Pluto

Everyone realizes, of course, that the question of whether Pluto is a "planet" is not a well-defined scientific question, since "planet" is not a well-defined concept in the sense of proton and electron or even species (defined in terms of fertile interbreeding) and star (defined in terms of nuclear fission). It's a term of convenience that we like using to group together the "major" objects circling a star, inherently having fuzzy boundaries.

That being said, I thought Pluto should be excluded from the club, or more precisely that my sense of how the term "planet" is most conveniently used suggests excluding it. In addition to all the differences between it and both the rocky inner planets and the gas giants, the fact that a whole bunch of other objects, not easily distinguished from Pluto, may be out there, suggests to me that we would have too many planets from a convenience standpoint if we didn't give Pluto the old heave-ho. And calling the asteroid Ceres a planet, as the earlier definition would have done, seemed a real violation - again, just of useful and familiar language categories although not of any scientific principle (one can define "planet" however one likes).

But I see a serious flaw in the latest approach taken by the scientific panel, even though I agreed with the result. The problem was how they did it, which brings to mind a judge getting the "right" result in a case of first impression by creating new law that is bound to function poorly in future cases. They emphasized the idea of "dominance," meaning that the would-be planet must be much bigger than anything in its neighborhood.

The problem is that local dominance really doesn't capture what makes us think of some objects as planets. If the Moon were bigger, would we think the Earth wasn't a planet? If Jupiter were a double planet, would we want to boot it from the club? For that matter, does Charon's size have anything to do with the reasons for thinking that maybe we don't want to call Pluto a planet?

If some inexorable law of solar system formation dictated that anything we really wanted to call a planet would fortuitously have the characteristic of local dominance, the spurious use of this special factor to get the "right" result would be harmless error (resorting to legal jargon once again). But I see no reason to think this must be so, even if it generally tends to be. True, in our solar system the inner 8 planets are locally dominant. The Earth is by far the closest to being an outlier (and of course wouldn't be classified as locally dominant if we made the definition more demanding), and this is thought to reflect an extraordinary event - collision with a Mars-sized planetoid in the early years of our solar system. But again this bit of history only goes to show that strange things can and will happen across a range of solar systems (which we are getting ever better at detecting in outer space).

Use of the local dominance factor may have anomalous results as we learn more about the outer reaches of our solar system. E.g., suppose there are 20 locally dominant iceballs out there with eccentric orbits, barely Pluto's size, and one more that's 50 times the size of Earth, less eccentric in its orbit, and closer in, only it's a double planet. Would it be the only non-planet of the bunch? Plus, with all the other solar systems we may detect, the definition is unlikely to consistently give us what we "want."

Given the term "planet's" peculiar linguistic usage and status, it's probably a mistake for scientists to try to come up with a tight definition, even though this ordinarily is the way they do business. They've designed a rule (as in "the speed limit is 55 mph") when what they need is a standard ("unreasonably fast under the circumstances").

More on the Murphy decision

A few more comments on Judge Ginsburg's shoddy, reckless, and foolish opinion:

1) The whole tone is one of absurdly showy "I'm a great judge!!" He's preening before an imaginary audience.

2) He assumes without argument that the enactors of the 16th Amendment intended their current understanding of the term "incomes" to be constitutionally binding, as opposed to anticipating that experience could rightly bring refinements in the understanding.

3) Amazing disregard of policy and common sense. By policy here, I don't mean tax policy. I mean sound judicial policy in deciding where to intervene, based on what courts are and are not good at doing. Ginsburg apparently thinks that this type of reasoning has no place in constitutional (or one presumes statutory) interpretation, even in the face of ambiguity.

The silly path he takes here, of using antiquated accounting concepts to say that return of "capital," compensation for purely psychic injury, etc. cannot be taxed is one that the courts tried right after the Sixteenth Amendment was passed. Within a few decades, they gave up, because they realized they could not do it well. The sorts of line-drawing judgments that it requires call for a legislatve response. So the courts got out of the business of fine-tuning the boundaries of what cash inflows are and aren't taxable.

In other words, it was sound judicial policy to leave this sort of thing to Congress, or else it was bound to become a complete mess. Are judges supposed to ignore this? Must we assume that the enactors wanted all future courts to ignore it?

Policymaking by judges can get a bad name because it can mean "my preferences regarding controversial political issues." But to jump from that to saying that judges cannot make reasonable judgments about where they can and can't do a good job, given their institutional characteristics, is something else entirely.

4) Ginsburg has one policy-minded hobby horse in the opinion. He abhors the idea that, under the Sixteenth Amendment, Congress can define income however it damn pleases. But again, if common sense were permitted under his theory of judging (if his biases can even be dignified with such a term), he would recognize that this (simply including gross and net receipts of cash) is not the place where policing by the courts is needed to make sure that our government remains one of limited and enumerated powers.

5) Can the rules taxing imputed interest on original issue discount bonds constitutionally be sustained under Ginsburg's view? I doubt the folks in 1918 anticipated that either. What's more, if I arrange a pure arbitrage where I deduct cash interest that is offset by imputed interest accruals, is it unconstitutional to deny the deductions? (After all, while we're at it, why not sweep away as well the idea that deductions are merely a matter of legislative grace. An income concept requires them.)

6) Ginsburg draws a constitutional wall around the issue of whether damages are paid for pain & suffering, etc. or for lost wages. In practice, these are extremely interchangeable categories in terms of actual settlements or jury awards? Constitutionally irrelevant as well?

7) Quick question for any reader who has the time to look into this: has Ginsburg been involved in any of the D.C. Circuit's opinions regarding Bush's claims of essentially dictatorial and unlimited war powers? If he has supported Bush's claims, he is flat-out guilty of hypocrisy in the first degree. No one (John Yoo notwithstanding) could seriously maintain that Bush's interpretation of his war powers follows from original intent. Rather, the claim would have to be that the powers have to evolve to meet today's needs, etc. - a theory of constitutional interpretation that cannot be squared with Ginsburg's opinion here.

That's what I'm talkin' about

Another bit of tax news I noted while on vacation is that the IRS, as reported by David Cay Johnston in the NY Times, is using private collectors to get unpaid tax revenues, even though this costs more than 20 cents on the dollar, in lieu of the 3 cents per dollar that it would cost to hire more revenue agents to do the collecting. Plus, from a social standpoint, it's probably best NOT to make the tax collectors' incentive too strong by letting them, as private parties, keep a part of the take. As Paul Krugman pointed out, this is why we have moved beyond tax farming.

My wife saw to the heart of it, however. I told her about the Johnston story and she replied (kidding, of course): "Yes, but if we hired more revenue agents, the government would be bigger."

That (meaning that type of thinking) is exactly what my forthcoming book is about, I told her.

Back from vacation

Now that I am back, I will shortly be addressing the decision in Murphy v. U.S. which has tax folk all excited. Here Judge Douglas Ginsburg of the D.C. Circuit wrote an opinion holding that the IRS cannot constitutionally treat cash damages for injury as "income." Two quick thoughts, admittedly before reading it, are: (a) I am inclined to wonder if the good Judge has graduated from marijuana, his vice in the good old days, to crack cocaine; and (b) under the radical right judges we have these days, all kinds of doctrine that has been good since the 1930s is up for grabs. In income tax law, this definitely includes the Gregory and Knetsch cases, establishing the business purpose & economic substance doctrines that keep IRS revenue collections above a flat zero.

Fun for the likes of me, I suppose. to have more things to write & rail about.

Daniel Henninger, meet Adolf Hitler (but I think you've already met)

Point in common, among others, is the Big Lie technique.

Henninger, WSJ columnist, has an op-ed today entitled "Democrats Knifed Lieberman on Eve of Airliner Plot."

"That was unfortunate timing this week for the Lamont Democrats ... [blah blah blah] ... Yes, we know, they support the war on terror but are merely against George Bush's war in Iraq. How does that work?"

Then more nonsense in the same vein.

Henninger must realize that the U.S. intelligence establishment sees no positive contribution of the war in Iraq to fighting terrorism - indeed, the contribution is massively negative. But this is less important than dishonestly stoking fear in the desperate effort to avoid the reckoning this November.

One amusing aspect of the recent debate has been the back and forth about whether the Democrats are discredited peaceniks as in the Vietnam era.

Hello? Does anyone really think we should have stayed in Vietnam past 1975?

UPDATE: The "unfortunate timing" was absolutely no coincidence. I had immediately thought of this possibility - deliberate timing to make the Democrats look bad right after the primary - but dismissed it, given that the Brits were involved, even though the plot had apparently been under surveillance for more than a year.

But now we learn the following from NBC News:

"A senior British official knowledgeable about the case said British police were planning to continue to run surveillance for at least another week to try to obtain more evidence, while American officials pressured them to arrest the suspects sooner. The official spoke on condition of anonymity due to the sensitivity of the case.

"In contrast to previous reports, the official suggested an attack was not imminent, saying the suspects had not yet purchased any airline tickets. In fact, some did not even have passports."

Why bother with an extra week of surveillance that might yield valuable added information when there's an opportunity to embarrass the Democrats, and sleazy hacks like Daniel Henninger are waiting to pounce?

Max Sawicky is wrong

At this point, I frankly have more respect for the centipede I crushed on the staircase at my kids' behest just a few minutes ago than I have for Joe Lieberman. The centipede, while unwelcome in our home and almost indecently multi-legged, at least was not sleazily exploiting terror problems, which Bush has made worse, as evidence that anti-Bush sentiment is treason. (Indeed, I don't recall the centipede's mentioning Bush at all, although then again I didn't give it much time.) But still, let's give Joe one iota of credit for something from a few years ago.

In 2003, Lieberman introduced S. 1915, the Honest Government Accounting Act, attempting to create budget rules, based on the log-term fiscal gap, that were designed to push the U.S. government back towards solvency. The legislation was far from perfect - and characteristically, was tilted towards the Republicans (institutionally and their policy preferences) in a couple of telling ways - but still I'd call it one of the more responsible and far-sighted legislative efforts of recent years.

Today Max Sawicky takes a shot at this legislation, calling it bad economic policy that will stay even if Joe goes.

Alas, I think it will go away and stay away, whereas Joe shows signs of sticking like a Greenwich deer tick.

With all due respect, which I do have for Max Sawicky, he is wrong, as in w-r-o-n-g. He thinks we shouldn't do long-term fiscal projections. I hope he doesn't live his life that way (e.g., is he planning to retire some day? Or send still-young kids to college?). Of course the future is uncertain, but that's another way of saying it's risky, and to the risk-averse this makes the future problems bigger, not smaller, than if their scope were certain.

Herewith Max:

"The saving grace of this novel regime of fiscal policy is that you can eliminate a $72 trillion 'present value' liability with a law mandating the dedication of all future revenues from the colonization of Jupiter. If fact, in the expectation that such a colonization will bring in even more revenues, one could offset this extra dough with new spending, right now. Honestly."

Exactly right, and rightly so, if in fact future revenues from the colonization of Jupiter have an expected present value of $72 trillion. I think it's fair to say they are more like zero, and I propose to count them today at exactly that value.

If Max's point is that politically influenced estimators will do bogus things when they look long-term, I would respond: OK, let's have good estimates instead, by independent people, and if he thinks short term estimates are better he must have been delighted with the recent Republican gimmick of using tax cuts to pay for tax cuts (i.e., conversion of traditional IRAs into Roth IRAs, raising money short-term but losing billions over time), which was based on the short time horizon that he prefers.

Max also complains that long-term accounting is "fuel for bad, radical reforms in Social Security and Medicare that would take effect well before the Jupiter bonanza." Again wrong. Take Bush's Social Security "plan" of 2005. Long-term accounting showed that it did nothing to reduce the fiscal gap. Or take Bush's prescription drug benefit. Long-term accounting showed that it cost an estimated $18 trillion, not the phony-baloney 10-year estimate that was held down through deferred implementation. And as for the Medicare/healthcare crisis, closing one's eyes is not going to make it go away. Better gradual smaller cuts than deferred but ultimately bigger cuts.

You have to separate out the analytics from the politics a little more crisply than Max seems inclined to.

Sorry for the peevish tone, Max. I'm really angry at other people (Senator Joe for one), not you. But I really don't see why thoughtful and responsible people on the left can't accept the value of rational long-term budget planning. I thought it was the Bushes and Liebermans of the world who reject rationality when they don't like the answers it gives them.

Quote of the day

This comes from Richard Haass, who is president of the Council of Foreign Relations, was the Middle East advisor to the National Security Council under the first President Bush, and served under Colin Powell in the State Department in the current Bush's first term. It's in response to the current Bush's optimism that the horrors in Lebanon present a wonderful opportunity to create a new and better Middle East:

"An opportunity? Lord, spare me. I don't laugh a lot. That's the funniest thing I've heard in a long time. If this is an opportunity, what's Iraq? A once-in-a-lifetime chance?"

A canticle for Lieberman

Here's hoping that the man's political career ends next Tuesday, third-party line notwithstanding. Thanks, for once, to the New York Times for its excellent editorial explaining why he must go. And if David Brooks is stupid enough actually to believe, as he wrote, that challenging Lieberman in the primary constitutes an "inquisition," then I truly pity him.

One thing I've always been curious about: did Lieberman actually want the Gore-Lieberman ticket to lose the 2000 Presidential election, or did it merely seem that way?

So much for the Laffer Curve

Herewith Jason Furman, courtesy of the U.S. Treasury Department.

I suppose they'll have to fire the real economists there and find people who are willing to make false estimates.

Just as clarification, the Laffer Curve is an economically valid idea. Only, for taxing labor income (the main component of the income tax), rates might have to go up to 80 or 90 percent before it would start to apply. So it's not exactly relevant with regard to the Bush tax cuts. (For capital gains, by contrast, the Laffer Curve may kick in at 30 to 40 percent, although it's hard to disentangle temporary from permanent effects.)

My article "Permanent Income and the Annual Income Tax"

Another article draft of mine is now available on-line, here.

The abstract goes something like this:

Under a prominent and influential economic model known as the permanent income hypothesis, people's decisions depend on their expected lifetime income, not their current income. If completely true, this hypothesis would have radical implications for tax, transfer, and entitlements policy. For example, unless modified by other information, it would suggest replacing the income tax with a consumption tax, establishing lifetime income averaging, viewing Social Security as irrelevant other than as a system for transferring lifetime resources between individuals, and dramatically changing welfare law to base aid purely on people's lifetime income, as distinct from their current circumstances. However, incomplete markets and departures from rational behavior, by shortening people s planning horizons, weaken some of permanent income's implications and refute others.

Eric Solomon update

Thanks to the efforts of Ellen Aprill and Paul Caron, among others, a law profs' petition in favor of Eric Solomon's confirmation is rapidly gaining signatures. There will also be a petition from former Treasury officials and Congressional staffers, along with that from tax lawyers at the New York State Bar Association.

Deciding not to enforce the estate tax

A recent New York Times article noted that the Bush Administration has decided to gut estate tax enforcement by having the IRS fire 45% of its estate tax lawyers. The article quotes estate tax lawyer Sharyn Phillips to the effect that the cuts are a “back-door way for the Bush administration to achieve what it cannot get from Congress, which is repeal of the estate tax.”

Pretty unusual stuff, not to enforce a set of laws on the books that raise so much money relative to the IRS staff involved. And, of course, no surprise if estate tax lawyers don't like it, as it moves in the direction of an open invitation not to file estate tax returns even when legally due.

My first thought on reading the news was: Why doesn't Bush just invoke his war power claims to nullify the estate tax? After all, how can he fight terrorism if the U.S. economy is being hurt as much by the tax as he claims?

Indeed, since Grover Norquist, speaking on NPR in 2003, compared the estate tax to the Holocaust, why not have Bush simply proclaim that it IS terrorism?

Endangered nomination

The post of Assistant Secretary of the Treasury for Tax Policy has been vacant for a very long time, and finally the Bush Administration has nominated someone: Eric Solomon, who has been a high-ranking Treasury tax official since the Clinton Administration. I lauded this nomination in an earlier post. Solomon is nonpartisan and, more importantly, one of the really good people in government (a dying breed in these highly political days).

Senator Baucus, the top Democrat on the Senate Finance Committee, has announced that he intends to block the nomination until the Bush Administration develops a plan to narrow the $290 billion tax gap (i.e., the estimate of annual taxes that are legally due but not paid). Baucus defends this on the ground that the issue is important, although he agrees that Solomon is "a good public servant and certainly a tax expert."

This strikes me as a really bad idea on Baucus's part, notwithstanding that it would be nice to lower the tax gap. (By the way, while some of the barriers to doing so are political - politicians don't want to turn loose the IRS on voters and campaign contributors - this may to some extent be a bipartisan problem although the Republicans surely do much more to fan anti-tax sentiment.)

The Treasury has been falling apart before our eyes as good public servants leave because they realize they are not being allowed to do tax policy - their motivation for accepting salaries that are below what they could get in the public sector. The Assistant Secretary for Tax Policy can do a lot of good, and Solomon in particular surely would, even though the Treasury has lost so much of its influence. Moreover, Solomon really deserves to be confirmed. Making life hard (or harder) for good public servants is not really what we need these days. (By the way, he is an acquaintance whom I have met a few times and had minor dealings with professionally, but not someone I know well enough to count as a friend. There is no unstated agenda here.)

I gather that a group of New York tax lawyers are circulating a petition in support of Solomon's nomination and urging that Baucus retract his opposition. If law professors or other academics get into the act, I would certainly sign. Eric Solomon should be confirmed as promptly and painlessly as possible.

Bush's next veto?

The New York Times has just posted an article entitled "Scientists Plan to Rebuild Neanderthal Genome."

I especially liked the last paragraph:

"If the Neanderthal genome were fully recovered, it might in principle be possible to bring the species back from extinction by inserting the Neanderthal genome into a human egg and having volunteers bear Neanderthal infants. There would, however, be great technical and ethical barriers to any such venture."

Drunk again?

Bush behaved so boorishly and outlandishly at the G-8, even by his standards, that one has to wonder.

Fun movie

Saw an enjoyable documentary last night, "Wordplay," about the sub-culture of crossword puzzle fanatics and their annual tournament. Celebs who participated (in the documentary, not the tournament) included Bill Clinton, Jon Stewart, Mike Mussina, and the Indigo Girls.

Seeing Clinton these days always reminds me of his successor. When he does the NY Times crossword puzzle in pen, the punch lines almost write themselves. For Bush, the Highlights word find? Probably too challenging.

My article "Welfare, Cash Grants, and Marginal Rates"

Not sure if I've posted some other link for this in the past, but this is a forthcoming article of mine, the abstract for which is as follows:

"Marginal rates are frequently analyzed based solely on taxes, without regard to benefit phase-outs that have exactly the same incentive and distributional effects as increasing positive taxes. This myopia reflects the notion, rooted in our current fiscal language, that “taxes” and “spending” are fundamentally different. In fact, however, the difference is purely one of labeling.

"Among the ill consequences of this confusion between substance and labels is the political unfeasibility of demogrant or negative income tax proposals. These proposals often are criticized for seemingly providing universal and unconditional cash grants. In fact, however, cash grants can be just as conditional or selective as benefits that are labeled as “welfare.” Clearer thinking about these matters would expand the realm of politically feasible policy choices, and make excessively high marginal tax rates on people who are escaping poverty easier to avoid."

In work this summer I've finished drafts of papers entitled "Permanent Income and the Annual Income Tax" and "Why Worldwide Welfare as a Normative Standard in U.S. Tax Policy?" To be posted in due course.

My forthcoming Cambridge U. Press book, "Taxes, Spending, and the U.S. Government's March Toward Bankruptcy," appears to be slotted now for the beginning of 2007.

Ron Suskind's "The One Percent Doctrine"

I just finished reading the new Suskind book about the "war on terror." Reported mainly as an anti-Bush screed becomes some of the facts reported in it are embarrassing (to say the least) to our own Dear Leader, it is in fact very balanced in tone. Obviously George Tenet gets favorable treatment, reflecting his cooperation with the author. But in some ways it actually treats Bush and Cheney far more favorably than people like me, who have completely given up on attributing any good faith whatsover to these individuals, would expect from a fairminded account. It portrays them as actually caring a lot about preventing attacks on U.S. soil and as attempting rationally, by their lights, even if misguidedly, to deal with the threat. Bush does, to be sure, turn out to be a thoroughly unpleasant bully who reads less words per day than the average third-grader, and who thinks his time is best spent focusing obsessively on operational details of particular anti-terrorist operations, which he inadvertently prevents the operators from doing properly. And his response to being warned in person about 9/11, in advance, was to say "Okay, you've covered your ass," and go back to his fishing. But still, when one's expectations are low enough it's not hard for these boys to come off better than one expected.

The best insight I got from the book concerns exactly how Cheney and Bush got it wrong. First an application, then the bigger picture. They insisted on torturing the high-value targets (or those Bush had falsely claimed in public were high-value) because they badly wanted results fast. But the CIA tried to tell them that torture doesn't work as well in getting information as building a relationship with the prisoner (good cop/bad cop style) and using it to coax info out of him. This was rejected, in part because even when successful it doesn't work especially fast. But they got so little out of the torture that it seems clear they made the wrong choice, even leaving aside all moral and reputational aspects.

The bigger point concerns Cheney's doctrine, giving the book its title and offering an organizing theme to explain all the insane things they have done, that if there is a 1 % threat of our being attacked we must treat it as an utter certainty. Hence, action is all and analysis worth next to nothing.

There are many reasons why this approach is mistaken, and the book shows this quite well. But let's start by giving Cheney his due. If one is risk-neutral, a 1% chance of 1 million casualties should be treated the same as a 100% chance of 10,000 casualties (i.e., more than 3 times the direct loss of life on 9/11). So yes, low-probability risks of something really bad happening must be taken seriously.

But Cheney's analysis is totally static. In his view, the 1% risk is completely exogenous. It's just there as an isolated event, and we either ignore it or incur large costs to knock it down to 0%.

There is no such thing as eliminating all risks. Facing some set of risks is unavoidable. And they are endogenous - they are affected by what we do. In other words, if you try to knock out those 1% risks one at a time, like people swatting the gopher in that arcade game, you are simply increasing your downside risk if by doing so you create more new risks than you are eliminating. Arguably this is exactly what the US has been doing, if we grant (I would say over-generously) that Saddam represented as much as a 1% risk to us.

More totally static thinking from the big toad with the bad heart: his way of dealing with endogeneity is to say: we'll make everyone so scared of us that no one will dare do anything. But again this looks just at our move without considering the possibility of counter-moves. How would a Cheney type who was running another country (Iran, Russia, etc.) want to react if he saw the US acting the way Cheney wants it to act? Not by meekly knuckling under, one can be quite sure.

We are not the only actors, and we can't control everything by force or by will. That is the core of why Cheney is so completely wrong even on his own terms, and leaving aside all the bad faith and the contempt for every positive value in our law and our history.

Grover's trover

Grover Norquist appears to be - lying? defying credulity? forgetful? you be the judge - in his latest attempt to explain his up-to-the-elbows entanglement in the sleazy Abramoff-Indian tribes scam.

What a surprise.

The "war on terror"

I'm including fewer Bush items when I have nothing distinctive to add, but I couldn't resist this bit from Matt Yglesias:

According to Bart Gellman's review of Ron Suskind's new book the following things are true:

** Al-Qaedist Abu Zubaydah was captured in March 2002.

** Zubaydah's captors discovered he was mentally ill and charged with minor logistical matters, such as arranging travel for wives and children.

** The President was informed of that judgment by the CIA.

** Two weeks later, the President described Zubaydah as "one of the top operatives plotting and planning death and destruction on the United States."

** Later, Bush told George Tenet, "I said he was important. You're not going to let me lose face on this, are you?" and asked Tenet if "some of these harsh methods really work?"

** The methods -- torture -- were applied.

** Then, according to Gellman, "Under that duress, he began to speak of plots of every variety -- against shopping malls, banks, supermarkets, water systems, nuclear plants, apartment buildings, the Brooklyn Bridge, the Statue of Liberty."

** At which point, according to Suskind, "thousands of uniformed men and women raced in a panic to each . . . target."