HEY ARNOLD

A commenter points me to this interesting essay by Arnold Kling. On TechCentralStation, fortunately it's not about global warming.

Kling notes that those who would like to gloss over the first couple of years of Reagan's term preclude giving him credit for supporting Paul Volcker and Fed's brutal squashing of inflation. I don't remember Reagan supporting the Fed -- to the contrary, I remember his people opportunistically grousing about the Fed. But my memory is not what it used to be. Either way, Kling is right on this. If you give Reagan credit for everything that happened, you take the bad with the good. The bad was the contraction caused by disinflation, the good was the disinflation itself.

Kling is also right that connecting the president to economic variables is a superficial exercise. I did it in reverse in the previous post to uncover the simple inaccuracy of typical popular celebrations of "Reaganomics."

I'm not sure what Kling means by failed "incomes policies" in the 1970s. I don't remember any, in my sense of the term. To me incomes policies mean what a politically ascendant labor movement would dictate to the Federal government, in the form of policies that alter the functional distribution of income (between labor and capital), through the use of monetary, fiscal and regulatory policies.

Kling says if Carter had been reelected and let the Fed do its thing, the economy of the 1980s would have been much the same. As the table below shows, in terms of GDP and unemployment it was much the same in the actual event. (I wouldn't credit or discredit any president for changes in productivity growth, one of the less understood economic variables around.)

Kling gives Reagan credit for deregulation and stemming growth of government, two topics I'm going to pass on for the moment. He does not get excited about tax cuts, but rather tax reform. By the latter he means the 1986 reform.

This last is a little murky. I was in the Treasury department for part of the run-up to the '86 reform. The campaign was launched with Reagan emphasizing "tax simplification," something everybody talks about but nobody does. The professionals in the Treasury Department undertook detailed research on tax reform and rejected consumption tax options. The Treasury secretaries in this period were James Baker and Donald Regan. They presided over what I see as excellent, objective work on the problem.

My sense is that the president was oblivious to the arcane details of this process. Little White House direction was evident, although I was a GS-9 and not exactly in the inner circle. Congress was deeply involved, however, and produced a bill that Reagan signed. The bill broadened the base, lowered rates, and incidentally raised some revenue, another brick replaced in the wall that had been torn down in the 1981 bill. Before long, whoever he may be, the next president is going to face the same task.

LEGEND

Speaking of cold water, Robert Pollin throws a tubful on Clintonomics, about which more later, in his book Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity. Another reading recommendation. In keeping with this week's preoccupation, however, I'd like to offer the table below from Bob's book with some supplementary information.

The gist is that "Reaganomics" cannot be associated with superior economic performance. The wonders of Reagan's tax cuts are mythic, not real. In no indicator below does the business cycle associated with Reagan and Bush (1980-90) compare favorably to others since 1960.

The periods reflect GDP peak-to-peak measures. Otherwise you get illusory effects from starting or ending somewhere in mid-cycle, along the lines of "The Seven Fat Years" dumbass analysis from people like Robert Bartley (WSJ editorial page). If I chopped off the first two Bush years, the Reagan averages would look worse. Bob's book has numbers for presidential terms as well and the basic story is not different.

Macroeconomic performance indicators
(percentages)

Growth in GDP and productivity were clearly worse in the 80s than before or after. Unemployment was no better than the 70s, worse otherwise. The only favorable comparison is inflation, which had more to do with Allan Greenspan and the Fed. Reagan Administration officials were fond of griping about the Fed in an effort to solidarize with victims of the painful effects of monetary tightening and higher interest rates.

I've added private investment numbers (NIPA Table 1.1.6, line 6 for initiates) because capital formation is supposed to be the raison d'etre of supply-side economics. In the 1980s, it stinks on ice. As I've noted before, investment sagged after "supply-side" tax cuts in the 1980s, and picked up after Clinton's tax increases in 1993.

Then there's the unknown Reaganomics: there were six or eight tax increases in the 80s, after the big tax cut of 1981. (See The Tax Decade, by C. Eugene Steuerle.) These were not sufficient to solve the deficit problems created in 1981, but the 1986 reform improved the tax system. Reagan signed it, so he gets points for that. Unfortunately, since 1986, the basic strategy of the '86 reform -- to lower rates and broaden the base -- has been trampled by both parties. Republicans concoct breaks for business and the wealthy, and Democrats invent social programs dressed up as tax cuts.

YOU'RE A GOOD MAN,
CHARLIE SCHULTZE

I've been scrounging around for elementary material on open economy income accounting, something I'd managed to avoid through graduate school. My plan is to rip to shreds the conventional paradigm on national saving and economic welfare, but that will come later. This prompted me to pick up Memos to the President by Charles L. Schultze, evidently written in his spare time when not drawing Peanuts cartoons.

People ask me for reading recommendations, and this is a good one. I happen to disagree with most of it, but it's a very accessible introduction to economic policy. Unlike textbooks that tend to rely on a linear progression of indoctrination, this book consists of fake memos on an orderly sequence of policy topics. The nice thing is that the 'memos' are more modular than textbooks tend to be, so those with limited patience for this kind of stuff can digest it in bite-sized pieces. The writing is also lucid, reflecting Schultze's career of trying to explain economics to Members of Congress.

The outlook is centrist. As far as it goes, it's a useful corrective to supply-side nostrums. In general it's conservative on spending and militant on deficit reduction. An antidote for the latter would be books by Robert Eisner.

When Memos came out, one of the controversies was public investment spending. EPI-aligned economists were advocating an expansion of spending on infrastructure, R&D;, and education (and still are). The Brookings people, Schultze's tribe, directed a fire hose of cold water on this priority.

With the benefit of hindsight, I'd like to quote a bit (p. 319):

"But an innovative new study has recently concluded that by making a number of reforms in the way we design and pay for the nation's highway and airport systems, we could achieve the desired modernization and improvements at small added cost.* These reforms are likely to be politically difficult, and they may never be enacted. Thus it may ultimately be necessary to overwhelm the problem with more money."

*Kenneth A. Small, Clifford Winston, and Carol A. Evans, Road Work (Brookings 1989)

I would say we are now into "ultimately." Roads wouldn't be my top priority for new investment, but the general priority remains. The Small/Winston/Evans book is about constructing a diabolically clever system of user fees to internalize externalities -- offset the costs of pollution and congestion.

Congress doesn't operate this way. When they attempt to solve problems, it's by overwhelming them with money, not only in the domestic realm, but also in national security tasks. Business firms have been known to do the same, not incidentally wasting a lot in the process.

On the concern for waste, there is a good argument that budget stringency generates more, not less waste. The reason is that a prohibition on considering new spending initiatives tends to squelch constructive debates on such issues. For lack of such a debate, legislators undertake spending outside the sunlight of informed consideration. We now have more pork than ever, deficit concerns notwithstanding.

If you want to reduce waste, promote judicious consideration of worthwhile spending initiatives.

"...AND TAKE BONZO WITH YOU!!"

by the Sandwichman

The Guardian's Steve Bell. Classic.

EAT YOUR CHILDREN WELL

by the Sandwichman

In Iraq, the Job Opportunity of a Lifetime: Managing a $13 Billion Budget With No Experience, WaPo, May 22: Occupied Iraq was just as Simone Ledeen had imagined -- ornate mosques, soldiers in formation, sand blowing everywhere, "just like on TV." The 28-year-old daughter of neoconservative pundit Michael Ledeen and a recently minted MBA, she had arrived on a military transport plane with the others and was eager to get to work....

When Ledeen's group showed up at the palace -- with their North Face camping gear, Abercrombie & Fitch camouflage and digital cameras -- they were quite the spectacle....

You gotta read the whole thing. You just gotta.

As Smedley Butler said so eloquently, "War is a racket. It always has been."

CONSTRUCTION AHEAD

If you hadn't noticed, we're doing a site redesign. It isn't quite working yet, so please bear with us. One burning issue is that some code change is blocking the Blogads. Advice and feedback would be welcome.

THE GOVERNMENT THAT GOVERNS LEAST USES CONTRACTORS

One interesting tidbit from the IRS conference was a remark made in passing. The IRS contracts out to a firm called ChoicePoint to obtain personal information on individuals. Besides residential addresses, this includes financial information. I think it is slightly mind-boggling that the IRS knows less about this stuff than a corporation.

This plays to an axe I like to grind here, that a vacuum of public authority opens the way to predators in the private sector. In this case, your privacy is compromised less by the Government than by a corporation.

A libertarian might say, sure but the private firm doesn't have the power to tax you or otherwise constrain your own decisions. Not necessarily. Information could be used to deny you a job, mortgage, business loan, or insurance, for instance. Oh and the right to vote. It can also be used to harrass you with advertising, which implies some time cost (i.e. deleting spam).

The only thing worse than government that leaves you at the mercy of predators in the private sector is one that is in league with them. Like now.

THIS IS YOUR JOURNALIST ON DRUGS

Possibly the most bizarre thing I will read today, by Glen Kessler in the Post:

"Reagan's predecessor, Jimmy Carter, may have ushered in deregulation or set in motion a big defense buildup. But it was Reagan who took those policies to heart. Former president Bill Clinton may have declared "the era of big government is over" or finally balanced the budget. But it was Reagan who set those goals and inspired the Republican Congress that worked with Clinton.

Reagan also placed tax cuts firmly at the center of the Republican agenda. Before Reagan, Republicans disliked government and abhorred deficits. After Reagan, tax cuts became a crusade that one day would -- maybe, possibly -- lead toward smaller government and the end of deficits. Reagan preached that lower taxes would lead to greater economic growth, a theme that still echoes in the House and the Senate and whenever President Bush steps up to give an economic speech."

Reagan set the goal of balancing the budget? The Republicans in Congress were inspired to work with Bill Clinton on balancing the budget? The most decisive act towards budget balance -- Clinton's first budget in 1993 -- passed without a single Republican vote.

Then in the second graph, tax cuts will lead to the end of deficits.

Call me crazy, but I think articles on economics in the Washington Post should rise above the analytic level of Doonesbury cartoons.

REAGAN

I won't be mourning. I disliked him a lot, but gloating would be stupid and obnoxious, and expressions of homage insincere. He doesn't need any pity. He was a lucky man, he had a pretty good life, and in his own right he was successful. You can't beat him because he has already won. Fortunately the game has more innings.

Respect is due the bereaved, as well as to those who have a good feeling about him. It's just the decent thing to do.

EVIL JEW FINANCIER WATCH

Kevin Drum understated the case. The Hannity and Colmes segment with Tony Blankly just oozes anti-semitism. Blankly takes the lead, Hannity joins in, and Alan Colmes is reduced to saying "Let me get my question out."

Here's the relevant portion, straight from the Fox web site (as of 11:11 pm, Saturday nite):

BLANKLEY: Yes, Americans have all rejected those photos. But let's get back to Soros.

Good to see you, Tony. Thank you.

This is so rich in Nazi filth one hardly knows where to begin, so let's begin at the beginning.

1. "He blamed the Jews for anti-semitism" is a lie. The implication is that Soros made a general statement to that effect. This is impossible to believe. What is likely is that at worst Soros pointed to some set of circumstances where some Jews provoked some kind of negative reaction. Not the same thing. It gets worse.

2. Plundering currencies, causing the Asian financial crisis. Lies combined with galloping ignorance. What is interesting here is that in this remark Blankly solidarizes with Malaysian Prime Minister Mahathir Mohamad, who blamed the Jews in a similar fashion. Paul Krugman made some flaky remarks explaining Mohamad's crass political motivations without condemning him in the same paragraph, and Donald Luskin accused Krugman of anti-semitism. That didn't stop Luskin from later accusing Robert Rubin and Soros of plotting to bring down the stock market in order to throw the election to the Democrats in November.

3. He's an athiest/he's a Jew. In other words, Jews are distinguished by a false religion.

4. He's a Jew who figured out how to survive the Holocaust. 'Atheist' is conflated with Soros' Judaism -- presumably both are bad -- and then with surviving the Holocaust -- presumably also bad. The good Jews are the ones whose virtuous qualities gave them the moral strength to forego surviving the Holocaust.

The segment goes on from there to Soros using his money in U.S. politics, wholly unlike Republicans, who never use their money to advance their political designs. Sean the Punk joins in at the end, little Alan is his customary whimpering, ineffectual self.

It's time to start keeping score. Those who forfeit any right to pontificate about anti-semitism. I'm starting a list . . .

1. The Anti-Defamation League. Greasing Italian neo-fascist Silvio Berlusconi as "our flawed friend."

2. Glenn Reynolds and other bloggers, taking a nonchalant attitude towards the blatant anti-semitism of The Passion of the Christ.

3. Tony Blankly, Sean Hannity, and Donald Luskin -- propagating the Jew financier plotting speculative shenanigans for the sake of manipulating world politics.

4. Fox News, for not cancelling Hannity and Colmes.

5. Political collaborators of Sun Myung Moon, meaning stooges in both parties who attend his bullshit conferences. Note that Moon's fake newspaper based an article on the Luskin musings.

6. Pat Robertson and defenders thereof. Obvious.

Add your entries below. This is not a contest. Please document with links if possible.

UPDATE: More on Soros is here from Ben Affleck Matt Welch.

THE LIES THE LYING LIARS ARE TELLING

This goes on for a bit, so you might want to get a cup of coffee before you start in.

I missed this week's conference of the Campaign for America's Future for one held by the Internal Revenue Service, so you know right off the bat how twisted my priorities are. Instead of putting the moves on Arianna Huffington, I listened to talks on the details of tax administration in New Zealand and the UK's Working Family Tax Credit (a fine thing, by the way).

The news about this conference properly speaking is the quasi-unity now among Democrats, something I generally applaud, if not without some mixed feelings. For the Bush Campaign and fabulists at National Review Online, it was more treason from one of their worst nightmares -- a very rich, very smart, very partisan Democrat, Mr. George Soros. (Full disclosure: Soros' foundation financed an EPI project a few years ago.)

You may think the jingoists' stock in trade is celebration of American power abroad. I disagree. Rather, it is hate speech directed at your own friends and neighbors. What do you hate the most? Somebody who is out to kill you! What's the next worst thing? Somebody who supports the people out to kill you. This is not a sophisticated doctrine, but it is powerful. Just ask Herman Goering.

Is there hate speech on the left? Of course there is. In fact, Insty notes a pretty good example today. What's different is that in the U.S., right-wing hate speech conduces to persecution by Government. The current poster child for persecution is alleged Al Queda member and American citizen Jose Padilla. Whatever Padilla has done, or would do, he had rights that have been summarily taken away. There is little or no analog on the left; maybe the IRS audits of right-wingers during the Clinton Administration.

There is also extra-legal persecution, in the form of vigilante-style violence of the sort we see routinely advocated by, for instance, bloggers on Glenn Reynolds' blogroll.

Isn't there the same sort of thing from the left? Sure. In fact, there was a comment to that effect right here that I removed as soon as I saw it. We are now conducting an experiment as to whether there are more left-types advocating violence against the right, or vice versa, in the confined category of bloggers. So far there is no contest.

Anyway, getting back to NRO and Soros, the NRO smear headline by the lying Byron York is "Soros: Abu Ghraib = September 11." The text of Soros' remarks is here. In passing I want to take note of the question of whether Soros conforms to the jingoists' caricature of the left. I am excerpting, so you can judge for yourself if I am distorting out of context. Soros is in italics; my comments are interspersed.

It's [Bush's foreign policy.--mbs] built on two pillars. One, that the United States must maintain its absolute military superiority in every part of the world and, second, that the United States has the right for preemptive action. Now, both these propositions taken on their own are quite valid propositions. . .

Here we are a long way from Noam Chomsky.

Here is York, quoting Soros:

The picture of torture in Saddam's prison was a moment of truth for us," Soros said Thursday morning in Washington at a meeting of the liberal activist group Campaign for America's Future."

Here is what Soros actually said:

I think that the picture of torture in Abu Ghraib, in Saddam's prison, was the moment of truth for us, because this is not what this nation stands for.

Doesn't exactly come off the same, does it? That excuse for a newspaper, Washington Times, similarly omitted the underlined words. York continues to quote, accurately:

"I think that those pictures hit us the same way as the terrorist attack itself," Soros continued, "not quite with the same force, because in the terrorist attack, we were the victims. In the pictures, we were the perpetrators and others were the victims."

"But there is, I'm afraid, a direct connection between those two events, because the way President Bush conducted the war on terror converted us from victims into perpetrators."

The words "equivalent" or "equivalence," much less "moral equivalence" do not appear in his remarks. There is no language saying the prison scandal is the equal of 9-11. There is no excusing the terrorism against the U.S., described as nothing less than an attack on us. What there is is criticism of Bush. The jingoists and the Bushists mean to package all criticism of Bush as hatred of America. Imputing an equation of the prison scandal to 9-11 dovetails with their campaign to trivialize the prison offenses, which by the way entail current investigations of ten possible murders.

Interestingly, Soros does say that in the war on terror in the large, more innocents have died at the hands of the U.S. than died on 9-11. This is a pretty hard thing to say too, but the jingoists haven't raised it. There is some possibility of empirical validation, after all, so I imagine they don't want to go there. The moral question -- causing the deaths of innocents to get some bad guys who would otherwise kill other innocents in the future -- doesn't necessarily disfavor the pro-war position, but that would admit of too much ambiguity for the jingoist mind.

Soros incidentally has done (and spent) tons for democracy in the ex-Soviet countries, enough to get him and his groups shut down in some places.

The speech is pretty good. Read the whole thing.

EVERYTHING ABOUT INDIVIDUAL INCOME TAXATION

I stumbled onto the 2nd edition of Taxing Ourselves by Joel Slemrod and Jon Bakija of the Office for Tax Policy Research at the University of Michigan. I would say it sets a new standard for the first book you'd want to read about taxes, were you so inclined. The first edition was a nice but slim overview. The second has been bulked up to be a reference on the individual income tax, as well as a comprehensive, accessible introduction to the debate over taxing income v. consumption.

The big holes are very little attention to the corporate income tax or payroll tax.

There's a third edition I haven't seen yet.

The traditional standard was Joseph Pechman's Federal Tax Policy. This is now dated -- Pechman died 14 years ago -- but it is still useful and covers topics neglected by Slemrod & Bakija.

I WANT TO BE YOUR INTERN

I can type too.

WHO SAID KERRY COULDN'T WIN NEW JERSEY

He's a lock.

THE SUM OF ALL BEERS

Caught a bit of Tom Clancy and General Anthony Zinni on (figuratively speaking) Deborah Norville last nite. Zinni was persuasive, but why is Clancy being asked to analyze intelligence policy? Because he writes spy novels? He should go back to driving his tank around his estate.

When asked to render their opinions of some Administration figures, Clancy responded to the name of Paul Wolfowitz with "Is he on our side?" Ouch. Oy.

OFFSHORING IS GOOD FOR YOU

Not. Here's a new guide to the issue.

CONTEST NOTES

I'll be closing the voting on the Vicious InstaPundit Blogroll Contest on Sunday, 6 pm.

Many think they have voted, but they haven't. For the third time, to vote you have to find the front page of this blog, then scroll down all the way to the bottom where you will see two Lycos Polling Gear thingies. That's where you vote. You are welcome to announce and/or explain your vote in the comments, but it won't be counted.

Some latecomers have criticized the lack of partisan balance, but they haven't done proper investigation. We have a counterpart contest for vicious remarks made by bloggers on my own blogroll (including ourselves), and it has a cash first (and only) prize of $50.

So far the response has been pathetic -- three or so entries. In an effort at getting a fair contest, I am extending the timeframe on the Vicious MaxSpeak Blogroll Contest through June 15th. Post your entries in comments to this post. Those few who have already entered, please do me a favor and repost here so I'll have all the entries in one place. (As contest administrator, I can make it worth your while, if you know what I mean.)

The rules are the same: statements by bloggers, either in their blog entries or their own comments; link must be provided. (I've dropped the word length rule, but understand the more brief and concentrated the viciousness, the greater the impact.) Entries must predate May 15, lest some enterprising soul compose a new screed and enter it. You must have a PayPal account to receive your prize (you need not post your email, you can send it to me at max-at-maxspeak-dot-org).

My other contest, the Rummy Death Watch Pool, is still running. The Tenet resignation spices up the possibility of further departures from Bush, Inc. Thus far there has been only one entry, so your chances of winning are excellent, but there isn't much money to recoup at this point.

HOT PIPELINE

I've heard of rough surf, but this is ridiculous.

ALL THE PRESIDENT'S JOBS:
BETTER LATE THAN NEVER

Good employment numbers for May. The unemployment rate was unchanged at 5.6, including this guy, still much higher than we know it needs to be. If we continue at the current pace, eventually that rate should decline.

From my colleagues:

The Economic Policy Institute’s JobWatch reports that in the 11 months since the “jobs and growth” tax cut went into effect in July 2003, the economy has added 1,365,000 jobs. The administration promised that that tax cut would lead to 3,366,000 jobs over those 11 months. Thus, the tax cut is running more two million jobs below the administration’s promise.

Today's update is up.

UPDATE: More here.

FRIDAY BUG BLOGGING:
TORA BORA

Osama Bin Cicadin is in there somewhere.

BUG TERROR ALERT UPDATE: Bush buzzed. (Thanx, Barry.)