What did Rudy actually do on 9/11?

Since I was there at the time, I remember. The answer is: one thing, and one thing only. He was a heckuva good TV talk show host over the period of several days right afterwards.

I don't want to minimize this too much. It actually mattered to a degree. A key virtue is that he was actually calm. With all the grief and shock in the air, he helped New Yorkers to feel better.

But that was it. So far as actual emergency management is concerned, the less said the better. Think of the lost command post that he put on top of the WTC, possibly as a love nest. Or the dead firemen who would have survived if they could have communicated by radio with the police. Or the lack of health precautions for people at the site, who are still getting sick due to his negligence. Or the fact that he spent more hours at Yankee games between 9/11 and the end of that year than at the site (not that he was really needed there).

Good talk show host for a few days. Period. Via a completely different persona than his mad dog spewings on the campaign trail these days. And again, this was genuinely valuable and I still appreciate it. But it is a slim reed for a Presidential campaign.

Invidious comparison

I felt slightly bad about rooting for the higher-budget, bigger-bully Red Sox, an involuntary reflex reflecting all the years of counting on them (faute de mieux) to stop the Yankees. I also wanted the thing to end already, so I wouldn't have to keep on staying up late.

If you think the World Series outcome was inevitable, even after 8 innings of Game 4, think back to game 4 of the 2004 ALCS. It's difficult to draw any distinction between the Yankees' degree of dominance (and seeming inevitability) through that point in 2004, and that for the Red Sox this time around. E.g., the Yankees in 2004 had outscored the Red Sox by 36-19 through the 8th inning of game 4, versus 29-10 for the Sox this time around.

Only, Rivera blew it and Papelbon didn't.

New tax bill introduced by Congressman Rangel

House Ways & Means Chair Rangel has introduced a major tax bill, the "Tax Reduction and Reform Act of 2007." Zero chance of enactment - probably zero chance of passage, but even if passed it would be vetoed by Bush - but it matters for two reasons. First, revenue-raisers in it might be used to pay for extending AMT relief. Second, all of its provisions automatically land on the shelf full of items that might be considered in the future, e.g., in 2009 under a Democratic President. (Which is not to say that Hillary or any of the others would actually take much from this bill - it would simply add to the background list of options.)

Clear discussion of the bill would be helpful but is unlikely to emerge in the political process. I gather no Democrats wanted to co-sponsor. Republicans will presumably yammer centrally furnished talking points about how it's a huge tax increase (a lie - it's a mix of tax increases and cuts), reflecting once again that they behave more like a Bolshevik-style cabal than like the type of political party one really would expect to find in a country with several centuries' worth of democratic traditions. But I am hopeful that thoughtful conservative commentators will take it seriously - there actually are parts of it that they ought to like, although they might quite reasonably dislike it on balance.

Anyway, here is a quick summary of several main features with my thoughts about them.

1) Lower-income tax reductions - The bill would cut taxes for lower-income Americans via about $86 billion (over 10 years) worth of increases to the standard deduction, earned income tax credit, and refundable child credit. This is a straight distribution issue. I'm sympathetic, but readers can evaluate it for themselves (the counter-argument is that it gives infra-marginal rate cuts that need financing via distortionary taxes).

2) AMT shuffle - interesting methodology here to try to pay for AMT repeal. Complete AMT repeal, costing $795B over 10 years, is financed by a "limitation of benefits of individual AMT repeal" provision (raising $831B). This is simply a rate increase of 4% initially, then 4.6%, on groups at income levels with a lot of AMT exposure. Amusing that the top rate gets back to exactly its pre-2001 level of 39.6%. Substantively, the idea is to raise top rates in lieu of having the AMT. Semantically, the idea is to call this a mere limitation of the benefits of AMT repeal. As a political or semantic matter, I don't think it will work. Substantive merits are mixed - getting rid of the AMT may be good but in part this amounts to higher marginal rates instead of indirectly denying state and local tax deductions. Further marginal rate increase here, although as a "bubble rate" not at the very top, from restoring the phaseout of personal exemptions. I would argue that personal exemptions are appropriate at all income levels, so the best rationale for this is an optimal income tax thing about not putting the highest rates at the very top.

3) Business, including international - Top corporate rate is cut from 35% to 30.5%. (Republicans will of course ignore this.) 90% of the revenue loss from this is offset by the revenue gain from (a) repealing the idiotic special lower tax rate for domestic production activities, (b) denying deductions related to foreign source income that is not currently taxable, until such income is actually repatriated & thus becomes taxable here, and (c) barring the use of LIFO accounting for inventories. This is a good package that almost any good-faith independent observer ought to like, with the possible exception of (b). I tend to think (b) probably is good policy - preventing what is effectively better-than-exempt treatment for foreign source income - but I feel a need to hear more about this issue from people who know more about the intimate institutional details.

One interesting effect, if you put it all together, is that marginal tax rates for individuals become much higher than for corporations if all this is enacted - 39.6%, plus more in the personal exemption phase-out range, versus 30.5%. I gather that the 15% dividend rate would be allowed to expire. Never mind, in an era when double taxation of corporate income is ever easier to avoid through sophisticated planning, this seems likely to make the corporate tax a net benefit rather than a net burden. All those economists doing incidence studies of the burden of the corporate tax (a subject I've been studying and writing about for my latest academic project) are going to have to turn around and write new papers about the incidence of the benefit from the corporate tax.

4) Other - about a gazillion one-year extenders. Not the fault of the Rangel bill, but I find it pretty unedifying to have all this stuff on regular extenders needing annual lobbying infusions to get them renewed for another year. This is a case where Congress and the lobbyists may be colluding to screw the lobbyists' clients. But again I don't lay this on Rangel or the bill - the extenders simply bring this preexisting situation to mind.

Among other features, the bill would take on carried interests, put "economic substance" in the Internal Revenue Code (which at least would stop Scalia & Thomas from saying, in any event prospectively, that there is no such doctrine), and address various little planning tricks that the staffers on Capital Hill have evidently learned about.

On the whole, I would definitely take this package over present law. Not going to happen, of course. Even apart from the lack of votes, and the Republican noise machine lying about it, it's inherently pretty hard to enact a break-even package with hundreds of billions of dollars worth of tax cuts and tax increases both, because the losers tend to screech more than the winners. Certainly a good try, in most respects, to throw out the AMT in a fiscally responsible manner and to improve the corporate tax rules through the classic combination of rate cuts and base-broadening.

Interesting National Bureau of Economic Research study of the Iraq "surge"

According to Michael Greenstone of the MIT Economics Department, in his new NBER working paper, "Is the 'Surge' Working? Some New Facts" (NBER Working Paper 13458, 10/07), while various on-the-ground Iraqi indicators are mixed, perhaps the most salient fact is that Iraq's bonds have declined by 40% since the surge started. He concludes:

"This decline signals a 40% increase in the market's expectation that Iraq will default. This finding suggests that, to date, the Surge is failing to pave the way toward a stable Iraq and may in fact be undermining it."

Bond prices reflect, of course, people betting real money for real payoffs down the road, either good or bad. This market, unlike that for Washington punditry, is one in which it actually pays off to be right, rather than wrong.

Current reading

I've just finished Ken Kalfus' A Disorder Peculiar to the Country, a black comedy about a divorce from hell, set in NYC on 9/11 and the ensuing months. For the first two-thirds I liked it, though sometimes I had to make myself pick it up, what with the themes being what they are. Often very dark and painfully funny. But it turned too episodic and scattershot, didn't build quite as I would have expected, and at the end took a sharp turn into a sarcastic historical fantasy ending that is the sort of thing I ought to like, but that I didn't feel built on or went with what had come before. So the potential effect, for me, was lost.

Next, Alexander Waugh's Fathers and Sons.

Just asking

If Bush sought legislation permitting him to throw the entire Democratic Congressional leadership in jail, would they support it? I rather think they would.

Strange alliance

Although obviously I am no fan of the Christian right, I must say I am encouraged by recent talk (to the extent one believes it) that they will take major steps to block Giuliani's candidacy. I don't know anyone in New York who doesn't regard the prospect of his becoming President with a mixture of astonishment and trepidation. This includes people (such as me) who believe he was in many respects a successful mayor.

As a Presidential candidate, Giuliani stands for two things: war and dictatorship. In a mayor, such inclinations don't matter so much. As President, they would go well beyond making him the living embodiment of the Peter Principle. Anyone who can block him, on any grounds, is doing a good thing whether or not for the right reasons.

What's so funny?

If you want your Halloween chills a couple of weeks early, check out the video of Bush smiling and giggling as he raises the idea of World War III with Iran.

If you know you've decided to attack, I suppose it's funny, at least to a certain type of mentality.

There's no magic bullet reason for doing this - a similar rat's nest of reasons, I would think, to those for attacking Iraq. Finding it fun and exciting is certainly one of the reasons.

For another, consider how the media will play it, and how the Democrats will react, if the Iranians take any violent counter-measures, be they in the U.S., in Iraq, or elsewhere. The Administration can only win from ratcheting up the tensions, having "America under attack," etcetera.

War with Iran?

From today's NY Times coverage of Bush's press conference:

“If Iran had a nuclear weapon, it’d be a dangerous threat to world peace,” Mr. Bush said. “So I told people that if you’re interested in avoiding World War III, it seems like you ought to be interested in preventing them from having the knowledge necessary to make a nuclear weapon.”

If I am interpreting this correctly, Bush is suggesting that Iran should be attacked unless there are other means of "preventing them from having the knowledge necessary to make a nuclear weapon.”

This mere "knowledge" standard appears to be much lower than the standard supposedly applied to Iraq, where the Administration claimed that Saddam actually had WMD including an active nuclear program. It does not, for example, appear to require any sort of access to bomb-making materials.

I personally put the odds of an attack at greater than 50 percent. The only arguments I have heard against the likelihood of its happening are that (a) it would be insane, and (b) people (whether the public, the military, or Secretary Gates) wouldn't stand for it. I can't see that (a) matters to this crew, or that the public will stop it, or that the military can stop it given the principle of civilian control plus generals' craven careerism. I fear that means we're down to Secretary Gates.

Presidential line item veto

The Republican Presidential candidates are having a little spat about the line item veto, which Rudy as Mayor successfully sued to have struck down on constitutional separation of powers grounds. Attacked for this at the last debate, he took the extremely bizarre position - for a Republican Presidential candidate - that it actually matters whether something is constitutional or not.

By the way, I read about all this in newspapers and blogs. If there is one rule I live by, it is never to watch either Republican or Democratic Presidential candidate debates. Doctor's advice, or at least it would be if I asked him after properly laying out the facts.

Anyway, today McCain renewed the attack, although I think it started from Romney, saying that no true fiscal conservative could oppose the line item veto. And this is not necessarily a purely hypothetical debate, since conceivably clever structuring could create something rather like the line item veto that would withstand constitutional scrutiny. (Even leaving aside whether the "unitary executive" types on today's Court would vote differently.)

But one small problem here. As I point out in my recent book, Taxes, Spending, and the U.S. Government's March Toward Bankruptcy, it is theoretically ambiguous whether a line item veto will increase or decrease government spending, budget deficits, or the fiscal gap - whichever one chooses as the operative measure. It all depends on how the president uses it.

There are decent political economy arguments for the view that presidents will typically have a lower preference than members of Congress for lots of small handouts to this interest group or that. (Although Bush never minded earmarks or other pork until the first Wednesday of November 2006.) But presidents also tend to like really big-ticket projects - monuments to their "great leadership," perhaps - much more than do the members of Congress. This is pretty much a constant across presidents.

Give a president the line item veto, and while there is reason to think that anyone except for Bush from 2001-2006 will occasionally use it to lop off egregious handouts here and there, there is also reason to think that they will see it as a bargaining chip, the threat of which can help them win extra votes for the really big items they are struggling to press through.

So I think it is plausible that the line item veto would exacerbate rather than ease problems of fiscal discipline.

There may be some empirical evidence from the state level supporting the more conventional view. But there is a big difference between presidents and governors regarding the incentive to swing for the fences with really big "historic" programs.

Extremely lucky travel day

Today I flew roundtrip NYC - Boston to present my new paper on tax and accounting at Boston College Law School, where I saw various old friends in the biz (Diane Ring, Jim Repetti, David Walker, Marjorie Kornhauser). Given the storm sweeping up the East Coast, I was astonishingly lucky in how it played out for me - I could easily have spent hours in the airport but actually saved time due to the travel delays. On a normal travel day I would have returned on the 3:30 shuttle, but because the 2:30 was delayed I managed to board it and leave Boston at 3. Back in NYC the Marine Air Terminal (where the Delta shuttle lands) was an absolute horror show, jammed with people and with one of the longest airport cab lines I've ever seen. But I caught a ride back with a limo driver who had lost his scheduled pick-up due to the wall-to-wall canceled flights from DC and Chicago, and who also proved a wizard at the sort of shortcuts through backed-up traffic that I resent when I am one of the other drivers. Plus I heard his very interesting life story, or at least the dramatic highlights.

Either I'm living right or the gods are making up for the pulled hamstring I suffered while playing tennis last week. Or else perhaps neither. (And do I owe the gods for those gnats in Cleveland game 2?)

One thing I like about my paper, in the course of presenting it, is that the proposal I offer (a 50% adjustment of companies' taxable income towards their financial accounting income, with a few miscellaneous bells and whistles) has some interesting pluses and minuses that - rightly, I think, from an expositional standpoint - I don't fully explore in my paper, as they would make it too long and ponderous. Maybe others will choose to write about the proposal if it gets off the ground sufficiently. I am also increasingly persuaded that it makes basic sense, at least enough to get off the ground as a serious contender even if in the end one might choose not to adopt it. (Although I myself would adopt it.)

How much did I pay for the new Radiohead album?

$ 5 U.S.

UPDATE: Pretty good album, by the way. Would certainly have been worth full price.

Today's Krugman column

He argues today that the Republicans have always been as they are now under Bush. I disagree. His analysis is a bit like saying that someone who has gone stark raving mad with a 105 fever was always just like this because back in the day he had an infected toenail. Yes, Barry Goldwater did some bad things, and the Reagan Administration did Iran-Contra. But they also worked in a bipartisan and responsible way with the Democrats on tax and budget policy in 1982, 1983, 1984, 1985-86, and 1988. They effectively admitted that the "riverboat gamble" had failed within 6 months of trying it. And, despite the Beirut fiasco, which of course is far from the worst blunder our country has ever perpetrated, they certainly did nothing like Iraq, Blackwater, the sinister plans for Iran, etc., etc.

No one is a saint in politics, not the Republicans at any time and certainly not the Democrats at any time. But our institutions can't survive for much longer with the Republicans that we have now, and it's worth remembering that they were never like this, more than just a little bit perhaps, before 1994.

It's only chamber pop, but I like it

The New Pornographers' Challengers, mildly criticized in early reviews for being too sedate, is actually quite enjoyable. It sounds a bit at times like Belle & Sebastian playing early-70s Bowie.

Encouraging news

I just saw a link somewhere to a new NBER study finding that people have U-shaped happiness across their lifetimes, sinking to a low point at age 49 for men and 45 for women before steadily rising again.

I suppose this is good news for me - apparently I have bottomed out and am headed back up again. Separate analysis, perhaps, for my wife ...

The word from Washington

I've just returned from a brief trip to Washington, where I attended a conference on taxes, technology, and privacy, and offered comments on a paper by Kyle Logue and Joel Slemrod on endowment taxation, the use by the tax system of genetic "tags" that correlate with expected income, etc.

While there, I happened to chat with several people who have worked for a long time in different agencies of the executive branch of the government (not just tax-related), and who report on what a historically unprecedented horror it is for career professionals in the government to have to deal with the current Bush Administration (earlier Republican Administrations were generally fine). Essentially, it's like being in the Soviet Union with a party commissar harassing everyone, except that while he can (and does) make your life miserable and prevent all honest governance he at least can't have you arrested.

Once the national nightmare has ended, someone should really go around collecting accounts from people in different departments. While unlikely to be a best-seller, it would be genuinely eye-opening reading with a lot of startling stories about dishonesty and dirty work.

Horrifying collapse of the Mets

By reminding myself of the (to me, hilarious and delightful) 2004 playoff collapse of the Yankees, I can at least avoid paranoid thoughts about the structure of the universe. Then again, who knows what horrors lurk in the 2007 baseball post-season.

If one could take a pill and eliminate one's rooting interest for a given team, I would certainly do so with respect to the Mets. But not mainly because of the horrifying choke they have perpetrated. From the standpoint of the principles that lead me to despise the Yankees, the Mets, not to mention the Red Sox, are merely lesser versions of the same thing. Okay, significantly lesser versions given the Yanks' nearly 2-1 spending advantage over the Mets, even though the Mets are the # 3 spenders in baseball.

No such pill exists, however. (And I would decline on ethical or aesthetic grounds to take the companion pill making me a Yankees fan.) The sad thing for me is that this Met fandom just goes so deep, immune to rational questioning and far beyond any positive rooting interest that I have in any other team in any sport. It all goes back to 1964, when at age 7 I became the only Mets fan on my block (in the Bronx, no less). Apparently, rooting interests that were laid down in sediments that deep simply go far beyond any laid down more recently in their emotional depth and ineradicability.