Sunday, August 27, 2006


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

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

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

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

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

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

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

Wednesday, August 23, 2006

More on the Murphy decision

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

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

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

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

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

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

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

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

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

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

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

That's what I'm talkin' about

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

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

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

Back from vacation

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

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

Friday, August 11, 2006

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

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

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

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

Then more nonsense in the same vein.

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

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

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

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

But now we learn the following from NBC News:

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

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

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

Thursday, August 10, 2006

Max Sawicky is wrong

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

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

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

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

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

Herewith Max:

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

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

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

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

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

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

Thursday, August 03, 2006

Quote of the day

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

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

Tuesday, August 01, 2006

A canticle for Lieberman

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

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

So much for the Laffer Curve

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

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

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