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

Live Bloggin’

I’ve never done this, but here goes:

– Whoa! Split screen. I thought the rules forbade that. Bush looks pissed as Kerry says he can do a better job of defending America.

– About sentence three of his first statement before mentioning 9/11. Next question: Bush “doesn’t think that’s gonna happen [another attack if Sen. Kerry is elected]”, but it’s unclear if he means “Sen. Kerry getting elected is not gonna happen” or “another attack is not gonna happen.” Oh wait, he clarified. Sen. Kerry’s election is not gonna happen, says Bush.

– Note to Bush:

vociferously. Making, given to, or marked by noisy and vehement outcry.

– Kerry: generals love me. We let Osama go. “Collosal failure” Great stuff, Sen. Kerry!

– Kerry knows his stuff. And his delivery is strong.

– “Saddam Hussein had no intention of disarming,” Bush just said. Query: disarm what?

– In fairness, Bush’s speaking — in terms of cadence and pronunciation — is pretty good by his standards. Soft bigotry of low expectations, I suppose.

– Kerry: “Iraq was not even close to the center of the war on error before the president invaded…” Nice one. Then move on to failure ot “plan for the peace”.

– Bush: “what message does ‘wrong war at wrong time’ send?” Delivered well, clearly practiced. But Kerry counters. Strong.

– Honey Bear thinks Kerry is doing a great job. I agree.

– Port security, passenger airplane cargo holds’ contents not inspected. “Does that make you feel safer?” Great one.

– Bush just got a litle flustered, said Kerry wouldn’t have the money for his safety proposals because of the “tax gap”. Then he moved on, apparently remembering his role in creating said tax gap.

– “A free Iraq” will apparently cure all the world’s ills.

– Kerry just cited Bush pere’s explanation for why he didn’t go into Iraq: “no exit strategy”

– Bush seems to return to previous points whenever he gets flustered.

– Big moment: Bush just played the $87b card. What will kerry respond?

– Good response, but Kerry didn’t give the simple answer: “You mean the $87b that you threatened to veto, Mr. Bush?”

– On Gen. Shinseki [who said, prewar, we’d need several hundred thousand troops in Iraq]: “Instead of listening to him, they retired him.” Pearl Harbor, Mexico, al Qaeda, Iraq.

– This just in: Look closely at the split screen and you’ll see (at the 32 minute mark, perhaps elsewhere) the screen shows Bush’s podium as noticably higher. 3-5 inches so, perhasps corresponding to the height difference?

– Note to Bush: stop using the “wrong war, wrong time” line; it’s a decent line, but you devalue it via repetition.

– Kerry: “We went in with US, GB, and AU. That is not a ‘grand coalition'”. Bush’s response: “You forgot Poland.”

– Bush: the post-war is such a mess because we won so quickly.

– Yep, the uneven podiums appear in every split-sccreen. In fact, looking again, the top of Bush’s head is even with Kerry’s.

– Is there really no intelligence that the President sees but the Senate Foreign Relations commitee does not?

– Kerry: Saddam was a threat and there was a right and wrong way to deal with it. Bush chose the wrong way. Pretty good line.

– Lehrer: Was the war worth the 1058 lives lost so far? Bush: “every life is precious.” Now, here’s a story about Missy Johnson. Yikes, within the story, “You know it’s hard work, to try to love her [Missy Johnson] as best I can, knowing the decision I made can cause her loved one to be in harm’s way.” Then more talk. Then finally, “But I think it’s worth it.” Because a free Iraq will lead to Christmas every day.

– Kerry just called Bush’s Iraq plan, “four words: ‘More of the same'” Good line. Bush’s grand riposte? Reusing the “Kerry said, ‘wrong war, wrong time'” line. As I said, it was devalued 20 minutes ago. But that doesn’t mean you won’t hear every blathering idiot on TV and in blog repeating it endlessly.

– Kerry’s smiling, what’s coming next? Oops, next question to Bush. Ok, here it is. Saddam didn’t attack us, Osama bin Laden and al Qaeda did. And we “outsourced” fighting him at Tora Bora, and he escaped.

– Nearly out of nowhere, Bush just brought up the International Criminal Court, to denigrate Kerry and the value of cooperating other nations. Lehrer gave Kerry no chance to respond.

– Bush just said “Mooolahs”, pronouncing the word as in “the cow says, ‘mooo'”. He just did it again.

– Now, on N. Korea, Lehrer just asked a follow up question — contra, I believe, the debate rules.

– Factual question for knowledgeable readers: Does N. Korea have plutonium or enriched uranium?

– Kerry: “We’ve got a backdoor draft going on in America today.” JK wants to add 2 divisions to the US Army and double the number of special forces troops. He also said, “We can never allow another Rwanda.”

– Lehrer to Bush: “Are there underlying character issues about Kerry that you believe are serious enough to deny Sen. Kerry the job as commander in chief of the US?” Bush: “Whew, that’s a loaded question.” Then said some good things about Kerry and his daughters. Then said, “you can not lead if you send mixed messages,” and went on to the repeat the need for non-flip-floppery on the part of a president. He was almost gracious, there.

– Kerry responds: he loves the Bush daughters and Laura, and he’s not going to talk character … then “it’s one thing to be certain, but you can be certain and be wrong.” People, please repeat this when you talk about the debate tomorrow. Just this one line. Remember.

– Kerry was very unambigous on his opposition to the creation of new nuclear weapons (e.g., bunker-busting nukes).

– Kerry says Bush has cut nonproliferation funding; Bush says he’s increased it by 35%. Who’s telling the truth?

– Note to Kerry: lay off the “13 years” line.


Well, hell. I really did live blog the rest of the debate, but I think the servers got overloaded and I lost the last part of the post. In any case, I really do think Kerry helped himself a lot tonight. He was well-spoken and very knowledgeable without being pedantic or long-winded; I’d even say he was tough, but likeable. Bush was as usual, which some people seem to like.

As they say at these things, Good night and God Bless!


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Watching the Debate

I’ll be watching the debate when it starts in half an hour, and if I have any thoughts about it I’ll share them with you. Please feel free to do the same, particularly if you’d like to try your hand at some fact-checking along the way.


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Distributed Fact-Checking

You already know that tonight’s debate between Bush and Kerry (9:00-10:30pm EDT) could be important to the outcome of the election. Note that I don’t say “will be important” — I think there’s a reasonable chance that it will just be another forum for the recitation of familiar lines from campaign speeches, having little effect on the race.

Regardless, I think there’s scope for us to take advantage of the fact that one thing that blogs are particularly good at is getting lots of people thinking about a problem from lots of different angles. It’s like distributed computing for policy issues.

Several other blogs (e.g. Atrios, Kos) will be harnessing the power of the blog-reading population to do some “distributed fact-checking” on Bush and Kerry’s statements. Given the rapidly rising prominence of political blogs in the media, I wouldn’t be surprised if much of the formal media will actually rely on blogs (to an extent yet to be determined) to do the fact-checking work for them.

In fact, Dan Froomkin of the Washington Post has explicitly asked blogs to post their best fact-checking finds after the debate. He’ll be checking them and writing about them in tomorrow’s column.

Here at Angry Bear I think we should try to do our part. Naturally, I think we have a comparative advantage in fact-checking statements related to the economy, most of which will be in later debates. (Tonight’s debate is supposed to be all about foreign policy.) Speaking for myself, at least, I know I’m much more likely to catch untrue or misleading statements about the economy than about anything else.

Nevertheless, I’m going to put up a post before the debate to which all Angry Bear readers should feel free to contribute their own fact-checking results. Who knows, maybe they’ll end up talking about international economics a bit… At any rate, late tonight or early Friday morning one of us will put together a post including the highlights of what we’ve collectively found.

Consider this a dry run for the domestic policy debate, where I’m sure that we’ll be able to shed some serious light on the candidates’ statements.


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August Personal Income

The BEA has just released its estimate of personal income in August. The headline figure is that there was a 0.4% increase in personal income during the month, which is roughly in line with economists expectations.

But month-to-month reports like this are notoriously volatile, so I think that year-on-year comparisons are much more informative. The graph below is an update of last month’s graph of personal income and savings, including the new August data.

Income growth has decidedly slowed. And savings are scraping record-bottom levels. Unfortunately, as I’ve said before, that leaves little room for consumption growth any time soon.


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Ahh, The Daily Show.

The show was in rare form tonight, leading off with some razzing of Bill O’Reilly for saying that The Daily Show’s audience is “stoned slackers”, when in fact the Daily Show audience is both more educated and more knowledgeable about current events than the Factor’s audience.

Then a bit of bipartisan ribbing of Bush and Kerry (who’s answer on whether Iraq was a mistake needs to improve dramatically in the next 18 hours).

And then on to this fantastic pre-debate segment between Jon Stewart and political correspondent Ed Helms:

We join the skit midway through. Correspondent Ed Helms has just finished giving an obviously fantastic preview of the upcoming debate (“…the Senator will wear cape and punctuate every sentence with the word ‘biotch’; … [Bush] will more than likely squeeze the juice out of an orange with his bicep.”)

STEWART: …Can we talk a little bit about what’s really going to happen at the debates tomorrow?

HELMS: [Sarcasm] Ookaay. This is the report I’m going to file. [grabs notebook and starts reading, in a quick monotone]. The two candidates exchanged pointed barbs about our Iraq policy and the war on Terror. Senator Kerry made strides towards shedding what some of his analysts call a patrician image…yadda yadda yadda…but the president with his plainspoken words was more effective in communicating his vision by relentless …

STEWART: [interjecting] Ed. Ed, I’m sorry. You’ve written your report as though it’s already happened. This is, is…

HELMS: Yeah, I wrote it yesterday.

STEWART: You write you stories in advance? And then put it in the past tense?

HELMS: Yeah. We all do. All the reporters do that.


HELMS: We write the narratives in advance based on conventional wisdom, and then whatever happens, we make it fit that storyline.


HELMS: We…We’re lazy. Lazy thinkers.

STEWART: But what happens if actual news happens?

HELMS: That’s what bloggers are for.

And, if that weren’t enough, Stewart closed with Sy Hersh, who didn’t mince words (“Oh, Man. If he’s reelected we’re really in trouble.”)

Speaking of Hersh, his Chain of Command : The Road from 9/11 to Abu Ghraib is out now. And speaking of books, Jon Stewart and his writers have a book out now, too: The Daily Show with Jon Stewart Presents America (The Book) : A Citizen’s Guide to Democracy Inaction. I don’t know much about Stewart’s book, but I’m guessing it’s funny. I’m also guessing that Hersh’s book is not.

One last Daily Show item. They’ll be running live post-debate coverage, and it’s a pretty safe bet that it will be better than the cable networks’ coverage, which as we just learned, has already been written.


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Bush supporters will “say anything”

This blog is properly named “sayanything” as evidenced by this claim:

John Kerry and his left-wing surrogates would have us believe that the Bush administration is going to re-instate the draft if re-elected… As part of his 100 day plan to change America, John Kerry will propose a comprehensive service plan that includes requiring mandatory service for high school students and four years of college tuition in exchange for two years of national service. To sum this up for you, Kerry flip-flopped on the issue of compulsory military service and then accused his opponent of holding the same position he himself held before the flip-flop.

You might think they have found Senator Kerry advocating the military draft but one of their readers had this comment:

This national service refers to AMERI-CORPS, not the military. It’s obvious if you go to the archived weblink and link to the originial Kerry document.

Yes, the Bush-Cheney ’04 strategy is to attack John Kerry with outright lies.

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Fact-Checking Bush’s Accusations

Bush has accused Kerry of endangering the economic recovery with his proposal to raise taxes on income over $200,000. Bush’s claim is that this will raise taxes on “the 900,000 small businesses and entrepreneurs who pay at the individual rate and who are creating most of the new jobs in our changing economy.”

Breaking with media tradition in this election, the LA Times actually takes the time to determine whether this claim is true. Unsurprisingly, it is not:

[S]tatistics show that only 1 in 25 small-business owners would be affected by Kerry’s tax increases. Of those who would get hit, half have no employees other than themselves. They include lawyers, accountants, consultants and investors who fall within Bush’s generous definition of small business.

One nice detail in the piece looks at the example of Cheney’s wife:

The available data indicate that roughly half of the people defined by Bush as job creators had no employees. One is Lynne Cheney, wife of the vice president. She listed $44,580 in consulting fees on the Cheneys’ 2003 tax return, qualifying her as a small-business owner under the president’s definition. But the only person on her payroll was herself.

Cheney was unavailable for comment. Her press secretary, Maria Miller, said she had received most of the consulting income as a director of Reader’s Digest, a position she resigned from last October.

“She had no personal employees,” Miller said. “As a board member, she was providing advice and counsel. So it really wouldn’t be a small business.”

“Lynne Cheney exactly fits who the president is talking about,” said George Plesko, a business tax expert at MIT’s Sloan School of Management. “The Cheneys reported more than a million dollars in income. Mrs. Cheney is a consultant, she makes good money doing it, and she benefited disproportionately from the tax bill.

“The president’s saying this person is an entrepreneur. I’ll buy that. But she’s not creating any jobs.”

Some people may have philosophical reasons (or reasons of personal interest) to believe that raising taxes on income over $200,000 is wrong. But then be honest and admit that, rather than making up bogus macroeconomic justifications about how it will hurt the economy in a significant way. Because that is just plain nonsense.


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The KC Fed Disagrees

In contrast to what I suggested yesterday, the head of the Kansas City Fed thinks that current oil prices will have little effect on the US economy. From CNN/Money:

“As long as oil prices do not rise significantly higher, the likely effects of recent increases will be relatively modest on the U.S. economy,” Kansas City Federal Reserve Bank President Thomas Hoenig told a forum of local business leaders Tuesday.

…He said that the country was better protected from an oil shock than in the past and also had the benefit of monetary and fiscal policies that were both aiding growth. Nor were oil prices, once adjusted for inflation, that steep in historical terms.

I disagree with that last statement. Yes, real oil prices were higher in the early 1980s; but is that really the benchmark that you want to use for comparison? I actually think that real oil prices are quite high right now, relative to past periods of healthy economic growth. As I pointed out yesterday, the only period in which they were higher was 1979-85. The chart below illustrates.

One last quibble: how exactly is monetary policy “aiding growth” when the Fed is currently increasing interest rates?


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Sustainability of US External Imbalances

If you want to see a bleakly pessimistic picture painted of the sustainability of the US’s current account deficit, take a look at this paper by Nouriel Roubini and Brad Setser. They argue that, within a very few years, the US’s net international debt will be too large for the deficits to continue, and that the ensuing adjustment will be painful. They estimate that:

  • By 2008, the US’s current account deficit will be more than 7% of GDP (in the absence of major policy changes).
  • The adjustment in the US’s trade deficit required simply to keep the foreign debt/GDP ratio constant is 5% of GDP — i.e. imports will have fall by 1/3 or exports will have to double (or some combination thereof).
  • By 2008, the US’s net foreign debt will total 50% of GDP (up from about 28% today).

These factors will make foreign creditors unwilling to continue loaning the US money at current interest rates, Roubini and Setser argue. They therefore expect a large rise in interest rates along with a large fall in the value of the dollar to happen sometime in the latter part of this decade, at the latest. The picture below shows the US’s foreign assets and liabilities, and illustrates that the current large net foreign debt of about $2.5 trillion is a fairly new phenomenon.

But I disagree slightly with Roubini and Setser’s assessment of why these imbalances will end. As they note, for any other country, the grim statistics on the US’s external debt would raise all sorts of warning flags for investors. But the fundamental difference between the US and any other country is crucial: the US can repay its loans in its own currency, and its own currency will continue (for the forseeable future) to be widely demanded for many types of international transactions, such as the purchase of oil. Even with a massive external debt, I find it impossible to believe that creditors would start to consider default by the US government a real possibility.

So I think that there’s one key to understanding if and when the financial adjustment will occur, and it’s not the debt/GDP ratio: it’s how Asian central banks feel about lending the US money at the rapid pace that we’ve seen over the past year. Every time that the central bank of China or Japan buys dollar-denominated bonds, it necessarily increases its own money supply. Over the past year, for example, China has accumulated an additional $125 bn in foreign reserves, and its (narrow) money supply has risen from $950 bn to $1,100 bn, according to the IMF. As long as China and Japan are content to let their money supply expand at this rate, they will have no reason to stop buying US dollars.

That’s why I think that the endgame for the US current account deficit will have nothing to do with international investors starting to doubt the credit-worthiness of the US, as would happen with any other country in this situation. Rather, it depends completely on what happens in the domestic economies and central bank boardrooms of East Asia.


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