Relevant and even prescient commentary on news, politics and the economy.

The Times Scandal

7,238 words ripping into the former Times reporter Jayson Blair for pulling the wool over their eyes for five years. Now, if they would just take a look back to 1999 and 2000, especially Frank Bruni. But I guess that overt servility and sycophancy don’t violate journalistic ethics.

AB

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A Little Perspective

The president pushed so hard to pass at least $550b in tax cats that Democrats will surely claim victory when the tax cut likely comes in at $350b (down from an original proposal of $726b). When they do, keep in mind that that even at $350b, it will be the third largest in history, on top of the largest in history in 2001.

Also, as the NYT story explains, even a bill that only costs $350b will only hit that number via the disengenuous practice of built in sunsets. For example, if you’re worried about paying estate taxes, be sure to die on or before 12/31/2010, as that’s when the estate tax repeal expires. (2010 and 2011 will provide a great test of the extent to which economic incentives to affect behavior). Building the 2010 sunsets into the 2001 tax cut allowed the Bush administration to cite only 9 years of costs as the “10-year cost of the tax cut”. (I don’t have the link on hand, but Somerby’s got a bunch of incomparable posts on this subject). Look for more of the same from the conference committee as the final bill takes shape.

And did I say that Grassley’s $500 dividend income exclusion proposal was pretty reasonable? (Yes, I did, in a post called “Credit Where it’s Due“). Now, as further proof that I was right and it is a reasonable proposal, there’s the fact that Republicans found a tax cut they don’t love:

The bill that came out of the Finance Committee would exclude from taxes each year the first $500 in dividends an investor receives and exclude part of dividends above $500 — 10 percent through 2007 and 20 percent thereafter.

This is too paltry to affect the economy or the stock market and would be of little help to the wealthy investors in the Republican camp. So Republican senators say they will try to expand the exclusion in amendments on the Senate floor. If they do not succeed next week, it is unlikely they will fare better when the bill comes out of conference.

The message appears to be that any tax cut has to be big and really skewed upwards or forget it

AB

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Angry Bear is Now Fully Justified!

I should leave it at that, but I’m actually referring to the slightly new look of Angry Bear, including fully justified text and a new right-hand sidebar where someday I may start asking you to buy stuff or give me money.

If you visited late Friday night or early Saturday morning, you may have seen some weird stuff, but it seems to be under control now.

AB

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More on the Distribution of Benefits

Just for comparison, the following chart shows the average benefit for the bottom 80%, the median benefit for the bottom 80%, and the benefit for the top 1%, under Bush’s plan and under Grassley’s plan. As you can see, Grassley’s plan isn’t progressive, per se, but compared to Bush’s proposal, it’s a plan Eugene Debs could endorse. (click here for a larger, more legible, graph).

Note how I had to add the labels indicating the savings for the median tax payer in the bottom 80%–without the labels, you can’t even see it.

AB

UPDATE: I should clarify that the $2.50 median figure is a best guess that is much more likely to be zero. All other numbers are real–derived from the Waxman report, the CNN report on Grassley, and some algebra. How did I get $2.50? For the first time ever, in 2001 the number of stock holders exceeded the number of non-stock holders. So a bit more than half of the U.S. population now owns stocks, meaning that 40-something percent do not own stocks and therefore do not receive dividend income at all and thus have a (direct) benefit of zero from a dividend tax cut. The median of the 0% to 80% range is the 40th percentile of the overall income distribution. If stock ownership increased one-to-one with income, then the median benefit would be zero. But then I figured that some (but a distinct minority) of the 40th percentile (income of $33,314) might hold a few shares of the biggies, ATT, Coke, GE, and the like, so I guessed that dividend income would average out to about $2.50 (averaging a bunch of zeroes, and a few numbers in the hundreds of dollars and then multiplying by the 20% tax rate for that bracket).

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More on the Dividend Tax Cut

The picture first appeared in Henry Waxman’s study of Bush’s proposed dividend tax cut, then appeared on gorilla-a-gogo, which Off the Cuff then linked and copied, which CalPundit then also posted ,with attribution. If you still haven’t seen it, here it is (for those unclear on the regressive concept, I’ve identified which bar applies to you, unless you make over $374k per year):

This graph is a great example of why I was earlier able to state with confidence that “[Grassley's] proposal is not Bush’s plan; it’s just the best he [Bush] can get without Snowe, Voinovich, Collins, and Chafee (Zell Miller can only sell out once). Were Bush’s plan implemented, I assure you it would be regressive.”

How would things look under Grassley’s plan? The rich would get to exclude $500 of dividend income, which would otherwise be taxed at 38.6% (2003 rate), for a savings of $193; the bottom 80% would get an average saving identical to that in Waxman’s graph, $29.50. Even that figure overstates the benefit–the $29.50 stems from a relatively small number of upper middle class (70-80%) getting a benefit well above $29.50 and the majority of the middle and lower class getting 0. Seriously, would it be so hard to identify the mean and the median benefit of the various tax programs? In this case, the median benefit to those in the bottom 80% would be the benefit to the person in the 40th percentile, which I suspect would be very close to zero–maybe $2.50 in tax savings.

Whenever the average of X is well above the median of X, you know that the distribution of X is skewed upward. Suppose you and ten friends are in a room and that the average income in the room is $50k, which is also the median (half make more than $50k, half make less). Now take your wealthiest friend and replace him with Bill Gates, who makes $1 billion per year. The average income becomes $104.5 million, but the median remains unchanged at $50 thousand. More to come.

AB

P.S. Why all the emphasis on attribution? See the previous post.

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Plagiarism

Since the topic is making the rounds in the blogsphere (Kieran Healy here; CalPundit here; Invisible Adjunct here; Yglesias here), I’ll toss in my two cents. Cent one: there are a lot of genuinely funny stories going around about students suddenly elevating their prose to Dostoyevskian levels, or their mathematical analysis to the level of Nash. The implication is that plagiarizers are all stupid and sure to get caught by clever professors.

Here’s my story. I had a student whose previous short paper was on internet shopping, and a shallow treatment at that. Internet shopping was actually a fine topic, given that the course was on the Economics of Innovation–shopping on the web was, at the time, indeed an innovation. The final paper that the student submitted, only a few paragraphs into it, went into text along the lines of “Let N denote the number of firms, and assume that there is a mass of consumers of [Lebesgue] measure one.” Later, the paper referenced Subgame Perfect Nash Equilibria and the like. Clearly, it was plagiarized. I gave the student an F, after threatening going to the dean and pursuing expulsion.

Cent two: It’s always important to think about sample selection. As professors, we only observe the bad plagiarizers. There are likely rather clever (but presumably lazy) students who are skilled plagiarizers. When plagiarism is done well, professors don’t know that it’s occuring. So the various amusing stories are not representative of the average instance of plagiarism, but simply a random sampling from poorly executed plagiarism.

Yes, plagiarism is very bad, and I do not think expulsion is too severe a punishment for plagiarism. For a handful of students, college and knowledge are intrinsically exciting; for such students, grades are probably not even necessary. For the remainder, the degree and the transcript are certificates indicating the student’s capability for learning. (So the cynical, but on balance true, answer to the eternal question, “when and how will I use this in real life?” is “Never. But if you can figure this material out, you can figure out other complicated things. Getting an A in my class will be credible evidence of your ability to do so”).

In addition to being stealing, plagiarism adds noise to this signal, benefitting poor but unethical students at the expense of hardworking and/or brilliant students. My advice to students is “don’t do it”, because if you are dumb enough to need to do it, then you probably won’t get away with it. My tip to faculty is that you aren’t catching as much of it as you think you are.

AB

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Liberal Media in Action

CNN Headline (from the front page): Alleged Chinese double agent indicted. Nowhere in the story did it mention that the spy in question, Katrina Leung, is a major Republican contributor; the word “Republican” is not even in the story. You have to go to the story, then notice the sidebar where there’s a link titled “Lieberman seeks investigation of accused spy’s finances“–still no mention of Republicans. Follow that link to read this phrase:

Katrina Leung, accused of being a Chinese double agent, was also a political fund raiser for the Republicans.

Don’t ask me what to think about agents of the Chinese government trying to influence US politicians, just ask the Weekly Standard, The National Review, David Horowitz, World Net Daily, and so on. I expect these sources will quickly leap to excoriate any Republicans who received funds from or with the aid of an [alleged] Chinese Spy. After all, Million Dollar Bill “no vice but my own shall go unpunished” Bennett didn’t get any special treatment or kindness from these pure souls, did he?

AB

UPDATE: Josh Marshall has a lot more on this. I noticed the surely inadvertent ommission at CNN; Josh observes that “And yet the reports of the charges filed against her today both at ABC News and CNN, give this [Leung's Republican connections and fundraising] no mention whatsoever. Not a one.”

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How was this for great timing?

The dollar continues to fall against the Euro, likely due to some nefarious plan by the French to decrease the US trade deficit. On a personal note, it looks like I picked the ideal time in 2003 to visit Europe:

AB

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Credit Where it’s Due

In this instance, to Sen. Charles Grassley (R-Iowa) who, given that a $350b tax cut is a fait accompli, actually came up with a pretty reasonable proposal on dividend taxes:

Bush says his proposal to eliminate dividend taxes would boost stock prices and create jobs [on this point, see my earlier post]. Committee Chairman Charles Grassley, an Iowa Republican, negotiated with key Republican moderates to develop a compromise that would fit elements of Bush’s original $726 billion, 10-year plan into a $350 billion total approved by the Senate.

The compromise bill would exempt the first $500 of dividend income from taxes, which Grassley said would eliminate such taxes for 86 percent of dividend-receiving taxpayers. An additional 10 percent of dividend income above $500 also would be excluded from taxes, with that rising to 20 percent in 2008 through 2012.

Only the pretty well off will have non-sheltered (i.e., non-IRA) dividend income over $500, so those who pay any dividend taxes under this plan will mostly be people in the 34% and 37.6% 2004 brackets, meaning that even with a 20% exclusion they will pay a net tax rate on dividend income of 27%-30%. The rest of the dividend-receiving population will pay much less, zero or nearly zero. Insofar as there are some benefits to not taxing dividends, this strikes me as a reasonable way to reduce the distortion. Nevertheless, this is still a bigger tax cut for the wealthy, to the extent that they derive a greater percentage of their income from dividends than do the less wealthy (they’ll be paying 30% on income that they previously payed around 35% on).

Also note that this proposal is not Bush’s plan; it’s just the best he can get without Snowe, Voinovich, Collins, and Chafee (Zell Miller can only sell out once). Were Bush’s plan implemented, I assure you it would be regressive.

AB

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Well Worth Reading…

…and then buying. Salon has excerpts from Sidney Blumenthal new book, The Clinton Wars. Of course, why buy the cow when you can get the milk for free? (just kidding, I think). Now, if I could just figure out how to get the kickbacks from Amazon for the thousands of click-through sales this post will surely generate.

AB

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