Saturday, December 24, 2005

David Friedman on libertarians & current politics

David Friedman (Milton's iconoclastic libertarian son) has a new blog. Sample quote:

"Libertarians still tend to identify with the Republican party. Save for historical reasons, it is hard to see why. The current administration, despite its free market rhetoric, has been no better--arguably worse--than its predecessor on economic issues. Its policy on public schooling, the largest governent run industry in the U.S., has been a push towards more central control, not less. Its support for free trade has been at best intermittant. Reductions in taxes have been matched by increases in government spending, increasing, not shrinking, the real size and cost of government. It has been strikingly bad on civil liberties. Its Supreme Court nominees have not been notably sympathetic to libertarian views of the law. Libertarians disagree among themselves on foreign policy, but many support a generally non-interventionist approach and so find themselves unhappy with the Iraq war."

Friday, December 23, 2005

Starve the beast, part 2

In my forthcoming book, which will be published by the Cambridge University Press, I address the “starve the beast” view at what I consider a more fundamental level.

BTW, the two leading candidates for the book’s title at this point are: (1) “The Abuse of Fiscal Language and the U.S. Government’s March Towards Bankruptcy,” and (2) “The Use and Abuse of Fiscal Language: Taxes, Spending, and the U.S. Government’s March Towards Bankruptcy.” I prefer # 2 aesthetically, but am inclined to accept counsel that # 1 is better commercially.

In the book, I address the problems with using deficits instead of long-term fiscal measures. But this is only Exhibit # 2 in how fiscal language has encouraged making things worse.

Exhibit # 1 is the use of the terms “taxes” and “spending” as proxies for determining the size of government. Thus, if the government were to give me $1 billion which I immediately handed back, simplistic idiots would say: “There’s just been a billion dollars of taxes and spending!” I would say that really nothing has happened.

No idle hypothetical – Social Security, for example, has aspects of this, although there is a greater time lag and the cash you get back may not equal, in time-adjusted value, the cash you put back. But this means it’s the aspects of non-equivalence, not the gross cash flows each way, that determine how significant the whole thing is.

The size of government, I’d say, is a concept that, in the budgetary realm, involves trying to quantify the effects of government policy, relative to some baseline that has to be specified, on allocation and distribution – on what we have and who has it. (I limit this to the budgetary realm because issues such as civil liberties operate in different dimensions.)

Once you take this perspective, the utter inadequacy of discerning how much the government is doing from the number of dollars associated with discrete and often offsetting cash flows becomes pretty clear.

Against this background, what does “starve the beast” accomplish even if there are large spending cuts in future years? (Note: there will almost certainly be large tax increases as well.) Point 1: It definitely increases redistribution, by handing vast sums of extra money to older generations at the expense of younger generations. (Older generations were huge net winners even before the whole exercise started.) Point 2: It probably increases government-induced economic distortion, what with the heightened disparity between tax rates in different periods, the instability and risk of fiscal crisis throughout the adjustment process (which may become chronic rather than coming to an end), etc.

If any “starve the beast” advocate whatsoever has actually tried to think through how the adjustment process is likely to go, and in particular why my analysis would NOT be correct, I certainly have yet to hear it. They are seemingly determined not to look past their own noses.

Starve the beast, part 1

In today’s New York Times, Paul Krugman addresses the “starve the beast” rationale for never-ending tax cuts, advocated by Republicans no matter what they do to the deficit or the fiscal gap:

“At this point starve-the-beast theory looks as silly as supply-side economics. Although a disciplined conservative movement has controlled Congress and the White House for five years - and presided over record deficits - public opposition has prevented any significant cuts in the big social-insurance programs that dominate domestic spending…

"In other words, the starve-the-beast theory - like missile defense - has been tested under the most favorable possible circumstances, and failed. So there is no longer any coherent justification for further tax cuts.

"Republicans have turned into tax-cut zombies. They can't remember why they originally wanted to cut taxes, they can't explain how they plan to make up for the lost revenue, and they don't care. Instead, they just keep shambling forward, always hungry for more."

Cute, but in my view Krugman under-estimates the unfalsifiability of starve-the-beast thinking. Counter-factual hypotheticals mean never having to say you’re sorry. No matter how fast spending keeps rising as tax revenues fall, one can always say: “Yes, but if not for the tax cuts, there would have been EVEN MORE spending!”

Because this argument rests on a counterfactual, it cannot directly be falsified. True, it can be tested empirically in the sense of testing past correlations between revenue levels and spending levels. Unfortunately, the research that has been done suggests that tax cuts are associated with spending increases, and tax increases with tighter spending, apparently because both respond to whether fiscal discipline is prevalent at any given time.

For a nice example of blithe unfalsifiability, however, when economists would ask Glenn Hubbard, during his White House years, about the rationale for cutting taxes in the face of a huge fiscal gap, he would respond that the long-term impact on the fiscal gap was zero because otherwise there would have been spending increases instead. Or rather, exta spending increases with the same present value as the revenue loss from the tax cuts.

Whatever. But anyway, starve-the-beasters have a further fallback, likewise unfalsifiable This is what I call the “manana theory.” True, we haven’t done anything yet to cut spending, it goes. But wait until manana – then we’ll take care of everything.

The great thing about the manana theory is that there are always more mananas to wait for.

Since this post is already pretty long, I will post a second, separate one explaining why “starve the beast” theory is mistaken even to the extent that the fiscal gap does indeed prompt large spending cuts manana.

Tuesday, December 20, 2005

Pop music

I wouldn't say I hear new stuff comprehensively enough to purport to assemble a best-of list, but five of my favorite new albums of the year, in no particular order, were:

Silver Jews, Tanglewood Numbers

Fiery Furnaces, EP

Sleater Kinney, The Woods

New Pornographers, Twin Cinema

Go-Betweens, Oceans Apart

New 2005 albums that come to mind right now that I liked enough to play for a bit but not enough to put on the list include those by Spoon, Stephen Malkmus, and Broken Social Scene.

I would have included the Belle and Sebastian EP/singles compilation, Push Barman to Open Old Wounds (better than their last new album) except I already had all the tracks and thus didn't buy it.

Title troubles

I am trying to finish a book manuscript, in time for it to come out by the election season next year, but the question is what to call it.

My working title from the start has been "The Use and Abuse of Fiscal Language." But people whose interest in the matter matches mine, and who know more about the publishing biz than I do, suggest that this will mis-label or fail to describe the book, to its commercial and attentional detriment. So right now the best we have is "Fiscal Language and the U.S. Government's March Toward Bankruptcy."

Part of me says, who cares what it's called, I'd be willing to call it "Banana" if that were best for getting readers and attention to what it says. But I prefer my original title aesthetically, and who knows, maybe aesthetics can even be good for sales.

Perhaps the thing to do is come up with something better than either.

The Wall Street Journal explains its vision of limited government

Today's WSJ editorial headline: "Thank You for Wiretapping"

I think they are cribbing from Animal House ("Thank you, sir, may I have another?").

Monday, December 19, 2005

Highly recommended novel

J.G. Farrell's "Troubles," a comedy of futility and decay set in Ireland in 1919.

The incentive problems caused by journalistic "balance"

There's been a lot of comment on the blogosphere, especially on the left, concerning journalistic "balance," or the habit of treating everything as a "he said/she said" story with no effort at assessment even if one side is provably correct. Thus, if Cheney says up is down and Harry Reid disagrees, the headline will say "Cheney Vigorously Insists Up is Down," with Harry's disagreement in paragraph five.

(Of course, this is better than Bob Woodward-style journalism, which would simply report as unsourced fact, based on the best inside sources, that up is down.)

I saw another example of this journalistic idiocy in the Sunday NY Times Book Review for 12/18, where the reviewer of the book "The Republican War on Science" denounced the author for being too one-sided and shrill, despite (a) agreeing that in fact what the book said was accurate, and (b) recollecting an occasion when the author of the review had been forced to supply "balance" even though one side was demonstrably totally wrong. Some habits are too deeply engrained to shake even when the truth is staring you in the face.

But if you think a bit more about mindless "balance." you come to realize that the Bush Administration, in a sense, is not entirely to blame for how they have exploited it to make wildly false assertions that then can reported without demur. These people are simply responding to the incentives the press gives them - admittedly, a bit more aggressively than most of their precursors on either side of the aisle, but then again successful strategies evolve over time.

If the press is going to say "He said/she said" no matter what, with absolutely no effort to test either side's assertions for internal logic, consistency with known facts, etc., then one no longer has any incentive to be reasonable. (The usual incentive to be reasonable is that you will lose credibility otherwise. Better to claim and get half a loaf then to claim the whole thing and get zilch.) But if your side will be your side no matter what, then the only thing that benefits you is being as extreme and shrill as possible. Just like, in a tug of war, the harder you pull the better off you are.

A stupid, mindless, timid, self-serving, cowardly, incompetent, ignorant journalistic practice that emerged by itself as a useful professional norm turns out to be a great danger to democracy and public deliberation. I wish I had a cure to suggest other than the naive one of better, smarter, more honest and honorable people in the press, which is a tall order when you observe where even the vile Woodward started out.

Saturday, December 17, 2005


The brazenness is just so breathtaking.

Secret wiretaps were required for national security, when they could wiretap anyone they liked for 72 hours and get a court order to continue it?

National security has been compromised by the NYT article, when any terrorists operating here would know they might be wiretapped? The lack of court approval was supposed to throw them off guard?

My guess is that they were wiretapping people in the Executive Branch they didn't trust, or journalists, or prominent Democrats, or people like George Soros, or each other, or all of the above.

By the lights of John Yoo's constitutional "theory," I would assume that Bush claims the constitutional authority to declare martial law and suspend all civil liberties and elections, so long as in his judgment this is part of fighting the "war on terror."

Friday, December 16, 2005

The New America Foundation again

As I noted in an earlier post, the New America Foundation recently issued an interesting tax reform plan, a but bolder and more novel than what the Tax Reform Panel was able to do, although flawed by the peculiar administrative idea of subjecting taxpayers both to an income tax and to a progressive consumption tax. Having everyone file two returns instead of just one is not an idea I would expect to go anywhere. But still, the NAF is trying a bit harder than most other groups in Washington these days.

Now the NAF has issued a "Nonpartisan Social Security Reform Plan," devised by Maya Maguineas of the NAF plus economists Jeffrey Liebman and Andrew Samwick. Although some in the liberal blogosphere have been experiencing heart palpitations because both Liebman and Samwick have worked with conservative eminence grise Martin Feldstein, in fact Liebman is on the Democratic side of the aisle and worked for the Clinton Administration, while Samwick lines up on the Republican side (albeit with principle, not hackery) and worked for the current Bush Administration.

The NAF plan tries to balance left and right policy preferences by providing a mix of benefit cuts, revenue increases, and mandatory individual accounts that are funded half through new taxes and half through diversion of a slice (1.5%) of the existing Social Security payroll tax. King Solomon and slicing the baby in half, you see. But in fact this is the sort of plan that deserves attention, and the most serious one out there, so far as I am aware, other than the Peter Diamond-Peter Orszag plan that tries to be similarly balanced but leaves out the accounts and presumably has no prospects for acceptance on the right.

Liberal bloggers have been attacking the plan, however, because it has the accounts with a bit of a Social Security payroll tax diversion to help fund them. So to some of them it might as well be the Bush plan all over again.

It's funny how arbitrary details can affect people's perception of things. The NAF plan replaces two-thirds of the diverted payroll tax revenue through a progressive increase to the payroll tax (raising the ceiling on the tax, not the rate). So, if they changed the sequence of the cash flows, they could almost fully fund the accounts through the new taxes. This would probably cause the plan to be perceived differently, even though in substance it would be exactly the same.

Samwick has sounded a bit touchy, perhaps understandably so (none of us likes to be trashed) in discussing the plan in his own blog. Among other things, he says that the mandatory accounts with a bit of payroll tax diversion are indispensable to get conservative support for the plan, including his. But alas, getting rid of them may be indispensable to liberal support for the plan, and no plan has a chance politically without both liberal and conservative support. (When I speak of a plan having a chance, I mean several years down the road - obvously nothing is possible now.)

It's a shame that the symbolism of individual accounts and payroll tax diversion matters more than the substance of Social Security reform, to many on both the left and the right. In fact, whether or not there are individual accounts is really more of a fiscal language or descriptive detail than one with important economic substance. More on that at some future time.

Tuesday, December 13, 2005

Heads we win, tails you lose

The European Court of Justice has just issued an opinion in the Marks & Spencer case, affirming an earlier opinion by its Advocate General, under which England (and other members of the European Economic Community) must allow resident companies to deduct the losses of their foreign subsidiaries, even though the resident companies are not required to include net income from their foreign subsidiaries.

The ruling is limited to cases where the subsidiary's losses can't be deducted in the country where it was resident. But this is a trivial limit. Given the universal nonrefundability of overall tax losses, all a European company has to do, in order to satisfy this requirement, is sell its foreign loss subsidiary.

This is going to be great fun for European tax planners. For a company that is resident in a high-tax country, one simple thing to do is establish a foreign sub in a low-tax country. If it's profitable, pay tax at the low rate. If it loses money, sell and get the loss deduction at the high rate. Companies can also probably gin up the losses, where they like, through inter-group games such as transfer pricing (have the foreign subsidiary pay too much and charge too little in inter-group transactions) and leverage (put lots of debt into the sub).

The ECJ was warned about this, but chose to disregard all such problems as mere concern about revenue loss, which can't carry the day since countries would never allow any deductions if this were all that mattered.

While supposedly charged with creating a single European market and preventing protectionism within the community, the ECJ is acting as if it wants to obstruct national revenue authorities and create open season for tax planners. But perhaps what it really wants to do is grab as much turf as possible. Reducing revenue while increasing economic distortion is evidently a small price (for someone else) to pay.

Monday, December 12, 2005

Tweetie triumphs again

The following is an e-mail message I received from home. You can fill in the earlier part of the story yourself, although I will note that the mystery lies in how the bird got in.

"The bird is out of the house. To sum up, it ended in Shadow's mouth, he put it down, I held the back door open, and it rallied and flew out.

"While this happened, Buddy was barricaded in the front. When I released him, he ran down to see what was up and, finding no bird, began meowing.

"I imagine they'll all need to sleep this off."

Friday, December 09, 2005

Is this why the Bush Administration is so keen on torture?

Today's New York Times had a front-page article revealing that one of the main pieces of evidence for an Iraq-al Qaeda link that the Bush Administration proferred during the run-up to the Iraq war came from a prisoner who the Egyptians had tortured to the point that he started fabricating what they wanted to hear. The Administration used this information even though, as early as February 2002, the Defense Intelligence Agency had warned that it was unreliable.

While torture's efficacy in getting people to provide true information is disputed, no one doubts that it works extremely well at getting people to say what the torturers want them to say. The likes of Cheney might be keen on this for either or both of two reasons. The first is that they are just trying to make a case, and don't care if the statements extracted through torture are true or not. The second is that they already "know" what is true, on ideological grounds, and thus regard all actual empirical evidence as false unless it confirms their fixed preconceptions.

Not only don't I know which rationale was more important to Cheney, but I'm not convinced that he knows the difference any more.

Phony numbers from the House of Representatives

The House of Representatives just approved tax cuts estimated at $95 billion over five years. So much for the much-touted deficit reduction from their earlier approving $51 billion of spending cuts over 5 years.

One thing I don't understand is why they didn't cut taxes by, say, $950 billion over 5 years. After all, the NY Times quotes a Republican House member, Jeb Hensarling of Texas, as saying that "tax relief is part of the deficit solution, not part of the problem."

Even the $95 billion number is phony, however. It includes $31 billion to extend, for just 1 year (not 5) provisions reducing the bite of the alternative minimum tax. Everyone knows, however, that there will be huge pressure to keep on extending the AMT relief year by year.

If we assume that Congress will keep on extending the AMT relief - who knows, but this is probably a better baseline estimate than saying it won't - and if the cost grows a bit each year, we are probably talking more than $200 billion of tax cuts over 5 years, if the House has its way, even leaving aside everything else they want to do.

A broader structural point: deferred adverse changes to current year law that will occur if Congress doesn't act again generally are not credible. Perhaps budgeting estimates should be prepared on the basis that current year law will continue when the law on the books involves deferred and discontinuous adverse changes. (By discontinuous, I mean something that isn't already phasing in at a steady rate.) That would take some of the juice out of sunsetting everything and then continually extending it a year at a time.

Thursday, December 08, 2005

Making us proud

From Steve Clemons, a nice little reminder of what sort of government we have (a more forgiving way to put it than "what sort of country we've become"):

El-Masri, a German citizen of Lebanese descent, was kidnapped while vacationing by American intelligence agents. He was transported and "questioned" -- allegedly roughly -- by American authorities in Afghanistan. Along the way, these investigators finally figured out he was innocent and reported back to CIA Director George Tenet. Tenet had him held ANYWAY for another two months.

And then. . . you might ask, could it get worse? Well, yes.

We dumped him blind-folded in the deep forest, mountainous triangle area between Albania, Serbia and Macedonia. He had to walk out with no money, no identification.

He got to a border guard station -- and because of his inability to identify himself and because of how "outlandish" his story sounded to the border guards he met, he feared that the entire process would begin.

We dumped him blindfolded in a forest in one of the roughest regions nearby. Were U.S. authorities hoping he'd just be shot by someone else?

Wednesday, December 07, 2005

Two-way FOIA madness

William Frenzel, one of the members of the Tax Reform Panel, is quoted in a recent edition of Tax Notes as saying that one of the Panel's biggest problems, in terms of presenting reasonably detailed plans, was that the 9 members could not meet privately with each other to discuss anything. Under the Federal Advisory Committee Act (OK, it's not really FOIA despite my heading), no more than 4 of the 9 panelists, to avoid a quorum, could meet together without its being in public. (It's a good thing no one had a birthday party.) They also faced restrictions on the use of documents that weren't made public.

As a result of this rule, as I myself have heard elsewhere, the sub-committees (sub-panels?) on the Panel could not discuss what they were doing with each other until the end of the process, when they had a public meeting. So there was next to no coordination between the parts in some important respects. Hence. perhaps, the fact that the so-called consumption tax prototype in the Panel's report was in some ways more of an income tax and less of a consumption tax than the so-called income tax prototype.

The problems the Panel faced suggest a sarcastic response, then a more serious response. The sarcastic response is: Why didn't the Administration just have Cheney appoint the same people as a Vice Presidential panel? Presto, no disclosure requirements and lots more political credibility.

More seriously, both this result and the fact that Cheney didn't have to reveal anything about his 2001 dealings with the energy lobbyists who wrote his "energy plan" seem inexcusable and indefensible. Couldn't Congress enact a more rational and uniform set of disclosure rules, so that groups such as the Panel just have to reveal their contacts and so that Cheney and his working groups or panels would have to do so as well?

I realize I'm being politically naive here.

Tuesday, December 06, 2005

Message to Jon Stewart's writers: don't look back, someone is gaining on you

Courtesy of a reader, I note a New York Times article, quoting Bush, almost in the same breath, as first demanding the extension of his tax cuts and then, in re. his Social Security plan, saying: "When you get elected to office in Washington, D.C., you have an obligation to confront problems, not pass them on to future generations and future Congresses."

Memo to Bush: Here is some straight math for you (I know you hate the fuzzy stuff). The infinite horizon estimated cost of extending your tax cuts is $13 trillion. The infinite horizon Social Security fiscal gap that you claim is so disastrous is $10 trillion.

Free plug

The New America Foundation, one of the more interesting (indeed, most interesting) D.C. thinktanks with a focus on tax and budget policy, just announced its own comprehensive tax reform plan.

Its elements are:

1) Replace the payroll tax with a progressive consumption tax.

2) Corporate integration, albeit by unspecified means.

3) Get rid of many or most tax expenditures.

4) In lieu of the estate tax, treat amounts inherited as taxable income.

5) Use environmental taxes, such as through a gas tax or system of tradable carbon permits, to raise revenue while also reducing economic distortion.

If I had to quarrel, just to get a discussion going, I'd say #1 would be more unwieldy than what we have now if the income tax remains in place, for #2 the choice of means is important, and #4 would create bad tax planning issues if applicable to bequests but not gifts made while the donor is alive. (Estate or inheritance taxation also raises lots of tougher issues on which I am agnostic, leaning towards opposed, if we assume that it can be traded in for other progressivity.) 3 and 5 are hard to quarrel with, by my lights.

But more importantly than any of this, the New American Foundation is to be commended for trying to put interesting ideas on the table at a time when the intellectual and political vigor of reform efforts seems so low. (With apologies to friends who worked on or with the Tax Reform Panel, and who were hemmed in by their mandate.)

Tuesday, November 29, 2005

Squeaky McGee ...

... is one of my new nicknames for our cat Buddy, the one who ran away. One of my kids calls him Tubby Lardo.

We're both right, and relatedly. Buddy's piteous squeaking for food, along with his sly tactic of begging from one adult after the other has fed him and left the room, paid off enough to earn him the second nickname.

But now he's been busted, or rather we have. The vet says he must lose 1/3 of his 15 pound body weight, like it or not, or else risk diabetes, arthritis, etc. At least he doesn't get mocked by the other cats in the feline equivalent of the schoolyard. (Although I don't know exactly what that big black cat was saying to him the time he ran away.)

Sorry, Buddy. It's high-fiber crunchies for you from now on. But keep on playing frisk-about with the other guys; it's kitty aerobics.

Shooting dead fish in a barrel

While the short-term political prospects of the Tax Reform Panel's recommendations are generally assumed to be nil, a clue to what would happen if they became more prominent is offered by an op-ed in today's LA Times, co-authored by NYC Congressman Charles Rangel. the ranking Democrat on the Ways and Means Committee. The op-ed portrays the proposals to disallow state and local tax deductions and to cap home mortgage interest deductions as reflecting the goals of "right wing ideologues'" in the Bush Administration to "shift the tax burden from the wealthy to the middle class and put pressure on states such as California and New York to shrink critical public services." He calls on everyone in adversely affected states such as New York and California, including those two states' Republican governors, to condemn this "double-barreled blast aimed squarely at the middle class."

Rangel ignores the Tax Reform Panel's surprising independence from right wing ideologues in the Bush Administration. One also might quarrel with his assertion that lowering the mortgage loan deduction cap from $1 million to $411,000 is a device to "shift the tax burden from the wealthy to the middle class." But he certainly shows us the politics that we could expect if these proposals ever got far, including the pressures that Republicans as well as Democrats in high-tax states would face.

Monday, November 28, 2005

Poor Saddam

I heard on the radio this morning that Saddam complained angrily when he arrived in court today because, with the elevators broken in the courthouse, he had to walk up several flights of stairs while handcuffed and carrying a cup of hot coffee. That's certainly pretty rich, coming from someone who treated prisoners as he did.

He surely must be the single best-treated prisoner the U.S. has abroad. Imagine what our other prisoners around the world would make of his complaint. They are probably a lot more likely to have their heads plunged in boiling fluids than to get anywhere near hot coffee in a cup.

Monday, November 21, 2005

Various CDs

New releases to which I have been listening lately include those by the Silver Jews (Tanglewood Numbers), Broken Social Scene (Broken Social Scene), and John Cale (Black Acetate), all recommended, perhaps in that order.

Another strange item I have been playing recently is the Dukes of Stratosphear (Chips from the Chocolate Fireball). This would be a little-known late-60s psychedelic classic except that it was actually done in the mid-1980s by XTC as a lark.

CDs I wish I could find, but that are out of print and available only at very high prices, include items by the Wrens (Silver), the dBs (Sound of Music), and Tom Verlaine (Dreamtime).

Wednesday, November 16, 2005


The House and Senate are busy right now fighting over exactly how to cut taxes by $60 to $70 billion over the next 5 years. It's hard to overstate how wildly irresponsible this is given the fiscal gap. Here's hoping that they will deadlock themselves and do nothing. This isn't impossible, given differing preferences as to where the money should go, along with the Senate Finance Committee's apparent move to raise taxes on oil companies (anathema to several influential Senators whose votes would likely be needed).

Some of the tax cuts being considered make sense as structural features of the Code. For example, the 15 percent rate for corporate dividends reduces double taxation of equity-financed corporate profits, and the alternative minimum tax is getting out of hand. But to address these things without paying for them is just one more instance of the drunken spree that we have been on in Washington for the last 5 years, which will at some point start to spook the bond markets (prompting a fiscal meltdown) if the premise that Congress will at some point act responsibly continues to be rebutted.

Monday, November 14, 2005

Tax and budget staff turnover on Capital Hill

I gather that Doug Holtz-Eakin is leaving his job as the Director of the Congressional Budget Office. This, in combination with George Yin's departure as the Joint Committee on Taxation Chief of Staff, leaves two vacancies in important tax or budget-related staff positions. The big question is not just who will replace them, but what type of person.

Despite all my qualms (to put it mildly) about the Congressional leadership, they really could not have named better, more reputable, or more honest and independent people to those two slots than Holtz-Eakin and Yin. From the standpoint of a Congressional leader, there are genuine selfish payoffs to appointing such a person. For example, they can give you better expert advice and research than a hack, they bring more prestige to what they do, they nurture staff professionalism, they are more likely to be honest brokers between competing interests, etcetera.

But there are also selfish benefits to naming a hack who will do whatever you say and say whatever you want. Not to mention the lure of cronyism and rewarding faithful foot soldiers.

I will refrain from making a pessimistic prediction this time around, as I was pleasantly surprised last time by the appointment of Yin. But whichever way it goes on either appointment, it should be pretty clear immediately which path the leadership has taken.

Saturday, November 12, 2005

Digging a deeper hole

One good thing to do, if nearly 60 percent of the country has concluded that you are a liar, is to stop lying.

This evidently has not occurred to President Bush, who, in addition to equating dissent with treason (despite an upfront disclaimer), is still making the false claims that (a) everyone in Congress had access to the same intelligence as he did (rather than just the parts the Administration chose to share), and (b) the Administration has been cleared by independent inquiries of slanting the prewar Iraq intelligence info.

The Washington Post puts this a bit gingerly in a straight news story, entitled "Asterisks Dot White House's Iraq Argument," and stating in its second paragraph that "neither assertion is wholly accurate."

The Post article is also kind enough to state: "The administration's overarching point is true: Intelligence agencies overwhelmingly believed that Saddam Hussein had weapons of mass destruction..."

But that is not the point in dispute, which is whether, in addition to the honest mistake that everyone on all sides made, the Administration also made dishonest mistakes by deliberately hyping what it knew were false particulars.

If I genuinely believe it is cold outside and everyone shares this belief, I am still lying if I falsely claim that a thermometer says it is 14 degrees.

Wednesday, November 09, 2005

A windfall profits tax for oil companies?

With oil companies' profits way up, reflecting what has happened to gasoline at the pump, Democrats are naturally pushing the windfall profits tax issue. At times like this, the tax becomes a great talking point for them, just as Republicans use power blackouts as an excuse to push totally unrelated giveaways to oil and coal companies.

Is there any decent intellectual defense for a windfall profits tax on oil companies? The standard economics-inflected answer would be no, for the same reason that one might want to let price gougers charge what they like for water in a drought disaster area. The argument is that the high returns encourage them to anticipate and fill demand, bidding the price back down and causing the market to respond to demand shocks much faster than it would otherwise. Thus, in the oil company case, the standard argument would be that windfall profits attract apparently needed extra capacity into the industry.

Nonetheless, a couple of reasonable arguments could be made, in present circumstances, for a windfall profits tax on oil companies. The first is worth considering though probably in the end wrong; the second has more clout. The first argument is that oil companies have a huge risk position in energy prices, which may not be economically desirable for them. Presumably they are in the energy supply business, and would want to hedge price risk rather than placing huge side bets on energy price uncertainties that are resolved once they have made a bunch of investment decisions. A windfall profits tax amounts to a government supplied hedge, in that they pay higher tax rates if they win the bets they have perhaps inadvertently made on energy prices than if they lose. The problem with this argument, however, is that it presupposes that they can't or won't properly hedge on their own. (This is mainly a company-level issue about default risk and the like, since shareholders can presumably diversify their stockholdings even if particular companies aren't diversified.) One would really need a missing financial market for hedging oil price risks to make this argument fly, and with derivatives and the like this is a hard argument to make. Flawed managerial incentives probably don't do the trick either, since the standard view is that managers are too risk-averse, relative to the interests of diversified shareholders, due to their firm-specific economic interests.

A variant of this argument would be that, for companies we might be likely to bail out if things get really bad (e.g., automobile companies and the airlines), having a windfall profits tax on the upside would make things more neutral overall. But it may not be the case that we would be bailing out the oil companies on the downside, which would be needed for the implication that a windfall profits tax on the upside makes things more symmetric with respect to extreme outcomes.

This brings us to the better argument, which is a political second-best. Even before the Bush-Cheney administration, oil companies had a tendency to win huge concessions, tax and otherwise, from the federal government, due to their immense political clout and insider connections. So we probably have a background situation in which oil companies are inefficiently favored by government policy. A windfall profits tax is one of the politically more feasible correctives, although it probably is not the response one would choose in the absence of political constraints.

So let's hear it, albeit tentatively, for a windfall profits tax on oil companies, on the view that it might (however imperfectly) reduce the overall bias of government policy in favor of this line of business as opposed to others.

Monday, November 07, 2005

Tax Reform Panel

My article on the Panel's report and recommendations should be in Tax Notes today. Summary of discussion, from the opening section, is as follows:

First, the Panel’s revenue parameters, which derive from its instructions and were not chosen by the members, are unacceptable, and thus discourage taking the plans seriously as complete packages. Although ostensibly revenue-neutral, the plans actually would lose almost $20 trillion over the infinite horizon compared to present law. More than two-thirds of the shortfall results from assuming a change in present law – that is, the law currently on the books – via extension of the 2001 and 2003 tax cuts to remain in force permanently. The rest results from testing for revenue neutrality only over the next ten years, rather than over the long term. Overall, the combined revenue loss, measured against actual present law, is almost twice the size of the infinite horizon Social Security fiscal gap that President Bush recently decried as posing a severe and immediate fiscal crisis.

Second, there is a lot of merit in the Panel’s proposals with regard to individual-level taxation. Here in particular it supplies a useful hit list, and also develops an important approach that has previously received too little attention: converting deductions into credits when accurate income measurement is not at issue.

Third, the Simplified Income Tax has a number of creative and novel features relating to the taxation of businesses. However, their workability remains in some cases unclear. Perhaps the biggest flaw is that businesses could continue avoiding tax at any level, as they often do under present law, by stripping out their taxable income via deductible interest that is paid to tax-indifferent parties. The Plan’s corporate integration rule relies on the incoherent present-law distinction between debt and equity, and it would permit businesses to pair accelerated cost recovery with debt that yields deductible interest payments.

Finally, the Growth and Investment Tax Plan, while having many virtues, is worsened by its being a quasi-consumption tax rather than a straight consumption tax. Its add-on tax at the individual level, which gives it this hybrid character, fits poorly into the rest of the structure, with unfortunate implications for tax planning at the business level, and reduces the individual-level simplification that would otherwise be possible. Without this feature, the Growth and Investment Tax Plan would clearly be much simpler for individuals than the Simplified Income Tax. From the standpoint of progressivity, raising the top rate in the Plan would make a lot more sense than imposing the add-on tax.

Thursday, November 03, 2005

David Brooks again

I've really run out of things to say. I just wish he would. Come to think of it, he has.

UPDATE: I simply didn't have the patience to deal once again with Brooks' intellectual dishonesty or astonishing stupidity (take your pick), so I will let Jonathan Chait at the L.A. Times take care of it:

Conservative columnist David Brooks wrote sneeringly Thursday of Senate Democratic leader Harry Reid's attempt to investigate "the Republican plot to manipulate intelligence to trick the American people into believing Saddam Hussein had weapons of mass destruction." Brooks pointed out that the Clinton administration also believed that Hussein had weapons of mass destruction. Therefore, Reid must believe that Democrats were part of the conspiracy to fool the public. Therefore, Reid is crazy. Other conservatives have made the same point as Brooks.

Are they really so dense? It isn't that complicated. The Bush administration, like almost everybody else, made some honest mistakes. Unlike everybody else, it also made some dishonest mistakes. The Clintonites warned against Hussein's weapons, but they didn't bully intelligence analysts into suppressing contrary information, and they didn't pass on information they knew was false. That's what the investigation is about. Everybody got it?

Fair comment?

Kevin Drum says:

"Back in March, we asked 'Is Grover Over?' We were, of course, talking about Grover Norquist, the anti-tax jihadist-in-chief whose sole goal in life is to bully politicians into endless tax cuts."

Kevin, that simply isn't fair. Grover also aims to make lots of money by procuring government favors for his lobbying clients.

Tuesday, November 01, 2005

Sorry, but ...

... I won't be commenting here on the Tax Reform Panel's plans, at least right away, as I am hoping to publish something on it in the fairly short term. When the details first came out, I did comment in several earlier posts that should not be hard to find.

UPDATE: My article discussing the tax reform plans will be in Tax Notes on Monday, November 7.

Monday, October 31, 2005

No surprise here

In re. the battle royal presumably building over the Alito nomination, Franklin Foer at the New Republic asks:

"Of course, Bush could have gone right and simultaneously avoided this kind of Battle- of-Somme scenario. Or to re-frame that assertion: Why didn't he nominate Judge Michael McConnell? After all, McConnell would have nearly the same Federalist Society friendly views as Alito. But he would also bring along the endorsement of liberal academia. My best guesses for why he skipped over McConnell: 1) Bush actually needs a bloody confirmation fight. 2) He probably can't stand McConnell's heretical position on Bush v. Gore. 3) McConnell represents the kind of pointy-headed intellectualism that the president can't abide. 4) He's not physically fit enough to deserve a promotion to the highest court in the land."

As one who knows McConnell from our days as colleagues on the University of Chicago law faculty, I can testify that I and many others not from the conservative camp would have supported him. Just because he's a charming and nice person? I don't think it's just that. Rather, my experience with McConnell, and I think that of many others, is that he is a fundamentally fair-minded and honest person intellectually.

I would have bet the house against his being selected however, not only due to # 1 above but # 3. If you hate intellectual merit and achievement, then McConnell is not the man for you.

Can't say I know anything about Alito in this respect. I certainly hope he doesn't share Scalia's abominable lack of anything approaching a judicial temperament.

Sunday, October 30, 2005

Stupid or dishonest?

I remember reading a Mad Magazine when I was a kid, in which one feature had a wife complaining to her husband: "You always say everything of yours is better. Can't you, just this once, name something of mine that you think is better?"

He stops and thinks for a moment, and then finally says: "Well, you have better in-laws than I do."

In approximately that spirit, if I had to praise David Brooks's column in the Sunday Times, I would say: "He can't possibly be that stupid, so he must be dishonest instead." Dishonest in the sense of spinning and making what he must realize are preposterous and phony arguments.

To his mind, Fitzgerald has found one rotten apple, Libby, while somehow affirming that everyone else in the Bush Administration is honest. Fitz has supposedly proven that "there is no cancer on this Presidency." (An actual quote.)

And anyone who thinks there are other crimes, or that there was any sort of cover-up, other than by Libby, is exhibiting what Richard Hofstadter called "the paranoid style in American politics." Witch-hunts, anti-Masonic agitation, McCarthyism, etc. Nice touch with the Hofstadter, by the way. Brooks, as a supposed "intellectual," is showing that he remembers some of the stuff he read in college.

Thus, it would be rampant and indeed clinical paranioa, in Brooks' stated view, to think that Cheney might have discussed outing Plame or had any idea about what Libby was doing.

When you insult your readers' intelligence as Brooks is doing, you are showing that you are either phenomenally stupid or else dishonest. A writer's first obligation should be to the readers, to level with them rather than pursue unstated agendas such as hacking and flacking for your side. Brooks fails this test, no less than Judy Miller in her own special way as an "investigative" reporter, unless he verges on being unable to tie his own shoes. I choose the more charitable interpretation (or is it?).

No need to argue facts, probabilities, reasonable interpretations, etc. if you can simply label all views other than the radically myopic (Libby did everything alone) as "paranoid."

Brooks would be a good 8th grade debater, with silly, transparent tactics like this. But he does not belong on the pages of a major newspaper, even one so compromised as the Times.

UPDATE: Trent Lott asserts that the Bush Administration has serious problems and must address them. I guess, by Brooks' dim lights, he must be "paranoid" too.

Friday, October 28, 2005

Two points about the Libby indictment

1) These are not claims of merely technical inaccuracy, forgetting, etc. Unmistakable perjury and obstruction of justice, dead on the central issue of the investigation, if the charges are true.

2) The underlying acts that Libby is charged with lying about are very serious, verging on treason, whether he is indicted for them or not. No sane person could seriously doubt that Cheney was 100% involved in them too.

Two things that made me laugh

This and this.

Gallows humor ...

... from the floor at a Curriculum Night meeting for parents of seventh graders.

The English/Social Studies curriculum looks at the Renaissance. They are reading parts of the Bible and Koran as literature. The teacher mentions the time when Galileo was forced to recant his claim that the Earth orbits the Sun. John Paul II apparently issued a decree stating that the Church was wrong about this.

"Hasn't that been revoked by Pope Benedict?"

On to the science classroom, where we hear that the kids are learning about the empirical method of testing hypotheses.

"That's not science any more."

"Shouldn't they be reading the Bible as science, not literature?"

Nothing really new here, but ...

... I thought I'd post a self-serving book feature that I dashed off for a local periodical that literally just serves a couple of blocks in the West Village (so not much circulation).


It isn’t easy to promise people $18 trillion of completely unfunded benefits, apparently under the pretense that nothing need be paid for, and yet to make no one happy. This, however, is what the Bush Administration appears to have accomplished with the new Medicare prescription drug benefit that it pushed through Congress in 2003. ($18 trillion, by the way, is the long-term cost of the benefit according to the Medicare Trustees.)

In my recently published book, Who Should Pay for Medicare?, I discuss the approaching fiscal crisis that the enactment of the prescription drug benefit only made worse. I also address the unpopular questions of how we should, and how we probably will, pay for senior healthcare that everyone agrees is important but seems to think our society can get for free.

Medicare’s financing problems partly arise from the aging of America’s population, due both to lengthening lifespans and lower birth rates. An even bigger cause, however, is that healthcare expenditures, for young as well as old, are growing faster than the economy. This trend reflects technological advances that really have made people’s lives longer and better. Strangely, however, studies show that, while America spends far more money per capita on healthcare than peer nations such as Canada and the United Kingdom, we do not seem to get any extra payoff in terms either of results or customer satisfaction.

Making people – the young as well as the old – pay more at the margin for the treatment they get will have to be part of any solution, unless we go to a nationalized healthcare model with queueing. There is no sign, however, that politicians, Democrats as well as Republicans – or, for that matter, voters – are prepared to start considering the hard choices that ultimately will have to be made. The solution that is ultimately adopted is likely to involve new taxes and a period of disruptive inflation, as well as tougher healthcare limits than would have been necessary had we acted sooner.

While Medicare has done much good, it ought to be more of a genuine insurance plan, with greater high-end protection (such as catastrophic coverage) and less funding of routine expenditures. The way it is structured now, it resembles car insurance that pays for your gasoline but will not help you if you have a major accident. Structuring Medicare to please voters rather than to do its job well is a luxury that we possibly could have afforded if the U.S. government’s overall long-term fiscal picture were not so dire. As things look now, however – especially given the Bush Administration’s five-year spree of tax cuts and wild spending – Medicare may have to change surprisingly soon. I certainly hope that the people who read this article will be financially prepared for whatever happens.

Thursday, October 27, 2005

A good idea catching on?

Democratic Senator Ron Wyden has just released a tax reform plan, about which I don't know anything beyond what it says in this description from his website. Whether or not it merits attention, one feature of interest is a proposed refundable credit for state and local taxes.

The Tax Reform Commission likewise proposes credits (although not refundable ones) in lieu of certain personal deductions under current law. So perhaps the idea is starting to catch on a bit, which is all to the good.

If I remember correctly, the Bradley-Gephardt tax reform plan of 1984, which influenced the Tax Reform Act of 1986, used percentage credits in lieu of certain personal deductions. But the idea then disappeared from tax reform agendas for the next twenty years. Score it as one good idea that can raise revenue while also, just maybe, not being politically impossible.

Wednesday, October 26, 2005

Indictments coming?

I hate the waiting, but am cheered by the thought that there are some very bad people out there who hate it a lot more than I do.

Tuesday, October 25, 2005

Why Bush picked Bernanke

The above is the title of a WSJ article by Fred Barnes, which I won't bother to link as it's subscribers-only.

The pick does appear to be a really good one. But a couple of amusing (to me) bits in Barnes' article are as follows:

"Mr. Feldstein's appointment as Fed chair was supported by the president's father, former President George H.W. Bush. But he had many critics, notably James A. Baker II, who was White House chief of staff in the early 1980s when Mr. Feldstein was CEA chairman. They clashed when Mr. Feldstein spoke negatively, on and off the record, about Reagan's tax cuts. Mr. Baker thought Mr. Feldstein was disloyal and warned the current White House not to nominate him."

My God, isn't a decade plus of toeing the line enough to atone for the good deeds of one's youth?

"Mr. Hubbard, now dean of Columbia Business School, was CEA chief. He favored the Bush policies of tax cuts and partial privatization of Social Security, but the president felt Mr. Hubbard sometimes talked down to him."

Can you really blame Glenn? I am not a complete fan of everything he did in the Bush Administration, although perhaps he can defended as supporting the bad so we wouldn't get the worst. But he has standards.

Their master's voice

The papers today have articles describing the Administration's new talking points in its war-room directed campaign against Fitzgerald (mere technicality, rogue prosecutor, not prosecuting the original crime, etc.). And sure enough, right on cue, John Tierney and Nicholas Kristof (who ought to know better) have op-eds in the Times today giving what is exactly the Administration line, with the ingenuous air of something they have thought of themselves.

Were they too busy to write their own columns today?

By the way, it's kind of easier to indict people under one's initial prosecutorial charter if they don't lie about it and cover up. If they do, should one simply fold up shop and go home?

UPDATE: My apologies to Kristof for under-estimating the hard work that he personally did in writing the column. William Kristol in the Weekly Standard, in executing the same set of talking points as Kristof, refers to "clear-cut" perjury rather than to "flat-out" perjury. Wow - that's even more different than their last names are.

Monday, October 24, 2005

New Fed chairman

Bush is apparently going to appoint Ben S. Bernanke, his top economic advisor, to replace Alan Greenspan as the Fed Chair. While that title, under the circumstances, sounds a bit like calling someone Karl Rove's top ethics advisor, so far as I know Bernanke is fairly blameless. Rove is actually Bush's top economic policy (and everything else) advisor.

Greenspan's would be harder shoes to fill were it 5 years ago, when his reputation was much better than it is now. Still, he did seem to have an odd talent for intuiting macroeconomic micro-trends, so we will see how Bernanke meets what are likely to be tougher challenges.

Interesting side bit: Glenn Hubbard and Martin Feldstein, both among the leading conservative economists in the U.S. today, were not named although considered possible candidates. For Feldstein, I am wondering whether this will result in his having a more independent voice in public policy discussion than he has had over the last few years as a hardworking member of the Bush Administration's hallelujah chorus.

In the 1980s, Feldstein showed great courage and integrity in speaking out for fiscal prudence at a point when the problems were much less severe than they are today. He seems to have been retreating from that stance ever since. It has been as if Sergeant York, after capturing all those German soldiers, had spent the rest of his life wishing that he had just surrendered.

Perhaps Feldstein will feel freer to put his true Sergeant York hat back on, now that the glittering prize is not his. What else could he possibly care about that the Administration can provide or deny?

UPDATE: Secretary of the Treasury, perhaps? But who would really want that job at this point?

A great mind at work

Herewith Tax Reform Commissioner Connie Mack talking to the New York Times. Thank goodness my children, aged 9 and 12, are considerably more mature and wise than he is.

NY Times: Well, the U.S. government has to get money from somewhere. As a two-term former Republican senator from Florida, where do you suggest we get money from?

Mack: What money?

NY Times: The money to run this country.

Mack: We'll borrow it.

NY Times: I never understand where all this money comes from. When the president says we need another $200 billion for Katrina repairs, does he just go and borrow it from the Saudis?

Mack: In a sense, we do. Maybe the Chinese.

NY Times: Is that fair to our children? If we keep borrowing at this level, won't the Arabs or the Chinese eventually own this country?

Mack: I am not worried about that.

Saturday, October 22, 2005

David Brooks begs credulity again

In his Sunday Times op-ed, David Brooks takes Bruce Bartlett to task for breaking with the man Brooks calls "the savior of the right." You guessed it, he means Bush.

I'm afraid that non-subscribers will think I'm making this up, but Brooks actually says:

"Almost single-handedly, Bush reconnected with the positive and idealistic instincts of middle-class Americans."

"Bush has ennobled and saved American conservatism. As the G.O.P. moves forward, its leaders will break into two camps, post-Bush and pre-Bush. The post-Bush conservatives will build on the changes Bush introduced and refine his vision of using government positively to give people the tools to run their own lives."

"He sought to mobilize government ... so people around the world can dream of freedom."

"[T]he G.O.P. has become the party of the middle class."

And lots more to the same effect. I guess Bush is far down enough that Brooks thinks he is being bold rather than sycophantic in writing this stuff.

What does Brooks have in mind, exactly? He refers to the "no child left behind" legislation, which recent research reveals has made no difference in school performance.

Medicare prescription drugs, perhaps? New Orleans? Placing incompetent hacks everywhere imaginable? Cutting taxes again and again while never vetoing a single pork barrel spending bill? I guess the Bridge to Nowhere is an example of "using government positively to give people the tools to run their own lives." Quite a $230 million tool for those 50 or so people out there.

These hopelessly out-of-touch Washington pundits, who don't know policy any more than they know anything else besides the right cocktail parties (no matter how many whimsical books they write), ought to realize that moments here and there of triangulating rhetoric, with the occasional dollop of enormously costly symbolic legislation, don't actually add up to anything except mountains of debt.

A final quote from Brooks concerns British conservative David Cameron, who "has learned the essential lessons of Bushism. He offered a positive, governing conservatism. He talked about helping moms afford child care and helping the people of Darfur survive. "

That's exactly it. "Offering" a positive, governing conservatism, and "talking" about childcare and Darfur.

Friday, October 21, 2005

More excitement?

This could be fun. The technical term for it is a two-fer.

Thursday, October 20, 2005

Tales of FEMA

Yes, I know that this is way past beating a dead horse, but it was too amazing to pass up.

Recently posted on the NY Times website, in an article about how FEMA ignored warnings from their local people in New Orleans:

Later, on Aug. 31, [FEMA Regional Director Marty] Bahamonde frantically e-mailed Brown to tell him that thousands are evacuees were gathering in the streets with no food or water and that ''estimates are many will die within hours."

''Sir, I know that you know the situation is past critical," Bahamonde wrote.

Less than three hours later, however, Brown's press secretary wrote colleagues to complain that the FEMA director needed more time to eat dinner at a Baton Rouge restaurant that evening. "He needs much more that (sic) 20 or 30 minutes," wrote Brown aide Sharon Worthy.

"We now have traffic to encounter to go to and from a location of his choise (sic), followed by wait service from the restaurant staff, eating, etc. Thank you."

Wednesday, October 19, 2005

Fun reading

This certainly makes for fun reading. I suspect that Senator Schumer is off President Bush's Christmas list.

Don't make me laugh (or, on second thought, please do)

A reader, picking up on my comparison of DeLay's legal defenses against the money laundering indictment to taxpayers' using sham transactions to circumvent the clear intent of tax rules, brings the following to my attention, from a Washington Post article the other day:

Among the multiple grounds on which DeLay's attorneys have sought dismissal of the indictment is that "the law cover[s] the 'money laundering of funds' such as coins or currency, and ... the money transfers cited in the indictment involved 'checks' that were not 'funds.'

Tuesday, October 18, 2005

Latest on the Tax Reform Commission

The New York Times offers a fair amount of detail concerning the Tax Reform Commission's current intentions. No X-tax in it any more, by the way.

Here is the blow-by-blow with comments on each, followed by my general comments at the end:

1) Elimination of state and local tax deductions for individuals - This is probably correct on the merits given the correlation, however crude, between taxes and benefits received from government services. But political suicide in high-tax states that have lots of voters, and I wouldn't expect even Republicans in New York or California to be pleased. If defended as simplification, I'd note that the complexity of allowing the deduction, while not zero, is not terribly high.

2) Limiting the tax benefit for employer-provided health insurance - More political suicide. But here the change is not merely "probably correct on the merits," like the above, but enormously important to create some possibility, however slim, of slowing the runaway rate of rising healthcare expenditures. People who are less over-insured may be more cost-conscious, although then again this is not a very well-functioning consumer market (given lack of good information) even with more cost-consciousness.

3) Death to the alternative minimum tax (AMT) - obviously necessary, unless one instead greatly raises the exemption amounts and indexes it. But the plan might get less political credit for this from voters than its proponents might hope, because the threat of this tax is still a present not a future one for many Americans.

4) Charitable deductions allowed to all (rather than just itemizers), but only to the extent in excess of 1% of income. Probably a good change, eliminating the penny-ante items and given the lack of a good rationale for allowing it to itemizers only if one likes the deduction. Good for the churches, which to me is unfortunate, but that's just my bias.

5) Lower the amount of mortgage loan principal that can trigger deductible mortgage interest - hear hear, but not exactly likely to be popular. One small technical point, by the way - this is not entirely dissimilar to raising marginal rates for the wealthy, if one's extra income would be spent on a larger house that exceeds the ceiling.

6) Convert various deductions, such as that for mortgage interest, into fixed percentage credits - clearly a better approach than current law to items that aren't part of measuring income and that there is no particular reason to offer with higher reimbursement rates for high-income people.

7) Similarly, family adjustments (personal exemptions et al) are converted into credits. Similar rationale; too bad they aren't refundable (I assume).

8) Only 4 brackets instead of 6, top rate is 33% instead of 35%, lots of people at 15% - The number of brackets is really no big deal from a complexity standpoint. You just look at the table, and I don't think the tax planning aspects of fewer brackets are enormously significant in practice. Here is the nub of the Commission's political problem, which was built into their instructions rather than something they could help. Only a trivial rate reduction (at least apparently) for all the pain they are proposing to inflict. They couldn't cut rates anywhere near as dramatically as happened in 1986, because they had to use nearly all the revenue to pay for the AMT problem, which is still hypothetical not real for lots of people. We now have a verdict: did the AMT end up making tax reform easier or harder? The answer is harder, because it prevents the Commission from offering a more visible tax rate cut in exchange for the base-broadening.

9) Simplified and larger tax-free savings plans, with refundable credits for low-income savers. In general, I'd give this the thumbs up except that I am worried (even with the reduced mortgage interest deduction) about the following arbitrage: borrow against your home and get the credit, invest tax-free in the plans. Result: no more net saving, but the Treasury in effect writes you a check.

I wonder about how the revenue estimators treated the tax-free savings accounts, in determining that the plan is revenue-neutral relative to current law (as modified to extend the Bush tax cuts). I have a sickening suspicion that the estimators might have been told to look only ten years ahead, thus omitting the huge revenue losses in the out years from tax-free withdrawals. (My apologies to the Commission staff if I am wrong about this.) The real hilarity here, if you will, would come from the use of 10-year estimating to ignore the long-term cost, when the Bush Administration so recently was insisting on infinite-horizon forecasting of Social Security.

By the way, I wouldn't bet a nickel on the government's claim (if this plan were to be enacted) that the withdrawals will actually be tax-free. Fast forward ahead to 2020, if you will, when someone who is financially well-off is withdrawing funds from her huge tax-free savings account. Add in the detail that the government might be in desperate fiscal trouble, scrambling to renege on as little as possible of its near-term Social Security and Medicare commitments. What are the odds that the withdrawal will really be tax-free, no matter what Congress said in 2006 or so?

10) Now we get into the really complicated part. Two alternative plans for individuals:

a) No dividend tax, 8.25% capital gains tax on selling corporate stock, interest is taxed like wage income (i.e., up to 33%).

Although the Times account doesn't make this entirely clear, I am guessing this is matched with business taxation plan a: corporations get to deduct interest (though not dividends) and have economic depreciation as under a well-designed income tax.

I am not thrilled with this option. It leaves the debt vs. equity, interest vs. dividend distinction for companies to play games with, stripping out all the interest to go to tax-indifferent parties - unless the plan stops this somehow in a manner not clear to me at the level of detail in the Times article.

To my mind, the only reason for the capital gains tax on selling corporate stock is optics, IF we can be reasonably confident of taxing economic income reasonably broadly at the corporate level.

Or alternatively:

b) 15% tax rate for individuals on interest, dividends, and capital gain. Companies get to expense their investments, but no interest deduction.

Here the interest vs. dividend distinction, a much bigger thorn in the side of the income tax than is generally recognized, is greatly reduced. But note that there is still a double tax on corporate investment, extended to cover both debt and equity investment. And equity is still better than debt, from a tax standpoint, because companies don't have to pay out the dividends and give their investors the tax hit. (Assuming that the debt vs. equity distinction as applied tracks with whether there is mandatory income recognition at the owner level.)

I suspect that this plan is dead on arrival. The Commission was unable to come up with a politically feasible plan. I don't blame them for this, as I don't think I could have done any better given the constraints under which they had to work. The killer, politically (although it would have had little hope anyway) was having to impose visible base-broadening in exchange for tax reductions that were much less visible than rate reductions because they involved the AMT.

The result could be another bad setback for the tax reform cause, killing the issue until the next time around.

For the Bush Administration, this is certainly not the magic bullet to restore those sinking poll ratings. I would not be surprised if they were to bury this plan under the heaviest rock they can find.

UPDATE: To no one's surprise, business interests have begun lobbying against the Tax Reform Commission's report, without even waiting for it to be issued.

Heaven is reserved to the faithful

Bruce Bartlett has been fired from his position as a senior fellow at the conservative think tank, the National Center for Policy Analysis. His sin was writing a forthcoming book, entitled Impostor : How George W. Bush Bankrupted America and Betrayed the Reagan Legacy.

The title would tell you a bit about what to expect from the book even if you have not been following Bartlett's columns. According to the New York Times, he was fired after the Center's president saw the manuscript.

Needless to say, the Center denies firing him because of the book's point of view. Rather, they were concerned that it offers "an evaluation of the motivations and competencies of politicians rather than an analysis of public policy."

Yeah, right. Next thing you know, Bartlett will be accused of playing "the blame game."

By the way, Bartlett's conservative credentials are pretty strong. He served in the Reagan Administration, promoted supply side thinking, and has been a big consumption tax advocate for many years. He supports Social Security privatization. His basic critique of the current Administration, also a theme of mine although I do not line up on the same side of the ball more than 40 percent of the time, is that they aren't conservatives. This is hard to dispute if you interpret "conservative" in the traditional quasi-libertarian, classical liberal, small-government, free market sense. On the other hand, the Bush Administration clearly is "conservative" if you interpret the term to fit, say, Brezhnev in the 1960s Soviet Union or the Nazis in 1930s Germany.

Think tanks with conscious ideological orientations certainly have the right to drum out people who cease to be consistent with their point of view. Thus, I suppose it stands to reason that Bartlett would have been fired had he, say, decided that "socialism with a human face" was his thing. But it is sad if conservative organizations no longer tolerate what I would say is true conservatism in its best sense. And even if one disagrees with Bartlett from a conservative standpoint in evaluating the Bush Administration, it is disgraceful that dissent within the ranks is evidently not allowed. This is storm trooper conservatism, not the leave-me-alone conservatism that the likes of Grover Norquist pretend to support.

I also note the following sentence from the Times article: "In response to a question about whether the administration had pressed the organization about Mr. Bartlett, [the Center's President] relayed a reply through a spokesman saying he had never had any conversation about Mr. Bartlett with anyone in the White House."

Okay, maybe one shouldn't make anything of this. It was a natural question to ask, and if the answer was no then of course they would say so. [Although is it merely one of those carefully drafted non-denial denials? After all, one needn't personally have a "conversation" with anyone, least of all anyone officially "in the White House," in order to receive and follow White House orders.]

But then again, if the answer was yes they would also say no. So the answer inevitably fails to convey any useful information. Its only significance is its putting them on record so they are liars (hairsplitting aside) if it turns out to be false.

I wish I felt less cynical and skeptical about this point, since I have no actual information suggesting that this was a White House-associated political hit. But does anyone want to bet that it wasn't?

Very, very interesting

Perhaps it's just another trial balloon from the Tax Reform Commission, or perhaps it's for real. But in any event, a Ryan Donmoyer story, just posted in here, bears what proves to be the misleading heading: "Bush's Panel May Propose Version of Flat Tax in Final Report."

What makes it potentially misleading is that what they are said to be considering proposing is David Bradford's X-tax, not the familiar flat tax as such.

Technically, the headline is accurate, in that the X-tax is indeed derived from the flat tax. It is, at the least, a "variant" of the flat tax. But it isn't really a "version" of the flat tax, because it isn't flat.

True, the flat tax isn't flat either, since it has a zero bracket. But when you have multiple brackets like the X-tax, it is simply misleading to call it a "version of the flat tax." Not to malign Donmoyer or assert intentionality here, but it sends a signal about the distributional aspects of the proposal that simply is not accurate. The X-tax, depending on its design, can indeed be as progressive as the current income tax, or even more so given the ease of sheltering economic income under the current system.

So I hope Democrats, progressives, etc., will give this a serious look on the merits even though it comes from a Bush-appointed panel, and even though it is related to the flat tax (which they correctly regard as significantly less progressive than current law).

Fat chance, I suppose. On the hopeful side, Bill Gale of Brookings doesn't outright slam it, noting that the X-tax is "an effort to take the flat tax and make it more progressive." I appreciate that Gale may oppose it on the merits in good faith, and that's fine. But others on the liberal side, less well-informed and responsible, will no doubt start baying at the moon any minute now.

Meanwhile, those inclined to oppose the X-tax should note who DOES slam it in the article: Skadden attorney Pam Olson, who was the Treasury Assistant Secretary for Tax Policy, under the Bush Administration, from 2002 to 2004. Olson predicts that it will "land with a thud," warning that under it, as the article paraphrases, "U.S. companies would stop issuing bonds, municipalities would face higher borrowing costs, [and] the housing and life insurance industries would become less attractive to investors."

This is the usual interest group, business-as-usual pablum. No insult intended to Olson here, but clearly she appears to be representing those interests, as one would expect. Something for people not affiliated with those interests to keep in mind.

It is ludicrous to say that U.S. companies would stop issuing bonds under the plan. Would grass grow in the streets, too? Bond interest would no longer be deductible, since financial instruments are ignored by the X-tax. But the interest income wouldn't be includable to investors. So the change is a wash - except insofar as the companies have been issuing bonds to tax-exempts (which is exactly what they do most of the time) so that their business income ends up being totally untaxed. Is that what we need to stop grass from growing in the streets, when other economic activity is being taxed?

It actually is possible to keep municipalities from losing overall under the change. E.g., it's well known that direct federal grants and revenue-sharing do a better job than municipal bonds at delivering the subsidy to the governments, rather than to high-bracket investors. But ending the bond preference has long been an aim of tax reformers of all stripes. Note, by the way, that the bond interest still wouldn't be taxable - it merely would lose its tax advantage over corporate bonds (leaving aside the tax-indifferent investors point).

By the way, I would love to ask Olson why municipalities would face higher borrowing costs if corporations totally exit the bond market as she predicts. Seems to me that this would be a big boon to the municipalities, wiping out the rest of the supply curve.

As for housing and life insurance, anyone who thinks their relative advantages under current law are economically desirable has a pretty hard case to make.

Again, I don't want to be obnoxious here to an intelligent and nice individual, with whom I have various friends in common, who is just doing her job. But the Olson quotes really ought to alert Democratic/left/liberal foes of the Bush Administration that perhaps the Commission's X-tax proposal (if it really is made) is worth looking at after all.

My biggest concern about the proposal, by the way, is that the form in which a Republican Congress would actually enact it would no doubt be odious. But this is true of any proposal that they might consider while the DeLay-Abramoff-Norquist junta continues to rule. The point of the TRC's work, as I see it, is to set forth options for consideration a few years down the road if the Republicans return to sanity and bipartisan compromise once again becomes possible.

Sunday, October 16, 2005

Still a grotesque disgrace

I continue to find the NY Times' behavior in the Judy Miller affair unfathomable. The difference between Judy Miller and Jayson Blair is analogous to the difference between an axe murderer and a jaywalker.

UPDATE: Here's something interesting from the Washington Post:

Craig Pyes, a former contract writer for the Times who teamed up with Miller for a series on al Qaeda, complained about her in a December 2000 [!!!!!] memo to Times editors and asked that his byline not appear on one piece.

"I'm not willing to work further on this project with Judy Miller," wrote Pyes, who now writes for the Los Angeles Times. He added: "I do not trust her work, her judgment, or her conduct. She is an advocate, and her actions threaten the integrity of the enterprise, and of everyone who works with her . . . She has turned in a draft of a story of a collective enterprise that is little more than dictation from government sources over several days, filled with unproven assertions and factual inaccuracies," and "tried to stampede it into the paper."

Thursday, October 13, 2005

Sometimes paranoids are right

The Miers nomination has been such a huge blunder that one struggles to explain it. Probably, the explanations already out there are good enough (Card vs. Rove White House wars, Bush feeling adolescent defiance towards attacks on his cronyism, her lack of any paper trail, etc.). But here is an additional possibility that occurred to me. Its virtue is that it would suggest that Miers had a genuine advantage, from Bush's perspective, over any other possible appointee, thus making the risk (however ill-appreciated) of a hostile reception more worth taking.

Suppose the White House wanted a Justice who would not only vote its way on executive power issues (which is what Bush really seems to care about), but be a double agent, covertly consulting the White House during important cases regarding how to get 5 votes, what the other Justices were thinking, etc. Most prospective Bush appointees, even lockstep hard-line conservatives, probably would not dream of doing such a thing, and it would be dangerous even to ask them. [Maybe Gonzalez would do it, too, and Bush seems to have wanted to name him, but note that Gonzalez has a bit more prominence & career independence than Miers.]

Perhaps Bush knows that Miers is willing to play such a role.

Wednesday, October 12, 2005

No, no, no

Time to quarrel with the liberal bloggers, who pretty well capture my sentiments about the Bush Administration but are people I would disagree with on various issues under saner political circumstances.

What I take to be the principal emerging response among them to the trial balloon from the Tax Reform Commission (see my previous post) is well exemplified by this comment in Eschaton, entitled "How They Want to Pay for Paris Hilton's Tax Cut," and saying that "it's time to start getting Republicans on the record about this cunning plan."

Okay, the Republicans have so exploited the tactic of mindlessly repeating talking points ad nauseum that it's understandably tempting for Democrats to play the same game, and trot out good old Paris Hilton every five minutes. But is supporting the AMT, and opposing limits on wasteful upper-end health insurance tax benefits, as well as on tax breaks that promote borrowing and big homes, really a good place to deploy this strategy?

Making changes such as these is only possible in a bipartisan environment where the two major parties give each other cover for taking on sacred cows. I fully understand that this is not the time for bipartisan cooperation, in that Bush has proved for five years that he does not cooperate in good faith. But it would be nice if these sorts of ideas could still have a chance if and when the political environment changes. And that of course is my hope regarding the work of the Tax Reform Commission - not that anything good will come out of it right away (at present it is bordering on impossible to have anything good come out of the U.S. Congress), but rather that its work will shape high-minded bipartisan compromise possibilities a few years down the road. These, in turn, could involve either revenue-neutral tax reform or tax increases to keep the U.S. Treasury (not to mention Social Security and Medicare) afloat.

Tuesday, October 11, 2005

Tax Reform Commission

Among the changes to current law that the Tax Reform Commission (per Bloomberg News:) reportedly is going to recommend are the following:

1) Reduce the cap on home borrowing that produces deductible home mortgage interest expense from $1 million to $350,000. Also, cap the tax saving from the deduction at 25% of the amount deducted, even for people in the 35% income tax bracket.

2) Cap the employer deduction (or the employee exclusion? - It's not entirely clear which) for tax-free health insurance at $11,000, which is the value of the coverage the federal government provides to its own employees.

3) Repeal the alternative minimum tax (##1 and 2 are supposed to pay for a big chunk of this).

4) Possibly reduce or repeal taxes on investment income.

## 1 through 3 are almost inarguably good tax and social policy. It will be interesting to see if anyone in Congress, from either party, signs on. (It would really almost have to be people from both parties or neither.) For #4, a really crucial consideration is how this is integrated with deductible borrowing. If people can borrow deductibly to finance tax-free investment income, that is a pretty big problem. Reducing the home borrowing cap would help a lot on this front, however.

UPDATE: It occurs to me that the story about what the Commission is considering must be coming out now as a trial balloon. But perhaps the very fact that enactment any time soon is unlikely will spare it from being shot down. If the Democrats decide to attack this, I will certainly be disappointed in them.

A sense of relief

At heart, perhaps we are all still seven years old. Or maybe I should just speak for myself. Part of me is still the only Met fan on my block, growing up in the Bronx towards the tail end of the last pre-Steinbrenner Yankee empire, while the Mets were still as pitiful as they have often continued to be. "Ron Hunt is better than Bobby Richardson!" was the only argument I could even make, and somehow we all had the strange belief that our teams' ability and merits said something about ours.

Nonetheless, I am not unreasonable or vindictive. It's absolutely fine with me for the Yankees to make the playoffs say, once every three years or so, and to win a world championship once every fifteen years or so, even though these are above the per-team average.

When the Yankees threaten to win every single year, however, with their obscene $205 million payroll, playing teams with 40-man rosters that are only 25% as high (or in the Angels' case maybe 40 to 50%), it gets sickening, and it gets really old. I don't even enjoy it when they lose (unless it is especially humiliating for them, like last year), so much as I am relieved - thank goodness that's over; now I can enjoy the rest of the playoffs; why couldn't they have lost even earlier and spared me a lot of anxiety.

Let them compete under fair circumstances, and I would complain less (also they would win a whole lot less). The regulatory way of doing this is salary caps. The free market solution would be allowing unlimited team movement, which would cause more teams to enter the NY area until an equilibrium was reached where the expected return from a franchise in NY was no greater than that from one in Pittsburgh or Kansas City.

As conservative and liberal economists would readily agree, often there is nothing worse than a market that is half-regulated. Case in point: the savings & loans crisis of the late 1980s. Better to restrict S & Ls' permissible investment choices, even if in a narrow and hidebound way, than to let them invest however they like with the owners getting the upside and the US government (via bank insurance) getting the downside. In other words, even if a fully free market was best, a fully regulated market was better than one half-regulated and half not.

Similarly, let's make the Yankees compete either with less regulation (teams can go wherever they like) or else with more (salary caps) and see how well they do. My guess is that a playoff spot every three years and a championship every fifteen is way on the high side as an estimate.

Future biographers take note

While I respect John Roberts, in the end he is simply too much of an intellectual gadfly, flitting from this subject to that, but never digging in with any depth.

Harriet Miers, by contrast, found her great theme some years ago, and has been amplifying it ever since.

Some choice quotes from her in today's NY Times piece on her paperwork from out of Texas:

"You are the best governor ever - deserving of great respect."

"[You and Laura are] the greatest.”

"Texas has a very popular governor and first lady!" [A true writerly touch here, in her use of the exclamation point.]

"I was struck by the tremendous impact you have on the children whose lives you touch."

"Keep up all the great work. The state is in great hands. Thanks also for yours and your family's personal sacrifice." [I would have thought that “your and your family’s” is better grammatically. Shows how much I know.]

"Hopefully Jenna and Barbara recognize that their parents are 'cool' - as do the rest of us."

"Keep up the great work. Texas is blessed."

"All I hear is how great you and Laura are doing … Texas is blessed." [Another writerly touch in the repeated use of "blessed,” assuming these are indeed from different quotes. The latest Sunday Times Book Review notes Joan Didion's use of repetition in her latest book.]

Monday, October 10, 2005

U.N. Secretary General George W. Bush??

Yes, I know it sounds ludicrous. But he has always failed up before, since the earliest Harken Energy days, and it's hard to see where else he could go.

Thursday, October 06, 2005

Money laundering and the economic substance doctrine in tax

One of the emerging DeLay defenses under the money laundering indictment is that he followed the law banning corporate contributions in Texas, because there were no such contributions. Thus, if Texas corporations gave $190,000 to the Republican National Committee, which immediately gave $190,000 to DeLay's gerrymandering jihad, supposedly the law has been followed.

The notion that this is no less illlegal than direct forbidden contributions, and constitutes attempted evasion of the Texas rules via money laundering, is identical to the economic substance doctrine in the income tax, whereby pointless paper-shuffling transactions that have no significance or purpose are disregarded as shams. In both areas, the doctrine is needed to stop people from making a mockery of the laws. Also in both, it means that people just have to go to the effort of differentiating the offsetting transactions a bit, with line-drawing questions regarding whether one has added enough sand to get away with it.

In the DeLay case as set forth in the indictment, it's not even a close call. Clearcut money laundering, cruder and more obvious, even, than the typical KPMG tax shelter.

Sounds like a good tax policy to me

From today's New York Times:

"Proposals to use tax breaks for rebuilding areas devastated by the recent hurricanes may provide only limited help to people and businesses that suffered actual losses, according to many economists. The biggest beneficiaries could turn out to be companies from outside the devastated areas that have big federal contracts to carry out cleanup and reconstruction work."


Bush has never vetoed a single pork barrel spending bill, but he is threatening to veto a bill that would bar the use of "cruel, inhuman or degrading treatment or punishment" against anyone in United States government custody.

One often hears discussion of torture's permissibility as a means (e.g., to head off a nuclear disaster). But for some people, possibly, torture is actually an end.

Wednesday, October 05, 2005

An interesting empirical finding, but what we do with it is unclear

From Landry, Lange, List, Price, and Rupp, "Toward an Understanding of the Economics of Charity: Evidence from a Field Experiment," National Bureau of Economic Research Working Paper 11611 (September 2005):

In measuring factors that affect charitable donation rates, "we find that a one standard deviation increase in female solicitor physical attractiveness ... is roughly equivalent" in its positive effect on participation to moving from the least favorable to the most favorable incentive approach that they tried. "This result is largely driven by increased participation rates among households where a male answered the door."

Still, my favorite NBER empirical paper of all time remains Joel Slemrod's justly infamous paper in which he found that death is tax-responsive (people die more when it is more tax-favorable to do so). Joel carefully noted that his data did not permit him to determine whether the tax-responsiveness pertained to actual times of death or merely to reported times of death.

A good working definition of "compassionate conservatism"

From Robert Samuelson in the Washington Post:

"In practice, Bush has taken the most self-serving aspect of modern liberalism (its instinct to buy public support with massive government handouts) and fused it with the most self-serving aspect of modern conservatism (its instinct to buy support with massive tax cuts)....

"'Compassion' for Bush has consisted mostly of distributing new benefits to large constituencies in the hope of purchasing their gratitude and support....

"Spend more, tax less. That's a brazen political strategy, not a serious governing philosophy."

Monday, October 03, 2005

Cronyism par excellence

For all I know, Miers might not be too terrible as a Justice. But Bush is starting to remind me of Caligula, who named his horse a consul.

Forthcoming NYU events, part 2

The schedule for this spring's Tax Policy Colloquium at NYU, which I will be running with Alan Auerbach, stands at this point as follows:

January 12 – Daniel Shaviro, NYU Law School, “Households and the Fiscal System.” Guest commentator Anne Alstott, Yale Law School.

January 19 – Alex Raskolnikov, Columbia Law School, “An Economic Analysis of Tax Enforcement and the Self-Adjusting Penalty.”

January 26 – Neil Buchanan, Rutgers Law School, [probably a piece on long-term budgeting issues].

February 2 – Jason Furman, NYU Wagner School, “Coping With Demographic Uncertainty.”

February 9 – Stacy Dickert-Conlin, Michigan State University Economics Department, "Love at What Price? Estimating the Value of Marriage."

February 16 – Lee Anne Fennell, NYU Law School (visiting), "Taxation Over Time" (with Kirk Stark, UCLA Law School).

February 23 – Alan Auerbach, Berkeley Economics Department, [paper to be determined.]

March 2 – Joseph Bankman, Stanford Law School, and David Weisbach, University of Chicago Law School, “The Superiority of an Ideal Consumption Tax Over an Ideal Income Tax.”

March 9 – Anne Alstott, Yale Law School, “Revisiting the Fiscal Politics of the 1920s.”

March 23 – Howell Jackson, Harvard Law School, [paper to be determined].

March 30 – Victor Fleischer, UCLA Law School, “Risky Compensation.”

April 6 – Ed McCaffery, USC Law School, “Shakedown at Gucci Gulch: A Tale of Death, Money, and Taxes.”

April 13 – Mitchell Kane, University of Virginia Law School, [paper to be determined].

April 20 – Jeffrey Liebman, Harvard University, Kennedy School of Government [paper to be determined].

Forthcoming NYU Law School events, part 1

For those who are interested, I'm posting two schedules. The first concerns a conference to be held on May 4-5, 2006 at NYU (I should mention sponsorship by NYU, the American Enterprise Institute, the Burch Center for Tax Policy and Public Finance at Berkeley, and the Fund for Tax and Fiscal Research at Harvard Law School). Alan Auerbach and I are collaborating to do the heavy lifting in terms of setting it up.

Tentatively, and I admit not very interestingly, entitled "Key Issues in Public Finance," it is in fact a conference in honor of David Bradford, but one that is intended to be serious and substantive, looking primarily forward at issues that interested David.

The paper topics, each with an author and two discussants, are as follows

1) ISSUES OF BUDGET MEASUREMENT - author is Laurence Kotlikoff, Boston University; discussants are myself and Kent Smetters, University of Pennsylvania.

2) CONSUMPTION TAX IMPLEMENTATION - author is David Weisbach, University of Chicago; discussants are Edward McCaffrey, USC, and Joel Slemrod, University of Michigan.

3) ISSUES OF TRANSITION TO A CONSUMPTION TAX - author is Louis Kaplow, Harvard University; discussants are James Hines, University of Michigan, and Kyle Logue, University of Michigan.

4) THE NEW VIEW OF CORPORATE DIVIDENDS - author is Roger Gordon, UC San Diego; discussants are William Andrews, Harvard University, and George Zodrow, Rice University.

5) THE CHOICE BETWEEN INCOME TAXATION AND CONSUMPTION TAXATION - author is Alan Auerbach, UC Berkeley; discussants are Glenn Hubbard, Columbia University, and Alvin Warren, Harvard University.

6) FISCAL DECENTRALIZATION - author is Wallace Oates, University of Maryland; discussants are Harvey Rosen, Princeton University, and Charles McLure, Hoover Institution.

Conference volume tentatively set to be published by the Harvard University Press. I believe that interested people will generally be welcome to attend the conference.

Sunday, October 02, 2005

1 + 1 = unindicted co-conspirators??

Read this and this, and there would seem to be a definite chance that, under Fitzgerald's theory of the Plame case, there was a criminal conspiracy involving, not just Rove and Libby, but also Bush and Cheney. This suggests the possibility that Fitzgerald will go beyond indicting Rove and Libby to name Bush and Cheney as unindicted co-conspirators.

This presumably would be accompanied by a formal referral to the House Judiciary Committee, not that they would do anything with it.

Quite a turn of the screw if it happens.

Thursday, September 29, 2005

Chief Justice Roberts

Despite being a law professor, I'm really not all that interested in the Supreme Court. Questions such as, "What do you think of Justice Kennedy's view of federalism, as set forth in his concurrence in the Blah Blah case?" strike me as distinctly less intellectually rewarding than [fill in the blank - Watching paint dry? Too cliched. Memorizing Ramones lyrics? At least they're funny sometimes. Reading airport fiction? At least it might be titillating.]

That being said, it's fine with me that Roberts was confirmed by a large vote. While presumably not the person I would have picked, he does at least appear to be highly qualified (a rarity in Bush appointees to anything), not to mention a thoughtful individual rather than a mad dog.


In today's New York Times, David Brooks, in keeping with his self-placement as a quasi-independent-minded Republican, issues a quasi-criticism of Tom DeLay. Although Tom is a lovely man, we are told, he is simply too partisan. But this is an endearing flaw in a way, because it shows selfless enthusiasm to help the team. Brooks notes that DeLay is charged with shenanigans to help his team win, not with stealing money for himself.

Let's leave aside all those lobbying junkets, which certainly had something in it for ol' Tom. This is not actually all that endearing. Would partisanship and the selfless desire to help the team be a satisfying defense of Bin Laden, Joseph Goebbels, or Communists around the world during the Stalin era? The U.S. political system cannot and will not survive if enough people take partisanship to the lengths that DeLay has.

Brooks quasi-acknowledges this, and ends with a quasi-dig at the Democrats suggesting that they will be as bad in their turn as DeLay. I suppose one can't rule this out, but it would take some doing.