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Kurdish Sell-out Watch Continues

Juan Cole has a long analytical post that is examing the Kurdish position on self-governance. Basically the Kurds are willing to be a part of Iraq as long as they have an extremely high level of autonomy. If I am understanding these articles, I would imagine that they are seeking a deal similiar to the Dayton Accords where there is a national government composed of the three major ethnic groups but a high degree of regional/ethnic indepedence. A major Shi’ite party, counting the votes, is opposing any weak form of federal government.

The threatening thing that I saw in this post by Juan is the implicit threat that the the Kurdish peshmerga which have aided the US Army in maintaining a reasonable degree of civil order in the north, may decide to undertake active combat operations against both American and potentially Turkish targets. That is one thing that we do not need as Kos points out, we have lost another twenty nine soldiers in the past two weeks and that these casualties are not in the Kurdish areas.

So bad news may be on the horizon.

Cross posted at Fester’s Place

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Desperately Poor Countries

Brad DeLong recently took a lot of heat in his comments for this statement:

I wonder about Bob Herbert: is he smart enough to have, when he looked in the mirror this morning, thought, “I see a man who is trying to keep India a desperately poor country?”

Brad’s acerbic comment was inspired by this piece in which Mr. Herbert writes about the problem of the “off-shoring” of white collar jobs. Not only is Brad right that opposing such off-shoring is tantamount to wishing poverty upon India, if IBM doesn’t outsource thusly then some other firm will, putting IBM at a competitive disadvantage, leading to job losses at IBM. But I want to focus on the “desperately poor” part of the issue, rather than the comparative advantage part of the issue.

Via Anne in comments, I see an NYT editorial today, Harvesting Poverty: The Unkept Promise. It speaks poignantly about the cost that protectionism in the US, EU, and Japan imposes on Third World nations (in addition to raising the price of food in the developed world — a cost borne primarily by the poor):

The club of rich nations that wrote the rules of global trade has been aggressive in dismantling barriers when it comes to industrial goods and services, in which they hold a comparative advantage. But they refuse to do the same when it comes to agriculture. Politically powerful farm lobbies in Japan, Europe and the United States are not willing to face global competition on fair terms. So agriculture remains the hypocritical asterisk to our fervent free-trade and free-enterprise creed.

… Worse, the developed world funnels nearly $1 billion a day in subsidies to its own farmers, encouraging overproduction, which drives down commodity prices. Poor nations’ farmers find they cannot compete with subsidized products, even within their own countries. In recent years, American farmers have been able to dump cotton, wheat, rice, corn and other products on world markets at prices that do not begin to cover their cost of production, all courtesy of the taxpayers.

… The World Bank estimates that an end to trade-distorting farm subsidies and tariffs could expand global wealth by as much as a half-trillion dollars and lift 150 million people out of poverty by 2015.

I’ll say it again. U.S. farm subsidies and import tariffs are truly bad policy and the bulk of the subsidies go to large farms, not the ma and pa farms of our idyllic but distant past. They make food more expensive in the U.S. while adding to Third World impoverishment. Finally, if I can’t count on them to back free trade, then what are Republicans good for?

AB

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Plame On

Remember Valerie Plame? Ashcroft has apparently recused himself from the investigation:

Attorney General John D. Ashcroft has decided to recuse himself from a widening Justice Department investigation into the leak of an undercover CIA officer’s identity, sources said today.

The probe into the disclosure of CIA agent Valerie Plame’s name to a columnist will be overseen by U.S. Attorney Patrick J. Fitzgerald of Chicago, who will report to new Deputy Attorney General James B. Comey, sources said.

AB

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Ephedra Ban

Today, the FDA today banned Ephedra, a substance that has no documented beneficial effects and some documented side effects:

Manufacturers of the supplement insist their product is safe when taken as directed. But FDA and Health and Human Services Department officials have been saying for months that they would like to ban ephedra and were building their case so there could be little dissent.

One interesting thing about the ban is that it’s an admission by the administration that self-regulation by industry participants doesn’t always work — though such self-regulation remains the preferred choice in the environmental arena.

A second interesting factor is that Ephedra became so widespread in the first place due to Orrin Hatch’s fervid support of the “Homeopathic” or “Herbal” industry, which eventually lead to passage of the 1994 Dietary Supplement Health Education Act, which exempted herbal supplement makers from proving the efficacy of their products. No double-blind testing needed. (*)

AB

(*) Bob Park explains the virtues of double-blind testing:

The most important discovery in the history of medicine was the randomized double-blind test. It allows us to find out what works and what doesn’t. So far, herbals are in the “doesn’t” category: St. John’s Wort doesn’t relieve depression, but it does interfere with some cancer drugs; echinacea doesn’t ward off colds and flu; ephedra causes frequent injuries and even death; and this week we learn that ginkgo biloba doesn’t enhance memory in people over 60.

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Sugar Farmers are Morally Superior to Candy Cane Makers

Just as we decided, via the steel tariffs, that Pennsylvania residents are more deserving than Michigan residents (and along the way, made every consumer pay more for goods made out of steel or made with machinery made out of steel), the latest example from the Chicago Tribune shows that we must think residents of Louisiana are superior to residents of Illinois and Ohio (and along the way, raised the price of anything made using sugar):

In the last three years, nearly half of all U.S. candy cane production has shifted to Mexico, industry experts say.

That’s true of the candy cane maker based in this northwest Ohio town, Spangler Candy Co., which recently opened a plant in Juarez that generates half of Spangler’s striped treats.

But the story of the Mexican candy cane isn’t your typical tale of American manufacturers chasing lower wages. It’s more about the cost of sugar than the cost of labor.

Because federal tariffs and subsidies push the price of U.S. sugar far above what it fetches on the world market, candy cane makers such as Spangler are opening factories overseas, where sugar can cost 6 cents a pound compared to 21 cents back home….

Other makers of hard candy have followed a similar pattern, at least in part because hard candy, unlike chocolates which can use corn syrup substitutes, are so sugar-intensive.

In Chicago, for example, Brach’s Confections plans to shut its plant in 2004, forcing about 1,000 workers out of their jobs. The Chicago area, the center of the U.S. confection business, has lost an estimated 3,000 candy-related jobs since 1998.

Yet another example of why making stuff more expensive is a bad way to protect jobs.

Via Dan Drezner, who points out that the recently passed Central American Free Trade Agreement may remedy this situation.

AB

UPDATE: In a post titled “Pour Some Sugar on Me,” Matt Y. adds, “In practice, the economical hard-rocker will instead ask for some high-fructose corn syrup to be poured on him, as the price of this ersatz sugar product is not nearly so distorted by the farm dole.”

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General Zinni

From the Washington Post, a piece on General Anthony Zinni, a self-professed moderate Republican and former chief of the Central Command (U.S. Military Headquarters for African and the Middle East), now dismayed by the administration he endorsed in 2000:

[Gen. Zinni] was alarmed that day to hear Cheney make the argument for attacking Iraq on grounds that Zinni found questionable at best:

“Simply stated, there is no doubt that Saddam Hussein now has weapons of mass destruction,” Cheney said. “There is no doubt that he is amassing them to use against our friends, against our allies, and against us.”

Cheney’s certitude bewildered Zinni. As chief of the Central Command, Zinni had been immersed in U.S. intelligence about Iraq. He was all too familiar with the intelligence analysts’ doubts about Iraq’s programs to acquire weapons of mass destruction, or WMD. “In my time at Centcom, I watched the intelligence, and never — not once — did it say, ‘He has WMD.’ ”

The rest of the story is definitely worth reading.

AB

[Source corrected]

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Progressive Consumption Taxes

Ruy T. has an interesting post that got me, once again, thinking about consumption taxes. At first glance, consumption taxes appear intrinsically regressive because poor and middle class households spend most of their income on consumption while wealthy households spend only a fraction of their income on consumption. Suppose there’s a consumption tax of 20% and that poor households spend 90% of their income on consumption (food, clothing, shelter, and miscellany) while wealthy families spend only 50% of their income on consumption. In this example, 18% of the poor household’s income goes to taxes while only 10% a wealthy family’s income goes to taxation.

But a system of exemptions could, in principle, make consumption taxes progressive. Exempting spending on housing from taxation is a good starting point because as income rises, a smaller portion of income is spent on housing. Continuing the example, suppose the poor household spends 40% of its income on rent and the wealthy family spends 20%. The taxable consumption by the poor family then falls to 50% of their income and the wealthy family’s taxable consumption falls to 30% of income. So with a 20% consumption tax, the poor family pays 10% of its income in taxes and the wealthy family pays 6% — still regressive, but less so. To make it actually progressive, high taxes could be added to luxury items, and further exemptions (e.g., of staple foods) could be implemented. Of course, for every exemption implemented, the tax rate on the non-exempted items has to be increased if the exemption is to be revenue neutral.

My fear is that a progressive consumption tax would lead to massively distorted relative prices, reducing economic efficiency (causing a “dead weight loss” in Econ 101 terminology). Worse, the lobbying and influence activity by firms seeking to have their goods and services favorably taxed would be severe. Even worse, development and design decisions would be distorted towards creating products likely to receive favorable tax treatment, creating further inefficiency.(*)

In short, a regressive consumption tax would be a simple, but bad, policy. A progressive tax might be good policy, but the devil is in the details; and in this case, the details are likely to swamp the otherwise potentially positive aspects of a progressive consumption tax.

What about approaching consumption taxes from the other side, by exempting savings? Because all the money you make has to go somewhere, taxing consumption and not taxing savings work out the same. Intuitively, if savings are exempted from taxation then the only money left to tax is income spent on consumption — a consumption tax (a point I made earlier). And this is precisely what the Bush administration’s proposed Lifetime Savings Accounts would accomplish.

This raises three questions: (1) Are the current Bush proposals in fact regressive? (The answer is yes); (2) Is any plan that uses tax incentives to encourage saving necessarily regressive? (The answer is no); and (3) Would a progressive savings-based tax plan also be unwieldy and introduce substantial economic distortions similar to those that would occur under a progressive tax on consumption? (The answer is perhaps not.)

The new Center for American Progress, a center-left think tank, now has a section devoted to this issue. It includes “Critiques of the Bush administration plan” (documenting point (1) above) and “A Progressive Alternative: The Universal 401(k)” (focusing on points (2) and (3) above). Soon, I’ll review the CAP proposal, but in the meantime, you can check it out for yourself.

AB

(*) Don’t income taxes also introduce distortions? Yes, but they only mess up one tradeoff, the labor vs. leisure decision. Moreover, the impact of income taxes on the amount of work people do is ambiguous. On the one hand, it will discourage work because whenever you tax something, people will do less of that thing. On the other hand, it will encourage work because people have to work more to afford a given set of goods. (For another Econ 101 flashback, the first effect is the substitution effect and the second is the income effect). If the two effects are roughly equal in magnitude then the amount people will work when income is not taxed and the amount they work when income is taxed are about the same, meaning that the economic distortion and inefficiency created by an income tax is modest. I doubt that the two effects precisely counteract each other in this fashion, but this does attenuate the distortion; with consumption taxes, there is no similar mitigating effect.

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Money and Inside Baseball Post

This USA Today article contains some information that blows holes in my matching funds projections. I had projected Clark will be eligible to receive 8.7 million dollars off of $15 million in fundraising for Q-3 and Q-4. While USA Today supports the total fundraising amount, they are projecting Clark will be eligible for only $3.7 million dollars. This can either be due to timing of donations or a change in donor profiles as he may just be getting very big money donations instead of the numerous and more valuable small donors.

IF this is true then Clark will have a significant cash on hand deficit compared to Dean as Dean had a 9 million dollar COH advantage at the end of the third quarter and the USA Today article is indicating that the Dean campaign believes that it should be able to increase its cash on hand for this quarter. Clark is spending some serious bucks on consultants and advertising so if his matching contribution is this low then he is facing serious competitive disadvantages against Dean.

Crossposted at Fester’s Place

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And she forced the pills down his throat too!

Attorney: Limbaugh blackmailed by maid. Damn, I’m sick of whining Conservatives yapping endlessly about personal responsibility — until they’re caught with their hand (or other body parts) in the cookie jar. Then it’s “the maid did it” or “I talked to him and God forgives me” (Rush and Gov. Rowland’s respective defenses).

AB

UPDATE: More personal responsibility here.

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Nader Update

I’m not sure what this means:

Ralph Nader, the third-party candidate viewed by many Democrats as the spoiler of the 2000 election for taking votes away from Al Gore, has decided not to run on the Green Party ticket next year, a party spokesman said Tuesday.

Nader, who garnered nearly 3 percent of the national vote in the last presidential election, has not ruled out running for president as an independent and plans to make a decision by January.

[snip] … Nader said running as an independent would not hurt his campaign. “As an independent, you can do more innovative things because you don’t have to check with all the bases,” he said.

Why Independent and not Green? Are there people inside the Green Party, people with sufficient intra-party power, opposed to Nader running? Opposed to any Green candidate running in 2004? Who knows. Still, this should get the Democratic candidate an extra .5% to 1% in some important states.

AB

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