Man Without Qualities

Saturday, May 18, 2002

The Curiouser and Curiouser Enron Ratchet

Obstruction of justice is a one way ratchet. One can be convicted of obstructing an investigation even though the investigation would have turned up nothing anyway.

Specifically, a defendant can be convicted under the federal “obstruction of justice” statute if he (or it) “corruptly” induced someone to destroy documents to impede an official investigation or proceeding. It is NOT necessary for the prosecutors to show that the defendant actually did something wrong that the investigation or proceeding might have uncovered.

But prosecutors usually try to show that defendant did do something wrong that the investigation or proceeding might have uncovered – because that helps prove that the defendant had motive to act “corruptly.”

Which makes the ongoing trial of Andersen rather odd. In that trial the prosecutors have not yet introduced substantial evidence that Andersen had committed a fraud that the investigation Mr. Duncan is alleged to have tried to obstruct would have uncovered. This is so even though the prosecutors have apparently secured the complete cooperation and extensive testimony of Mr. Duncan, the Andersen partner in charge of the Enron relationship.

And it is also worth pointing out that not a single indictment of any individual has yet been returned in the Enron matter. It’s getting a little late. Has Mr. Duncan not been able to fill THOSE gaps, either?

The media is not covering the Andersen “obstruction of justice” trial very carefully – especially the New York Times - perhaps because most of them already convicted Andersen months ago. But not everyone agrees that the trial is going as well as expected for the government, although a conviction still seems to be the most likely outcome.

If there is no conviction, look for accusations that the government “threw” the trial - maybe by failing to introduce the copious evidence that the media finds everywhere of all that "obvious and egregious fraud" that Andersen had committed and Mr. Duncan was trying to cover up.

UPDATE: The Associated Press reports: "Judge Melinda Harmon... sustained repeated prosecution objections, blocking former Andersen partner David Duncan from answering Hardin's questions about whether he believed any illegal shredding happened after he told his Enron audit staff on Oct. 23 to comply with the firm's document retention policy."

Shouldn't the jury should be told that? Isn't blocking that kind of testimony just a little bit finicky on the judge's part - regardless of the technical charges against Andersen?

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Maybe Senator Daschle Can Tell Us All What to Do This Time

Some people have suggested that there wasn’t very much the government could have done prior to September 11 even if they had had specific warnings. For example, a reader of Charles Johnson's Little Green Footballs (eighth response, by “Enough”) presents very good observations along those lines. After all, these hijackers only had things like plastic knives, boxcutters, sheets and Korans.

But such suggestions are very, very wrong. The reasons the hijackers succeeded was that the people on those aircraft let them succeed. The people on those aircraft let the hijackers succeed because the crew on those aircraft had been rigorously trained - pursuant to government instruction - NOT TO RESIST HIJACKERS. In only one aircraft did the people in the aircraft resist - and that aircraft went down in a Pennsylvania field instead of the White House living room.

So the government COULD, at least in principle, have done quite a lot. Specifically, if the government had known that these were serious, suicide hijackers - not the old fashioned "let-our-prisoners-go-or-we-blow-up-the-plane" type hijackers - the government could have changed its policies and instructed the crew to resist and tell the passengers to resist. That would probably have stopped every single September 11 hijacker. Of course, that change of policy hugely increases the risk of disaster if, in fact, the hijackers ARE the old fashioned kind. Next time, the responsible officials will have to explain why they let the crew and passengers resist - thereby killing, say, 250 people, who would have been just fine if there had been no resistance. And, of course, the information available prior to September 11 DID NOT indicate any such suicidal intentions - as far as we know. So the government would have been changing policy in a way that could have created a disaster (although it would have prevented the actual disasters) without any hard information. Such decisions are very, very tough. But what's that to the second-guessers like the Democrats in Congress and their media water carriers.

The New York Times reports that US intelligence is intercepting al Qaida communications suggesting their general interest in doing something bigger and meaner than September 11. No specifics, the Times says.

Liberal Democrats in Congress for many years resisted proposals that would encourage broad information sharing between the nation's domestic and international intelligence services. Their claimed concern was that such cooperation might endanger civil rights. They enjoyed the staunch, rock-ribbed support of the New York Times and other such media.They generally suppressed national intelligence gathering and funding. But they now seem to be taking positions that imply that it was the government's inability to "connect the dots" because of a lack of intelligence service cooperation and intelligence service enthusiasm that allowed September 11 to happen. And they are saying that the memos and briefings the President received included information new to them. And they are saying this though the memos and briefings seem to have included only very general information not much more useful than what an ordinary intelligent person would have thought to be the case just sitting in a comfy chairs thinking about things for a few minutes: "Yup, guess those terrorists would like to hijack our planes and blow up our cities." But it was all new to the Democrats in Congress! Even to Hillary - who says we have to find out what the government knew - even though she WAS basically the government for the eight years before it all happened. And she doesn't remember a thing about the 1999 report produced by her husband's Administration - a report that the Democrats are suggesting was somehow VERY IMPORTANT. It's all so confusing. Just what did the Congressional Democrats and the Clinton Administration know and when did they know it? And let's not forget that the reason the President didn't have access to specific (or as Mr. Rumsfeld calls it, "granular") information that these were suicide hijackers rather than the old fashioned kind is now being laid by Mr. Daschle at the feet of a "broken system" - a system in which the intelligence services were underfunded, underencouraged and not allowed to cooperate with each other extensively. In other words, they were the intelligence services of the liberal Democrats dreams.

So this is a big chance for Senators Daschle and Clinton. Given the new, general reports - what do we do NOW?

Tom and Hillary? Tell us, PLEASE!

Maybe the President and Congress should hold a giant press conference together. Isn't that what Senators Daschle and Clinton do when they're up to important business? Maybe they can propose some new legislation. But, of course, nothing that might injure their delicate, hyper-refined sense of what we need to protect our civil rights - like letting the intelligence agencies extensively compare notes.

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Friday, May 17, 2002

Missing the Point Again!

President Bush has said: "Had I known that the enemy was going to use airplanes to kill on that fateful morning, I would have done everything in my power to protect the American people."

But the Associated Press reports: "Senate Majority Leader Tom Daschle, D-S.D., said the President was missing the point. 'I think the question is, why didn't he know? If the information was made available, why was he kept in the dark? If the President of the United States doesn't have access to this kind of information, there's something wrong with the system.'"

Is that George Bush a bumkin, or what?! There he goes making poor Tom Daschle explain that he isn’t making his current big fuss because of concerns over what the President knew. NO! The fuss is all about what the President didn’t know!

Now, to be fair to poor under performing George, a few other people in the country seemed to also get the impression that Mr. Daschle’s question WASN’T “why didn't he know?” but “what did he know.” Just like the President.

The New York Times, for example, seems to have got the silly impression that the Administration was: "Confronting a political uproar over its disclosure that President Bush was cautioned last August that Osama bin Laden may have been planning a hijacking …”

Also missing Mr. Daschle’s point was the Los Angeles Times, which in a misdirected excitement rather similar to the very same misdirected excitement for which Mr. Daschle had to correct Mr. Bush’s, tendered the cliched: "Suddenly, President Bush is confronting questions that bedeviled one of his predecessors: What did the president know and when did he know it?"

The Washington Post was yet another newspaper tragically misunderstanding Mr. Daschle’s point - and its just down the street: "The aura of invincibility that President Bush has enjoyed since Sept. 11 received a sharp jolt with the revelation that he had been told that Osama bin Laden's followers might try to hijack American airplanes.

The Washington Times, in its usual haste to defend the White House, also entirely missed Mr. Daschle’s point when it said: "Vice President Richard B. Cheney yesterday warned congressional Democrats against trying to score political points by making 'incendiary' assertions about what the White House knew about terrorist threats before the September 11 attacks."

And, of course, failing to grasp the basic fact that the fuss was NOT over what the President knew was the New York Post, which actually went out of its way to irrelevantly state that NBC had contributed to the fuss by also missing the point and reporting that two days before Sept. 11, Bush was given a 'detailed war plan' to dismantle bin Laden's al Qaeda network.".

And The Boston Globe reported that "Congressional Democrats yesterday demanded that the Bush administration turn over documents showing what warnings it had last summer of a possible terrorist hijacking and called for a new investigation of what the White House knew and when," which surely the Globe wouldn't have printed if they had known they were just embarrassing themselves by so badly missing the simple point the Congressional Democrats were trying to make.

And Salon cut right to the missing point by foolishly running the headline: "What did they lie about, and when did they lie about it?"

If only Mr. Daschle had been there to explain!

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Ms. Feinstein Regrets

Stung by White House comments, Senator Dianne Feinstein says: "I, for one, do not believe that any of our nation's leadership had specific information last summer to know when and what kind of attack to anticipate." She also restricts her retorts to White House spokesman Ari Fleischer, avoiding any mention of the President.

It is difficult to see in Ms. Feinstein's statement any indication that she is closing ranks with Messrs.Daschle or Gephardt in their attempt to savage the President.

I wonder if she's done a quick poll - or maybe she's just a decent person.
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All Negative, All the Time ... Again.

The Washington Post columnist Howard Kurtz is usually an excellent reporter and columnist, so when he doesn't include a disclaimer that Robert Lichter of the Center for Media and Public Affairs emitted gales of laughter when he said "Journalists have been waiting for a chance to be their old, aggressive, hard-nosed selves," with respect to the Bush Administration's handling of terrorism, I believe Mr. Lichter meant his statement to be taken seriously.

But the conceit that American journalists have been cowed into Presidential deference since the events of September 11 would be highly laughable if it were not such a serious subject. American mainstream journalists did not relax their overwhelming hostility to the Bush Administration for a moment following September 11. As hilariously lampooned by another Washington Post columnist, Michael Kelly the media remained "All Negative, All the Time" while the President took on Al Qaida in Afghanistan.

The record is clear: American reporters were fearless. They assiduously reported on how the "brutal Afghan winter" rendered the military effort foolhardy and dangerous. They produced constant comparisons to Vietnam. They offered criticisms of the United States for moving in ways that might "endanger the fragile coalition." Or "inflame the Arab Street." Or permit resumption of the "butality" and "chaos" that preceded the Taliban rule. Then there were the media predictions made by their "seasoned reporters" that the war would just be getting going in the Spring. Would "inevitably" bog down.

Did all that reflect "deference" by reporters and the media to the Administration? No. Reporters and the media defied the possibility that constantly second guessing an Administration engaged in an active war might be unpatriotic. They cared not a wit that their constant carping might burden the military effort. Nor did their almost unbroken record of serious and pervasive error and bad predictions slow down their criticisms of the President's efforts. They seemed to live by a motto: "Neither patriotism, nor accuracy, nor prudence, nor common sense stays these couriers from the swift completion of their self-annointed screeds." If what the media and their reporters did was "non-aggressive" to the White House previously, then "aggression" would have to look like the Palestinians' treatment of the Church of the Nativity.

To suggest that the media is coming out of a "deferential" period is grotesque. They are just up to the same old tricks. All Negative, All the Time ... Again... and Still.
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Animal and Abortion Rights

There is, of course, much controversy about whether a fetus should be considered a "person" - especially in the arena of abortion rights. However, it seems inescapable that a fetus is at least an "animal."

So what effect - if any - will the recent German inclusion of a provision in that country's constitution requiring legal and judicial respect for the rights of animals have on German abortion policies? The provision supposedly requires courts to balance the rights of animals against other (human) social needs. That would, at a minimum, seem to be inconsistent with the Roe v. Wade principle that abortion decisions in the first trimester are solely a matter between a woman and her doctor - at least when the means of abortion is painful to the fetus.
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Attack of the Media Clones

To get some idea of the raw hatred pent up in the liberal media and Democratic Party against Mr. Bush, a hatred which is ever more obviously propelling their current attack on the President, consider the statement of CBS "newsman" Dan Rather regarding pressure he has experienced not to express his true thinking:

"It is an obscene comparison ... but you know there was a time in South Africa that people would put flaming tyres around people's necks if they dissented," said Mr Rather. "And in some ways the fear is that you will be necklaced here, you will have a flaming tyre of lack of patriotism put around your neck."

Yes. Mr. Rather has it right the first time. It is an obscene comparison. But it appears that he and his like minded Democrats feel they now need to indulge in obscenity to express their innermost thoughts. As Cole Porter put it: "When authors, too, who once knew better words, now only use four letter words writing prose ... anything goes!"

Link found on Matt Drudge.
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What Terrorists Do III

UPDATE: Already the Vice President has begun the process made inevitable by the Democrats' accusations. Are they keeping track of who among them decided to pick this particular fight?

According to the New York Times, "In a Senate speech, Senator Hillary Rodham Clinton, Democrat of New York, called on Mr. Bush to "come before the American people at the earliest possible time to answer the questions so many New Yorkers and Americans are asking." The Democrats are also more generally demanding "full disclosure of what Mr. Bush was told last summer about the danger of terrorist hijackings."

A great deal is at risk. Previously, the very partial disclosure of information regarding monitoring of Bin Laden's cell phone calls in a pre-September 11 criminal trial caused those calls to cease, which choked off an important source of intelligence on his activities. By calling for "full disclosure" the Democrats seem to be willing to risk a lot more of that kind of thing. And they - even Mrs. Clinton - seem willing to risk forcing the Administration to talk about Clinton-era intelligence policies. The Democrats seem either very confident or very desperate.

Over the past month or so the Democrats through liberal media have engaged in a chorus of accusations that the Administration had unfairly "questioned the patriotism" of anyone who criticized the President following the September 11 disasters. The Times itself has been testing the waters through its in-house columnists, such a Maureen Dowd, who was producing shocking and insensitive material on the topic months ago - even Paul Krugman's last incoherent emission on the tax consequences of companies reincorporating in Bermuda (!) included an aside on the topic. That chorus now seems to have been preparation for their current attack on the President. But what will their game plan be for answering the almost inevitable high-dudgeon Presidential speech about Democrat partisan efforts to undermine him in this time of a national crisis whose existence the Democrats are now implicitly denying?

A sign of how far the Democrats and the Times are willing to go can be found in the highly irresponsible Times editorial, couched in pseudo-reasonable prose, which asserts that "Mr. Bush's aides were scrambling yesterday to deflect suspicion that he had failed to act on a clear warning, a sure sign that they feared the accusation would stick and damage him politically." But there is no support whatsoever in any Times coverage that there was any "clear warning," and no Democrat has yet dared to assert such thing. No doubt that will come later. The Times editorial bears the inappropriate trivializing title "The Blame Game" - indicating that the September 11 aftermath is now regarded by the Times as a political "game." But the indications so far are that only the Democrats and their media water carriers regard these matters as a game. The summer will tell if the public is willing to play along with them.

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Thursday, May 16, 2002

Not Usually A Good Idea

It doesn't look like things are going well for Arthur Andersen in its criminal trial. According to the Associated press:

"Perhaps the most dramatic moment of the day, however, was when Andersen's lead attorney got into a shouting match with U.S. District Judge Melinda Harmon, who stormed off the bench after being accused of `bias.'''

It usually isn't a good idea for a trial lawyer to get into a big shouting match with the judge.

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What Terrorists Do II

Condoleezza Rice has now given her briefing to the media regarding the "warnings" received by the White House prior to the September 11 disasters, Matt Drudge has provided the transcript and the New York Times has provided its rather predictable spin. Ms. Rice describes White House considerations very much like the hypothetical conversation between White House aides invented in the prior post. The reader may examine the transcript for herself to see if she agrees with the Times that Ms. Rice "had a difficult time explaining why it took eight months to reveal that the C.I.A. had raised the specific possibility of a hijacking by Al Qaeda, even a conventional one." Perhaps I missed it, but Ms. Rice didn't seem to have a "hard time" with anything.

Now that the White House has had its representative fill in the details of the pre-September 11 White House understanding, it would be useful to the nation for Congressional Democrats to submit their representative to similarly intense questioning about how they could have thought there was NOT a substantial generalized hijacking desire on the part of al Qaida and other such groups prior to September 11. The Democrats have been making out as if the White House "revelations" contained lots of information new to them. But from the descriptions of the "warnings" in the media, it is hard to see what that "new" information could possibly be. They owe it to the people to explain in detail.

But not according to the Times. The Times thinks that "The revelation of the warning seems likely to hasten the investigation in Congress about what preventive steps the administration might have taken, an examination that Mr. Bush has been eager to avoid." But if "Mr. Bush has been eager to avoid" such an examination, the Times certainly has thought it worth while to bring that matter to the publics attention previously.

One might have thought that such a thing would be news, as in the kind of news that goes into two inch high headlines: "PRESIDENT EAGER TO AVOID EXAMINATION OF WHAT MIGHT HAVE BEEN DONE TO AVOID 9-11 DISASTERS!!!" The Man Without Qualities does not remember such headlines in the Times. What could the paper be trying to tell us? Maybe the Congressional polls aren't looking as good for the Democrats as they make out. It sounds as if they may be getting a bit desperate.

But then there is Senator Shelby.
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What Terrorists Do

"Why did it take eight months for us to receive this information?" asks Senator Daschle, referring to the report that the White House knew prior to Sept. 11 that Osama bin Laden was seeking to hijack aircraft.

Well, this information was released by the White House of its own accord. So the answer to Mr. Daschle's question is probably: "The White House is releasing this information eight months after September 11 so it doesn't get released thirteen months after September 11 - just in time for Election Day."

But perhaps the most disturbing aspect of this affair is the present suggestion of Messrs. Daschle, Gephardt and other Democrats that their thinking and policies prior to September 11 did not assume that all major terrorist organizations - including Osama bin Laden's - were generally interested in aircraft hijackings. The only news in yesterday's White House "revelations" was that White house aides had actually briefed the President on non-specific reports of bin Laden's hijacking interest - and this could be news only because it is interesting that an aid would brief the President on something anyone who cared to think about the matter would assume to be the case anyway.

To assist the national Democratic leadership, here is a hypothetical July. 2001 White House conversation between aides:

First Aide: "Al Qaida - that terrorist organization that did the 1993 World Trade Center bombing, the 1996 killing of 19 US soldiers in Saudi Arabia, and the 1998 bombings in Kenya and Tanzania - is still in business, isn't it?"

Second Aide: "They're out there. That kind of organization - like Hezbolla, Islamic Jihad, Friends of the Earth, that kind of group - pop up when they can. They try to kill a major business executive, or plant a bomb or hijack a plane. We just got some report that al Qaida would like to hijack planes - but there's nothing specific, as usual, so nothing new."

First Aide: "What the heck do we do with a report like that?"

Second Aide: "What can you do with it? Maybe we mention it to POTUS on a laundry list day. He knows these groups are out there trying to get away with this stuff - everybody knows. What the heck else do you DO if you're a terrorist."

In contrast, according to Messrs. Daschle, Gephardt and such other Democrats, conversations among Congressional Democrats apparently went more like this:

Mr. Daschle: "Al Qaida, that terrorist organization that blew up the bomb in the World Trade Center in 1992 is still in business, isn't it?"

Mr. Gephardt: "I don't think we can assume they're out there. I generally think that kind of organization - like Hezbolla, Islamic Jihad, that kind of group - either ceases to exist or goes straight not more than thirty days after they pop up and kill a major business executive, or plant a bomb or hijack a plane. We haven't got a report that al Qaida would like to hijack planes in the last thirty days, so I'm assuming they've gone into charitable work. I've structured all Democrat intelligence legislation in the House based on that assumption. I suppose if we got a report we'd have to say something - those reports come in all the time. But thy never have anything specific in them."

Mr. Daschle: "What the heck do you do with a report like that?"

Mr. Gephardt: "What can you do with it? I just treat them as sacred cows I pat as we walk by. You can't take that stuff seriously."

There is a remarkable self-destructiveness in the proposals of Messrs. Daschle and Gephardt to hold hearings and investigations on this topic. Immediately following the September 11 disasters many people began to point out that the successful terrorism could be placed at the door of Clinton-era restrictions on the intelligence services and other Clinton administration misfeasance and nonfeasance. The Bush White House deliberately did not engage in such finger pointing - and there could have been a serious political downside if it had. But if Messrs. Daschle and Gephardt get their way, the Bush Administration will have an essentially free hand to savage its Democrat predecessor.

Is that what the Democrats want? Do they want to force the administration to argue that the reason the reports were non-specific, and therefore useless, was that the Clinton Administration had made it all but impossible to obtain specific information by prohibiting the use of criminal informants and otherwise crippling the intelligence services? Do the Democrats think such White House arguments couldn't be supported?

It is worth noting that the junior Senator from New York has not joined with Messrs. Daschle and Gephardt on this topic to date. And New York's interests were affected a lot more by these events than those of Missouri and South Dakota.

UPDATE: The comments of Republican Sen. Richard Shelby of Alabama, vice chairman of the Intelligence Committee, add an interesting twist: "There was a lot of information. I believe and others believe, if it had been acted on properly we may have had a different situation on Sept. 11." Is there that big a rift between the White House and this Senator?

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Tuesday, May 14, 2002

TechCentral Bonanza

TechCentral is so good today, with so many excellent articles, it's downright amazing. They must take smart pills.
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As Inevitable As Paul Krugman's Economic Silliness and Taxes

Why are American corporations like Stanley Works re-incorporating themselves in low tax havens like Bermuda? Well, because it would save the company a lot of money and thereby benefit the company's shareholders a lot. As Paul Krugman says: "By incorporating itself in Bermuda, a U.S.-based corporation can — without moving its headquarters or anything else — shelter its overseas profits from taxation. Better yet, the company can then establish "legal residence" in a low-tax jurisdiction like Barbados, and arrange things so that its U.S. operations are mysteriously unprofitable, while the mail drop in Barbados earns money hand over fist."

Now, as a preliminary matter, it is best to rid the analysis of that latter bit about how the corporation can "arrange things so that its U.S. operations are mysteriously unprofitable, while the mail drop in Barbados earns money hand over fist," since that bit is just a silly red herring. What Mr. Krugman is suggesting amounts to misallocation of income among members of the corporate group (if done innocently) or criminal tax fraud (if the allocation deliberately does not reflect the groups economic reality). The Internal Revenue Code attaches no special penalty to income allocations that are "mysterious," despite Mr. Krugman's thought to the contrary. Misallocation disputes regarding the income of international corporate groups happen all the time, in ways having nothing to do with "reincorporation". For example, Japanese car companies sell portions of their cars to their wholly owned United States subsidiaries, which then sell the whole cars to American consumers. The United States subsidiary pays full United States taxes on its income (from which it deducts payments made to its parent for the cars), and the Japanese parent pays only Japanese taxes on the money it receives from its subsidiary. Determining the price paid by the wholly-owned United States subsidiary is an intra-group "allocation" issue, and such matters often result in big differences of opinion between the companies and the Internal revenue Service. (In Krugman-speak, the IRS sometimes takes the position that the Japanese company "arranged things so that its U.S. operations are mysteriously unprofitable, while the parent in Japan earns money hand over fist.") Happens every day. No big deal. Many good tax lawyers are employed almost exclusively in such disputes. And it’s not what the "reincorporation" trend is about. In other words, a Krugman red herring.

But the possibility of tax fraud raised by Mr. Krugman is also a red herring, because the problem is not tax fraud. Rather, the development is that American corporations are reincorporating to take advantage - full, legally permissible and highly tax-efficient advantage - of certain features of the internal revenue laws of the United States.

There is no need to insinuate "mysterious" conspiracies on the part of reincorporating American companies - but Mr. Krugman does so insinuate - and, of course, the insinuation involves a nasty act by a Bush administration tax official who issued "executive orders" helping it all along. What would a Paul Krugman column be without an insinuated conspiracy involving the Bush administration? Here, his allegation is that the Administration not only issued those executive orders, but doesn't really want to collect taxes! Mr. Krugman does not explain how he has obtained his deep knowledge of the Administration's "wants." Indeed, Mr. Krugman appears to have a macro installed in his computer to provide the Bush-conspiracy part of his columns week after week, the way other people run spread sheets.

As the above Japanese car example indicates, much of the income in an American-based international corporate group is often not the result of United States activities. The United States has no particular interest in taxing such non-United States income simply because the ultimate parent company happens to be organized under the law of a local United States jurisdiction - any more than the United States has an interest in taxing the income of the Japanese parent on sales to its United States subsidiary. And the prospect of "mysterious" allocations doesn't create a legitimate interest. The executive orders Mr. Krugman (and the earlier Times articles on the matter) complain about seem to have mostly the effect of rationalizing the corporate tax system to reduce US taxation of income it shouldn't be taxing in the first place. Or perhaps Mr. Krugman proposes that the US tax all of the income of any foreign country that does business in the United States at full US rates? That would at least bring to his thinking a certain consistency - although action in that direction would set off an international uproar that would make the current fracases over steel tariffs and the like look tame.

Since the board of directors of a corporation has a fiduciary duty to operate the corporation to maximize the financial benefit the corporation yields to its stockholders, the better question is: Isn't the board of directors of any American corporation NOT advocating an off-shore reincorporation to the company's shareholders in breach of its fiduciary duty to the shareholders? Shouldn't Mr. Lerach be reworking his standardized, copyrighted form of complaint against the directors of public corporations to add a cause of action based on the shocking and egregious allegation: "And the defendant directors willfully and maliciously refused to recommend and submit to the shareholders plans to reincorporate their corporation in Bermuda or a similar low tax jurisdiction, thereby costing their corporation and its shareholders literally tens of millions, if not hundreds of millions, of dollars per year!"

So why does Paul Krugman question the patriotism of Stanley Works for contemplating exactly this move, while simultaneously and irrelevantly castigating the Bush administration for supposedly questioning other unrelated people's patriotism for other unrelated matters?

And why, for that matter, would any sensible economist not be advocating the complete abolition of corporate taxes? The arguments against such taxes are standard and legion, have been around for many years, can be obtained from any competent tax professors for the cost of a few margaritas and the burden of spending an evening drinking with a tax professor, and are about as close to being the beneficiaries of the kind of "consensus" among serious economists so valued by Mr. Krugman as anything in that field. However, given the phrasing of the question, there is no need to address the matter here any further. [UPDATE: Jane Galt gives a nice list of some reasons why the corporate tax should go and says lots of interesting things about Mr. Krugman's latest silliness.]

Perhaps the most pernicious effect of the corporate tax is "double taxation" of dividends. Revenue is taxed first at the corporate level, and then again as income when it is distributed to shareholders. "Double taxation" does not happen with "tax transparent" business entities - such as limited liability companies - which can sometimes be substituted for the corporate form. However, equity interests in limited liability companies cannot be traded publicly and retain this tax advantage. So one effect of "double taxation" is to handicap public corporations in comparison to private limited liability companies. There is no good reason to do that. Other countries - such as Britain - seek to eliminate "double taxation" by the use of an "integrated corporate tax system."However, Mr. Krugman's only reference to other countries is a misleading comparison of their tax rates with US rates, with no mention given to the fact that the integrated tax systems of those countries eliminate part or all of the corporate level tax on corporate earnings distributed to shareholders as dividends.

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Monday, May 13, 2002

Just Say Anything

InstaPundit notes some anti-Chomsky statements by Harvard Law School Professor Alan Dershowitz. I agree with Mr. Dershowitz conclusions, and frankly cannot understand why anyone listens to anything Noam Chomsky has to say about foreign policy or anything other than the most abstruse linguistics.

However, as is typical of Mr. Dershowitz's style of argument, he does much damage to his cause by grossly and unnecessarily overstating his case, writing:

"There is no intellectually or morally defensible case for singling out Israel for divestiture, and I challenge Chomsky to debate me on the morality of this selective attack against an American ally that is defending itself -- and the world -- against terrorism that targets civilians. Universities invest in a wide array of companies that have operations in countries that systematically violate the human rights of millions of people. Nor are these countries defending themselves against those who would destroy them and target their civilians. Yet this petition focused only on the Jewish State, to the exclusion of all others, including those which, by any reasonable standard, are among the worst violators of human rights. This is bigotry pure and simple, and those who signed the petition should be ashamed of themselves and shamed by others."

The first phrase highlighted above is obviously correct on many grounds, and the move to cause American universities to divest stock in companies doing business in Israel is horribly wrong. But the argument that the move is wrong because "[u]niversities invest in a wide array of companies that have operations in countries that systematically violate the human rights of millions of people" is absurd, proves vastly more than is needed, implicitly tends to equate Israel with such countries, and is hypocritical with respect to many people he is attempting to persuade and probably with respect to Mr. Dershowitz himself.

It is obvious that Israel is not in need of an argument that would preserve university investments in a "countries that systematically violate the human rights of millions of people." Israel is not doing that. Further, the movement for university divestiture of companies doing business in Israel is formally (although anything but substantively) analogous to the successful prior movement for university divestiture of companies doing business in South Africa - a country which, at the time, DID systematically violate the human rights of millions of people. Also, the white South Africans then running that country could and did also plausibly argue that South Africa was then a country defending itself against those who would destroy it and target its civilians. So what? If Mr. Dershowitz's sweeping arguments are correct, then did he - and many in his audience - support divestiture in the South African case? I suggest that he is probably being hypocritical here because, on the basis of his general politics, it seems likely he DID support university divestiture in the South African case. But he is surely inviting many of his readers to engage in such unnecessary hypocrisy. Also, what's the deal with his creepy "equal protection" argument: "Yet this petition focused only on the Jewish State, to the exclusion of all others ... This is bigotry pure and simple." Mr. Dershowitz thereby suggests that it would NOT have been "bigotry pure and simple" if the petition had been phrased in terms of forcing divestiture with respect to countries such as Iraq in addition to Israel, even though that would expressly equate Israel with wretched dictatorships!?

The hypocrisy is unnecessary because Mr. Dershowitz's sweeping arguments ignore that only a legitimately constituted democratic country such as Israel has the right to survival and self-defense - and to take vigorous measures to assure its survival and defense. Under such conditions such measures do not constitute the violation of human rights. This is what separates Israel from South Africa and, for that matter, from Iraq. Similarly, if the movement were to force divestiture of companies doing business in the United States, there would be no need to resort to the arguments Mr. Dershowitz uses here. What is perhaps most disturbing about Mr. Dershowitz's performance here is that he appears to believe he DOES need to resort to his arguments.

Mr. Dershowitz's fulsome arguments sound more like the kind of claptrap one hears at the United Nations, where the right of survival and self defense are asserted by and on behalf of almost every tin pot dictator, routinely and in the most disgusting manner. Does Iraq have the right of survival and self defense? No question about it in the minds of the geniuses in the big blue glass box. Israel does not need those arguments or the specious support they provide, especially since few, if any, of the pseudo-diplomats spouting that claptrap into the East River believes a word of it anyway. It is exactly that kind of excess that so often makes "international law" a travesty.

True, there were reasonable arguments against university divestiture even in the South African case. Some were made by Milton Friedman, if memory serves. Those arguments continue to apply to the case of Israel a fortiori - although, oddly, Mr. Dershowitz doesn't proffer THOSE arguments here. But Israel has vastly more in its favor than the old South Africa did. Mr. Dershowitz implicitly equates the two situations, which makes his arguments overbroad, feckless - and just bad lawyering.

That Mr. Dershowitz's ultimate conclusions are correct in this case doesn’t make him a good lawyer or a person offering trustworthy arguments one would want to chance over, say, the dinner table.

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Sunday, May 12, 2002

Tea and Bones

Tea has long been known as the drink of civilization. Now there appears to be at least preliminary evidence that tea may also make for strong bones, at least if you drink enough for long enough.

If true, maybe this has something to do with the common conception that very old people are often tea drinkers.
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Who Will Rid Me of This Meddlesome Blogger?

There was recently some discussion in the blogosphere about pseudonymous blogs, such as this one. The arguments made then in favor of such blogs were largely hypothetical.

But Andrew Sullivan describes a truly awful career plunge which would not have happened to him if his blog had been operated under a strict pseudonym:

"If, like me, you both write for the mainstream media and also snarl at it on a regular basis, some editors can take revenge and cut you off. Most of the time, people in big media, being journalists, don't mind criticism, especially from a piddling one-man blog. But others take offense, and you get canned. In my case, I have been barred indefinitely from writing any more for the New York Times Magazine. Although I have long had a fantastic relationship with the editors there, and have written some of my best journalism for them, their boss, Howell Raines, has sent down a ruling. My presence in the Times, I'm told, makes him "uncomfortable," and I am off limits for the indefinite future. A great sadness to me, but completely his editorial prerogative and, given the sharpness of some of my broadsides, understandable. I'm lucky I have other outlets - and this blog of course! - but it does tend to show that the notion that new media and old media are effortlessly complementary is not completely true. When you bite the hand that feeds you, sometimes you'll get a good slapping. But don't worry. I'll keep biting."

Of course, not using his own name would have meant not being able to take credit for all the cool things he puts in his blog - at least outside the blogosphere. That's a high price. But, then, the reason people like Howell Raines are such terrible human beings is that they insist on imposing such prices. There are many, many such terrible people out there.

On a related point, Mr. Sullivan has sufficient stature that I very much doubt that Mr. Raines made this decision or indulged his discomfort without first consulting "Pinch". In fact, not nearly enough scrutiny is given to "Pinch's" likely role generally in the increasingly apparent across-the-board declines at the Times in standards, ethics and - as seen in Mr. Sullivan's case - decency.

For what it’s worth: I wager on the average of Mickey Kaus’ choices "b" and “c” – Raines will do approximately nothing. My guess is that Mr. Raines and “Pinch” are far too bloated now with the Times’ seven Pulitzers to see any need for even a token offering to Mr. Sullivan. I say "approximately" because I also think that Raines and “Pinch” will order up some kind of hunt for the “leaker” at the Times, but it will be too low-key to meet Captain Queeg’s standards.

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A Sort of Conspiracy Now Happens

As noted in the prior post, two memos from Enron’s attorneys Stoel Rives and Brobeck have caused even some good commentators such as Matt Miller to formulate complex conspiracy theories. The Man Without Qualities strongly disagrees with such conspiracy theories, but does believe people with serious manipulative political agendas released the memos.

But "manipulative" does not mean "sinister." Everyone is free to attempt to manipulate the political marketplace and the "marketplace of ideas." In this case, I do believe it is likely the Bush Administration has engineered the release of the memos for partisan reasons, but reasons far less sinister than those advanced by Mr. Miller. The memos were probably released simply to make sure they were "yesterday's news" long before the upcoming November elections. As noted here, by Mr. Miller, by Arnold Kling and by others, the memos do not contain serious evidence against Enron. Even sad Paul Krugman implicitly and sullenly agrees through his omission of substantive quotes from the memos in his most recent hyperbolic rant against Enron and the Administration. What the memos DO contain is all those silly - but sound bite filling - names of the Enron strategic moves: "Death Star," "Fat Bay," "Ricochet," etc. Such material would be far more effective if released closer to Election Day. By releasing the memos now, the Administration all but guarantees that the overwhelming "eyes-glaze-over" character of the Enron mess will have swallowed these silly names, too. The political actors now rushing to announce hearings and investigations know perfectly well that those hearings and investigations will probably just bog down as inconceivably boring energy and arbitrage economists wield their graphs in the summer doldrums, eventually to conclude that the memos contain essentially nothing.

The Administration has an additional incentive: summer is almost here - and the Administration absolutely does not want, and cannot afford, another energy crisis this summer. A summer of cheap energy will entomb the politically radioactive waste from Enron's meltdown. So the stakes for the Administration in a quiet, cheap energy summer couldn't be bigger. The fuss the memos are creating serves that purpose well by reminding the energy companies that the Enron matter, while dormant and boring, is far from dead. And that they had better behave

Is that a cynical take? I'd call it ordinary strategic thinking. But if I worked in the Administration I wouldn't put an analysis of the strategy using silly-sinister names in any confidential memos.

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