And Now, Random Convention Thoughts

• Al Sharpton: good speech. My favorite line was this:
  

  You [President Bush on Friday before the Urban League] said the Republican Party was the party of Lincoln and Frederick Douglass. It is true that Mr. Lincoln signed the Emancipation Proclamation, after which there was a commitment to give 40 acres and a mule.
  
  That's where the argument, to this day, of reparations starts. We never got the 40 acres. We went all the way to Herbert Hoover, and we never got the 40 acres.
  
  We didn't get the mule. So we decided we'd ride this donkey as far as it would take us.

  Also,I hereby revoke the right of any commentator who mentions "Tawana Bradley" to tell Democrats to "get over" Florida.
  
  
• Bob Graham, Bill Richardson, Ed Rendell, and Jennifer Granholm: Great content, mixed on delivery. Graham was worst (even his "Osama bin Forgotten" line fell flat), Richardson next worst, Granholm not bad but needs to talk faster, and Rendell did a decent job making energy policy entertaining. Here's a tip for watching speeches like these, meaning speeches for which the content is more important than the delivery.
  

  Step 1: Get Tivo.
  Step 2: Record the convention
  Step 3: Bring up subtitles (SAP)
  Step 4: Watch on fast forward.

  
  
• At long last, I know how to pronounce "Shalikashvili" -- just like it's spelled, except that the first two i's are pronounced like hard e's. Shalikashvili's best line was at the start of his speech: "But I do not stand here as a political figure. Rather, I am here as an old soldier and a new Democrat."
  
  
• The montage of statements from generals and admirals endorsing Kerry should be made into a commercial of some sort.
  
  Speaking of generals and admirals, surely the DNC can find someone of high rank from the USMC to join the rest? If not, I'll volunteer my father (Captain, USMC, 6 years, mostly in Vietnam). He's not particularly fond of Kerry but recently opined, "I'll tell you one thing, son: George Bush is not fit to lead this country."
  
  
• Edwards: Good speech, not great. Unlike Joe "Mentum" Lieberman, he'll debate circles around Cheney. In fact, the prospect of that debate may revive the talk of Cheney leaving the ticket. For health reasons, of course.
  
  Edwards' best line: "And we, John and I, we will have one clear unmistakable message for al Qaeda and these terrorists: You cannot run. You cannot hide. We will destroy you." Best catchphrase: "Hope is on the way."
  



• The convention closed with a live performance by the Black Eyed Peas singing "Let's Get it Started" [in here]. Given that the actual song is "Let's Get Retarded", and "Let's Get it Started" is the radio version, have the Democrats at long last cast off the political correctness label?
  

AB

Free Trade Update

Matt Yglesias reports from the convention that Laura D'Andrea Tyson (former Clinton National Economic Adviser and current Kerry advisor), in no uncertain terms, stated that Kerry supports free trade:

It is an irony that "the evidence is getting stronger every day that globalization has benefits while skepticism is growing stronger." "When people say, 'well, listen to what the Kerry campaign has said about trade in some of the primaries, we are concerned that Sen Kerry will move US away from trade integration.' To which I say, well, think about the issue of national campaigns in the US. Recognize that what might be said in one primary . . . is not an indicator of the future." The thing to look at "is Sen Kerry's very courageous, very consistent, very long-term record on trade and global economic integration." A man who has consistently voted for a pro-trade, pro-integration agenda. His career has been oriented in this direction...

Every country must find a way to ensure that those dislocated by economic integration find support for that dislocation. Globalization creates aggregate benefits for countries, but internal distribution of costs and benefits is uneven. "It must be taken entirely seriously as a policy agenda what to do for those who are not better off." The voices of protectionism in America are the voices of those who have lost, a Kerry administration would do a better job of taking care of those people which will make their voices grow less stridently anti-trade. Thus, Kerry would be better for free trade.

"I want to assure you that a Kerry-Edwards administration will continue in the great American tradition of leading the way on global economic integration. Thank you very much."

That bit about having to lie in the primaries is a bit, well, too honest.

AB

P.S. Time to get off of that fence, Dan -- the free trade grass is greener to your left.

Computer Science and Outsourcing

Notwithstanding the cry and furor over outsourcing, and several poignant stories readers and commenters have shared, the market for computer scientists appears to still be strong:



$49,691 seems pretty good for entry level computer scientists.

AB

Bush More Like Carter Than Reagan

... as measured by oil prices:

The U.S. Energy Information Administration (EIA) said Wednesday that crude stocks rose in the United States by 1.2 million barrels to 300.5 million barrels amid record imports of 11.3 million barrels per day (bpd).

The $43 per barrel price is the loftiest level in the 21-year history of crude futures trading at NYMEX.

Interestingly, OPEC is pumping at the highest rate in 25 years (as promised?), the real problem is potentially reduced supply from Russia.

AB

The Real Deal

I've liked Obama -- the "skinny kid with a funny name" -- since I first took a closer look at him last March. His speech Tuesday night was truly great. Here's the transcript, here's the streaming video, and here's where you can contribute to his campaign. That said, he's currently unopposed, so you can probably find candidates who need your money more. I recommend watching rather than reading the speech, because it's not nearly as powerful in print as it is when heard.

Speaking of contributions, we here at Angry Bear -- Kash, PGL, me, and our readers -- managed to raise $5,642 for John Kerry, which the Kerry website says ranks me 227th overall in the Kerry Points tally (you get points for gathering emails, hosting events, volunteering, and fundraising.) Thanks for all your contributions! (Special thanks to MP and LK.)

After the convention, Kerry, like Bush, will be using public money and so will not be allowed to accept contributions. So we'll need a new cause here at Angry Bear. I'm leaning towards the Democratic Senatorial Campaign Committee (DSCC), but I'm also considering the Democratic National Committee (DNC). Any thoughts on which is more deserving?

AB

UPDATE. It's unanimous:

• CalPundit: "Hey, that Obama guy is pretty good!"
• Atrios: "I'll just state the obvious -- the rising star is exceeding even the inflated expectations." Speaking of Atrios, he's anonymous no more. Meet Duncan Black.
  
• Digby: I just felt the hair on the back of my neck stand right on end. Obama is the real thing ... He looks great, he sounds great --- he is great.
• Jesse, in his inimitable style:

  Besides watching Illinois Messiah (it was promised that he would ride into the Senate on a horse and an ass, praising the Cubs and Bears)... what else can you do? This man is not a future Senator. He's a future President. Right now, I honestly believe that the Democratic Party, had it control of the Senate and a majority of legislatures, would start a push for a constitutional amendment to form the position Praetor Obama.

  You know how good this speech is? It will be on rap albums next year, during the tracks that are trying to be socially conscious.

  He entered this a star, he's leaving a Clinton.

  Ezra agrees: "And then they gave him the keynote. And then he knocked it out of the park. Not only this park; it flew over Fenway, shot across state lines and landed somewhere in DC, on the White House's front line."
  

A Cheesey Tax-Induced Export Subsidy with Transfer Pricing Holes

Letters To Switzerland is the transfer pricing chapter of David Kay Johnson’s Perfectly Legal – who argues certain multinationals are diverting income from the U.S. Treasury offshore. The topic of transfer pricing manipulation was also raised by a John Plender and Martin Simons article in the Financial Times on July 22, 2004, but this time in reference to diverting revenues away from the UK tax authorities. The Financial Times article reminded me of the E. I. DuPont de Nemeours classic, which involved a Swiss sales subsidiary formed about the time John Edwards was finally out of diapers. George Mundstock’s Leave No Corporation Behind  discusses the U.S. tax incentive for exports, which used to be DISC, then FSC (foreign sales corporation), and is now ETI, and each time has been challenged by the EU under WTO rules. The U.S. Treasury has tried to argue that FSC transfer pricing was arm’s length, but we shall use a simple example based on this Swiss classic to suggest otherwise.

Consider a U.S. manufacturer of winkettes that sells 100 million units to its EU distributors for a wholesale price of $10. The distributor sells to European customers each winkette for $12.50 and thereby earns a 20% gross profit margin to cover its accounting costs as well as provide for a normal return to its invested capital. Our U.S. manufacturer has two types of accounting costs: production costs equal to $8 per unit and logistics costs equal to $0.50. U.S. profits are therefore $1.50 per unit or $150 million per year generating $52.5 million in corporate income taxes at a 35% tax rate. The ETI rules allow for two types of tax planning: (a) a simple administrative pricing rule where 15% of profits could be sourced to a no-tax entity; or (b) arm’s length pricing under section 482 where any FSC profits would be get a 30% haircut from taxes, which is a tax rate equal to 24.5% of FSC income. Under the first type of planning, the effective tax rate would be only 29.75%. The other approach would make sense only if at least half of the profits should accrue to the FSC.

If the FSC were responsible for the logistics function, its arm’s length commission rate would be around 5.5% under most sensible approaches, which would mean the FSC would pay the manufacturer a price equal to $9.45 per unit, would generate $55 million in gross profits and incur $50 million in expenses, which results in only $5 million in net profits. Tax obligations under arm’s length pricing would be nearly $52 million. So do all multinationals go for the administrative rule?

Oddly, some tax advisors tell these multinationals that the FSC should earn a 20% gross profit margin, which has the effect of putting all income in the FSC taxed at an effective tax rate of only 24.5%. Their premise is that many distributors earn 20% gross profit margins or more, which was the taxpayer’s position in the E. I. DuPont de Nemeours case. Of course, the Tax Court saw the fatal flaw in this logic noting sensibly that gross profit margins depend on the functions of the sales entity and that related party entities with very few functions should earn more modest gross margins. Yet, this illogical argument has resurfaced. And if you are wondering who might argue such aggressive and illogical positions, Mr. Johnson has some clues for you.

I raise the Financial Times article only because it posits a similar pricing policy between a UK manufacturer and a Benelux subsidiary and tries to argue any gross profits in the subsidiary is evidence of an intercompany price that is below the arm’s length standard. That might be correct in our Swiss classic, but if the Benelux subsidiary was a typical distributor, then the authors should rethink their example.

A Good Idea

Digby has one:

I have a public service idea for the convention bloggers. When you are talking to reporters, why don't you all mention that they should read The Daily Howler?

Sommerby does the absolute best press criticism in the blogosphere...

AB

Voting for Kerry

Looking for reasons to vote for Kerry, instead of simply against Bush? Read this piece by Thomas Oliphant in the current issue of The American Prospect.

Kash

Sullivan Coming Around

I've always said a few things about Andrew Sullivan: smart and a good writer, but sadly, roughly equal parts misguided and disingenuous. Today, in a scathing analysis of the Bush administration, he displays the first two characteristics admirably. Here's a sample, but the rest is similar and well worth reading:

There has also been, it's safe to say, a remarkable recklessness in Bush's approach to governance. Was it really necessary to insist that the Geneva Conventions do not apply to detainees in the war on terror? When Osama bin Laden was isolated in the Afghan-Pakistani border, was it wise to deputize the campaign to capture him to Afghan warlords? When so many people warned that the hardest task in Iraq would be what happened after the fall of Baghdad, was it sensible to junk all the carefully-written government reports for reconstruction and go in on the fly? Was it wise to brag in the days after the first military victory in Iraq that it was "Mission Accomplished"? When the Iraqi insurgency was gaining traction, was it sensible to apply the methods in Guantanamo Bay to the hundreds of petty criminals and innocents hauled into Abu Ghraib? At almost every juncture, where prudence might have been called for, Bush opted for winging it. Whatever else his methodology is, it can scarcely be called conservative.

Sullivan's conclusion is a hair's breadth short of an endorsement:

Put all that together, and I may not find myself the only conservative moving slowly and reluctantly toward the notion that Kerry may be the right man - and the conservative choice - for a difficult and perilous time.

So conservative semi-endorsements of Kerry now include Sullivan, Bruce Bartlett, Dan Drezner, and Jacob Levy. Alleged liberals siding with Bush include Zell Miller, Chris Hitchens, and Ralph Nader (Bartlett, Drezner, and Sullivan have strong conservative credentials to this day; Miller and Hitchens haven't really been liberals for at least 3-5 years.) If I'm missing anyone, on either side, please expand my lists in comments.

AB

The Million Billionaire March

Wondering what the group Billionaires for Bush is up to during the DNC in Boston? True to the grassroots nature of their crusade to hold on to the hard-fought advances that billionaires have enjoyed over the past 3½ years, they are holding a protest march. I wish them well – may they keep exercising their right to speak out against the unwashed masses and "class-traitor" Kerry! It's so hard for billionaires to get their voices heard above those of average Americans, after all.

Kash

Speaking of Michigan and Nader

Josh Marshall links to this from ABC News:

Consumer advocate Ralph Nader's quixotic presidential campaign says it submitted about 5,400 signatures to get on the Michigan ballot, far short of the required number of 30,000. Luckily for him, approximately 43,000 signatures were filed by Michigan Republicans on his behalf, more than meeting the requirement.

Should be great for Nader's ego. And since there's no difference between what Bush and Kerry administrations would do over the next 4 years(*), I don't see why Marshall quips, "Speaks for itself. Idiots ..."

AB

(*) Statement excludes issues pertaining to war, peace, taxation, civil rights, the environment, judicial nominations, the federal deficit, free trade, international diplomacy, national security, and jobs.

Swing State Numbers

The latest Gallup/USA Today poll shows Kerry even in Missouri, down 4 in Florida, and up 5 in Ohio -- with Nader in the race.(*) Since Gore barely lost in 2000 while carrying none of these states, and Bush seems unlikely to win any states he didn't carry in 2000 (the possible exception is Michigan, which Gore won 51-46 in 2000, but is so far tighter with Bush at 43 and Kerry at 45), a win in Ohio would basically do the trick for Kerry.

FYI, for a quick explanation of why Bush is doing poorly in Ohio, which he won 50-46 in 2000, see this post.

AB

(*) Two-way race numbers: Bush 50, Kerry 47 in Florida; 48-48 in Missouri; Kerry 51, Bush 45 in Ohio.

Bush Tells Urban League Employment is Rising
 
After George Bush snubbed the NAACP, he appears before the Urban League with another partisan attack at the Democrats with lines like: “I know plenty of politicians assume they have your vote. But did they earn it, and do they deserve it?” and “Have the traditional solutions of the Democrat Party truly served the African-American people? There is an alternative this year. Take a look at my agenda.”

OK, he may have a point about the Democrats taking the black community for granted, but let’s take a look at his agenda.  He starts off by touting his supposed tax cuts, which we know is really a tax shift imposing less of the burden on the rich and more on the middle class and the poor.  But the following line caught my attention:

The role of government is to create an environment where people from all walks of life have a chance to realize their dream. And that's precisely what is taking place in America. And the economy is better for it. And more people are finding work.

 
Employment for blacks has improved?  Let’s look at the data in terms of overall employment, the employment-to-population ratio, and the unemployment rate.  Black employment peaked in February 2000 at 15.624 million with the employment-to-population ratio hitting 61.7%.  Black unemployment fell to 7.0% by April 2000.  By the middle of 2003, however, employment was only 14.727 million with the employment-to-population ratio hitting 57.3% and the unemployment rate rising to 11.6%.  Employment did rise to 14.909 million by March 2004 with a corresponding increase in the employment-to-population ratio and a decline in the unemployment rate.  Since then, however, employment has declined to 14.833 million with the employment-to-population ratio now being only 57.0% and the unemployment rate rising back to 10.1%. 

Did Bush realize who he was talking to?  Is he that clueless as to the reality of the job market?  Even if he is, one has to wonder who wrote this speech for him.

Perspective

Kuffner puts things into perspective nicely today:

...I have a few words to say about the attempt by the Republicans in Congress to force DOMA-related lawsuits out of the federal courts. I just can't decide if I find this sort of behavior outrageous or pitiable. I mean, for crying out loud, we've just had the 9/11 Commission's report which baldly stated that "we are not safe", we've got the Army dragging 67-year-olds back into service because they don't have any better non-draft options for manpower in Iraq (one wonders when someone will consider doing something about this), we've still got a crappy economy and huge structural budget deficits, and this is what the GOP leadership thinks is important? How unserious can you get?

AB

The National Archives

I'm not sure what to make of the Sandy Berger kerfuffle, other than that it's strange. But Bob Somerby has a pretty good idea:

Meanwhile, add the National Archives to the list of deeply dysfunctional agencies. Apparently, they only keep close watch on their documents after they think that some are missing. Would it kill them to number and monitor documents before they think that some have been swiped? Let’s see—could they actually keep track of the documents a person takes, then make him return them before he leaves? That’s how it works at our public library. Any chance that Archives staff could check out this complex arrangement?

AB

Rumsfeld’s Pentagon Before 9/11

My earlier post excerpting Chapter 8 portrayed the Commission's findings regarding Attorney General Ashcroft prior to 9/11. Chapter 6 paints a similar picture of (probably benign) negligence in the case of Rumsfeld.

The confirmation of the Pentagon’s new leadership was a lengthy process. Deputy Secretary Wolfowitz was confirmed in March 2001 and Under Secretary of Defense for Policy Douglas Feith in July. Though the new officials were briefed about terrorism and some of the earlier planning, including that for Operation Infinite Resolve [the military options for striking at Al Qaeda in Afghanistan that were developed during the Clinton administration], they were focused, as Secretary Rumsfeld told us, on creating a twenty-first-century military.

At the Joint Chiefs of Staff, General Shelton did not recall much interest by the new administration in military options against al Qaeda in Afghanistan. He could not recall any specific guidance on the topic from the secretary. Brian Sheridan—the outgoing assistant secretary of defense for special operations and low-intensity conflict (SOLIC), the key counterterrorism policy office in the Pentagon—never briefed Rumsfeld. He departed on January 20; he had not been replaced by 9/11.

Rumsfeld noted to us his own interest in terrorism, which came up often in his regular meetings with Tenet. He thought that the Defense Department, before 9/11, was not organized adequately or prepared to deal with new threats like terrorism. But his time was consumed with getting new officials in place and working on the foundation documents of a new defense policy, the quadrennial defense review, the defense planning guidance, and the existing contingency plans. He did not recall any particular counterterrorism issue that engaged his attention before 9/11, other than the development of the Predator unmanned aircraft system.

--9/11 Commission Report, pp. 207-208.

The Commission Report very neutrally states that “the key counterterrorism policy office[r] in the Pentagon... had not been replaced by 9/11.” Actually the truth is a bit starker: the Bush administration didn’t even put forward a nomination for this vacant post until September 21.

In general, this passage speaks to me of a Secretary of Defense who really didn’t care about issues of terrorism, or want to do anything about it. In some ways this is more damning than Ashcroft's indifference, because our military had directly suffered from a terrorist attack with the Cole bombing just a couple of months before Rumsfeld moved into the Pentagon.

Kash

Clinton-Bashing and National Security

Here’s another short excerpt from the Commission Report that I find enlightening. Apparently all of the useless obsession with Clinton’s personal life during 1998 had an impact on our national security:

By the early hours of the morning of August 20, President Clinton and all his principal advisers had agreed to strike Bin Ladin camps in Afghanistan near Khowst, as well as hitting al Shifa… Everyone involved in the decision had, of course, been aware of President Clinton’s problems. He told them to ignore them. Berger recalled the President saying to him “that they were going to get crap either way, so they should do the right thing.” All his aides testified to us that they based their advice solely on national security considerations. We have found no reason to question their statements.

The failure of the strikes, the “wag the dog” slur, the intense partisanship of the period, and the nature of the al Shifa evidence likely had a cumulative effect on future decisions about the use of force against Bin Ladin.

-- 9/11 Commission Report, pp. 117-118.

In other words, the Clinton administration did not have any motivations other than national security for their actions. Nevertheless, because Republican criticism of the use of force against Bin Laden was so fierce during 1998 (including the “Wag the Dog” talk about Clinton’s motivations for the air strikes), the Clinton administration was probably discouraged from using further force against Bin Laden. MoveOn.org was exactly right in 1998 – it was important for the country to move on from the Lewinsky business. Too bad we didn’t, for far too long.

Kash

The System Was Blinking Red

After spending only an hour or two with the report so far, Chapter 8 has become my favorite chapter. That’s because it seems to offer the most insight into whether and how the attacks might have been prevented. Chapter 8 describes the state of US intelligence reporting and government responses during the summer of 2001. During the first summer of Bush’s presidency (nearly half of which he spent on vacation in Texas) this is what was happening in Washington:

On June 25, Clarke warned Rice and Hadley that six separate intelligence reports showed al Qaeda personnel warning of a pending attack.

...On June 28, Clarke wrote Rice that the pattern of al Qaeda activity indicating attach planning over the past six weeks “had reached a crescendo.” …One al Qaeda intelligence report warned that something “very, very, very, very” big was about to happen, and most of Bin Laden’s network was reportedly anticipating the attack.

...The headline of a June 30 briefing to top officials was stark: “Bin Ladin Planning High-Profile Attacks.” The report stated that Bin Laden operatives expected near-term attacks to have dramatic consequences of catastrophic proportions.

...On July 5, representatives from the INS, FAA, Coast Guard, Secret Service, Customs, CIA, and FBI met with Clarke to discuss the current threat… That same day the CIA briefed Attorney General Ashcroft on the Al Qaeda threat, warning that a significant terrorist attack was imminent.

...The next day, the CIA representative told the CSG that al Qaeda members believed the upcoming attack would be “spectacular,” qualitatively different from anything they had done to date.

...In mid-July, reporting started to indicate that Bin Ladin’s plans had been delayed, maybe for as long as two months, but not abandoned… Tenet [said] that in his world “the system was blinking red.” By late July, Tenet said, it could not “get any worse”… On June 30, the SEIB contained an article titled “Bin Ladin Threats Are Real.” Yet Hadley told Tenet in July that Deputy Secretary of Defense Paul Wolfowitz questioned the reporting. Tenet replied that he had already addressed… questions on this point; the report was convincing. To give a sense of his anxiety at the time, one senior official in the Counterterrorist Center told us that he and a colleague were considering resigning in order to go public with their concerns.

...[T]he CIA decided to write a briefing article summarizing its understanding of this danger. Two CIA analysts involved in preparing this briefing article believed it represented an opportunity to communicate their view that the threat of a Bin Ladin attack in the United States remained both current and serious. The result was an article in the August 6 Presidential Daily Brief titled “Bin Ladin Determined to Strike in US.” It was the 36th PDB item briefed so far that year that related to Bin Ladin or al Qaeda, and the first devoted to the possibility of an attack in the United States.

...Most of the intelligence community recognized in the summer of 2001 that the number and severity of threat reports were unprecedented. Many officials told us that they knew something terrible was planned, and they were desperate to stop it.

What was the Bush administration’s response? As we know, President Bush’s response was to spend a month on vacation in Texas. How about Attorney General Ashcroft, the man ultimately in charge of the FBI, INS, and numerous other law enforcement agencies?

Attorney General Ashcroft was briefed by the CIA in May and by [Acting FBI Director] Pickard in early July about the danger. Pickard said he met with Ashcroft once a week in late June, through July, and twice in August. There is a dispute regarding Ashcroft’s interest in Pickard’s briefings about the terrorist threat situation. Pickard told us that after two such briefings Ashcroft told him that he did not want to hear about the threats anymore. Ashcroft denies Pickard’s charge.

...The Attorney General told us he asked Pickard whether there was intelligence about attacks in the United States and that Pickard said no. Pickard said he replied that he could not assure Ashcroft that there would be no attacks in the United States, although the reports of threats were related to overseas targets. Ashcroft said he therefore assumed the FBI was doing what it needed to do. He acknowledged that in retrospect, this was a dangerous assumption. He did not ask the FBI what it was doing in response to the threats and did not task it to take any specific action.

Ashcroft may have actually been incompetent, not just making assumptions. On page 209 of Chapter 6 the commission gratuitously notes that Ashcroft faced a "steep learning curve" -- which I interpret as a way for the Commission to say "Ashcroft was in over his head as Attorney General." The depths of his ineptness are revealed on page 208 of the commission report, however. All of the information presented all summer long about the impending terrorist attack was apparently falling of deaf ears:

The Justice Department prepared a draft fiscal year 2003 budget that maintained but did not increase the funding level for counterterrorism in its pending fiscal year 2002 proposal. [Acting FBI director] Pickard appealed for more counterterrorism enhancements, an appeal the attorney general denied on September 10.

This is not new information. But the context that the commission report provides, with the long string of increasingly strident warnings about an impending attack, highlights how shocking Ashcroft’s indifference toward anti-terrorism efforts was. As far as I can tell so far, if there’s a single character in the report that looks culpably negligent, it’s Ashcroft.

Kash

The 9/11 Commission Report

The 9/11 commission report is an odd document in some ways. Ten out of thirteen chapters of the report simply contain an organized retelling of the factual documents and statements that they received. Only the last three chapters contain any sort of “editorializing,” as it were. And in that section, the commission was extremely careful to always mention the Clinton and Bush administrations in the same sentence, and therefore to avoid casting blame on either one.

The factual statements presented in the first ten chapters will be read in different ways by different people, as the commission intended. Nevertheless, it is still possible that the commission reached certain conclusions which they were uncomfortable explicitly stating, but which may be discernable upon close reading of the strictly factual portions of their report. That's what thousands (millions?) of people will be doing over the next few days. I encourage you to look at the actual report (helpfully made available online by the Washington Post) to draw your own conclusions.

Kash

Update on the Tax Cuts

Here's the latest on the proposed tax cuts about which I wrote the other day. Yesterday congressional Republicans reached a compromise between the extreme tax-cutters and those fiscally responsible Republicans who wanted to limit the tax cuts and find offsetting revenue to make the changes budget-neutral. So what was the White House response? They ordered the House leadership to cancel the deal and postpone the whole tax cut effort. They would rather try again from scratch in September, when they hope that they can get enough votes without any compromising at all on their tax cut wish list. The Washington Post has the story.

Kash

Bush Resolves to Dramatically Change Course

According to the New York Times, Bush is promising that in a second term he will do exactly the opposite of what he’s done in his first term:

WASHINGTON, July 21 - President Bush on Wednesday set out the broad principles that he said would guide his domestic agenda for a second term, saying he would tackle education, health care, energy and the economy through an emphasis on limited government, individual responsibility and the power of markets.

I suppose it’s a good tactic, since what he’s done in his first term has been such a miserable failure.

Kash

Lying Liars

Visiting Pandagon, I re-encounter a crazy story that I'd heard before but never got around to posting about. No, Pandagon is not the source of the story, they just link to it, and also point out that it's crazy. Via Yahoo News:

Republican officials expect the Democratic ticket -- Kerry and running mate John Edwards -- to receive a bounce in polls of about 15 percentage points after the convention. Their goal is to try to cut into that likely post-convention advantage by ensuring that media coverage of the Democratic convention includes the GOP's views.

Clearly, the purpose of this story is for Republicans to wait until there's a blip of less than 15 points and then say, "See! Americans hate Kerry/Edwards!", even if there's a +5 to +7 point blip. It's the converse of the primary Bush-promotion stratagem (set expectations ridiculously low, and then shout triumphantly from the hilltops when Bush surpasses them by, e.g., committing only a few malapropisms in a speech/debate/interview).

In any case, where did the 15-point convention blip myth come from? As far as I can tell, it is spun out of whole cloth and earwax somewhere deep within the bowels of RNC headquarters.

For example, in 2000, the Democratic Convention was held from 8/14-8/17 and the Republican Convention was held from 7/31 to 8/3. Were there blips in the polls? Did they come even close to 15 points? Here are the data from Gallup, to which I've added a blue vertical line for the Democratic convention and a red one for the Republican convention:



If you look closely, if anything, there appears to be a short-lived spike in the Democratic numbers and drop in the Republicans' numbers, after the Republican convention. Then, after the Democratic convention, Gore's numbers drop and Bush's jump -- the exact opposite of the alleged 15-point convention blip^TM.(*)

So by the Republicans' own logic, this time around, if Kerry/Edwards fail to drop after the convention, then it will have been a smashing success.

AB

(*) I suspect that if you search enough polls, you could probably find one poll such that on or around 8/17-8/14, the Gore increase plus the |Bush decrease| equals 15. Failing that, there's probably a poll out there such that Gore increase plus the |Bush decrease| + the margin of error equals 15. Failing that, there's probably a poll out there such that Gore increase plus the |Bush decrease| + 2 X (the margin of error) = 15. This is irrelevant: if it's an effect that we should "expect" this time around then it should be present in most polls from the prior election, not appear only in carefully chosen outliers.

Religion in the US

The Chicago Sun-Times has an interesting story about how dramatically the religious composition of the US has changed over the past decade. The results are summed up in this table:



The Sun-Times article focuses on the fact that Protestants will probably comprise less than 50% of the US within another year or two, for the first time since the 17th century. But just as interesting, I think, is the growth in people who self-identify as having no religion, and the growth in the "other" religions. The largest of these "other" religions is Islam, with Buddism and Hinduism making up the bulk of the rest.

Kash

Divergent Opinions on the Economy

This week’s survey of consumer confidence by ABC News and Money Magazine showed no changes from the previous week. What I found really interesting about this survey, though, was how very different the opinions on the state of the economy were depending on the political affiliation of the person surveyed. Specifically:

The index stands at -47 among Democrats, its lowest level since November 1993, but +43 among Republicans, matching its highest point since November 2000.

That strikes me as a huge difference in perceptions. Basically that says that Democrats think the economy is still in recession, while Republicans think the economy is booming like there’s no tomorrow.

Why such a big difference? Are people are just adhering more closely to the view of the economy as given by each party’s leadership? Or are Democrats and Republicans really experiencing different parts of the economy? Maybe Democrats are in the types of jobs and industries that are hurting, while Republicans are in sectors of the economy that are doing well.

It’s probably some combination of these factors. But either way, this is an aspect of partisanship that I haven’t seen in a while (though I suppose you could have found similarly divergent views on the economy in 1984). Yet another way in which Bush has proved to be a divider rather than uniter, I suppose.

Kash

Political Markets

I’ve referred to the Iowa Electronic Markets on political futures in past posts. The exchange creates contracts that pay either $0 or $1, depending on what happens. For example, a George Bush Presidential election contract will pay you $1 for each contract that you own if Bush wins, and will pay you zero if he loses. Effectively it works out to a form of betting on the outcome of the election. Note that there are other markets that do similar things, such as Tradesports.com.

The puzzling thing to me is that when people are putting their money on the line by betting on one candidate or another, they tend to bet on Bush despite his lag in the polls. For a nice way to see Kerry’s slight but beginning-to-be-noticeable lead in the polls, take a look at this assessment by Chris Bowers at MyDD. My conclusion from these poll results is one that others have also come to recently: if the election were held today, John Kerry would win.

Despite this, however, more people are betting on Bush than Kerry. This chart shows the prices of the Bush and Kerry contracts at the IEM since the beginning of June (Bush is yellow, Kerry is blue):



And this chart shows the price of the Bush contract at Tradesports.com since the beginning of 2003:



While the Tradesports.com contract has taken a pretty sharp fall over the past week, it’s still selling above 50, indicating a slightly better-than-even chance for Bush to win, according to the people betting on this exchange. While on the IEM, participants there had Bush and Kerry neck-and-neck for a few days last week, but recently Bush’s lead has opened up again.

My question is a simple one: why aren’t the political futures markets following the poll results? Do the participants in those markets believe that the poll results are wrong? Do they think that people are going to change their mind and opt for Bush between now and November 2, perhaps because they expect an “October surprise”? Or how about this less likely but more interesting (at least to an economist) theory: maybe the participants in the markets tend to be Kerry supporters and are using the political markets as a way to hedge or provide themselves with some insurance (I’d rather have Kerry win, the thinking goes, but if he loses at least I’ll make some money in the political markets).

I'm sure there are some other good explanations out there that I can't think of -- if you have an idea, let me know. Coming up with an explanation for this discrepancy probably won't shed light on any significant political dynamics this year (though it might), but regardless, this is an interesting little puzzle to think about.

Kash