent of households), saw their average adjusted gross income decline by 15 percent and their average after-tax income decline by 11 percent. All other filers—the 99.5 percent—saw average increases of 15 percent in AGI and 17 percent in after-tax income. The middle class has not “lost ground” over the last decade.

 

The ubiquitous references to rising income inequality—with President Obama the offender-in-chief—are erroneous and serve mainly to fan the flames of class warfare in this country. But who benefits from that?

Janice Willett

Ridgewood, NJ

We now return you to the ongoing narrative.

NOPRIZE:  There is a missing "Full Disclosure" here.  Five minutes sleuthing didn't solve it for me, but I already know the answer.  [UPDATE:  Can't hide from Sue.]

And Then There Were Five

Huntsman is out, which creates a great sense of excitement - whom will the NY Times endorse this spring on the Republican side, prior to endorsing Obama this fall?

And let's brace for tonight's debate.

Paul Krugman Has A Dream

Paul Krugman uses Martin Luther King Day to latch on to income inequality as the new "evil" to be opposed as vigorously as racism.

He cites a recent speech by CEA chair Alan Krueger, described by Timothy Noah; the speech took inspiration (and the Great Gatsby Curve) from this thoughtful and interesting paper by Miles Corak (who provides more background here.).

At a quick read I would say that Corak does not come out of the shadows on immigration, as Krugman did briefly in 2006.  The gist - allowing unskilled Third World workers into the US to work improves their income situation and helps global income inequality but depresses the wages of unskilled native Americans, thereby hurting US income inequality statistics.  Furthermore, the public won't support both a generous social safety net and open borders.  So, although the moral case for the de facto open border policy favored by Democrats may make sense to some hypothetical President of the Americas, the case is a bit less compelling for a President of the US.  Krugman does not add that the case for open borders becomes more compelling if there are lots of prospective new voter to co-opt.

I will also add that what is missing here is a baseline - David Brooks explained years ago that a hereditary meritocracy may not be what we want, but it is not surprising:

At the top end of society we have a mass upper-middle class. This is made up of highly educated people who move into highly educated neighborhoods and raise their kids in good schools with the children of other highly educated parents. These kids develop wonderful skills, get into good colleges (the median family income of a Harvard student is now $150,000), then go out and have their own children, who develop the same sorts of wonderful skills and who repeat the cycle all over again.

In this way these highly educated elites produce a paradox - a hereditary meritocratic class.

And at the bottom of the ladder:

And this is not even to speak of the children who grow up in neighborhoods in which more boys go to jail than college, in which marriage is not the norm before child-rearing, in which homes are often unstable, in which long-range planning is absurd, in which the social skills you need to achieve are not even passed down.

The Corak paper discuss this, after citing Solon 2004:

To understand these differences we need to appreciate the possible underlying causes of generational mobility, and an important starting point is Solon (2004) who has adapted a standard perspective in the economics literature and made it appropriate for comparisons across countries.

Very broadly speaking, the reasons for the differences in the intergenerational elasticity across countries has to do with the role of three fundamental institutions determining the life chances of children—the family, the labor market, the state—and the different balance struck between their influence across countries.Solon’s model invites us to think of families differing in their capacities and resources to invest in their children, but also as facing different incentives to do so according to their socio-economic status and the social context in their country. While some of these capacities and incentives to invest in children may be genetic or due to family history and culture, others are influenced by how families interact and interface with the labour market and public programs. It is these later influences that are related to public policy and choices.

Corak also discusses the implications of the cost and return to education:

As another example, an increase in the cost of human capital investment, such as in market-based provision of child care or health care, private primary schooling, or higher college tuition fees, will implylower human capital investment. In a similar way a higher potential return to human capital will create an incentive for more investment. Solon (2004) takes the rate of return to education as an indicator of the degree of inequality in the labour market, and shows that societies with labor markets characterized by more cross-sectional inequality—that is, a higher return to education—will be less generationally mobile.This is because a higher income, dual earner family with fewer children not only has a higher capacity to invest in the education of their children than a single parent low income family, but also because the incentives to do so are greater. Inequality in demographics and labor markets in the here and now will have an influence on the degree of inequality in earnings in the next generation. Consequently we can expect the intergenerational elasticity to differ across countries for reasons associated with the costs and returns of investing in a child’s human capital, the way in which the labor market works and how “good jobs” are obtained, and the income inequalities between parents.

A country with confiscatory taxes and a generous social safety net has less incentives for investment in education than, for example, the US. .

Finally, Corak presents a troubling, if unsurprising, finding in a comparison of the US and Canada:

In both countries there is a considerable degree of mobility among the broadly defined middle earnings group, but both the sons of high and low earning fathers are more likely to grow up to be, respectively, high and low earning adults.

...There is in fact a good deal of fluidity in the American earnings distribution across the generations with the children of most middle earning parents experiencing outcomes that are not strongly associated with their parents’ income levels. But even so, on average, the United States stands out as being among the least generationally mobile among the rich countries, and in particular the overall degree of relative earnings mobility across the generations is almost three times greater in Canada, a country to which it might be most apt to make a comparison. This difference is due to a greater stickiness in earnings across the generations at both the top and the bottom.

So Horatio Alger is alive and well in the middle class - a permanent underclass and a semi-permanent overclass would be the problem.  Now, Paul Krugman's child, the offspring of two Princeton profs, is undoubtedly being raised in advantaged circumstances and will get into the college of her choice.  My suspicion is that Paul Krugman does not consider his decision to raise his child with attention and care to be "evil".  So maybe the notion that the well-to-do are making the ffort to raise their kids well is not really the problem.  If class status was conferred by the inheritance of land, well, one might feel differently.  But if parents pass down, through nature and/or nurture, some combintion of height, high energy, good health, good looks, intelligence, motivation, and organizational skills, well, is that really so terrible?  

At the bottom of the ladder the problems are very different.  I assume nobody wants to hear from a middle-class white guy on this topic, so let's cut to a middle class white gal - Megan McArdle attempted to imagine the difficulties of pulling a Hoartio Alger act from the ghetto, and struck me as quite insightful.  Her point is that even if the door to success is open, expecting a kid to make the choices necessary to walk through it is not the high-probability bet.

Sunday School

Are Mormons Christians?  Opinions vary, and the Times explains why:

Mormons consider themselves Christians — as denoted in the church’s name, the Church of Jesus Christ of Latter-day Saints. Yet the theological differences between Mormonism and traditional Christianity are so fundamental, experts in both say, that they encompass the very understanding of God and Jesus, what counts as Scripture and what happens when people die.

...

On the most fundamental issue, traditional Christians believe in the Trinity: that God is the Father, the Son and the Holy Spirit all rolled into one.

Mormons reject this as a non-biblical creed that emerged in the fourth and fifth centuries. They believe that God the Father and Jesus are separate physical beings, and that God has a wife whom they call Heavenly Mother.

It is not only evangelical Christians who object to these ideas.

“That’s just not Christian,” said the Rev. Serene Jones, president of Union Theological Seminary, a liberal Protestant seminary in New York City. “God and Jesus are not separate physical beings. That would be anathema. At the end of the day, all the other stuff doesn’t matter except the divinity of Jesus.”

There are also questions about the afterlife and the relative status of God and man:

Another big sticking point concerns the afterlife. Early Mormon apostles gave talks asserting that human beings would become like gods and inherit their own planets — language now regularly held up to ridicule by critics of Mormonism.

But Kathleen Flake, a Mormon who is a professor of American religious history atVanderbilt Divinity School, explained that the planets notion had been de-emphasized in modern times in favor of a less concrete explanation: people who die embark on an “eternal progression” that allows them “to partake in God’s glory.”

“Mormons think of God as a parent,” she said. “God makes the world in order to give that world to his children. It’s like sending your child to Harvard — God gives his children every possible opportunity to progress towards this higher life that God possesses. When Mormons say ‘Heavenly Father,’ they mean it. It’s not a metaphor.”

It is the blurring of the lines between God, Jesus and human beings that is hard for evangelicals to swallow, said Richard J. Mouw, president of Fuller Theological Seminary, an evangelical school in Pasadena, Calif., who has been involved in a dialogue group between evangelicals and Mormons for 12 years and has a deep understanding of theology as Mormons see it.

“Both Christians and Jews, on the basis of our common Scriptures, we’d all agree that God is God and we are not,” Mr. Mouw said. “There’s a huge ontological gap between the Creator and the creature. So any religious perspective that reduces that gap, you think, oh, wow, that could never be called Christian.”

And is The Book of Mormon scripture?

The Mormon Church says that in the early 1800s, its first prophet, Joseph Smith, had revelations that restored Christianity to its true path, a course correction necessary because previous Christian churches had corrupted the faith. Smith bequeathed to his church volumes of revelations contained in scripture used only by Mormons: “The Book of Mormon: Another Testament of Jesus Christ,” “The Doctrine and Covenants” and “Pearl of Great Price.”

Traditional Christians do not recognize any of those as Scripture.

Who makes these distinctions?  Mainly, Evangelical Christians:

In a Pew poll released in late November, about two-thirds of mainline Protestants and Catholics said Mormonism is Christian, compared with only about a third of white evangelicals. By contrast, 97 percent of Mormons said their religion is Christian in a different Pew poll released this month.

 Meanwhile, Romney is polling well in South Carolina, where Evangelicals are well represented.

 

Johnny, We Hardly Knew Ye

In the news:

Heart Surgery Is Planned for Edwards; Trial Delayed

Subsequent trial delays will be attributed to "conscience surgery" and "judgment surgery".

Setting Aside For A Moment The Fact That We Are The Good Guys...

Jonathan Tobin at Commentary explains that the targeted assassination of Iranian nuclear scientists is not "terrorism":

But you need a particular form of moral myopia not to see that heading off a potential second Holocaust in the form of an Iranian nuclear attack on Israel or the nuclear blackmail of the rest of the Middle East is not a form of terrorism.

Do I really need moral myopia?  Why can't I just rely on the US criminal code, as I excerpted yesterday:

From U.S. Code Title 22, Ch.38, Para. 2656f(d) (d) Definitions

As used in this section—

(1) the term “international terrorism” means terrorism involving citizens or the territory of more than 1 country;

(2) the term “terrorism” means premeditated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine agents;

Now, I am not a lawyer and it may be that other caveats and exceptions cover state-sponsored acts when the state is the US or an ally.  But the part of the code I am looking at does not seem to include a "good guys" exception.

Now, maybe it ought to - I can't say I am too worked up about these killings, whether they are being done by the Israelis, the US, both, or with the aid of even more parties.

That said, I believe we are stuck on the terrorist-freedom fighter puzzle that has prevented the UN from agreeing to a definition of "terrorism".

Battling Back On Bain

Dan Primack of Fortune corrects some errors in the Bain attack video.

And on the Hyperbole Front, let's cut to Mr. Old Reliable himself - here is Andrew Sullivan on Romney's problem with Bain:

I just don't think Romney can get in the weeds of each accusation without making things worse. So he has to do something much bigger.

This is Mitt's Jeremiah Wright moment. Can he meet it, the way candidate Obama did?

Puzzling - does Sully mean the first Wright speech, where Obama explained that he could no more cut his ties to Wright than he could cut his ties to his racist grandmother?  Or does he mean Obama's second Wright speech a month or so later when Obama did in fact cut those ties?  Let's call out beyond the grave for perspective:

Nettled at last by the way in which this has upset his campaign, Sen. Obama last week cut the ties that bound him to his crackpot mentor. Well, high time. But those who profess relief at this should perhaps revisit what they thought (and wrote) about the earlier Philadelphia speech in which Obama was held to have achieved the same result with less trouble. If he was right last week, then the Philly speech was a failure on every level...

Ahh, well, Romney can't rely on the sort of cheerleading that carried Obama.

As Long As They Confine Themselves To Republicans...

NY Times Public Editor Arther Brisbane gets guffaws with this query:

Should The Times Be a Truth Vigilante?

I’m looking for reader input on whether and when New York Times news reporters should challenge “facts” that are asserted by newsmakers they write about.

Please.  I am sure that as long as they limit their fact-checking to Republicans their readership will be in heaven.  No one wants or expects the Times to challenge anything out of the mouth of Barack, Nancy, Harry, or any other prominent Democrat.

And that expectation is reinforced by Mr. Brisbane himself - in ruminating about the wisdom of including more fact-checking in their "news", Mr. Brisbane offers Clarence Thomas and Mitt Romney as recent examples.  Dems can relax and continue to run their mouths.

NO MERCY FOR THE DEAD HORSE: On my list of things that will never happen I include a Times reassessment of their non-coverage of Obama's evolving story about the Obama-Ayers relationship.

One Man's Terrorist Is Another Man's Targeted Assassin

A bomber on a motorcycle has blown up yet another Iranian nuclear scientist, leading to this intriguing headline at the NY Times:

Iran Reports Killing of Nuclear Scientist in ‘Terrorist’ Blast

Why the quotes - was this terrorism, or not?

The safe answer is that they are quoting the Iranians:

“The Islamic Republic of Iran expresses its deep concern over, and lodges it strong condemnation of, such cruel, inhumane and criminal acts of terrorism against the Iranian scientists,” Iran’s United Nations ambassador, Mohammad Khazaee, wrote in a letter sent to Secretary General Ban Ki-moon and other U.N. officials.

Hmm.  Personally, I think "terrorism" connotes an attack on a random civilian population. But who am I?  The UN has never agreed to a formal definition of terrorism.  However, the US criminal code seems clear enough:

From U.S. Code Title 22, Ch.38, Para. 2656f(d) (d) Definitions

As used in this section—

(1) the term “international terrorism” means terrorism involving citizens or the territory of more than 1 country;

(2) the term “terrorism” means premeditated, politically motivated violence perpetrated against noncombatant targets by subnational groups or clandestine agents;

As an examle, back in 1993 when Saddam Hussein tried to assassinate former President Bush during a visit to Kuwait both President Clinton and the Pentagon described it as terrorism.  Here is the President:

We could not, and have not, let such action against our nation go unanswered.

From the first days of our Revolution, America's security has depended on the clarity of this message: Don't tread on us. A firm and commensurate response was essential to protect our sovereignty, to send a message to those who engage in state-sponsored terrorism, to deter further violence against our people and to affirm the expectation of civilized behavior among nations.

And the Pentagon:

The Iraqi Intelligence Service, the I.I.S., is the largest of the Iraqi intelligence agencies. It is responsible for investigating and acting against any suspected disloyalties. It's also responsible for monitoring Iraqi citizens and political activities, and countering dissident Iraqis and opposition groups outside the country. It is responsible -- the primary agency responsible for terrorist attacks abroad, as it tried to do in this case.

More recently, the bizarre plot to kill the Saudi AMbassador was also described by the Times as terrorism.  Without quotes:

Unlikely Turn for a Suspect in a Terror Plot

Well - my quirky interpretation notwithstanding, "terrorism" can certainly include targeted killings, under US law and common usage.

Glenn Greenwald marvels at the silence on the left today now that Obama and/or the Israelis are doing this, in contrast with the outraged howls that greeted a mere suggestion of targeted assassination by Glenn Reynolds three years ago.

As to the prospective legality of this, in the hypothetical case of US involvement - the rationale used to kill Al-Awlaki would scarcely seem to apply:

"The administration has tried to make very clear that this was an act of self-defense, that Awlaki was part of not only al Qaeda in the Arabian Peninsula, the al Qaeda affiliate in Yemen, but he was the external operations chief. He was ongoing in his plotting against American citizens - not only having done so in the past, but continuing to do so in an imminent way," said CBS News national security analyst Juan Zarate.

"So based on the rules of self-defense, based on the principles that we're at war with al Qaeda and the fact that he was a part of the group, self-professed, all of that suggests that it's lawful and appropriate to go after him and to kill him," Zarate said.

But of course we are not at war with Iran, or with the University of Teheran.  Don't ask about Berkeley.

As The Romney Bandwagon Rolls Forward

Dan McLaughlin lays out his reservations about Mr. Inevitable.  First, on Bain, private equity, and swift boats:

So, I don’t like seeing pro-free-market Republicans attacking the concept of what Bain does, any more than I liked seeing Romney attack Rick Perry from the left on entitlements. But just because the role of red-in-tooth-and-claw capitalists is a crucial and necessary one does not mean that they are likely to be popular candidates in today’s general election environment. Criminal defense lawyers, for example may be crucially necessary to our system of justice, but if they have represented a lot of unpopular clients, they are not likely to be politically viable. I continue to think that Romney’s business record is an under-explored political vulnerability (one Ted Kennedy used against Romney in 1994, but didn’t even use all the ads he cut) that the Democrats will exploit ruthlessly. And Romney’s existing defenses of that record are fairly weak. We should not be caught unawares by this in the summer and fall when it’s too late to pick another candidate. In many ways, it’s like the swift boat story. You’ll recall that the centerpiece of John Kerry’s electability argument in 2004 was his military record – not any policy proposal on national security, mind you, but the simple fact of his biography as a war hero. Given that Kerry had decades-old enemies from his activties as an anti-war protestor, it was unwise for Democrats to assume that this biographical narrative alone would go unchallenged in the general election. But that’s exactly what they did, and the Swift Boat Veterans’ ads (especially the ads using Kerry’s own Senate testimony from 1970) did terrible damage to Kerry.

Romney’s story is much the same. There’s no serious argument that Romney’s record of supporting free enterprise and job growth in his single term as Massachusetts governor is better than the records of Perry, Gingrich, Santorum and Huntsman; his claim to be a job creation specialist is grounded in his record at Bain, and just like Kerry’s war hero biography, this claim is bound to attract scrutiny. It would be foolishness in the extreme for Republicans to demand that nobody talk about this during the time when we’re choosing a candidate. The harder question, for free-market Republicans, is how to have a serious debate on this point without compromising our integrity and our principles.

It goes without saying that the media will be much more interested in examining Romney's record than they were in Kerry's.

And on to Romney himself:

The other point I would make about integrity is that it goes close to the core of why a Romney nomination worries me so much: because we would all have to make so many compromises to defend him that at the end of the day we may not even recognize ourselves. Romney has, in a career in public office of just four years (plus about 8 years’ worth of campaigning), changed his position on just about every major issue you can think of, and his signature accomplishment in office was to be wrong on the largest policy issue of this campaign. Yes, Obama is bad, and Romney can be defended on the grounds that he can’t possibly be worse. Yes, Romney is personally a good man, a success in business, faith and family. But aside from his business biography, his primary campaign has been built entirely on arguments and strategies – about touting his own electability and dividing, coopting or delegitimizing other Republicans – none of which will be of any use in the general election. What, then, will we as politically active Republicans say about him?

Well, we'll say he is not Obama. The Democrats will try to turn the election into an up-down vote on Wall Street financiers; Republicans will try to create a referendum on The Obama Years.

But Mitt Romney’s record is just one endless sheet of thin ice as far as the eye can see – there’s no way to have any kind of confidence that we can tell people he stands for something today without being made fools of tomorrow. We who have laughed along with Jim Geraghty’s prescient point that every Obama promise comes with an expiration date will be the ones laughed at, and worse yet we will know the critics are right. Every time I try to talk myself into thinking we can live with him, I run into this problem. It’s one that particularly bedeviled Republicans during the Nixon years – many partisan Republicans loved Nixon because he made the right enemies and fought them without cease or mercy, but the man’s actual policies compromised so many of our principles that the party was crippled in the process even before Watergate. We can stand for Romney, but we’ll find soon enough that that’s all we stand for.

That's an interesting point - nominating Romney against Obama is an offer to swap one biography and cult of personality for another.

Back In New Hampshire...

Romney wins with a projected 36% but does not improve much on his 2008 percentage of 32%, back when he came in second to the maverick McCain.  There sems to be a ceiling on his love in New Hampshire.

Rick Perry looks like a one-percenter - OK, the Texas act doesn't always play in New England, but my goodness...

And The Ivory Tower Is Heard From

Former Enron advisor Paul Krugman draws on his seemingly non-existent business experience to explain to us that business experience does not prepare one for the White House:

A brief thought on something I’ll try to expand on later. Leaving aside all the questions about what Mitt Romney did or didn’t do at Bain — and about his self-aggrandizing double standard — there’s an even broader question: why does anyone believe that success in business qualified someone to make economic policy?

For the fact is that running a business is nothing at all like making macro policy. The key point about macroeconomics is the pervasiveness of feedback loops due to the fact that workers are also consumers. No business sells a large fraction of its output to its own workers; even very small countries sell around two-thirds of their output to themselves, because that much is non-tradable services.

This makes a huge difference. A businessman can slash his workforce in half, produce about the same as before, and be considered a big success; an economy that does the same plunges into depression, and ends up not being able to sell its goods. Nothing in business experience prepares one for the paradox of thrift, or even the inflationary impact of increases in the money supply (which is real when the economy isn’t in a liquidity trap.)

Oh, brother.  Well, in 2008 Prof. Krugman backed Hillary, so we won't find him explaining why a career as a community organizer, law lecturer and auto-biographer prepares one for economic policy-making.

Secondly, if "macro policy" is broadened to include regulatory and tax policy, it is certainly plausible that a businessman who spent his career reflecting on the impact of those issues on his hiring decisions might have a more nuanced sense of just how lightly or heavily the hand of government actually falls.  Since voters have a choice, the contrast would be with a chap who felt that his brief stint in the private sector represented a trip behind enemy lines.

Left-leaning economist Jared Bernstein lauds Krugman's insight, but reverses course with this anecdote:

So I asked a prominent business person–who was formerly a prominent gov’t official–about this and his response both cracked me up and had a ring of truth.  Here’s what he essentially told me:

“What these whiners don’t understand is that if I or someone like me—someone from the business world—were in there right now, we’d be telling these business guys to get lost.  You can’t make them happy and it’s no use trying.  The irony is you’re already doing more for them then I’d advise and true to form, they don’t like you any better for it.”

Now, this guy was a democrat, and his view may not cross party lines.  But it’s an interesting wrinkle.  Maybe you need a business person who has the perspective and clout to tell you when to ignore business people.

Set a thief to catch a thief.  Neuther Geithner nor Obama have ever worked for Wall Street and they never climbed out of Goldman Sachs' pocket either.  Just saying.

MAKE IT SO: Krugman pretends to believe in the 'CEO as autocrat':

And I haven’t even mentioned the fact that presidents need to work with Congress, and face far more limits on their authority than CEOs.

The idea that what America needs now is an executive type is just foolish.

Uh huh.  Here in reality, a CEO needs to negotiate with current and prospective clients, suppliers, employees, regulators and investors. If they head a large firm they also enjoy the satisfactin of dealing with an entrenched bureaucracy.  It may not be quite as challenging as organizing a community (or writing TWO autobiographies!), but it ain't as easy as ordering people about.

AND SPEAKING OF GEITHNER:

I don't have enough tin foil to grasp this:

Ford Foundation Links Parents of Obama and Treasury Secretary Nominee

December 3, 2008, 1:00 pm

By Ian Wilhelm

In an unusual twist of fate, the parents of Barack Obama and his pick for secretary of Treasury, Timothy Geithner, share a nonprofit connection: they worked at the Ford Foundation at the same time.

Indeed, Mr. Geithner’s father was head of the philanthropy’s Asia grant making for a period in the early 1980s and oversaw the work of Mr. Obama’s mother, who developed the organization’s microfinance programs in Indonesia.

According to the foundation, they met at least once in Jakarta.

No word on whether the two parents speculated on the future careers of their sons.

 

On The Good Ship Lollipop

Apparently Times reporters and editors no loger read the Times.  Here is Mark Landler describing the decision by Obama's chief of staff to bail out early:

WASHINGTON — President Obama announced Monday that the White House chief of staff, William M. Daley, was stepping down, jolting the top ranks of his administration less than a year before he faces a difficult re-election. Mr. Daley will be replaced by Jacob J. Lew, the budget director and a seasoned Washington insider with ties to Capitol Hill.

...

It was a distracting shake-up in a White House that has prided itself on a lack of internal drama, with a tightly knit circle of loyal senior advisers playing a steadying role.

Tight-knit?  No drama?  Huh?  Where was it I was reading about staffers taking shots at Valerie Jarrett and Robert Gibbs cursing Michelle Obama behind her back?  Oh, that's right.

Off To The Races

The traditional Monday morning afternoon 'Time Slips Away' open thread.

The Times On Obama's Recess Appointments - Republicans Made Him Do It

The NY Times pretends to examine the legal and Constitutional issues surrounding Obama's recent recess appointments.  They include this "the devil made him do it" howler in the second paragraph:

Senate Republicans had been using procedural rules and filibusters to block or delay the confirmation of nearly 200 agency nominations, leaving vital positions vacant and neutralizing agencies they did not like. That compelled Mr. Obama to escalate matters further on Wednesday, making recess appointments even though the Senate was technically not in recess.

Obama was compelled!  The most powerful man in the world was powerless on this point.

The Times extensive research did not include a review of their own writing on this topic. For example, we are offered the assurance that, even though Harry Reid invented the pro forma sesion in order to thwart Bush during 2007/08, it has only become a problem lately:

Senator Harry Reid of Nevada, the majority leader, began using pro forma sessions, lasting just seconds, in late 2007 to keep the Senate nominally in session and prevent President George W. Bush from making recess appointments.

...The White House and Senate Democrats say the experiences of Mr. Obama’s nominees had become intolerable. In the two years that Mr. Bush had to contend with a Democratic Senate, 740 of his 981 nominees for civilian positions were confirmed, a rate of 75 percent. During the 112th Congress, 285 of Mr. Obama’s 503 civilian nominees have been confirmed, or 57 percent, according to Senate statistics.

So the process has only gone to hades recently.  Hmm - back in the spring of 2008 the Times editors deplored Bush's intransigence in simply refusing to give Harry Reid what he wanted and had this to say about the state of the government:

Unhappily for the country, we have learned that Mr. Bush has no idea when standing on principle becomes blind stubbornness and then destructive obsession. So it goes with his choice to run the Justice Department’s Office of Legal Counsel, Steven Bradbury.

...Mr. Bradbury is widely viewed on both sides of the aisle as such a toxic choice that he will never be confirmed. The Senate has already refused to do so twice. Still, Mr. Bush clings to this lost cause, snarling the confirmation process for hundreds of nominees and crippling parts of the federal regulatory apparatus.

See, back then it was Bush that was snarling the process.  Fortunately, the ever-reasonable Harry Reid had a plan:

When Mr. Bush refused to withdraw the Bradbury nomination, the Senate’s Democratic leaders decided to stop processing other controversial nominations. Senator Harry Reid, the majority leader, twice offered to resume confirmations and compromise on candidates if Mr. Bush withdrew Mr. Bradbury — and forwarded the names of six Democrats chosen for bipartisan panels like the Federal Election Commission. The White House refused, and Mr. Reid took to keeping the Senate in pro forma sessions during vacations to prevent Mr. Bush from making a recess appointment of Mr. Bradbury and other objectionable choices.

At this point, according to a review by Politico.com, the election commission, the Consumer Product Safety Commission, the Mine Safety and Health Review Commission, the Chemical Safety and Hazard Investigation Board and the National Labor Relations Board do not have enough members to do their jobs. Scores of federal judgeships are vacant. The Council of Economic Advisers is down to one adviser.

This is bad for the country. Mr. Bush should withdraw Mr. Bradbury’s nomination, replace him at the Justice Department with someone committed to upholding the law and take Mr. Reid’s offer. The president’s hyperpartisanship and my-way-or-the-highway arrogance is now close to paralyzing his own administration.

If only Bush had given the Democrats what they wanted the near-paralysis of his Adminstration could have been avoided.  Of course, today if the Senate would agree to amend the Dodd-Frank bill, Obama's troubles would pass.  Or would they?  Even the Times manages to detect a whiff of politics in Obama's "compulsion":

Mr. Reid has stayed silent on Mr. Obama’s decision. Privately, Senate Democratic aides said he backed it as part of a broader effort by Mr. Obama to confront Republicans in Congress. One of the parliamentary minds behind the pro forma session said in an interview that Democrats knew from the beginning that it might be challenged.

The move will almost certainly face legal scrutiny.

John Elwood, a senior lawyer in the Bush administration, said that any business affected by a regulation under Mr. Cordray or a decision by the labor relations board could have legal standing to challenge the action as illegitimate, because the plaintiff could claim that it was directed by officials not lawfully appointed.

If the president had flouted the pro forma sessions to name someone to a less divisive position, like the head of the Justice Department’s Office of Legal Counsel, which provides internal legal advice, virtually no one outside the administration would be affected by the move, Mr. Elwood said. Instead, Mr. Obama rolled the dice, setting off a legal process that could last years.

“It’s a high-roller move,” he said.

 The Times does present a bit of the Republican spin:

Republicans say the White House and Senate Democrats share the blame. Democratic committee leaders are responsible for the scores of nominees that have not gotten through their panels, said Don Stewart, a spokesman for the Republican leader, Senator Mitch McConnell of Kentucky.

Mr. McConnell was prepared to clear a long list of presidential nominees before the holiday break if the president had offered his assurance that he would not ram through recess appointments, Mr. Stewart added. Mr. Obama did not.

How many are stuck in Democrat-controlled committees?

Republicans have responded with stalling tactics that have left 74 nominees pending consideration on the Senate floor and an additional 107 bottled up in committees, many of them for economic posts or to run initiatives that Republicans fiercely oppose.

Obama chose this fight and now the Times is flacking for him.  Surprise!

MEMORY LANE:  Let's reprise the Times exultation when Harry Reid brought the pro forma genie out of the bottle:

Democrats Move to Block Bush Appointments

By CARL HULSE

WASHINGTON, Nov. 20 — Who says the Senate cannot act quickly? It conducted a full day’s business in less than 30 seconds on Tuesday.

Of course, there was no real business to conduct. But fearing that President Bush would again use a Congressional recess to install disputed executive branch appointees without Senate confirmation, Democrats convened the Senate for the first of four microsessions to be held during the holiday break, precisely to thwart such an end run.

“I am glad to see the leadership stepped up here,” said Jim Webb, the junior senator from Virginia, called upon by the majority to open the Senate with a skeleton staff for the express purpose of immediately closing it down.

Senator Harry Reid of Nevada, the majority leader, chose to schedule the so-called pro forma sessions because Mr. Bush took advantage of past recesses to install nominees including John R. Bolton, as ambassador to the United Nations, and, most recently, Sam Fox, a donor to Swift Boat Veterans for Truth, as ambassador to Belgium. This time, Democrats were particularly suspicious of plans to appoint as surgeon general a nominee they oppose.

“This is the first time that pro formas have been used to block recess appointments,” said Jim Manley, a spokesman for Mr. Reid.

...

But Democrats appear dead set against allowing any more recess appointees, who would serve until the end of the next Congressional session — that is, essentially through the end of Mr. Bush’s term. So unless there is an agreement between the White House and Democrats, it appears likely the Senate will not be in formal recess any time through 2008.

And that might mean more trips for Mr. Webb from his home in nearby Northern Virginia to preside in a nearly empty Capitol.

“It is not very fun going through the traffic,” he said, “but I don’t mind. I think this is important.”

 

 

How About That Republican Debate?

The Times tells me that Romey did well in the debate no one watched.  This detail caught my eye:

In one of the most personal clashes of the evening, Mr. Paul and Mr. Gingrich fought over military service. Mr. Gingrich said he was married and had a child, so he did not join the military as a young man. Mr. Paul said that he, too, had children, and when he was drafted, “I went.”

We thank him for his service, but... this is from his bio:

Ronald Paul was born on August 20, 1935, in Pittsburgh, Pennsylvania.... He graduated from Gettysburg College in 1957 and furthered his education by attending Duke University Medical Center. During this time, he married Carol Wells, who he had known since high school. In 1961, four years after his marriage, Paul obtained his medical degree.

Paul, by now in his late 20s, moved with his wife to Michigan where he completed his internship at the Henry Ford Hospital in Detroit. Utilizing his physician's training, Paul served in the United States Air Force as a flight surgeon for several years (1963-1965). While in the air force, Paul reached the rank of Captain. Directly after his service in the air force, Paul worked again as a flight surgeon for the United States Air National Guard (1965-1968). After serving the nation's armed forces, Paul and his wife Carol moved to Texas, where they still reside.

And from his website:

Ron Paul is a proud Air Force veteran. He served as a flight surgeon in the U.S. Air Force from 1963 to 1965 and then in the U.S. Air National Guard from 1965 to 1968. During his military service Ron Paul spent time on the ground in Iran, Pakistan, South Korea, Turkey, Ethiopia and other countries.

That would certainly be disruptive to family life and the establishment of a practice, but he was not likely to be shot at.

CNN has a fact-check with Gingrich's background:

The facts: Gingrich turned 18 in 1961, as U.S. involvement in Vietnam was escalating. But he continued his studies, getting an undergraduate degree in 1965, his Master's in 1968 and his doctorate in 1971.

According to the Selective Service, prior to 1971 "a man could qualify for a student deferment if he could show he was a full-time student making satisfactory progress in virtually any field of study. He could continue to go to school and be deferred from service until he was too old to be drafted."

In addition, the fact that Gingrich had two daughters -- born in 1963 and 1966 -- gave him a III-A classification, putting him far back in the line of people who might have been called to serve.

Verdict: True, but incomplete. Gingrich is correct, that he was not eligible for the draft. But that does not mean he could not have been one of the 3 million Americans who ultimately served in the war.

Vietnam was scarcely on the radar in 1961.  By 1965, after he had an undergraduate degree and a daughter, Gingrich had a decision to make.  And in 1965, it was not yet clear to the public at large that the Johnson Administration had no strategy for winning the war.  If Newt was going to enlist, that would have been the time.

I am no fan of the 'chickenhawk' argument, but CNN includes this from Gingrich:

"Given everything I believe in, a large part of me thinks I should have gone over," he told Vanity Fair in 1989.

 

With Friends Like This...

With friends like this Michelle and Barack don't need enemies.  One might have expected a White House book by Jodi Kantor of the NY Times to be a great big Valentine to Michelle and Barack.  Instead we hear of an aide (Robert Gibbs) cursing her, an unhapy Michelle, ahh, vigorously exhorting her husband, and bitter dissension amongst Barack's Chicago Mafia.

Let's start with this laugher from the Chicago Magazine interview with author Jodi Kantor:

When the Obamas left for D.C., they said they would come home [to Chicago] about every six weeks. Yet they’ve hardly been back at all.

 They did not have a clear idea of what the presidency was going to be like. Look at the contrast between George W. Bush and Barack Obama. Bush’s father was the president and before that was the vice president, so the Bushes spent holidays in the White House; they knew the staff, the routines, the traditions. The Obamas didn’t have any of that. Four years before the Obamas went to the White House, they were living in this condo apartment in Hyde Park, which I’ve been in; fairly small, has a very small closet, so it’s hard to figure out how Michelle Obama’s clothes, even her more modest wardrobe back then, fit in there.

In other words, they had no clue what the Presidency would be like.  Imagine my surprise.

For a darker mood we can turn to Jodi Kantor's story in the Times. She opens with Angry Michelle:

Michelle Obama was privately fuming, not only at the president’s team, but also at her husband.

In the days after the Democrats lost Edward Kennedy’s Senate seat in January 2010, Barack Obama was even-keeled as usual in meetings, refusing to dwell on the failure or lash out at his staff. The first lady, however, could not fathom how the White House had allowed the crucial seat, needed to help pass the president’s health care legislation and the rest of his agenda, to slip away, several current and former aides said.

To her, the loss was more evidence of what she had been saying for a long time: Mr. Obama’s advisers were too insular and not strategic enough. She cherished the idea of her husband as a transformational figure, but thanks in part to the health care deals the administration had cut, many voters were beginning to view him as an ordinary politician.

Wow. Michelle was a True Believer in the Obama hype?  Poignant.  

But how long had she been complaining about insular Chicago advisors?  Let's cut to the Huffington Post, which highlights the clashes between Rahm Emanuel and Michelle Obama:

Kantor writes, "To her, the Scott Brown victory provided grim evidence for what she had been saying for months, in some cases years: [her husband] had been leaning on the same tight group of insular, disorganized advisers for too long; they were not careful planners who looked out for worst-case scenarios."

That tight group would include Robert Gibbs, David Axelrod and Valerie Jarrett.  Let's go back to Ms.Kantor:

Mrs. Obama’s difficulties illuminate some of the president’s central challenges in the White House, including how the Obamas’ freshness to political life, a selling point in 2008, became a liability in office. Her worries about his staff point to a chief executive with little management experience who clung to an inner circle less united than it appeared. (Mr. Emanuel’s relationship with the president grew so strained that the chief of staff secretly offered to resign in early 2010; Robert Gibbs, the White House press secretary, had a tense relationship with Mrs. Obama and with Valerie Jarrett, another adviser). She shared the president’s ambivalence about political chores and the back-patting and schmoozing that can help get things done in Washington.

And let's have that Gibbs swearing-in ceremony:

In September 2010, after a summer of infighting throughout the West Wing, things finally exploded.

Early on Sept. 16, Robert Gibbs was scanning the news when a story stopped him short: according to a new French book, Michelle Obama had told Carla Bruni-Sarkozy, the French first lady, that living in the White House was “hell.” It was a potential disaster — the equivalent of the $400 haircut, Mr. Gibbs feared, coming just weeks before election day and on the heels of a vacation in Spain that had drawn accusations of lavish spending.

Mr. Gibbs asked her aides to find out if she had said anything even close (no, the answer came back), and then fought the story back for hours, having the book translated and convincing the Élysée Palace to issue a denial. By noon the potential crisis had been averted.

But at Mr. Emanuel’s 7:30 a.m. staff meeting the next day, Ms. Jarrett announced that the first lady had concerns about the White House’s response to the book, according to several people present. All eyes turned to Mr. Gibbs, who started to steam.

“Don’t go there, Robert, don’t do it,” Mr. Emanuel warned.

“That’s not right, I’ve been killing myself on this, where’s this coming from?” Mr. Gibbs yelled, adding expletives. He interrogated Ms. Jarrett, whose calm only seemed to frustrate him more. The two went back and forth, Ms. Jarrett unruffled, Mr. Gibbs shaking with rage. Finally, several staff members said, Mr. Gibbs cursed the first lady — colleagues stared down at the table, shocked — and stormed out.

Mr. Gibbs later acknowledged the outburst but said he had misdirected his rage and accused Ms. Jarrett of making up the complaint. After the book incident, he “stopped taking her at all seriously as an adviser to the president,” Mr. Gibbs said, adding, “Her viewpoint in advising the president is that she has to be up and the rest of the White House has to be down.”

As to whether Ms. Obama may have actually said that life in the Whte House is hell, let's skim the Kantor piece:

Michelle Obama was privately fuming, not only at the president’s team, but also at her husband....her story has been one first of struggle, then turnaround and greater fulfillment...Initially, she had considered postponing her move to the White House for months; after arriving, she bristled at its confinements and obligations...she was also deeply frustrated and insecure about her place in the White House...she tried to wriggle out of some ceremonial events that she saw as not having much purpose...The confinement of the White House was also a shock; suddenly she was cut off from her old life and rituals, and she hesitated even to take her daughters to school or some soccer games for fear of causing a fuss...The family had intended to return to Chicago frequently, but their first attempt was so complicated — their brick-front home was shrouded in black curtains to foil snipers, and because they couldn’t just buy groceries anymore, Navy stewards fed them in their own home — they seldom returned...

And let's include a bit of loneliness and paranoia:

“I don’t think any of us contemplated how isolating this whole experience would be,” Dr. Eric Whitaker, a close friend from Chicago, said in an interview. “I don’t think this is a fun part about being the first family for any of them.”

Mrs. Obama often found herself caught in an internal debate about how the Obamas should look and live, travel and entertain. As the first African-American first lady, she wanted everything to be flawless and sophisticated; she felt “everyone was waiting for a black woman to make a mistake,” a former aide said.

This sounds exactly like the Sister Grim that hit the trail in 2008.  However, I had picked up on the "White House is hell" story back in September 2010, and had imagined Gibbs' spin:

I am sure White House spinmeisters will restore the missing context, in which we will learn that Michelle's life is hell because she is so worried about disabled soldiers and unemployed workers, as well as Gitmo remaining open, and a lack of a public option in the health bill.

 

Liberal Media For Huntsman

The Boston Globe, which endorsed Barack Obama for President in 2008 with "great enthusiasm", has come out for Jon Huntsman.  Whee!  That might be enough to sway any Republicans worried that Romney is insufficiently moderate and has secretly become the conservative he is pretending to be.

Well.  It's reassuring that Huntsman's political vision is not totally flawed - his strategy of courting the liberal media by bashing the right is at least connecting him with his target audience.

Constitutional Crisis du Jour

Jon Chait explains the political strategy behind the "recess" appointment of Richard Cordray as leader of the Consumer Financial Protection Bureau.

Reuters looks at the Constitutional question of recess appointments.

Politico and Todd Zywicki look at the specifics of the Dodd-Frank law that may pre-emptively neuter recess appointments.  From Prof. Zywicki:

...Section 1066 of Dodd-Frank provides that the Secretary of the Treasury is authorized to perform the functions of the CFPB under the subtitle transferring authority to the CFPB from the other agencies “until the Director of the Bureau is confirmed by the Senate in accordance with Section 1011.”  It turns out that section 1011 is a defined term which provides: “The Director shall be appointed by the President, by and with the advice and consent of the Senate.”

This seems to suggest that even if the President might be able to appoint Cordray under the recess power the full grant of statutory authority wouldn’t transfer to the Bureau unless the statutory language was fulfilled as well.

This was mooted a year ago.  The Inspectors General of the Treasury and the Federal Reserve prepared a report for Congress.  The law firm of Ballard Spahr delivered the highlights, from which I excerpt this:

The designated transfer date (DTD) under the Dodd-Frank Act is currently set for July 21, 2011. Certain Bureau authority that can be exercised by Secretary Geithner (or his designee, Professor Warren) terminates on the DTD, and other authority terminates when a Bureau Director is appointed by the President and confirmed by the Senate. (Although the report does not directly address whether the President could make a recess appointment of a Director, without Senate confirmation, we note that his authority is not limited merely by the U.S. Constitution—as with other appointments—but also by the Dodd-Frank Act, which expressly speaks in terms of Senate confirmation.)

Under Section 1066 of the Dodd-Frank Act, after the DTD and before the confirmation of a Director, the Secretary (and his designee) can continue to exercise authorities transferred from other federal agencies, such as the authority to: (1) adopt regulations under the Truth in Lending Act (TILA) and other enumerated federal consumer financial laws; and (2) examine large depository institutions for consumer compliance. However, the Secretary and his designee cannot perform new functions during this period. For example, the report states that the Secretary (and any designee) may not during this period adopt rules prohibiting unfair, deceptive, or abusive acts or practices in connection with consumer financial products and services, or supervise or examine nondepository institutions. The report does not detail the full extent to which the Bureau can exercise its enforcement powers during this period, but, under the report’s logic, it appears that it could not bring an enforcement action based on its authority to prohibit unfair, deceptive, or abusive acts or practices.

Presumably someone who objects to a new rule will seek to have it overturned on this basis.

All The News That Fits The Narrative

Can you say "reciprocity" three times quickly? The NY Times editors are very familiar with the concept, and opined on the controversy when the Republican-controlled House of Rwpresentatives passed a bill forcing states to recognize concealed-carry permits issued in other states.

But dare they report some actual news?  Meredith Graves, a nursing student from Tennessee, had a bit of brain-lock at the World Trade Center Memorial in the greatest city in the world.  She has a concealed carry permit issued in Tennessee but tried to check her gun with security at the Memorial.  Ooops!  Now she faces three years for a felony conviction, Mayor Bloomberg has engaged in a bit of tourist-bashing by alleging (incorrectly) that she was carrying cocaine, the prominent Democrat leading the Ground Zero district has opined that the law ought to be reconsidered, and here is the NY Times coverage:

 

No coverage whatsoever, although the story made it as far as the LA Times.  All the news, indeed.

As to the House reciprocity bill, I think that goes too far in overturning our Federal system.  However, the current law in New York really does need to be rethought - the goal is to lock up bad guys, not nurses.

CHEAP SHOT:  The nurse was carrying crushed aspirin for her migraines, which led to the drug allegation.  She's just lucky she wasn't carrying table salt.

Resolutions In The Shredder

Megan McArdle joins in on the latest Paul Krugman imbroglio and gives us pause with this:

However, I will note that the commenters Paul Krugman sends to other sites harbor a very strange faith in his predictive powers.  When other economists dispute something that Paul Krugman has said, they tend to rejoinder that the reason Paul Krugman is obviously a more reliable source than this crappy ideological hack they're speaking to is that, unlike YOU, Paul Krugman has gotten things right over and over.

What is so strange about this belief--aside from the collective hyperlocal amnesia that prevents them from remembering that yes, even the great Paul Krugman has made some bloomers in his time--is that the examples of his Nostradamus-like powers are not, in fact, at all special.  Chief among them--the sort of Ur prediction upon which he has apparently made his reputation--is "calling" the housing bubble in 2003.

Really?  First, I don't think Ms. McArdle would disagree that Krugman's adulation from the left derives from his early and consistent Bush-bashing, amplified by his opposition to the Iraq war.  No one on the left was swooning for him in 2003 because of his views on the housing bubble.

But on that topic, I do love Krugman's Bold Restatement of his views on the housing bubble from May 2006, when the coming crisis should have been even more clear to a true visionary:

As I summarized it awhile back, we became a nation in which people make a living by selling one another houses, and they pay for the houses with money borrowed from China.

Now that game seems to be coming to an end. We're going to have to find other ways to make a living — in particular, we're going to have to start selling goods and services, not just I.O.U.'s, to the rest of the world, and/or replace imports with domestic production. And adjusting to that new way of making a living will take time.

Will we have that time? 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.

It's all going to end badly, unless it doesn't.  Were truer words ever written?

Let me also add that in his description of the housing market Krugman's grasp of basic economics was quite shaky.  In 2008 he patted himself on the back for a vision he presented of "Flatland" versus "Zoned Zone" with a deeply flawed assumption:

Calculated Risk, in a discussion of home price declines, links to my three-year-old analysis, That Hissing Sound, which I think was one of the best pure-economic pieces I’ve done in my tenure at the Times.

The best was not so very good.  Here is the basic model, as described by Krugman (Aug 8, 2005):

When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.

The Flatland flaw is apparent with a moment's reflection.   A boom in demand is met by new supply provided by a boom in construction, with (relatively) stable prices.  But is a bust in demand met by a decrease in supply caused by a burst of deconstruction?  Do developers (led, perhaps, by Deridda) role the videotape backwards and start bulldozing homes?

Presumably not.  Consequently, the housing supply curve in Flatland is always kinked - adding new homes is easy but subtracting homes requires attrition which can take decades.

Which suggests (to me, if not to Paul Krugman) that in Flatland, demand booms will call forth new supply and demand busts will result in plunging prices and lots of use of words such as "glut" and "overhang".  Until a new boom can sweep clean the glut.  And maybe financiers track housing starts for a reason.

Krugman's belief that a housing price bubble couldn't develop in Flatland led him into a policy maze when he tried to explain in 2010 why Flatland Georgia banks were failing despite their imagined immunity to a real estate bubble.  A sampling:

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.

Obviously, if we admit the possibility of demand surges followed by price collapses, trouble in Flatland is a lot less mysterious.  Certainly the Atlanta Fed was able to figure out the association with the real estate market.  And if price collapses are probable even in Flatland, results such as these (cited by Krugman) are less baffling:

The share of mortgages with delinquent payments is higher in Georgia than in California; the percentage of Georgia homeowners with negative equity is well above the national average. And Georgia leads the nation in bank failures.

Let's also add that Krugman's "Flatland" and "Zoned Zone" distinction became meaningless.  In 2005, his notion was that the Zoned Zone lay "along the coasts".  By 2010, Krugman explained that Phoenix and Las Vegas had become coastal (Lex Luthor nods!), or at least, Zoned Zones.  With a bit of poking I learned that from 2000 to 2008/9 the housing stock of Las Vegas increased by 46% while the stocks of New York and Los Angeles increased by 3% and 4%.  Is it meaningful to insist that these are all exemplars of the Zoned Zone where new construction is limited?  Or may I pound the table and insist that Vegas saw a construction boom followed by a price collapse, just as predicted by a kinked Flatland supply curve?

Well.  Set aside his wishy-washy prediction of doom-or-not, and his misunderstanding of the housing supply curve and we have a heartbreaking work of staggering genuis.

BUT DON'T TAKE MY WORD FOR IT:

I'ss see your Princeton Prof and raise you a Harvard - here is the abstract from Housing Supply and Housing Bubbles by Edward L. Glaeser, Harvard University and NBER; Joseph Gyourko, The Wharton School, University of Pennsylvania and NBER; and Albert Saiz*
The Wharton School, University of Pennsylvania (my emphasis):

Like many other assets, housing prices are quite volatile relative to observable changes
in fundamentals. If we are going to understand boom-bust housing cycles, we must
incorporate housing supply. In this paper, we present a simple model of housing bubbles
which predicts that places with more elastic housing supply have fewer and shorter bubbles, with smaller price increases. However, the welfare consequences of bubbles may actually be higher in more elastic places because those places will overbuild more in response to a bubble.

The data show that the price run-ups of the 1980s were almost exclusively experienced in cities where housing supply is more inelastic. More elastic places had slightly larger increases in building during that period. Over the past five years, a modest number of more elastic places also experienced large price booms, but as the model suggests, these booms seem to have been quite short. Prices are already moving back towards construction costs in those areas.

I CAN QUIT ANYTIME:  While on the topic of Krugman's Great Insights from 2003, let's recall that when George Bush (in concert with the G-7 and the IMF) was bashing China for maintaining an undervalued yuan, Krugman was explaining that Bush was a moron.  By 2011, when Democrats were bashing China for maintaining an undervalued yuan, Krugman had figured out that maybe China was a "bad actor".

Possible explanations - Bush, the G-7 and the IMF were wrong in 2003, but subsequent events vindicated their view, forcing Krugman to change his mind; they were Lucky Liars while Krugman was a reality-based genius beleagured by a new reality.

Or maybe, the Princeton Populist is a partisan hack who reflexively backs Democrats and bashes Republicans.

Tough call. 

FWIW, the Times editors completely ignored their own Nobel Laureate in Economics (for his work on international trade!) when opining on the China posturing by the Senate Democrats.  I suspect they know their columnist.

A Mandate To Serve

Landslide Mitt! On to New Hamsphire.  And South Carolina.  And Florida.  I feel a scream coming on myself.

The Traditional Iowa Caucus "Go, Mitt!" Open Thread

Go, well, Mitt.