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


I’ve made a few changes that will, hopefully, slightly improve your reading experience:

  • The archives are fixed (weeks after 5/14 had mysteriously stopped displaying).
  • I’ve replaced the FreeFind search engine with Google’s search engine. However, due to the failure of the archives, search engines were not finding entries from after 5/14. As soon as Google reindexes this site, which I think happens fairly often, you should find it much easier to find old posts. Right now, Google isn’t finding anything. If anyone has a recommendation for a better search option, please let me know.
  • Images now load on all pages, not just the main page.
  • The link to contribute to Kerry is gone. In its place, I’ve put a link to give to the DSCC. Since I think there’s a non-trivial chance that Democrats can retake the senate, but that it will be very close, this seems like a worthy cause. If you would like to recommend other worthy campaigns, let me know.
  • The top of the right panel now lists the ten most recent posts.


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Silver Lining in the GDP Report

Someone get President Bush a copy of the latest GDP report as he is telling a Missouri audience about the alleged highest real GDP growth in 20 years. I guess he’s still talking about that temporary spike in the annualized rate for 2003QIII (which is no longer being reported as 8.2% but only 7.4%). For 2004QII, the annualized growth rate was reported to be 3.0% today.

So what’s the silver lining? For those of us who lament the low national savings rate, it is of some comfort that real investment grew at 12.8% and real exports grew at 13.2% (annualized, of course).

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Sitting Next to Mrs. Kerry

During the 1993 State of the Union, Alan Greenspan sat next to Mrs. Clinton.  A friend asked what does this imply?  We now know that the successful economic policies of President Clinton included fiscal restraint combined was easy money that has become known as Rubinomics.  But I give it away – yes, it was Robert Rubin sitting next to Mrs. Kerry last night.  As John Kerry did promise fiscal responsibility. 

Critics will ask how.  Alice Rivlin is right – spend smarter not more.  And when Bush says he cut taxes, let’s remind him of Brad DeLong’s expression “Tax Shift, not Tax Cut”.  Bush has increased the taxes of the middle class long-term.  He will not say this, but we must remind voters again and again of the truth about fiscal policy. 

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Pre-Presidential Succession

Addressing the question of what to do if the presidency changes hands and both the incoming president and vice-president are killed before choosing a cabinet, Eugene Volokh comments on an interesting suggestion from Sen. John Cornyn (R-Tex):

Sen. John Cornyn (R-Tex.), the chair of the Senate Judiciary Subcommittee on the Constitution, proposed an interesting Senate resolution: A nonbinding agreement (it probably can’t be made binding, given the President’s and the Senate’s broad constitutional powers in this area) that the outgoing President appoint, and the Senate confirm, some of the incoming President’s Cabinet picks before Inauguration Day. This would of course work best with a revision of the Presidential Succession Act (at least to remove the Congressional officials from the line of succession), which Sen. Cornyn would also favor; and it would surely still leave lots of other problems in any event. Still, I’m glad some people are thinking about this, and that a Republican Senator is willing to suggest it even when the immediately forthcoming transition — if there will be a transition — would be from a Republican to a Democrat.

Cornyn’s statement explains his reasoning:

But in the event of a successful inaugural day attack, the official who could become the acting President— perhaps serving for four full years—could very well be a member of the outgoing Administration, a member of the political party that the American people expelled from office in the election.

Cornyn is certainly not among my favorite politicians; nevertheless, his idea seems reasonable.


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Stock Options and Transfer Pricing

Part VII of George Mundstock’s US Taxation of Multinational Enterprise (July 28) suggests that the arm’s length standard for avoiding transfer pricing manipulation does not work. Maybe it’s the very high standards of discourse in his first sixth threads, but I found this argument a bit unconvincing. But I’d like to take this argument “To figure out an arm’s-length price, one needs a comparable transaction between unrelated parties. In every interesting case, there is no useful comparable”, and extend it to one aspect of the Cost Sharing regulations where enforcement has failed in practice.

Imagine that your team of Northern California R&D employees has a hot new MP3 technology that still is in its beta version as I chug beers on Grafton Street in Dublin, Ireland. I call you and offer up a joint venture where I market whatever comes out of this in-process R&D in Europe as you market it in North America. Even though I should pay you the fair market value for the European rights to in-process R&D, many U.S. multinationals grant these rights to their Irish subsidiaries literally for a song.

But let’s focus more on how we pay for the ongoing R&D to bring the technology to market assuming I hire one Irish R&D engineer for total compensation equal to $100,000 per year and you hire nine San Jose R&D engineers for the same total compensation, which consists of $80,000 in salary and $20,000 in employee stock options (ESOs). Assuming I get half of the anticipated benefits but only pay for one-tenth the costs directly, you would think I should pay you $400,000. But many taxpayers have argued that the ESOs are costless. Can someone call the Financial Advisory Standards Board – please?

This issue is being litigated and the latest Court testimony now has it that ESOs provide incentives to attract and retain good employees and for some odd reason cannot be costs. But wait a minute – the Giants attracted Barry Bonds from the Pirates over ten years ago and he still plays in San Francisco. Yes, his salary was an incentive, but it still represents a cost to the owners of the Giants. This taxpayer’s argument reminds me of some of Lawrence Kudlow’s arguments – and you know how I love the National Review.

If this taxpayer’s argument prevails, George may be right that the arm’s length standard fails on practice. But why? Is it that some “experts” are willing to spin for the right fee, while the government is spending too little to make what should be an easy case.

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B and S

Those are the letters Chris Mathews and Pat Buchanan need to understand in order to tell “Osama” from “Obama”; learning those same letters could also help them understand the very things they utter. Here’s Mathews, and no, I’m not making this up:

MATHEWS: [Buchanan], … Would you rather have Obama or Osama as your key symbol of the campaign?

Yes, I’m omitting a bit of context, but the question, like Chris Mathews, is asinine.

Before that, Mathews also said, “What did you make of Osama — not Osama, but what did you make of Barack Obama?” Buchanan then replied with a brief Obama/Osama compare and contrast:

BUCHANAN: Well, look, what—Osama, with due respect, is reality, Chris. Obama last night was pleasant. He’s a very articulate young man. It says something good about America that this young man, African-American, can run for the Senate and maybe win big-time.

Sheesh. Mathews gets paid, well, for this crap.


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The More Things Change …

… The more they stay the same. Since George W. Bush has so much in common with Herbert Hoover, particularly in the areas of jobs and trade, and since I liked Obama’s speech so much, I decided to search for the 1932 Democratic Keynote speech and see if there were any interesting parallels. I couldn’t find it. However, along the way, I did find this quote in an FDR speech:

FDR on Trade (Commonwealth Club Adress, San Francisco, 9/23/1932):

The same man who tells you that he does not want to see the government interfere in business-and he means it, and has plenty of good reasons for saying so-is the first to go to Washington and ask the government for a prohibitory tariff on his product. When things get just bad enough-as they did two years ago-he will go with equal speed to the United States government and ask for a loan; and the Reconstruction Finance Corporation is the outcome of it. Each group has sought protection from the government for its own special interest, without realizing that the function of government must be to favor no small group at the expense of its duty to protect the rights of personal freedom and of private property of all its citizens.

… Our system of constantly rising tariffs has at last reacted against us to the point of closing our Canadian frontier on the north, our European markets on the east, many of our Latin American markets to the south, and a goodly proportion of our Pacific markets on the west, through the retaliatory tariffs of those countries. It has forced many of our great industrial institutions who exported their surplus production to such countries, to establish plants in such countries within the tariff walls. This has resulted in the reduction of the operation of their American plants, and opportunity for employment.


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IRS data: Americans’ incomes fell for two years

NEW YORK (CNN/Money) – Americans’ overall income shrank for two consecutive years after stocks plunged in 2000, the first time that has effectively happened since the current tax system was put in place during World War II, according to a published report Thursday. The New York Times, reporting data from the Internal Revenue Service, said gross income reported to the agency fell 5.1 percent to $6.0 trillion in 2002, the most recent year for which data is available, down from $6.35 trillion in 2000. Because of population growth, average income fell even more, by 5.7 percent, and adjusted for inflation the decline was 9.2 percent.

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And Now, Random Convention Thoughts

  • Al Sharpton: good speech. My favorite line was this:

    You [President Bush on Friday before the Urban League] said the Republican Party was the party of Lincoln and Frederick Douglass. It is true that Mr. Lincoln signed the Emancipation Proclamation, after which there was a commitment to give 40 acres and a mule.

    That’s where the argument, to this day, of reparations starts. We never got the 40 acres. We went all the way to Herbert Hoover, and we never got the 40 acres.

    We didn’t get the mule. So we decided we’d ride this donkey as far as it would take us.

    Also,I hereby revoke the right of any commentator who mentions “Tawana Brawley” [spelling corrected] to tell Democrats to “get over” Florida.

  • Bob Graham, Bill Richardson, Ed Rendell, and Jennifer Granholm: Great content, mixed on delivery. Graham was worst (even his “Osama bin Forgotten” line fell flat), Richardson next worst, Granholm not bad but needs to talk faster, and Rendell did a decent job making energy policy entertaining. Here’s a tip for watching speeches like these, meaning speeches for which the content is more important than the delivery.

    Step 1: Get Tivo.

    Step 2: Record the convention

    Step 3: Bring up subtitles (SAP)

    Step 4: Watch on fast forward.

  • At long last, I know how to pronounce “Shalikashvili” — just like it’s spelled, except that the first two i’s are pronounced like hard e’s. Shalikashvili’s best line was at the start of his speech: “But I do not stand here as a political figure. Rather, I am here as an old soldier and a new Democrat.”
  • The montage of statements from generals and admirals endorsing Kerry should be made into a commercial of some sort.

    Speaking of generals and admirals, surely the DNC can find someone of high rank from the USMC to join the rest? If not, I’ll volunteer my father (Captain, USMC, 6 years, mostly in Vietnam). He’s not particularly fond of Kerry but recently opined, “I’ll tell you one thing, son: George Bush is not fit to lead this country.”

  • Edwards: Good speech, not great. Unlike Joe “Mentum” Lieberman, he’ll debate circles around Cheney. In fact, the prospect of that debate may revive the talk of Cheney leaving the ticket. For health reasons, of course.

    Edwards’ best line: “And we, John and I, we will have one clear unmistakable message for al Qaeda and these terrorists: You cannot run. You cannot hide. We will destroy you.” Best catchphrase: “Hope is on the way.”

  • The convention closed with a live performance by the Black Eyed Peas singing “Let’s Get it Started” [in here]. Given that the actual song is “Let’s Get Retarded”, and “Let’s Get it Started” is the radio version, have the Democrats at long last cast off the political correctness label?


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