Texas

I'm going to Texas today. If they let me live, I'll be back posting on Thursday.

Posted by Peter

Outsourcing and Wages

From the Fed conference in Jackson Hole:

Two Princeton University economists claim that job outsourcing increased
productivity and real wages for low-skilled U.S. workers.
Princeton professors Gene Grossman and Esteban Rossi-Hansberg debated that salaries for the least-skilled blue collar jobs had been increasing since 1997 as outsourcing pushed productivity....The Princeton economists say that critics tended to gloss over the productivity benefits that come with offshoring labor.

I haven't read their paper, but here's the problem with this type of work: How do you link outsourcing to productivity increases for low wage workers? Productivity has increased in the US since 1997 and the US has outsourced, but it is difficult to show, causally, that outsourcing raises productivity. I'll have more on this after I read the paper.

Hat Tip: Mankiw's Blog

Problems for the uninsured

Vox Baby cited this from a Levy and DeLeire article.

The uninsured in the lowest quartile of the distribution of total expenditures spend more on housing, food at home, alcohol and tobacco, and education than do the insured.

In contrast, households in the top quartile of the distribution of total
expenditures spend more on transportation and furniture and appliances than do
comparable insured households.

These results are consistent with the idea that poor uninsured households face higher housing prices than do poor insured households.

Yet more evidence that the poor, uninsured are screwed on multiple levels.

Bernanke on Free Trade

"The challenge for policymakers is to ensure that the benefits of global economic integration are sufficiently widely shared — for example, by helping displaced workers get the necessary training to take advantage of new opportunities."

Why Hillary Clinton Shouldn't Run

That Hillary Clinton can't win in '08 is a favorite topic for liberal blogs. The Daily Kos vehemently opposes her candidacy and its author even wrote to the Washington Post, just in case he wasn't reaching enough people. I'm one of the people who not only thinks she can't win, but would beg her not to run, if she'd listen.

There are some simple facts to support this. In polls, McCain leads Clinton by 11 percentage points in a National election (50 to 39). Giuliani even bests Clinton by 12 percentage points (51 to 39). But the real kicker, are Hillary's favorable/unfavorables. A CBS news poll in July found her favorables at 32% and her unfavorables at 39%. People have made-up their minds about Hillary Clinton. She is a polarizing figure and little will change that in November, no matter how much people dislike the Republicans right now.

The problem for liberals at this juncture is not Hillary's weakness vis-a-vis Republicans, but her strength among democrats. Polls show that 43% of democrats support her. Her war chest is unrivaled, her celebrity status brings crowds to a frenzy, and her husband remains (for irrational reasons) the idol for democrats across the land. She is terrifying as a Primary candidate. Our problem is that Hillary would be hard for other democrats to beat, but minced pie come November. The 800 pound gorilla would slap around most challengers, and while I pray that Democrats would wake-up as they did with Howard Dean, it would drain the budgets of most challengers looking to take the White House back. She would sink like the Titanic: majestic, brilliant, but ultimately dooming the poor and the under-served, while the Rich scuddle off to better things.

Ezra Klein has a better idea: Hillary should fight for the Senate leadership post. At least that's a job she can win.

Posted by Peter

Oh Boy

Disclaimer: I of course do not endorse any of the views put forth in this video. But I sent it to my girlfriend and she laughed hysterically so I thought it was worth posting...

Posted by Kingston

Khatami granted visa to visit U.S.

Now, I realize that Khatami is in all liklihood (I could be wrong) not coming to America as a representative of Khamenei or Ahmadinejad but does NRO really think that we can improve our situation in the Middle East without talking to our enemies? Obviously that's exactly what they think but it still blows my mind.

Posted by Kingston

"France commits 2,000 to Lebanon"

Me: It's about time.

Posted by Kingston

Energy Taxes

The Naked Economist (aka, Charles Wheelan, PH.D.) suggests that the US should make a revenue neutral switch to carbon taxes.

The idea is pretty simple. Taxes affect behavior. If the governments switches taxes from corporations and income to a carbon tax, people would, on the margin, work more and drive less. Our "addiction to oil" would slowly move into detox and we would be less dependent on certain distasteful foreign governments. People would pay more for gas and electricity, but they would theoretically get the same amount back in their income taxes; at $4+ a gallon, people should buy fewer SUVs, stop suburban sprawl, commute less, pollute less and buy more widgets.

I've heard more serious proposals for gas import taxes, since they take a chunk out of OPEC's monopoly profits. Nonetheless, I would sign myself up for this consumption tax. As long as it gave larger tax breaks to the poor (who spend more on gas) and the transportation industry (which is more susceptible to gas price hikes), it has real potential.

That doesn't mean it will ever happen.

Wheelan also thinks that a carbon tax is a winning platform in 2008. I have to disagree on this point, although I'm sure someone will put it at the front of their campaign. Whoever uses the idea, it certainly won't be a Republican banking on Big Oil money. It also wouldn't survive a hard smear campaign. I like the idea, but i'm not holding my breath.

"Farmers believe cows 'moo' with an accent"

"I spend a lot of time with my Friesians and they definitely 'moo' with a Somerset drawl," [Llyod Green, a farmer from southwest England] said, referring to the breed of dairy cow he owns.

Despite what appears to be a growing - albeit far from overwhelming - scientific consensus on this issue, me thinks Lloyd has had one too many pints...

Cause For Hope?

Encouraging news from Iraq on the security front. The problem is that we've heard these kind of statements from Iraqi and U.S. officials before. What's more, the trajectory of the conflict over the course of the past few years has been characterized by cycles of extreme violence followed by cycles of less violence. The discouraging part of all this has been that each new cycle always seems to be more violent than the last one.

UPDATE: Spencer Ackerman makes a bunch of good points about this issue here.

Mankiw and Krugman on Inequality

Mankiw attacks Krugman's stance on Unions and inequality on his blog today. Krugman argues in a letter to Economist's View, that government policy and the decline of unions plays a large role in the increased US inequality. Mankiw obviously disagrees and says that globalization and technology are more important factors.

To test the hypothesis that policy is behind the slide in Unions and the rise in inequality, one can simply look across the pond to Europe.

Europe has faced the same globalization trends as the US, but has a much lower Gini coefficient. I haven't read anything about whether this is due to greater redistribution or union bargaining power (my guess is that it has more to do with Europe's generally socialist policies).

Prof. Mankiw also claims that corporations have less profits to share with lower labor; however, senior executives have received unprecedented compensation and Wall Street earnings have been strong. It is true that some of these record profits are due to shifting production overseas, but this does not mean that US employees remaining in country could not take a larger share of the pie.

Take Walmart v. Costco as an example. Costco shares more of its profits with labor, whereas Walmart takes every penny it can from its lowly workers. Wall Street punishes Costco for this move, but Costco still does healthy business and is Walmart's main competitor.

Smoking Ban Hurts Scottish Pubs

Having spent some quality time in the Scottish pubs, I am sorry to report that:

Pubs in Scotland risk going out of business due to a smoking ban that has led to a 10 percent drop in drinks sales, the Scottish Licensed Trade Association (SLTA) has said.

I am surprised to hear that the smoking ban has been bad for business, since the experience in the US has been just the opposite. Bars in NYC actually saw improved business after the ban, something that the Scottish government also promised the Scottish pub association.

Where are the Scots going for fun at night?

According the Scottish Ministry of Health "Seven out of 10 people don't smoke and of those who do, seven out of 10 want to give up." I would also expect people to smoke less in order to maintain their social lives at the pubs.

I'm predicting a resurgence in Pub visits in the future, as non-smokers return for their Haggis. If nothing else, King will give them all the business they need come October.

Quote of the Day

U.S. involvement in Iraq has been incredibly successful and developments there have been "nothing short of a miracle," Sen. James Inhofe said Monday.

I don't even know where to begin...

How "right" can you go?

In the course of gloating about the new Gallup poll showing that the President's approval rating has risen to 42%, the Weekly Standards' Daniel McKivergan puts his political scientist hat on and comes up with the following:

As I have noted before, if Democrats were hitting Republicans from the right on national security, the GOP would be in far deeper trouble.

So the American public wants us to commit 500,000 more troops to Iraq, stay there indefinitely, bomb Iran, and pretty much make a mess out of the Middle East? Last time I checked, this wasn't exactly the case.

"Israeli reservists protest Olmert"

If only this could happen in our own country. I can dream, can't I?

Bush and the Pill

As King noted, Bush's approval of over-the-counter Plan B sales is momentous politically. I'm surprised that so little has been made of it.

Check out this quote from Bush's news conference: "I believe Plan B ought to be a required prescription for minors."

This had a very short mainstream news cycle. Hopefully this will get more coverage in the future. I'm sure the Family Research Council has more to say on the subject.

It makes me wonder, more than ever, what goes on in that muddled head of our president.

Islamo-Idiocy

TNR's Spencer Ackerman just spent a week in Dearborn Michigan and here's what he has to say about the impact of the President's usage of the term "Islamfascism" on the psyche of that city's Muslim population:

Last week in the Weekly Standard, the apparent inventor of the phrase, Stephen Schwartz, dismissed those who'd be offended by "Islamofascism" as "primitive Muslims." That should tell you all you need to know about those who use the term. I confess to using it, if ironically, in a recent piece, and here in Dearborn I learned precisely why you and I shouldn't. The people it infuriates aren't primitive. They're the moderate, pro-American, well-integrated Muslims who form one of the greatest bulwarks against Al Qaeda that the U.S. possesses, and they see the term as draining their Americanness away.

Dearborn is of course home to America's "largest and oldest Muslim community in the U.S." Read the whole thing!

President Bush says "Screw You" to Religious Right!!

Well, maybe that goes a bit far. But you gotta love this:

For his pro-life supporter base, President George W. Bush stepped into one of the biggest political landmines of his Presidential career today with his approval of over the counter status for the abortion-causing morning after pill Plan B.

Let the intra-Republican party bloodletting begin...

Posner on Stem Cells

Richard Posner offers some thoughts on Stem Cell research over at his blog:

It is not easy to deal analytically with arguments that are based on religion or
emotion rather than on pragmatic considerations. Given the number of spontaneous
(not to mention deliberate) abortions and the fact that in vitro fertilization,
which produces excess embryos, is lawful, it is a little mysterious what exactly
is objectionable about using some of these excess embryos, which would otherwise
either be destroyed or stored indefinitely with dim prospects of ever being used
to produce more in vitro children, unless the objector opposes all
nonspontaneous abortion. And that is an opposition founded on religious belief.

I wasn't aware that half of all abortions are "spontaneous" (usually miscarriage), meaning that they occur naturally, usually before a woman even knows that she is pregnant. It's an important piece of information for the ethical debate on the subject, as well as the pragmatic part of the argument, as Posner notes.

Insurance

Ben Stein posted an article today about the Terrorism Risk Insurance Act over at his permanent column with Yahoo. Ben and I disagree on many things, but not, as far as I can tell, about the role the Federal government should play as the Insurer of last resort in the case of terrorist attacks.

The Terrorism Risk Insurance Act was passed after 9/11, because Insurance companies stopped covering for terrorist related incidence, because their exposure was difficult to measure. A large terrorist attack could bankrupt the insurance industry.

As Ben notes, anti-government Republicans want the Terrorism Risk Insurance Act to end as soon as possible. As much as I detest the insurance industry right now, it's important that the government remain involved. Indeed, I would much rather see the Federal government stop bailing-out homeowners on barrier islands after hurricanes, than stop terrorism.

Insurance is about controlling for risk. Hurricanes are fairly predictable and people who build fancy houses along the Florida coast are aware of the risk. Terrorism is a different beast entirely. It is designed to surprise people. It is designed to destabilize the center of our economy and the will of our people. The insurance industry has no fiduciary responsibility to our nation-state, but our government does. Acting as the insurer of last resort for terrorist acts is as, if not more important than our defensive measures.

This provides a similar argument for why I support limited national health coverage, but i'll save that for another post.

Quote of the Day

Is there anyone in the country who can say honestly, in their heart of hearts, that when that moment of fear hit them after the recent reports out of London, they said to themselves, "God, I'm glad we're in Iraq"?

Josh Marshall stating the obvious: Our invasion of Iraq has made us more - not less - vulnerable to terrorism.

Supply Side

Angy Bear has a nice post debunking the myth of Supply-Side economics, which Lawrence Kudlow keeps peddling to unsuspecting minds over at the National Review. You're better off reading the post by PGL, but here's a nice bite to take home:

Never mind the fact that economic growth averaged only 3% during the
Reagan-Bush41 period and only 2.6% under Bush43. Yes, it was that 3.7% growth
during the Clinton years that kept the overall average near 3.5%.

That's Delicious.

Dubai

I've only flown through the Dubai airport, but a friend sent me this report on the city, following a week visit:

Dubai is like Blade Runner mixed with something slightly less dystopic, on Ecstasy. It's like that Mitsubishi commercial for the new Eclipse, with the night lights and Dirty Vegas' "Days Go By" playing. It's the future. The last Sheikh of this Emirate, and now his two successive sons, have somehow decided to evolve and progress. It's still an Arab country, of course. There are public prayer halls, and the women walk the malls in their abayas and veils (some of them). But, still, this city-state is incredible.

25% of the construction cranes in the world are here. The whole city has a vitality, an energy. It's fraught with excess, with clubs and drinking and prostitution (all venerable and non-public Arab traditions), but it's a city being born. They have carved a commercial capital out of the desert. There are hundreds of skyscrapers going up at once, including the Burj Dubai, which will be the tallest building in the world (one new floor per week, 62 out of a planned 160+ completed). During the day, it's like watching a live, life-sized game of SimCity2000 happening before your very eyes. Beautiful towers, everywhere. Landscaping, terraforming, creating something by force of will. It's an incredibly rich city-state, 75% of the population is foreign workers.

The last Sheikh realized that the oil would only last so long, and so he decided to make his emirate the financial capital of the region. And he did it. He was adored by his people, instead of loathed like the House of Saud. He died, and his boys are carrying on the work. Apparently, about 15 years ago, the sheikh thought, "Well, my oil is going to run out in about 46 years. I better leverage that now so that Dubai has something when it's gone." So, he went ahead and turned his city into the finance hub for the entire region. Now oil accounts for only 6% of Dubai's considerable GDP. The rest is finance and commerce and trade. And so, when the rest of the Arab world is tapped out because the oil is gone, Dubai will still have money. (Like the one great line from Syriana, a movie that otherwise simplistically lays every woe of the world at America's feet: "A hundred years ago you were living in tents out here in the desert chopping each other's heads off and that's where you'll be in another hundred years.")

In Dubai, though not in the rest of the Emirates, they made a choice: to advance. They are building something that is at least partially worthwhile. Of course, a corollary result of this is that they've taken all of the age-old vices of Arab Muslim culture (prostitution, alcoholism, misogyny, brutality toward social subordinates, exploitation of workers, absurd materialism, ostentation, extravagance, etc.), and combined them with many of the vices of Western culture (drugs, prostitution, consumerism, flashy cars, dehumanizing bureaucracy, simply enormous shopping malls, fatty foods, etc.). In some senses, it's the worst of both worlds, but in other senses, the sheer audacity and will required to make something that has an actual role in the world beyond oil supply is quite admirable.

By night, Peter... By night, it's the Blade Runner, like I said. It's gorgeous. All of these skyscrapers are illuminated, and they tower over frickin' creation. All of the cranes are illuminated, and they're everywhere. It stretches along the coast for miles. And they're building entire new cities. Marina District, Dubai Internet City, Dubai Media City, Knowledge Village, American University Dubai. Billions of square feet of space, most of it vertical. By night, it's all about zipping through the highways at 2:30 AM in the company's brand new BMW 5-series (because Gourgy the Indian driver goes to sleep at 10), with every option imaginable, at 185 km/hr with the techno trance bumping and a beautiful Romanian girl in the back seat, going to the Buddha Bar with two terrific colleagues, for more great trance, and incredible food, and terrific ambience. It's like a futuristic psychedelic dream. The level of service, of course, is unbelievable. The rich Arabs have all of their guest workers trained to be super-attentive. And these Koreans and Indians and Pakistanis love the Americans, because we're actually nice to them, in contrast to the Saudis and Omanis and Abu Dhabi emiratis, who treat them like slaves. So Americans get even more special treatment.
The last Sheikh realized that the oil would only last so long, and so he decided to make his emirate the financial capital of the region. And he did it. He was adored by his people, instead of loathed like the House of Saud. He died, and his boys are carrying on the work. Apparently, about 15 years ago, the sheikh thought, "Well, my oil is going to run out in about 46 years. I better leverage that now so that Dubai has something when it's gone." So, he went ahead and turned his city into the finance hub for the entire region. Now oil accounts for only 6% of Dubai's considerable GDP. The rest is finance and commerce and trade. And so, when the rest of the Arab world is tapped out because the oil is gone, Dubai will still have money. (Like the one great line from Syriana, a movie that otherwise simplistically lays every woe of the world at America's feet: "A hundred years ago you were living in tents out here in the desert chopping each other's heads off and that's where you'll be in another hundred years.")In Dubai, though not in the rest of the Emirates, they made a choice: to advance. They are building something that is at least partially worthwhile. Of course, a corollary result of this is that they've taken all of the age-old vices of Arab Muslim culture (prostitution, alcoholism, misogyny, brutality toward social subordinates, exploitation of workers, absurd materialism, ostentation, extravagance, etc.), and combined them with many of the vices of Western culture (drugs, prostitution, consumerism, flashy cars, dehumanizing bureaucracy, simply enormous shopping malls, fatty foods, etc.). In some senses, it's the worst of both worlds, but in other senses, the sheer audacity and will required to make something that has an actual role in the world beyond oil supply is quite admirable. By night, Peter... By night, it's the Blade Runner, like I said. It's gorgeous. All of these skyscrapers are illuminated, and they tower over frickin' creation. All of the cranes are illuminated, and they're everywhere. It stretches along the coast for miles. And they're building entire new cities. Marina District,
Dubai Internet City, Dubai Media City, Knowledge Village, American University Dubai. Billions of square feet of space, most of it vertical. By night, it\'s\nall about zipping through the highways at 2:30 AM in the company's brand new BMW n5-series (because Gourgy the Indian driver goes to sleep at 10), withnevery option imaginable, at 185 km/hr with the techno trance bumping and a beautiful Romanian girl in the back seat, going to the Buddha Barwith two terrific colleagues, for more great trance, and incredible food. It's like a futuristic psychedelic dream. The level of service, of course, is unbelievable. The rich Arabs have all of their guest workers trained to be super-attentive. And these Koreans and Indians and Pakistanis love the Americans, because we're actually nice to them, in contrast to the Saudis and Omanis and Abu Dhabi emiratis, who treat them like slaves.

Dubai Internet City, Dubai Media City, Knowledge Village, American University Dubai. Billions of square feet of space, most of it vertical. By night, it's all about zipping through the highways at 2:30 AM in the company's brand new BMW 5-series (because Gourgy the Indian driver goes to sleep at 10), with every option imaginable, at 185 km/hr with the techno trance bumping and a beautiful Romanian girl in the back seat, going to the Buddha Bar with two terrific colleagues, for more great trance, and incredible food, and terrific ambience. It's like a futuristic psychedelic dream. The level of service, of course, is unbelievable. The rich Arabs have all of their guest workers trained to be super-attentive. And these Koreans and Indians and Pakistanis love the Americans, because we're actually nice to them, in contrast to the Saudis and Omanis and Abu Dhabi emiratis, who treat them like slaves. So Americans get even more special treatment.

On Violence

I just got an email from my friend in Iraq today. He spends most of his time with American-friendly Iraqis, which gives an interesting picture of the situation. He recently met a guy they call "the wolf", who comes for a wealthy family. He "transports" goods for companies in Iraq. The wolf is muslim and his father was kidnapped by terrorists last year; because of what the terrorists did, the guy has renounced his religion. They sent the family CDs of their father bound and asked for money.

When violence in Iraq switched from a purely anti-Western reaction, to one of class conflict and greed, it severely damaged the ability of terrorists to threaten the long-term stability of the world order. The more muslims are harmed by their own terrorism and senseless violence, the better chance the world has of creating a global culture against this type of activity.

However, for any norm like this to develop, Israel will have to be less beligerent and the US will have to take troops out of the Middle East, since we consolidate opposition and give an outlet, or excuse, for terrorists. To win over sensible people in the Middle East, we must keep reason on our side. Since America's continued presence in Iraq is not reasonable, we should leave.

Bomb Plot

In an open letter, the 3 Muslim members of Britain's Parliament have blamed the country's policy in Iraq, and its failure to bring about a cease fire in Lebanon, for terrorist threats. While I disagree with Britain's Iraq policy, and believe that the Lebanese conflict is outside of Britain's control, Britain's foreign policy is not to blame for the terrorist attacks. The alleged plotters were apparently Pakistani nationals, or British nationals of Pakistani origin. Their only connection to Lebanon or Iraq is a Muslim heritage.

From comments to the Press, it appears that they have never been directly harmed by British foreign policy. Their grievance is ideological. Their planned action goes beyond any reasonable action given their concerns. This is globalization and the wealth of nations at its worst. Privileged citizens of wealthy countries get more upset about the effect of their governments' policies in foreign countries than their own.

If the press is correct, and these terrorists were going to blow up planes over two countries they had never visited, the problem is not with Britain's foreign policy but how wealthy countries assimilate marginalized groups.

On Vacation in the U.S.

So my blogging will be light over the course of the next week.

Mankiw on Democratic Fair-Trade

A lot of politicians are railing against outsourcing and the china factor, which they claim is squeezing the middle class. Some see this as a reason for isolationism or, more commonly, a reason for only trading with countries who also open up trade to the US. This is described as another version of fair-trade, although third-world coffee growers have rights to the original.

Greg Mankiw grabs on to some rhetoric from Lamont's website (The man who just beat Lieberman in the primary) and worries about the future of America's economy if Democrats gain power. Here's what Lamont's website says:

Connecticut has lost 75,000 manufacturing jobs in the last six years, many replaced by retail and service jobs which pay less and have reduced healthcare and pension benefits. Today, the middle class is getting squeezed and most people living in poverty or near poverty are employed but not earning enough to get by. Many of our high-skill jobs are being sent overseas, drawn by low wages and no benefits.

I support strictly-enforced fair trade policies which level the playing field, requiring that American products have the same access to Chinese markets that Chinese products have to American markets. I would support only reciprocal trade agreements which include strong labor and environmental standards.

Here's what Greg has to say about it"

So Lamont seems to think the U.S. economy is suffering and the primary reason is competition from poor workers in China.
This rhetoric scares me. Wages, benefits, and labor and environmental standards are primarily a function of the level of economic development. Complaining about poor countries low wages and benefits is essentially blaming the poor for being poor.

Greg misses the point. Lamont's statement isn't about the economy in general, it's about middle class jobs. America's middle class is hemoraging. Free trade is important for economic growth, but you can't ignore class differences. Economists know that free trade tells you nothing about the distribution of benefits. Theoretically, and usually in practice, free trade makes the entire economic pie of a country bigger, but it makes life worse for those who lose their jobs.

In America, middle class jobs are going overseas and the wage gap between educated and uneducated workers is growing. The government needs to support educating the poor more than it does bombing Iraq, but we also need to give the middle class a break. If you could outsource Harvard teaching posts, I'm sure Greg would be more sympathetic.

"Requiring that American products have the same access to Chinese markets that Chinese products have to American markets," is a tactic the US has used to increase Free Trade around the World. I agree with Greg that promoting labor and environmental laws in China is like pissing in the wind, but Lamont's objective is right: helping those who are hurt for reasons outside of their control.

Quote of the Day

But there's an alternative: persuading the American public that there's a different and more effective way to fight radical jihadism, one that relies more on economic engagement and public diplomacy and less on mid-20th century notions of fighting wars against uniformed armies. Unfortunately, most Dems don't know how to do this, and their prescriptions end up sounding mushy and unconvincing. In fact, they often sound like they don't really believe their own rhetoric.

I know it's easy to say and harder to do, but: for the good of the country and the good of the party, someone better figure out how to do this. My guess is that the messengers of withdrawal from Iraq will end up getting shot (or at least winged) unless they pair up that message with a truly persuasive and inspiring plan for fighting the overall war in a better and more winnable way. The first Dem to do this is the frontrunner for 2008.

Kevin Drum on what the Dems need to do regain the American public's confidence on national security.

How Good is TNR's Spencer Ackerman?

This good.

UPDATE: You can check out Michael Rubin's response to Ackerman here.

Inexcusable?

"BEIRUT, Lebanon (CNN) -- Lebanese Prime Minister Fouad Siniora said Monday that one person was killed in an Israeli airstrike on the southern village of Houla, not 40 as he had earlier reported."

Tax Cuts Don't Help the Budget

For those people who believe that tax cuts increase government revenues (e.g. National Review), Angry Bear provides some more evidence that Bush's "fairy tale economics" is still a dream. Federal real tax collections are down from 2000.

Cactus offers a way of testing the tax issue in the US: compare states with different tax rates.

Here's his conclusion:

the data doesn’t seem to support the idea that lower taxes are associated with faster growth rates. In fact, the opposite is true, especially for the fastest growing states. One way to interpret this is to conclude that taxes are actually below their optimal rates, and therefore, at the margin, the government is actually more efficient than individuals at converting its spending into growth. Society needs a certain amount of public goods (infrastructure, public health, confronting the Canadian menace, etc.) for businesses to thrive, and perhaps we currently have too little provision of public goods rather than too much.

"U.S.: Talk of Cuban invasion 'absurd'"

I would certainly hope so.

Quote of the Day

"There's no plan - we are constantly reacting," said a senior American military official, who spoke on the condition of anonymity. "I have absolutely no idea what we're going to do."

Things in Iraq just keep going from bad to worse. And to think that Bush continues to argue that if he had to do it all over again he still would have invaded...

An epochal moment?

Back in May of this year, FAIR plublished a widely-publicized list of Tom Friedman quotes on the war in Iraq. The FAIR review caught Friedman in the act of making the same "do or die" statements about Iraq for pretty much the entire duration of the war and occupation. Well, apparently Friedman's six to nine month window during which we would find out "whether we have liberated a country or uncorked a civil war" has finally arrived. Here's Friedman on the state of our efforts in Iraq in today's New York Times:

When our top commander in Iraq, Gen. John Abizaid, tells a Senate Committee, as he did yesterday, that ''the sectarian violence is probably as bad as I've seen it,'' it means that three years of efforts to democratize Iraq are not working. That means ''staying the course'' is pointless, and it's time to start thinking about Plan B — how we might disengage with the least damage possible.

First it was George Will. Next came David Broder. And now Tom Friedman has joined the chorus of voices calling for the withdrawal of U.S. troops from Iraq. As Kevin Drum notes, all three are "cautious, centrist, establishment liberals who have long hoped for success in Iraq." That all three have now thrown in the towel is evidence of a fundamental shift in "moderate" opinion on the war. What's more, as a recent Gallup poll of U.S. public opinion on Iraq demonstrates, Will, Broder, and Friedman's change of heart essentially mirrors the American people's changing attitudes toward the war. I hope Repubs have a lot of "cut and run" stickers because pretty soon they're going to have to start affixing them on the entire country!

Country Boy in the City

I'm from Montana, and although I've spent a lot of time in New York and London, I wasn't ready for Baltimore. Most cities these days have a Green Zone, like Iraq, where country boys can wander freely without getting into too much trouble. Such is not Baltimore. In Baltimore, you can be downtown and cross from the swanky harbor to the ghetto before realizing the you crossed the street.

I'm in Baltimore with my dad while he gets treatment at John Hopkins. We pulled into our hotel around 10pm and after settling into our room, my dad asked if I could make a run to the store for him: he'd forgotten a couple of things at home. On his list of things were 1) Gatorade (because he gets dehydrated) and 2) Vaseline (because his skin is dry from radiation treatment). We're staying on old Charles Street in Baltimore, which is the equivalent of Park Avenue down here. I exit the hotel for my quest around 11pm; I figure I'll find an all night convenient store. I wonder around for a few blocks, and don't see anything open, but 4 blocks down Baltimore street I can see some neon lights and figure there will be something open.

4 blocks later, I'm being offered crack, cocaine and sex from everyone on the street. The bright neon lights I saw were for sex shops and strip joints, and the bouncer's at the door promised me free services of all kinds if I would go inside. I just wanted some goods for my dad, so I went up to the nicest looking crack dealer, and asked me if there was a convenient store. After declining his sack of rocks, he tells me that there's a 7/11 one block down. Perfect.

It's only at this point that I realize my predicament. I'm in the sleazy sex district of Baltimore, looking for vaseline.

I walk into the 7/11, which has homeless people milling about, enjoying the air conditioning. I grab the Gatorade and look around for some vaseline. I can't find it, but see the other drugs behind the counter, so I go up to ask the man at the cash register.

Country Boy: "Excuse me, do you have any Vaseline."
Register Man: "Hey Hey, you mean like some Peroleum Jelly?"
Country Boy: "Yeah"
Register Man: "Oooh, I like the way you work brother. Ooh yeah, Gotta work that. Ah sorry brother, we're all out."
Country Boy: "Do you know where I might get some, I sort of need it tonight."
Register Man: "Oh yeah, you dirty boy. Ha. Yeah. Sometime you just got a need."
Counry Boy: "It's not like that, I just need it for some cracked skin."
Register Man: "Yeah, that's what I'm talking about, a little 'cracked skin', hell yeah, give me some of that."
Country Boy: "Sure, Ok, is there a shop around the corner where I might get some?"
Register Man: "Yeah, try the sex shop up the street."

I eventually got the Vaseline and managed not to buy in Meth.

I learned a valuable lesson though: don't go looking for vaseline in ghetto sex districts.

Quote of the Day

The prospect of a low intensity civil war and a de facto division of Iraq is probably more likely at this stage than a successful and substantial transition to a stable democracy.

Even the lowered expectation of President Bush for Iraq - a government that can sustain itself, defend itself and govern itself and is an ally in the war on terror - must remain in doubt.

William Patey, Britain's outgoing ambassador in Baghdad, on the liklihood of civil war in Iraq. Despite all this, Patey thinks that any premature withdrawal would make the situation worse. So let me get this straight. Patey thinks there's probably going to be a civil war yet continues to maintain that the most prudent course for the U.S. and UK would be to make sure we're right in the middle of it? Given the terrible news that keeps coming out of Iraq, I'd argue exactly the opposite.

It's Time

Here's David Broder in today's Washington Post:

The point is that history and economics have their own logic. A military mission that fails to yield a victory does not always presage disaster. Today, virtually no one argues that we should have continued fighting the North Koreans or the Viet Cong and the North Vietnamese.

Can we think about the costs of carrying on, without an end in sight, against Hezbollah and the insurgents in Iraq?

Translation: Getting out of North Korea and Vietnam was the right thing to do. Getting out of Iraq is also the right thing to do.

Quote of the Day

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

Richard N. Haass, President Bush's first-term State Department policy planning director exploding Bush's claim that the fighting in Lebanon and Iraq represents "a moment of opportunity for broader change in the region."

The Minimum Wage, Again

Greg Mankiw once again hammers at the minimum wage. He's not alone in his view that the minimum wage is worthless, many conservatives agree with him, but the analysis is shallow, based more on theory than fact. As I mentioned in a previous post, there is strong evidence that raising the minimum wage has little effect on unemployment, at least at the levels proposed. (Obviously if one raised the minimum wage to $20 an hour, there would be a serious shock to the system and unemployment would soar.)

My problem with the classic economic analysis of the minimum wage is that it completely ignores bargaining power. The basic assumption, and republican mantra, is that people deserve what they get. To an economist with complete faith in the free market, if someone is paid $5.25 an hour, that must be all they are worth; likewise, if a CEO earns $100 million a year, he must be worth that much, or the market wouldn't pay him. In both cases, this is wrong; simply because someone earns X, does not mean that they, de facto, deserve that much money. Does a bank robber earning $10 million a year deserve his money? A rhetorical question, but obviously the answer is obviously no.

Employers have significant bargaining power over their low wage workers, who have no safety net to take time off work, or look for a better job. People earning $10,900 a year work every day, because they have to do so; that income is below the poverty line. Workers in this country should be able to live out of poverty.

Corporate America is enjoying record profits. American CEOs earn sums incommensurate with their performance. The wages of the bottom quintile is at a low point in real terms. When conservatives begin arguing against the minimum wage, because it will hurt the poor, one should realize that they are offering a shallow argument.