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

National manufacturing policy


WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH), chairman of the U.S. Senate Banking Subcommittee on Economic Policy, will conduct a hearing tomorrow on how best to establish a national manufacturing policy. Brown is a leading advocate in Congress for a manufacturing policy to strengthen the industry and ensure its future global competitiveness. Brown’s hearing, entitled “The U.S. as Global Competitor”…

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Progress Report on my book

by cactus

Progress Report, and a Plea For Help

Regular readers may recall that together with a co-author, I’ve been writing a book. The topic should be familiar to the coterie of merry madmen/madwoman who lurk at the blog as writers or readers or both: we look at how a large number of variables – everything from abortion rates to economic growth, evolved over the length of each presidential administration beginning with Ike and running through GW.

I thought I’d share a bit of information about the process of getting a book “out there” given that we’ve recently crossed a milestone, namely the receiving and cashing of an advance check. Until this process began, I knew absolutely nothing about the process of writing and publishing a book, so its been very interesting. We (my currently still nameless co-author and I) have been extremely lucky, but I think the path we followed may be somewhat representative of that you might go down should you have the same delusions of literary grandeur that got us started.

So here’s the process, summarized:

1. Have vague but exciting idea for book.
2. Flesh out the idea – in our case, with data as well as some early drafts.
3. Realize that the drafts suck. Rewrite multiple times. I’ve heard it said that “writing is rewriting.” This saying should be amended to “writing is rewriting way more times than you would expect.”
4. Find an agent. This process for us involved writing letters to different agents who represented authors who wrote books that could conceivably be considered in the same space as ours.
5. A good agent – and I believe we were very lucky – has a good idea of what publishers are after and is willing to tell you straight out where your book deviates from that model. Our agent read a few chapters, told us the concept was good but the execution sucked. He made us rewrite the first few chapters multiple tmes. Eventually he was happy, and he told us to rewrite the rest of the book the same way.
6. The agent begins shopping the book around. Interestingly enough, we caught a break here too. The Ex-GF had just reconnected with a former high school classmate on FaceBook who was the editor at a publishing company. They had a book on US presidents in their portfolio, and were looking for another one. Anyway, the Ex-GF and her classmates somehow began discussing the book… which led to files being sent back and forth, and a request that our agent negotate a contract.
7. The contracts generally stipulate some sort of an advance. If you’re famous or have a history with the publishing company, the advance can be huge and I guess requires merely signing on the dotted line. In our case, we got the advance after turning in something that qualified as a rough draft.
8. At this point, we’re waiting for comments back from the editor. Once they come back, we’re going to have a week or two to tighten everything up and the book will be out of our hands to some extent somewhere in August.
9. Meanwhile, we’ve been getting first looks at some of the art work that the illustrator is doing for the book. All of the graphs we made for the book were in Excel, and looked the part. The illustrator is a real artist who works well with data, and he is redoing all the graphs.
10. Meanwhile 2, the sales staff at the publishing house has been prepped. They vetoed the title we had for the book (more on that later). Sometime soon they start talking to bookstores; it seems that many bookstores line up their shelf space to some extent nine months or so in advance.

It should be noted that the process is lengthier than it looks, or at least it was for this book. The first genesis of the book, the first attemnpt to write anything down, came (and I remember this specificially) when Bill Simon was running for governor of CA. That would be 2003. Something Simon said (and sadly I cannot remember what, except that it involved taxes and economic growth and Ronald Reagan) sounded so absolutely implausible to me that I had to check the data. After running down the data and concluding to my satisfaction that Simon was dead wrong, I thought to myself, “someone should write a book.”

Then I thought about making it about Presidents and scrawled out some notes. Those first attempts were as mediocre as it seemed to me Bill Simon would have been as governor, so I put them aside. But I kept pulling them out and again every so often.

Another comment… family and friends are always telling me I don’t toot my own horn enough, so I’ll say this… I’m really proud and pleased with the book. After a zillion re-writes, going back and re-reading pieces of it now, I’m amazed at how much is covered in the book. Not just in terms of topics, but also (when it comes to economic issues) the reasons and the excuses that would otherwise be put forward by those who don’t like the outcomes, and why those excuses don’t fly.

I’ve had friends of mine give random chapters of the book to people who don’t normally read anything that resembles economics or contemporary American politics or anything with numbers in it. (Having third parties who don’t know us at all read a piece is an easy way to get something resembling an unbiased comments, I hope.) The comments that typically came back generally were of this nature: “X wouldn’t buy a book like this if he/she passed it in the bookstore, but he/she read the chapter and said he/she would enjoy reading more of it. Got any more chapters to share?”

I think we managed that without watering it down so it loses its value to folks who do have an economic background. Lord knows, making the book accessible was the single most difficult thing about the whole process.

Here’s the current outline of the book:

Chapter 1. Real GDP per Capita
Introduction to GDP, What the Data Says, Excuses and Explanations

Chapter 2. Fiscal ResponsibilityGovernment Spending, Tax Receipts, The Deficit (or if We’re Lucky, the Surplus!)

Chapter 3. The National Debt and the Real Real GDP per CapitaWhat Real GDP per capita leaves out, The National Debt, Net Real GDP per capita

Chapter 4. Employment Issues
Employment, The Employment to Population Ratio, Real Wages, Employment Related Health Insurance

Chapter 5. Income and Wealth
Real Median Income, Net Real Disposable Income, Real Net Worth, Homeownership, Owner’s Equity

Chapter 6. Traditional Republican IssuesNational Defense, The Size of Government, Taxes, Washington v. the States, The National Endowment for the Arts,

Interlude: What Is the Effect of Taxes On Growth?

Chapter 7. Traditional Democratic Issues
Social Issues, Poverty, Income Inequality, Tax Progressivity, Protecting The Environment
Democratic Issues Conclusion

Chapter 8. HealthcareHealthcare Costs, Infant Mortality, Health Insurance

Chapter 9. Crime
Spending on the Administration of Justice, Murder, An Interlude: Explaining the Murder Rate, Public Corruption

Chapter 10. The Public Mood
Consumer Confidence, Suicide, The Stock Market, The Value of the Dollar

Chapter 11. Family Values
Abortions, Marriages and Divorce, Unwed Mothers

Chapter 12. Investing in the Future
Education, Research and Development, Building Infrastructure, Energy Independence

Conclusion. Ranking the Presidents, and What We Can Learn

Bonus Chapter 1: Is it Congress?
(I really like this one a lot. I think we came up with a very simple and elegant way to look at the question of whether the President is really causing these changes by looking at an alternative, namely that Congress is doing it. Our approach quickly shows that Congress is not generally in the driver’s seat. In so doing, it also provides readers an easy contrast between what is having a minimal effect and what the President is doing.)

Bonus Chapter 2. Explaining Economic Growth
(Megan McArdle is going to be very critical!)

Bonus Chapter 3. The Office of the President

Bonus Chapter 4. Please Try This at Home!!!!

So that’s roughly what it looks like. Now, a few issues. The first is that we haven’t entirely satifactorilly come up with a title. The topic is a hard one on which to pin a name. We’ve got it tentatively down to:

A Statistical Look at How Recent Presidents Really Performed on the Issues that Matter Most


The Best President
A Statistical Look at How Recent Presidents Really Performed on the Issues that Matter Most

Any thoughts on the titles? Any better ideas?

We’ve also got one more issue…. the publisher has put a lot of time and effort and resources into the book, and the next step is to corral some luminaries into reading the manuscript and ideally write up a positive blurb to put on the jacket or someplace. Ideally, one of them could be coerced into writing a forward. While the publisher has some ideas, I was wondering if you have any… not just of the people we should try to hunt down (particularly for the forward), but how to reach them. I’m thinking the ideal folks are prominent economists in the public sphere (e.g., Krugman) or journalists who the public associates with gravitas (e.g., Tom Brokaw). Names like that are probably overly ambitious to unknowns like my co-author and I, but since this whole process has required a degree of chutzpah, plus I’ve been worked into the tooting my own horn frame of mind, so what the heck?

Questions? Comments? Thoughts?
by cactus

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The Critique of the Golgotha Program

Robert Waldmann

on Karl Marx, Arthur Laffer and Simon Peter.

Which one here is not like the others, because he was a lunatic extremist egalitarian not an ambitious sophist ?

Marx famously declared “From each according to his ability, to each according to his needs.” This is quite probably the grossest distortion of a quote by removal of context in human history. The words are (a translation from German) of two prepositional phrases from a sentence from The Critique of the Gotha program (the absence of a verb is a hint that maybe some relevant context may have been removed). The grossest possible distortion based on removal of context is removal of the word “not” and, lo and behold, it appears in the (English translation of the sentence). A more accurate but still partial quotation (of a translation) is

“not … inscribe on our banner “from each according to his ability to each according to his needs”)”. I mean there ought to be an absolute rule that, while many words can be decently elided we can all agree that “not” is not one of them (or to repeat with a minor edit “while many words can be decently elided, we can all agree that not is … one of them).

more antiquarian exegesis and atheist theology after the jump.

The full (translation of) the quote is IIRC “It is not until work ceases to be a burden on life and becomes it’s chief joy and purpose that we can inscribe on our banner “from each according to his ability, to each according to his need.” Which I, quite honestly, interpret as meaning “from each according to his ability, to each according to his needs from the first of never and not before.”

Marx believed that “from each according to his ability, to each according to his needs” to the same extent that he was an anarchist — that he wanted to eliminate the state, that is, rather less than not at all. IIRC Marx wished for the state to seize ownership and control of the means of production, rather a huge expansion of the power of the state than an elimination of same.

To make an analogy, I think that Marx considered it a good proposal to eliminate the state *and* give to each according to his abilities to exactly the same extent that Arthur Laffer aims to increase the amount of money the federal government has to spend. Marx said expand the power of the state and it will disappear, Laffer said cut taxes and revenues will increase. I think Marx was devoted to the reduction of the power of the state to exactly the same extent that Arthur Laffer is devoted to expanding the federal budget.

Over at the first international, Marx had a problem called Bakunin. The guy promised people no capitalists, no private property and no state. Marx claimed that you could get everything Bakunin was promising from Marx, because in the long long long run the state would wither away. So,. sure it looks like communism implies a huge expansion of the power of the state but nope that’s just socialism which will lead to the communist utopia of now bosses neither capitalists nor bureaucrats — just trust me.

Later Marx had this problem that his few German followers (the Eisenachers) decided to join with the Social Democrats who had the inexcusable fault of being led by Ferdinand Lassale not Karl Marx. Hence the Gotha program and its only lasting fruit “The critique of the Gotha program.” The phrase was torn from the context of the proposal that all workers be paid the same equal wage. Marx said that was nonsense. He made an argument which was a bit ahead of his time asking if this mean all workers get the same wage so single workers are rich and large families supporterd by one worker are poor ? Makes no sense (he actually didn’t even mention compensating differentials so he was ahead of his time but behind Smith who was way ahead of his time and, come to think of it, ours). So he was arguing *against* equal wages. He said no way so long as we need wages to convince people to work. Only when (not if — when) people just work out of public spirit and joy in labor can we even think about demanding perfect equality (and then we will have to find someone whose love of labor is extreme insane and humanly impossible enough that he or she will calculate equivalence scales without being paid to do so).

Please please please follow this rule “Do not elide the word ‘not'” that is “Do … elide the word ‘not.'”

I don’t believe Marx’s promises about the withering away of the state and the joy of work (comparing our work efforts one can at least understand how Karl and I have very different views about work). I therefore interpret the Critique of the Gotha Program as implying, in practice,
“from each according to his ability, to each according to his needs, starting on the first of never.”

OK so what about those apostles. Fact is that The Gotha Program is extreme but that Marx is deliberately conflating it with a much much more egalitarian and extreme program as a rhetorical trick (so if he were to complain as I do about the elision of “Not” one might reply that what goes around comes around and chi lo fa l’aspetta). Basically the man was trying to insult the united Social Democrats and Eisenachers by conflating them with a bunch of lunatic extremists — the Christians.

update: Chapter and verse references added plus when looking for chapter and verse for “to each according to his need” I found “from each according to his ability too.”

The phrases which can be translated (from Greek not German) as “from each according to his ability” and “to each according to his need” and fairly quoted without distortion due to removal of context comes neither from “The Critique of the Gotha Program” nor from “The Gotha Program” (as quoted in the critique) but from the Bible and, in particular from “The Acts of the Apostles” which, quite frankly, makes “The Communist Manifesto” look like the McCain platform (with all due respect for McCain, Marx and the Apostles).

The Bible, New King James Version

Acts Chapter 4 Verse 35
“…; and they distributed to each as anyone had need.”

Acts Chapter 11 verse 29
“Then the apostles, each according to his ability, determined to send relief to the brethren dwelling in Judea.”

OK so history is a prankster and karma is a bitch. Driven by envy and ambition, Marx decided to claim that, when it came to wages, Ferdinand Lasale was an impractical impossiblist extremist just like Simon Peter. As a result, many people have decided that Karl Marx was an impractical impossiblist extremist egalitarian just like Simon Peter. This is crazy. Not quite as crazy as the idea that one can be both a Christian and a crusader or both a Christian and a Republican, but crazy.

In closing, I note that I am both an atheist and a reasonable moderate, so I agree with Karl Marx and, like Marx, reject the impractical dreams of St Peter (at least for the foreseeable future).

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Medical Innovation in the USA

Robert Waldmann

Kevin Drum writes

Conor Friedersdorf has three reasons he doesn’t think he’ll be able to support any of the progressive healthcare reforms currently on tap.

Argument #3:

I keep seeing the argument that America is the leading health care innovator, and that if our system looks more like what Europe has, there won’t be anyone left making strides in research and development. I haven’t seen a convincing rebuttal, though there may well be one. Links?

NIH is a 3 letter response to argument number 3. The USA does not just spend huge amounts on health care, it also spends huge amounts on investigator initiated peer reviewed grants.

The budget of the National Institutes of Health is similar to the combined R&D budgets of all pharmaceutical companies in the USA. The US public sector spends huge amounts of money funding medical research.

The NIH budget is just gigantic compared to all other sources of funding for independent scientific research (except maybe the DARPA budget which is spent on top secret research & development so I don’t have much to transmit about its contribution to total research along the internet AKA grandson of ARPAnet). It dwarfs the NSF budget (much of which goes to biology too) and makes researchers around the world drool with envy.

Claiming that US leadership medical innovation proves the superiority of the private sector to the public sector is like claiming that US leadership in flights to the moon shows the superiority of the private sector to the public sector.

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House Tri-Committee Health Care Bill w/CBO Prelim Analysis

by Bruce Webb

House Education and Labor:: America’s Affordable Health Choices Act all links from the Committee web page.


Bill Text (1.7 MB PDF)

CBO-Preliminary Analysis: Tri-Committee Health Care Bill

Compare to the tables scoring the Senate HELP Bill Kennedy-Dodd Bill with CBO Scoring

House Tri-Committee: Ten year addition to budget $1.082 trillion. Total coverage non-elderly: 94%. Coverage for legal non-elderly: 97%
Senate HELP: Ten year addition to deficit: $597 billion. Total coverage non-elderly 88%. Coverage for legal non-elderly 90%.

Over to you.

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CIA, TIA & RBC: Who was watching?

by Bruce Webb

The MSM and the blogosphere alike are ablaze with speculation about exactly what secret program the CIA kept concealed for eight years. Assasination squad targetted at al-Qaeda? Well since we have been firing Hellfire missiles from Predators whenever we suspect the presense of high level al-Qaeda for years now that news would not have shocked anyone, still less people like Peter Hoekstra. Domestic surveillance? Well the Patriot Act already authorized cetain types of secret searches and we have spent the last couple of years debating domestic wiretapping. That would not have shocked Congress on either side of the aisle. No it had to be something pretty shocking, and I am suggesting it may be as easy as transforming the CIA into USA-TIA at the behest of one Richard Bruce Cheney.

The graphic attached to this post drew some ridicule at the time but it really was the official logo of the proposed Information Awareness Office. Its projected task:

The Information Awareness Office (IAO) was established by the Defense Advanced Research Projects Agency (DARPA) in January 2002 to bring together several DARPA projects focused on applying information technology to counter asymmetric threats to national security. The IAO mission was to “imagine, develop, apply, integrate, demonstrate and transition information technologies, components and prototype, closed-loop, information systems that will counter asymmetric threats by achieving total information awareness”.
Following public criticism that the development and deployment of these technologies could potentially lead to a mass surveillance system, the IAO was defunded by Congress in 2003, although several of the projects run under IAO have continued under different funding.

The version of TIA revealed to the public was limited to overseas targets but even so drew much critical attention and attempts by Congress to impose strict limits on it, and ultimately it was largely defunded.

On January 16, 2003, Senator Russ Feingold introduced legislation to suspend the activity of the IAO and the Total Information Awareness program pending a Congressional review of privacy issues involved.[4] A similar measure introduced by Senator Ron Wyden would have prohibited the IAO from operating within the United States unless specifically authorized to do so by Congress, and would have shut the IAO down entirely 60 days after passage unless either the Pentagon prepared a report to Congress assessing the impact of IAO activities on individual privacy and civil liberties or the President certified the program’s research as vital to national security interests. In February 2003, Congress passed legislation suspending activities of the IAO pending a Congressional report of the office’s activities (Consolidated Appropriations Resolution, 2003, No.108–7, Division M, §111(b) [signed Feb. 20, 2003]).

. We KNOW that the Bush/Cheney Administration wanted this capability developed. That was public. We also KNOW that the Bush/Cheney Administration claimed the ability to do warrantless domestic wiretaps. It is not a huge step to add one plus one and speculate that Richard Bruce Cheney wanted to transform a portion of the CIA into a domestic USA-TIA organization that would gather all information on everybody in the country and have it available under the sole control of the one office in government that was neither part of the Executive Branch nor part of Congress and as such categorically exempt from Congressional oversight, i.e. the ‘Fourth Branch’ OVP.

Which is to say the CIA turned into an electronic version of the STASI and reporting only to Cheney and Addington (with legal advice from John Yoo.) Sure it sounds crazy, but it is consistent with every bit of public information we have about the past Administration’s policies and desires.

‘Scientia est potentia’: Knowledge is Power. Why yes it is, and a handy way to deliver an Arbitrary Executive with a Permanent Majority.

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Putting the ‘no’ in innovation?

by cactus

The inimitable TBogg sums up one of the big arguments against having the gubmint involved in healthcare:

Because, when it’s on the governments tab, innovation dries up, which might explain why our military men and women are currently fighting in Iraq and Afghanistan with pointy sticks and small but sharp-edged pebbles.

A few years ago I had a similar post, noting that when push comes to shove, such as when we have to deal with a formidable threat such as Nazi Germany, the Empire of Japan, the USSR, the People’s Republic of China, or even Grenada (for crying out loud), we don’t mess around and stick the gubmint, and in particular, perhaps the most socialist organization in the entire gov’t (the US Military), in charge of the whole shebang. Funny that.

Back to TBogg’s post… One of TBogg’s readers, AirportCat, in comments, adds this quote from a Pew Research piece:

There also is common ground between the public and scientists regarding the pivotal role of government in funding scientific research. Government institutions and agencies are the dominant funders of research, according to scientists: 84% list a government entity as an important source of funding for their specialty, with nearly half specifically citing the National Institutes of Health (49%) or the National Science Foundation (47%). Half of the scientists (50%) cite non-government funding sources as among the most important in their field.

AirportCat goes on:

So all that government-funded medical science will just evaporate if … what? huh?

One more of his readers, jenniebee has this:

As a matter of fact, the only innovations I can think of that the insurance industry has come up with are in creative accounting, PR, & marketing. Gotta give it to them though, that rescission idea? That was pure genius.

by cactus

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Justin Fox’s new book: ‘Myth of the Rational Market’

by Bruce Webb

Over at TPM Justin Fox is launching a discussion of his new book The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street which feeds right into some discussions we have had here at Angry Bear. So I propose to give his set-up here and then suggest people comment in either or both places.

(But) a couple of seeming certainties that emerged from academic economics and finance in the 1960s and 1970s have been showed by experience to be mighty uncertain. One was the contention that financial market prices were in some fundamental sense correct, or at least fluctuated in a reasonably narrow band around their fundamental values. The other–and the two don’t have to be linked, although they often were–was that it was relatively easy to model the movements of markets and manage the risks thereof.

If you believed these two things, then the spectacular growth in power of financial markets (at the expense of government, of corporations, of commercial banks) over the past three or four decades was great news. I’m pretty sure, in fact, that rational-market economic theories fueled this rise–although it’s awfully difficult to sort out cause and effect.

Now that this financialized economy has proved to be extremely fragile, we’re due for an extended period of rethinking–of financial economics, of regulation, of taxes, of how we think about economic growth (clearly, growth fueled purely by rising asset prices isn’t such a great thing). I’m of the opinion that it’s not as simple as, say, putting the regulators back in charge, given that there’s no reason to think financial regulators are more likely to be rational and right than financial markets are. But clearly we can do better. Got any ideas?

(My TPM Cafe comment is reproduced under the fold.)

My take:
Well we might start by recognizing that market participants are intent on maximizing their own interest and where possible will exploit asymmetrical information to achieve that end. Moreover unless restrained they will also exploit power imbalances.

I think we would all be well served by having all economists study the way markets actually operated back in the Gilded Age. What happens to a market when insider trading is not only not illegal but valued as a best business practice? The old adage “What the market will bear” implies a lot more than a simple affair of supply and demand setting price, not when the vendor has the ability to control supply and influence demand.

And then after mastering the methods of Cornelius Vanderbilt they could move on back and study the history of wage setting in industrializing England from 1790 to say 1848. I am currently re-reading E.P. Thompson’s ‘Making of the English Working Class’ and can say that the reality of the wage market in those years bears no resemblance to the sanitized market models found in text books. The notion that some Invisible Hand was busy adjusting compensation to marginal productivity is belied by facts on the ground, wage suppression was a national policy backed as necessary by the use of State force (see Peterloo Massacre).

I firmly believe that much of the problem with the classical liberal economic model is that it was formalized in a time and a place where political democracy based on universal suffrage was not only not the norm but conceived to be a positive danger to society at large. Give all workers and (shudder) women the vote and who knows what might happen. Well now we know, it gave Britain the Labour Party and the U.S. the New Deal and with them reverberations that shook old ideas about how markets should work to the core.

Caplan’s book ‘Myth of the Rational Voter’ whose title I assume is at least an ironic inspiration to that of the book under discussion is I think at root the product of frustration. Don’t the proles understand that everything was better back when the world was run by J.P. Morgan and a handful of associates?

It is no wonder that both the political and economic right look back at the McKinley Era for their ideal. No income tax, no universal suffrage in England, no popular election of Senators in the U.S., no insider trading rules, no restrictions on wage suppression. Now that is freedom!!

Prof. Thoma told me a few years ago that “Economics does not handle equity well”. And after giving that some long thought I figured out why. Because classical economics does not handle popular democracy well. That is for some people in England everything was downhill after the Reform Act of 1832 with ultimate disaster delivered with Representation of the People Act of 1918, while in the U.S. it was the changes introduced with the 16th, 17th and 19th Amendments.

Damn democracy! Always screwing with this nicely designed business plan!

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Second Best Second Stimulus

Robert Waldmann

It sure looks like the US economy would benefit from a second stimulus. However, it also looks clear that congress will not pass an optimal second stimulus. Getting my thoughts on economics and politics from a philosophy major, I note that Matthew Yglesias notes that it would be very hard for congress to say no to a tax cut only second stimulus.

So would a tax cut only second stimulus be better or worse than no second stimulus ?

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