Semi-Daily Journal

Comment Spam

Our first serious outbreak of comment spam. Comments will be disabled until the forces of unrighteousness are suppressed...

How Much of a Ponzi Scheme Was Enron, Anyway?

A correspondent writes:

One piece of the puzzle I don't understand . . .

Richard Kinder is President and COO of Enron from 1990 to 1996. He leaves and takes over Kinder Morgan, which is a pipeline company. Then, it would appear, he successfully executes a strategy of building up from solid pipeline assets.

In other words, it (tentatively) looks like the guy who is really running Enron leaves in '96 and proceeds to successfully execute the strategy Enron avowed. It makes me suspect there really was a there there at Enron, but that Kenneth Lay allowed silly lieutenants like Skilling, Fastow, White, et cetera to start doing silly things--like overpaying for foreign assets and building up big trading infrastructures to trade in immature markets.

Krugman: The Awful Truth

Paul Krugman muses on how very few people are willing to attempt a substantive defense of the Bush administration, on any front:

People are saying terrible things about George Bush. They say that his officials weren't sincere about pledges to balance the budget. They say that the planning for an invasion of Iraq began seven months before 9/11, that there was never any good evidence that Iraq was a threat and that the war actually undermined the fight against terrorism.

But these irrational Bush haters are body-piercing, Hollywood-loving, left-wing freaks who should go back where they came from: the executive offices of Alcoa, and the halls of the Army War College.

I was one of the few commentators who didn't celebrate Paul O'Neill's appointment as Treasury secretary. And I couldn't understand why, if Mr. O'Neill was the principled man his friends described, he didn't resign early from an administration that was clearly anything but honest.

But now he's showing the courage I missed back then, by giving us an invaluable, scathing insider's picture of the Bush administration.

Ron Suskind's new book "The Price of Loyalty" is based largely on interviews with and materials supplied by Mr. O'Neill. It portrays an administration in which political considerations -- satisfying "the base" -- trump policy analysis on every issue, from tax cuts to international trade policy and global warming. The money quote may be Dick Cheney's blithe declaration that "Reagan proved deficits don't matter." But there are many other revelations.

One is that Mr. O'Neill and Alan Greenspan knew that it was a mistake to lock in huge tax cuts based on questionable projections of future surpluses. In May 2001 Mr. Greenspan gloomily told Mr. O'Neill that because the first Bush tax cut didn't include triggers -- it went forward regardless of how the budget turned out -- it was "irresponsible fiscal policy." This was a time when critics of the tax cut were ridiculed for saying exactly the same thing.

Another is that Mr. Bush, who declared in the 2000 campaign that "the vast majority of my tax cuts go to the bottom end of the spectrum," knew that this wasn't true. He worried that eliminating taxes on dividends would benefit only "top-rate people," asking his advisers, "Didn't we already give them a break at the top?"

Most startling of all, Donald Rumsfeld pushed the idea of regime change in Iraq as a way to transform the Middle East at a National Security Council meeting in February 2001.

There's much more in Mr. Suskind's book. All of it will dismay those who still want to believe that our leaders are wise and good.

The question is whether this book will open the eyes of those who think that anyone who criticizes the tax cuts is a wild-eyed leftist, and that anyone who says the administration hyped the threat from Iraq is a conspiracy theorist.

The point is that the credentials of the critics just keep getting better. How can Howard Dean's assertion that the capture of Saddam hasn't made us safer be dismissed as bizarre, when a report published by the Army War College says that the war in Iraq was a "detour" that undermined the fight against terror? How can charges by Wesley Clark and others that the administration was looking for an excuse to invade Iraq be dismissed as paranoid in the light of Mr. O'Neill's revelations?

So far administration officials have attacked Mr. O'Neill's character but haven't refuted any of his facts. They have, however, already opened an investigation into how a picture of a possibly classified document appeared during Mr. O'Neill's TV interview. This alacrity stands in sharp contrast with their evident lack of concern when a senior administration official, still unknown, blew the cover of a C.I.A. operative because her husband had revealed some politically inconvenient facts.

Some will say that none of this matters because Saddam is in custody, and the economy is growing. Even in the short run, however, these successes may not be all they're cracked up to be. More Americans were killed and wounded in the four weeks after Saddam's capture than in the four weeks before. The drop in the unemployment rate since its peak last summer doesn't reflect a greater availability of jobs, but rather a decline in the share of the population that is even looking for work.

More important, having a few months of good news doesn't excuse a consistent pattern of dishonest, irresponsible leadership. And that pattern keeps getting harder to deny.  

President Empty Suit

Brian C.B. notes a paragraph by James Fallows in the new Atlantic Monthly:

This is the place to note that in several months of interviews I never once heard someone say "We took this step because the President indicated..." or "The President wanted..." Instead I heard "Rumsfeld wanted," "Powell thought," "the Vice President pushed," "Bremer asked," and so on. One need only compare this with any discussion of foreign policy in Reagan's or Clinton's Administration--or Nixon's, or Kennedy's, or Johnson's... to sense how unusual is the absence of the President as prime mover. The other conspicuously absent figure was Condoleeza Rice.... It is possible that the President's confidants are so discreet that they have kept all his decisions and instructions secret. But that would run counter to the fundamental nature of bureaucratic Washington, where people cite a President's authority whenever they possibly can ("The President feels strongly about this, so...").

James Fallows's use of the word "unusual" is the most extreme use of understatement I have ever read or will ever read, no matter how long I should happen to live.

Open Trials for Those Accused of Crimes Against Humanity

Let's give the microphone to Robert H. Jackson:

Of one thing we may be sure. The future will never have to ask, with misgiving, what could the Nazis have said in their favor. History will know that whatever could be said, they were allowed to say. They have been given the kind of a Trial which they, in the days of their pomp and power, never gave to any man.

But fairness is not weakness. The extraordinary fairness of these hearings is an attribute of our strength. The Prosecution's case, at its close, seemed inherently unassailable because it rested so heavily on German documents of unquestioned authenticity. But it was the weeks upon weeks of pecking at this case, by one after another of the defendants, that has demonstrated its true strength. The fact is that the testimony of the defendants has removed any doubt of guilt which, because of the extraordinary nature and magnitude of these crimes, may have existed before they spoke. They have helped write their own judgment of condemnation.

The Lost[?] Promise of International Capital Flows

Those of us card-carrying neoliberals who pushed for large-scale opening of capital flows in the early 1990s had a particular vision of the future in our minds' eyes--a vision of the future did not come to pass. We looked at how extraordinarily strongly the world's system of relative prices was tilted against the poor: how cheap were the products that they exported, and how expensive were the capital goods made in the post-industrial core that they needed to import in order to industrialize and develop. "Why not free up capital flows and so encourage large-scale lending from the rich to the poor?" we asked. Such large-scale lending might cut a generation off the time it would take economies where people were poor to converge to the industrial structures and living standards of countries where people were rich. Certainly such large-scale borrowing and lending had played a key role in the economic development of the late-nineteenth century temperate periphery--Canada, the western United States, Australia, New Zealand, Chile, Argentina, Uruguay, and South Africa--more than a century ago.

But the future we saw did not come to pass. Instead of capital flowing from rich to poor, it flowed from poor to rich--and overwhelmingly in recent years into the United States of America, whose rate of capital inflow is now the largest of any country, anytime, anywhere. Central banks that sought to keep the values of their home currencies down so that their workers could gain valuable experience in exporting manufactures to the post-industrial core, first-world investors who feared sending their money down the income and productivity gap after the crises of Mexico '95, East Asia '97, and Russia '98, techno-enthusiasts chasing the returns of the American technology boom, the third-world rich who thought a large Deutsche Bank account would be a good thing to have in case something went wrong and they suddenly had to flee the country in the rubber boat (or the Learjet)--all of these fueled the flow of money into the United States, which was thus enabled to invest much more than it managed to save. The U.S. economy became, and remains, a giant vacuum cleaner, soaking up all the world's spare investible cash.

And so those of us who still wish to be card-carrying flag-waving advocates for international capital mobility are reduced to two and only two arguments. First, and most important, capital controls create the setting for large-scale corruption. People who badly want to move their capital across borders can't--unless they can find some complaisant bureaucrat. A well-functioning market economy needs to minimize the incentives and opportunities for corruption or it will turn into something worse. Second, perhaps the inflow of capital into America was and is justified: perhaps there is something uniquely valuable about investments in America today. (But in that case, if these investment opportunities are so great, why aren't Americans themselves saving more--both privately and publicly--to take advantage of them?)

1960-85 was the era in which development was to be financed by public institutions like the World Bank because market failures and distrust of governments made it very hard for poor countries to borrow on the private market. 1985-2000 has been the era in which development was to be financed by private lending to countries that had adopted the market-friendly and market-conforming policies that were supposed to lead to high returns and rapid growth. The first era was not one of unqualified success. And looking at the reverse inflow of capital into the United States, I cannot say that the second era has been one of unqualified success either. It is very nice that Mexican workers and entrepreneurs are gaining experience in export manufactures, and exporting enough to the U.S. to run a trade surplus. But the flip side of the trade surplus is the capital outflow. Should capital-poor Mexico really be financing a further jump in the capital intensity of the U.S. economy?

It is not possible for a card-carrying neoliberal like me to wish for any but the most minor of controls to curb the most speculative of capital flows. Capital markets can get the allocation of investment badly wrong, but governments are likely to get it even worse, and the incentives to corrupt bureaucrats do need to be kept as low as possible. But the hope for a repetition of the late nineteenth-century experience, in which core investors' money gave peripheral economies the priceless gift of cutting decades off the time needed for successful economic development, has--so far--proved vain.

Employment Declines of a Magnitude Not Seen Since 1944-45

Louis Uchitelle writes about the employment sitch:

Growth in Jobs Came to a Halt During December: Dropping out has been a characteristic of the recovery since June, reflecting the struggles of the unemployed amid companies' reluctance to add workers. As a result, the percentage of the working-age population participating in the labor force -- that is, employed or seeking employment -- fell to 66 percent in December from 66.5 percent in June, a withdrawal of roughly 1.1 million people. Reflecting this exodus, the employment-to-population ratio -- a measure of the percentage of the working-age population actually holding jobs -- has been dropping, as well. It has fallen nearly eight-tenths of a percentage point, to 62.2 percent, since the recession ended in November 2001, and 2.1 percentage points since the start of the recession in March of that year.

Federal Reserve policy makers consider this ratio an important indicator of how many jobs can be added without upward pressure on wages or inflation. Mr. Bernanke has cited the weakness in the ratio as an important reason for keeping interest rates low. The decline in the ratio has been particular sharp among young people, African-Americans and Hispanics, and economists say it may help to explain a deterioration in wages among workers in jobs below the level of manager or supervisor. These workers account for 80 percent of the 130.1 million people in the work force. Their average hourly earnings, which rose 3 cents, to $15.50, in December, are growing at an ever slower annual rate: 2 percent in December, down from 3.2 percent a year earlier.

"What we worry about is consumer spending in 2004," said Mr. Gault, the Global Insight economist. "We got a lot of help in 2003 from tax cuts and from mortgage refinancings. This year, however, we are counting on better employment gains to support consumer income growth and, in turn, consumer spending. If we don't get the jobs, we will have to worry about the consumer."...

Despite the mild job growth since August, total employment fell last year by 331,000 on top of a 1.5 million drop in 2002. The last time employment, as measured by the survey of 400,000 establishments, declined for two consecutive years was in 1944 and 1945 as war production wound down...

Edmund Andrews Says Bush Seeks Jobs

Edmund Andrews writes in the New York Times:

News Analysis: Bush Seeks Ways to Create Jobs, and Fast: The stage had been set to celebrate the revival of jobs. With a phalanx of women entrepreneurs at his side and a billboard covered with the word "Jobs!" behind him, President Bush proclaimed his confidence about the economy here on Friday. But he made only passing reference to the latest news about employment.

The reason was clear: Friday's report on unemployment in December was much weaker than either the administration or most independent economists had predicted. Job creation was virtually nil, and the unemployment rate declined only because the labor force shrank by 309,000 workers. Many of those were people who had simply become too discouraged to keep looking for work. The problem confronting Mr. Bush is that there is little he can do between now and the elections except wait and hope that the employment picture improves. And the administration is not likely to get much more help from the Federal Reserve, which has already reduced short-term interest rates to just 1 percent.

"In terms of big levers to pull, they don't have anything," said Pierre Ellis, a senior economist at Decision Economics, a forecasting company.... Both the White House and the Fed are confronted by a recovery unlike any other in modern history. Economic growth has been soaring for months, corporate profits have shot up and the stock market has regained much of its old ebullience. Yet job creation has been slower than in almost any previous recovery, and wage growth has slowed to a crawl. That appears to reflect another big new element that lies entirely outside the president's control: the enormous increases in productivity, which have made it possible for companies to squeeze more output from each worker.

"The evidence is powerful that we can have 4 or 5 percent growth without hiring much," said John Makin, a senior economist at the American Enterprise Institute. Mr. Makin has long been among the more pessimistic economic forecasters, but the employment and wage data on Friday came in far worse than even he had expected. "I was stunned, quite frankly," he said. It is not unusual for presidents to undertake actions to straighten out the economy and then do little but hope and pray they work - and in time. Jimmy Carter appointed Paul A. Volcker as chairman of the Fed, and he increased interest rates to stem inflation. The first President Bush reluctantly raised taxes to deal with a ballooning budget deficit. In each case, those actions helped the economy recover, but not in time to earn Mr. Carter or Mr. Bush a second term...

The most puzzling thing about Andrews's story is that Andrews appears to have no memory at all. A year ago--remember--the administration was having an internal debate over economic policy. And the administration decided to use the concern about employment as fuel to pass a dividend tax cut--not a tax cut that would get lots of money to those likely to spend it and so boost employment, but a tax cut that would enrich the well-off five, ten, twenty years from now.

The thinking inside the administration was (i) we want to tilt the distribution of wealth in favor of the rich this way, (ii) the current worries about unemployment give us an opportunity to do so if we claim that the dividend tax cut is really a jobs program, and (iii) employment will probably recover on its own anyway so we really don't need an actual jobs program.

That was the administration's thinking: pass the dividend tax cut rather than a real stimulus program and bet that job growth would accelerate on its own. It was a risky bet to make. They made it. They now appear to have crapped out.

Why isn't this backstory worth including in the article?

Yet Another Must-Read... Weblog

Is Dan Froomkin allowed to call the White House Briefing he has started doing for the Washington Post a "weblog"? It is an extraordinarily fine one. I have only one question: what is the URL for its archives going to be?

It is truly a wonderful world we live in, in which someone as smart and energetic as Dan Froomkin is functioning as my personal pre-processor for White House-related news...

Paul O'Neill

I was never a fan of Paul O'Neill as a Treasury Security. He never figured out how to deploy or listen to his professional staff, both making himself infinitely less effective and leading to serious personnel losses that will damage the Treasury as an institution for decades to come. He did not do a good job at marshalling opposition to the steel tariff. He did nothing to raise the level of the administration's pronouncements on economics. He let himself get rolled at the start of the administration by not drawing a line in the sand and requiring a tax cut focused on improving incentives rather than getting money to the rich. He shared the Bush administration bias against even talking to our allies. He never learned that even his most thoughtless words were taken seriously--and that he should try hard to keep from using his big mouth to amplify Brazil's economic problems. He would rather spend time touring Africa with Bono than trying to nail down AIDs funding in the budget. He never seems to have bothered to learn about monetary policy. Such rhetorical gems as his attempt to trash Bob Rubin for going to Singapore and having a falling stock price.

I could go on...

But today we have another, much bigger reason to be un-fans of Paul O'Neill. If as much as one-fifth of what he says about Bush administration decision making is true--and I assure you that much more than one-fifth of it is--he had a duty to the country to submit his resignation from the post of Treasury Secretary and to tell the American people why no later than June 21, 2001:

Wall Street Journal: Suskind: Mr. O'Neill began to view Mr. Lindsey as a partisan for deep tax cuts rather than an honest broker.... He marched to Mr. Cheney's office. "Dick, I think we need to talk," Mr. O'Neill said. He reasoned that Mr. Cheney would understand the importance of establishing sound processes.... Mr. O'Neill said that he was concerned that Mr. Lindsey was masquerading as the honest broker and was anything but.... The need to really "run the traps" on every potential presidential move was more important for this Bush than for his father or Gerald Ford, both of whom had vast experience in the federal government. God knows, Mr. Cheney would understand that as well as anyone.... O'Neill sketched some notes for another serious talk he wanted to have with Mr. Cheney about effective process -- a way to handle decision making so that policy didn't get served half-baked and larded with political calculations. In his personal experience, the president didn't appear to have read even the short memos he sent over. During his weekly one-on-one with Mr. O'Neill, Mr. Bush sat, often for an hour, offering no response. He rarely asked questions in meetings. "The only way I can describe it is that, well, the president is like a blind man in a roomful of deaf people," Mr. O'Neill said. "There is no discernible connection."...

Mr. O'Neill thought about how to add fiber to the policy process in this White House, and about how to persuade Mr. Cheney to take the lead. "I realized it would be hard to find things we did with Nixon or Ford that would be applicable for this president," Mr. O'Neill said later. He recalled Mr. Bush's unresponsiveness in large and small meetings. "This president was so utterly different from those men."... "We need to be better about keeping politics out of the policy process. The political people are there for presentation and execution, not for creation." As before, Dick nodded. He thanked Paul, as always, "for his sharp insights."....

Mr. O'Neill and Mr. Greenspan both made the case that the largely bipartisan consensus on free trade was one of the great victories of the last decade; that the president would confuse many constituencies by flouting that consensus. Mr. O'Neill explained that tariffs would do little to offer long-term support to the U.S. steel industry. Mr. Greenspan pointed out that tariffs might actually violate certain World Trade Organization agreements. Mr. Cheney didn't show his hand. Mr. O'Neill left concerned that the meeting was largely tactical -- that the vice president had already made up his mind.... Mitch Daniels, the budget director, then blurted out, "If you can't do the right thing when you're at 85% approval, then when can you do the right thing? I think it's time to say no [to steel tariffs]." Everyone looked with surprise at Mr. Daniels, who had a way of expressing what others are thinking but won't say. His comment seemed to tip the room. Is there any point, Mr. Daniels's outburst implied, when the political team says they have enough advantage that they are satisfied with their franchise and not constantly twisting the arm of policy? Mr. O'Neill wondered about this as he broke his silence, which was so out of character it was drawing notice. "Well," he said, "certainly, there should be a high hurdle before we take this step" of imposing tariffs. Soon the meeting was a free-for-all. "I think we have a split here," Ms. Rice said. "Do we take this to the president?" This is what Mr. Cheney had been hoping to avoid -- a split. In fact, it was anything but a split. Nearly everyone seemed on one side; Mr. Cheney and Mr. Zoellick were on the other. A consensus on sound policy was colliding with a political favor. Secretary of State Colin Powell spoke. "Why are we thinking about doing this?" he asked in frustration. "I have heard good reasons today not to do it, but I haven't heard one good reason to move forward with tariffs. We can't even say this will improve our steel industry." Finally, it came back to Mr. Cheney. He mumbled that "imports are, in fact, way down from the surge. ... Our minimills are competitive," all arguments against tariffs. But then he added that whatever we do, the tariff-empowering statute says "we can review this in 18 months." In other words, if what we do now is go with tariffs, it will be political bait, and in 18 months -- after the 2002 midterm elections -- we can effect the switch. Meeting over....

Cheney had shown up at a few of the regular meetings of the economic team.... Now, the group was meeting on the vice president's turf. As the meeting in Mr. Cheney's office progressed, it became clear that the vice president was ready to weigh in on what the president should do to bolster the economy, and his standing with voters worried about the economy, as the second half of his term began. A package of tax proposals, led by a 50% cut in the individual tax on dividends, had been all but buried since Mr. O'Neill took his stand against it in early September.... Cheney mentioned them again, how altering the double taxation of dividends would provide some economic stimulus. Mr. O'Neill jumped in, arguing sharply that the government "is moving toward a fiscal crisis" and then pointing out "what rising deficits will mean to our economic and fiscal soundness." Mr. Cheney cut him off. "Reagan proved deficits don't matter," he said. Mr. O'Neill was speechless, hardly believing that Mr. Cheney -- whom he and Mr. Greenspan had known since Dick was a kid -- would say such a thing. Mr. Cheney moved to fill the void. "We won the midterms. This is our due." Mr. O'Neill left Mr. Cheney's office in a state of mild shock. Yes, he knew Mr. Lindsey believed this brazen ideology. And Mr. Rove, and others. But to hear it from the vice president seemed to stop the world turning. The inscrutable Mr. Cheney had finally shown himself...

Interesting how in this telling of the story it is Cheney who shows up as the heavy, uninterested in domestic policies that are good for the country and uninterested in running the kind of honest process that Cheney ran so well for Gerald Ford. (Of course, Cheney would probably say, "With this president, why bother running an honest policy development process? Do you think you would be doing anybody a favor giving this guy the honest options and making him choose one of them?"

A Word of Advice for Greg Mankiw

From this morning's Wall Street Journal:

In the book, Mr. O'Neill, who held senior positions in the White House budget office in the administrations of former presidents Richard Nixon and Gerald Ford before beginning a 23-year business career that took him to the top of Alcoa Inc., describes his conversations with the president as a "monologue" and said the president rarely asked questions in meetings. "The president is like a blind man in a room full of deaf people," he says. "There is no discernible connection." The chairman of the president's Council of Economic Advisers took issue with that assessment. "That's not my experience at all," Gregory Mankiw said on CNN. "The president understands the economy. He comes from a business background."

Greg: It's too late to convince anyone that George W. Bush understands the issues that come before him at the level that a president should. We know that he didn't read Paul O'Neill's or Glenn Hubbard's two-pagers. You know whether or not he reads yours. You're not helping George W. Bush's reputation. And you're harming your own.

Armageddon

Israeli historian Benny Morris looks forward to the day when Israel will be able to expel Arabs--all Arabs--Palestinians and Israeli Arabs alike--from the West Bank, the Gaza Strip, and Israel itself, and so complete the task that David Ben-Gurion began in 1948 before he got "cold feet":

Survival of the fittest (cont.):

You went through an interesting process. You went to research Ben-Gurion and the Zionist establishment critically, but in the end you actually identify with them. You are as tough in your words as they were in their deeds.

"You may be right. Because I investigated the conflict in depth, I was forced to cope with the in-depth questions that those people coped with. I understood the problematic character of the situation they faced and maybe I adopted part of their universe of concepts. But I do not identify with Ben-Gurion. I think he made a serious historical mistake in 1948. Even though he understood the demographic issue and the need to establish a Jewish state without a large Arab minority, he got cold feet during the war. In the end, he faltered."

I'm not sure I understand. Are you saying that Ben-Gurion erred in expelling too few Arabs?

"If he was already engaged in expulsion, maybe he should have done a complete job. I know that this stuns the Arabs and the liberals and the politically correct types. But my feeling is that this place would be quieter and know less suffering if the matter had been resolved once and for all. If Ben-Gurion had carried out a large expulsion and cleansed the whole country - the whole Land of Israel, as far as the Jordan River. It may yet turn out that this was his fatal mistake. If he had carried out a full expulsion - rather than a partial one - he would have stabilized the State of Israel for generations."

I find it hard to believe what I am hearing.

"If the end of the story turns out to be a gloomy one for the Jews, it will be because Ben-Gurion did not complete the transfer in 1948. Because he left a large and volatile demographic reserve in the West Bank and Gaza and within Israel itself."

In his place, would you have expelled them all? All the Arabs in the country?

"But I am not a statesman. I do not put myself in his place. But as an historian, I assert that a mistake was made here. Yes. The non-completion of the transfer was a mistake."

And today? Do you advocate a transfer today?

"If you are asking me whether I support the transfer and expulsion of the Arabs from the West Bank, Gaza and perhaps even from Galilee and the Triangle, I say not at this moment. I am not willing to be a partner to that act. In the present circumstances it is neither moral nor realistic. The world would not allow it, the Arab world would not allow it, it would destroy the Jewish society from within. But I am ready to tell you that in other circumstances, apocalyptic ones, which are liable to be realized in five or ten years, I can see expulsions. If we find ourselves with atomic weapons around us, or if there is a general Arab attack on us and a situation of warfare on the front with Arabs in the rear shooting at convoys on their way to the front, acts of expulsion will be entirely reasonable. They may even be essential."

Including the expulsion of Israeli Arabs?

"The Israeli Arabs are a time bomb. Their slide into complete Palestinization has made them an emissary of the enemy that is among us. They are a potential fifth column. In both demographic and security terms they are liable to undermine the state. So that if Israel again finds itself in a situation of existential threat, as in 1948, it may be forced to act as it did then. If we are attacked by Egypt (after an Islamist revolution in Cairo) and by Syria, and chemical and biological missiles slam into our cities, and at the same time Israeli Palestinians attack us from behind, I can see an expulsion situation. It could happen. If the threat to Israel is existential, expulsion will be justified."

Benny Morris, sometime dove. My estimate of the chances that Tel Aviv, Cairo, and Damascus will vanish beneath mushroom clouds sometime in the next fifty years has just doubled, from 10% to 20%.

Benny Morris, in the month ahead the new version of your book on the birth of the Palestinian refugee problem is due to be published. Who will be less pleased with the book - the Israelis or the Palestinians?

"The revised book is a double-edged sword. It is based on many documents that were not available to me when I wrote the original book, most of them from the Israel Defense Forces Archives. What the new material shows is that there were far more Israeli acts of massacre than I had previously thought. To my surprise, there were also many cases of rape. In the months of April-May 1948, units of the Haganah [the pre-state defense force that was the precursor of the IDF] were given operational orders that stated explicitly that they were to uproot the villagers, expel them and destroy the villages themselves.

"At the same time, it turns out that there was a series of orders issued by the Arab Higher Committee and by the Palestinian intermediate levels to remove children, women and the elderly from the villages. So that on the one hand, the book reinforces the accusation against the Zionist side, but on the other hand it also proves that many of those who left the villages did so with the encouragement of the Palestinian leadership itself."

According to your new findings, how many cases of Israeli rape were there in 1948?

"About a dozen. In Acre four soldiers raped a girl and murdered her and her father. In Jaffa, soldiers of the Kiryati Brigade raped one girl and tried to rape several more. At Hunin, which is in the Galilee, two girls were raped and then murdered. There were one or two cases of rape at Tantura, south of Haifa. There was one case of rape at Qula, in the center of the country. At the village of Abu Shusha, near Kibbutz Gezer [in the Ramle area] there were four female prisoners, one of whom was raped a number of times. And there were other cases. Usually more than one soldier was involved. Usually there were one or two Palestinian girls. In a large proportion of the cases the event ended with murder. Because neither the victims nor the rapists liked to report these events, we have to assume that the dozen cases of rape that were reported, which I found, are not the whole story. They are just the tip of the iceberg."

According to your findings, how many acts of Israeli massacre were perpetrated in 1948?

"Twenty-four. In some cases four or five people were executed, in others the numbers were 70, 80, 100. There was also a great deal of arbitrary killing. Two old men are spotted walking in a field - they are shot. A woman is found in an abandoned village - she is shot. There are cases such as the village of Dawayima [in the Hebron region], in which a column entered the village with all guns blazing and killed anything that moved.

"The worst cases were Saliha (70-80 killed), Deir Yassin (100-110), Lod (250), Dawayima (hundreds) and perhaps Abu Shusha (70). There is no unequivocal proof of a large-scale massacre at Tantura, but war crimes were perpetrated there. At Jaffa there was a massacre about which nothing had been known until now. The same at Arab al Muwassi, in the north. About half of the acts of massacre were part of Operation Hiram [in the north, in October 1948]: at Safsaf, Saliha, Jish, Eilaboun, Arab al Muwasi, Deir al Asad, Majdal Krum, Sasa. In Operation Hiram there was a unusually high concentration of executions of people against a wall or next to a well in an orderly fashion.

"That can't be chance. It's a pattern. Apparently, various officers who took part in the operation understood that the expulsion order they received permitted them to do these deeds in order to encourage the population to take to the roads. The fact is that no one was punished for these acts of murder. Ben-Gurion silenced the matter. He covered up for the officers who did the massacres."

What you are telling me here, as though by the way, is that in Operation Hiram there was a comprehensive and explicit expulsion order. Is that right?

"Yes. One of the revelations in the book is that on October 31, 1948, the commander of the Northern Front, Moshe Carmel, issued an order in writing to his units to expedite the removal of the Arab population. Carmel took this action immediately after a visit by Ben-Gurion to the Northern Command in Nazareth. There is no doubt in my mind that this order originated with Ben-Gurion. Just as the expulsion order for the city of Lod, which was signed by Yitzhak Rabin, was issued immediately after Ben-Gurion visited the headquarters of Operation Dani [July 1948]."

Are you saying that Ben-Gurion was personally responsible for a deliberate and systematic policy of mass expulsion?

"From April 1948, Ben-Gurion is projecting a message of transfer. There is no explicit order of his in writing, there is no orderly comprehensive policy, but there is an atmosphere of [population] transfer. The transfer idea is in the air. The entire leadership understands that this is the idea. The officer corps understands what is required of them. Under Ben-Gurion, a consensus of transfer is created."

Ben-Gurion was a "transferist"?

"Of course. Ben-Gurion was a transferist. He understood that there could be no Jewish state with a large and hostile Arab minority in its midst. There would be no such state. It would not be able to exist."

I don't hear you condemning him.

"Ben-Gurion was right. If he had not done what he did, a state would not have come into being. That has to be clear. It is impossible to evade it. Without the uprooting of the Palestinians, a Jewish state would not have arisen here."

Benny Morris, for decades you have been researching the dark side of Zionism. You are an expert on the atrocities of 1948. In the end, do you in effect justify all this? Are you an advocate of the transfer of 1948?

"There is no justification for acts of rape. There is no justification for acts of massacre. Those are war crimes. But in certain conditions, expulsion is not a war crime. I don't think that the expulsions of 1948 were war crimes. You can't make an omelet without breaking eggs. You have to dirty your hands."

We are talking about the killing of thousands of people, the destruction of an entire society.

"A society that aims to kill you forces you to destroy it. When the choice is between destroying or being destroyed, it's better to destroy."

There is something chilling about the quiet way in which you say that.

"If you expected me to burst into tears, I'm sorry to disappoint you. I will not do that."

So when the commanders of Operation Dani are standing there and observing the long and terrible column of the 50,000 people expelled from Lod walking eastward, you stand there with them? You justify them?

"I definitely understand them. I understand their motives. I don't think they felt any pangs of conscience, and in their place I wouldn't have felt pangs of conscience. Without that act, they would not have won the war and the state would not have come into being."

You do not condemn them morally?

"No."

They perpetrated ethnic cleansing.

"There are circumstances in history that justify ethnic cleansing. I know that this term is completely negative in the discourse of the 21st century, but when the choice is between ethnic cleansing and genocide - the annihilation of your people - I prefer ethnic cleansing."

And that was the situation in 1948?

"That was the situation. That is what Zionism faced. A Jewish state would not have come into being without the uprooting of 700,000 Palestinians. Therefore it was necessary to uproot them. There was no choice but to expel that population. It was necessary to cleanse the hinterland and cleanse the border areas and cleanse the main roads. It was necessary to cleanse the villages from which our convoys and our settlements were fired on."

The term `to cleanse' is terrible.

"I know it doesn't sound nice but that's the term they used at the time. I adopted it from all the 1948 documents in which I am immersed."

What you are saying is hard to listen to and hard to digest. You sound hard-hearted.

"I feel sympathy for the Palestinian people, which truly underwent a hard tragedy. I feel sympathy for the refugees themselves. But if the desire to establish a Jewish state here is legitimate, there was no other choice. It was impossible to leave a large fifth column in the country. From the moment the Yishuv [pre-1948 Jewish community in Palestine] was attacked by the Palestinians and afterward by the Arab states, there was no choice but to expel the Palestinian population. To uproot it in the course of war.

"Remember another thing: the Arab people gained a large slice of the planet. Not thanks to its skills or its great virtues, but because it conquered and murdered and forced those it conquered to convert during many generations. But in the end the Arabs have 22 states. The Jewish people did not have even one state. There was no reason in the world why it should not have one state. Therefore, from my point of view, the need to establish this state in this place overcame the injustice that was done to the Palestinians by uprooting them."

And morally speaking, you have no problem with that deed?

"That is correct. Even the great American democracy could not have been created without the annihilation of the Indians. There are cases in which the overall, final good justifies harsh and cruel acts that are committed in the course of history."

And in our case it effectively justifies a population transfer.

"That's what emerges."

And you take that in stride? War crimes? Massacres? The burning fields and the devastated villages of the Nakba?

"You have to put things in proportion. These are small war crimes. All told, if we take all the massacres and all the executions of 1948, we come to about 800 who were killed. In comparison to the massacres that were perpetrated in Bosnia, that's peanuts. In comparison to the massacres the Russians perpetrated against the Germans at Stalingrad, that's chicken feed. When you take into account that there was a bloody civil war here and that we lost an entire 1 percent of the population, you find that we behaved very well."

The next transfer

You went through an interesting process. You went to research Ben-Gurion and the Zionist establishment critically, but in the end you actually identify with them. You are as tough in your words as they were in their deeds.

"You may be right. Because I investigated the conflict in depth, I was forced to cope with the in-depth questions that those people coped with. I understood the problematic character of the situation they faced and maybe I adopted part of their universe of concepts. But I do not identify with Ben-Gurion. I think he made a serious historical mistake in 1948. Even though he understood the demographic issue and the need to establish a Jewish state without a large Arab minority, he got cold feet during the war. In the end, he faltered."

I'm not sure I understand. Are you saying that Ben-Gurion erred in expelling too few Arabs?

"If he was already engaged in expulsion, maybe he should have done a complete job. I know that this stuns the Arabs and the liberals and the politically correct types. But my feeling is that this place would be quieter and know less suffering if the matter had been resolved once and for all. If Ben-Gurion had carried out a large expulsion and cleansed the whole country - the whole Land of Israel, as far as the Jordan River. It may yet turn out that this was his fatal mistake. If he had carried out a full expulsion - rather than a partial one - he would have stabilized the State of Israel for generations."

I find it hard to believe what I am hearing.

"If the end of the story turns out to be a gloomy one for the Jews, it will be because Ben-Gurion did not complete the transfer in 1948. Because he left a large and volatile demographic reserve in the West Bank and Gaza and within Israel itself."

In his place, would you have expelled them all? All the Arabs in the country?

"But I am not a statesman. I do not put myself in his place. But as an historian, I assert that a mistake was made here. Yes. The non-completion of the transfer was a mistake."

And today? Do you advocate a transfer today?

"If you are asking me whether I support the transfer and expulsion of the Arabs from the West Bank, Gaza and perhaps even from Galilee and the Triangle, I say not at this moment. I am not willing to be a partner to that act. In the present circumstances it is neither moral nor realistic. The world would not allow it, the Arab world would not allow it, it would destroy the Jewish society from within. But I am ready to tell you that in other circumstances, apocalyptic ones, which are liable to be realized in five or ten years, I can see expulsions. If we find ourselves with atomic weapons around us, or if there is a general Arab attack on us and a situation of warfare on the front with Arabs in the rear shooting at convoys on their way to the front, acts of expulsion will be entirely reasonable. They may even be essential."

Including the expulsion of Israeli Arabs?

"The Israeli Arabs are a time bomb. Their slide into complete Palestinization has made them an emissary of the enemy that is among us. They are a potential fifth column. In both demographic and security terms they are liable to undermine the state. So that if Israel again finds itself in a situation of existential threat, as in 1948, it may be forced to act as it did then. If we are attacked by Egypt (after an Islamist revolution in Cairo) and by Syria, and chemical and biological missiles slam into our cities, and at the same time Israeli Palestinians attack us from behind, I can see an expulsion situation. It could happen. If the threat to Israel is existential, expulsion will be justified."

Cultural dementia

Besides being tough, you are also very gloomy. You weren't always like that, were you?

"My turning point began after 2000. I wasn't a great optimist even before that. True, I always voted Labor or Meretz or Sheli [a dovish party of the late 1970s], and in 1988 I refused to serve in the territories and was jailed for it, but I always doubted the intentions of the Palestinians. The events of Camp David and what followed in their wake turned the doubt into certainty. When the Palestinians rejected the proposal of [prime minister Ehud] Barak in July 2000 and the Clinton proposal in December 2000, I understood that they are unwilling to accept the two-state solution. They want it all. Lod and Acre and Jaffa."

If that's so, then the whole Oslo process was mistaken and there is a basic flaw in the entire worldview of the Israeli peace movement.

"Oslo had to be tried. But today it has to be clear that from the Palestinian point of view, Oslo was a deception. [Palestinian leader Yasser] Arafat did not change for the worse, Arafat simply defrauded us. He was never sincere in his readiness for compromise and conciliation."

Do you really believe Arafat wants to throw us into the sea?

"He wants to send us back to Europe, to the sea we came from. He truly sees us as a Crusader state and he thinks about the Crusader precedent and wishes us a Crusader end. I'm certain that Israeli intelligence has unequivocal information proving that in internal conversations Arafat talks seriously about the phased plan [which would eliminate Israel in stages]. But the problem is not just Arafat. The entire Palestinian national elite is prone to see us as Crusaders and is driven by the phased plan. That's why the Palestinians are not honestly ready to forgo the right of return. They are preserving it as an instrument with which they will destroy the Jewish state when the time comes. They can't tolerate the existence of a Jewish state - not in 80 percent of the country and not in 30 percent. From their point of view, the Palestinian state must cover the whole Land of Israel."

If so, the two-state solution is not viable; even if a peace treaty is signed, it will soon collapse.

"Ideologically, I support the two-state solution. It's the only alternative to the expulsion of the Jews or the expulsion of the Palestinians or total destruction. But in practice, in this generation, a settlement of that kind will not hold water. At least 30 to 40 percent of the Palestinian public and at least 30 to 40 percent of the heart of every Palestinian will not accept it. After a short break, terrorism will erupt again and the war will resume."

Your prognosis doesn't leave much room for hope, does it?

"It's hard for me, too. There is not going to be peace in the present generation. There will not be a solution. We are doomed to live by the sword. I'm already fairly old, but for my children that is especially bleak. I don't know if they will want to go on living in a place where there is no hope. Even if Israel is not destroyed, we won't see a good, normal life here in the decades ahead."

Aren't your harsh words an over-reaction to three hard years of terrorism?

"The bombing of the buses and restaurants really shook me. They made me understand the depth of the hatred for us. They made me understand that the Palestinian, Arab and Muslim hostility toward Jewish existence here is taking us to the brink of destruction. I don't see the suicide bombings as isolated acts. They express the deep will of the Palestinian people. That is what the majority of the Palestinians want. They want what happened to the bus to happen to all of us."

Yet we, too, bear responsibility for the violence and the hatred: the occupation, the roadblocks, the closures, maybe even the Nakba itself.

"You don't have to tell me that. I have researched Palestinian history. I understand the reasons for the hatred very well. The Palestinians are retaliating now not only for yesterday's closure but for the Nakba as well. But that is not a sufficient explanation. The peoples of Africa were oppressed by the European powers no less than the Palestinians were oppressed by us, but nevertheless I don't see African terrorism in London, Paris or Brussels. The Germans killed far more of us than we killed the Palestinians, but we aren't blowing up buses in Munich and Nuremberg. So there is something else here, something deeper, that has to do with Islam and Arab culture."

Are you trying to argue that Palestinian terrorism derives from some sort of deep cultural problem?

"There is a deep problem in Islam. It's a world whose values are different. A world in which human life doesn't have the same value as it does in the West, in which freedom, democracy, openness and creativity are alien. A world that makes those who are not part of the camp of Islam fair game. Revenge is also important here. Revenge plays a central part in the Arab tribal culture. Therefore, the people we are fighting and the society that sends them have no moral inhibitions. If it obtains chemical or biological or atomic weapons, it will use them. If it is able, it will also commit genocide."

I want to insist on my point: A large part of the responsibility for the hatred of the Palestinians rests with us. After all, you yourself showed us that the Palestinians experienced a historical catastrophe.

"True. But when one has to deal with a serial killer, it's not so important to discover why he became a serial killer. What's important is to imprison the murderer or to execute him."

Explain the image: Who is the serial killer in the analogy?

"The barbarians who want to take our lives. The people the Palestinian society sends to carry out the terrorist attacks, and in some way the Palestinian society itself as well. At the moment, that society is in the state of being a serial killer. It is a very sick society. It should be treated the way we treat individuals who are serial killers."

What does that mean? What should we do tomorrow morning?

"We have to try to heal the Palestinians. Maybe over the years the establishment of a Palestinian state will help in the healing process. But in the meantime, until the medicine is found, they have to be contained so that they will not succeed in murdering us."

To fence them in? To place them under closure?

"Something like a cage has to be built for them. I know that sounds terrible. It is really cruel. But there is no choice. There is a wild animal there that has to be locked up in one way or another."

War of barbarians

Benny Morris, have you joined the right wing?

"No, no. I still think of myself as left-wing. I still support in principle two states for two peoples."

But you don't believe that this solution will last. You don't believe in peace.

"In my opinion, we will not have peace, no."

Then what is your solution?

"In this generation there is apparently no solution. To be vigilant, to defend the country as far as is possible."

The iron wall approach?

"Yes. An iron wall is a good image. An iron wall is the most reasonable policy for the coming generation. My colleague Avi Shlein described this well: What Jabotinsky proposed is what Ben-Gurion adopted. In the 1950s, there was a dispute between Ben-Gurion and Moshe Sharett. Ben-Gurion argued that the Arabs understand only force and that ultimate force is the one thing that will persuade them to accept our presence here. He was right. That's not to say that we don't need diplomacy. Both toward the West and for our own conscience, it's important that we strive for a political solution. But in the end, what will decide their readiness to accept us will be force alone. Only the recognition that they are not capable of defeating us."

For a left-winger, you sound very much like a right-winger, wouldn't you say?

"I'm trying to be realistic. I know it doesn't always sound politically correct, but I think that political correctness poisons history in any case. It impedes our ability to see the truth. And I also identify with Albert Camus. He was considered a left-winger and a person of high morals, but when he referred to the Algerian problem he placed his mother ahead of morality. Preserving my people is more important than universal moral concepts."

Are you a neo-conservative? Do you read the current historical reality in the terms of Samuel Huntington?

"I think there is a clash between civilizations here [as Huntington argues]. I think the West today resembles the Roman Empire of the fourth, fifth and sixth centuries: The barbarians are attacking it and they may also destroy it."

The Muslims are barbarians, then?

"I think the values I mentioned earlier are values of barbarians - the attitude toward democracy, freedom, openness; the attitude toward human life. In that sense they are barbarians. The Arab world as it is today is barbarian."

And in your view these new barbarians are truly threatening the Rome of our time?

"Yes. The West is stronger but it's not clear whether it knows how to repulse this wave of hatred. The phenomenon of the mass Muslim penetration into the West and their settlement there is creating a dangerous internal threat. A similar process took place in Rome. They let the barbarians in and they toppled the empire from within."

Is it really all that dramatic? Is the West truly in danger?

"Yes. I think that the war between the civilizations is the main characteristic of the 21st century. I think President Bush is wrong when he denies the very existence of that war. It's not only a matter of bin Laden. This is a struggle against a whole world that espouses different values. And we are on the front line. Exactly like the Crusaders, we are the vulnerable branch of Europe in this place."

The situation as you describe it is extremely harsh. You are not entirely convinced that we can survive here, are you?

"The possibility of annihilation exists."

Would you describe yourself as an apocalyptic person?

"The whole Zionist project is apocalyptic. It exists within hostile surroundings and in a certain sense its existence is unreasonable. It wasn't reasonable for it to succeed in 1881 and it wasn't reasonable for it to succeed in 1948 and it's not reasonable that it will succeed now. Nevertheless, it has come this far. In a certain way it is miraculous. I live the events of 1948, and 1948 projects itself on what could happen here. Yes, I think of Armageddon. It's possible. Within the next 20 years there could be an atomic war here."

If Zionism is so dangerous for the Jews and if Zionism makes the Arabs so wretched, maybe it's a mistake?

"No, Zionism was not a mistake. The desire to establish a Jewish state here was a legitimate one, a positive one. But given the character of Islam and given the character of the Arab nation, it was a mistake to think that it would be possible to establish a tranquil state here that lives in harmony with its surroundings."

Which leaves us, nevertheless, with two possibilities: either a cruel, tragic Zionism, or the forgoing of Zionism.

"Yes. That's so. You have pared it down, but that's correct."

Would you agree that this historical reality is intolerable, that there is something inhuman about it?

"Yes. But that's so for the Jewish people, not the Palestinians. A people that suffered for 2,000 years, that went through the Holocaust, arrives at its patrimony but is thrust into a renewed round of bloodshed, that is perhaps the road to annihilation. In terms of cosmic justice, that's terrible. It's far more shocking than what happened in 1948 to a small part of the Arab nation that was then in Palestine."

So what you are telling me is that you live the Palestinian Nakba of the past less than you live the possible Jewish Nakba of the future?

"Yes. Destruction could be the end of this process. It could be the end of the Zionist experiment. And that's what really depresses and scares me."

The title of the book you are now publishing in Hebrew is "Victims." In the end, then, your argument is that of the two victims of this conflict, we are the bigger one.

"Yes. Exactly. We are the greater victims in the course of history and we are also the greater potential victim. Even though we are oppressing the Palestinians, we are the weaker side here. We are a small minority in a large sea of hostile Arabs who want to eliminate us. So it's possible than when their desire is realized, everyone will understand what I am saying to you now. Everyone will understand we are the true victims. But by then it will be too late."

The Maher Arar Case

Impeach George Bush and Richard Cheney. Impeach them now. We are the United States of America. We do not do things like this.

Torture by proxy / How immigration threw a traveler to the wolves: On Sept. 26, 2002, U.S. immigration officials seized a Syrian-born Canadian at Kennedy International Airport, because his name had come up on an international watch list for possible terrorists. What happened next is chilling.

Maher Arar was about to change planes on his way home to Canada after visiting his wife's family in Tunisia when he was pulled aside for questioning. He was not a terrorist. He had no terrorist connections, but his name was on the list, so he was detained for questioning. Not ordinary, polite questioning, but abusive, insulting, degrading questioning by the immigration service, the FBI and the New York City Police Department.

He asked for a lawyer and was told he could not have one. He asked to call his family, but phone calls were not permitted. Instead, he was clapped into shackles and, for several days, made to "disappear." His family was frantic.

Finally, he was allowed to make a call. His government expected that Arar's right of safe passage under its passport would be respected. But it wasn't. Arar denied any connection to terrorists. He was not accused of any crimes, but U.S. agents wanted him questioned further by someone whose methods might be more persuasive than theirs.

So, they put Arar on a private plane and flew him to Washington, D.C. There, a new team, presumably from the CIA, took over and delivered him, by way of Jordan, to Syrian interrogators. This covert operation was legal, our Justice Department later claimed, because Arar is also a citizen of Syria by birth. The fact that he was a Canadian traveling on a Canadian passport, with a wife, two children and job in Canada, and had not lived in Syria for 16 years, was ignored. The Justice Department wanted him to be questioned by Syrian military intelligence, whose interrogation methods our government has repeatedly condemned.

The Syrians locked Arar in an underground cell the size of a grave: 3 feet wide, 6 feet long, 7 feet high. Then they questioned him, under torture, repeatedly, for 10 months. Finally, when it was obvious that their prisoner had no terrorist ties, they let him go, 40 pounds lighter, with a pronounced limp and chronic nightmares.

Why was Arar on our government's watch list? Because "multiple international intelligence agencies" had linked him to terrorist groups. How many agencies? Two. What had they reported? Not much.

The Syrians believed that Arar might be a member of the Muslim Brotherhood. Why? Because a cousin of his mother's had been, nine years earlier, long after Arar moved to Canada. The Royal Canadian Mounted Police reported that the lease on Arar's apartment had been witnessed by a Syrian- born Canadian who was believed to know an Egyptian Canadian whose brother was allegedly mentioned in an al Qaeda document.

That's it. That's all they had: guilt by the most remote of computer- generated associations. But, according to Attorney General John Ashcroft, that was more than enough to justify Arar's delivery to Syria's torturers.

Besides, Ashcroft added, the torturers had expressly promised that they would not torture him.

Our intelligence agencies have a name for this torture-by-proxy. They call it "extraordinary rendition." As one intelligence official explained: "We don't kick the s -- out of them. We send them to other countries so they can kick the s -- out of them."

This secret program for torturing suspects has been authorized, if that is the right word for it, by a secret presidential finding. Where the president gets the authority to have anyone tortured has never been explained.

It is time someone asked. What our government did to Maher Arar is worse than anything the British did to our Colonial forefathers. It was worse than anything J. Edgar Hoover did to alleged Communists, civil rights workers and anti-war activists during his long program of dirty tricks.

According to the Bush administration, we are at "war" with al Qaeda. If so, then delivering a suspect to torturers is a war crime and should be prosecuted as such. But first, we need to know who was responsible, and that will not be easy -- unless there is a firestorm of protest.

Isn't it time to condemn torture by proxy and demand prosecution of the persons responsible? Isn't it time to question how these watch lists are assembled and used, before more of us fall victim to secret detentions and brutal interrogations based on guilt by computerized associations?

Notes: Adam Smith on Celebrity

From Adam Smith's Theory of Moral Sentiments:

When we consider the condition of the great, in those delusive colours in which the imagination is apt to paint it. it seems to be almost the abstract idea of a perfect and happy state. It is the very state which, in all our waking dreams and idle reveries, we had sketched out to ourselves as the final object of all our desires. We feel, therefore, a peculiar sympathy with the satisfaction of those who are in it. We favour all their inclinations, and forward all their wishes. What pity, we think, that any thing should spoil and corrupt so agreeable a situation! We could even wish them immortal; and it seems hard to us, that death should at last put an end to such perfect enjoyment. It is cruel, we think, in Nature to compel them from their exalted stations to that humble, but hospitable home, which she has provided for all her children. Great King, live for ever! is the compliment, which, after the manner of eastern adulation, we should readily make them, if experience did not teach us its absurdity. Every calamity that befals them, every injury that is done them, excites in the breast of the spectator ten times more compassion and resentment than he would have felt, had the same things happened to other men. It is the misfortunes of Kings only which afford the proper subjects for tragedy. They resemble, in this respect, the misfortunes of lovers. Those two situations are the chief which interest us upon the theatre; because, in spite of all that reason and experience can tell us to the contrary, the prejudices of the imagination attach to these two states a happiness superior to any other. To disturb, or to put an end to such perfect enjoyment, seems to be the most atrocious of all injuries. The traitor who conspires against the life of his monarch, is thought a greater monster than any other murderer. All the innocent blood that was shed in the civil wars, provoked less indignation than the death of Charles I. A stranger to human nature, who saw the indifference of men about the misery of their inferiors, and the regret and indignation which they feel for the misfortunes and sufferings of those above them, would be apt to imagine, that pain must be more agonizing, and the convulsions of death more terrible to persons of higher rank, than to those of meaner stations.

Upon this disposition of mankind, to go along with all the passions of the rich and the powerful, is founded the distinction of ranks, and the order of society. Our obsequiousness to our superiors more frequently arises from our admiration for the advantages of their situation, than from any private expectations of benefit from their good-will. Their benefits can extend but to a few, but their fortunes interest almost every body. We are eager to assist them in completing a system of happiness that approaches so near to perfection; and we desire to serve them for their own sake, without any other recompense but the vanity or the honour of obliging them. Neither is our deference to their inclinations founded chiefly, or altogether, upon a regard to the utility of such submission, and to the order of society, which is best supported by it. Even when the order of society seems to require that we should oppose them, we can hardly bring ourselves to do it. That kings are the servants of the people, to be obeyed, resisted, deposed, or punished, as the public conveniency may require, is the doctrine of reason and philosophy; but it is not the doctrine of Nature. Nature would teach us to submit to them for their own sake, to tremble and bow down before their exalted station, to regard their smile as a reward sufficient to compensate any services, and to dread their displeasure, though no other evil were to follow from it, as the severest of all mortifications. To treat them in any respect as men, to reason and dispute with them upon ordinary occasions, requires such resolution, that there are few men whose magnanimity can support them in it, unless they are likewise assisted by familiarity and acquaintance. The strongest motives, the most furious passions, fear, hatred, and resentment, are scarce sufficient to balance this natural disposition to respect them: and their conduct must, either justly or unjustly, have excited the highest degree of all those passions, before the bulk of the people can be brought to oppose them with violence, or to desire to see them either punished or deposed. Even when the people have been brought this length, they are apt to relent every moment, and easily relapse into their habitual state of deference to those whom they have been accustomed to look upon as their natural superiors. They cannot stand the mortification of their monarch. Compassion soon takes the place of resentment, they forget all past provocations, their old principles of loyalty revive, and they run to re-establish the ruined authority of their old masters, with the same violence with which they had opposed it. The death of Charles I. brought about the Restoration of the royal family. Compassion for James II. when he was seized by the populace in making his escape on ship-board, had almost prevented the Revolution, and made it go on more heavily than before.

Do the great seem insensible of the easy price at which they may acquire the public admiration; or do they seem to imagine that to them, as to other men, it must be the purchase either of sweat or of blood? By what important accomplishments is the young nobleman instructed to support the dignity of his rank, and to render himself worthy of that superiority over his fellow-citizens, to which the virtue of his ancestors had raised them? Is it by knowledge, by industry, by patience, by self-denial, or by virtue of any kind? As all his words, as all his motions are attended to, he learns an habitual regard to every circumstance of ordinary behaviour, and studies to perform all those small duties with the most exact propriety. As he is conscious how much he is observed, and how much mankind are disposed to favour all his inclinations, he acts, upon the most indifferent occasions, with that freedom and elevation which the thought of this naturally inspires. His air, his manner, his deportment, all mark that elegant and graceful sense of his own superiority, which those who are born to inferior stations can hardly ever arrive at. These are the arts by which he proposes to make mankind more easily submit to his authority, and to govern their inclinations according to his own pleasure: and in this he is seldom disappointed. These arts, supported by rank and preheminence, are, upon ordinary occasions, sufficient to govern the world. Lewis XIV. during the greater part of his reign, was regarded, not only in France, but over all Europe, as the most perfect model of a great prince. But what were the talents and virtues by which he acquired this great reputation? Was it by the scrupulous and inflexible justice of all his undertakings, by the immense dangers and difficulties with which they were attended, or by the unwearied and unrelenting application with which he pursued them? Was it by his extensive knowledge, by his exquisite judgment, or by his heroic valour? It was by none of these qualities. But he was, first of all, the most powerful prince in Europe, and consequently held the highest rank among kings; and then, says his historian, 'he surpassed all his courtiers in the gracefulness of his shape, and the majestic beauty of his features. The sound of his voice, noble and affecting, gained those hearts which his presence intimidated. He had a step and a deportment which could suit only him and his rank, and which would have been ridiculous in any other person. The embarrassment which he occasioned to those who spoke to him, flattered that secret satisfaction with which he felt his own superiority. The old officer, who was confounded and faultered in asking him a favour, and not being able to conclude his discourse, said to him: Sir, your majesty, I hope, will believe that I do not tremble thus before your enemies: had no difficulty to obtain what he demanded.' These frivolous accomplishments, supported by his rank, and, no doubt too, by a degree of other talents and virtues, which seems, however, not to have been much above mediocrity, established this prince in the esteem of his own age, and have drawn, even from posterity, a good deal of respect for his memory. Compared with these, in his own times, and in his own presence, no other virtue, it seems, appeared to have any merit. Knowledge, industry, valour, and beneficence, trembled, were abashed, and lost all dignity before them.

Employment and the Labor Force

Between unemployment's April 1979 low point and its July 1980 peak, the American employment-to-population ratio fell by one percentage point--from 59.8% to 58.8%--while the unemployment rate climbed by 2.1 percentage points. Between unemployment's July 1981 low point and its December 1982 peak, the employment-to-population ratio fell by 1.9 percentage points--from 59.1% to 57.2%--while the unemployment rate climbed by 3.6%. Between unemployment's June 1990 low point and its June 1992 peak, the employment-to-population ratio fell by 1.4%--from 62.9% to 61.5%--while the unemployment rate climbed by 2.6%. In general, during a serious labor-market downturn the unemployment rate jumps up sharply, and jumps up sharply by almost twice as much as the fall in the employment-to-population ratio.

But this past recession has been very different. Since December of 2000 the employment-to-population ratio has shrunk by 2.3%--from 64.5% to 62.2%. From previous experience we would expect such a fall in the employment-to-population ratio to be accompanied by a big jump in the unemployment: 3.5%, 4.1%, or 4.6%. But it hasn't--the unemployment rate today is only 1.8% above its peak. We have had less than half the jump in the unemployment rate I would have expected given the fall in the employment-to-population ratio. We have had more than twice the fall in the employment-to-population ratio that I would have expected given the rise in the unemployment rate.

In an arithmetic sense, it is straightforward to account for this deviation from standard labor-market downturn patterns. Over 1979-1980 the labor-force-to-population ratio jumped by 0.5%. Over 1980-1982 the labor-force-to-population ratio jumped by 0.3%. Over 1990-1992 the labor-force-to-population ratio jumped by 0.3.%

But since December 1990 the labor-force-to-population ratio has fallen by 1.2%--from 67.2% down to 66.0%. On net, a much larger than usual share of those who have lost jobs have stopped looking for work and so dropped out of the labor force. And the fact that they are no longer looking for work--and so are not counted as unemployed--is responsible for the fact that what is the smallest labor-market downturn of the past quarter-century using the measuring rod of the change in the unemployment rate is the largest labor-market downturn of the past quarter-century using the measuring rod of the change in the employment-to-population ratio.

Kash of the Angry Bear reports that the decline in the labor force share over the past three years is concentrated among men, not women: it's not that the boom of the late 1990s and the associated extraordinary employment opportunities led women who in normal times would have preferred not to be in the labor force to find jobs, and that they are now returning to their normal out-of-the-labor-force state. That is not what is going on. He also reports that the decline in the labor force share over the past three years is concentrated among the over and not the under-educated: it is not that the boom of the 1990s allowed a lot of people with low skills and formal education who had a hard time looking for work to get jobs, and that they are now returning to their normal out-of-the-labor-force state. That is not what is going on.

What is going on, then? That is the hard question. My hunch is that finding jobs has been very hard for very long, and that as a result a lot of people have stopped looking. However, the numbers of those who report themselves as falling into the formal "discouraged workers" category are not that great. So the answer is that I really do not know why the labor force has been shrinking as a proportion of the adult population over the past three years.

It is, however, tremendously depressing to look at the evolution of the household survey numbers over the past couple of years. When the recession came to its formal end late in 2001, 63.1% of the working-age population was at work at 66.9% of the working-age population was in the labor force. Since then both numbers have declined by 0.9%--on net, every lost fraction of the population at work has been matched by an equivalent fall in the labor force share. The job market is much worse than it was in late 2001, but the unemployment-rate indicator needle has not moved.

Even more depressing, perhaps, is the decline in the unemployment rate since its peak in June: 120% of the decline in the measured unemployment rate is due to the fall in the labor-force share of the working-age population.

Is George W. Bush Really This Big an Idiot?

From Edmund Andrews of the New York Times:

Growth in Jobs Came to a Halt During December: ...President Bush, speaking in Washington before a group of small-business owners, focused on the drop in the unemployment rate, which he called "a positive sign that the economy is getting better."

According to the household survey, the number of people at work fell by a net 54,000 in December. Nevertheless, the unemployment rate fell because a net 309,000 people stopped looking for work and so dropped out of the labor force.

Does George W. Bush really believe that this is good news?

The Future of NASA

Mark Kleiman reacts as one would expect to Karl Rove's convincing George W. Bush to further eviscerate NASA's science budget in order to build a moonbase:

Mark A. R. Kleiman: A Moonbase? A MOONBASE?:

Can anyone come up with a single thing to say in defense of the Bush plan? It looks to me like Jimmy Dean politics: pure pork. Bush wants to "go back to being a uniter, not a divider" (How can he "go back" to where he never was?) by enriching his home state and the aerospace contractors at the expense of the rest of us?

And apparently in addition to wasting tons of additional money the Federal government doesn't have on the project, NASA is going to have to get rid of all the actual science it does to help pay for it. (The dollar hit another new low against the Euro today, suggesting that people with their own money on the table aren't as blase as Bush's economic yes-men about deficits stretching as far as the eye can see.)

Of course Bush is grateful to the space program: What would he do without his precious Teflon coating? And obviously he can't afford to be cut off from his supply of ideas that obviously came from anther planet.

But this is even more disgusting than usual. If you're going to let your scientifically illiterate political advisor staff a huge science- policy decision, you should at least have the common decency to lie about it.

What's even more depressing is that none of the alleged conservatives and libertarians who support Bush are going to get off the train for this, or for anything else he does.

So far, I've found only one person signing up for the Bush plan to reinvigorate our manned space program with the aim of someday going to Mars. Scottish science fiction author Ken MacLeod has signed on. He believes that we "owe it to ourselves to make the chaps with the heat-rays and tentacles sorry they ever heard of Woking."

Books: The Sacred Land

Recommended:

Harry Turteltaub (2003), The Sacred Land (New York: Tor: 0765300370).

Book Description: In Over the Wine-Dark Sea and The Gryphon's Skull, H. N. Turteltaub brought to life the teeming world of maritime Greece, in the unsettled years following the death of Alexander the Great. Now Menedemos and Sostratos, those dauntless capitalists of the third century B.C., have set sail again--this time to Phoenicia. There Menedemos will spend the summer trading, while his cousin Sostratos travels inland to the little-known country of Ioudaia, with its strange people and their even stranger religious obsessions. In theory, Sostratos is going in search of cheap balsam, a perfume much in demand in the Mediterranean world. In truth, scholarly Sostratos just wants to get a good look at a part of the world unknown to most Hellenes. And the last thing he wants is to have to take along a bunch of sailors from the Aphrodite as his bodyguards.

But Menedemos insists. He knows that bandits on land are as dangerous as pirates at sea, and he has no faith in Sostratos's ability to dodge them. Meanwhile, it turns out that the prime hams and smoked eels they picked up en route are unsalable to Ioudaians. (Who knew?) And worst of all, Sostratos's new brother-in-law has managed to talk their fathers into loading the Aphrodite with hundreds of amphorae of his best olive oil--when they're trading in a region that has no shortage of it. It's a hard day's work, hustling for an honest drachma.

It's not Aubrey/Maturin, but it is nevertheless a very nice excursion to the Mediterranean late in the fourth century B.C.... A past that is truly another country.

Another George W. Bush-Quality Policy

Daniel W. Drezner and Gregg Easterbrook bang their heads against the wall as they consider our now Mars mission-based space program. But what did they expect? This is just another George W. Bush-quality policy, produced by the standard operating procedures of the modern Republican executive.

Bush Employment Forecasts

Back in February of 2003 the Bush administration began handing around a piece of paper from the Council of Economic Advisers that purported to forecast that--if the Bush administration's 2003 tax cut was enacted--payroll employment in December 2003 would hit 134.3 million (up from its January 2003 value of 130.4 million.

Nobody I talked to could figure out how the Bush CEA had arrived at forecasts of baseline employment growth plus effects of tax cuts that could possibly produce such a forecast: such payroll of employment growth averaging 354,000 a month seemed out of the question. The only theory advanced was that back in January 2003 somebody inside the White House had demanded a forecast showing huge honking employment growth starting now, and that the CEA had failed to resist.

I'm told the piece of paper actually had some influence in persuading some members of Congress to vote for the tax cut...

And, of course, today we don't have 134.3 million payroll jobs. We have 130.1 million. Economic forecasting is a black and inaccurate art. But to be off by 4.2 million in a ten month-ahead forecast of employment is truly remarkable.

Impeach Bush Now

Former Treasury Secretary Paul O'Neill discourses on George W. Bush's competence as president:

CBS News | No Dialogue In Bush Cabinet? | January 9, 2004 13:51:26: President Bush was so disengaged in cabinet meetings that he "was like a blind man in a roomful of deaf people," says former Treasury Secretary Paul O'Neill in his first interview about his time as a White House insider.... "It's revealing," said Stahl on The Early Show Friday. "I would say it's an unflattering portrait of the White House and of the president -- and specifically, about how they make decisions."

O'Neill, fired by the White House for his disagreement on tax cuts, is the main source for an upcoming book, "The Price of Loyalty," written by former Wall Street Journal reporter Ron Suskind.... In it, Suskind builds an insider's picture of the White House drawn on interviews with O'Neill, dozens of other Bush administration insiders and 19,000 documents provided by O'Neill. A lack of dialogue, according to O'Neill, was the norm in cabinet meetings he attended. The president "was like a blind man in a roomful of deaf people," O'Neill is quoted saying in the book.

It was similar in one-on-one meetings, says O'Neill. Of his first such meeting with the president, O'Neill says, "I went in with a long list of things to talk about and, I thought, to engage [him] on...I was surprised it turned out me talking and the president just listening...It was mostly a monologue."

The Tentacles of the World Market

British science-fiction author Charlie Stross quails as the tentacles of the world market snatch away pieces of his livelihood:

I was deeply unamused to notice the US dollar continuing its slide... you can now buy 1.8025 dollars with a single pound sterling.... [T]he dollar was at 1.50 to the pound for almost the whole of the 1990's.... [T]he majority of my sales... are to publishers in the United States.... If the dollar loses 15% of its value against the pound between a contract being negotiated and the books written, delivered and paid for, then the author loses 15% of his or her pay packet....

[I]f you're a British SF/fantasy writer, then almost by default (if you want to earn a living) you're a one-person export industry aimed at the North American market. Which is why headlines like this one (No end in sight to dollar's descent) do not fill me with joy and goodwill towards all Federal Reserve bankers.

But what the world market taketh away, the world market also giveth. Big businesses that want to lock-in overseas earnings against exchange-rate fluctuations use derivatives contracts to do so. Within the decade, I predict, Charlie will find it possible to (with only small transactions costs) to take huge honking short derivative positions against the dollar, positions backed and collateralized by claims on his future royalty earnings. Then he will view declines in the dollar with equanimity rather than terror, as the losses on his expected royalty earnings are offset and neutralized by the gains on his derivative portfolio. (Of course, he will then view gains in the dollar with equanimity rather than joy, as the gains on his expected royalty earnings are offset and neutralized by the losses on his derivative portfolio.) He will, however, have gained an additional second-order worry: did his financial derivative technicians calculate the hedge portfolio correctly?

But in the meanwhile, the creations of humanity's brains become oppressive alien powers and... "BACK, you beast, BACK! That's my money you're taking!!"

For my part, I highly recommend Singularity Sky and Toast, and I am told by reliable sources that the Atrocity Archive (a story I understand to be vaguely along the lines of Thomas Powers's Declare and David Brin's "Thor vs. Captain America") is better.

A Lousy Jobs Report

A lousy December jobs report:

Payrolls Barely Rise, Worse Than Expected: American employers barely took on any new workers in December, a disappointing government report on Friday showed, indicating the economic recovery has yet to translate into sustained jobs growth.... The number of workers on U.S. payrolls outside the farm sector in December increased by just 1,000, after a downwardly revised rise of 43,000 in November. It was the fifth consecutive monthly rise but was far worse than economist expectations of a rise of 130,000.... "This is a very disappointing jobs report," said John Person, head financial analyst, Infinity Brokerage Services, Chicago.... However, the report showed a 38,000 fall in hiring in the retail sector, which the department said was due to general merchandise stores taking on fewer workers than usual.

The troubled manufacturing sector failed to break its job-cutting trend, shedding 26,000 jobs in December, the 41st month of declines. Some economists, pointing to recent data suggesting a turnaround in manufacturing, had predicted factories would finally take on new workers in December...

The gap between the size of the recession as measured by what is happening to the unemployment rate and the size of the recession as measured by other labor market indicators continues to grow. Since the summer the unemployment rate has fallen by six-tenths of a percentage point, but the employment-to-population ratio has not risen: it has fallen by one-tenth of a percentage point.

One of the Facts of the Millennium

Ronald Lee (2003), "The Demographic Transition: Three Centuries of Fundamental Change," Journal of Economic Perspectives 17:4 (Fall), pp. 167-190.

In 1800, women spent about 70 percent of their adult life bearing and rearing young children, but that fraction has decreased in many parts of the world to only about 14 percent...

---

Before the start of the demographic transition, life was short, births were many, growth was slow, and the population was young. During the transition, first mortality and then fertility declined, causing population growth rates first to accelerate and then to slow again, moving toward low fertility, long life, and an old population. The transition began around 1800 with declining mortality in Europe. It has now spread to all parts of the world and is projected to be completed by 2100.

This global demogaphic transition has brought momentous changes, reshaping the economic and demographic life cycles of individuals and restructuring populations. Since 1800, global population szie has already increased by a factor of six and by 2100 will have risen by a factor of ten. There will then be 50 times as many elderly, but only 5 times as many children.... The length of life, which has already more than doubled, will have tripled, while births per woman will have dropped from six to two...

Movable Type-Based Courseware

Movable Type-based courseware from Elizabeth Lane Lawley.

Colin Powell

Why Thomas Jefferson is one of Colin Powell's heroes:

Interview by Peter Slevin of The Washington Post: ...the reason I like Jefferson is Jefferson has a great line in the first inaugural which I've used with many individuals, and Richard's heard me use it many times, and as he gets to the end of the first inaugural, which is a great statement of American values, he said something along the lines, "I go now to the task that you have put before me, in the certain knowledge that I will come out of it diminished."... And he said -- and I'm paraphrasing because I don't have it in front of me, but the great line in it he says -- and I may be repeating myself just a little bit but you can look it up -- he said, "I go now to the task that you have put before me, until you realize that it is in your power to make a better choice."

In other words, you picked me. I'm going to get beat up. I'm going to get diminished by this. I'm going to get criticized. Those who don't know everything I know or cannot see as much as I can see will criticize me constantly. And -- but that's what I have to do. I go to serve until you realize it is in your power to make a better choice. And so I take the consequences of service, and I will do it to the best of my ability for as long as I'm asked to do it.

A Well Deserved Prize

Steve Levitt wins the John Bates Clark medal. A very well-deserved award. The Economist writes about it:

Economist.com | Economics focus: If you browse through the working papers circulated by the National Bureau of Economic Research (at www.nber.org) you will find that in 2003 alone Mr Levitt wrote or co-wrote seven. His topics included the effect of school choice on educational results; the causes and consequences of distinctively black names; the effect of legalised abortion on crime; how to test theories of discrimination using evidence from the television programme, "The Weakest Link"; the gap in test results between blacks and whites in the first two years of schooling; gambling and the National Football League; and teachers who cheat in appraisals of their students' performance. Among the work he has published in prestigious peer-reviewed journals are a series of papers on crime and punishment, drug-gang finance, penalty kicks in soccer, money and elections, drunken driving, and the effect of ideology as opposed to voter preferences on the policies supported by politicians. In 2002 the impeccably sober American Economic Review published a paper co-written by Mr Levitt on corruption and sumo wrestling. You get the idea....

Imaginative prospecting for data, together with great ingenuity in drawing warranted inferences from them--the Levitt hallmarks--can reveal far more than you might suppose. Mr Levitt's research on crime has earned him occasional spells of petty notoriety in the wider world.... Mr Levitt, along with co-author John Donahue, boldly surmised that legalised abortion might have reduced the number of unwanted children born to parents likely to raise criminal offspring. The evidence, as it turned out, strongly supported that guess. The states that first allowed legal abortion in 1970 (three years before Roe v Wade) were the first to experience the subsequent downturn in crime; states with high abortion rates experienced bigger reductions.... The authors reckon that legalised abortion may account for half of the fall in crime of the 1990s.

Mr Levitt has also ruffled some feathers with his work on imprisonment. A chief finding is that prison works... a big challenge in this area of research was to deal with a classic instance of the so-called simultaneity problem: incarceration rates affect crime rates, but the converse is also true. Disentangling the two relationships is impossible [without] a third variable with the right statistical properties... Mr Levitt used prison-overcrowding litigation--an improbable but statistically effective instrument--to do the job... reducing the prison population by one... increases the number of crimes committed by 15 a year.... Despite such provocative and uncomfortable findings, few if any of Mr Levitt's peers will deny he deserves the Clark medal. That may say as much as the award itself.

Indeed, the only people I know of who are seriously down on Steve Levitt are... John Lott and Glenn Reynolds.

Don't Apologize

The extremely thoughtful Decembrist--former Bill Bradley senior aide Mark Schmitt--almost seems to apologize for Bradley's 2000 presidential primary campaign against Al Gore:

The Decembrist: The Bradley Endorsement: One of the problems all along in 2000 was that Bradley and Gore didn't have very sharp differences on issues, even on issues such as trade on which there are very different views within the party. That's part of what made their competition much nastier and petty-seeming than it might have been otherwise. Also, Bradley was really running against the tone, style, and what he saw as the missed opportunities of the Clinton administration, the strategic triangulation, the bite-sized policies, the compromised fundraising, and to a small degree, the personal scandals. Gore wore the legacy of the Clinton administration quite uncomfortably, and I have always believed that that discomfort, together with his general discomfort in public life, brought out some of his viciousness in 2000...

Don't apologize. I have never met anyone, anywhere, anytime, who can make an even half-convincing argument that Al Gore would make a better president than Bill Bradley.

Mark goes on:

Since then, a huge gulf has emerged between Gore and Clinton, which now puts Gore, Bradley, and Dean together on one side of the party, although they got there by very different paths. At the same time, though, I think others of us have become much more appreciative of what Clinton was able to accomplish in the face of an opposition that refused to grant him an ounce of legitimacy, and so that distinction doesn't seem quite as important...

But do hold tight to that last thought. The things wrong with the Clinton administration ("the strategic triangulation, the bite-sized policies, the compromised fundraising, and to a small degree, the personal scandals") were the products of Clinton's political situation (well, except for Clinton's big problem with his zipper) and not Clinton's desired outcome. There is no "Clinton wing" to counterpose to a "Dean-Gore-Bradley wing." There are different assessments of the range of live political possibilities, and there are arguments over what are the best means to social-democratic ends.

The Budget Picture

David Wessel writes about a serious attempt to think about U.S. fiscal policy--as opposed to the forthcoming clown show that will be the Bush administration's 2005 budget proposals:

WSJ.com - Capital: ...Next week, a band of experienced budgeteers convened by the Brookings Institution think tank -- most of them Clinton administration veterans such as Isabel Sawhill, Alice Rivlin and Peter Orszag, but including Ron Haskins, a former Republican congressional and White House aide -- will detail what it would take to balance the budget by 2014. Without action, they project, that year's deficit would be $687 billion, or roughly 3.7% of what the Congressional Budget Office guesses will be the gross domestic product then.... In a clever analysis that could frame the deficit debate -- if one ever emerges in this presidential campaign -- the analysts offer three paths to eliminating the deficit: a "small government" plan that Republican conservatives can embrace; a "big government" plan that puts numbers on the rhetoric of Democratic candidates; and an in-between plan that is three parts tax increases and one part spending cuts.

Like Goldilocks, the authors think the in-between one is just right.... Two conclusions are particularly important.

First, it is impossible to balance the budget by 2014 simply by cutting spending. Using wish lists of small-government-is-better think tanks such as the Cato Institute and Heritage Foundation, the analysts tally savings from wiping out business subsidies; eliminating federal spending on K-12 education, housing, worker training, environmental protection and manned space flight; squeezing out waste; raising the Social Security retirement age; and trimming Medicare payments to health-care providers.

All of that gets them only three-quarters of the way to the goal; it still takes $134 billion in tax increases during 2014 to balance the budget. You won't read that in Mr. Bush's Feb. 2 budget, which likely will avoid looking beyond the next five years....

Second, undoing all of the Bush tax cuts, as Democratic front-runner Howard Dean proposes, won't be enough to balance the budget either. That yields about $300 billion in 2014. Even if Mr. Dean banked that whole sum and didn't keep his $1 trillion health-care promise, he still would be only 55% of the way to balance.

The Bush administration declined to send budget director Josh Bolten to join former Treasury Secretary Robert Rubin and ex-Congressional Budget Office directors Robert Reischauer, a Democrat, and Dan Crippen, a Republican, at a forum on all this next week.... Once there was a Republican budget director who took the long view. In the official White House budget, he wrote: "At some point, it is appropriate to put games aside -- at least for a while. At some point, partisan posturing must yield to the responsibility to govern. Sooner or later, the American political system will rise to the responsibility to complete the job of fiscal policy correction." His name was Richard Darman.... His message, dated 1990, remains relevant.

The IMF Wishes the Bush Administration Had a Very Different Fiscal Policy

The IMF wishes that the Bush administration had a different and less stupid fiscal policy:

WSJ.com - IMF Report Sees U.S. Budget Gap Driving Up Rates: Soaring U.S. government debt will drive up interest rates world-wide by as much as a full percentage point, hampering investment and growth, the International Monetary Fund says. According to an IMF report, if cumulative budget deficits rise by 15% of gross domestic product, as the Congressional Budget Office expects, world interest rates would be pushed up by one-half to one percentage point over 10 years.

The IMF said that U.S. deficits have helped the world economy in the short term by cushioning the effect of the burst stock-market bubble and the September 2001 terrorist attacks. But in coming years, as the economy recovers and the cost of Medicare, Social Security and the Bush tax cuts mount, the deficits will increasingly put a drag on growth. World capital markets are more and more integrated, and budget deficits in one country draw on a global pool of savings. For example, foreigners own 31% of all Treasury debt outstanding, according to Bianco Research LLC, a financial research firm. IMF researchers found that when U.S. inflation-adjusted interest rates move one percentage point, average world rates move 0.6 point.

Federal Reserve Governor Donald Kohn sounded a similar warning yesterday, saying that "If the fiscal path does not change ... interest rates will be higher than they otherwise would be." That would reduce capital spending and purchases of houses and autos, he said. In the late 1990s, large inflows of foreign investment and a government surplus helped finance domestic investment, he said in a speech to the Federal Reserve Bank of Atlanta. "A few years from now we may have less of the former and none of the latter." The Bush administration expects the budget deficit to top $500 billion in the current fiscal year, or about 4.5% of GDP...

Too High a Price to Pay

Jim Henley tells us what he really thinks about the war in Iraq:

Unqualified Offerings: Nothing. Nada. Zip. - "Iraq's Arsenal Was Only on Paper" writes the Post's Barton Gellman in an authoritative report. On the WMD front, the hawks seem now reduced to two claims:

1) Saddam was eeeeeeeeeeviiiillllllll! Stop asking about this stuff!

2) Saddam tried to bluff the world into thinking he had WMD. He succeeded and got wiped out for his troubles. Where's the problem?

The first is actually the stronger argument., but it simply returns us to familiar should the United States expend blood and treasure toppling foreign tyrants? ground. Had the Administration thought that argument a winner they'd never have bothered pushing the WMD line in the first place.

That leaves us with the second. We are faced with an immediate problem. Saddam's "bluff" consisted, in the main, of insisting his country had no WMDs. He furthered this bluff by having his government spokesmen say the same thing. To this, the hawks reply that these denials were pro forma, and the bluff was proven by his pattern of obstruction of the inspectors. Sticking purely to the post-resolution period, from October 2002 to March 2003, our main evidence for Iraq's non-cooperation with the inspection regime is continual, categorical statements by the Bush Administration, and weaker ones from Hans Blix.

The irony of the hawks choosing Hans Blix for an argument from authority is palpable. As for the Administration's statements, I noticed at the time how reflexive they were - no matter what Iraq did or didn't do, what papers it released or sites it opened up, someone in DC instantly declared that "Iraq is still not cooperating enough." We are faced with this problem: the same administration said, out of various mouths that it believed Iraq had "reconstituted nuclear weapons" (just add water!), that it knew of specific sites full of chemical and biological weapons, that Iraq was hording 20,000 liters of this and 30,000 liters of that, that its human sources had confirmed these facilities manufactured such and such.

We know now that none of those statements about WMD were an accurate reflection of reality. We know in retrospect, and this pisses me off no end, that the statements of one of the worst dictatorships in the world on this issue were more nearly the truth than the statements of our own government officials. So those same officials automatic and largely unspecified statements about "obstruction" are suspect.

And what about those dire warnings of Hans Blix about Iraqi non-cooperation? It makes sense to see these as part of Blix's double game - trying the best he could to keep the Americans sweet on one hand ("Look, I am tough!") and to get the most possible out of the Iraqis ("Hey, you don't deal with me, you deal with them.") It is manifestly the case that Blix's team felt the inspections were worth continuing, and clear that the hawks' derision of Blix for "failing to find any WMD" was unjust. There weren't any to find.

The inspections were, from the Administration's perspective, a charade. Blix said "Nice Doggie" while we gathered rocks. That Blix largely meant "Nice Doggie" made the charade that much better.

Which brings us back to argument 1. Saddam really was evil. And we really did get him. The costs of that deed include not just the dead and the maimed on our side, and the dead and the maimed on theirs, and the couple hundred billions of dollars from buildup through reconstruction. The costs include the Administration's decision to motivate the American people by fear, to perpetrate an official farce (inspections) and to be less truthful about factual matters than one of the most tyrannical governments on earth.

Yes, it was too much to pay, and to continue to pay.

A Full Division's Worth of Casualties

David Hackworth says that we have taken a full division's worth of casualties in Iraq so far:

: ...Even I -- and I deal with that beleaguered land seven days a week -- was staggered when a Pentagon source gave me a copy of a Nov. 30 dispatch showing that since George W. Bush unleashed the dogs of war, our armed forces have taken 14,000 casualties in Iraq -- about the number of warriors in a line tank division.

We have the equivalent of five combat divisions plus support for a total of about 135,000 troops deployed in the Iraqi theater of operations, which means we've lost the equivalent of a fighting division since March. At least 10 percent of the total number of Joes and Jills available to the theater commander to fight or support the occupation effort have been evacuated back to the USA!

Lt. Col. Scott D. Ross of the U.S. military's Transportation Command told me that as of Dec. 23, his outfit had evacuated 3,255 battle-injured casualties and 18,717 non-battle injuries. Of the battle casualties, 473 died and 3,255 were wounded by hostile fire. Following are the major categories of the non-battle evacuations:

• Orthopedic surgery -- 3,907
• General surgery -- 1,995
• Internal medicine -- 1,291
• Psychiatric -- 1,167
• Neurology -- 1,002
• Gynecological -- 491

Sources say that most of the gynecological evacuations are pregnancy-related, although the exact figure can't be confirmed -- Pentagon pregnancy counts are kept closer to the vest than the number of nuke warheads in the U.S. arsenal. Ross cautioned that his total of 21,972 evacuees could be higher than other reports because "in some cases, the same service member may be counted more than once."

The Pentagon has never won prizes for the accuracy of its reporting, but I think it's safe to say that so far somewhere between 14,000 and 22,000 soldiers, sailors, airmen and Marines have been medically evacuated from Iraq to the USA...

The scary thing is the 18,000 "non-battle injuries" evacuated out of the theater of operations in seven months. 18000/135000 * 12/7 = .228, which means that in a year 23% of this bunch of guys and gals in their twenties and thirties are having non-war related medical misadventures serious enough to require treatment back in Germany or the USA. That's an unbelievably large accident/disease rate, and makes me very worried about what might really be going on.

The cream of the U.S. army are not military police. They should not be used as military police. Those in the Pentagon and the White House whose policies have turned them into military police should be... they should be sent to the Pakistan-Afghanistan border as undercover agents in the hunt for Osama bin Laden.

Statistical Innumeracy

Mark Kleiman bangs his head against the wall in frustration at reporters who have no understanding of statistics:

Mark A. R. Kleiman: Wrong!:

WASHINGTON -- Wesley Clark has closed the gap with Howard Dean among Democratic voters, according to a national poll taken at a time when Dean had been under intense criticism from rivals. Dean had the support of 24 percent and Clark had the backing of 20 percent in the CNN-USA Today-Gallup poll out today. The poll of 465 Democrats and those who lean Democratic had a margin of sampling error of plus or minus 5 percentage points, meaning Dean and Clark are essentially tied for the lead nationally.

No, dammit, no! [Pounds the lectern in sheer frustration.] Being 4 points behind with a 5- point margin of error isn't being "essentially tied." It's being 4 points behind, plus or minus 5 points. That's a lot better than being 21 points behind, plus or minus 5 points, but I'd rather be ahead, thanks.

Of course, the reported margin of error reflects sampling error only, and ignores all the sources of systematicerror. All it means is that, if I'd called another 465 people at the same time, using the same algorithm to select them, using the same weighting formula to adjust the sample to he assumed population of actual voters, and having the same interviewers ask the same questions, there's a 95% chance that the results of the second sample would have been within 5 points of the results of the first sample.

But the interviewers might not be perfectly impartial, and the questions, the sampling algorithm, and the weighting formulas might all embody imperfect models of actual voting behavior. The extent of those "systematic" errors cannot be estimated by simply taking the reciprocal of the square root of the sample size. So the reported margin of error is an underestimate of the actual uncertainties involved.

But there's no such thing as a "statistical tie," and it's better to be ahead than behind.

[Yes, this will be on the exam.]

All I can say is that, when the Day of Wrath comes and you look up to see Mark Kleiman standing next to the Pantokrator whispering in his ear, those of us who paid attention in our statistics classes will be very glad that we did so.

Weapons of Mass Destruction

Perhaps the biggest reason to impeach Bush (and Cheney!) today:

FT.com / World: Bush administration officials "systematically misrepresented" the threat from Iraq's weapons of mass destruction in the run-up to war, according to a new report to be published on Thursday by a respected Washington think-tank. These distortions, combined with intelligence failures, exaggerated the risks posed by a country that presented no immediate threat to the US, Middle East or global security, the report says. The study from the Carnegie Endowment for International Peace concludes that, though the long-term threat from Iraq could not be ignored, it was being effectively contained by a combination of UN weapons inspections, international sanctions and limited US-led military action....

It concludes that before 2002 the US intelligence community appears to have accurately perceived Iraq's nuclear and missile programmes, but overestimated the threat from chemical and biological weapons. But it also says that during 2002, published intelligence became excessively politicised. A "dramatic shift" in intelligence assessments during the year was one sign that "the intelligence community began to be unduly influenced by policymakers' views sometime in 2002". The report says administration officials misrepresented the threat in three ways.... lumping together the high likelihood that Iraq had chemical weapons with the possibility that it had nuclear weapons, a claim for which there was no serious evidence. The administration also insisted without evidence that Saddam Hussein, the former Iraqi leader, would give WMD to terrorists. Finally, officials misused intelligence... "the wholesale dropping of caveats, probabilities and expressions of uncertainty present in intelligence assessments from public statements," it says.

The Carnegie assessment concluded: "There is no evidence of any Iraqi nuclear programme", contrary to assertions by Dick Cheney, vice-president, and others in 2002. It notes that since the war the US-led coalition has found no chemical weapons or programmes and no biological weapons or agents...

Wes Clark's Tax Plan Is a Good One

Wes Clark's tax plan is a good one for the country. And Michael Froomkin gives Howard Dean some good advice: Dean should steal Clark's tax plan, and do it today:

Discourse.net: Some Utterly Tactical Tax Policy Advice for Dr. Dean: ...Second, steal Gen. Clark's plan -- the pundits seem to like it -- with maybe some minor tweaks here and there. Third -- and this is the radical part --admit you stole Clark's plan. In fact, don't just admit, brag about it. After all, it's traditional for a nominee to pick up parts of rivals' programs for the general election. Why wait? Say that this just demonstrates what a great guy Clark is, and that it also demonstrates that you approach public policy like a doctor or scientist. When someone comes up with a better treatment for a sick patient (Bush's economy) you don't hold on to the old method just because you are used to it. You read the medical journals, you keep up with developments, you rely on peer review, you use the latest and greatest techniques. Let the Republicans (or the Democrats!) scream "flip-flop". Tell them you are proud of it. Unlike traditional politicians you listen. You don't have ego in your plan, you want what is best for America, and your experts have convinced you that this was better than version 1.0. Say that Presidents who are prisoners of an ideology are bad Presidents. Good ones listen and learn. To the charge that this means voters can't know what you stand for, you say it shows you stand for what is best for America, whoever thought it up. Then find something (minor!) Bush did you like and say, you even agree with Bush on some things. Wanna make something of it?

Eating Your Own Dogfood!

In a passage that seems ripped from a cyberpunk novel, a daring reporter hacks into the key communications system of a group of high corporate executives, monitors their daily activities, and then ambushes them by posting probing questions about their forthcoming unannounced merger directly to their computer screens.

Of course, the "key communications system" was nothing but AOL. The "high corporate executives" were the executives of AOL itself. The "daring reporter" is Wall Street Journal reporter Kara Swisher. She "monitored their daily activities" by adding them to her own AOL Buddy List. And the direct access to their screens was provided by AOL Instant Messenger. AOL executives back then really did eat their own dogfood. And reporters covering them ate it too.

From Kara Swisher and Lisa Dickey (2003), There Must Be a Pony in Here Somewhere: The AOL Time Warner Merger Debacle and the Quest for the Digital Future (New York: Crown Business: 1400049636).

pp. 1-7: ...the door slammed in my face from 3000 miles away.... Luckily for me, it wasn't a heavy wooden door, but a virtual one. Many virtual ones being banged shut by different high-level executives at America Online Inc. almost immediately after I pinged them electronically. I had done so because an unusual number of them were logged on... in the wee hours of Monday, January 10, 2000. How did I know this? The digital footprints were unmistakable, right there on my "Buddy List"....

I wasn't AOL exec-fishing just for fun.... Peter Gumbel... had just gotten a killer tip... Time Warner was merging with AOL.... More important, Peter's source had told him that AOL and not Time Warner was going to hold the majority stake.... Even in the midst of what turned out to be the Internet's frothiest moment, this was still a jaw-dropping idea.... As I would later write, a company without assets was buying a company without a clue....

Peter Gumbel had called reporters in various cities to get a critical second and third confirmation.... I dialed into the AOL service to see if I could email someone.... It soon became clear that pretty much everyone in any position of power at AOL was signed on to the service.

"We know," I wrote in a flurry of initial instant messages, attempting to be as vague as possible. "Tell all." I hoped this would produced a response....

Slam. Slam. Slam. Slam.

The people I had I[nternet ]M[essag]ed were signing off the service as soon as the little message bombs I sent had exploded onto their screens.... [M]any... block[ed] my messages.... The technique was usually used... to deflect creepy online chatters, which I now seemed to have become to the top rank of AOL executives...

Of course, almost all of the traditional atmospheric tropes of the cyberpunk novel--the drugs, the cybernetic nanosurgery, the tattoos, the concrete floor, the weird sex with avatars or puppets of post-human entities, the loft in a burnt-out neighborhood of a post-apocalyptic city, the ever-present brain-frying dangers of Intrusion Countermeasures Electronics--were missing when Bob Pitchman, Steve Case, Ted Leonsis, Dave Colburn, Myer Berlow, and company stared at their computer screens at 2 AM on January 10, 2000, and realized that Wall Street Journal reporter Kara Swisher (1) knew that they were all online, (2) knew that they were doing something about a merger, (3) had at least a hint that the merger was with Time Warner, and (4) wanted them to talk. And it is somewhat of a letdown that the software tools used have names like "AOL Instant Messenger" and "Buddy List," rather than names like "Satan" or "KRAXXER" or "Black Ice VII" and origins in the machine-language bit-by-bit hand-craftwork of insane programming geniuses living underground under false identities with large corporate prices on their heads.

But you can't have everything. And it must have been a highly cool moment indeed to have been there at: her, thinking "I see them, I see them all, and this panicked collective reaction means that Peter Gumbel's tip is true"; them, thinking, "she sees us, how long has she been watching us, what does she know?"

How was the book, you ask? Not as good as Swisher's previous aol.com book about AOL, which was very good indeed. The book doesn't have enough numbers. This book doesn't have enough on post-merger operations. I started the book knowing that the collapse of the internet bubble and of AOL's valuation with it meant that the merger would have been judged a total failure no matter what, but not knowing why it is that AOL Time Warner is not a happy company. I had three theories: (1) AOL Time Warner could never have been a happy company because the synergies between the online business and the old media business didn't exist, and so there never was any prospect of cooperation between the AOL side and the Time Warner side generating big profits. (2) The upper-middle managers on the Time Warner side sabotaged the merger, and prevented the realization of synergies that really were there. (3) Gerard Levin chose the wrong executives to run the combined business and they couldn't figure out where the real synergies were.

I ended the book with the same three theories, and with no better idea of how much weight to allocate to each of them. Recommended for gossip (which is very good). Not recommended if you want to know why, say, AOL Time Warner couldn't figure out a way to make huge $$$$$$$ by selling the songs of Time Warner recording artists over the internet to AOL subscribers.

Kara Swisher and Lisa Dickey (2003), There Must Be a Pony in Here Somewhere: The AOL Time Warner Merger Debacle and the Quest for the Digital Future (New York: Crown Business: 1400049636).

pp. 1-7: When the door slammed in my face from 3000 miles away, I knew Steve Case had actually managed to pull [it] off.... Luckily fo rme, it wasn't a heavy wooden door, but a virtual one. Many virtual ones being banged shut by different high-level executives at America Online Inc. almost immediately after I pinged them electronically. I had done so because an unusual number of them were logged on... in the wee hours of Monday, January 10, 2000. How did I know this? The digital footprints were unmistakable, right there on my "Buddy List"....

I wasn't AOL exec-fishing just for fun.... Peter Gumbel... had just gotten a killer tip... Time WArner was merging with AOL.... More important, Peter's source had told him that AOL and not Time Warner was going to hold the majority stake.... Even in the midst of what turned out to be the Internet's frothiest moment, this was still a jaw-dropping idea.... As I would later write, a company without assets was buying a company without a clue....

Peter Gumbel had called reporters in various cities to get a critical second and third confirmation.... I dialed into the AOL service to see if I could email someone.... It soon became clear that pretty much everyone in any position of power at AOL was signed on to the service.

"We know," I wrote in a flurry of initial instant messages, attempting to be as vague as possible. "Tell all." I hoped this would produced a response....

Slam. Slam. Slam. Slam.

The people I had IM'ed were signing off the service as soon as the little message bombs I sent had exploded onto their screens.... [M]any... block[ed] my messages.... The technique was usually used... to deflect creepy online chatters, which I now seemed to have become to the top rank of AOL executives...

pp. 124-5: In a December 23, 19998 email... Case advised [his major executives] to think big, even as he appeared nervous about AOL's growing valuation. AOL now needed, he insisted, something much more stable. "I like the idea of buying fallen stars that have real assets versus chasing the highfliers that are fluffy and inevitably will come crashing back to earth," Case wrote, noting he was amazed that the online auctioneer eBay was worth $12 billion at that point. "Given the Internet zaniness, I also like the idea of looking beyond... companies that have a profound impact on how people get informaiton, communicate... buy... are entertained.... They tend to be suffering from the Internet momentum."

p. 145: Fannie Mae head Franklin Raines raised a legitimate concern about the 71 percent premium [for Time Warner shares], noting that at some point it might look as if AOL was selling the company at a discount...

p. 241: Columnist Allan Sloan first made this salient point.... "[Case] actually took wonderful care of his old America Online shareholders by snookering Time Warner into taking bubble-inflated AOL stock.... AOL stock is probably sellin gfor about twice what it would be fetching without the deal." Internet stocks, as Sloan noted, were mostly down 95 percent, and if AOL hadn't merged it might have gotten as low as $6 a share, rather than languishing in the mid-teens as AOL Time Warner stock.... "Steve was fabulous for his shareholders," John Malone, the cable baron, admitted to me.... "They should build a statue to this guy."

Why Oh Why Can't We Have a Better Senior Democratic Senator from New York?

The New Republic's talented Noam Scheiber bangs his head against the wall, killing millions of brain cells, as he contemplates an anti-free trade op-ed by Chuck Schumer and by Paul Craig ("slaves were happy! really! really happy!") Roberts:

&c: ...the fact that we could one day find ourselves in a situation where our comparative advantage lies in a low-value good like T-shirts rather than a high-value good like software isn't exactly comforting. Still, as long as we enjoy a comparative advantage in enough high-value goods--which will be the case as long as our workforce remains incredibly well-educated and high-skilled relative to India's and China's, which should be our top policy priority and which, even if it wasn't, is going to be the case for decades (when was the last time you checked the literacy rate of India?)--then all the doom and gloom you hear from people like Schumer and Roberts is way overstated. There are real globalization-related issues we need to address--most importantly, the dislocation caused when whole industries cease to be efficient, and the speed with which we allow that to happen. But the theoretical foundation of the case for free trade isn't one of them...

European Financial Crisis?

Ed Hugh (who travels these days in the company of Sergio Leone rather than in that of a band of pygmy chimpanzees) fears that we are about to see the first financial crisis within the euro zone, as all those northern Europeans who have been lending Portugal an extra 10% of its GDP year after year wake up and say, "Why are we lending money to a poor country without visible growth that has a lousy educational system?"

Forgiveness

I may even be able to forgive Jim Henley for writing for The American Spectator. He is that good:

Unqualified Offerings: Gary Farber finds an article in which a US Army Captain informs us that "The only thing they [Arabs] understand is force - force, pride and saving face." How fortunate for us! Apparently, since pride and saving face are so important to the, well, let's just call them wogs, shall we? the key to success in Iraq is to grind down their pride and make saving face impossible by surrounding their towns with razor wire, requiring passes to move around and demolishing the homes of whoever our famously effective intelligence operations tell us is closer to the Iraqi resistance than Kevin Bacon. Hey, that should work! A couple of thoughts:

1) Maybe it's a coincidence, but doesn't it seem like everybody on the planet has enemies who, they tell us, only understand force? Do we all have the same enemy or something? Because if we do, it should be easy to gang up on the bastards...

Things Better in the Movie Version of Return of the King than in the Book Version

Things that I thought were better in the movie version of The Return of the King than they are in the book.

First of all, and most extraordinarily:

• the beacon-fires on the mountain tops...

But also:

• Smeagol conversing with Gollum in the pool, and Sam's arrival behind him...
• The Witch-King of Angmar looks much more like the Witch-King of Angmar in the movie than he does in the book...*
• The sallying-forth of the Witch-King and his army from Minas Morgul...
• The city of Minas Morgul itself...
• The charge of the Rohirrim itself...
• Denethor: "That will depend on the manner of your return"...
• Eowyn and Meriadoc vs. the Witch-King...
• Gothmog the Lieutenant of Minas Morgul...
• The battering-ram Grond...

Additional better moments, anyone?

*I am still, in the middle of the night, hearing the screams of the Nazgul as the army of Mordor sallies forth from Minas Morgul.

Two of the Most Benificent Transformations in Human History

The Financial Times's Martin Wolf writes about how the crisis of Europe's social-insurance state is but the flip side of an extraordinary revolution in human welfare:

FT.com Home US: We are enjoying two of the most beneficent transformations in human history: a revolution in life expectancy and the liberation of women.... [H]ow do we respond? We mope about imploding pension schemes. The worries are not unjustified. But let us for a moment enjoy the achievement. Two centuries ago, life expectancy in today's high-income countries was 36 years; today, it is nearly 80. In the early 19th century, French mortality in the first year of life was 181 per 1,000; today, it is four. Today, parents can expect their children to survive them and both men and women have hopes of living lives that are long, varied and fulfilling.

We can even hope for that comfortable extended holiday we call retirement. Or can we? What has been liberating for individuals creates challenges for collectives. The nature of that challenge was spelt out by Adair Turner, former director-general of the Confederation of British Industry and currently chairman of the UK's commission on pension policy, in a lecture last autumn.*

Europe, observes Mr Adair, is experiencing a profound demographic shift as a result of two forces: increasing longevity and declining fertility. Neither development is news. But some of the details may be. In the first place, increasing longevity is much more than a matter of declining mortality among the young. The old are living longer than ever before. The rise in life expectancy of the old has been accelerating over the past two decades (see chart below). In 1980, male life expectancy at 60 was just over 16 years in the UK; today, it is nearly 20 years...

The Return of the Sixth International

The Sixth International has returned! All comrades are urged to master and command the latest twist and turn of the party line:

The Sixth International: Tory porn: ...The [Aubrey/Maturin] books are far more interesting and important. At present I am midway through a third reading of the cycle, and have come to a pretty firm understanding, I think, of their appeal. And that appeal makes the books, for me at least, rather a guilty pleasure. For the Aubrey/Maturin novels are, at bottom, pornography for tories.

Perhaps I'd better explain myself. I don't refer to the floggings at the grate, nor to the bare bottoms of 'young gentlemen' getting six of the best from the burly captain. (Though there's certainly enough of that; O'Brian was, after all, an Englishman.)

No, the books are not sexual but social pornography. They allow the reader to indulge a shameful fantasy of social stratification, where people have their place, know it, and look happy about it. O'Brian's navy does have a small, a very small avenue of meritocratic advancement for the truly exceptional; but for all that, position is overwhelmingly a matter of having the right connections. For those from the right families and with sufficient means, promotion is as of right. Those less fortunate, unless they should distinguish themselves in battle (and chances to do so seem to have been surprisingly rare), are doomed to end their days as unpromoted lieutenants. And that is just abaft the mast. The lower deck are invariably lovable, stalwart, stout-hearted fellows, but their God-appointed role is to heave on ropes, run out the guns, holystone the decks and wait on the officers at table. And best of all, that's the way they like it. (Bonden, for example, cheerfully refuses Jack's offer to make him a notional bourgeois by rating him midshipman.)

Politics at home is largely a struggle to see which set of corrupt grandees will have access to the cream. Parliamentary boroughs are cheerfully rotten (hence Jack's own seat), the electorate tolerably small. And this is, you see, a goodthing. Foreign policy is simplicity itself: one goes out and thumps Frenchmen (and gets rich into the bargain). True, come 1812 our brave tars had to start thumping Yanks as well, and everybody regretted that (perhaps O'Brian had an eye to transatlantic sales). But the important thing is that one had somebody to thump. Peace is hell to our sailors: it means boredom and unemployment. And why shouldn't peace be hell, with war such a jolly time altogether. Boom boom boom go the great guns; then it's over the side to board, discharging pistols and waving cutlasses. Most of the time the French will strike and then you may have their captain's expert cook. On the rare occasions when one is taken prisoner, the enemy captain is courtesy incarnate, and probably has cousins in Bath and knows many of the same people one knows oneself.

What tory could not love the world O'Brian made? How could anybody else love it? And yet, I must confess, I do love this world, for all that its very structure is an abomination to every principle that I hold dear. Perhaps the charm lies in O'Brian's vast erudition, so lightly worn; his excellent turn of phrase; his undeniable ability to spin a yarn. And, perhaps, there's something in all of us that would love to wave a cutlass...

And who can forget those famous words of Lord John Hay at the Battle of Fontenoy? ""Messieurs les Gardes Francaises, s'il vous plait tirez le premier."

Long-Run Economic Consequences of George W. Bush

John Irons links to Robert Rubin, Peter Orszag, and Allen Sinai writing about how bad America's long-run budget situation is:

ArgMax Economics Weblog: Longer-run Economic Performance: Sustained Budget Deficits: Longer-Run U.S. Economic
Performance and the Risk of Financial and Fiscal Disarray
Robert E. Rubin, Peter Orszag, and Allen Sinai

"The U.S. federal budget is on an unsustainable path. In the absence of significant policy changes, federal government deficits are expected to total around $5 trillion over the next decade. Such deficits will cause U.S. government debt, relative to GDP, to rise significantly. Thereafter, as the baby boomers increasingly reach retirement age and claim Social Security and Medicare benefits, government deficits and debt are likely to grow even more sharply.

"The scale of the nation's projected budgetary imbalances is now so large that the risk of severe adverse consequences must be taken very seriously, although it is impossible to predict when such consequences may occur."

Screams and Leaps...

Daniel Drezner takes understandable exception to my characterization of him as screaming and leaping fangs-bared for Paul Krugman's jugular...

He states that when he wrote that "[Paul] Krugman is either wrong or has a different definition of 'unusual' than the rest of the English-speaking world. Distortions like this one could explain parodies like this one..." he did not intend to:

1. Provide an unfavorable description of Paul Krugman
2. Impugn Paul Krugman's motives
3. Convey the impression that Paul Krugman lied
4. Or ascribe any form of malign intent to Paul Krugman

But intended only to state that he believed Krugman to be wrong.

Unfortunately, for Dan, of the four claims made by Krugman in his paragraph at issue:

1. The measured unemployment rate of 5.9 percent isn't that high by historical standards, but other labor market indicators paint a less favorable picture.
2. Because an unusually large number of people have given up looking for work, dropped out of the labor force, and thus escaped being counted as "unemployed," the rise in unemployment is smaller than we would have expected given the fall in employment.
3. Many of those who say they have jobs seem to be only marginally employed--there is an unusually large gap between the number of people who say they are working for employers and the number of people whom employers say they have working for them.
4. And such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years.

All four are correct. There is no "error."

However, looking back over what Paul Krugman wrote:

An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years.

I have to concede that Dan has half... no one-third... of a point. The way that Paul's paragraph is constructed as a web of assertion and qualification, the phrase "worst job market in 20 years" applies only to a few "measures" of labor market conditions like "the length of time it takes laid-off workers to get new jobs." But the way that Krugman's paragraph is constructed as a piece of rhetoric, the force of "worst job market in 20 years" leaks out of its proper box and extends its penumbra over the entire paragraph. Most measures of labor-market conditions suggest the worst job market in 10 years. Only a few--the fall in the employment-to-population ratio, the duration of unemployment--suggest that things are clearly worse now than they were in the early 1990s, and thus that we have the worst job market in 20 years.

Oolong

A pot of Golden Dragon Oolong tea at Peet's on a rainy afternoon...

I am, once again, overwhelmed with how very, very little I have done to deserve a life in which so many good things happen.

History as Tragedy: The Peloponnesian War

The Thirteen-Year-Old got Donald Kagan's (2003) Peloponnesian War (one volume) for Christmas. Now I find that the New Yorker's Daniel Mendelsohn doesn't think much of it:

Daniel Mendelsohn: Critic at Large: Kagan... informs us that... he wants his work to "meet the needs of readers in the 21st century"... "an uninterrupted account will better allow readers to draw their own conclusions." Uninterrupted, yes, but not unbiased... you tend to come away from his history with an entirely different view of the war than the one you take away from Thucydides....

The only way to do this, unfortunately, is [for Kagan] to flatten Thucydides's presentation of the Peloponnesian War, stripping away the many voices and points of view that [Thucydides] worked so hard to include.... Thucydides tends to be shy about overtly intruding.. not so Kagan. This is most apparent in [Kagan's] revisionist championing of Cleon and other Athenian hawks, whose policies he consistently presents as the only reasonable choice. "It is tempting to blame Cleon for the breaking off of the negotiations," goes a typical bit of rhetorical strong-arming. "But what, realistically, could have been achieved?" Anyone who hasn't read Thucydides will be inclined to agree. [Thucydides's own] explanation of the Athenians' distaste for peace was that "they were greedy for more."

The desire to rehabilitate Cleon inevitably results in a corresponding denigration of the [Athenian] peace party (with its "apparently limitless forbearance") and of the cautious policies recommended first by Pericles and then by Nicias, a figure for whom Kagan has particular disdain. Here Kagan's revisionism borders on being misleading. Nicias had tried to bluff the Athenian Assembly into abandoning the invasion of Sicily, declaring that it would require far greater expense than people realized; but they simply approved the additional ships and troops. This leads Kagan, bizarrely, to characterize the Sicilian Expedition as "the failed stratagem of Nicias." As for the Athenians' massacre of the Melians, Kagan dismisses it as "the outlet they needed for their energy and frustration."

Kagan's perspective on events and personalities at first suggests an admirable desire to see the war with fresh and unsentimental eyes. But after a while it becomes hard not to ascribe his revisionism to plain hawkishness, a distaste for compromise and negotiation when armed conflict is possible. His book represents the Ollie North take on the Peloponnesian War: "If we'd only gone in there with more triremes," he seems to be saying, "we would have won that sucker."

It is certainly the case that I have always found it very strange that Kagan is not much, much more hesitant than he is to dismiss and overturn Thucydides's analytical conclusions and moral judgments. Thucydides, after all, was there. We know next to nothing about the Peloponnesian War that he did not. He knew a great deal about the Peloponnesian War that did not make it into his book.

Actually, we do know one important, big thing about the Classical Greek world that Thucydides did not know (and that, strangely, Kagan appears not to know). There is a deep, powerful sense in which time was on the side of Athens and its empire. Each decade that the war between Sparta and Athens remained cold rather than hot was a decade for metics and immigrants to the Geek world to think whether they wanted to live in Spartan-allied oligarchies dominated by a closed guild of landowners, or in Athenian-allied places where the (male, citizen) demos ruled and where there was much more growth, commerce, trade, and opportunity. Each decade that the war between Sparta and Athens remained cold rather than hot was a decade for rich Spartiates to marry the daughters of other rich Spartiates, and for poor Spartiates to find that they could no longer afford the Spartan lifestyle and so drop out of the citizen body--and of the main line of battle. By 350 Sparta could--this is a guess--put only one-fifth as many professional hoplite soldiers into the line of battle as it could have two centuries before. A policy of postponing the showdown--even if one of "apparently limitless forbearance"--was a policy of greatly increasing the relative strength of the Athenian side.

But what is most disappointing to Mendelsohn (and most disappointing to me) is that he finds Kagan's Peloponnesian War to be a very different and much less interesting thing than Thucydides's Peloponnesian War (or, I would argue, than the Peloponnesian War as it really happened). The lessons from Kagan's Peloponnesian War appear to be that war against Bad Guys calls for Harsh Measures and Total Mobilization.

By contrast, Mendelsohn writes, the lessons from Thucydides's Peloponnesian War:

...are no different from the ones that the tragic playwrights teach: that the arrogant self can becom the abject Other; that failure to bend, to negotiate, inevitably results in terrible fracture; that, because we are only human, our knowledge is merely knowingness, our vision partial rather than whole, and we must tread carefully in the world...

But let's give Thucydides himself the last word:

[W]ar... proves a rough master that brings most men's characters to a level with their fortunes... the cunning of their enterprises and the atrocity of their reprisals. Words had to change their ordinary meaning.... Reckless audacity came to be considered the courage of a loyal ally; prudent hesitation, specious cowardice; moderation was held to be a cloak for unmanliness; ability to see all sides of a question, inaptness to act on any. Frantic violence became the attribute of manliness; cautious plotting, a justifiable means of self-defence. The advocate of extreme measures was always trustworthy; his opponent a man to be suspected. To succeed in a plot was to have a shrewd head, to divine a plot a still shrewder; but to try to provide against having to do either was to break up your party and to be afraid of your adversaries.... The fair proposals of an adversary were met with jealous precautions... not with a generous confidence. Revenge also was held of more account than self-preservation. Oaths of reconciliation... only held good so long as no other weapon was at hand; but when opportunity offered, he who first ventured to seize it... thought this perfidious vengeance sweeter than an open one, since... success by treachery won him the palm of superior intelligence.... The leaders in the cities... on the one side with the cry of political equality... on the other of a moderate aristocracy... [recoiled] from no means in their struggles... in their acts of vengeance they went to even greater lengths, not stopping at what justice or the good of the state demanded, but making the party caprice of the moment their only standard.... Thus every form of iniquity took root in the Hellenic countries...

Convenient Source of Economic Growth Estimates

Kurt Schuler writes:

You should put up a link to the Penn World Tables on the Online Resources page of your Web site. You can find the tables at at the University of Pennsylvania:

http://pwt.econ.upenn.edu/

or at the University of Toronto, which I sometimes use because its site has an easy format for downloading individual series:

http://datacentre2.chass.utoronto.ca/pwt/

...the Penn World Tables are the best free dataset I know for fairly long-term international comparisons.

Yours truly,

Kurt Schuler

He is, of course, completely correct.

Is It Just Me?

Is it just me, or is there something very, very wrong about Arthur Miller going to Cuba without having bothered to think about what he would want to say to Cuba's writers? What he did seems a profound and deep betrayal of intellectual solidarity:

Arthur Miller: A meeting had been arranged the previous afternoon, no doubt through the writers union, with some fifty or so Cuban writers. Initially the organizers had expected only a few dozen on such short notice, but they had had to find a larger space when this crowd showed up. We encountered a rather barren auditorium, a speaker's platform and an odd quietness for so large a crowd. What to make of their silence? I couldn't help being reminded of the fifties, when the question hanging over any such gathering was whether it was being observed and recorded by the FBI.

It was hard to tell whether [William] Styron's or my work was known to this audience, almost all of them men. In any case, with the introductions finished, Styron briefly described his novels as I did my plays, and questions were invited. One man stood and asked, "Why have you come here?"

Put so candidly, the question threw my mind back to Eastern Europe decades ago; there too it was inconceivable that such a meeting could have no political purpose. Styron and I were both rather stumped. I finally said that we were simply curious about Cuba and were opposed to her isolation and thought a short visit might teach us something. "But what is your message?" the man persisted. We had none, we were now embarrassed to admit. Still, as we broke up a number of them came up to shake hands and wordlessly express a sort of solidarity with us, or so I supposed. But in some of them there was also suspicion, I thought, if not outright, if suppressed, hostility to us for failing to bring a message that would offer some hope against their isolation. But back to the dinner with Fidel... [ellipsis in original]

There were fantastic shrimp and spectacular pork, dream pork, Cubans being famous for their pork. (Castro, however, ate greens, intending to live forever.) Our group sat intermixed with Cubans, government ministers and associates, several of them women. Styron sat alongside Castro and his fabulous instantaneous interpreter, a woman who had been in this work the past quarter-century. Surrounding the table was a plastic tropical garden beautifully lit, possibly to suggest the sort of jungle from which the Revolution had sprung.

It quickly became clear that instead of a conversation, we were to have what seemed a rather formalized set of approaches to various ideas springing from the Leader's mind...

Of course, intellectual solidarity has always been a myth. On the one side are those who believe that their words should somehow, somewhy be able to change the world for the better. On the other side--well, the pork is truly excellent! And the shrimp too!

Why Oh Why Can't We Have a Better Press Corps? Part CCCCLXXXI

Sisyphus Shrugged bangs its head against the wall as it finds the Washington Post editorial page engaged in a not-atyical act of shallow stupidity:

Sisyphus Shrugged: A case in point for why silly ol' regulations are beside the point: the Washington Post, on the ephedra ban.

But while the ban was a wise and necessary move, market forces had already largely worked in the case of ephedra. The combination of state laws banning or restricting ephedra sales, the threat of costly lawsuits, and bad publicity have all but killed the ephedra market...

Me personally, I'm perfectly OK with defining aggressive government regulation and a healthy tort system as Market Forces, but I'm not all that sure the nice folks at the editorial page do.

The Ongoing Flame-Out of David Brooks

Kevin Drum's jaw drops to the floor as he views the ongoing total flame-out of David Brooks:

Calpundit: OK, let's get this out of the way: I was mistaken to ever think that David Brooks was anything other than a hack. I could swear that I've read good stuff by him in the past, but I guess not. I was wrong, wrong, wrong.

His column in the New York Times today is the latest offering in a developing conservative meme: neoconservatives, he says, don't really exist, they don't have any influence if they do exist, and "neocon" is just a codeword for "Jew" in any case. This argument is so deeply dishonest and morally offensive that it's hard to even know where to begin with it.... [W]hy would Brooks write this stuff? And why is the Wurlitzer being cranked up to pretend that "neocons" (complete with scare quotes) are little more than a figment of liberal imaginations? What's the agenda here?

A Disappointing "New Factory Orders" Number

A disappointing "new factory orders" number for November:

New Orders for Factory Goods Sank in Nov: The fall reflected a revised 2.5 percent drop in orders for expensive, long-lasting durable goods and a 0.2 percent drop in goods expected to last less than three years. The report showed a decline in orders in several categories in November. Demand for transportation equipment tumbled 1.3 percent and orders for computers and electronic products plunged 10.7 percent. Orders of non-defense capital goods excluding aircraft, which economists use to gauge business spending plans, fell 5.1 percent.

One bright spot in the report was machinery orders, which climbed 2.1 percent. Excluding defense, orders were down 1.3 percent and excluding transportation, orders fell 1.5 percent...

The Slime Machine at Work Again

Daniel Drezner screams and leaps, fangs bared, for Paul Krugman's jugular. However, he trips over a tree root and falls off a cliff:

Daniel Drezner: CORRECTING KRUGMAN.... Krugman's assertion here is that the number of discouraged workers ("those who have given up looking for work") plus the number of part-time workers who wish they were full-time ("only marginally employed") are unusually high by historical standards.... [But] the percentage of discouraged workers... was much higher a decade ago.... [T]he percentage of Americans who are part-time workers but would prefer full-time... was higher a decade ago.... Krugman is either wrong or has a different definition of "unusual" than the rest of the English-speaking world. Distortions like this one...

There are, of course, two big problems with Drezner's "argument." When Krugman writes "an unusually large number of people have given up looking for work" he is tracking the flow of people who used to be employed into out-of-the-labor force status, and is referring to a much larger category of people who have dropped out of the labor force over the past three years than just the Bureau of Labor Statistics's "Discouraged Workers" category. When Krugman writes "many of those who say they have jobs seem to be only marginally employed" he is referring to a large group that has nothing at all to do with those who are working part-time for economic reasons. He is referring to those who tell the BLS household survey interviewers that they are working but for whom there is no corresponding employer telling the BLS payroll survey that they have somebody working for them

Does Krugman say that those who have "given up looking for work" are in the BLS "discouraged worker" category? No. Does Krugman say the words "discouraged workers" at all? No. Does Krugman say that those "marginally attached" are in the BLS "part-time for economic reasons" category? No. Does Krugman say the words "part-time for economic reasons" at all? No.

It is true that anybody who has been watching the labor market over the past three years--and seen the remarkably large fall in employment coupled with the remarkably small rise in the unemployment rate--will know that what Paul Krugman wrote was completely correct: this recession looks small as measured by the rise in unemployment, but it looks large as measured by the fall in employment as a share of the population or the duration of unemployment. Anybody who has been watching will know that Daniel Drezner's fangs-bared attack is fake and loony.

But the numbers of those who watch the flow of data out of the BLS are small. And the numbers of those who will read Drezner, and conclude that Krugman has written something wrong or questionable, are large.

Misrepresent somebody as saying something they did not say. Attack them for it. And then accuse them of "distortions." Way to go, Dan: you're now at the loony hack level. You ought to at least try to be better than that.

What Krugman did write:

Paul Krugman: An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years...

Me, from last December:

Look at what has happened to the U.S. employment-to-population ratio--estimated from the BLS household survey--over the past half century:

The employment-to-population ratio falls in each recessionary period.* Back in the old days, the rule of thumb was that the rise in the unemployment rate (in percentage points) was about five-thirds as large as the fall in the employment-to-population ratio (in percentage points). Thus the 1973-1945 recession saw the unemployment rate rise by 4.4% while the employment-to-population ratio fell by 2.4%. The 1979-1983 recessionary period saw the unemployment rate rise by 5.2% while the employment-to-population ratio fell by 3.1%.

But in the most recent 2000-2003 recessionary period, the employment-to-population ratio has fallen by 2.7% while the unemployment rate has only risen by 2.1%. The old pattern would have led us to expect such a fall in the employment-to-population ratio to have been accompanied by a rise in the unemployment rate of not 2.1% but 4.5%. More than half of the additional people who would have reported themselves as unemployed in a previous big recessionary period... aren't. They're reporting themselves as out of the labor force instead.

Why? What's happened to change the relationship between changes in employment and changes in the labor force? And what does it mean? (It's not the self-employed: this is from the household survey.)

It might be the sheer length of the downturn: a longer downturn may induce more people to give up looking, and produce more discouraged workers out of the labor force. But the 1979-1983 period was also prolonged, and although I remember Larry Summers and Olivier Blanchard worrying about how prolonged employment declines might discourage workers and produce a version of the European structural employment disease, it didn't.

It is a mystery to me.

---

*The employment-to-population ratio also rises over time as discrimination against women is severely reduced, and women find jobs outside the home in amazing numbers in the 1970s, the 1980s, and the 1990s.

UPDATE: Daniel Drezner states that when he wrote that "[Paul] Krugman is either wrong or has a different definition of "unusual" than the rest of the English-speaking world. Distortions like this one could explain parodies like this one..." he did not intend to:

1. Provide an unfavorable description of Krugman
2. Impugn Krugman's motives
3. Convey the impression that Krugman lied
4. Or ascribe any form of malign intent to Krugman

But intended only to state that he believed Krugman to be wrong.

The Gibbon-o-Matic

The Gibbon-o-Matic:

Gibbon-o-Matic!: In the second century of the Christian era, the Empire of Rome comprehended the fairest part of the earth, and the most civilised portion of mankind.* The frontiers of that extensive monarchy were guarded by ancient renown and disciplined valour. The gentle but powerful influence of laws and manners had gradually cemented the union of the provinces. Their peaceful inhabitants enjoyed and abused the advantages of wealth and luxury. The image of a free constitution was preserved with decent reverence: the Roman senate appeared to possess the sovereign authority, and devolved on the emperors all the executive powers of government. During a happy period (A.D. 98-180) of more than fourscore years, the public administration was conducted by the virtue and abilities of Nerva, Trajan, Hadrian, and the two Antonines. It is the design of this, and of the two succeeding chapters, to describe the prosperous condition of their empire; and afterwards, from the death of Marcus Antoninus, to deduce the most important circumstances of its decline and fall; a revolution which will ever be remembered, and is still felt by the nations of the earth.

*I think that at the time the Han people of the Central Country would have disagreed.

Department of "Huh?"

The Federal Reserve's Ben Bernanke says something I really do not understand:

Forbes.com: Monetary policy not impotent at zero rates-Fed Bernanke: Federal Reserve Board Governor Ben Bernanke said on Saturday the U.S. central bank had tools other than interest rates that would enable it to boost the economy, even if it had pushed rates to zero. "The Federal Reserve has other ways of expanding the economy other than lowering the federal funds rate, by expanding the money supply for example," Bernanke said in response to a question at a the annual meeting of the American Economic Association. "I remain convinced that monetary policy can still be very constructive even if interest rates are zero," he said...

This I do not understand. When short-term interest rates are zero, expanding the money supply--buying back short-term government bonds for cash--means that the government is inducing the private sector to swap one short-term zero-interest asset--Treasury bills--for another short-term zero-interest asset--cash. Its as if Bernanke were claiming that mass transit ridership was going to rise because the transit authority was going to replace its red buses with blue buses.

When short-term interest rates aren't zero, of course, Treasury bills and cash have very different characteristics. But that's not the hypothetical Bernanke was answering.

Spirit Is Down!

The Mars Rover Spirit appears to have successfully landed:

Mars Exploration Rover Mission: The Mission: About 8:29 pm PST, one of the most challenging aspects of the mission begins. In only six minutes, the spacecraft will slow down from 12,000 to 0 miles per hour...

Just think of what we could have done and would now know if we had had the Space Shuttle's budget to spend on something worthwhile for the past three decades. Everyone working for NASA has a lot of apologizing to do to Galileo Galilee and Isaac Newton. ("You spent how much money? On what!?!?")

Note: Statistical Discrepancies

In the second quarter of 1994 some $39.7 billion more worth of goods and services were sold to customers than were earned as income--an amount equal to 2.4% of the then-ongoing flow of national income. This cannot be, of course: the National Income and Product Accounts are set up to enforce the identity that the money paid for everything sold becomes somebody's income, that income is equal to expenditure. But the NIPA numbers are estimates, and fuzzy estimates at that--this 2.4% of GDP in 1994:II was thus a statistical discrepancy (and a very unusually large number for this discrepancy.

By the first quarter of 2000 this statistical discrepancy had swung around to be -$42.9 billion: incomes were some $42.9 billion--some 2.0% of national income--higher that quarter than the value of goods and services sold. This large swing in the statistical discrepancy matters for our picture of growth in the late 1990s: according to income measures, the U.S. economic growth rate from 1994:II to 2000:I was some 0.8% per year higher than according to output or expenditure measures.

Since 2000, the statistical discrepancy has swung back. This latest quarter--the third quarter of 2003--the statistical discrepancy was $13.5 billion, or 0.6% of national income: some $13.5 billion more of goods and services were produced and sold than should have been given how much accrued in incomes. This means that over the past three and a half years, economic growth as measured by incomes has been at a rate 0.7% per year slower than economic growth as measured by product and expenditure.

Our standard measures of productivity are based on the "product" side of the NIPA. According to our standard measures, American nonfarm business labor productivity growth averaged 2.1% per year from 1994:II to 2000:I during the boom of the late 1990s, and then accelerated to a remarkable and astonishing rate of 4.0% per year from 2000:I to 2003:III--in spite of the fact that a century and a half of business cycle experience had taught us that times of recession and slack demand are times of slow, not rapid, productivity growth.

But suppose the "income" side is a more accurate measure than the "product" side. If we add the statistical discrepancy in and calculate adjusted productivity numbers, they show an average growth rate of 2.9% per year from 1994:II to 2000:I during the boom of the late 1990s and then 3.3% per year from 2000:I to 2003:III. Productivity growth doesn't slow down during the recession, but we are not left searching for a cause of an extraordinary productivity boom just at the time when firms are cutting back shifts and making less intensive use of capital either.

The problem is that I'm not qualified to say whether the "income" and the "product" side measures are superior. It does, however, seem to me that the income-side measures give a picture of American economic history over the last decade that is more sensible and less weird.

Still Dumbfounded

I'm still dumbfounded at how sharp the fall in the employment-to-population ratio has been...

The Median Duration of Unemployment

Half of all the unemployed have been unemployed for more than X weeks:

The number of unemployed at any point in time is the product of (a) how many people become unemployed in a typical week times (b) how long they stay unemployed. This statistic is a measure of how lousy the labor market feels to those of us who have lost their jobs (or who are just entering the labor force and starting to search).

Notes: Elise Gould on the Household and Payroll Surveys

The EPI's Elise Gould writes about the differences between the household and the payroll surveys of employment:

Measuring employment since the recovery: ...Some have speculated that the household survey provides a better indication of the trend in employment at and around turning points in the business cycle. These critics question whether the payroll survey accurately and fully picks up new businesses, known as "firm births." This problem may be especially exacerbated when measuring employment in a recovery. In its estimates of employment, the BLS addresses the problem of firm births and deaths using past history and various estimation techniques to provide an adjustment factor to the current series. In addition, updates to the payroll survey are conducted annually to adjust for any discrepancies....

However, the BLS announced in October that its analysis of detailed tax records through March 2003 would result in a downward revision of total nonfarm payroll employment by approximately 145,000 for the March 2003 reference month (BLS 2003b).

A second critique of the payroll survey is that it leaves out self-employment. However, because the household survey employment reports do not distinguish between the self-employed who are gainfully employed and those who are searching for work--and because the numbers of self-employed nonearners would be expected to increase during tough economic times--the omission of self-employment numbers from the payroll survey may more accurately reflect overall employment trends.

The BLS periodically revises the household survey to account for new Census Bureau population estimates. In the last four years, there have been two population adjustments: one in January 2000 and one in January 2003. The shift in January 2000 was based on the new population estimates from the decennial Census and added about 1.5 million persons employed. The shift in January 2003, based on new estimates of faster than expected population growth since the 2000 Census, added another 576,000. At each shift, a discontinuity occurs in the series, reflective of only new population estimates and not an actual jump in employment. To make valid comparisons with the numbers since January 2003, previous employment numbers must be adjusted upward to account for new population estimates. The BLS warns that use of the household survey employment numbers without making these adjustments makes any estimates of trends since January 2003 not comparable with those for earlier months (Bowler et al. 2003)...

Nevertheless, enormous differences between the two surveys remain. Even after adjusting the household survey by "subtract[ing] agriculture, self-employment, private households, unpaid family workers, and those on unpaid leave, and add[ing] multiple job holders... seasonally adjusted," the payroll survey shows a 2.4 million fall in the number of jobs since March 2001, while the [fully adjusted] household survey shows a fall of only 0.2 million. This gap is not due to statistical sampling variability: workers are giving different answers to those conducting the household survey than employers are giving to those conducting the payroll survey: a lot of workers think they work (or say they work) for employers, but the employers don't think the workers work for them.

A look back at the longer time series tells us that (i) the ratio of payroll to household employment moves around a lot (and not just because of discontinuous changes in the estimated population used for the household survey, as happens--for example--at the very start of 2000), and (ii) there is no strong and obvious reason for this ratio to move around so much.

A better sociologist than I could probably write an interesting article on just how it can be that people claim to work for employers who do not claim to employ them, and how the changing numbers of such people reflect both the material base and the cultural superstructure of society.

What Is the Point of the Republican Party?

David Brooks argues that the Republican Party has no reason to exist--save to channel money to favored businessmen and their lobbyist friends:

Op-Ed Columnist: Running on Reform: ...The G.O.P. used to have a governing philosophy: reducing the size of the state.... But reducing the size of government can no longer be Republicans' animating principle... Republicans have no credibility on this subject.... Now Republicans control everything, and over the past three years the size of government has still increased.... Republicans have learned through hard experiences that most Americans do not actually want their government sharply cut....

With its old governing philosophy obsolete, the Republican Party is adrift domestically.... Meanwhile, corporate lobbyists have jumped into the vacuum. If principles aren't going to guide the Republican Party, the opportunists are happy to take control...

The 2004 Bruce Sterling State of the World Address

The 2004 Bruce Sterling State of the World Address:

Bruce Sterling: In the case of the American polity, the manual is supposed to be the Constitution. It gets kinda spooky when power-players in the USA decide to no longer read it.

I'm very interested indeed in smart-mobs, but a mob isn't a democracy, no matter how much hardware its members may be carrying or how clever they get at deploying it. Woodstock is unexpected, delightful and surprising, because nobody expected it and there are huge raw energies there. Altamont comes to grief. It's like a principle.

Burning Man doesn't come to grief, but Burning Man has a cabal of hardened, experienced cadres, it only lasts three days, and it's swarming with cops. Burning Man is organization disguised as licence. If bikers started beating and knifing naked people at Burning Man they'd be jumped on by Danger Rangers and Nevada cops with guns. Burning Man is a party, not a city-state.

I'm gonna believe in the Internet as a true-blue "platform for democracy" when a bunch of people go start some new settlement, using the Internet first, and then a town *grows up around that.* It's like the apotheosis of the "smart house," which isn't a normal house with some wiring and chips strung through it, but a place specifically built to shelter the network.

A functional polity needs a social infrastructure. Government requires things like separation of powers, balance of powers, consent of the governed, rules of order for debate. It needs civility. Its institutions have to command public credibility. It helps a lot if they've been around a while and their workings are open and obvious. The Internet has been around a while but it's conspicuously lacking in those other things.

I'm glad that major candidates are understanding that the web is around, and I'm all for Thomas Paine getting a few sentiments off his chest. Radio used to have much the same political role, when it was shiny new and sexy in the 1930s. Radio is technology, not a political panacea. Roosevelt was great at radio, but so were Goebbels, Huey Long, Father Coughlin and Mussolini. Those particular struggles weren't resolved by building better vacuum tubes...

Time Considered as a Helix of Semiprecious Stones Department

Patrick Nielsen Hayden lays a geas upon me. I must--finally--read Samuel R. Delaney's Dhalgren:

Making Light: Varieties of insanity known to affect authors: ...And speaking of Dhalgren, for all the crap that novel took inside the SF field, it sold nearly a million copies over a period of ten years. That isn't a flash in the pan of literary faddism. It's word of mouth--people who love it telling other people about it, who turn out to love it too.

The Second Gilded Age

Paul Krugman writes:

Op-Ed Columnist: Our So-Called Boom: ...An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years.

So if jobs are scarce and wages are flat, who's benefiting from the economy's expansion? The direct gains are going largely to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. Indirectly, that means that gains are going to stockholders, who are the ultimate owners of corporate profits. (That is, if the gains don't go to self-dealing executives, but let's save that topic for another day.)

Well, so what? Aren't we well on our way toward becoming what the administration and its reliable defenders call an "ownership society," in which everyone shares in stock market gains? Um, no. It's true that slightly more than half of American families participate in the stock market, either directly or through investment accounts. But most families own at most a few thousand dollars' worth of stocks.

A good indicator of the share of increased profits that goes to different income groups is the Congressional Budget Office's estimate of the share of the corporate profits tax that falls, indirectly, on those groups. According to the most recent estimate, only 8 percent of corporate taxes were paid by the poorest 60 percent of families, while 67 percent were paid by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class warfare!" the right shouts.) So a recovery that boosts profits but not wages delivers the bulk of its benefits to a small, affluent minority.

The bottom line, then, is that for most Americans, current economic growth is a form of reality TV, something interesting that is, however, happening to other people. This may change if serious job creation ever kicks in, but it hasn't so far...

The Second Gilded Age

The Economic Policy Institute points out that while real GDP grew 3% in the second half of 2003, real wages did not grow at all.