Brad DeLong's Semi-Daily Journal: A Weblog

"...won't take the deficit seriously until financial markets force them to."

We knew that already. The Judd Gregg argument is another plea that we believe leopards change their spots, that first terms are all about getting re-elected, but that second terms are all about civic-minded public service, reverting to fact and rationality after making crap up for four years.

Being ruled by people who won't take the basics of good governance seriously until something or other forces them to is...what does one say...is just what we all went to the polls to correct. We failed.

Bush wants to shift from income to consumption based taxation. That is very clear. He very likely doesn't really understand what that means, not in the macroeconomic sense, the fiscal sense, nor the political sense. What matters, though, is that somebody has put the idea into his head, and he knows that he can serve his class well through such a move. Middle class, look out.

Opening up a major reform of the tax system, when lobbyists have strong reason to believe they will get most of what they show up to demand, is a terrible idea. First, kill the lobbyists, then reform the tax code.

http://www.johnkay.com/political/358

makes a pretty cogent case why we should welcome a Bush victory.

If we are genuinely in global deflation, then the sort of radical expansionist policies now being pursued are a good idea. So what if we don't call it Keynesianism? That is what it is.

Irony of ironies if Bush is right, but for the wrong reasons.

At least we get to keep Laura Tyson for a bit longer ;-).

(remove the (at) to reply by email)

Brad,

Sorry you won't be there to help. Glad you'll still be here, though.

If people like Murray want this administration to take the deficit seriously, they are going to have to fight them tooth and nail. W Bush is not on Murray's side. The disconnect between Bush policies and what his supporters believe to be Bush policy is mind boggling.

Spend a couple of nights watching religious broadcasting. They will say that if you believe, you will be financially blessed and those that are financially blessed have been so blessed by the Lord. You will be told to trust in the Lord and your future will be bright. It ain't reality based, folks.

Two thoughts:

1. The notion that Karl Rove has lost his client doesn't wash. I believe it's clear that the Roverian wing of the party has as its objective NOT gaining working control of the levers of government, but complete elimination of the Democratic Party as an effective opposition. ALL policy issues will be determined from a basis of what can be done to run pretty much every last democrat to ground.

2. The deficit does have legs as a moral issue. If memory serves, when the Moral Majority and Christian Coalition first surfaced as effective political bodies in the 80s, the deficit was one of the issues identified in the first voter guides as a reason for Christians to vote against Democrats. Although I believe there was and has been(obviously) a great deal of cynacism at work in picking issues for the guides, I also think the moral argument still resonates with that audience. Given the credibility Democrats now, arguably, have on the deficit, I think this can be used to our advantage.

OK, a third, only somewhat related thought:

Every election cycle, lots of time and effort gets invested in opposition research. We expanded into the think tank/message management arena this cycle with such groups as American Progress, but I think we need more. I think we need to consider establishing a military-style "Red Team" approach. What I mean is a group devoted to establishing strategies, plans and tactics as though they were the "bad guys." It seems, like it does for the military, such an excercise might get us somewhat ahead of the game in terms of dealing with what they're planning and doing, not with what they've done.

We are not robbing our children and grandchildren. We are robbing the children, grandchildren, and retirement savings of the Asians whose governments manipulate the dollar exchange rates to gain or preserve their control strategic manufacturing industries. Since they have no collateral for their loans to us, and there is no way for them to foreclose on us, this is, at least for now, completely painless for us.

Modern financial "technology" has enabled governments to conceal massive loan losses in their national financial systems. Some estimate that loan losses in Japan and China amount to are 30% or even more of principal. But no one calla in the depositors and tells them, "We've lost a third of your money, to please give us you deposit book so we can adjust your balance to reflect that." As long as inflows of workers' savings remain high enough relative to retirees' withdrawals, the fiction can be sustained.

You ought to go read General Glut today. He passes out some home truths that all Dems should hear.

Somehow, it's hard to take Wessel seriously when this is his bio on the WSJ.com:
"[Wessel] is the co-author, with fellow Journal reporter Bob Davis, of "Prosperity: The Coming 20-Year Boom and What It Means to You" (Random House/Times Books, 1998), which argued that the next 20 years will be better for the American middle class than the previous 20 years."

The first 5 years of 'the next 20 years', haven't exactly been gangbusters.

I thought one of the original goals of running up the deficits, back in Reagan's day at least, was to force this very issue. Once there is very little room to manuveur, you can slash spending because there is "no choice".

Yes, but at this point, you would have to slash either social security and medicare, or cut substantially all nonentitelement/nondefense/nonsecurity spending -- all of it.

While I'd like to see the Republicans tarred as the party that cut services for old, sick people to give tax cuts to the wealthy, I think they'd rather be reelected.

Deficits, ahoy.

Brad,

You made a good start when you started talking about "tax cuts" as "tax shifts."

What the fiscal realists really need to do is start referring to the "federal deficit" as "tax raises on our children."

E.g., "In 2004, George W. Bush raised taxes on our children by 421 billion dollars."

1) I am skeptical about the moderation that we can expect in a second Bush term (though I would love to believe it). The idea that Bush will look to his place in history and tack back to a more progressive path strikes me as naive. After all, there are more Bushes to come, and 2005-09 may be the chance to knock out the non-fundamentalist forces for decades to come.

2) "We are robbing our children ... and enjoying the benefits of more government spending ... today." Perhaps the saddest thing about our deficit spending is that, for most of us, we are seeing remarkably few benefits. If you're an Iraqi who needs a school rebuilt, or a CEO who wants a new vacation hideaway a little higher up the mountain, then, yes, the benefits are clear.

But most Americans are getting very little benefit today, and we're passing a huge burden on to the next generations. Does this make any sense?

1) I am skeptical about the moderation that we can expect in a second Bush term (though I would love to believe it). The idea that Bush will look to his place in history and tack back to a more progressive path strikes me as naive. After all, there are more Bushes to come, and 2005-09 may be the chance to knock out the non-fundamentalist forces for decades to come.

2) "We are robbing our children ... and enjoying the benefits of more government spending ... today." Perhaps the saddest thing about our deficit spending is that, for most of us, we are seeing remarkably few benefits. If you're an Iraqi who needs a school rebuilt, or a CEO who wants a new vacation hideaway a little higher up the mountain, then, yes, the benefits are clear.

But most Americans are getting very little benefit today, and we're passing a huge burden on to the next generations. Does this make any sense?

kharris wrote, "Bush wants to shift from income to consumption based taxation."

Right, but can they realistically do this? DeMint's plan is for 30% (the 23% figure denotes the number you get if you compute the usual income tax way, but 30% is what you get when you compute the usual sales tax way). Some observers claim this includes revenue from all sorts of problematic sources---e.g. the government taxing itself, imputed rent to homeowners, etc. And without those bogus revenues, the rate goes up from 30% to something quite a bit higher. (And...a sales tax as opposed to a VAT is very difficult to administer, or so claim Slemrod and Bakija in _Taxing Ourselves_.)

Then there's the transition costs involved in any consumption tax scheme---people who've saved all their lives under the income tax will be totally screwed.

jm,

Asian holders of Treasuries do not have to continue to hold them. Yes, they could take a loss - in fact, it is very likely to be losses that would induce selling - but that doesn't help us. In the end, we drain off some wealth from abroad if domestic accounts buy back Treasuries at 95 that will eventually mature at par, but the impact on the US would very likely be larger. For one thing, we still hold more of our own debt than does the rest of the world, though by a smaller margin than before. For another, debt issueed in the private sector is priced off of Treasuries. Corporations and households will have to pay higher rates of interest than otherwise would be the case if Asian Treasury holders decide to sell rather than buy (even though Greenspan says it ain't so). The public sector would also face higher borrowing costs if there were suddenly a competing supply of debt in the secondary market. That would mean more drastic changes in public sector activity than if we were to confront the issue before markets force our hand.

1) I am skeptical about the moderation that we can expect in a second Bush term (though I would love to believe it). The idea that Bush will look to his place in history and tack back to a more progressive path strikes me as naive. After all, there are more Bushes to come, and 2005-09 may be the chance to knock out the non-fundamentalist forces for decades to come.

2) "We are robbing our children ... and enjoying the benefits of more government spending ... today." Perhaps the saddest thing about our deficit spending is that, for most of us, we are seeing remarkably few benefits. If you're an Iraqi who needs a school rebuilt, or a CEO who wants a new vacation hideaway a little higher up the mountain, then, yes, the benefits are clear.

But most Americans are getting very little benefit today, and we're passing a huge burden on to the next generations. Does this make any sense?

One of the more interesting things I own is a postcard from my grandmother's stamp collection. It's a perfectly ordinary postcard, except for the twelve million reichmarks of postage stuck to it. When I hold that thing, and think about our administration's seriousness on the deficit, I have to wonder if it's just a coincidence that we have a president who's proud of not being an intellectual, and seems to worry far more about capital than citizens.

And I wonder exactly what sort of America Grover Norquist and his friends intend to build from the rubble. Looking into the shadow cast across the decades by that german postcard, and hearing the newscasts use that code phrase "moral issues", I'm thinking it's a rock that I really, really don't want to see turned over.

Not that I think this is likely yet, but last week it was maybe a 2% probability of a South American style economic meltdown and this week it feels a lot higher.

"An Iraqi who wants his school rebuilt" - err, no,
not really - we're running a $400B+ deficit and
the total spent so far on actual Iraq reconstruction
(rather than CPA overhead and security) is $270M.
If you're an Iraqi who wants to be shot or bombed,
then yes ...

One danger I foresee is that baby boomers and those younger are sold on a consumption tax because then they get all their 401K/IRA payouts TAX-FREE.

But most Americans are getting very little benefit today, and we're passing a huge burden on to the next generations. Does this make any sense?

I'm about to rant here, so please forgive me. This makes sense to the selfish, permanant-revolutionary Baby Boomer generation. Me, me, me. What I personally desire can be projected onto the whole damn world. I can remake the world in my image. The future will thank me!

Regarding the meme that deficits = taxes for our children:

Maybe if you're 80. If you're much younger than that, you'll probably live to see the day when we'll have to pay for the mess we're creating now.

I think that an argument based on tax shifts to our not-so-distant future selves is more persuasive than the moral argument that deficits will be a burden on our children. People in general are out for themselves and would gladly rob the children for a tax cut.

I wonder if Bush and his ilk think the estate tax cut will prevent the deficit from being 'passed on' to our children and grandchildren and great-grandchildren.

You know, I don't think the tax cuts (or shifts, to be proper) were great, but if they really want to stick with them, then spending needs to be reigned in. The problem is, that will never, ever happen, for a few reasons. One of which is that it would require the repeal of the Medicare drug bill; doing that would require the Whitehouse to admit a mistake and/or give up something politically. When does that happen?

I'd really like to know if they are going to do two things: create reality-based, not fantasy-based, budget estimates and fiscal plans, and actually listen to the people who are the experts in their fields. I'm not an economist, so I don't know that much about them, but I doubt the expertise of Greg Mankiw, Harvey Rosen, and Kristin Forbes is in question. The thing is, will anyone listen to them? That's the big problem we experienced in the first term, and now that they got such a huge mandate in the popular vote, I see no reason why they would change.

If you watched the Bush press conference today it was clear that it will be more of the same from him.

Mayb it did not seem important, but he made a change in the press ground rules. Reporters are allowed one question only with no follow up questions.

That sends a clear message that the President will continue to live in his fantasy world and no one is going to bother him with the facts.

We built a prosperous middle class American society from the Roosevelt Administration. Institutions such as Social Security and the GI Bills and Medicare supported and insured this middle class society. Arch conservatives have wished to undo the legacy of the New Deal, and they find the chance now.

I teach 18 year olds economics and nothing makes their eyes glaze over faster than talking about budgets and deficits.

The Bushies are similarly childlike in their outlook. Instant gratification is what they want and they will, like Scarlett O'Hara, worry about everything else "tomorrow".

What to do? Buy euros. It is the reserve currency of the future if the US continues to pump another $2 billion of paper out into the world every working day. Check the graph on the dollar/euro rate - The dollar started to head down the moment it became clear early Wed. morning that Bush had won. His acceptance speech promising to make the tax cuts permanent helped the trend along. It continues now. Non-wild eyed observers like Fred Bergsten estimate a 30% adjustment in the dollar is needed, and more if we wait for a crisis to change our policies.

They are waiting for a crisis, but we dont need to. Buy euros. You wont be sorry.

Anyone who thinks that bush is going to change anything in the second term has left the reality-based community. Why should he? His permanent contribution to the presidency will be "don't negotiate against yourself." Assisted by a complaint congress, he has no interest in fiscal discipline and won't, as the prof notes, until market discipline forces him to.

Which takes me back to the only silver lining i can draw from tuesday: i have no doubt that there will be 3 major crises in the next 4 years. There will a market-driven fiscal crisis; there will be an iraq disaster, and there will be another jihadist terrorist attack on american soil.

had john kerry been in office, there wouldn't be another democrat elected president for 20-30 years, minimum; perhaps it would have meant the end of the democratic party.

george bush, of course, will continue to be enabled when these crises hit, but it only required 100,000 voters to think differently in ohio for him to lose, and i don't think that denial can continue indefinitely....

Above all, Brad DeLong, I and so many others are grateful for you, for
your wonderful teaching, your wonderful conversation, you beloved
decency.

Bush, Rove, Delay, Norquist, et al. do not think about sound policy. They don't care about sound policy. They think only about politics. Norquist has a picture of Lenin in his living room. He is an advocate of "worse is better" I think that they want to create enough of a crisis so that they can eliminate Social Security and Medicare entirely. Of course, you can't prove that.

No sort of "sound policy" argument will work. The moral one might.

Oh dear, how my lines were typed was not that way. And, at times, I know how to spell "your."

http://www.nytimes.com/2004/11/04/business/worldbusiness/04outsource.html

An Industry in India Cheers Bush's Victory
By SARITHA RAI

BANGALORE, India - India's outsourcing companies were jubilant Wednesday that the elections in the United States will return President Bush to office.

"This is great news for the offshoring industry," said Nandan M. Nilekani, chief executive of Infosys Technologies, a software services company. The trend toward outsourcing will now become even more inexorable, Mr. Nilekani said.

Offshore outsourcing, or the moving of work from the United States to low-cost centers like India, was an issue in the presidential election. The Democratic candidate, Senator John Kerry, blamed Mr. Bush and outsourcing for the loss of thousands of American jobs.

Mr. Bush, in contrast, was largely silent on the issue. But members of his team, among them N. Gregory Mankiw, the chief economic adviser, and Treasury Secretary John W. Snow, have both defended outsourcing as another form of free trade.

Mr. Kerry referred to ''Benedict Arnold companies and C.E.O.'s'' that sent jobs overseas. He promised that as president he would end tax deferrals for companies that send work abroad.

The tone of some campaign comments criticizing outsourcing was noted with some concern in India. The Times of India, the country's leading newspaper, called outsourcing the "swear word" of the 2004 elections. Thousands of workers in India's technology centers like Bangalore and Hyderabad closely followed the campaign. India's outsourcing industry employs over 800,000.

For more than a decade now, leading Indian outsourcing companies like Infosys Technologies and Wipro have written software applications and done back-office work for top American corporations including General Electric and Citigroup. The work can be done more cheaply here, where skilled labor is inexpensive and plentiful. The leading outsourcing companies earn as much as two-thirds of their revenue from customers from the United States.

India's software and back-office services industry posted $12.5 billion in export revenues in the year ended in March, a 30 percent rise over the previous year as global demand for its services grew.

News that Mr. Kerry had conceded the election to Mr. Bush was greeted with joy in the industry. "We are very happy that Bush is back," said Kiran S. Karnik, president of the industry group Nasscom, or National Association of Software and Service Companies.

"The president's track record has been of recognizing the advantages of free trade," Mr. Karnik said.

Mr. Bush's re-election will bring out the latent demand for outsourcing and lead to more offshoring announcements by companies, he said.

"Some corporations have been cautious about signing or announcing deals in the last few months," he said, adding, "Now they will no longer hold back."

This is a crew that wants to crush the left so badly that they're willing to destroy the country in order to 'save' it from us.

Remember that the old Congress comes back soon to raise the debt ceiling. If we want any hope of fiscal moderation in the next four years, this is our only chance: we have to filibuster the increase in the debt ceiling. I doubt the filibuster will hold, but we have to show that some people still care about deficits.

Ravi wrote, "...we have to filibuster the increase in the debt ceiling."

That's a silly suggestion.

http://www.nytimes.com/2004/11/04/business/04bizreact.html?

After the Voting: What May Lie Ahead for Business in America

WALL STREET
For Corporations, Their Kind of Guy

For Wall Street firms, a second Bush term represents a lush dividend on the millions that their chief executives began raising for the president in the early days of his first term. Led by Morgan Stanley and Merrill Lynch, executives on the Street embraced the supply-side policies of President Bush - underscored by sweeping cuts in capital gains and dividend taxes - that brought the most pro-Wall Street moves since Ronald Reagan began cutting taxes in 1981.

Expectations are rife that the president's economic platform will be even better for business in his second term as he pushes for such initiatives as private Social Security accounts and continued emphasis on lower taxes.

"Sure there is a quid pro quo," said Mallory Factor, a merchant banker and fund-raiser for the president. "It's a pro-growth economy, lower taxes and less regulation. The market's reaction speaks for itself."

Wall Street's full-throated support for President Bush comes despite a certain coolness that the president has had for the Street. He is the first Republican president since Dwight D. Eisenhower not to have a Treasury secretary with a Wall Street pedigree, and in public speeches he has been quick to blame the excesses of the stock market boom and bust for the mini-recession he inherited in his first term.

Wall Street has remained a vigorous backer all the same. Four out of the top contributors to the president's campaign hail from Wall Street - Morgan Stanley, Merrill Lynch, UBS and Goldman raised close to $2 million among them.

But analysts warn that Mr. Bush's market-friendly tax policies will do little to lift Wall Street profits if fears of a growing budget deficit result in a sustained rise in interest rates. That, in turn, could result in lower earnings for Wall Street firms as the long bull market in bonds finally recedes. Wall Street firms have made billions in trading bonds since the collapse of the stock market in 2001.

For the time being, though, Wall Street firms are mostly applauding a second term; they expect that the temporary cuts in the capital gains and dividend taxes of Mr. Bush's first term will now be made permanent. Analysts also foresee merger and acquisition activity to be more robust under Mr. Bush than it would have been under John Kerry, given the Bush administration's tendency not to interfere with large corporate mergers.

"There is a relief that this is over," said Frank Fernandez, the chief economist for the Securities Industry Association, the industry lobby. "This administration has a good track record on pro-investment policies. We know where they stand." -- LANDON THOMAS JR.

No, I regret to opine, a moral appeal will not work. Nothing will, except the election we just lost.

1. If you read the excerpt again, Bush explicitly rejected a moral argument according to Petersen's account. The people Bush actually even listens to is few, and probably growing fewer as we speak. He already knows what he thinks is moral, and it is only your job to nod your head or begone.

2. Their morality, to the extent it is identifiable, is based on institutionalizing fundamentalist Christian "values" and fully defeating their opposition even more than they have already achieved. It has nothing to with rational economics or an interest in moral arguments about economic consequences. Please understand that they do not fear widespread destruction any more than Mohammed Atta feared death in advancing his political goals. They see destruction and chaos as an opportunity to remake the aftermath in their image.

3. Think of sports. Moral arguments are irrelevent, it is solely a matter of victory and achieving of a goal. Sound like a stupid, illogical comparison? It is, but you can bet it has crossed Shrub's mind more than anything Petersen or anyone else has to say: win, win, win. And now he personally has nothing to lose. Why presume he possesses an ability to evaluate morality in terms of future consequences? I see no evidence for that. Quite the opposite.

4. Think of the mineral composition of Pluto's north pole. It has about the same relevence to their imminent economic policies as any rational or moral suasion. If they cared, the numbers would already be enough. They. Don't. Care.

5. And if the world goes to Hell, guess what? At least he is saved and blessed by who matters: his personal Saviour and philosopher/economist extraordinaire: Jesus H. Christ.

I don't mean to be disagreeable, but the idea that Bush will respond to moral arguments is just impossible for me. He won't even understand them. Nor will he try to. He will only reject anything that disputes his pre-existing certainty.

It is really time for people to discard all illusions and accept things in terms of survival and preservation, not place any hope in some newfound sanity from this regime which has mastered the art of winning, unfettered by any actual competence at (or interest in) wise governance.

/rant

>>The idea that Bush will look to his place in history and tack back to a more progressive path strikes me as naive.

I agree. I think Bush does care about his place in history: He wants to be known as the Republican president who wiped out the Democratic opposition. I think he really wants for the United States to become a one-party country.

I think he wants to become so famous that in the far future, whenever anyone refers to "President Bush," GWB, not GHWB, will come to mind. That's a way to one-up your daddy.

So, assuming the second Bush term will result in an economic crisis of some sort, what are the financial steps an average American can take to hedge against it? What general strategies in terms of investment can we take? And if interest rates are bound to shoot up, what can a homeowner do to protect against such issues?

Just preparing for the upcoming lean years...

Though Alan Greenspan suggested there are advantages to adjustable rate martgages, I would have a fixed mortgage now.

"He wants to give Americans more control over their health-care plans."

Is it not somewhat laughable to say this when the big problem is that so many Americans cannot afford one in the first place?

Anne,

I am heartsick.

I read and agree with your posting on Outsourcing from the New York Times. I have been a marginally employed 40 Year old IT worker for the last two years. I have seen the very bad job market for IT dry up over the the last couple of months. Now that Bush has been reelected the Outsourcing of IT is proceed at a rapid pass. The Bushies could not give a dam. The majority of IT workers live in Blue States, the Bushies figure they owe us nothing.

Look, I am not against against foreign competetion or even some Outsourcing. But the tax loopholes that have lead Corporate America to create dummy compaines with which to shelter income while sending jobs overseas combined the recent $130+ corporate Tax bill will destroy much of the US IT industry.

US companies have been delaying outsourcing to avoid big headlines that could have helped the Democrats. Also they are afraid that the Democrats might gain control of either the house or the Senate and hold hearings on Outsourcing. Now there is no such hope. The middle class squeeze will proceed as never before. Thank God I do not have a morgage, a wife or kids to feed. But is that something to be happy about at my age??

I spent as much free time as possible volunteering to help the Kerry campaign the last 3 months, largely through America Coming Together. I felt it was my best bet of having a stable carreer. Now that hope is gone.

What am I suppose to wish for, a 60 hour a week job paying half of what I use to make in IT with no health or retirement benefits? A financial meltdown that will distroy the value of the US dollar making Indiams labor substantially more costly? The collapse of the US housing market/bublbe that will awake even comservative suburbanites to the insanity of the Bush admininstration's economic mismanagement?

Please feel free to email me if you wish to. I would also appreciate hearing more from both yourself and Brad on this issue.

Absolutely. And, those with Medicare coverage have no ability to control Medicare premium increases.

Llamajockey,

We have reason to worry.

http://www.nytimes.com/2004/11/02/business/worldbusiness/02india.html?position=&pagewanted=print&position=

India Taps China's Reserve of Technological Talent
By SARITHA RAI

BANGALORE, India - When Infosys Technologies began scouting for an alternative to India as a source of unlimited, low-cost human resources, the fast-growing company came up with one answer: its home country's archrival, China.

Now, a year after the Infosys Technologies (Shanghai) Company was set up, the venture center has 200 employees and 4 multinational customers.

Infosys, the Bangalore-based software services company, and other top Indian outsourcing rivals, including Tata Consultancy Services and Wipro Technologies, are doing application development and maintenance work in China as they grow rapidly to keep up with booming demand from the West for their services.

And they are quickly concluding that only China has a worker base equal to India's in terms of cost, quality and scale. Expansion there also offers the ability to cater to - and possibly garner more of - the local and regional markets, including Japan.

Vigorous global demand - revenue from India's information technology exports was $12.5 billion in the year ended in March, up 30 percent from the previous year - has resulted in a 10 percent to 15 percent annual rise in wages in India's software and back-office services industry.

According to a KPMG study for the National Association of Software and Services Companies, or Nasscom, an industry trade group in India, the country will face an acute shortage of technical employees by 2009, falling short by about 250,000 workers.

"We need a deep reservoir of talent as well as an alternative low-cost center like India as we continue to grow," said Nandan Nilekani, chief executive of Infosys, who has talked of his company's scaling up to become the Wal-Mart of outsourcing. "And only China can match up."

In the quarter ended in September, Infosys alone added more than 5,000 employees, for a total of nearly 33,000. And Wipro added 5,500 employees, reaching more than 36,000.

As Indian companies have looked for skilled workers outside the country for software development and customer support centers, some have ventured into Mexico and Eastern Europe. But many say that China holds the most promise, in part because of its potential as a rival.

Though its software export revenues were just $700 million in 2003, "China will soon be competing with India as an outsourcing destination," said the Singapore-based Girija Pande, director for Asia Pacific of Tata Consultancy, India's top software services exporter. It set up operations in China in 2002.

And a presence now, these companies say, positions them to grab such future business. Entry into the country is made easier by the ability to piggyback onto the existing base of customers with interests in China. "With China's economy swelling so quickly, multinationals are looking for global software firms who already understand their standards and systems," Mr. Pande said.

Tata Consultancy, for instance, is working in China with its longtime customer, General Electric.

http://www.nytimes.com/2004/11/02/business/02textile.html?pagewanted=all&position=

Textile Quotas to End, Punishing Carolina Towns
By ELIZABETH BECKER

KANNAPOLIS, N.C. - Leann Harrington's experience losing her job has an all-too-familiar ring, one that is soon likely to be heard with even greater frequency.

The textile plant where she was employed shut down last year, a victim of fierce foreign competition. After scrambling, she was lucky to land a job as manager and waitress at the Towel City Junction Cafe, earning $3 an hour plus tips, a fraction of her factory wages.

For many years, textile and clothing factories in the mill towns of the Carolinas - originally drawn from New York and New England decades ago by the prospect of inexpensive nonunion workers - have been closing one after another as the industry migrated abroad in search of ever-cheaper labor. Now, this gradual loss may be about to turn into a rout.

On Jan. 1, the global system of country-by-country quotas regulating the $495 billion international trade in textiles and apparel is scheduled to be eliminated. That will transform the vast business in ways that were barely glimpsed a decade ago, when the newly created World Trade Organization went along with the demands of developing countries and agreed to phase out the quotas imposed by advanced nations to protect their own industries.

Today, though, poor countries at the bottom of the economic ladder, like Cambodia and Bangladesh, have a new fear: China. It is the colossus in the field, home to a seemingly endless supply of workers available to feed vast numbers of suppliers operating with high efficiency and low costs in ways that threaten to overwhelm competition from developing countries except India, Pakistan and Brazil.

For China and other big developing nations with expanding apparel industries, the end of the quotas will mean tens of millions of new factory jobs for people without work or barely scraping out a living.

But for dozens of even poorer Asian and African countries now relying on their clothing exports to gain a foothold in the global economy, it could be still another bitter pill to swallow. The quotas they fought so hard to eliminate had ensured that their products would have at least a narrow opening in American and European markets.

Without rules, though, restricting how much fabric or how many garments they can buy from any country, name brands and merchants like Tommy Hilfiger, Ralph Lauren, J. C. Penney and the Gap will buy most of what they want from five or six countries, not the 50-plus countries that are now part of their networks.

Meanwhile, here in the slowly beating heart of the remaining American textile industry, workers and owners of factories still operating along a stretch of Interstate 85 from Charlotte to Greensboro see the dawning of 2005 as a death sentence. More companies, they fear, will go bankrupt. More communities will wither like Kannapolis, and thousands more workers will be desperate for training, employment and health insurance.

I wish the adults would just shut up. Allow the administration to follow its own agenda. When this president says "let's drive the country off the cliff" you should stop being a smartass and just applaud patriotically.

Point out the errors after they are committed, not before. Don't be stupid.

This administration has so far been arrogant and irresponsible. Only if this attitude continues can they and what they stand for be permanently discredited.

Robert K

Anne

Please Read my response.

India Taps China's Reserve of Technological Talent
By SARITHA RAI

Here is part about IT Outsourcing that comes back to bite US companies in the Ass. Anybody who has ever worked in IT knows that one of major costs is employee turnover. In a hot IT market turnover can decimate an IT department. Why because everybody wants to do the part of the job that is either most enjoyable or increases ones marketablity and wage potential like gaining experiance in the next hot computer language or technology. Likewise many employees try to avoid the aspect of the job that are either
boring or do not increase marketablity. Such as documenting code, writing procedure manuals and testing. Basically anything that enhances the institutional knowledge of the software project.
Most employees leave a Software project or ask for a raise at the tail end of the development phase, prior to the final testing and implementation phases of the software development lifecycle. This way they move on to a better paying job while maximising their increase in future marketablity gains which usually occur during the early phases of the project while avoiding the boring less career enhancing aspects of the job. This especially true if the project does not turn out well. Or if the project is a badly managed sweat job and employees want to stick it to the boss. Who wants to stick arround for a lousy review. Therefore the absolutely least enjoyable and productive, but all too common software task is trying to decipher the intent or work of others who have long left the company.

There are lots of debates concerning software productivity vs cost center on productivity. Many have found that paying employees well, inspiring loyality, teamwork, open and direct, instant communication with clients and users and of course documenting and testing one's work as one develops are a critical part of managing cost and delivering successful projects. The productivity and inovation of such companies are multiple factors higher that companies that do not follow an employee valuing software methodolgy. Testing and documenting the work prior and during the construction phase of the project is a critical issue. Unless the project is well managed and the developers well payed and regarded relative to the market it does not get done. Otherwise a software project may still be delivered but is unsupportable and costly to enhance and ends up often being rewritten long before its anticipated lifetime. Also rarely is the future cost of maintaining a project a part of the initial project's estimated cost or outsourcing bid. All that matter is the delivery date and cost to deliever.

Outsourcing especially turns these proper software development theories/methodologies on their head. It is all about the cost of labor. Software developers are no different than assembly line workers.

Outsourcing is so attractive to US companies because it allows them to forget about problems of managing some of their software projects. It is the other guys problems. Lucrative tax breaks and a strong dollar made trying outsourcing even more appealing. Outsource X percent your software development overseas and even if the cost marginally pays out (20 to 30% percent savings vs claimed 70 to 80%) over the difficulties and risks, it will at least keep the rest of your developers in line and limit your own turnover. And believe me, to some degree the I think it has. Reports are up to 80% of IT headhunters have left the field since 2000.

But from what I have been hearing the same problems that plaqued US software development are now starting to plaque the Indian outsourcers, namely high turnover. With rapidly rising expectations Indians are learing the Old US IT workers trick of job hopping as a way of advancing ones carreer and income. The old say in the US IT field that only suckers stayed at a company more than a year and never stuck arround for the completion of a project or accepted a software maintainence job.

A US company sends software jobs overseas only to find that they are plaqued with 20% annual turnover, significantly higher than 5-7% in well managed US projects that valued employee loyality while 8-12% is the average. Send your IT project overseas and a crucial part of your company's operation is all but gone for good. Any problems and the folks most able to fix it are likely not to be arround for long.

Now my bet is that Infosys and Tata are now maturing operations like rest if India's IT industry. Inorder to keep their own increasingly uppity workers in line they must atleast investigate the threat of using cheaper Chinese labor to keep their own workers in line.

What are your thoughts Anne???

Anne

Please Read my response.

India Taps China's Reserve of Technological Talent
By SARITHA RAI

Here is part about IT Outsourcing that comes back to bite US companies in the Ass. Anybody who has ever worked in IT knows that one of major costs is employee turnover. In a hot IT market turnover can decimate an IT department. Why because everybody wants to do the part of the job that is either most enjoyable or increases ones marketablity and wage potential like gaining experiance in the next hot computer language or technology. Likewise many employees try to avoid the aspect of the job that are either
boring or do not increase marketablity. Such as documenting code, writing procedure manuals and testing. Basically anything that enhances the institutional knowledge of the software project.
Most employees leave a Software project or ask for a raise at the tail end of the development phase, prior to the final testing and implementation phases of the software development lifecycle. This way they move on to a better paying job while maximising their increase in future marketablity gains which usually occur during the early phases of the project while avoiding the boring less career enhancing aspects of the job. This especially true if the project does not turn out well. Or if the project is a badly managed sweat job and employees want to stick it to the boss. Who wants to stick arround for a lousy review. Therefore the absolutely least enjoyable and productive, but all too common software task is trying to decipher the intent or work of others who have long left the company.

There are lots of debates concerning software productivity vs cost center on productivity. Many have found that paying employees well, inspiring loyality, teamwork, open and direct, instant communication with clients and users and of course documenting and testing one's work as one develops are a critical part of managing cost and delivering successful projects. The productivity and inovation of such companies are multiple factors higher that companies that do not follow an employee valuing software methodolgy. Testing and documenting the work prior and during the construction phase of the project is a critical issue. Unless the project is well managed and the developers well payed and regarded relative to the market it does not get done. Otherwise a software project may still be delivered but is unsupportable and costly to enhance and ends up often being rewritten long before its anticipated lifetime. Also rarely is the future cost of maintaining a project a part of the initial project's estimated cost or outsourcing bid. All that matter is the delivery date and cost to deliever.

Outsourcing especially turns these proper software development theories/methodologies on their head. It is all about the cost of labor. Software developers are no different than assembly line workers.

Outsourcing is so attractive to US companies because it allows them to forget about problems of managing some of their software projects. It is the other guys problems. Lucrative tax breaks and a strong dollar made trying outsourcing even more appealing. Outsource X percent your software development overseas and even if the cost marginally pays out (20 to 30% percent savings vs claimed 70 to 80%) over the difficulties and risks, it will at least keep the rest of your developers in line and limit your own turnover. And believe me, to some degree the I think it has. Reports are up to 80% of IT headhunters have left the field since 2000.

But from what I have been hearing the same problems that plaqued US software development are now starting to plaque the Indian outsourcers, namely high turnover. With rapidly rising expectations Indians are learing the Old US IT workers trick of job hopping as a way of advancing ones carreer and income. The old say in the US IT field that only suckers stayed at a company more than a year and never stuck arround for the completion of a project or accepted a software maintainence job.

A US company sends software jobs overseas only to find that they are plaqued with 20% annual turnover, significantly higher than 5-7% in well managed US projects that valued employee loyality while 8-12% is the average. Send your IT project overseas and a crucial part of your company's operation is all but gone for good. Any problems and the folks most able to fix it are likely not to be arround for long.

Now my bet is that Infosys and Tata are now maturing operations like rest if India's IT industry. Inorder to keep their own increasingly uppity workers in line they must atleast investigate the threat of using cheaper Chinese labor to keep their own workers in line.

What are your thoughts Anne???

Fortunately all of this talk about the long-term financial consequences of Bushian fiscal policy, and whether the Chinese will at some date cease to finance our deficits is irrelevant, since Jesus is coming back before the T-bills mature.

I thought forcing the crisis was the point, i.e. the crisis is what will starve the beast.

The ultra wealthy will be shielded from the blow because they are more diversified. They will hold euros and yuan and high tech firms in India. They will have a secure compound on St. Johns. The dope who has a savings account will get to buy a week's groceries with a wheel barrow full of money. Plus granny comes back from the nursing home when Medicaid shuts down.

Catastrophe is the point, not something inadvertant.

Our only hope is to somehow, somehow pin the blame where it belongs. Unfortunately, this administration is highly skilled at avoiding blame. If the crash were to happen tomorrow Fox would have the blame pinned on Kerry or Hillary, anyone but W. It would really, really help if there were an anti-Fox network in existance.

BTW, I am a software guy also, owner of a very small company. Life sucks these days. IMO, the state of Texas is about to dump a boatload of IT staff out the door. The work will be contracted out to the big boys who will in turn outsource. The only thing I can see that might help is cooperative ventures: small groups of individuals pooling their talents, exploiting whatever niches they can find. But that is very, very hard and not a behavior typical of IT sorts.

I've been lurking on this blog for awhile and want to say how interesting this all is and that after reading these comments I am scared poopless.

If the neocons goal was to 'shrink gov't to a size small enough to drown in a bathtub' then I guess the rising water is the deficit.

What % of GDP will be enough to force Bush to start slashing spending? Cause you know he won't raise taxes. Read Poppy's lips.

Robert K has a point. The people have spoken; they want endless wars and deficits, not jobs. So that's what they'll get. We can't stop the republicans, so just sit back and let them hang themselves while we buy gold and euros. The one thing that made me hesitate about voting for Kerry is that I didn't want him to get blamed for the mess which would inevitably follow Bush's term. He would have been a temporary respite anyway; these guys won't stop until they've destroyed the country.

Speaking of grown-ups, does Greg Mankiw really want to be known as the economist who presided over the great meltdown of the US finance?

I'd like to find a defensive strategy against a falling dollar, and perhaps significant inflation that might follow. My question is how? How can a middle class investor buy Euros, Swiss Francs, Yen, whatever? Unhedged mutual funds provide at least a partial answer, but is there something more conservative? I don't want to leave foreign currency sitting in a drawer. Credit Suisse isn't interested in discussing foreign denomiated accounts until I have a half million dollars. There's plenty of options for big investors - not so for more modest "fortunes".

Anyone figured out how to deal with this?
Thanks
Jim W.

I see a lot of concern about the twin deficits on this board, which is understandable even to a newb like me. Forgive my youthful ignorance, but how did Reagan get away with running deficits that were a higher percentage of GDP without experiencing some of the same currency depreciation and other negative effects back in the eighties?

In short: what makes Cheney believe that deficits don't matter?

Jim W: "How can a middle class investor buy Euros, Swiss Francs, Yen, whatever? Unhedged mutual funds provide at least a partial answer, but is there something more conservative?"

www.everbank.com, then click on "Currencies". Three-, six-, nine- and twelve-month CDs in various foreign currencies. FDIC insured. IRAs available. $10,000 minimum for many single currencies (Euros, Swiss Francs and Yen are all in that category). I haven't opened an account there, but have read comments from several people who seem quite happy with the service.

mtn_biker:

Good question. Hopefully someone with more horsepower than me will answer it...

When Reagan came into office after a decade of stagflation, there was arguably a shortage of capital. When Bush 43 came into office, there was no shortage of capital, nor had there been one for many years. On the contrary, the crash that led the economy into recession was created by a glut of capital that bid asset prices up far beyond their value.

Reagan's policies shouldn't have been repeated-- not because they failed, but because they succeeded.

Work is the curse of the drinking classes. Oscar Wilde (1854 - 1900), In Life of Oscar Wilde, H. Pearson

1148 http://www.top-texas-hold-em.com

texas hold em

6955 Kona Coffee Starbucks Coffee Jamaica Blue Mountain
Coffee
coffee maker gourmet coffee green mountain coffee kenya coffee organic coffee specialty coffee folgers coffee coffee brewers costa rica coffee Tullys Coffee Millstone Coffee coffee grinder
http://www.coffee-delivered.com

You only get one set of teeth. Take care of them with a good
dental plan.
Dental
insurance is
money well spent. I sleep better since I signed up for my new dental insurance
plan.
Get yours at: http://dental-insurance-plan.freeservers.com/

individual
dental
plans
You only get one set of teeth. Take care of them with a good
dental plan.
Dental
insurance is
money well spent. I sleep better since I signed up for my new
dental insurance
plan.
Get yours at:
http://www.dental-plan-source.com
individual dental
plans
You only get one set of teeth. Take care of them with a good
dental plan.
Dental
insurance is
money well spent. I sleep better since I signed up for my new
dental insurance
plan. Get yours at:
http://www.e-dental-insurance-plans.com/
individual dental
plans

I like getting emails from people I know, makes me feel better every morning.

Well Done