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

Katrina, the Aftermath

Via Steve Benen, an article in the Washington Post:

As the winds and water of Hurricane Katrina were receding, presidential confidante Karen Hughes sent a cable from her State Department office to U.S. ambassadors worldwide.

Titled “Echo-Chamber Message” — a public relations term for talking points designed to be repeated again and again — the Sept. 7, 2005, directive was unmistakable: Assure the scores of countries that had pledged or donated aid at the height of the disaster that their largesse had provided Americans “practical help and moral support” and “highlight the concrete benefits hurricane victims are receiving.”

Many of the U.S. diplomats who received the message, however, were beginning to witness a more embarrassing reality. They knew the U.S. government was turning down many allies’ offers of manpower, supplies and expertise worth untold millions of dollars. Eventually the United States also would fail to collect most of the unprecedented outpouring of international cash assistance for Katrina’s victims.

Allies offered $854 million in cash and in oil that was to be sold for cash. But only $40 million has been used so far for disaster victims or reconstruction, according to U.S. officials and contractors. Most of the aid went uncollected, including $400 million worth of oil. Some offers were withdrawn or redirected to private groups such as the Red Cross. The rest has been delayed by red tape and bureaucratic limits on how it can be spent.

In addition, valuable supplies and services — such as cellphone systems, medicine and cruise ships — were delayed or declined because the government could not handle them. In some cases, supplies were wasted.

three dots

More than 10,000 pages of cables, telegraphs and e-mails from U.S. diplomats around the globe — released piecemeal since last fall under the Freedom of Information Act — provide a fuller account of problems that, at times, mystified generous allies and left U.S. representatives at a loss for an explanation. The documents were obtained by Citizens for Responsibility and Ethics in Washington, a public interest group, which provided them to The Washington Post.

In one exchange, State Department officials anguished over whether to tell Italy that its shipments of medicine, gauze and other medical supplies spoiled in the elements for weeks after Katrina’s landfall on Aug. 29, 2005, and were destroyed. “Tell them we blew it,” one disgusted official wrote. But she hedged: “The flip side is just to dispose of it and not come clean. I could be persuaded.”

In another instance, the Department of Homeland Security accepted an offer from Greece on Sept. 3, 2005, to dispatch two cruise ships that could be used free as hotels or hospitals for displaced residents. The deal was rescinded Sept. 15 after it became clear a ship would not arrive before Oct. 10. The U.S. eventually paid $249 million to use Carnival Cruise Lines vessels.

three dots

Overall, the United States declined 54 of 77 recorded aid offers from three of its staunchest allies: Canada, Britain and Israel, according to a 40-page State Department table of the offers that had been received as of January 2006.

I would add something, but I’m already over my Bush Derangement Syndrome quota for the week.

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On Long War

The Art of War, SunTzu, About 2,500 years ago:

II Waging War:

3. Again, if the campaign is protracted, the resources Of the State will not be equal to the strain.

4. Now, when your weapons are dulled, your ardor damped, Your strength exhausted and your treasure spent, Other chieftains will spring up to take advantage Of your extremity. Then no man, however wise, Will be able to avert the consequences that must ensue.

5. Thus, though we have heard of stupid haste in war, Cleverness has never been seen associated with long delays.

6. There is no instance of a country having benefited from prolonged warfare.

Gathered from writing of about 512 BCE.

The consequence of interminable war, the appeasement of the military industrial complex in Iraq and elsewhere could be the demise of the United States. It may be occurring as we debate.

We bankrupt ourselves in the pursuit of security and the vain notion that we can impose a government to our liking on Iraq and elsewhere.

The 4% of GDP for national security enriches a few while harming many.

Sun Tzu foresaw the military industrial complex.

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Krugman : Disconnected

Krugman doesn’t get; he will never get it. In today’s piece,” Another Disconnect,” Krugman is more disconnected than ever.

“High profits,” he laments, “have not led to high investment.”

Scratching his head, he ponders what is happening. He trots out the usual liberal complaint about business being more interested in profits than in rewarding labor.

Then he offers up some possible answers:

  1. Corporations are more interested in buying back stock than reinvesting.
  2. Corporations might not be investing because of the cloudy U.S. economic outlook

I wonder if Krugman can spell “China?” (Obviously, “developing country” is too long a phrase to spell.)

Where does he think major corporations are making these profits? Who does he think making these goods we buy and then exporting them back to the states? Does he understand that sixty per cent of China’s exports are from foreign companies inside China? Does he realize that U.S. companies are a substantial part of that FDI?

Question: Where are our corporations making the goods they sell to us?

Answer: C-H-I-N-A and other “d-e-v-e-l-o-p-i-n-g” countries.

At some point, Krugman will have to take a long hard look at globalization, at wage arbitrage, at tax arbitrage, and at environmental arbitrage. Meanwhile, he is just another liberal who whines about poor labor but who hasn’t a clue as to why U.S. labor is getting screwed.

It is clear Krugman will never be and never was a businessman. Who can blame corporations for off-shoring? That’s good business. That’s globalization.

Let him write his textbooks and leave the real business to someone else. He is just too disconnected.

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Trade Debate: Dobbs v. Luskin or Dumb & Dumber

Legend for Graph (at AB readers request of this lazy Bear): blue line = total worker compensation relative to national income with red line representing wages and salaries and green line representing fringe benefits.

I’m certainly no Lou Dobbs Democrat so I tend to enjoy it when someone takes down his anti-trade, anti-immigration garbage. But why does it have to be the Stupidest Man Alive taking on some rather obvious myths from Mr. Dobbs? The one part of this stupid debate that struck me was:

The claim about salaries and wages is so deceptive as to very nearly be a lie. Dobbs ignored the fact that for many of the years following 1929, companies paid only salaries and wages, and no fringe benefits such as pensions or health care. In the modern economy, fringe benefits are a significant portion of total compensation. Today, the income share of total worker compensation – wages and salaries plus benefits – is higher than in any year prior to 1967, and lands in about the middle of the narrow range in which it has since fluctuated.

We have graphed total worker compensation relative to national income as well as its components (salaries&wages and fringe benefits). While Luskin is correct that fringe benefits are a larger component of compensation today than they were in 1929 – notice something. The share of worker compensation has declined from 66.2% in 2001 to 64% in 2006. To disguise this fact, he has to reach back 40 years to find a period when the share of worker compensation was lower. Donald Luskin has found a foe that may be even dumber than he is – but his attempt to defend free trade was still really stupid.

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Traffic Jams, Externalities… What’s the Solution

I’m very lucky. I don’t have to drive very much or often. Most of my work is done from home.

But, like anyone else in LA or any other big city for that matter, I sometimes get caught on a traffic jam on the freeway. Sometimes, these traffic jams occur when there isn’t much traffic on the road. In such instances, the jam is usually caused by an accident. Let me rephrase – the jam is caused by rubberneckers. Talk about a massive negative externality. Tens of thousands of hours wasted because a few feel a need to stare. I recall once being behind one guy who got came to a complete halt and poked his head out of the car to stare at an accident that had been cleared hours earlier. It wasn’t important enough to him to pull over to the side of the road, but it was important enough to delay everyone else. I honked the %&*#-head and he turned around and flipped me off and went back to staring.

So… what is the solution to the rubberneck problem?

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The Roots of the Problem in Iraq

Until recently, I did the adjunct Professor thing at a local business school. I had a few students that served in Iraq and Afghanistan. Most of them were officers, and a bit older than the average student.

So here’s a story one of them told me when he got back. It dates back to shortly after the invasion of Iraq and I think illustrates how we got where we are.

Anyway, being senior officer in a given area, this officer found himself having to deal with local Sunni sheikhs in small villages. He wasn’t trained for it, but that’s OK – he’s a very smart guy, and he exudes both capability and humility. In other words, he’s the kind of guy you would trust with your life if you have to. And every one of them told him the same thing. It seems they were terrified someone called Talibani was going to come and kill them and everybody in their village. Needless to say, this was reported up the chain of command, but he had no idea who this Talibani character was. All he could do was tell the local sheikhs was that his men would never allow this Talibani person or anyone else to come out and kill them.

(Now, at this point, most of us have heard of Talibani, as he is now one of the Presidents of Iraq. At the time this story took place, he was leader of the Kurds.)

It turned out that other officers of his rank were having precisely the same issue – local Sunni sheikhs were all scared of Talibani. All these officers were reporting this up the chain of command, but they weren’t receiving any guidance to the contrary. Eventually the obvious conclusion is reached: Talibani was some sort of boogy man, a local version of Keyser Soze if you will. And it never occurred to the folks higher up the food chain to send any guidance down despite repeated questions. After a few months of this, one of the officers found out who Talibani was by checking on the internet.

Now, a lot of the mess in Iraq is caused by massive misunderstandings between US troops and the locals. Those misunderstandings are natural, given the very different cultures involved. But mistakes made early on were huge, and they exacerbated the situation.

(I would contrast my student’s experience with that of my grandfather in WW2. Because he spoke Yiddish, which is similar to German, he was the guy that had to talk to the local mayor or outpost leader or whatever whenever his unit took a town or wanted to arrange a surrender. Most of these people were very unhappy to be talking to a Jew, but given that his Sherman idling in their front yard they got over it. My grandfather was not a negotiator, he was a tank driver. His informal negotiation job was merely to make sure the locals stayed quiet between the time unit raced forward to take the next town and the rear echelon folks showed up to run things. Still, he was given very precise instructions about what to say and what not to say, and how to say it. He was given information about local politics. Clearly, one would think that in 2003 and 2004, the military has a much greater ability to brief a Captain or a Major than it did a tank driver in 1944 and 1945, and yet…)

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Armed Forces Journal, Lt Col Paul Yingling

He said in an article in Armed Forces Journal:

“America’s generals have failed to prepare our armed forces for war and advise civilian authorities on the application of force to achieve the aims of policy. The argument that follows consists of three elements. First, generals have a responsibility to society to provide policymakers with a correct estimate of strategic probabilities. Second, America’s generals in Vietnam and Iraq failed to perform this responsibility. Third, remedying the crisis in American generalship requires the intervention of Congress.”

The first failure: America’s military and its strategy are based on wildly expensive solutions to non threats. The generals have fostered the growth of investment in ill designed technical solutions to any threats with an order of battle like the one that defeated the Axis powers, while this enemy is not an industrialized country.

The generals have allowed our security to be measured in dollars spent. They fail to recognize that money and security are not the same. But the money is good once they retire and get on the boards of directors.

The second failing was not recognizing the fact that the structure the generals built and grew up in was not suited to the challenge. They fought the Vietnamese nationalists as if they were Nazi or Japanese regular formations. They took and gave up ground as if it mattered. They continued to spend our precious resource, our young soldiers in a tactical process with no means to deliver an acceptable outcome. Their failing was staying with the hammer they had when a new tool box was needed.

Their failing was living in the past, building strategy on the wrong enemies and then wishing they would get away with it.

Here is one issue I disagree with Lt Col Yingling:

“Congress must ask for a candid assessment of the money and manpower required over the next generation to prevail in the Long War.”

No general should advocate “long war”. Here is a basic problem with the US in Asian wars. The US military clings to Clauswitz, who advocated land war early industrial age war. Clauswitz is not useful in Asia where war existed before the Industrial Age before even the Roman republic.

Long war is no good. In Asia long is measured in centuries.

This is truth: “America’s generals have been checked by a form of war that they did not prepare for and do not understand.”

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Bradley’s Social Security Proposal – to Reduce What Deficit?

Via Greg Mankiw comes this review of Bill Bradley’s The New American Story:

To get the budget deficit under control, Bradley proposes gradually raising the minimum eligibility age for Social Security until the year 2099, when it would be 70 (he recommends a “narrowly liberalized” disability benefit for people in their late 60s whose jobs cause health problems that won’t permit them to keep working). This is more than justified, he notes correctly, by the rise in average life expectancy (from 61 years to 78) in the seven decades since Social Security was introduced.

It may not be fair to judge Bill Bradley on what Tim Noah writes here. Greg seemed to like the statement, but I find it utterly nonsensical. First of all – WHICH deficit are we referring to? The Social Security system is currently running a surplus. We might need to address shortfalls in the distant future, but the deficit we have now is a large General Fund deficit. Gradual increases in the minimum eligibility age might be necessary for the long-run solvency of the Social Security Trust Fund but to say “to get the budget deficit under control” is the kind of stupid silliness we’d expect from the National Review.

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