Survivor 1 winner Richard Hatch has been indicted for tax fraud, including failure to report the $1 million prize that he won on the show. As a big Richard Hatch fan (as a TV character - I wouldn't actually want to have to deal with him), I must admit to feeling sorry for him. Also, given how many millions of people know that he won the million dollars, and given as well that Michael Brown of FEMA (who didn't know there were people in the Superdome) does not head the IRS, this was not exactly a case of immorally but rationally playing the audit lottery. It seems clearly to have been a case of self-destructive pathology (which is not to challenge in any way that the IRS is doing what it must in going after him).
Survivor is actually the only network show that I have watched regularly in the last couple of decades, and Survivor 1 truly was classic. One of the great pities, from a social science standpoint, is that they didn't film Survivor 2, and perhaps a couple more, before broadcasting Survivor 1. I guess I should be grateful that Steven Johnson's Everything Bad is Good for You offers at least a qualified defense of watching Survivor.
Friday, September 09, 2005
Thursday, September 08, 2005
Budgetary impact of Katrina
I believe it's been estimated that Katrina will increase the annual federal budget deficit by $100 billion. I'm not sure if this is purely from expected outlays, or if it takes account of macro effects on existing programs (e.g., reduced income and payroll tax revenues from the hit to economic activity, more unemployment insurance payouts, etc.).
This of course is on top of what were already projected to be huge deficits. And it helps to show why budgetary targets and planning ought to take account of the possibility that there will be adverse shocks from time to time.
A further problem is that the Administration had been claiming it would cut the 2004 deficit in half by the end of Bush's second term. Most experts expected this target not to be met, other than through gamesmanship redefining the target so that it could ostensibly be met (a la monthly military recruiting targets). In addition, even if the target was met, the deficit was projected to explode again as soon as Bush was safely out of office.
Katrina not only means that the deficit reduction target can't be met, but also that there is now an excuse for not meeting it. If the Administration's behavior in 2001 is any guide, this suggests that they will regard the deficit reduction pledge as having been completely called off. So perhaps any deficit at all is now politically permissible, since the excuse "We would have done what we promised, except for Katrina" can be used even if Katrina is responsible for only a small percentage of the shortfall.
Since I have to get back to writing my fiscal language book, perhaps this is enough cheerful thoughts for one day.
This of course is on top of what were already projected to be huge deficits. And it helps to show why budgetary targets and planning ought to take account of the possibility that there will be adverse shocks from time to time.
A further problem is that the Administration had been claiming it would cut the 2004 deficit in half by the end of Bush's second term. Most experts expected this target not to be met, other than through gamesmanship redefining the target so that it could ostensibly be met (a la monthly military recruiting targets). In addition, even if the target was met, the deficit was projected to explode again as soon as Bush was safely out of office.
Katrina not only means that the deficit reduction target can't be met, but also that there is now an excuse for not meeting it. If the Administration's behavior in 2001 is any guide, this suggests that they will regard the deficit reduction pledge as having been completely called off. So perhaps any deficit at all is now politically permissible, since the excuse "We would have done what we promised, except for Katrina" can be used even if Katrina is responsible for only a small percentage of the shortfall.
Since I have to get back to writing my fiscal language book, perhaps this is enough cheerful thoughts for one day.
Katrina and pending tax issues
Okay, back into my cage of discussing issues in my area of professional expertise rather than spouting off about public affairs. So here are some quick thoughts on tax policy issues affected by Katrina:
1) The Tax Reform Commission has postponed its final hearings and the date for release of its report. I didn't think that tax reform would be going anywhere anyway, so its chances of enactment in the near term weren't hurt by the effect on legislative agendas generally (the chance of something happening can't slip below zero). Given what I have heard about some of the really good people who are working out of the public spotlight on the report, I am hoping that the TRC will come up with something that exercises influence down the road, as a blueprint for reform that possibly has a consumption tax component. Perhaps David Bradford's X tax? (I am hoping that the Graetz plan, which I criticized in earlier posts, has lost steam as people became aware of its missing elements.) But even apart from all the other obstacles, such as interest group opposition and lack of strong public support, I think that a 1986-style bipartisan process would be necessary, which I certainly don't see happening any time soon.
There actually has been a minor shift towards bipartisanship lately. But it has been of exactly the wrong kind. The grotesque highway bill represented boodle for everyone in Congress, Democrats as well as Republicans, in contrast to recent tax bills and the energy bill that tended to reserve it for the Republican majority. Needless to say, the Democrats proved more than willing in the highway bill to be just as craven as the Republicans.
2) This brings me to topic 2, income tax policy responses to Katrina. My guess is that a bipartisan process of corruptly giving handouts to campaign contributors and calling it Katrina relief will rule the day. E.g., the Republicans give billions of dollars to energy companies and pretend that this is a response to Katrina. But rather than use their usual playbook of the last few years - putting a dishonest label on something and then trashing the Democrats if they oppose it ("They're against Katrina relief!"), perhaps this time the strategy, given Bush's political weakness on Katrina, will be to give enough Democrats enough pork that the bill will pass by bipartisan acclamation. So I anticipate a disgusting multi-billion dollar giveaway that masquerades as a response to the people hurt by Katrina and the need to rebuild but that in fact is nothing of the sort.
3) A further response to Katrina that has been floated is lowering the federal excise tax so that gas prices ostensibly won't rise as much. This is exactly the wrong response, given the widespread view among experts (extending, if I am remembering correctly, to the likes of Martin Feldstein) that higher gasoline taxes would be desirable, and would to a large degree be borne by foreign resource owners given US monopsony power in the worldwide energy markets as a big consumer. But if oil companies' economic experts conclude that a lower federal excise tax would be a windfall to them, rather than to consumers, one can bet that Congress will follow their bidding.
4) Estate tax repeal does seem to have been pushed back by this, notwithstanding Grover Norquist's pathetic and disgusting effort to portray it as a response to Katrina. Ed McCaffery has been writing about how Congress's fondest desire on the estate tax, shared on both sides of the aisle, is to keep on postponing the final decision so people have to keep on lobbying. As per my earlier post, I am pretty much on the fence regarding the estate tax, although repealing it without doing anything else to replace the revenues would be insanity in the present budgetary context. I have long thought that the most sustainable political equilibrium here would be to retain the estate tax but with a much higher exemption amount so that it really is a hit just on huge fortunes. And I think this is what a sane bipartisan process would likely yield, whether or not it is one's own preferred policy. But again, the only bipartisanship on view for several years has involved making looting and giveaways a bipartisan process.
1) The Tax Reform Commission has postponed its final hearings and the date for release of its report. I didn't think that tax reform would be going anywhere anyway, so its chances of enactment in the near term weren't hurt by the effect on legislative agendas generally (the chance of something happening can't slip below zero). Given what I have heard about some of the really good people who are working out of the public spotlight on the report, I am hoping that the TRC will come up with something that exercises influence down the road, as a blueprint for reform that possibly has a consumption tax component. Perhaps David Bradford's X tax? (I am hoping that the Graetz plan, which I criticized in earlier posts, has lost steam as people became aware of its missing elements.) But even apart from all the other obstacles, such as interest group opposition and lack of strong public support, I think that a 1986-style bipartisan process would be necessary, which I certainly don't see happening any time soon.
There actually has been a minor shift towards bipartisanship lately. But it has been of exactly the wrong kind. The grotesque highway bill represented boodle for everyone in Congress, Democrats as well as Republicans, in contrast to recent tax bills and the energy bill that tended to reserve it for the Republican majority. Needless to say, the Democrats proved more than willing in the highway bill to be just as craven as the Republicans.
2) This brings me to topic 2, income tax policy responses to Katrina. My guess is that a bipartisan process of corruptly giving handouts to campaign contributors and calling it Katrina relief will rule the day. E.g., the Republicans give billions of dollars to energy companies and pretend that this is a response to Katrina. But rather than use their usual playbook of the last few years - putting a dishonest label on something and then trashing the Democrats if they oppose it ("They're against Katrina relief!"), perhaps this time the strategy, given Bush's political weakness on Katrina, will be to give enough Democrats enough pork that the bill will pass by bipartisan acclamation. So I anticipate a disgusting multi-billion dollar giveaway that masquerades as a response to the people hurt by Katrina and the need to rebuild but that in fact is nothing of the sort.
3) A further response to Katrina that has been floated is lowering the federal excise tax so that gas prices ostensibly won't rise as much. This is exactly the wrong response, given the widespread view among experts (extending, if I am remembering correctly, to the likes of Martin Feldstein) that higher gasoline taxes would be desirable, and would to a large degree be borne by foreign resource owners given US monopsony power in the worldwide energy markets as a big consumer. But if oil companies' economic experts conclude that a lower federal excise tax would be a windfall to them, rather than to consumers, one can bet that Congress will follow their bidding.
4) Estate tax repeal does seem to have been pushed back by this, notwithstanding Grover Norquist's pathetic and disgusting effort to portray it as a response to Katrina. Ed McCaffery has been writing about how Congress's fondest desire on the estate tax, shared on both sides of the aisle, is to keep on postponing the final decision so people have to keep on lobbying. As per my earlier post, I am pretty much on the fence regarding the estate tax, although repealing it without doing anything else to replace the revenues would be insanity in the present budgetary context. I have long thought that the most sustainable political equilibrium here would be to retain the estate tax but with a much higher exemption amount so that it really is a hit just on huge fortunes. And I think this is what a sane bipartisan process would likely yield, whether or not it is one's own preferred policy. But again, the only bipartisanship on view for several years has involved making looting and giveaways a bipartisan process.
Wednesday, September 07, 2005
It isn't really happening if it isn't reported
From Kevin Drum:
"GUN SHY?....Can you spot the common thread in these three reports?
Reuters: "The U.S. agency leading Hurricane Katrina rescue efforts said Tuesday that it does not want the news media to photograph the dead as they are recovered."
Bob Brigham: "We are in Jefferson Parish, just outside of New Orleans. At the National Guard checkpoint, they are under orders to turn away all media. All of the reporters are turning their TV trucks around."
Salt Lake Tribune: "'[FEMA has] people here who are search-and-rescue certified, paramedics, haz-mat certified,' said a Texas firefighter. 'We're sitting in here having a sexual-harassment class while there are still [victims] in Louisiana who haven't been contacted yet.' The firefighter, who has encouraged his superiors back home not to send any more volunteers for now, declined to give his name because FEMA has warned them not to talk to reporters'."
Yes, the Bush Administration has finally gotten the hang of managing the New Orleans catastrophe.
"GUN SHY?....Can you spot the common thread in these three reports?
Reuters: "The U.S. agency leading Hurricane Katrina rescue efforts said Tuesday that it does not want the news media to photograph the dead as they are recovered."
Bob Brigham: "We are in Jefferson Parish, just outside of New Orleans. At the National Guard checkpoint, they are under orders to turn away all media. All of the reporters are turning their TV trucks around."
Salt Lake Tribune: "'[FEMA has] people here who are search-and-rescue certified, paramedics, haz-mat certified,' said a Texas firefighter. 'We're sitting in here having a sexual-harassment class while there are still [victims] in Louisiana who haven't been contacted yet.' The firefighter, who has encouraged his superiors back home not to send any more volunteers for now, declined to give his name because FEMA has warned them not to talk to reporters'."
Yes, the Bush Administration has finally gotten the hang of managing the New Orleans catastrophe.
The Bush Administration's priorities
From today's Salon:
"From all across the nation, local fire departments have sent firefighters -- many of them trained in emergency medicine and search-and-rescue techniques -- to help the victims of Hurricane Katrina. The Federal Emergency Management Agency requested the help. But when the firefighters arrived in Atlanta, loaded down with the firefighting gear FEMA told them to bring, they were sent to a hotel to wait. Some of them have been waiting for three or four days now....
"As the Los Angeles Times reports, 'Hundreds of firefighters who volunteered to help rescue victims of Hurricane Katrina have instead been playing cards, taking classes on the Federal Emergency Management Agency's history and lounging at an Atlanta airport hotel for days. 'On the news every night you hear [hurricane victims say], "How come everybody forgot us?' said Joseph Manning, a firefighter from Washington, Pa. 'We didn't forget. We're stuck in Atlanta drinking beer.'"
"Well, not just drinking beer. The Salt Lake Tribune reports that FEMA put a team of 50 firefighters on a flight to Louisiana Monday morning. Their mission: Stand beside Bush as he toured the devastation -- just possibly not the best use for highly trained emergency workers...
"On Monday, the Tribune says, some firefighters began to take off their FEMA-issued T-shirts in protest [against being used as Bush photo props but not to help save victims of the hurricane.] A FEMA spokesman responded by questioning the firefighters' willingness to help in a time of need. I would go back and ask the firefighter to revisit his commitment to FEMA, to firefighting and to the citizens of this country,' FEMA spokeswoman Mary Hudak told the Tribune."
Bush is starting to give Kim Jong Il a run for his money.
"From all across the nation, local fire departments have sent firefighters -- many of them trained in emergency medicine and search-and-rescue techniques -- to help the victims of Hurricane Katrina. The Federal Emergency Management Agency requested the help. But when the firefighters arrived in Atlanta, loaded down with the firefighting gear FEMA told them to bring, they were sent to a hotel to wait. Some of them have been waiting for three or four days now....
"As the Los Angeles Times reports, 'Hundreds of firefighters who volunteered to help rescue victims of Hurricane Katrina have instead been playing cards, taking classes on the Federal Emergency Management Agency's history and lounging at an Atlanta airport hotel for days. 'On the news every night you hear [hurricane victims say], "How come everybody forgot us?' said Joseph Manning, a firefighter from Washington, Pa. 'We didn't forget. We're stuck in Atlanta drinking beer.'"
"Well, not just drinking beer. The Salt Lake Tribune reports that FEMA put a team of 50 firefighters on a flight to Louisiana Monday morning. Their mission: Stand beside Bush as he toured the devastation -- just possibly not the best use for highly trained emergency workers...
"On Monday, the Tribune says, some firefighters began to take off their FEMA-issued T-shirts in protest [against being used as Bush photo props but not to help save victims of the hurricane.] A FEMA spokesman responded by questioning the firefighters' willingness to help in a time of need. I would go back and ask the firefighter to revisit his commitment to FEMA, to firefighting and to the citizens of this country,' FEMA spokeswoman Mary Hudak told the Tribune."
Bush is starting to give Kim Jong Il a run for his money.
Saturday, September 03, 2005
What if George W. Bush had been President earlier in U.S. history?
1789 - Tax cuts lead to bond default, collapse of nascent U.S. economy.
1812 - Hello, British Empire. I don't even want to think about the Battle of New Orleans.
1848 - Mexico re-takes Texas and adds Louisiana, so today it would be their problem.
1861 - Union wins Civil War in 3 months, but that's because Bush is the Confederate President.
1890 - Congress passes the Sherman Protrust Act, banning small firms from competing with conglomerates.
1918 - Germans break through Allied lines after U.S. deployment follows the Rumsfeld Doctrine.
1940 - Philip Roth has already written about this.
1941 - Bush responds to Pearl Harbor attack by invading Mexico.
1946 - Marshall Plan botched; Soviet empire extends to the English Channel.
1979 - Iran quagmire.
1983 - Grenada quagmire.
1990 - Bush avoids the Iraq quagmire of 2003 by failing to retake Kuwait (Saddam's army was stronger back then).
1812 - Hello, British Empire. I don't even want to think about the Battle of New Orleans.
1848 - Mexico re-takes Texas and adds Louisiana, so today it would be their problem.
1861 - Union wins Civil War in 3 months, but that's because Bush is the Confederate President.
1890 - Congress passes the Sherman Protrust Act, banning small firms from competing with conglomerates.
1918 - Germans break through Allied lines after U.S. deployment follows the Rumsfeld Doctrine.
1940 - Philip Roth has already written about this.
1941 - Bush responds to Pearl Harbor attack by invading Mexico.
1946 - Marshall Plan botched; Soviet empire extends to the English Channel.
1979 - Iran quagmire.
1983 - Grenada quagmire.
1990 - Bush avoids the Iraq quagmire of 2003 by failing to retake Kuwait (Saddam's army was stronger back then).
Friday, September 02, 2005
The latest rationale for estate tax repeal
I am ambivalent about the estate tax, if we look at it as a long-term element of tax system design rather than evaluating repeal with no other changes. Straight repeal today strikes me as insane given the long-term budget picture, and as unfortunate in distributional terms because of its effect on overall progressivity. But if I were given the choice of a comparably progressive fiscal system with or without the estate tax (e.g., getting more out of a progressive consumption tax if we dump the estate tax), I would regard it as a close call. My own take on it, not entirely the usual one, is that it is a tradeoff between (a) the bad aspect, which is its imposing higher taxes on multi-generational households that have gratuitous transfers to heirs than on those that don't, and (b) the good aspect, which is the possibility (requiring further empirical verification) that behavioral responses to it might be surprisingly low if people find it difficult to plan rationally for their own deaths. Evidence for (b), by the way, comes from the low level of inter vivos gifts, relative to the optimal amount in a tax planning sense, from people who are certain to leave large bequests and don't face obvious King Lear-type issues.
Plus on the bad side we might have the high ratio of tax planning and avoidance costs to revenue raised, if the tradeoff is indeed worse here than in the income tax or the hypothetical progressive consumption tax.
So much for my basic take on the estate tax. Then there is Grover Norquist's take. This guy really is a barrel of monkeys. Missing no opportunity to exploit whatever tragedy is at hand, he apparently sent today a memo to U.S. Senators explaining why, in the light of the New Orleans tragedy, it is more important than ever to repeal the estate tax. The title of the memo is "Death Tax Repeal/Katrina." The money quote from the memo, courtesy of the dailykos.com website (which posted the pdf file):
"The 2003 tax cut lifted economic growth far beyond what most people expected. We know repeal of the Death Tax will also have a similar effect. And higher levels of economic growth is [sic] exactly what the residents of the Gulf Region need at this time to start the rebuilding process for their neighborhoods and more importantly for their lives."
Thanks, Grover. Nice of you to take time out from selling photo ops to see the President to take on the Gulf Coast tragedy.
Plus on the bad side we might have the high ratio of tax planning and avoidance costs to revenue raised, if the tradeoff is indeed worse here than in the income tax or the hypothetical progressive consumption tax.
So much for my basic take on the estate tax. Then there is Grover Norquist's take. This guy really is a barrel of monkeys. Missing no opportunity to exploit whatever tragedy is at hand, he apparently sent today a memo to U.S. Senators explaining why, in the light of the New Orleans tragedy, it is more important than ever to repeal the estate tax. The title of the memo is "Death Tax Repeal/Katrina." The money quote from the memo, courtesy of the dailykos.com website (which posted the pdf file):
"The 2003 tax cut lifted economic growth far beyond what most people expected. We know repeal of the Death Tax will also have a similar effect. And higher levels of economic growth is [sic] exactly what the residents of the Gulf Region need at this time to start the rebuilding process for their neighborhoods and more importantly for their lives."
Thanks, Grover. Nice of you to take time out from selling photo ops to see the President to take on the Gulf Coast tragedy.
Tax reform within the income tax
On a completely different note, although it is hard to think about other things during the calamity, tax reform is still ostensibly on the agenda (although I don't expect it to go anywhere). It occurs to me that I haven't previously mentioned one approach that I think deserves more attention than it has gotten: NYC attorney Edward Kleinbard's Business Enterprise Income Tax (BEIT) plan that emphasizes a "cost of capital allowance" (COCA). [Disclosure: he is a friend.]
The key idea in Kleinbard's plan, which he described in a Tax Notes article, dated 1/3/05 [106 Tax Notes 97], that Lexis subscribers can access
here, is to wipe out the debt-equity distinction in the income tax by making all capital that businesses (corporations or not) hold subject to an interest-like deduction, while all holders of such capital have an interest-like inclusion. The Treasury's CBIT plan of some years back would have eliminated the debt-equity distinction in the other logically possible way, by treating everything like equity (i.e., not deductible by the company or includable by the holder). These are the two basic ways to eliminate the problems resulting from the debt-equity distinction.
While the Tax Notes article emphasizes detailed description of the BEIT, casual observers may be more interested in an article prepared by Kleinbard for a forthcoming (September 23) Brookings/Urban Institute conference on taxing capital income, available as a pdf file if you scroll down a bit here. Two key features of this article are as follows. First, Kleinbard offers detailed reasons for preferring his approach to the CBIT approach. Again, the reason for paying attention to this comparison is not just that the CBIT was a prominent plan, but that CBIT and BEIT epitomize the only two logical ways of eliminating the debt-equity distinction while otherwise retaining a business-level income tax (and integrating the corporate and individual levels). But second, and more surprising to me, was Kleinbard's argument that a lot of the problems with the current income tax which make us feel it is unworkable come out of the debt-equity distinction, or more broadly the lack of consistent and coherent rules for taxing financial capital. Kleinbard argues that a business-level income tax actually is reasonably feasible so long as we get this one point right.
Past academic work has tended to emphasize instead the problems caused by the realization requirement, but Kleinbard argues that those problems get significantly less bad under his approach. His position deserves further attention and analysis whether one prefers a workable income tax to a consumption tax or simply thinks that we are stuck with it.
The key idea in Kleinbard's plan, which he described in a Tax Notes article, dated 1/3/05 [106 Tax Notes 97], that Lexis subscribers can access
here, is to wipe out the debt-equity distinction in the income tax by making all capital that businesses (corporations or not) hold subject to an interest-like deduction, while all holders of such capital have an interest-like inclusion. The Treasury's CBIT plan of some years back would have eliminated the debt-equity distinction in the other logically possible way, by treating everything like equity (i.e., not deductible by the company or includable by the holder). These are the two basic ways to eliminate the problems resulting from the debt-equity distinction.
While the Tax Notes article emphasizes detailed description of the BEIT, casual observers may be more interested in an article prepared by Kleinbard for a forthcoming (September 23) Brookings/Urban Institute conference on taxing capital income, available as a pdf file if you scroll down a bit here. Two key features of this article are as follows. First, Kleinbard offers detailed reasons for preferring his approach to the CBIT approach. Again, the reason for paying attention to this comparison is not just that the CBIT was a prominent plan, but that CBIT and BEIT epitomize the only two logical ways of eliminating the debt-equity distinction while otherwise retaining a business-level income tax (and integrating the corporate and individual levels). But second, and more surprising to me, was Kleinbard's argument that a lot of the problems with the current income tax which make us feel it is unworkable come out of the debt-equity distinction, or more broadly the lack of consistent and coherent rules for taxing financial capital. Kleinbard argues that a business-level income tax actually is reasonably feasible so long as we get this one point right.
Past academic work has tended to emphasize instead the problems caused by the realization requirement, but Kleinbard argues that those problems get significantly less bad under his approach. His position deserves further attention and analysis whether one prefers a workable income tax to a consumption tax or simply thinks that we are stuck with it.
Horrifically slow response
When you have a President who wouldn't be qualified to run a corner drug store, this is what happens.
It is beyond obvious by now that the sole point of the Bush Administration's supposed domestic security focus has been as a political issue to win votes and hold power. If that is your sole concern, why on earth would you bother to do annoying work such as designing actual evacuation plans for cities that are at risk?
It is beyond obvious by now that the sole point of the Bush Administration's supposed domestic security focus has been as a political issue to win votes and hold power. If that is your sole concern, why on earth would you bother to do annoying work such as designing actual evacuation plans for cities that are at risk?
Thursday, September 01, 2005
The long vacation
All these are courtesy of a former college classmate who sent them around in a discussion group e-mail.
DAVID LETTERMAN:
"President Bush is taking his summer vacation. It's a five-week vacation. This is his fiftieth vacation in the last five years -- that's about the national average isn't it? During his five-week vacation, he will continue to receive national security briefings. He won't be reading them, but he will receive them."
"President Bush is on a five-week vacation. How many folks get five weeks off a year? You know, if I want five weeks off I have to have open heart surgery, for God's sake."
"President Bush is at his ranch in Crawford, Texas, and here's the good news -- he says he will only stay until Crawford is capable of self rule."
"President Bush is vacationing in Crawford, Texas. He will be vacationing for five weeks. That's a long time. I don't think he has an exit strategy for his vacation either."
"Now is a great time for President Bush to go on vacation because Iraq is pretty much under control. But a White House spokesman said Bush is using his vacation to reconnect with regular people. So you know what that means -- he's drinking again."
"President Bush is on a three-week vacation down in Crawford, Texas, and it's what they call a working vacation. And staff say it is an important time because it's time for him to kick back. And I'm thinking, when does this guy kick forward?"
JAY LENO:
"So Congress is on recess and Bush is on vacation -- the town is empty. It's so lonely in D.C. right now the NRA and the oil lobby are just giving money to each other."
"As you know, President Bush is taking 5 weeks off. It's like he's still in the National Guard."
"It turns out President Bush can run again in the next election. Now I know you're only supposed to be allowed two terms, but the Supreme Court said if you count his vacation time, he's barely served one."
"Bush woke up this morning, saw his shadow and now -- six more weeks of vacation."
"President Bush talked tough today. He said he's not backing out, he's staying the course for as long as it takes. He's in it for the long haul. Not Iraq -- his 5-week vacation."
"President Bush is on week three of his marathon five-week vacation. In fact, he has been gone on vacation for so long that today in Washington, a judge ruled that a young couple with two children can now legally move into the White House because it appears to have been abandoned by its previous tenants."
"President Bush is now in the second week of his five-week vacation down there in Crawford, Texas. He's been taking a lot of criticism for this long vacation and his aides say he has his laptop with him so he can still play Solitaire and Minesweep -- so it's business as usual."
"A lot of people are every critical of President Bush for taking the entire month of August off for his vacation. But his staff points out, there's nothing at the White House he can't do at the ranch because the ranch is fully equipped. It's got the treadmill, the weight room, the jogging path, the big screen TV, they get Nickelodeon. It's got everything he would do."
JIMMY KIMMEL:
"The president jumped on a plane to start a five-week vacation. This will be the longest presidential vacation in 36 years. This means President Bush has now been on vacation for 27% of his presidency. That means the country could be 27% more screwed up than it already is."
CONAN O'BRIEN:
"President Bush still having his five-week vacation. Today President Bush announced he is going to leave his ranch in Texas to visit Idaho for two days. However, Bush told his supporters, 'Don't worry, I won't do any work there either.'"
DAVID LETTERMAN:
"President Bush is taking his summer vacation. It's a five-week vacation. This is his fiftieth vacation in the last five years -- that's about the national average isn't it? During his five-week vacation, he will continue to receive national security briefings. He won't be reading them, but he will receive them."
"President Bush is on a five-week vacation. How many folks get five weeks off a year? You know, if I want five weeks off I have to have open heart surgery, for God's sake."
"President Bush is at his ranch in Crawford, Texas, and here's the good news -- he says he will only stay until Crawford is capable of self rule."
"President Bush is vacationing in Crawford, Texas. He will be vacationing for five weeks. That's a long time. I don't think he has an exit strategy for his vacation either."
"Now is a great time for President Bush to go on vacation because Iraq is pretty much under control. But a White House spokesman said Bush is using his vacation to reconnect with regular people. So you know what that means -- he's drinking again."
"President Bush is on a three-week vacation down in Crawford, Texas, and it's what they call a working vacation. And staff say it is an important time because it's time for him to kick back. And I'm thinking, when does this guy kick forward?"
JAY LENO:
"So Congress is on recess and Bush is on vacation -- the town is empty. It's so lonely in D.C. right now the NRA and the oil lobby are just giving money to each other."
"As you know, President Bush is taking 5 weeks off. It's like he's still in the National Guard."
"It turns out President Bush can run again in the next election. Now I know you're only supposed to be allowed two terms, but the Supreme Court said if you count his vacation time, he's barely served one."
"Bush woke up this morning, saw his shadow and now -- six more weeks of vacation."
"President Bush talked tough today. He said he's not backing out, he's staying the course for as long as it takes. He's in it for the long haul. Not Iraq -- his 5-week vacation."
"President Bush is on week three of his marathon five-week vacation. In fact, he has been gone on vacation for so long that today in Washington, a judge ruled that a young couple with two children can now legally move into the White House because it appears to have been abandoned by its previous tenants."
"President Bush is now in the second week of his five-week vacation down there in Crawford, Texas. He's been taking a lot of criticism for this long vacation and his aides say he has his laptop with him so he can still play Solitaire and Minesweep -- so it's business as usual."
"A lot of people are every critical of President Bush for taking the entire month of August off for his vacation. But his staff points out, there's nothing at the White House he can't do at the ranch because the ranch is fully equipped. It's got the treadmill, the weight room, the jogging path, the big screen TV, they get Nickelodeon. It's got everything he would do."
JIMMY KIMMEL:
"The president jumped on a plane to start a five-week vacation. This will be the longest presidential vacation in 36 years. This means President Bush has now been on vacation for 27% of his presidency. That means the country could be 27% more screwed up than it already is."
CONAN O'BRIEN:
"President Bush still having his five-week vacation. Today President Bush announced he is going to leave his ranch in Texas to visit Idaho for two days. However, Bush told his supporters, 'Don't worry, I won't do any work there either.'"
Let the games begin (as there's no stopping them)
When a tragedy such as that in New Orleans happens, politicians' first thought, although they try to pretend otherwise, is "How can I gain some advantage from this?"
Bush, I think it is fair to say, is eager to use this as 9/11 Part 2 so he can revive his again-failing Presidency. Assuming he doesn't decide to blame the hurricane on Iran, he will try to look solemn (although he hasn't done too well on this one so far), reprise his 9/11-style site visits, play up the looter angle since law and order is as close to national security as he can come on this one, and do whatever he can to rebut the argument that he has over-stretched the National Guard in Iraq. The White House must be thrilled, regarding this opportunity as providential good fortune.
That's how politics is played.
The anti-Bush side, already appearing on various blogs, is that his Administration drastically slashed funding for New Orleans' levies and the like, in the face of warnings that hurricanes were getting worse each year, apparently in response to Iraq war needs, and also that the Administration's downgrading of FEMA impeded a coherent response. But the Democrats won't voice this publicly for some time, not because they wouldn't like to gain from doing so, but because they are scared that Bush will accuse them of politicizing the tragedy while pretending that he isn't doing so himself.
UPDATE: Scott McClellan at his press briefing today, faced with an awkward question about the fact that the White House had cut funding for the specific levies that failed, inevitably took the scoundrel's way out [it's just his job, nothing personal] and decried what he called "playing politics" with the issue. This makes for an interesting fit with the Administration's approach towards 9/11.
There is, of course, no better example of playing politics with tragedies than strategically and selectively saying that people shouldn't play politics with them.
Another amusing note is that Bush said today that no one could have anticipated that the levies would fail. In fact, a government report stated that this was one of the three most likely disasters in the US (along with a terror attack in NYC and presumably earthquake threats in California).
Bush, I think it is fair to say, is eager to use this as 9/11 Part 2 so he can revive his again-failing Presidency. Assuming he doesn't decide to blame the hurricane on Iran, he will try to look solemn (although he hasn't done too well on this one so far), reprise his 9/11-style site visits, play up the looter angle since law and order is as close to national security as he can come on this one, and do whatever he can to rebut the argument that he has over-stretched the National Guard in Iraq. The White House must be thrilled, regarding this opportunity as providential good fortune.
That's how politics is played.
The anti-Bush side, already appearing on various blogs, is that his Administration drastically slashed funding for New Orleans' levies and the like, in the face of warnings that hurricanes were getting worse each year, apparently in response to Iraq war needs, and also that the Administration's downgrading of FEMA impeded a coherent response. But the Democrats won't voice this publicly for some time, not because they wouldn't like to gain from doing so, but because they are scared that Bush will accuse them of politicizing the tragedy while pretending that he isn't doing so himself.
UPDATE: Scott McClellan at his press briefing today, faced with an awkward question about the fact that the White House had cut funding for the specific levies that failed, inevitably took the scoundrel's way out [it's just his job, nothing personal] and decried what he called "playing politics" with the issue. This makes for an interesting fit with the Administration's approach towards 9/11.
There is, of course, no better example of playing politics with tragedies than strategically and selectively saying that people shouldn't play politics with them.
Another amusing note is that Bush said today that no one could have anticipated that the levies would fail. In fact, a government report stated that this was one of the three most likely disasters in the US (along with a terror attack in NYC and presumably earthquake threats in California).
Monday, August 29, 2005
What a surprise
From today's New York Times:
ARMY CONTRACT OFFICIAL CRITICAL OF HALLIBURTON PACT IS DEMOTED
A top Army contracting official who criticized a large, noncompetitive contract with the Halliburton Company for work in Iraq was demoted Saturday for what the Army called poor job performance.
The official, Bunnatine H. Greenhouse, has worked in military procurement for 20 years and for the past several years had been the chief overseer of contracts at the Army Corps of Engineers, the agency that has managed much of the reconstruction work in Iraq....
The demotion removes her from the elite Senior Executive Service and reassigns her to a lesser job in the corps' civil works division.
Ms. Greenhouse's lawyer, Michael Kohn, called the action an "obvious reprisal" for the strong objections she raised in 2003 to a series of corps decisions involving the Halliburton subsidiary Kellogg Brown & Root, which has garnered more than $10 billion for work in Iraq.
Known as a stickler for the rules on competition, Ms. Greenhouse initially received stellar performance ratings, Mr. Kohn said. But her reviews became negative at roughly the time she began objecting to decisions she saw as improperly favoring Kellogg Brown & Root, he said....
ARMY CONTRACT OFFICIAL CRITICAL OF HALLIBURTON PACT IS DEMOTED
A top Army contracting official who criticized a large, noncompetitive contract with the Halliburton Company for work in Iraq was demoted Saturday for what the Army called poor job performance.
The official, Bunnatine H. Greenhouse, has worked in military procurement for 20 years and for the past several years had been the chief overseer of contracts at the Army Corps of Engineers, the agency that has managed much of the reconstruction work in Iraq....
The demotion removes her from the elite Senior Executive Service and reassigns her to a lesser job in the corps' civil works division.
Ms. Greenhouse's lawyer, Michael Kohn, called the action an "obvious reprisal" for the strong objections she raised in 2003 to a series of corps decisions involving the Halliburton subsidiary Kellogg Brown & Root, which has garnered more than $10 billion for work in Iraq.
Known as a stickler for the rules on competition, Ms. Greenhouse initially received stellar performance ratings, Mr. Kohn said. But her reviews became negative at roughly the time she began objecting to decisions she saw as improperly favoring Kellogg Brown & Root, he said....
Sunday, August 28, 2005
Culture wars of the past
It's funny how culture battles of the past smolder on even years later. I have in mind here a battle between factions on the same side, not a divide on the level of Jerry Falwell versus Jerry Garcia, say. Rather, Beatles versus Stones, that staple of the late 1960s.
The dying embers of this ancient dispute were revived by a NY Times op-ed about the Beatles and their lasting impact. I didn't personally think the op-ed added a whole lot or said much of enormous interest, so I figured the Times' internal op-ed selection politics must have been at work in some unknown way. But judging from the volume of letters about the op-ed that the Times published in today's Week in Review, it must have been a real audience pleaser.
Anyway, two of the letters revive the Rolling Stones fans' side of the dispute. The op-ed had obtusely cited the Beatles' "Revolution" as indicative of the revolutionary political spirit of music at the time, so the first letter rightly points out that "Revolution" is anti-political activism, and indeed "the Beatles' declaration of blissed-out withdrawal," whereas the Stones sang that "the time is right for fighting in the streets."
Yes, and (showing my age) I actually remember how much the radio stations played "Revolution" even though it was the "Hey Jude" B-side, a fact that my brother and I attributed to the quietistic message radio stations hoped people would glean from it. But on the other hand, "Revolution" is intense and heartfelt (certainly not a "blissed-out" song), reflecting taking the violent emotions of the time seriously, whereas the Stones' "Street Fighting Man" comes off in retrospect as phony and insincere playing to the audience (albeit with a great riff). Showing once again one of the Beatles' chief advantages over the Stones. Perhaps because they were provincials who had to make things up for themselves rather than (until they made it big) plugged-in London hipsters, they were less prone to just do the cool thing rather than their own thing.
The second letter dismisses the Beatles as a "kid's band, perfect for daydreaming and first romances, but not for the long haul, where only the blues and the toughest rock 'n' roll [a la the Stones] can help see you through." Yes, it certainly is easier to keep going if you don't need fresh inspiration but can just keep on doing the same thing with less and less energy and originality for decades on end.
For almost all of the great 1960s bands that kept going (e.g., Stones, Who, Kinks) I greatly prefer what I call the "before the bombast" phase of their work, meaning the early stuff before they got too grandiose and/or rigidified. Making their more inspired work pretty much coterminous with that of the Beatles, leaving aside the Stones' Exile on Main Street and Some Girls.
But of course the real dichotomy of the 1960s, identified once in a Brian Eno interview that I read, was Beatles versus Velvet Underground. With all due respect to the Stones' great early work, this one is a tougher call. Interestingly, while Eno of course endorsed the VU side of this divide, both he and John Cale (of the VU's first two albums) have done a fair amount of work that sounds more like a thoroughly de-sillified Paul McCartney than like "Heroin" or "The Black Angel's Death Song."
I have been listening in the last few days to a 1970s Cale album (Paris 1919) as well as the Eno-Cale album from 1990, both of which are pretty and melodic. So who needs the great divides eventually.
The dying embers of this ancient dispute were revived by a NY Times op-ed about the Beatles and their lasting impact. I didn't personally think the op-ed added a whole lot or said much of enormous interest, so I figured the Times' internal op-ed selection politics must have been at work in some unknown way. But judging from the volume of letters about the op-ed that the Times published in today's Week in Review, it must have been a real audience pleaser.
Anyway, two of the letters revive the Rolling Stones fans' side of the dispute. The op-ed had obtusely cited the Beatles' "Revolution" as indicative of the revolutionary political spirit of music at the time, so the first letter rightly points out that "Revolution" is anti-political activism, and indeed "the Beatles' declaration of blissed-out withdrawal," whereas the Stones sang that "the time is right for fighting in the streets."
Yes, and (showing my age) I actually remember how much the radio stations played "Revolution" even though it was the "Hey Jude" B-side, a fact that my brother and I attributed to the quietistic message radio stations hoped people would glean from it. But on the other hand, "Revolution" is intense and heartfelt (certainly not a "blissed-out" song), reflecting taking the violent emotions of the time seriously, whereas the Stones' "Street Fighting Man" comes off in retrospect as phony and insincere playing to the audience (albeit with a great riff). Showing once again one of the Beatles' chief advantages over the Stones. Perhaps because they were provincials who had to make things up for themselves rather than (until they made it big) plugged-in London hipsters, they were less prone to just do the cool thing rather than their own thing.
The second letter dismisses the Beatles as a "kid's band, perfect for daydreaming and first romances, but not for the long haul, where only the blues and the toughest rock 'n' roll [a la the Stones] can help see you through." Yes, it certainly is easier to keep going if you don't need fresh inspiration but can just keep on doing the same thing with less and less energy and originality for decades on end.
For almost all of the great 1960s bands that kept going (e.g., Stones, Who, Kinks) I greatly prefer what I call the "before the bombast" phase of their work, meaning the early stuff before they got too grandiose and/or rigidified. Making their more inspired work pretty much coterminous with that of the Beatles, leaving aside the Stones' Exile on Main Street and Some Girls.
But of course the real dichotomy of the 1960s, identified once in a Brian Eno interview that I read, was Beatles versus Velvet Underground. With all due respect to the Stones' great early work, this one is a tougher call. Interestingly, while Eno of course endorsed the VU side of this divide, both he and John Cale (of the VU's first two albums) have done a fair amount of work that sounds more like a thoroughly de-sillified Paul McCartney than like "Heroin" or "The Black Angel's Death Song."
I have been listening in the last few days to a 1970s Cale album (Paris 1919) as well as the Eno-Cale album from 1990, both of which are pretty and melodic. So who needs the great divides eventually.
Thursday, August 25, 2005
Alan Auerbach on consumption taxation
Alan Auerbach's Wall Street Journal op-ed (subscription required) concerning the consumption tax option in fundamental tax reform is, of course, excellent and well worth reading. But his analysis reflects some underlying assumptions that I have for a long time questioned.
Though not a consumption tax advocate (his aim is simply to explain the main dimensions of the choice), Alan cites studies from his academic work suggesting that a consumption tax could increase GDP, in the long run, by as much as 9 percent (though perhaps only half as much - still not a trivial gain - if current progressivity is maintained).
Although I am more of a consumption tax advocate (assuming retained progressivity) than he is, I question these studies due to an important underlying assumption that he is entirely straightforward about. A key component of the GDP (and efficiency) gain that he finds is the wealth levy on holders of existing assets that would arise upon enactment without transition relief. Since this is ostensibly a one-time-only wealth tax, he models it as lump-sum (i.e., as having no effect on future behavior because people do not expect their wealth to be taken again).
My objection, spelled out at length in my book When Rules Change, is twofold. First, an ostensibly one-time wealth levy will not necessarily be viewed as such, since it may show a political predilection or at least willingness to use wealth levies, hence potentially affecting people's expectations, given in particular that its logic is infinitely repeatable. (Take wealth once with the solemn promise never to do it again, then repeat complete with fresh promise.) This is not necessarily to condemn the wealth levy, but to suggest that it might have similar distortionary effects to a standing wealth tax. Who is right on this depends on how people's expectations actually end up being affected, a tricky empirical question that would likely depend on the context. Alan's view, presumably, is that the wealth levy's being a kind of byproduct of the dramatic change in tax base makes the claim that it is being levied once and once only more politically credible. Certainly not a silly view, but consider that rate increases in a consumption tax can have the same wealth levy effect as introducing the tax (which is itself merely a rate increase from 0% to whatever is the starting rate or set of rates). And consider that the plea for transition relief would presumably have been made and consciously rejected by Congress, adding to the likelihood of its affecting expectations.
Second, I think of the wealth levy as conceptually and practically distinct from the shift from an income tax to a consumption tax. As I discuss in When Rules Change, it results, not from the change in tax base itself, but from the change in what I call "accounting methods." That is, it results from shifting from a system with income tax style accounting, where certain expenses are capitalized and allowed only over time, to a system with cash flow accounting or expensing of all business-related outlays. Yet one could have a consumption tax with income tax-style accounting (deferred deductions but interest on basis to make them expensing-equivalent in present value). Indeed, David Bradford actually proposed this in his later X-tax refinements because he didn't like the transition hit that Alan relies on. In theory, moreover, though making it work would be tricky, one could have an income tax with expensing-style accounting (e.g., you are allowed up front the present value of the entire future stream of deductions for economic depreciation).
If you like the ostensibly one-time capital levy, you could have it without switching tax systems. As Bradford showed, wiping out income tax basis, once and once only, while otherwise retaining the current system would impose a comparable transition hit, although admittedly it might be trickier to make people believe the "once and once only" claim. Or we could enact, say, a one-time 25% wealth tax, plus a constitutional amendment to stop us from doing it again.
At the least, the merits of the wealth levy seem to me analytically separate from the income to consumption tax change, since it results from a conceptually distinct "accounting" change and could be done without the broader change (or not done while doing the broader change).
The 9% GDP growth finding must therefore be viewed in the context of its including the impact of a wealth levy that is distinct from the change of tax base as such (even if brought about thereby), and that is assumed to be credible to prospective investors as a one-time-only event.
Alan and I have discussed this issue in the past, and I think we agree about the basic analytics. Perhaps we will have a chance to discuss it further. For those who follow the NYU Tax Policy Colloquium, which I co-taught with David Bradford until the tragedy last February, I will be co-teaching it with Alan in winter/spring 2006, which he will spend at NYU as a visitor.
Though not a consumption tax advocate (his aim is simply to explain the main dimensions of the choice), Alan cites studies from his academic work suggesting that a consumption tax could increase GDP, in the long run, by as much as 9 percent (though perhaps only half as much - still not a trivial gain - if current progressivity is maintained).
Although I am more of a consumption tax advocate (assuming retained progressivity) than he is, I question these studies due to an important underlying assumption that he is entirely straightforward about. A key component of the GDP (and efficiency) gain that he finds is the wealth levy on holders of existing assets that would arise upon enactment without transition relief. Since this is ostensibly a one-time-only wealth tax, he models it as lump-sum (i.e., as having no effect on future behavior because people do not expect their wealth to be taken again).
My objection, spelled out at length in my book When Rules Change, is twofold. First, an ostensibly one-time wealth levy will not necessarily be viewed as such, since it may show a political predilection or at least willingness to use wealth levies, hence potentially affecting people's expectations, given in particular that its logic is infinitely repeatable. (Take wealth once with the solemn promise never to do it again, then repeat complete with fresh promise.) This is not necessarily to condemn the wealth levy, but to suggest that it might have similar distortionary effects to a standing wealth tax. Who is right on this depends on how people's expectations actually end up being affected, a tricky empirical question that would likely depend on the context. Alan's view, presumably, is that the wealth levy's being a kind of byproduct of the dramatic change in tax base makes the claim that it is being levied once and once only more politically credible. Certainly not a silly view, but consider that rate increases in a consumption tax can have the same wealth levy effect as introducing the tax (which is itself merely a rate increase from 0% to whatever is the starting rate or set of rates). And consider that the plea for transition relief would presumably have been made and consciously rejected by Congress, adding to the likelihood of its affecting expectations.
Second, I think of the wealth levy as conceptually and practically distinct from the shift from an income tax to a consumption tax. As I discuss in When Rules Change, it results, not from the change in tax base itself, but from the change in what I call "accounting methods." That is, it results from shifting from a system with income tax style accounting, where certain expenses are capitalized and allowed only over time, to a system with cash flow accounting or expensing of all business-related outlays. Yet one could have a consumption tax with income tax-style accounting (deferred deductions but interest on basis to make them expensing-equivalent in present value). Indeed, David Bradford actually proposed this in his later X-tax refinements because he didn't like the transition hit that Alan relies on. In theory, moreover, though making it work would be tricky, one could have an income tax with expensing-style accounting (e.g., you are allowed up front the present value of the entire future stream of deductions for economic depreciation).
If you like the ostensibly one-time capital levy, you could have it without switching tax systems. As Bradford showed, wiping out income tax basis, once and once only, while otherwise retaining the current system would impose a comparable transition hit, although admittedly it might be trickier to make people believe the "once and once only" claim. Or we could enact, say, a one-time 25% wealth tax, plus a constitutional amendment to stop us from doing it again.
At the least, the merits of the wealth levy seem to me analytically separate from the income to consumption tax change, since it results from a conceptually distinct "accounting" change and could be done without the broader change (or not done while doing the broader change).
The 9% GDP growth finding must therefore be viewed in the context of its including the impact of a wealth levy that is distinct from the change of tax base as such (even if brought about thereby), and that is assumed to be credible to prospective investors as a one-time-only event.
Alan and I have discussed this issue in the past, and I think we agree about the basic analytics. Perhaps we will have a chance to discuss it further. For those who follow the NYU Tax Policy Colloquium, which I co-taught with David Bradford until the tragedy last February, I will be co-teaching it with Alan in winter/spring 2006, which he will spend at NYU as a visitor.
Wednesday, August 24, 2005
Back from vacation
I'm just back from vacation with the fam on Montauk, LI, jumping waves at the beach on the ocean side when not grilling various ocean or land meats or playing either miniature golf with my kids, or else Scrabble or the highly recommended Blokus (which ought to be called "Lebensraum") with my wife. She thinks my playing style in these games is too ruthless (I think it's simply the logic of how to play the games), but has become persuaded that she has to match it. Tit for tat, the oldest rule in the book.
Beachtime reading:
(1) Levitt & Dubner, Freakonomics - a fun read though not much that is new for people who already know about the economics of information and about Levitt's often very interesting research.
(2) Carl Hiassen, Skinny Dip - delightful genre fiction, with a wonderful comic writing touch.
(3) Kang Choi Hwan, The Aquariums of Pyongyang - chillng look inside the North Korean gulag (sorry for the cliched adjective, but it's too apt to change).
(4) Mary Cantwell, American Girl - well-written memoir of a quiet childhood.
(5) John M. Barry, The Great Influenza - horrifying story, albeit with some standard nonfiction bestseller genre touches, of the 1918 horrors that may have killed 50 to 100 million people worldwide, aided by US government decisions of such chilling stupidity [less of a cliche to use the word here] as to bring to mind, well, the present. Writing style is a bit tired and annoying sometimes - lots of one-sentence paragraphs that might as well have exclamation points - but worth reading for the content.
Beachtime reading:
(1) Levitt & Dubner, Freakonomics - a fun read though not much that is new for people who already know about the economics of information and about Levitt's often very interesting research.
(2) Carl Hiassen, Skinny Dip - delightful genre fiction, with a wonderful comic writing touch.
(3) Kang Choi Hwan, The Aquariums of Pyongyang - chillng look inside the North Korean gulag (sorry for the cliched adjective, but it's too apt to change).
(4) Mary Cantwell, American Girl - well-written memoir of a quiet childhood.
(5) John M. Barry, The Great Influenza - horrifying story, albeit with some standard nonfiction bestseller genre touches, of the 1918 horrors that may have killed 50 to 100 million people worldwide, aided by US government decisions of such chilling stupidity [less of a cliche to use the word here] as to bring to mind, well, the present. Writing style is a bit tired and annoying sometimes - lots of one-sentence paragraphs that might as well have exclamation points - but worth reading for the content.
Sunday, August 14, 2005
Cindy Sheehan
One interesting thing about the Cindy Sheehan story is that it is potentially such an easy opportunity for Bush to score political points. The big focus is on why he won't meet with her. Well, it would be pretty darned easy for him to meet with her. A lot easier than, say, making any headway in the Iraq debacle. So it is a politician's dream: he is facing growing demands that he do something that would be incredibly easy for him to do.
Maybe that is where we're headed. But between Bush's mania for showing that he never gives in or changes his mind, and, I am guessing, a feeling of terror about having to leave his protective bubble for a few minutes and meet a woman who is angry at him because she lost (he lost) her son, perhaps this incredibly easy thing is more than he can do. We will see.
Maybe that is where we're headed. But between Bush's mania for showing that he never gives in or changes his mind, and, I am guessing, a feeling of terror about having to leave his protective bubble for a few minutes and meet a woman who is angry at him because she lost (he lost) her son, perhaps this incredibly easy thing is more than he can do. We will see.
Saturday, August 13, 2005
A story for Krugman?
I heard an interesting tale about Bush Administration numbers fakery today, actually from my parents (who certainly have no inside information). They noticed that lately, whenever you hear about the Administration's inflation figures, for example on news radio, it is always about something called "core inflation."
Core inflation is an inflation calculation minus information about food and energy.prices. These are excluded from the measure on the view that they are more volatile, presumably because they are subject to such shocks as a hurricane or drought that destroys crops, or an international oil market disruption. This may distinguish them from structural factors in price movements that might be considered more likely to just keep going on a particular path.
Anyway, core inflation has been around as a measure since 1957. But it was not until now being treated by a U.S. Administration as the main inflation measure to discuss publicly.
Especially with this Administration's track record on - well, just about everything - it is natural to be more than a bit cynical about its reasons for emphasizing core inflation. I am reminded of their totally shifting attention from the on-budget deficit, which excludes the Social Security surplus, to the unified budget deficit, which is smaller by reason of including it.
In short, the obvious reason that comes to mind for their emphasizing core inflation, rather than the CPI, is that it gives a lower number.
I have an even better measure to propose - the "sample consumer product inflation measure." For short, we could call this the SCPIM, to be pronounced Sick-Pim. This new measure determines the inflation rate based on a single consumer product that has been picked to stand for the rest. (Kind of like polling.) The product we will use first is televisions, or maybe flat screen TVs or some such thing. And don't whine about the need (as with polling) for a broader sample - heck, there are hundreds of thousands if not millions of TVs being sold each year.
Given how TV prices have been going in real terms (adjusting for features and quality) for at least 20 years, basing the Sickpim on TV prices is likely to show that what we really have is a deflation problem. Meaning that we need lots more tax cuts in order to stop it from getting out of hand.
On a more serious note, this shift to using core inflation, if sufficiently demonstrable, looks like a story that Paul Krugman ought to consider covering.
Core inflation is an inflation calculation minus information about food and energy.prices. These are excluded from the measure on the view that they are more volatile, presumably because they are subject to such shocks as a hurricane or drought that destroys crops, or an international oil market disruption. This may distinguish them from structural factors in price movements that might be considered more likely to just keep going on a particular path.
Anyway, core inflation has been around as a measure since 1957. But it was not until now being treated by a U.S. Administration as the main inflation measure to discuss publicly.
Especially with this Administration's track record on - well, just about everything - it is natural to be more than a bit cynical about its reasons for emphasizing core inflation. I am reminded of their totally shifting attention from the on-budget deficit, which excludes the Social Security surplus, to the unified budget deficit, which is smaller by reason of including it.
In short, the obvious reason that comes to mind for their emphasizing core inflation, rather than the CPI, is that it gives a lower number.
I have an even better measure to propose - the "sample consumer product inflation measure." For short, we could call this the SCPIM, to be pronounced Sick-Pim. This new measure determines the inflation rate based on a single consumer product that has been picked to stand for the rest. (Kind of like polling.) The product we will use first is televisions, or maybe flat screen TVs or some such thing. And don't whine about the need (as with polling) for a broader sample - heck, there are hundreds of thousands if not millions of TVs being sold each year.
Given how TV prices have been going in real terms (adjusting for features and quality) for at least 20 years, basing the Sickpim on TV prices is likely to show that what we really have is a deflation problem. Meaning that we need lots more tax cuts in order to stop it from getting out of hand.
On a more serious note, this shift to using core inflation, if sufficiently demonstrable, looks like a story that Paul Krugman ought to consider covering.
Wednesday, August 10, 2005
The cure for partisan bickering
Evidently, the best cure around is billions of dollars worth of debt-financed pork.
From today's New York Times, describing the miracle in which Bush actually left his ranch to go to Illinois for a public signing of the supposedly $286.4 trillion (but actually higher than that) transportation bill:
"The transportation bill includes money for thousands of projects across the country. To put it another way, it has something for every state and just about every Congressional district, as reflected in the votes that enacted it in late July: 412 to 8 in the House and 91 to 4 in the Senate.
"Critics of the bill have complained that it is wasteful. But the president, who flew to Illinois from his ranch in Crawford, Tex., rejected that view. 'It accomplishes goals in a fiscally responsible way,' he said.
"Mr. Bush heaped praise on Speaker J. Dennis Hastert, whose district includes Montgomery and who introduced the president today. Mr. Bush also had warm words for other Republicans who helped to fashion the bill and who accompanied him today: Senator James M. Inhofe of Oklahoma and Representatives Bill Thomas of California, chairman of the House Ways and Means Committee, and Tom Petri of Wisconsin, who is on the House Transportation and Infrastructure Committee.
"But in a striking example of friendliness across the political divide, Mr. Bush said he was proud to be with Gov. Rod R. Blagojevich, Senators Richard J. Durbin and Barack Obama of Illinois, and Representative Rahm Emanuel of the Chicago area - Democrats all."
This is followed by several more paragraphs of nauseating bipartisan encomiums.
From today's New York Times, describing the miracle in which Bush actually left his ranch to go to Illinois for a public signing of the supposedly $286.4 trillion (but actually higher than that) transportation bill:
"The transportation bill includes money for thousands of projects across the country. To put it another way, it has something for every state and just about every Congressional district, as reflected in the votes that enacted it in late July: 412 to 8 in the House and 91 to 4 in the Senate.
"Critics of the bill have complained that it is wasteful. But the president, who flew to Illinois from his ranch in Crawford, Tex., rejected that view. 'It accomplishes goals in a fiscally responsible way,' he said.
"Mr. Bush heaped praise on Speaker J. Dennis Hastert, whose district includes Montgomery and who introduced the president today. Mr. Bush also had warm words for other Republicans who helped to fashion the bill and who accompanied him today: Senator James M. Inhofe of Oklahoma and Representatives Bill Thomas of California, chairman of the House Ways and Means Committee, and Tom Petri of Wisconsin, who is on the House Transportation and Infrastructure Committee.
"But in a striking example of friendliness across the political divide, Mr. Bush said he was proud to be with Gov. Rod R. Blagojevich, Senators Richard J. Durbin and Barack Obama of Illinois, and Representative Rahm Emanuel of the Chicago area - Democrats all."
This is followed by several more paragraphs of nauseating bipartisan encomiums.
Friday, August 05, 2005
The Kotlikoff tax and entitlements reform plan
The cover story in the latest New Republic is an article by the economist Laurence Kotlikoff and the author Niall Ferguson describing what they call the "New New Deal," ostensibly a plan the Democrats should advance in lieu of Bush's idiotic Social Security "reform" to show that they have constructive ideas to eliminate the fiscal gap. Early Democratic blogger responses, such as by Matthew Yglesias in tpmcafe.com and Kevin Drum in washingtonmonthly.com are not encouraging, to say the least. Apart from disliking the substance, they note that Kotlikoff and Ferguson would have to be quite mad to think the plan had possible political appeal for the Democrats at the current juncture. I myself would cut Kotlikoff and Ferguson a large break on this point, since they are trying to get the ideas out there rather than to make practical short-term political suggestions to the Democrats. So what about the substance of their plan as a longer-term objective?
A word of disclosure here: the only one of these individuals whom I know personally is Kotlikoff, with whom I am on friendly terms. I feel that if I have learned a fair amount from him, although I certainly have many disagreements with him. (For example, I see no basis for his definition of "inter-generational equity" as having all age cohorts pay the same lifetime net tax rates.) So I am predisposed to be at the least much less hostile, and all the more so because, despite my intense anti-Bush sentiments, I am certainly no conventional Democrat or even New Democrat and would be bipartisan or non-partisan if the Republicans were still sane, adult, and in favor of constitutional democracy.
Anyway, the Kotlikoff plan, as I will call it since he is evidently its main designer, has three components that I will comment on in turn:
1) REPLACE THE INCOME AND PAYROLL TAXES WITH A 33% RETAIL SALES TAX (RST) PLUS A REBATE. I'll start with the good news. The rebate is like a zero bracket but better. To illustrate, suppose we had an income or consumption tax with a $20,000 exemption and a 40% rate above that. Someone who earned or spent $20,000 would get an $8,000 benefit from the zero bracket, but someone who earned or spent zero would get no benefit, as she wouldn't have paid tax anyway. Kotlikoff gives everyone the $8,000 in effect (using my numbers). To put it another way, Kotlikoff has a demogrant instead of a zero bracket, which I would certainly say is better assuming proper integration with the welfare system (a subject I don't have space for here).
The bad news is that just about everyone with serious institutional knowledge realizes that the RST is a terrible idea administratively. A value-added tax (VAT) can be substantively equivalent, but leaves much more of a paper-matching and audit trail for compliance purposes. And existing RSTs at the state and local level have horribly pockmarked tax bases, leaving out lots of things and double-taxing others due to screw-ups with the business-level exemption. A really bad model to follow, I would say.
Also, as a business-level tax, the RST has no adjustment for personal or household circumstances, other than the amount spent on consumption. So we have the Graetz problem (from my earlier posts on Michael's idea) all over again, although at least the credit side is more spelled out.
2) PHASE OUT CURRENT SOCIAL SECURITY AND REPLACE IT WITH A COLLECTIVE "PERSONAL SEECURITY SYSTEM" - Everyone would pay what is in effect a 7.15% payroll tax up to the Social Security ceiling - so the payroll tax isn-t really repealed in full - and notionally deposit it in a personally owned "account." But the Social Security Administration would invest all the money, on everyone's behalf, in a market-weighted global index fund. So everyone would have the same portfolio and get the same rate of return (at least if they retired in the same year). Plus the government would guarantee no loss to contributors (i.e., a real return of no less than 0%).
Unlike the Bush plan, this one is fully funded - assuming Congress ignores the revenues because they are deemed to be in individual accounts - and it achieves risk-sharing among participants and economies of scale. I am liking it better as I think about it a bit more. Essentially it amounts to forcing everyone to save 7.15% of their first $90,000 of earnings and invest it prudently, assuming that Congress doesn't undo the saving by spending more and/or taxing less in the rest of the budget, which the ownership of the accounts is supposed to accomplish.
3) REPLACE MEDICARE AND MEDICAID WITH RISK-ADJUSTED VOUCHERS THAT GIVE EVERYONE THE SAME BASIC HEALTH INSURANCE COVERAGE FROM PRIVATE INSURERS - For example, you might get a $150,000 voucher if you are 75 and have colon cancer, as opposed to a $3,500 voucher if you are a healthy 30-year old single (their example). Again this raises issues I can't discuss in this already-long entry, but this is a serious idea. One question it raises is whether the government could get the pricing sufficiently well-adjusted and what would happen if it couldn't. A second is whether market forces, which the plan relies on after socializing health risk, work well enough in this particular consumer market. Medicine is a pretty bad market no matter what (consumers don't know much, those who do the diagnosis have an interest in selling more services, etc. - think of auto repair mechanics but with higher stakes). So market solutions may not work very well here, although one can be confident that non-market solutions won't work very well either.
Anyway, this is a serious plan apart from the retail sales tax. Why not make that a VAT, or better still an X-tax so there can be brackets, if desired, not limited to the better-than-zero-bracket aspect of having a demogrant?
A word of disclosure here: the only one of these individuals whom I know personally is Kotlikoff, with whom I am on friendly terms. I feel that if I have learned a fair amount from him, although I certainly have many disagreements with him. (For example, I see no basis for his definition of "inter-generational equity" as having all age cohorts pay the same lifetime net tax rates.) So I am predisposed to be at the least much less hostile, and all the more so because, despite my intense anti-Bush sentiments, I am certainly no conventional Democrat or even New Democrat and would be bipartisan or non-partisan if the Republicans were still sane, adult, and in favor of constitutional democracy.
Anyway, the Kotlikoff plan, as I will call it since he is evidently its main designer, has three components that I will comment on in turn:
1) REPLACE THE INCOME AND PAYROLL TAXES WITH A 33% RETAIL SALES TAX (RST) PLUS A REBATE. I'll start with the good news. The rebate is like a zero bracket but better. To illustrate, suppose we had an income or consumption tax with a $20,000 exemption and a 40% rate above that. Someone who earned or spent $20,000 would get an $8,000 benefit from the zero bracket, but someone who earned or spent zero would get no benefit, as she wouldn't have paid tax anyway. Kotlikoff gives everyone the $8,000 in effect (using my numbers). To put it another way, Kotlikoff has a demogrant instead of a zero bracket, which I would certainly say is better assuming proper integration with the welfare system (a subject I don't have space for here).
The bad news is that just about everyone with serious institutional knowledge realizes that the RST is a terrible idea administratively. A value-added tax (VAT) can be substantively equivalent, but leaves much more of a paper-matching and audit trail for compliance purposes. And existing RSTs at the state and local level have horribly pockmarked tax bases, leaving out lots of things and double-taxing others due to screw-ups with the business-level exemption. A really bad model to follow, I would say.
Also, as a business-level tax, the RST has no adjustment for personal or household circumstances, other than the amount spent on consumption. So we have the Graetz problem (from my earlier posts on Michael's idea) all over again, although at least the credit side is more spelled out.
2) PHASE OUT CURRENT SOCIAL SECURITY AND REPLACE IT WITH A COLLECTIVE "PERSONAL SEECURITY SYSTEM" - Everyone would pay what is in effect a 7.15% payroll tax up to the Social Security ceiling - so the payroll tax isn-t really repealed in full - and notionally deposit it in a personally owned "account." But the Social Security Administration would invest all the money, on everyone's behalf, in a market-weighted global index fund. So everyone would have the same portfolio and get the same rate of return (at least if they retired in the same year). Plus the government would guarantee no loss to contributors (i.e., a real return of no less than 0%).
Unlike the Bush plan, this one is fully funded - assuming Congress ignores the revenues because they are deemed to be in individual accounts - and it achieves risk-sharing among participants and economies of scale. I am liking it better as I think about it a bit more. Essentially it amounts to forcing everyone to save 7.15% of their first $90,000 of earnings and invest it prudently, assuming that Congress doesn't undo the saving by spending more and/or taxing less in the rest of the budget, which the ownership of the accounts is supposed to accomplish.
3) REPLACE MEDICARE AND MEDICAID WITH RISK-ADJUSTED VOUCHERS THAT GIVE EVERYONE THE SAME BASIC HEALTH INSURANCE COVERAGE FROM PRIVATE INSURERS - For example, you might get a $150,000 voucher if you are 75 and have colon cancer, as opposed to a $3,500 voucher if you are a healthy 30-year old single (their example). Again this raises issues I can't discuss in this already-long entry, but this is a serious idea. One question it raises is whether the government could get the pricing sufficiently well-adjusted and what would happen if it couldn't. A second is whether market forces, which the plan relies on after socializing health risk, work well enough in this particular consumer market. Medicine is a pretty bad market no matter what (consumers don't know much, those who do the diagnosis have an interest in selling more services, etc. - think of auto repair mechanics but with higher stakes). So market solutions may not work very well here, although one can be confident that non-market solutions won't work very well either.
Anyway, this is a serious plan apart from the retail sales tax. Why not make that a VAT, or better still an X-tax so there can be brackets, if desired, not limited to the better-than-zero-bracket aspect of having a demogrant?
Thursday, August 04, 2005
Presented without comment
From today's New York Times:
President Bush has never exercised his veto power, but he brandished it over major transportation legislation for two years, threatening Congress with the V-word should lawmakers break the bank in pursuit of home-state road and bridge work.
So when Congress delivered transportation legislation with a price tag put at $286.4 billion, the administration claimed victory, noting the final amount was just $2 billion above the White House's limit and far below what senior members of Congress wanted.
But as details of the measure came under closer inspection this week, the spending picture got a bit blurry. In a piece of legislative legerdemain, Congress managed to stuff an extra $8.5 billion into the highway bill and still meet Mr. Bush's demands by requiring that the added money be turned back to the Treasury on Sept. 30, 2009, the day the bill expires....
Budget watchdog groups, already upset at spending they equate to highway bill robbery, say the maneuver is the crowning offense perpetrated by a profligate Congress and exposes the administration as co-conspirators.
"They have this paper tiger approach of holding down the total cost when in reality Congress got its way," said Steve Ellis, vice president for programs at Taxpayers for Common Sense. "Everyone gets to walk away happy."
He and other critics portrayed the maneuver, known in federal budget parlance as a rescission, as a classic example of using the calendar to mask spending excess. They doubt the money will ever be seen again, noting that Mr. Bush and many of the lawmakers responsible will no longer be in office when time runs out on the new highway plan….
President Bush is apparently not disturbed, telling an audience in Texas on Wednesday that he intends to sign the highway measure soon. "We had a little problem getting that bill done over the last couple of years because we had a disagreement about the right number," he said. "I felt that the number ought to be a fiscally responsible number. We worked hard with members of the Senate and the House. I'll be proud to sign a fiscally responsible highway bill next Wednesday in the state of Illinois."
President Bush has never exercised his veto power, but he brandished it over major transportation legislation for two years, threatening Congress with the V-word should lawmakers break the bank in pursuit of home-state road and bridge work.
So when Congress delivered transportation legislation with a price tag put at $286.4 billion, the administration claimed victory, noting the final amount was just $2 billion above the White House's limit and far below what senior members of Congress wanted.
But as details of the measure came under closer inspection this week, the spending picture got a bit blurry. In a piece of legislative legerdemain, Congress managed to stuff an extra $8.5 billion into the highway bill and still meet Mr. Bush's demands by requiring that the added money be turned back to the Treasury on Sept. 30, 2009, the day the bill expires....
Budget watchdog groups, already upset at spending they equate to highway bill robbery, say the maneuver is the crowning offense perpetrated by a profligate Congress and exposes the administration as co-conspirators.
"They have this paper tiger approach of holding down the total cost when in reality Congress got its way," said Steve Ellis, vice president for programs at Taxpayers for Common Sense. "Everyone gets to walk away happy."
He and other critics portrayed the maneuver, known in federal budget parlance as a rescission, as a classic example of using the calendar to mask spending excess. They doubt the money will ever be seen again, noting that Mr. Bush and many of the lawmakers responsible will no longer be in office when time runs out on the new highway plan….
President Bush is apparently not disturbed, telling an audience in Texas on Wednesday that he intends to sign the highway measure soon. "We had a little problem getting that bill done over the last couple of years because we had a disagreement about the right number," he said. "I felt that the number ought to be a fiscally responsible number. We worked hard with members of the Senate and the House. I'll be proud to sign a fiscally responsible highway bill next Wednesday in the state of Illinois."
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