Monday, October 23, 2006

Same old bloody rubbish

I hate to call Bush French or something, but he certainly lives by the slogan: "Toujours l'audace."

He's up to an old trick today, denying that he ever said he wanted to "stay the course" in Iraq. Unfortunately, as Dan Froomkin points out in his Washington Post blog (which is hands-down superior to any print column that the Post regularly publishes), he actually did say "stay the course" repeatedly.

Word of clarification: by repeatedly I mean again and again and again and again.

Now it turns out that Bush, and by strange coincidence his aides, are out there denying in almost identical words that he ever said any such thing.

This brings back the nostalgia for me a bit, because I remember the Social Security debate. Recall that his plan, such as it was (since he disclosed it but declined to endorse it), for many years bore the label "privatization." I argued in my 2000 book, Making Sense of Social Security Reform, that this label was in fact a misnomer for a genre of proposal that in essence would lend people the money to make debt-financed purchases of government-selected stock and bond funds. But they called it privatization anyway, I think sincerely even if inaccurately, because this term had a positive valence in the conservative think tank circles where it spent a couple of decades gestating.

Once Bush was actually proposing it, this handlers started to focus-group the name "privatization," and found that it was a flop with the general public. So, as I discuss in what I considered one of the more amusing sections of my forthcoming book, the name marched ever onward from privatization to private accounts to personal accounts to personalization (this last one being too strained and ludicrous to catch on).

The amazing thing about this march of the fiscal language terms was how shamelessly and egregiously they would accuse anyone of bias who used a term that they had used last week but were no longer using this week.

We have always been at war with Eastasia, not Eurasia, or is it the other way around.

Sunday, October 22, 2006

Tax Reform Act of 1986

Today is the 20th anniversary of the enactment of the Tax Reform Act of 1986. At the time, I had a seat near the action as a Legislation Attorney at the Joint Committee on Taxation. It was easy to be cynical about the political process that led to its enactment, and I was, but compared to today the word Pollyanaish seems fairly apt. Notwithstanding the sleazy "rifleshot" transition rules, exempting particular companies from adverse changes, that we put in, presumably, to buy individual votes. And notwithstanding the core reason for its enactment, which was the "dead cat" problem - few politicians actually wanted it, and they all came to understand fairly early on that the voters didn't really want it, but whoever let it die (Rostenkowski, Packwood, the White House) would have a "dead cat" rotting on his doorstep.

Still, at the time there was an actual policy process, with staffs that had ideals and institutional memories getting to play a role, and there actually were some powerful people who cared at least a bit about good policy (e.g., Don Regan and Dan Rostenkowski), and there was bipartisan cooperation, along with a notion that the voters would reward actual achievement (or at least punish its absence), and there was a sense of fiscal responsibility. It wasn't actually Pollyanna. But it was a functioning political system, sleazy and ignorant to be sure if one should be too high-minded about it, but far as yet from being utterly debased and dysfunctional.

Thursday, October 19, 2006

The Mets lose

Well, they had a good year, and Oliver Perez apparently pitched well in Game 7, and the new Cardinal closer, Wainwright, has an absolutely vicious curveball.

Thursday, October 12, 2006

Act now while supplies last

My book, Taxes, Spending, and the U.S. Government's March Towards Bankruptcy, is coming out at the end of next month (November 30 in-stock date). If I'm not mistaken, it has blurbs supplied by Bruce Bartlett, Richard Epstein, and Jason Furman. Here is the publisher's description:

What's in a word? Plenty, when it's a word such as “taxes,” “spending,” or “deficits” that pervades Washington political debate despite lacking coherent economic content. The United States is moving toward a possible catastrophic fiscal collapse. The country may not get there, but the risk is unmistakable and growing. The “fiscal language” of taxes, spending, and deficits has played a huge and underappreciated role in the decisions that have pushed the nation in this dangerous direction. This book proposes a better fiscal language for U.S. budgetary policy, rooted in economic fundamentals such as wealth distribution and resource allocation in lieu of “taxes” and “spending” and in the use of multiple measures (such as the fiscal gap and generational accounting) to replace misguided reliance on annual budget deficits.

Available for pre-order here from Amazon and here from Barnes & Noble.

At the moment, Barnes & Noble is offering a better paperback price.

Wednesday, October 11, 2006

Quote of the day about U.S. tax politics

From House Ways and Means Chair Bill Thomas, whose epitaph ought to be "There Were Plenty Worse" - and I mean this as high praise, all things considered:

"Don't think in this business that you're dealing with the best and the brightest. You're dealing with the available and the willing."

Sunday, October 08, 2006

Sometimes it's fun to be wrong

Make that, A LOT of fun.

I admit it, I thought the Yankees' chances of beating the Tigers were somewhere in the range of 90 to 95 percent.

Thursday, October 05, 2006

Fool or tool?

David Brooks' op-ed today, a thumb-sucker about how the Foley scandal reveals a "tear in our social fabric," contains the following astounding lines:

"In discussing the Foley case, the political class, with its unerring instinct for the aspect of any story that will be the least important to average Americans, has shifted attention from Foley’s act to Denny Hastert’s oversight of it. It has fled morality to talk about management."

OK, David, we understand that you won't get invited to as many cocktail parties if you don't try to help take the heat off the Republican Congressional leadership. I suppose that would make your life less fun, although perhaps you could use the extra time to do some actual research for your next sociological tract.

But leaving aside the impudence of Brooks' posing as not part of the "political class" but rather as one in touch with "ordinary Americans," does he really think Hastert is being criticized for bad management skills? Or perhaps I should say, does he really think he can con readers into thinking this is the issue being posed?

Deliberately covering up and enabling the actions of a vile sexual predator in order to help the Republicans keep control of Congress is not a "management" issue. If it isn't a moral issue, then I am not entirely clear on what is. Of course, I already know from what I have and haven't read in Brooks that torture isn't a moral issue either.

Also, why is Brooks so sure (or why does he pretend to be so sure) that "average Americans" don't care about the moral issue of supposed moral leadership types treating potential sexual abuse of boys as less important than their retaining as much power as possible?

Wednesday, October 04, 2006

Would Al Gore have prevented 9/11?

As I look at the public information that has dribbled out over the last few years, I increasingly think that the answer is Yes.

I should note that this is nothing particular about Gore. The sense I increasingly get is that just about anyone and everyone who has been a serious Presidential candidate in the last 50 years could also have prevented 9/11.

If this reasoning is correct, then 9/11 would have been prevented, not only by Al Gore, but also (for example) by John McCain, Bill Clinton, Bob Dole, George H.W. Bush, Dick Gephardt, Michael Dukakis, Ronald Reagan, Fritz Mondale, Jimmy Carter, Gerald Ford, Richard Nixon, George McGovern, Hubert Humphrey, Barry Goldwater, and Dwight Eisenhower, to name just a few.

Point 1: It has become clear that the U.S. intelligence community was very, very close to breaking the plot. If the FBI, CIA, and a few others such as local law enforcement had pooled their information a bit sooner and better, they had everything they needed to stop the attacks. The highest levels also fully realized how serious and imminent the al Qaeda threat was, and they tried desperately and repeatedly to get the Bush Administration to pay attention.

Examples include the infamous "Bin Laden determined to attack in U.S." memo, the CIA guys who went to see Bush at his ranch and were told "OK, you've covered your ass," and of course the most recently revealed briefing in which Tenet tried to get Condi Rice and several other top Administration officials to pay attention, but got the brushoff.

What stimulated this line of thinking on my part was Condi's non-denial denial that it was "incomprehensible" that she could have gotten these warnings and paid no attention. Various anti-Bush bloggers naturally riposted along the lines of: "I couldn't have said it better myself."

Given the seriousness of the warnings, it is plausible that any of the above-named actual or hypothetical Administrations would have paid attention. Likewise, would any of them, if invading Iraq, have done absolutely no planning for the occupation whatsoever? And then made absolutely no effort to succeed, such as by bringing in competent staff rather than political hacks? Again, this is a wildly unique Administration. The resistance to making any inquiry into the al Qaeda threat is completely consistent, however, with how they've acted on other occasions before or since. They never pay attention to information that doesn't fit their biases, even when it is in their interest to do so.

Surmise 1, therefore, is that in any Administration but this one there would have been a serious nudge from the top to try to put all of the pieces together. And since we were so close to breaking the plot, Surmise 2 is that this would have done the trick.

So we have this buffoon with a fifth grade reading level, who "knows" that Iraq is going well even though he had never heard of the Sunnis and Shiites until about a year ago, who is campaigning for continued power on the ground that only he can make us safe. Yet not only has he made us much less safe with the Iraq misadventure, as his own intelligence officials have determined, but he heads the one and only conceivable U.S. government that could have bungled the job of preventing 9/11.

I always thought I liked irony, but this one is a bit too rich even for me.

Tuesday, October 03, 2006

My Public Economics class

Today's subject: social insurance.

xtIt's odd how leading economists, including very good ones such as Jonathan Gruber, the author of the textbook I am using, acquiesce to categories that have no economic substance. They could say that they're deferring to common usage, but don't always do so and may not always realize it.

Case in point: Gruber defines social insurance - following prevailing conventional wisdom - in terms of private insurance, which he says is characterized by (1) premiums, (2) event conditioning (i.e., it's paid when and if X happens), and (3) lack of income conditioning. This supposedly explains why Social Security is "social insurance" but the income tax and welfare system aren't.

In fact, insurance is a kind of bet one places to hedge other bets one is forced by circumstances to make with the aim of directing dollars to states of the world where they are expected to have greater marginal value in utility terms. One doesn't insure against horrific events, such as the death of a child, that don't make the marginal dollar more valuable. One does sometimes insure against good things, such as living longer & thus needing more money, or having an untreatable medical condition that becomes treatable.

Let's look at Social Security and the 3 supposed key features. It doesn't meaningfully have premiums absent arm's length exchange. What it has is the arbitrary designation of certain compelled tax revenues as ostensibly earmarked to pay over the long term for the program. Earmarking is an interesting issue, having to do with the effort to create political binding pre-commitment, but has nothing to do with premiums as such. If they ended the earmarking and folded the Social Security premiums into general revenues, absolutely nothing would change beyond bookkeeping unless (as is plausible) actual political decisions changed.

Event conditioning: OK, the Social Security life annuity addresses life expectancy risk and provides insurance against living "too long." Probably not a mode of insurance that the government has to provide on adverse selection grounds, the usual lead argument for government involvement. Rather, the argument is paternalism if people under-save and under-annuitize with a dollop of externalities if they would get public support in the absence of other resources.

But insofar as you expect to live to retirement age, a retirement benefit is not event-conditioned in the usual insurance sense - it relates to an event that just happens at a certain point, rather than one that is risky.

OK, lack of income conditioning. Well, it is pure formalism to say that Social Security isn't income-conditioned. Even leaving aside the payroll tax financing to focus exclusively on the benefit side, we could make it income-conditioned with no change in substance whatsoever if we simply reshuffled existing fiscal rules so that the effect of partial income taxation of Social Security benefits was formally made part of Social Security.

Also, why would anyone say insurance isn't income-conditioned? All insurance other than automobile insurance isn't automobile accident-conditioned. Likewise, insurance that isn't income insurance isn't income-conditioned. By definition, income insurance is income-conditioned and other insurance isn't.

We don't observe much income insurance outside of the fiscal system due to the adverse selection problem. (People expecting low income would disproportionately sign up.) This is why the government provides it through income taxation and welfare, among other fiscal instruments. As recognized in the Mirrlees tradition in optimal income taxation, income insurance via taxes and welfare is the government insurance example sine qua non.

Only, it doesn't have anything that we arbitrarily label as a premium, so the economic substance doesn't count.

Monday, October 02, 2006

Mark Foley and Iran

Anyone who doesn't understand that the Foley affair significantly increases the likelihood of an attack on Iran, as a way of changing the subject, doesn't understand these guys very well.

Non-denial denials

Responding to the Woodward book, Condi Rice calls it "incomprehensible" that she would have brushed off attack warnings from CIA director Tenet, and "ludicrous" that Rumsfeld wouldn't have been returning her calls.

In Washingtonspeak, the use of these terms is synonomous with admitting that the statements are true.