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

More Bad News

Just yesterday, I said that unemployment increases tend to follow slowdowns in the manufacturing sector. Now today, the new unemployment figures are out and they are worse than expected (coming in at 445,000 instead of the anticipated 410,000 new jobless claims). In this case, these numbers are related to past slowness in the manufacturing sector; what yesterday’s news about drops in orders for both durable and non-durable goods means is that there’s likely more bad unemployment news to come.

Both pieces of news combine to make an interest rate cut by the Fed, perhaps even an inter-session cut, much more likely. But I’m not sure that more cuts will do much. Interest rates are already very low by historical standards–business don’t need to invest when they are not using, and do not expect to soon use, current capacity. That leaves the consumer sector, where interest rates primarily affect housing and car purchases. On Monday, General Motors rolled out 0% financing on most models, and Ford also stepped up its incentives. Others are likely to follow. But can this have a big effect? Zero-percent and other very attractive terms have been around for some time now, so these new deals might be expected to keep the industry about where it has been for the last two years, but are unlikely to provide a big lift.

And the same is true for housing: interest rates have been low for so long that the number of households in the market for a new house is unlikely to jump substantially in response to a mortgage rate decrease (the refinance business would benefit, however). Moreover, a Fed rate cut may not even affect mortgage rates, as they are driven in large part by expectations of future inflation. What makes people expect future inflation? Large federal deficits are one important factor.

AB

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If it Sounds to Good to be True

Then it probably is. Kevin Drum (CalPundit) points to a CNN story, Study: Smoking ban cuts heart attacks; Trend shows heart attacks down by half. Here’s the big quote from the story:

Now, about eight months after Dr. Richard Sargent first noticed the trend, both doctors are saying their data shows heart attacks in Helena fell by more than half last summer after voters passed the ban.

Clearly, cutting heart attacks in half would be a tremendous health benefit, both in terms of quality of life, length of life, and health care expenditures. But of course there’s a catch: the authors of the study were also long-time backers of the smoking band in Helena. Kevin points out that the CNN story says that Helena, population 26,000, may be too small a sample from which to draw definitive conclusions. And the CNN story goes on to quote the author of the study as saying “This is a tiny, little community in the middle of nowhere. This study needs to be replicated in New York City.”

Kevin points out that we don’t need to wait:

But why New York? California has had a statewide indoor smoking ban for years, so there ought to be plenty of data available. And since it’s statewide, you don’t have to worry about the possibility that smokers all just “went outside city limits” to light up.

As it turns out, California data are readily available on the web. I thought that if the result were true, economists would have already written papers on the subject and if not then I should probably do so. So I took a quick look and found that there was no noticeable change in California’s rate of heart attacks after the smoking ban started:

Year

Hospital Discharges for
“Heart Failure and Shock”
(DRG 127)

Hospital Discharges for
“Heart Failure and Shock”
(DRG 127),
as a percent of total discharges.

1997

85,819

2.33%

1998

91,008

2.44%

1999

89,144

2.36%

The ban in California took effect on January 1, 1998, so if the results from Montana are credible then there should surely be an effect in California in 1998, but there were actually a bit over 5,000 more hospital admissions for heart attacks in 1998 than 1997. Is some of that population growth? Perhaps, but heart attacks as a percentage of hospital admissions also increased in 1998 (note: a death counts as a “discharge”, so discharges are essentially equivalent to admissions). California heart attacks fell from 1998 to 1999, but not back to their 1997 (pre-ban) levels–measured either in the number of attacks or attacks as a percentage of discharges.

So what could account for the Helena result? It may simply not be true. Alternatively, the ban lasted from June to December, so it may be that heart attacks are historically lower in that period for some reason. To check this, the doctors should compare the June-December heart attack rate in 2002 to the rate for the same period in 2001. Another story: It might be the result of random statistical variation. Or maybe a new Bally’s opened. But, at least in California, there was no pronounced effect on heart attacks following the smoking ban.

On the other hand, if you smoke you should quit anyway.

AB

UPDATE: The Montana story is spreading fast (Google News finds 115 relevant hits). The numbers were actually first released yesterday (Tuesday, 4/1/2003), a somewhat suspicious (or perhaps inauspicious) release date for such “big” news.

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This is Bad Economic News

Factory orders fall 1.5% in February; Manufacturing sector remains sluggish as factories hold out for further developments in Iraq war. Quoting:

Orders for durable goods — items such as cars and appliances meant to last three or more years — fell 1.6 percent, a bigger fall than the previously reported 1.2 percent drop…Orders in almost all major categories of manufactured goods were down. Non-durable orders were also down, falling 1.4 percent, their largest decline since February 2002, the department said.

Unfortunately, unemployment increases tend to follow decreases in any (or in this case, all) of these numbers. With more unemployment and less optimistic expectations as a result of these numbers, it is rational for firms to further scale back their orders, leading to further unemployment and worsened expectations… It’s the type of situation where short-term stimulus (either from fiscal or monetary policy) is usually called for, especially with inflation not an issue. Instead, we have a tax plan that (1) skews the benefits upward, (2) is phased in over time, and (3) is not alleged even by its supporters to be stimulative in the short run (except perhaps insofar as it improves expectations of lifetime income–the permanent income hypothesis).

AB

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More Rumsfeld, Meyers, and “The Plan”

Rumsfeld and Meyers had a press conference today (transcript here).

AB

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In Honor of Mr. Cheney Today

There’s this from the Press Gaggle:

Q. So you think that his [Vice President Cheney] prediction could still pan out that the Iraqis wouldn’t fight?

MR. FLEISCHER: I assure you, the Vice President does not say things lightly. So when the Vice President says something like that, he has good reason to say it and to think it and, therefore, to say it.

25 Mar. 03

AB

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Orcinus found a Great Quote

It’s sufficiently appropriate for the current times that I’ll lift it entirely from Dave:

“The President is merely the most important among a large number of public servants. He should be supported or opposed exactly to the degree which is warranted by his good conduct or bad conduct, his efficiency or inefficiency in rendering loyal, able, and disinterested service to the Nation as a whole. Therefore it is absolutely necessary that there should be full liberty to tell the truth about his acts, and this means that it is exactly necessary to blame him when he does wrong as to praise him when he does right. Any other attitude in an American citizen is both base and servile. To announce that there must be no criticism of the President, or that we are to stand by the President, right or wrong, is not only unpatriotic and servile, but is morally treasonable to the American public. Nothing but the truth should be spoken about him or any one else. But it is even more important to tell the truth, pleasant or unpleasant, about him than about any one else.” [emphasis mine]

Theodore Roosevelt in the Kansas City Star, 149. May 7, 1918.

Yes, this is from Teddy “Speak Softly and Carry a Big Stick” Roosevelt. Based on this, Roosevelt would clearly argue that those who are against people exercising their right to free speech and their right to criticize U.S. policy are “base”, “servile”, “unpatriotic and servile”, and “morally treasonable to the American public”. Using the logic heard often on talk radio and righty blogs, this anti-American behavior gives aid and comfort to the enemy and makes those who practice it objectively pro-Saddam.

AB

And, while we’re mentioning Dave Neiwert, when you have free time and are mentally prepared to be a little bit frightened, make sure to read his excellent 12 part series on “Rush, Newspeak, and Fascism“. If you’re not in a hurry, it will be easier to read when he finishes compiling all the posts into a single pdf.

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Controversy becoming more public

The story of the Military Brass vs. Rumsfeld and the Neocons has been getting a lot of play lately. In Europe, both the very liberal Guardian and the center-right Financial Times had daily stories alleging that the troops and commanders were unhappy over the limited deployment of ground troops. Today’s New York Times has a story that must really make Rove–not to mention Defense Secretary Rumsfeld–unhappy. Here are some quotations:

  • Long-simmering tensions between Defense Secretary Donald H. Rumsfeld and Army commanders have erupted in a series of complaints from officers on the Iraqi battlefield that the Pentagon has not sent enough troops to wage the war as they want to fight it.
  • [there are] questions [from troops in Iraq] that challenge not only the Rumsfeld design for this war but also his broader approach to transforming the military.
  • Even some of Mr. Rumsfeld’s advisers now acknowledge that they misjudged the scope and intensity of resistance from Iraqi paramilitaries in the south, and forced commanders to divert troops already stretched thin to protect supply convoys and root out Hussein loyalists in Basra, Nasiriya and Najaf.
  • General Shinseki, who commanded the NATO peacekeeping force in Bosnia, said several hundred thousand troops could be needed [for the post-war occupation]…”Wildly off the mark,” was how Paul D. Wolfowitz, the deputy defense secretary, dismissed the Army chief’s comments. Mr. Rumsfeld was a bit more circumspect in his criticism, saying that the general had a right to his opinion, but that this one would be proven wrong.
  • General Nash, currently a senior fellow at the Council on Foreign Relations, added, “It is extremely unfortunate that he [Gen. Shinseki] has not had more influence on the war planning and the allocation of forces.”

Of course, Gen. Shinseki is the Army Chief of Staff, and under the Rumsfeld/Wolfowitz model of war, the Army will play a less crucial role. So some of this debate may be traditional turf battles. On this subject, it’s worth noting that Rumsfeld spent 35 years in the Navy (4 years active, 31 reserve). Wolfowitz, though he has extensive experience in defense policy, apparently never served in the armed forces.

AB

UPDATE: This today from Joint Chiefs Chairman Richard Meyers: “It is not helpful to have those kind of comments [comments that “the plan” is a bad one” come out when we’ve got troops in combat, because, first of all, they’re false, they’re absolutely wrong, they bear no resemblance to the truth, and it’s just harmful to our troops that are out there fighting very bravely, very courageously”. Meyers entered the Air Force in 1965. What I still haven’t seen is a senior Army official defending the plan. (Note: I think it’s still too early to state that the plan is good or bad).

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Gary Hart Has a Blog

It looks like Hart is posting on alternate days. Here’s a sample:

I’ve been meeting with students and activists in Durham, Manchester, Hanover, Boston, Amherst, and New Haven and I have been hearing some common themes…Heidi Brooks, a business school student, asked me “how will we know when the war is won?” We’ll know the war is won when we withdraw the last of the American forces from the region.

This link is not an endorsement of Hart (I don’t think he can win, which is perhaps unfortunate since Hart has–or should have–substantial credibility on the subject of anti-terrorism). As far as I can tell, the principle flaw with Hart’s blog is the blogroll, which is at least one link short. It would be nice if more of the field added blogs, assuming they are not vacous and ghost-written statements, press releases disguised as blogs. Just for fun, ponder briefly what blogs by G. W. Bush and John McCain would have looked like in the spring of 2000 (say, during the South Carolina primary); even better, consider Gore and Bush blogs between the 2000 election and the final Supreme Court ruling.
AB

P.S. Taking cheap shots might be viewed by some as somehow giving “aid and comfort” to the enemy so I probably shouldn’t, but I try as I might I can’t stop myself from suggesting www.hungrycaterpillar.blogspot.com [for Bush’s campaign blog].

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Angry Bear Back from Vacation

I guess the headline says it all. Europe was great and the people were friendly to Americans–at least to us. Unfortunately, I didn’t talk much to the locals about war views. I guess I wasn’t real anxious to approach people and say “Hi, I’m American, what do you think about the war?” Here’s one exchange, which occurred in a pool hall in Brussels:

European: You’re American? How do you feel about the war?

AB: We’re against, she (“Honey Bear”?) is entirely, and I am against without UN and NATO being on board. [pause]…I suppose you’re against?

European: Why? Because I’m Muslim?

AB: No, because you’re European.

European: Yes, I’m against.

Then we played snooker. AB won.

More interesting were the conversations with Americans upon my return. Here’s an unfortunately typical exchange:

American: How was your trip?

AB: I had a great time.

American: Good. Were they mean to you because you are an American?

AB: No, they were quite nice, even the French.

American: You spent money in France?

AB: Yes, lots.

American: I hate the French.

AB: Don’t you see the contradiction in supporting a “war for democracy and freedom” while hating countries that are actual democracies when the leaders of those countries follow a course that reflects the will of 80 to 90 percent of their citizens?

American: I hate the French.

AB: Another beer, please.

In any event, I have to catch up on (1) real work, (2) the news, and (3) my favorite bloggers. Normal posting should resume tomorrow.

AB

P.S. In the meantime, there’s this for your consideration: Is this the second dip? Recent economic numbers show contraction has already begun.

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Paris Scenes

We caught the tail end of a protest in the Place de Concorde last night. It ended at 5:00 and we didn’t get there till around 5:30, so the pictures below don’t show the full turnout. The most notable aspect was the lack of any overt anti-Americanism…the signs were all peace oriented as opposed to “bush=hitler” and things along those lines. “No war for oil” was about as extreme as it got. We were speaking English and got no dirty looks or comments, which was a nice surprise. Here’s a few shots from the protest:

1. The crowd:

2. The police:

3. More crowd:

4. A sign left at the plaza (about as anti-American as it got):

AB

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