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

Economists Who Should Know Better

Via the new Bush Blog, Max Sawicky caught a WSJ editorial (editorial here, subscription required) by three very sharp labor economists who should know better. Max gives their argument a quick drubbing and then issues a powerful warning to academic economists:

The greatest threat to academic economists is the chance that they will get an opportunity to publish on the WSJ editorial page. Robert Barro, Larry Lindsey, Kevin Hassett, Greg Mankiw, Glenn Hubbard, and now these three dudes, all very smart guys — they write columns and turn into blithering idiots.

So, the WSJ editorial page transforms economists into blithering idiots, while a stint at AEI makes them into lying frauds. By comparison, writing for the NYT editorial pages is quite benign–it is only alleged to make an economist shrill.


P.S. The basic point of the WSJ editorial is that lowering taxes raises the marginal return to investment in human capital and is therfore necessarily a good thing. Here was my response (written to Max) regarding this argument:

I’d expect more of that trio…Yes we know that cutting taxes raises the marginal return to just about everything. On the other hand, many of the things taxes fund also have high marginal returns. And massive deficits make the future less bright, which also lowers the marginal return to everything.

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The Arnold Effect in Germany

From Reuters today:

The straight-talking Hollywood action star’s election win in California has had an electrifying impact on Germany, leading to calls Friday for top politicians to voice clear ideas in simple language or be swept away at the polls.

“The more confused we are by what they say, the greater our longing for a man or woman with simple words,” wrote Bild newspaper columnist Franz Josef Wagner. “The only problem is that it’s the wrong ones who usually master simple language.”

Schwarzenegger’s victory in the California race for governor has led to editorials calling for German politicians to abandon their barely comprehensible speaking style in favor of “Klartext” (straight talk).

Is this good? Is this creepy? Maybe even downright scary? I honestly can’t quite tell.


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Producer Prices are Still Not Rising

Unfortunately, the US still appears to be flirting with deflation. The BLS released new PPI numbers this morning, showing no increase in prices (excluding food and energy):

The Bureau of Labor Statistics of the U.S. Department of Labor reported today that the seasonally adjusted Producer Price Index for Finished Goods gained 0.3 percent in September. This increase followed a 0.4-percent advance in August and a 0.1-percent rise in July. The index for finished goods other than foods and energy showed no change in September, compared with a 0.1-percent increase in the preceding month.

I’ve put the latest numbers of the Core PPI and CPI rates (i.e. excluding food and energy prices) into a chart, to provide some context.

We’ll get new CPI numbers next Friday… but judging from today’s PPI report, don’t look for much of an increase. Why does this matter? Deflation (which means an inflation rate of roughly zero percent or less), if it happens, would be a serious problem for the US. One problem with it is that it is very hard to get out of. Japan has been trying for the better part of a decade. There are other problems with deflation, too, which I won’t get into right now.

As the weeks go by, Fed Governor Ben Bernanke is looking more and more prescient. In a fairly well-publicized speech in early September he said that he expected productivity growth to remain high, but that this would increase the slack in the economy and thus drive inflation lower and lower – implying that there is some risk of eventual deflation. Let’s hope that prices pick up some time soon – but I wouldn’t hold my breath.


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This Isn’t Your Father’s IMF

Yesterday I came across this tidbit, published yesterday by the IMF. It’s a synopsis of a speech made by Peter Heller, IMF Deputy Director for Fiscal Affairs:

Over the last decade, the IMF has moved forcefully to integrate issues of poverty reduction into the mainstream of its policy objectives in fostering growth and employment creation. This presentation examines the Fund’s perspective on the promotion of poverty reduction and improved distributional outcomes. It examines the relative balance that must be sought as between strictly growth-enhancing policies and those policies that are specifically targeted at poverty reduction and equity. It also explores how issues of social justice and environmental sustainability are taken into account by the Fund in working with its member countries.

Social justice? Environmental sustainability? Boy, the IMF sure has changed since the good old days when it was simply a source of short-term dollar loans for central banks during currency crunches under the Bretton-Woods system. It seems like they’ve really taken some of the criticism they’ve received over the past decade to heart…


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Help President Bush has had some so-so ideas, and some very clever ideas. I like this suggestion that it just sent out to its members yesterday:

President Bush told the press on Tuesday that he doesn’t “have any idea” whether the senior administration officials who blew a CIA operative’s cover will ever be found. But if he just asked his staff to sign a legally binding affidavit confirming that they weren’t involved, and referred anyone who wouldn’t to the FBI, it’s possible he could flush out the perpetrators in a day. To date, the President hasn’t even discussed this matter with his staff.

President Bush can do better than that. He could start by simply asking his staff to sign a legally binding affidavit. Show the President how easy it is. We’ve already done the President’s homework for him by writing the affidavit. Now let’s show him how easy it is for innocent people to legally declare their innocence. You can sign the affidavit and send it to the President in under a minute…

Sure it’s gimmicky, but it also effectively makes an important point. Where is that Plame investigation, anyway?


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Texas Nearly Redistricted

In the end, it took the exterminator-turned-Congressman, Tom DeLay, to iron out the differences among the Texas Republicans over how best to divvy up the spoils of John Whitmire’s cowardice (Whitmire is the Texas Senator who returned to Texas and gave Republicans a quorum):

…House Majority Leader Tom DeLay (R-Tex.) spent three days in Austin this week brokering the final shape of the plan. State GOP leaders credited DeLay with playing a key role in resolving the final issue, an intraparty dispute between Republicans over congressional districts in West Texas.

DeLay’s role in the bruising battle left Democrats embittered. “Like [Republicans] often do, they overreached,” said Rep. Jim Dunnam, chairman of the Texas House Democratic Caucus. “Tom DeLay was here for three days. Obviously, it’s pretty repulsive. This guy was elected to represent us in Washington, and he’s got nothing better to do than come down here and mess up the Texas tradition of bipartisanship.”

While Dunnam may think the Republicans have overreached, don’t look for the win in Texas, or this week’s victory in California, to slow them down much–with a firmer grip on the House, they may just decide to reach farther.


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What a Difference 30 Years Makes

The Washington Post has Nixon Tapes excerpts mentioning current Defense Secretary Don Rumsfeld:

Using the Nixon Tapes — the gift that will forever keep on giving — Mann found Nixon one night fretting about “the Rumsfeld problem.”

…In an April 7, 1971, chat, Nixon, Kissinger and then-Chief of Staff H.R. “Bob” Haldeman talked about the war in Vietnam. “I think Rumsfeld may be not too long for this world,” Nixon said, a few minutes later suggesting, “Let’s dump him.”

This next exchange is oddly reminiscent of what just happened to Rumsfeld on Iraq policy:

“He’s just positioning himself to be close to The Washington Post and the New York Times,” Kissinger said. (This is what the shrinks might call “projection.”)

“Well then, let’s dump him after this” speech to the nation that evening, Nixon said. “Good God, we’re sending him . . . on a two-month holiday to Europe. . . . For what purpose?”

“To get him out of town,” Kissinger said.”


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Clark Update

It’s been a tough week for the Clark campaign, and a lot of the controversy centers over the role that Clark’s grass roots supporters (given that it’s on the internet, perhaps that should be “fiber roots” supporters) will play versus the role that long time DC political strategists like Fabiani and Lehane will play. Right now, it’s advantage: DC strategists.

But the internet supporters are down, but not out, as Tapped’s Garance Franke-Rutte reports in this post (in a much more fair and balanced way than in her previous posts).


P.S. I somewhat disagree with Franke-Rutte’s characterization of Angry Bear as a “Clark-friendly blog”, even though I’m listed as such at This is a Democrat-friendly blog. I also contend that my previous posts were attacks on her selective presentation of facts and quotations, not really attacks on her (“Clark-friendly blogs — like Angry Bear and former Senate staffer Amy Sullivan’s Political Aims — have launched attacks on me for my reporting on the Draft movement”). On the other hand, she may have a point: comparing her to Bill Safire was probably below the belt.

UPDATE: Josh Marshall adds this:

Based on things I hear from various folks who are in the mix, I think that it’s much less clear-cut than this Internet types versus the insiders line we’re hearing.

What surprises me and, to an extent, impresses me is that Clark has managed to do as well as he has, even with this sort of chaotic management at the home office.

…Getting a campaign up to speed in a few weeks is no simple task. If Clark is someone who will make a good president, he’ll get this situation in hand.

…The big picture here is that there’s a vacuum of authority in the campaign operation. Because of that, all the various currents in the Dem party — out-of-power Clinton-Gore types, new-fangled Internet types, etc. — are trying to fill that vacuum. Bottom line: Clark has to assert himself over his campaign back office.

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Iraq and Spain

The US newspapers (e.g. the NYTimes) are reporting that a “Spanish diplomat” was killed today in Iraq by unknown gunmen. Spain has about 1,300 troops supporting the US in Iraq, btw. I gleaned two interesting points from the Spanish newspaper reports of the incident, however. First, according to the Spanish newspaper El Pais, the man killed, José Antonio Bernal Gómez, was an officer in the Spanish Air Force who worked for the Spanish intelligence agency (the Spanish CIA). I’m not sure if “diplomat” is a very good description of his activities.

Also, this incident provides a glimpse into the internal political debate in another country that’s tangled up in Iraq. The spokesman for the center-right government called it a “terrorist attack” that “reaffirms that we must continue working to achieve stability in and the reconstruction of the Iraqi community.” (Translations are my own.) Sounds reasonably similar to what our own government would say.

However, the leader of the center-left opposition group in Spain, Gaspar Llamazares, said that he was upset with the death of the Spaniard, but that he thought that this should serve as a reminder that while the Spanish government maintains its commitment to the “illegal war and occupation in Iraq,” Spaniards will continue to be at risk. Strong stuff.


UPDATE: It looks like the NYTimes has changed their description of the man who was killed. They now report that he was “a Spanish intelligence officer.”

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As Texas Goes…

…So goes the nation if we aren’t careful.

If you read only one CalPundit post, read this one. If you read only one really long post, also make it that one. Either way, read it. Here’s Kevin’s basic point, and it is well-illustrated throughout:

These are not the words of sane people. This is not “reform,” this is not “common sense,” and this is not “restraining government growth.” This is plain and simple madness and the people behind it have real influence.


UPDATE: Link repaired (technical issues forced all of Kevin’s permalinks to change).

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