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

Another Treasury Gaffe

The record of ineptitude by Bush’s Treasury secretaries continues. Yesterday, Snow said that he’d be “frustrated and concerned” if interest rates didn’t rise next year. For a short list of reasons why it’s really, really bad for Treasury secretaries to make statements about future interest rates, visit Brad DeLong’s blog.

So today it was left to people who understand how the financial markets work to clean up the mess that this statement left in the financial markets, as reported by CNN/Money:

Officials at the Treasury Department and the White House quickly moved to clarify Snow’s remarks, saying they weren’t meant to hint at future Fed policy but were just musings on the typical relationship between economic growth and interest rates.

This statement settled things on the financial markets, but some permanent damage has been done.

What really concerns me about this, however, is that these sorts of instances reflect more than just inept media management. They really betray a fundamental lack of understanding of the relationship between economic policy making and the financial markets. So once again, I’m forced to conclude that the Bush White House really doesn’t know what it’s doing when it comes to economics.

Kash

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Gen. Boykin

I came across this article, titled “FIRST-PERSON: Stabbed in the back.” It’s from something called BP News, which appears to be news for Baptists, and it’s a defense of Gen. “My God is bigger than yours, idolator” Boykin. Here’s the thrust:

Gen. MacArthur and Gen. Patton and multiple others called on God, prayed to God, gave God praise and glory for victories and called upon God to defeat their enemies. Not a single one of those military leaders ever was belittled, harassed or chastised for speaking out about their spirituality.

Now, Patton liked coining quotes (e.g., “The object of war is not to die for your country but to make the other bastard die for his”) about as much as Ben Franklin (“They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety”), but I don’t think Patton’s in Boykin’s league when it comes to invoking the wrath of God. Here’s a prayer by Patton, and it’s not even close, rhetorically, to Boykin:

God of our fathers, who by land and sea have ever lead us to victory, please continue your inspiring guidance in this the greatest of all conflicts. Strengthen my soul so that the weakening instinct of self-preservation, which besets all of us in battle, shall not blind me to my duty to my own manhood, to the glory of my calling, and to my responsibility to my fellow soldiers. Grant to our armed forces that disciplined valor and mutual confidence which insures success in war. Let me not mourn for the men who have died fighting, but rather let me be glad that such heroes have lived. If it be my lot to die, let me do so with courage and honor in a manner which will bring the greatest harm to the enemy, and please, oh Lord, protect and guide those I shall leave behind. Give us the victory, Lord.

But this post isn’t about which general is most religious (though Boykin is surely tops the above list), it’s about the empirical validity of this statement by Gen. Boykin about his victory over a Somali Warlord:

I knew my God was bigger than his. I knew that my God was a real God and his was an idol.’

Let’s take a look at Boykin’s track record. Again, this is from the BP News article [emphasis mine]:

An evangelical Christian, Boykin has been in the Army since 1971, serving in such key operations as the 1980 rescue attempt of U.S. hostages in Iran and in 1993 in Somalia.

So, if success and failure indicate the size of one’s god, and given the outcome of Operation Desert One, Gen. Boykin must admit that Ayatollah Khomeini’s god is bigger than Boykin’s? And if so, then it’s only good policy to remove Boykin from the OBL hunt, and from any operations in the Middle East.

AB

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Addendum on the Deficit

As AB mentions below, the final tally of 2003’s budget deficit was $374 billion. Yes, that’s a lot, and yes, it’s a record deficit by far. The next closest deficit in US history was $292 billion, under Bush 41. However, it is lower than the White House’s mid-year estimate of $455 billion, and that’s the emphasis that the Bushies are certainly hoping for in the media.

Why was the deficit smaller than predicted 4 months ago? If you look at the breakdown, it turns out that the biggest single reason is because when they made the mid-year estimate, the White House was expecting spending on Iraq and Afghanistan to be higher than it actually was. Put another way, it looks like the White House was banking on part of their $87 billion request to be approved in 2003. Instead, of course, all of the $87 billion will be spent in 2004. That means that, while the deficit was lower than predicted this year, it will be higher than predicted next year. So don’t get carried away with thoughts of fiscal happiness at the “lower than expected” reports that you’ll read about.

By the way, given that the predicted deficit for next year was $475 billion, it looks pretty safe to guess that 2004’s deficit will pass $500 billion, as White House Budget Director Josh Bolten discreetly mentioned today. And don’t look for it to get a lot better in 2005.

Kash

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Biggest Deficit, Ever

At least, until next year:

WASHINGTON (Reuters) – The U.S. government posted its largest budget gap in history in the just-ended 2003 fiscal year, $374.22 billion in red ink, the Treasury Department said on Monday.

That broke the previous record of more than $290 billion in the 1992 budget year. As a percentage of the economy, the deficit totaled 3.5 percent, the largest since 1993. In its final monthly budget statement for fiscal 2003, the Treasury also said the government posted a $26.38 billion surplus in September.

The deficit number that will be released next October will be over $500 billion.

AB

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Why Is Inflation Falling?

In a pair of previous posts about the CPI and PPI, I pointed out that inflation is still falling in the US, with no sign yet of stabilization. I didn’t really address the reasons why inflation is falling so persistently, however. The most important reason, I think, was given in another data release last week: the Fed’s estimate of Industrial Production and Capacity Utilization. While the headlines generally focus on IP, it’s actually CU that’s more interesting to me. Because our CU is low – very low – and that’s exactly what is pushing the US economy dangerously close to deflation.

Over the weekend, the NYTimes provided a story about this phenomenon with some illustrative anecdotes. But as the old economists’ adage goes, the plural of anecdotes is data, and that’s what can really make a story convincing. So here’s a graph showing CU from 1985 to today:

The pink line, scaled on the right axis, shows the total capacity in the US, and reveals that firms added an astonishing amount of productive capacity during the late 1990s. They’ve continued adding to capacity since then, leaving the US able to produce 50% more than we did just 6 years ago. In other words, the US economy can produce much more stuff than there is demand for.

This is reflected in the blue line, which shows capacity utilization – the percent of the US’s industrial capacity that is working – and is measured along the left axis. The striking thing about it is that it has been unprecedentedly low for the past 2 years – and hasn’t started improving yet. With all of that excess capacity, firms have no choice but to offer sales and otherwise keep their prices low, in order to try to boost their businesses and get a reasonable return out of their existing assets. Based on how high the total capacity index is, it looks like it will take years more of low growth in capacity before the productive overhang disappears.

That’s why my bet is that we will continue to see disinflation for some time to come. Prices won’t start rising until our capacity utilization index starts really increasing. And as far as that goes, the US economy has yet to show the first signs of improvement.

Kash

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Keep Your Eyes Open…

…for some upcoming developments in this story: The independent 9/11 investigative commission, headed by Republican Thomas Kean, is having serious difficulty in getting the documents that it has requested from the Bush administration. Things may be coming to a head this week.

From Newsweek, a couple of weeks ago:

Sept. 24 — A long-running and largely behind-the-scenes struggle by an independent commission to gain access to some of the most sensitive White House documents about the September 11 terror attacks may be heading to a public showdown in the next few weeks, creating potential political problems for the Bush administration.

And from the Washington Post, last week:

Oct. 15 – Yesterday’s hearing [of the bipartisan commission investigating the Sept. 11, 2001, terrorist attacks] — the fourth held publicly since the panel was formed last year — was interrupted by a lengthy emergency meeting that involved a “remarkable development” related to disputes over access to documents between the commission and the Bush administration, according to chairman Thomas H. Kean.

A commission spokesman said the development involved an agency other than the White House, but Kean and other members declined to reveal any other details. Kean said the panel will release more information by today. Several administration officials declined to comment or said they were unaware of the dispute. Kean, a Republican former New Jersey governor, and the commission’s vice chairman, former representative Lee H. Hamilton (D-Ind.), have said that the panel’s work would be harmed if it does not receive access to crucial administration documents immediately. The commission has subpoena power.

This story disappeared in the end of last week, but I wouldn’t be surprised if it resurfaces with some new information this week. It’s just a hunch, but stay tuned…

Kash

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Plame Still On

While the NYT continues to studiously minimize coverage of the Plame outing and investigation, Time Magazine keeps pounding the administration:

Security agencies all over the world are now quietly running Plame’s name through their data banks, immigration records and computer hard drives as the White House leak scandal continues to percolate. Officials with two foreign governments told TIME that their spy catchers are quietly checking on whether Plame had worked on their soil and, if so, what she had done there. Which means if one theme of the Administration leak scandal concerns political vengeance — did the White House reveal Plame’s identity in order to punish Wilson for his public criticism of the case for war with Iraq?–another theme is about damage. What has been lost, and who has been compromised because of the leak of one spy’s name? And who, if anyone, will pay for that disclosure?

and

Some Bush partisans have suggested that the outing of Plame is no big deal, that she was “just an analyst” or maybe, as a G.O.P. Congressman told CNN, “a glorified secretary.” But the facts tell otherwise.

There’s a lot more, do check it out (no subscription required!).

AB

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Whaaaa?

When I first saw this at Blah3, I had to check and make sure it wasn’t a link to a story from the Onion. Then a quick Google search and I found this from the Washington Times (scroll down to “Unlikely recipient”):

Sen. Edward M. Kennedy, Massachusetts Democrat, who recently accused President Bush of perpetrating a fraud on the American people in regard to the prewar threat from Iraq, will receive the 2003 George Bush Award for Excellence in Public Service.

…Former President Bush will present the award, which previously went to former Soviet leader Mikhail Gorbachev and former German Chancellor Helmut Kohl, the Associated Press reports.

Former President Bush has sole discretion on who receives the award, said Penrod Thornton of the George Bush Presidential Library Foundation.

Blah3 has more excerpts from the Boston Globe, excerpts with a lot of speculation that this is tantamount to a public paternal rebuke of Bush II’s foreign policy.

That seems like a stretch, but I’m at a loss for a better interpretation. If Kennedy had simply gone along with the Leave No Child Behind stuff and then kept his mouth shut, that would be one thing. Instead, since that time, he’s been one of the administration’s loudest and most direct critics (which explains the 78% increase in references to “Mary Jo Kopechne” this year).

AB

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State Department Predicted Post-War Trouble

According to today’s NYT:

“The period immediately after regime change might offer these criminals the opportunity to engage in acts of killing, plunder and looting,” the report warned, urging American officials to “organize military patrols by coalition forces in all major cities to prevent lawlessness, especially against vital utilities and key government facilities.”

Unfortunately, post-war planning was apparently mostly in the hands of Don “Were there that many vases?” Rumsfeld. The Times story recounts how State’s expert, Tom Warrick, impressed Army staffers in charge of post-war planning so much that they brought him onto the reconstruction team–until, according to State sources, “top Pentagon officials blocked Mr. Warrick’s appointment, and much of the [post-war planning] project’s work was shelved.”

Stuff like this really puts the Angry in Angry Bear.

AB

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Libertarians for Dean

18 Minute Gap also pointed me to this Reason editorial by Libertarian Julian Sanchez. Julian is starting to realize something:

Perhaps it’s time for libertarians to stop getting starry-eyed over the candidates who write us the prettiest love poems and begin comparing policy outcomes.

And, unlike most dedicated Greens I see, Julian (who is a dedicated Libertarian) seems to be aware of the world-as-it-is:

Because of our first-past-the-post, winner-take-all voting system, the reality is that Ds and Rs are going to be the only live contenders for the foreseeable future. When libertarians as a group defect from the GOP to the Democrats (or vice-versa), our threat power is effectively doubled: each of us counts both as a vote lost to one candidate and a vote gained for the other. In close elections, a willingness to coalition jump may make the libertarian swing vote enough of a prize that candidates become, at the least, afraid of alienating us too severely.

So here’s my offer to Libertarians: you’ve tried the Republicans and that clearly isn’t working out, so give the other side a try (and bring your Libertarian friends with you). Here’s what you’ll get in exchange:

  1. We’ll let you sleep with whoever you want to.
  2. We won’t force you to pray or otherwise interfere with your private religion.
  3. We won’t force you to pay for other people’s religious choices.
  4. We still won’t let you smoke pot on the public square, but Democrats generally support decriminalization. And we’ll do all we can to promote rehabilitation over incarceration. Soft on the drug war remains a damning indictment so there’s not much more we can do. Yet.
  5. We won’t start unilateral wars without evidence of a real threat.
  6. We won’t spend as much of your money, though still more than you would like.
  7. For most Libertarians, those making roughly $100k or less, we’ll tax you either no more, or less than the Republicans will.
  8. We will generally support free trade, or at least do so more often than Republicans.
  9. As you point out, we will–perhaps surprisingly–run a smaller government and regulate business activities less than do Republicans.

I’m probably missing a few more, but this list is a pretty good starting point. Pass it on.

AB

UPDATE: Here are two more from the comments that are important enough to be in the post proper:

10. We won’t interfere with your reproductive rights and choices.

11. Despite what you might think, we really won’t take your guns away (possible exception: if you are a criminal).

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