Man Without Qualities

Friday, February 28, 2003

Two More

The Note says:

With Bush facing the possibility of running for re-election with an economy so weak that just might trump any national security credentials, here's your clip-and-save of why and how 43 (struggling GDP and all) is in better shape than his dad was at this point in the 1992 cycle,

and then provides a list of factors which seem to favor Mr. Bush. The list is rather long, and I'm not convinced of the significance of every listed item, but I would like to append to that list two more factors which I think do have real significance:

1. Unlike his father, the current President is making significant inroads into ethnic constituencies that are absolutely essential to Democratic success. As Donna Brazille put it: "The GOP is making inroads in the black vote. It's trending away. Groups of [minority] voters are hearing the Republican message." Every time Powell and Condi goes on television, obviously in charge, another piece of this constituency comes loose - and the Democrats still retain the proven multiply-inept Terry McAuliffe in his role over probably more capable African-Americans. And it's not just African-Americans who are "trending" - its Hispanics, too. Just one word: "Estrada."

[UPDATE: And certain remarks of Senator Lieberman that passed little-noticed outside of the African-American community are still troubling and vividly remembered within that community. Former Atlanta Mayor Maynard Jackson, a longtime civil rights activist and prominent player within the Democratic Party - the man who should now be the head of the Democratic National Committee - has said: "I didn't appreciate Lieberman saying that Thurmond is 'a man of iron with a heart of gold.' " Mr. Jackson is a man of admirable and remarkable restraint.]

2. Democrats are experiencing a huge loss of American Jewish support on the national level because of the Iraq/Israel interface and Democratic waffling over the coming Iraq war. The fact is that what the President is doing hugely helps Israel, as Israel keeps pointing out. And, no, arguments that invading Iraq may trigger Iraqi attacks on Israel are not going to get the Democrats out of this box. The Israelis see through those silly arguments and so do most Americans - including most American Jews. It's a big problem for the Democrats.

In contrast, the current President's father got into all kinds of stupid scrapes with the American Jewish community and Israel, which inculcated a deep suspicion of the former President. Just by way of example, remember the kerfluffle over the housing subsidies for settler housing in occupied areas, and the prior President's appalling comments of September 1991, when he spoke of himself as "one lonely little guy down here" and referred to his being "up against some powerful political forces?" It is all but impossible to imagine such a thing in this Administration - where Mickey Kaus runs a cottage industry analyzing the scope of Likudnik influence in the White House.

Has the current President learned from the mistakes of his father? If you have to ask, ....
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Self Serving Soros

A few years ago it was entirely arguable that the most hated man in the international community was an infamous individual who trafficked against the interests of countries around the world to the fury of foreign governments everywhere: George Soros.

For example, Malaysian prime minister Datuk Seri Dr Mahathir Mohamad has accused hedge funds owned by Soros of speculating against regional currencies including the ringgit which led to the 1997 Asian financial crisis: "When he (Soros) said that I was a menace to my own country, actually he is the menace to the world's economy." What his critics called "assaults" on currencies around the world, including the Pound, Italian Lira, Rouble, Thai baht, Malaysian ringget and Japanese yen exposed him and his funds to scathing criticisms, accusations that he was a major threat to the world economy, demonic and "worse than Hitler." International hatred of Mr. Soros at both the international government and individual levels seemed to know no bounds nor did there seem to be any limits to its scurrilousness. That criticism was often excessive, hideous and racist.

It all meant nothing to Mr. Soros, who quite properly kept racking up his billions in profits until he lost his shirt in some very bad currency bets, which caused him to scale back his investment activities.

Mr. Soros is now a full time blowhard who says the President of the United States must do what some foreign governments tell him to do, and govern by international poll results. He also complains that the Bush administration has a "visceral aversion to international cooperation."

Odd. Mr. Soros seems to have had quite a different view of the value of "international cooperation" when he was racking up his billions by blowing up currencies from one end of the earth to the other to the howls of all those international politicians.

I, personally, prefer the original, rapacious Soros, who stuck it to all those governments and currencies as a matter of economic principle - not the current blowhard sent down by central casting to play the phony, make-it-all-better philanthropist role.
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Underappreciated Dead White Men Get Boost

Talk show host Oprah Winfrey revealed that she was bringing back her book club to celebrate writers from the past, such as William Shakespeare, William Faulkner and Ernest Hemingway.

Bravo, Oprah! Bis!

But the real test will come with Mark Twain, especially Huckleberry Finn.

You can go there, Oprah! Make a real difference! Twain's a genius for everyone to read and celebrate! Go, girl! You've got a billion in the bank - you can afford to do what's right, open their eyes - you've done it before!!!
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For Those Who Prefer A Real Meal

Perhaps the reader made it a New Year's resolution: no more Herr Doktorprofessor Krugman, no more Good Professor DeLong, no more economic junk food for the mind generally.

What to read? Of course, there are many good economics blogs: Jane and Mindles. Don Luskin is an excellent economist with a personal blog who is also associated with the TrendMacro site, which regularly links to wonderful economics articles from all over the web. There are lots more, some of them listed on the left.

And for a site which finds an interesting niche between the academic and the really popular, one might try looking at the Library of Economics and Liberty. The current interview there with Dr. R. Glenn Hubbard, the just-resigned Chairman of the President's Council of Economic Advisers, is surprisingly transparent on many interesting points - avoiding many of the stock non-answers common to this kind of interview. Dr. Hubbard really does answer some questions with clarity, and puts himself on the line. In this case, at least, he's the anti-Krugman, anti-obscurationist.
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Ah, Tradition II

Tom Maguire says the problem TAPPED identified just gets worse and worse.

Ah, these kids! No respect for tradition, with their sex and their drugs and their Nobel committees that hand out economics prizes to people who aren't even economists.

And their music!

It's just noise!

And what about those blogs?! They just don't know when to shut up and leave a newly minted tradition in peace!
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Faster And Better Than Thought

The Associated Press reports:

The economy grew at a 1.4 percent rate in the final quarter of last year -- twice as fast as the government first estimated. ...

The major factors in the upward revision to fourth quarter GDP were stronger investment by businesses in building up stockpiles of unsold goods and a slight boost to consumer spending, the main force keeping the economy going. ...

Economists believe the economy is picking up momentum in the current quarter, expanding at a rate of 2.5 percent or more.

But to Paul Krugman, the apocalypse is near:

Is there any relief in sight? The conventional wisdom among business forecasters now calls for growth of a bit more than 3 percent over the next year. Growth at that pace is barely enough to keep up with rising productivity and an expanding labor force, not enough to make a serious dent in unemployment.

"Barely enough to keep up with rising productivity?" It seems that Herr Doktorprofessor sees a need for economic growth that exceeds rising productivity. Of course, when the economy is coming out of a recession or otherwise underperforming such a state of affairs is possible in the very short run. But well within sight a point must be reached where only rising productivity and an expanding labor force can sustain an expanding economy. What the heck is he talking about here? [UPDATE: And, by the way, wasn't it just a little while ago that Democrats were telling us that the real problem with the economy was that workers just didn't have enough time to spend with their families and personal lives? Why don't we hear about that issue now from the likes of Messrs. Krugman, DeLong and Daschle? Unemployment is painful for those who wish to be employed - and things like calling it "free time" the way, say, Europeans label their statute-imposed work week limitations, doesn't make the problem go away. Couldn't we at least be treated to something along the lines of "workers have even less time now, because they must now work even longer and harder to make ends meet now that there is less employment!" Just asking.]

And rising productivity - thought by the naive be a good thing - is actually seen by this sophisticated economist as a bad or threatening thing, something that we must "keep up with," like a weight problem. Apparently (resort to "apparently" is needed here because Herr Doktorprofessor provides no explanation), the current theory around the Princeton economics department is that rising productivity is luddite in its effect, and every up tick in productivity means that many more human workers displaced. Other, sillier, people might think that up ticks in productivity create more efficiency and wealth - and more jobs - pretty fast. Those jobs are clearly "in sight" to any but the intentionally myopic, although they may not come well before the next election - which is probably all Herr Doktorprofessor cares about now, anyway.

And what to make of "enough to make a serious dent in unemployment?" According to the Bureau of Labor Statistics:

Payroll employment rose by 143,000 in January, and the unemployment rate decreased to 5.7 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment in retail trade and construction increased after seasonal adjustment, but most other major industries were little changed.

What is a "serious dent" in an unemployment rate of just 5.7%? Surely Herr Doktorprofessor would not view a mere reduction in this rate to, say, 4.7% as a "major dent." He seems to see a need for something a lot more "major" than that. The Man Without Qualities is no fan of the Phillips Curve, but recent experience shows that an unemployment rate of less than 4%, say, has some pretty strange effects, effects which are scarcely without their problematic aspects, although not necessarily bad. For example, who says it's necessarily bad that that a new college graduate with a computer programming degree gets hired into a first job at more than the combined income of her parents? Who says it's bad that the florist shop help have to be paid way, way more than minimum wage, won't give customers the time of day and take off early to go rock climbing, or that real estate prices in the magic valley or belt or alley de jour appreciate at 25% a month? Those are decisions for the market to make. Contrary to the dogma of the Phillip's Curve worshiper cult, I can see no need to avoid such low unemployment rates, if that's what an otherwise healthy economy produces. But it is a little hard to see the political or economic imperative for driving the economy into a state that produces such effects - even if one resorts to expressing the issue in percentage-of-percentage terms (as in describing a rise in unemployment from 4% to 6% as "a 50% rise in unemployment" - a type of phrasing which seems increasingly popular on the left - although that rhetoric didn't work for them in the 2002 elections - or even describing the growth in the GDP last quarter as "twice as fast as the government first estimated").


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Thursday, February 27, 2003

Speak, Dan

Dan Rather has an op-ed piece in OpinionJournal today concerning his recent interview with Saddam Hussein. It is as completely lacking in insight as it is filled with Rathery ticks, such as his annoying use of "this reporter" when he means "I" or "me." The anchor and managing editor of "CBS Evening News" shares portentous pseudo-insights: "It is ... a story.. that can be told in a single line: Saddam Hussein considers himself to be the consummate survivor" and "one imagines, he may think that he can slip, foxlike, into the underbrush, to gather his resources for the next battle" and the like fill the allotted inches.

Let's face it: Mr. Rather did not collect information during his interview that allows him to justify the conclusion that Hussein's story can be told in such a "single line." And where the heck could the dictator of a whole country "slip, foxlike, into the underbrush" if the United States takes his country from him? Is "this reporter" suggesting that Hussein thinks he can take to the hills or the caves a la the young Castro or bin Laden? Please. If that's what he means, no wonder Mr. Rather won't come right out and say it.

But surely the most unintentionally hilarious part of this whole ream of Rather blather is this reporter's apparently naive unawareness that he has been chosen as a useful idiot:

This ... reporter found himself again interviewing the Iraqi president. ... I wound up, on this trip, in a meeting with Deputy Prime Minister Tariq Aziz. He listened and then said that they liked the fact that I knew the region well and had a reputation for being independent. He would take my request directly to the president, with the clear understanding that there would be no conditions whatsoever about questions to be asked in any interview. There was a long night and day of waiting. Then, a phone call in my hotel room, a pickup by armed guards, and a long circuitous drive, first to a "guesthouse," then to the palace. Saddam Hussein would see me there.

Can anyone think that Deputy Prime Minister Tariq Aziz cared a bit that Mr. Rather "knew the region well and had a reputation for being independent?"

No. What Deputy Prime Minister Tariq Aziz cared about and liked was that Mr. Rather has a reputation for being a foaming-at-the-mouth critic of the President of the United States and an obvious opponent of war with Iraq.

"Knew the region well and had a reputation for being independent?" Who would have guessed that Dan Rather does such droll stand up comedy?

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Krugman v Kuttner: Not Exactly The Fight Of The Century

If this were a boxing match, calling it would be strange:

This is Don Luskin at ringside in Madison Square Garden! There's the bell!

Krugman has just hit Kuttner with a savage left uppercut!

Kuttner comes back with a left to the body!

Krugman counters with a left to the jaw!

It's a left!

Another left!

And ... a left!

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More On That Shay

Aaron Haspel has some additional thoughts on Oliver Wendell Holmes Sr.'s poem: The Wonderful One Horse Shay.
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You Can't Always Get What You Want (Satisfaction)

Brad DeLong complains about the economists' letter supporting the Bush Administration's budget proposals. His complaint has landed him in some hot water.

Professor DeLong comments on this criticism in a post bearing the curiously appropriate style and grammar of a Valley Girl rant:

Wow! Gee! Especially since my major complaint was a "process" one: my major objection was not that they had signed a letter in support of the Bush plan, but that they hadn't drafted their own economist-type letter--they'd just signed something very short drafted by some clueless dweeb associated with White House media affairs.

Professor DeLong's original post quite clearly states his three reasons for objecting to the letter. But - contrary to what he says in his "explanation" - it is untrue that his "major objection was not that they had signed a letter in support of the Bush plan, but that they hadn't drafted their own economist-type letter..." In fact, Professor DeLong's major objection was that the letter did not say what he wanted it to say:

And--here is ... the reason I was most disappointed--exercising their muscles would have materially improved the chances that Bush Administration economic policy would move in a positive direction. ... The chance of establishing the dum metuant point, that good substantive economic policies are worth having, if only because otherwise one's stable of economists won't cooperate, has been lost.

Professor DeLong objected to the letter because he objects to the substantive economic policies the letter supports. Could a reasonable person believe otherwise? He did criticize the economists for signing the letter rather than drafting another, but only because their signing the letter increased the likelihood that those substantive economic policies would become reality. Professor DeLong would have objected every bit as much as he did if the economists had drafted their own letter in favor of the same substantive economic policies. In short, it is untrue that his major complaint was a "process" one.

Another criticism he offers up:

If you have an opportunity as a professional economist to gain some media attention, you have a duty to use that opportunity to raise the level of the media debate over economic policy. This letter doesn't. It doesn't tell anyone who reads it why cutting dividend taxes would (if the appropriate adjustments are made to hold the right other things constant) be a good idea.

His assertion that this matter involved a failure of "duty" is fatuous. From where does this "duty" come? It is perfectly fine for an economist to seek economic progress solely through his or her academic writings - and turn down every, single "opportunity as a professional economist to gain some media attention." One's academic writings have to be of high quality to take that route and actually be effective. In short, there is no such "duty" to grandstand. Of course, some good economists do, and more mediocre economists must, resort to manipulating the media and the government/academic revolving door for influence.

And what about his complaint that "[t]his letter doesn't... tell anyone who reads it why cutting dividend taxes would (if the appropriate adjustments are made to hold the right other things constant) be a good idea?" If this is a valid criticism of this letter, then it applies equally to the letter signed by 450 economists opposing the Administration's plans (which Professor DeLong did not sign). That letter states, without explanation:

The permanent dividend tax cut, in particular, is not credible as a short-term stimulus. As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex, and could be, but is not, part of a revenue-neutral tax reform effort.

So all of the 450 economists signing the opposing letter and the 250 economists signing the letter of support signed letters to which Professor DeLong's objection applies. Maybe the reason for this is that each of these letters was crafted to fit in a newspaper ad. It wouldn't have mattered who wrote them, there is no way they could have contained any coherent explanation of "why cutting dividend taxes would (if the appropriate adjustments are made to hold the right other things constant) be a good idea." Maybe these 700 economists thought that because they were respected in their field they could "raise the level of the media debate over economic policy" just by signing a letter with some general conclusion which did not read like an economics encyclopedia - and they were right. All of those 700 economists seem to understand these simple facts that Professor DeLong says he cannot grasp.

Professor DeLong also complains that the letter supporting the Administration "doesn't tell anyone who reads it why it would improve corporate accountability (a thing that nobody has explained to me to my satisfaction)." Now a lot of people have tried to explain this issue, and Professor DeLong says that none of those explanations is to his satisfaction. So how could a letter designed to fit in a newspaper ad possibly include an explanation? He is again dissembling. In any event, maybe this will help:

One consequence of the corporate income tax, which came into being in 1909, is that it has lessened shareholder control over corporate assets. A key way shareholders exercised control in the pre-corporate tax era was by demanding that firms pay out a large percentage of their profits in the form of cash dividends. Among other things, this helped guarantee that corporate earnings were "real" and not based on creative accounting. At this time, it was common for companies to have a dividend-price ratios of about 5 percent.

Eventually, companies and shareholders figured out that it was mutually beneficial either to retain corporate profits, thereby raising the value of company assets, or use those profits to buy back shares on the open market. The effect of both strategies is to raise stock prices. Thus, shareholders get their earnings in the form of capital gains, rather than dividends. Not only are capital gains more lightly taxed than ordinary income, but shareholders themselves decide when to pay the tax, since capital gains taxes are assessed only when shares are sold.

The flexibility afforded by receiving one's profits as capital gains allowed sophisticated investors effectively to pay nothing except the corporate tax. They could eliminate even the capital gains tax on their shares by realizing gains only when they had offsetting losses, or by borrowing against their shares.

As a consequence, there has been a steady decline in the number of companies issuing dividends and the amount of such pay-outs. According to economists Eugene Fama and Kenneth French, the percentage of large companies paying dividends in a given year has fallen from 68.5 percent in 1978 to 21.3 percent in 1998. Over this same period, the dividend yield fell from 5.28 percent to just 1.49 percent. In effect, most shareholders are now getting virtually all of their investment returns from capital gains rather than dividends.

Unfortunately, in the process, investors lost an important source of control over the assets they ultimately own. Freed from the need to come up with hard cash to pay quarterly dividends, corporate managers had much more flexibility in how to present a company's performance to shareholders. Although Securities and Exchange Commission rules and accounting conventions theoretically kept them honest, inevitably there were gray areas that could be exploited by aggressive managers.

Or perhaps Professor DeLong would prefer to read about how the taxation of corporations encourages corporate management to acquire other companies rather than concentrate on what performance management can extract from the corporate assets they already control - thereby avoiding full accountability for their past performance. In that case, he could study this paper by Nobelist Myron Scholes and others.

And there's lots more out there if he cares to look. But, then, the whole question is whether the explanations are to the Good Professor's personal satisfaction. And that is a matter that requires competence, intellectual honesty and open mindedness.

But for now it is enough to contemplate how much confusion he exhibits, and how many not-very-hard concepts and considerations he misses or misunderstands, in connection with just one short letter. It terrifies me to imagine what it is like to be his student.

Has he had accomplished students?
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Curing Health Care

In today's Wall Street Journal Walter Olson scribes a terrific article on the ongoing medical malpractice wars that threaten the heart of American health care. Subscription to the Journal is required, but the following excerpt should give some suggestion of what is at stake:

[A] comprehensive new three-year study surveying what is known about the causes of cerebral palsy and brain injury in full and near-full term infants ... [finds that] "the vast majority" of brain damage and cerebral palsy among these infants originates in factors largely or completely outside the control of delivery-room personnel -- factors that include prenatal infection, genetic fetal abnormalities, disorders of blood clotting, and maternal thyroid problems and diabetes. Contrary to what had long been assumed, interruption of oxygen during labor is "not a significant cause in most of the cases." Why is this news? In part because lawsuits blaming OBs for cerebral palsy and other infant brain damage may constitute the single biggest branch of medical malpractice litigation, yielding lawyers the highest settlements and the richest contingency fees, rivaled only by failure to diagnose cancer. If ACOG's report is to be credited, much of this litigation looks to be scientifically unfounded.

There's lots more, all of it worth reading and thinking about.

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Ah, Tradition!

Daniel Kahneman has no doctorate in economics!

And he was allowed to found an entire school of economics! So he seems to be in the business of granting doctorates in economics to other people.

Somebody alert the Nobel Prize Committee who awarded him the Nobel Prize in Economics just a few months ago!

Somebody alert TAPPED!

And for God's sakes, don't let him sign any letters to the President pretending to be an economist! For, as TAPPED says, by tradition, one can't claim to be an economist unless one has the sheepskin - and a mere Nobel Prize in economics sure ain't sheepskin, although it does help to pay the bills.

Now that he's won his Nobel Prize in economics, maybe some university will give Professor Kahneman an honorary doctorate in economics - that all-important sheepskin - which should clear up his checkered past with TAPPED.

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Wednesday, February 26, 2003

Scenes Of Clerical Life II

Peter Sean Bradley has some very interesting things to say about the ongoing attempt by a Massachusetts state court to impose a "reasonable care" standard on the Catholic Archdioceses (and, by extension, all churches) there, including a cite to the very apposite Richelle v. Roman Catholic Archbishop of San Francisco (filed 2/14/03) which came down on February 14, 2003 and of which I had no knowledge at all.

Many thanks, Peter.
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Not An Ornament To His Profession

Judge Richard Posner on Justice William O. Douglas:

Apart from being a flagrant liar, Douglas was a compulsive womanizer, a heavy drinker, a terrible husband to each of his four wives, a terrible father to his two children, and a bored, distracted, uncollegial, irresponsible, and at times unethical Supreme Court justice who regularly left the Court for his summer vacation weeks before the term ended. Rude, ice-cold, hot-tempered, ungrateful, foul-mouthed, self-absorbed, and devoured by ambition, he was also financially reckless--at once a big spender, a tightwad, and a sponge--who, while he was serving as a justice, received a substantial salary from a foundation established and controlled by a shady Las Vegas businessman. ... The deterioration manifested itself in paranoid delusions, senile rages and sulks, sadistic treatment of his staff to the point where his law clerks--whom he described as "the lowest form of human life"--took to calling him "shithead" behind his back, and increasingly bizarre behavior toward women, which included an assault in his office on an airline stewardess who had unsuspectingly accepted an invitation from this kindly seeming old man to visit him there....

One can be a bad person and a good judge, just as one can be a good person and a bad judge....Douglas was not a good judge... [T]aken as a whole, Douglas's judicial oeuvre is slipshod and slapdash. Here are typical criticisms, none of them by conservatives. "His opinions were not models; they appear to be hastily written; and they are easy to ignore" (Lucas Powe). Their carelessness is rooted in "indifference to the texture of legal analysis, which arises from an exclusively political conception of the judicial role" (Yosal Rogat). "Douglas was the foremost anti-judge of his time" (G. Edward White). A careful study of his tax opinions by Bernard Wolfman and others has documented Douglas's unreasoning hostility to the Internal Revenue Service and accuses him of "refusing to judge in tax cases."

And Posner's just warming up!

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That Old Pistol Whippin' Justice Stevens

The New York Times reports:

The Supreme Court ruled Wednesday that federal racketeering and extortion laws were improperly used to punish aggressive anti-abortion protesters, lifting a nationwide injunction that barred people from interfering with clinic business. The court's 8-1 ruling applies to protests of all sorts, not just at abortion clinics.

Upon reading that a Supreme Court ruling has come down 8-to-1, there is a strong momentary inclination to guess: who was the dissenter? Supreme Court Justices are unpredictable and the answer is often surprising - but here I was in no doubt from the instant I read the article lead. Justice Stevens dissented, of course.

Why was this obvious? Because the case under consideration essentially came down to whether federal racketeering and extortion laws could be used to pistol whip aggressive protesters. Yes, the actual Court opinion is much more esoteric:

We first address the question whether [the protestors'] actions constituted extortion in violation of the Hobbs Act. That Act defines extortion as "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." 18 U. S. C. §1951(b)(2). ... [The government and other parties opposing the protestors] asserted ... that [the protestors'] committed extortion under the Hobbs Act by using or threatening to use force, violence, or fear to cause [women seeking abortions] "to give up" property rights, namely, "a woman's right to seek medical services from a clinic, the right of the doctors, nurses or other clinic staff to perform their jobs, and the right of the clinics to provide medical services free from wrongful threats, violence, coercion and fear."

Now, whatever other irregularities may be committed by overly aggressive protestors obtaining property is not one of them. The attempt to stretch the meaning of "property" to include "a woman's right to seek medical services from a clinic, the right of the doctors, nurses or other clinic staff to perform their jobs, and the right of the clinics to provide medical services free from wrongful threats, violence, coercion and fear" is clearly improper in the context of a criminal statute. Such a construction would amount to a government pistol whipping of protestors of all stripes - and was seen in this light by 8 Justices.

This was not a case aligned on current political lines. The Court's decision had been sought by activists like actor Martin Sheen, animal rights groups and even some organizations that support abortion rights, all of whom argued that protesters of all types could face harsher penalties for demonstrating, if the court ruled otherwise.

So why is it so obvious that Justice Stevens would dissent from what should have been an easy case? Simply because Justice Stevens has long seen nothing wrong with government pistol whipping as a substitute for correct policy. For example, in his critique of antitrust policy, The Antitrust Paradox, Robert Bork lamented the attitude among some policymakers and practitioners that antitrust need have neither coherence nor an intellectual foundation: "Several hundred lawyers at a meeting of the Antitrust Section of the American Bar Association listened to a nationally prominent attorney, who subsequently became an Associate Justice of the Supreme Court, contend that it was fruitless to worry about antitrust's intellectual problems. Antitrust, the attorney said, is in the good old American tradition of the sheriff of a frontier town: he did not sift evidence, distinguish between suspects, and solve crimes, but merely walked down main street and every so often pistolwhipped a few people."

That "nationally prominent attorney, who subsequently became an Associate Justice of the Supreme Court" is Justice John Paul Stevens.

Is it true, as Justice Stevens insists that "The Court's murky opinion seems to hold that this phrase [the obtaining of property from another] covers nothing more than the acquisition of tangible property?" Of course not. And the Court goes out of ts way to point out that Justice Steven's misuse of precedent is dotty and that the Court is not attempting in this case to define exacly what "property" is for purposes of the extortion laws. But Justice Stevens is. Justice Stevens thinks that anything of "value" is "property," which is not the way those words are used. General political gain and having one's own candidate elected to office also have "value" - so demonstrators who support their candidates too aggressively commit "extortion" as far as Justice Stevens is concerned. And surely Justice Stevens must think that the vote of a member of Congress is "property" since such a vote has value at least on par with what he accepts as "intangible property." And if a vote is "property," then every member of Congress or an administrative agency must be both accepting and giving a criminal bribe every time the member trades his or her vote for the vote of another - since bribery surely includes (to Justice Stevens) taking "valuable property" in exchange for one's vote.

And it is nothing short of a disgrace that the Bush Administration defended the rejected construction of the law to the extent it did.


Above, I characterize Justice Stevens dissenting position as equating "property" with "things of value" (or, more exactly, "obtaining property" with "interference with things of value"). Justice Stevens does not expressly write that. He writes: "[T]he term "property" [has] an expansive construction that encompasses the intangible right to exercise exclusive control over the lawful use of business assets. ... The use of violence or threats of violence to persuade the owner of a business to surrender control of such an intangible right is an appropriation of control embraced by the term "obtaining."

That is: My description of what Justice Stevens is doing here is my conclusion, not his admission.

The majority opinion is based on its conclusion that the Hobbs Act did not apply in this case because, as the majority puts it, Petitioners neither pursued nor received "something of value from" respondents that they could exercise, transfer, or sell. Justice Stevens objects to the restriction of the kind of "value" implied by the majority opinion (something they could exercise, transfer, or sell) and wants to reconstrue "obtaining" this generalized property to include "interference with" that property. He indicates no boundaries for his generalized "property" other than it must be a thing with "value" of some form (not just something one can exercise, transfer, or sell).

I submit that when his shell game stops, there is nowhere for his argument to go other than to include in "obtaining property" all acts of interference with activities valued by the persons conducting such activities.

Further, how often is it the case that a person voluntarilly engages in an activity that that person deems to have no value of any form? For legal purposes, never. So Justice Stevens' approach has nowhere to go than to include all acts of interference with any voluntary activity of another within the definition of "obtaining property" under the Hobbs Act. In my opinion, Justice Stevens should be writing for the Onion, not the Supreme Court.
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A Jump In Unemployment Almost Everyone Can Enjoy

The Wall Street Journal reports:

President Bush's proposal to end the double taxation of dividends has been killed off so many times in the media that many investors think it'll never happen. But the real news is that the idea has been gaining support, as politicians and business take time to understand it.

This is excellent news in one respect. "Double taxation" of corporate income is silly, counter-productive and anti-growth: Another study, by the Business Roundtable, shows that the dividend proposal will increase job creation by as many as 500,000 a year over the next five years. (On a side note, the Journal refers to this five year effect as a "short term" benefit - but "short term" within the Beltway clearly means "before the next election." This aspect of the President's tax plan will not create meaningful "short term" benefits under that Beltway definition.)

But in another respect the news is not so good, because the President's program eliminates the wrong tier of such double taxation: the taxes paid by individuals. It's the corporate income tax that should go - not the tax on dividends. Even the liberal-leaning economists who signed the letter opposing the President's tax plan all agreed that the corporate income tax should go instead of the tax on dividends. (Perhaps it was this letter's inclusion of this common sense, obviously appropriate proposal that deterred Brad DeLong from signing it - notwithstanding his hyper-partisan distain for the President.) While that letter did say that its signers would prefer that corporate income tax repeal be included in a revenue neutral reform - the issues of overall tax revenue and tax structure are not identical, and I believe that most of those signers would hold that repeal of the corporate income tax would benefit the economy regardless of the level of overall tax revenue.

Of course, many people have pointed this out and - as the Journal admits - the President's approach is correct given the current political reality that the Tom Daschle's and Nancy Pelosi's of the world would have fallen upon any proposal to eliminate the corporate income tax like hungry political wolves.

But if, as the Journal reports, the substance of the President's approach can be accepted by enough people (especially in Congress), then perhaps it can be given the right form.

The cost differences between eliminating the corporate income tax and the dividend tax would be huge. Because the effect of the President's proposal is located at the wrong (individual taxpayer) tier, it must be - and is - enormously complex. The complexity essentially models as closely as possible at the individual level tax effects that could be achieved by actually eliminating existing complexity (and introducing no new complexity) if the corporate tax were eliminated.

To get some understanding of the dimensions of the cost and complexity differences between eliminating the corporate income tax and eliminating the tax on dividends one might consider that eliminating the corporate income tax would (1) put every corporate tax accountant and tax lawyer in the country out of business, (2) eliminate the entire departments maintained by every major investment bank in the nation for the sole purpose of cranking out tax-advantageous financing structures of the very type Congress is now saying it is shocked, shocked! to find that Enron employed to "manipulate" its earnings, and (3) completely eliminate all incentives on corporate management to spend time stroking their employer's tax position - leaving management lots more time to actually run the company and make money for their investors and a lot fewer opportunities to obscure managment's performance by manipulating tax obligations.

But the President's proposal will greatly increase the complexity of many aspects of the corporate/investor interface. The substantive benefits from the President's proposal are very real - much more than enough to justify the added complexity. But there is absolutely no good reason for accepting such additional complexity and cost when substantive tax effects which are almost the same as those the President is proposing could be achieved by Congress enacting a new statute of one sentence: The corporate income tax is hereby repealed and the Internal Revenue Service is authorized and instructed to publish such rules and procedures reasonably necessary and proper to effect an orderly and efficient termination thereof. And then all those tax accountants and tax lawyers and tax investment bankers could line up at the job board!

Wouldn't it be nice to see the unemployment rate jump just that much?

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Tuesday, February 25, 2003

Berkeley Dough Boy

Don Luskin posts a bracing critique of Brad DeLong's web site. DeLong is as bloated and insubstantial and self important as any product of modern American academics I know. A veritable Pillsbury Dough Boy of economics.

And Luskin is also right that Professor DeLong is a downright copyright kleptomaniac. His routine appropriation of entire magazine articles and other proprietary materials - sometimes with little or no commentary or criticism of his own - clearly often goes way beyond any legally accepted notion of "fair use." I do not know if taxpayer money is used to support Professor DeLong's website or if the University of California tolerates systematic copyright violation by its faculty members. But many other institutions of higher education do carefully point out to their students and faculties that copyright violation is a federal crime, that all providers of Internet access have a responsibility to ensure compliance with the Digital Millennium Copyright Act of 1998, and that failure to do so can expose the University to significant penalties in the tens of thousands of dollars for each violation.

Based on Professor DeLong's ongoing, casual intellectual property theft and his personality as generally displayed on his blog, I suggest that it might be interesting to ask around Berkeley economics and other places the Good Professor has inhabited over the years to see if Professor DeLong has any history of others - especially students, junior faculty and authors of papers which he has refereed for peer review professional journals - claiming or suspecting that he has stolen ideas and published them as his own. I suggest this simply because a habit of one form of egregious intellectual property theft naturally raises the question of whether the thief has the same casual attitude about misappropriating other forms of intellectual property. My guess (and it is only a guess) is that Professor DeLong is likely as big a stinker with respect to both forms of theft. And from the high handed fashion with which he deals with his blog critics, I also would not be surprised to find that the Good Professor uses his academic positions and basically abusive style to threaten and pound potential accusers down. So as a further guess I suggest that few who have been robbed by Professor DeLong (if there are any) would readily go public.

But discreet inquiries might be made concerning the reach of those DeLongian sticky digits - those that grasp the copyrights of others with such flagrant, narcissistic entitlement. Such inquiries might finger out some interesting consistencies in the character of this academic Dough Boy.

UPDATE: This post has predictably been controversial, which is fine. But The Man Without Qualities finds it interesting that I have not received - either by e-mail or in any post - a single defense of Professor DeLong's flagrant practice of copyright kleptomania notwithstanding the widespread and intense distain for much copyright protection in the Blogosphere.
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The Twentieth Century And After

One interesting characteristic of a receding wave of racial or religious bigotry is the often hilarious rattle of the stupid human pebbles left behind. I was reminded of this great source of humor by a poisonous letter to Bill O'Reilly from a certain Howard Veit - who appears to be a frequent commenter on many blogs. The letter inarticulately sputtered:

"O'Reilly you deserve what you got. You're just a dumb mick who got lucky."

First things first. "A dumb mick?" The venomous Veit should keep in mind that the correct epithet is "thick mick," - or, sometimes, "Thick Mick Bastard". Just as a detail of historical accuracy. Of course, in fairness to Mr. Veit one must acknowledge that the pristine contempt and mindlessness conveyed by the historically accurate insult has more recently been sullied by certain pornographic and extra-Celtic associations, which he perhaps was selflessly struggling to avoid.

But what really concerns me about Mr. Veit's letter is its ambiguity. Is "dumb mick" intended as a rage against Mr. O'Reilly's Irish ancestry - or is his Catholic faith also necessary to render him "dumb?" At one time - many years ago - this particular insult would probably have been construed to refer to Irish Catholics. True, most people today seem to think that religion and intelligence are not so closely related - but perhaps not Mr. Veit. Is Irish-American-Protestant writer David E. Kelley of the ABC television series "The Practice," and many other shows, also a "dumb mick who got lucky?" Is Mr. Veit's a defanged anti-Irish slur or a somewhat nastier anti-Catholic one? Clarity, Mr. Veit, strive for clarity. And what kind of post-modernist, critical-legal-studies-ridden society have we become that the meaning of a mindless personal insult has now been so severely undermined. Where are those nineteenth century certainties we all crave like good, hi-fat comfort food?

Yes, yes - it's not the nineteenth century now. But, on the other hand, the rattle of things such as Mr. Veit's little pebble of bigotry does yield some comic effect. It's true:

Though the great song return no more
There's keen delight in what we have:
The rattle of pebbles on the shore
Under the receding wave.

OVERSIGHT CORRECTION: Original Veit letter language received from Henry Hanks.

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Sunday, February 23, 2003

Sic Et Non Krugman

Or, in this case, ridiculous and counter-ridiculous.

Jay hits this one out of the ballpark.

But there are no corrections from the Times, Herr Doktorprofessor Krugman or the ever-ridiculous Atrios, who says that Paul Krugman hates America - even as Atrios helps spread the endorsed, uncorrected Krugmania.

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Saturday, February 22, 2003

Soaking Them

Some years ago I found myself in discussions with a federal court of appeals judge about whether punitive damages should be allowed in certain asbestos injury cases. Some states in the appeals circuit clearly did allow punitive damages awards but one state's law (the state in which the case we were discussing was then pending) seemed not to allow punitive awards.

As it happened, the major source of funding for all actual and punitive damages in asbestos cases brought in the states included in that federal appeals circuit was a common trust that had a determined, finite amount of money in it. If punitive awards were allowed, the common fund would be drained by large punitive awards before some plaintiffs with actual damages to their lungs even discovered what had happened to them - at which point there would likely be nothing left to compensate them for their actual ills and scarred lungs.

The federal appeals court had already tried asking the relevant state supreme court to clarify the matter, but the state court refused to answer the question. In such cases the federal courts are generally supposed to guess what the state supreme court would do with the question if made to decide it. After much indeterminate legalistic head scratching, the federal judge tried a more practical approach. He personally knew every member of the local state supreme court (it was a small state), and he said:

"Look, every other state in this circuit is allowing its residents to get punitive damages, which will drain the trust and screw future plaintiffs. The question we're considering is whether, knowing what the other states are doing, our state supreme court is going to restrict the citizens of this state to actual damages while the residents of other states run off with big punitive damages? We're just being overly subtle and therefore stupid. There's no doubt what the answer would be if the issue were put to that supreme court in that way. The court would say: SOAK 'EM! SOAK 'EM!"

The federal court therefore decided to allow punitive damages. The wisdom of its decision was subsequently confirmed when the state supreme court actually decided the issue - reversing its own fairly clear but somewhat ambiguous precedent to reach that result. The horror of the decision was also confirmed when the trust was quickly drained by large punitive damages awards.

If the trust had been governed by law common to the states in the circuit the question would probably have been decided the other way: punitive damages would have been prohibited (or subordinated) to ensure that actual damages awards could be paid in the future. Prior to 1938 the federal courts probably would have decided the matter that way, under what was known as "federal common law." Indeed, a dissenting judge in the asbestos case wanted to revive federal common law for this reason. But the 1938 Supreme Court case Eire v Tompkins and its descendents pretty clearly ruled that out.

I think of my discussions with that federal judge every time I see a case in which some state court awards a huge damages claim against some out-of-state interest: manufacturers and insurance companies, especially. The overriding interest is so often whether imposing liability will bring money into this state.

That is, in so many cases the state court's guiding legal principle seems to be: SOAK 'EM! SOAK 'EM!"

UPDATE: I'm reminded by an astute reader to emphasize the role played by the trial lawyers bar in distorting the purposes of damages awards, and that that bar is most handily represented nationally by Senator John Edwards.

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Thursday, February 20, 2003

Scenes Of Clerical Life

A state court in Boston has now rejected an attempt by the Catholic Archdiocese of Boston to use the First Amendment to shield it from more than 400 lawsuits claiming sexual abuse by priests. The Archdiocese argued that the separation of church and state prevented civil courts from making judgments on how it supervised priests:

Superior Court Judge Constance M. Sweeney ruled that the lawsuits should proceed toward trial because the cases will not delve into religious principles, such as church doctrine, but the handling of allegedly abusive priests by their superiors. To accept the church's argument, Sweeney wrote, would be akin to granting the church blanket immunity from civil lawsuits. ''If the court were to recognize the defendants' sweeping church autonomy doctrine ... the result would be that church representatives could exercise all the rights and privileges the secular law affords yet not be burdened by any of the essential civil laws that protect the safety of all members of society, particularly children,'' she wrote.

Judge Sweeney's ruling is apparently based on her finding that a civil court may impose a "reasonable care" standard on a church hierarchy the way the state may impose a "reasonable care" standard on a corporate board of directors, but may not stray into religious matters - such as determining whether the Archdiocese wrongly ordained or failed to "laicize" the priests. But this grossly overstates the degree into which a civil court may entangle itself with church affairs. For example, the Supreme Court has determined that the First Amendment includes 344 U.S., at 116:

[A] spirit of freedom for religious organizations, an independence from secular control or manipulation - in short, power to decide for themselves, free from state interference, matters of church government as well as those of faith and doctrine.

"Reasonableness" standards are objective standards determined by weighing costs against benefits. Judge Sweeney seems to think that such a balancing can be effected on secular factors alone. That is grossly wrong. A religious administrator must weigh both the religious and secular costs and benefits of any decision. Secular risks must sometimes be taken to save souls, which (within the precepts of the religion) are invaluable, and secure other benefits seen (by the religion) as not of this earth. But a civil court cannot take spiritual benefits into account. Judge Sweeney's approach therefore requires a civil court to second guess the administrator or religious organization by conducting the court's own cost/benefit analysis while assigning a zero value to any religious benefit the decision may have. In other words, under Judge Sweeney's approach religion and spiritual benefits are officially and expressly determined to be worthless as a matter of policy by civil authorities.. It is hard to imagine a ruling more inconsistent with the First Amendment.

Whatever "reasonableness" means in this case, there are certainly people who are incapable of reliably providing "reasonable" supervision. Judge Sweeney makes religious groups run by mystics who spend all their time in religious contemplation - to the exclusion of reasonable matters - now mere fodder for the tort bar. The civil court will now take it upon itself to determine when a member of the clergy is too old or infirm to occupy his or her office while providing whatever the court deems to be "reasonable" supervision of the flock. No more wise old rabbis or parsons or eccentric dottering Anglican ministers, nearly blind and plagued by creeping senility but nonetheless holding on and dispensing periodic jewells of wisdom and experience. Judge Sweeney says they don't have what it takes to fend off the tort lawyers.

By way of background, the issue here is not whether an individual member of the clergy can be held liable for his or her own acts. The question is whether or when the clergy's religious organization - in this case, the Archdiocese - can be held liable. Judge Sweeney has held that the organization can be held liable if it was merely negligent in supervising offending clergy. This case involves no claim that clergy members have any religious right to abuse their charges, so recent Supreme Court decisions upholding generally applicable laws not aimed at religion which have the effect of restricting religious practices (such as legal prohibitions on drugs used in religious services) are not applicable.

The amounts of money involved are large - and some organizations, including that Archdiocese, may soon be forced into bankruptcy. The whole affair has been compared to the tobacco lawsuits. One plaintiff attorney noted that Judge Sweeney's decision ''puts the church in the same shoes as other individuals and other corporations.''

So it does. That's exactly what's wrong with it.

The church is not a corporation. A church is not created by the state and need not take the form of a corporation, a limited liability company, a partnership, nor any other government-recognized entity - and the state is not entitled to impose what it believes to be good policies of corporate governance on a church. In particular, the First Amendment leaves the state very limited power to hold a religious group liable for failure to exercise any particular degree of control or supervision - and a "reasonable care" standard surely goes far beyond that state power.

The analogy between corporations and churches conceals more than it reveals. For example, corporations selling stock are subject to the securities laws and have the burden of proving that the materials they present to their investors is "true" - but it would be absurd to argue that the First Amendment allows the state to require a religious body to prove that the teachings it presents to its members are "true." In other words, the state may not put the church in the same shoes as "other corporations." Also, while members of general partnerships are personally liable for all obligations of the partnerships, the shareholders of a corporation are not personally liable for obligations of the corporation. But while the state could change its corporate law and hold shareholders of a public company liable for corporate liabilities, the First Amendment does not permit the state to hold all Catholics in Boston liable for acts of Catholic priests. In other words, the state may not put the church in the same shoes as general partnerships.

In the history of religion since the Reformation - and Christianity, in particular - the question of who holds what authority and responsibility in a church has featured prominently. Proposed answers run from centralization (exemplified by the Roman Catholic Church) to atomization (exemplified by some Evangelical sects). Other authority structures feature bishops, church councils and congregational elections, each with varying degrees of asserted secular and religious authority. And, of course, there are distinct authorities within church entities - an abbot's authority over a monastery, for example.

The religion clauses of the First Amendment take all American governments out of the business of regulating or structuring the religious or secular government of religious bodies. It is often said that the First Amendment imposes a "wall of separation" between church and state.

Further, the point of the Boston lawsuits is to seize church property. The Supreme Court has quite clearly held that matters of ownership of church property are to be determined by church authorities - not civil courts. It is entirely open to the members of a religious group to hold all church property as they see fit. They could hold it severally - that is, each member of church could be declared to own a ratable but separate portion of the church property. Or the church could determine that one individual - such as a bishop - "owns" all of the church property. It should follow that church property (as opposed to the personal property of particular members of the clergy) is not available to satisfy a judgment based on the acts of one of its clergy, no matter how high, unless the church has agreed to make that property available. That state courts may adopt "neutral principles" to determine church property disputes is not to the contrary, since that doctrine concerns rules for determining what churches have chosen to do with their property - not what they are permitted to do with it.

In short, Judge Sweeney's decision is a catastrophe for religious freedom in the guise of vindication of victims' rights. The Archdiocese may not appeal this decision, since it says it only raised the issue to satisfy its insurers. But if the Archdiocese seeks bankruptcy protection, the Archbishop may find himself in the uncomfortable position of a trustee with civil fiduciary duties to the Archdiocese's creditors - fiduciary duties that require him to raise such arguments with full force.

Will the advocates of Judge Sweeney's approach relish the inevitable motion to replace the Archbishop with a trustee in bankruptcy if the Archbishop fails to fully defend the Archdiocese's assets?

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Tuesday, February 18, 2003

Witless In Seattle

The Man Without Qualities and family were in Seattle over the weekend, visiting old friends. We - including a total of four eight-and-under children - took in the Science Museum located in the park around the Space Needle. While we were inside the Museum exclaiming at the device that permits one to create huge soap bubble membranes, a fully functional beehive and, of course, the picnic table arrayed with various edible insects, the antiwar protestors were massing outside for their march into the city. The protestors began to assemble after we entered the museum and the last of them had just trotted off after we came out, leaving the enduring park population of popcorn, doo-dad, hotdog and cotton candy vendors making surprisingly (at least to me) skeptical comments about the demonstrators. One wondered if, perhaps, the demonstrators didn't buy enough for all the ruckus they made, while displacing the more reliable family purchasers of such victuals and paraphernalia.

But we rode the Monorail into their midst, since Seattle Center - the zone immediately surrounding the southern Monorail terminus - seemed to be a point of regrouping. Many of our fellow passengers on the Monorail could be heard repeating what a few of the park vendors had also suggested - that there were north of 30 thousand people in the demonstration. I'm not sure where that number came from, although some of the people repeating it said it came from the "demonstration organizers." In any event, it was clearly absurd. The Man Without Qualities grew up in a town of a little more than 30 thousand - and there were certainly far fewer than that on the Seattle streets. Later news reports placed the number at between 10 and 20 thousand - about half of number the protest "organizers" claimed. There was some - but not much - drizzle.

The protestors carried utterly predictable, pre-printed signs and chanted utterly predictable pre-processed slogans. There seemed no strong emotion. The entire affair resembled not so much a popular outpouring of outrage or concern as something lifeless staged for a made-for-TV movie on a tight budget, close-ups to be mostly avoided.

This form of protest seems odd to me. Printed placards, chants, 60's nostalgia, the obvious staging for television news effect. The form of protest seems to overwhelm its intended content, and the strongest message conveyed was simply:


Where there is no better means of communicating one's message, the restrictions and implied message imposed by this form may be overcome. It is in just such circumstances that the form developed and remains vital. Where, for example, the government controls most means of communication - the Shah's Iran or the later Soviet Empire, for example - how else can one communicate effectively? Even where there is a free flow of information, one can see a role for such protests where the media simply fails to present one's argument to the public. But these protestors' message and arguments are already and constantly disseminated in many ways: from Senator Levin's petards to the squirrelly reporting of National Public Radio to the sly, self-serving omissions and distortions of Dan Rather and most of the rest of the liberal media. In such circumstances the form seems to convey yet an additional message of the protestors' deliberate misconception of the society in which they live and their inflated and self-mythologising opinion of their place in it.

UPDATE: Tim Blair posts interesting comments. And more from Angela Bell.

FURTHER UPDATE: This San Francisco report squares pretty well with my Seattle experience as far as the inflated crowd size goes.

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Thursday, February 13, 2003

One, Two, Three

Mr. Bush's aides do not seem especially concerned about the prospect of a veto [in the Security Council]. But they concede they do not know if they have the votes to pass what one official called "a clearly worded resolution." Several officials expressed fear today that the deep divide over Iraq that has already triggered a crisis within the NATO alliance — a formal meeting of NATO ambassadors was called off today — may soon engulf the European Union.

The United Nations, NATO and the EU. The existence of each one threatened by Franco-German meglomania, denialism and obstructionism.

This is not necessarilly a bad thing.
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The reliability of "lie detectors" (polygraphs) is often successfully condemned.

But when an informant reporting that al Qaeda is preparing to set off a "dirty bomb" in New York or Florida fails a polygraph test, to some people it's suddenly "the fabricated report."

Strange it is. Passing strange.
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How International Law Evolves

Japan has warned it would launch a pre-emptive military action against North Korea if it had firm evidence Pyongyang was planning a missile attack. Defence Minister Shigeru Ishiba said it would be "a self-defence measure" if North Korea was going to "resort to arms against Japan". Mr Ishiba said it would be too late if a North Korean missile was already on its way.

So "firm evidence Pyongyang was planning a missile attack" is enough for even Japan? Is there no need for firm evidence Pyongyang was planning an imminent missile attack? Isn't the magic word under international law supposed to be "imminent?"

Just an oversight, Mr. Ishiba? Or did the vision of, say, a large number of burning suburban Osaka housewives spur a reconsideration of the legal standard?

And is that a "plan" with or without contingencies, Mr. Ishiba?

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All About The Oil ...?

Lynne Kiesling thoroughly and elegantly shows that it is for some, ... but Max Boot shows that does not include the United States.
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This post should not be read in any sense as taking pleasure from Senator Kerry's medical condition, and I wish him a fast recovery. Nor would I wish a condition such as his on him or anyone else.

That being said, I note that the Senator has energetically presented his condition and surgery as minor. On its face, this post abides by the Senator's energetic presentation of his condition. But I admit to disingenuousness here, because the main point of this post is that Senator Kerry's presentation of his condition should not be believed without a great deal of additional proof.

The Senator presents his condition and surgery as posing no substantial impediment to his ability to run or serve as President. His doctor has fulsomely confirmed his patient's politically convenient self diagnosis. But his medical condition is potentially very serious. The same disease demolished Michael Milken's life and that of many other men, and was a major reason why Rudy Giuliani withdrew from his Senate campaign in 2000. The Giuliani precedent in particular indicates that Senator Kerry's current representations - even on their own terms - are manipulative. He is now attempting improperly to harvest public sympathy for his condition and surgery without cultivating the doubts that should inevitably come with that sympathy. The Senator is now publicaly showing insufficient respect for his own medical condition, and there is no good reason he should not be criticized for what he is doing now. There is no need to wait for his recovery - or for a indication that he is having more trouble recovering than he is now saying he expects - to point out fully what he is about. If one is supposed to be inhibited in criticizing him at the time of his surgery, then shouldn't one be all the more inhibited at the time he experiences "unexpected" complications? Is one only allowed to criticize Senator Kerry on this point if it all turns out for the best?

The Senator has established a substantial record of promulgating other energetic confections to advance his Presidential ambitions, including his preposterous claim to have been illuminated from within by a Jewish heritage which he has been concealing for fifteen years - and is now denying he has concealed. That misrepresentation is manipulative and serious, and shows that the Senator is perfectly willing to misrepresent his deepest and most personal characteristics. One should also keep in mind his multi-decade misrepresentation (also now denied) in highly-Irish Catholic Massachusetts that he has Irish Catholic heritage. As noted above, the Senator's medical condition is probably more uncertain than he is saying. But there is good reason to believe that if the Senator simply doesn't know whether his condition will be an impediment, or even if he affirmatively knows that it will be an impediment, he would misrepresent his knowledge to the public.

Given the Senator's record and the nature of his disease, nobody is justified in accepting the representations about his condition or prognosis, or those of his doctor, at face value.
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Why Only Audio?

Some people have speculated that, assuming the recent bin Laden tapes are genuine, they are audio rather than video because bin Laden looks bad. Posited injuries are the usual explanation.

But the Evening Standard reports:

US intelligence officials believe Osama bin Laden has altered his appearance as he moves to escape capture in the mountainous region between Afghanistan and Pakistan. This is why he no longer addresses his supporters on videotape.

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Wednesday, February 12, 2003

Mr. Greenspan Reports, Again

The New York Times reports some additional comments from Alan Greenspan:

But where Mr. Greenspan inveighed about the dangers of deficits on Tuesday, he played down those concerns today and asserted that the worst of the budget problems would only arise once the current generation of baby boomers began to retire in 2010.

"Actually, it turns out that we do not really have a fiscal problem of moment until we get beyond the end of this decade," he said.

Mr. Greenspan said the $300 billion deficits projected by the White House for this year and next were "modest" in relation to the size of the economy, and that the country's longer-range budget problems, caused by a projected surge in Social Security and Medicare spending, would occur "with or without the president's program."

Mr. Greenspan was warmer today than on Tuesday about the president's dividend tax proposal. He said that eliminating taxes on most stock dividends would "almost surely increase the aggregate of economic activity" over the long term and might provide a small immediate boost as well.

"I strongly support it," he told the committee.

Mr. Greenspan predictably continues to cleave to his opinion that no short term stimulus is needed, and the White House predictably begs to differ. But the net effect of the dialogue can only be to reduce the significance of the whole "short term stimulus" necessity - a necessity which the Democrats have made the centerpiece of their criticism of the Bush proposals.

The Times also reports Democrats said Mr. Greenspan had refocused the debate on the implications of Mr. Bush's proposal for the budget deficit in the long run, a shift that they said would help them alter the plan to make it smaller, temporary and focused more on lower and moderate income people who needed the help most. That is a preposterous construction of Mr. Greenspan's comments. Those are the same "short term stimulus" considerations that the Democrats have been hawking - exactly what Mr. Greenspan says we don't need. If the question were put to him with directness, I think he would publicly and with as much directness disabuse tthe nation and the media of the Democrats' silly interpretation of his intent.
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Another Economists Letter To Congress ...

... about the proposed tax cuts, but not the letter you have been reading about. This one supports the tax cuts. Three Nobelists signed along with 112 other economists.

Link from Trend Macrolytics
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Batty Over Baghdad

Maureen Dowd blathers: "Osama bin Laden came to the rescue of George W. Bush yesterday."

She seems to be ventilating her frustration over Osama bin Laden just blowing away all her good efforts, and the good efforts of those like her, to obscure and deny the willingness of al Qaeda and Iraq to work together even though they don't like each other and don't go to mosque together on Fridays.

The immediate object of Big Mo's venom was bin Laden's tape urging Moslems to do whatever they could to stop and kill Americans, especially the coming American troops, apparently including suicide actions. Big Mo characterizes the Administration's decision to replay the tape this way:

So the Bushies no longer care if Osama sends a coded message to his thugs as long as he stays on message for the White House?

So to this New York Times columnist an exhortation to Iraqis to resist and kill Americans and American troops stays on message for the White House.

God is she sick. Obscene batty blather – and lots of it.


Batty Big Mo blathers about her concern that:

In the past, Condi Rice has implored the networks not to broadcast the tapes outright, fearing he might be activating sleeper cells in code. But this time the administration flacked the tape. And Fox, the official Bush news agency, rushed the entire tape onto the air.

But buried deep with another New York Times story is the following explanation:

One senior intelligence official said that analysts had determined that it was unlikely that any secret code was on the tape. Instead, the official said that the taped message was in its entirety a "go signal."

That a determination of such sort had been made was already obvious to all but Big Mo. But Big Mo was apparently miffed because the tape was replayed to the American public, thereby undoing all her hard work obscuring and denying the willingness of al Qaeda and Iraq to work together.

Boo Hoo Big Mo!
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Mr. Greenspan Reports

The Chairman of the Federal Reserve Board is not hired or employed to be the head of anyone's sale's department. And he is not, and no sensible person has accused him of being, a partisan hack. His advice and opinions have their own policy considerations and agendas, which are only related - but not identical - to those of Congress or any Administration. At least that is the way things are supposed to work. Yesterday, they did.

Just what did Mr. Greenspan say before Congress yesterday? The New York Times reports that his comments ... were a serious blow to the Bush administration, and the Times opinion is reflected in much of the media. Is that correct?


Mr. Greenspan's comments were a serious blow to the Bush administration's economic plans only if one thinks the Administration was counting on Mr. Greenspan to be the head of its sales department - a partisan hack. But Mr. Greenspan did no real harm, and, properly construed, provided considerable cover for the Administration's efforts.

Perhaps the major attack - especially from the Democratic side - on the Bush proposals has been that they do not provide much short-term stimulus. Mr. Greenspan agreed with this. For that matter, Milton Friedman, who is a big supporter of the Bush plan, agrees with this. No sensible person could seriously disagree with this. The Times sees Mr. Greenspan's statement as bad for the Administration. But anyone who thought that Mr. Greenspan was likely to come before Congress and argue that the Bush tax proposals would give the economy a big short term jolt, notwithstanding all the evidence and theory to the contrary, and also notwithstanding that to say such a thing would have eviscerated his credibility, was just being silly. The sillies apparently included one or two Republican Senators. Too bad.

But Mr. Greenspan went two steps further:

First, he argued that the economy doesn't need short term stimulus now. In fact, such stimulus might be counterproductive:

"I am not one of those who is convinced that stimulus is desirable policy at this point. ... My own judgment is that fiscal stimulus is premature."

If Mr. Greenspan is right, and the economy doesn't need short term stimulus, it's not much of a criticism of the Bush plan that it doesn't deliver such stimulus in big doses. So Mr. Greenspan really pulled the rug out from under one of the major arguments being made against the Bush plan. Moreover, the Bush tax plan doesn't exist in a vacuum. The Democrats have proposed their own plan, which they say has much more short term simulative punch than the President's does. That's just the punch Mr. Greenspan says we need to avoid. So is Senator Daschle happy with Mr. Greenspan? I don't think so.

Second, Mr. Greenspan clearly accepts that the elimination of "double taxation" of dividends will foster growth, which will help every American. This undercuts a second major argument against the Bush tax cuts: that they will not foster growth, but merely benefit a few well-positioned rich people.

It's true that Mr. Greenspan focused more on the potentially adverse effects of deficits (including on long term interest rates) than does the administration, and that his endorsement of the dividend tax cut was coupled with his recommendation that it be "revenue neutral." His position here is probably overly conservative. Given a set level of government spending, until actual solvency risks are encountered, how can it not be better for the government to obtain funding through fully voluntary borrowings than through only taxation, whose voluntariness is limited to the effectiveness of organs of representative democracy not particularly designed for economic efficiency?

But Mr. Greenspan heads the Federal Reserve Bank - and in that capacity he has as one of his main constituencies current long term holders of long term debt. Even if it would be better for the economy as a whole for the government to borrow more at the cost of increasing interest rates, such an increase in long term interest rates would likely disproportionately hurt this constituency, which in large but silent measure counts on Mr. Greenspan to watch out for them. This is one point where the Fed's own agenda and policies are relevant in understanding its representative's positions before Congress. Similarly, the testimony of, say, the undersecretary of veteran affairs before Congress must be construed in light of the fact that he or she in some ways represents veterans.

Further, as support for its assertion that Mr. Greenspan bluntly challenged the administration's contention that big budget deficits pose little danger or that the government can largely offset them through faster economic growth, the Times cites to these remarks:

"We are all too aware that government spending programs and tax preferences can be easy to initiate or expand but extraordinarily difficult to trim or shut down."


"Faster economic growth, doubtless, would make deficits easier to contain. But faster economic growth alone is not likely to be the full solution to the currently projected long-term deficits."

But these comments seem best construed as expressing first, that more growth is needed and that eliminating "double taxation" of dividends will deliver some growth, and, second, an imperative to get federal spending under control - no matter how it is financed (including "tax preferences" - which the Times seems to mistakenly believe is a reference to Mr. Bush's tax cut proposals). That's a message very hostile to the traditional Democratic approach. So, again, is Senator Daschle happy with Mr. Greenspan? Again, I don't think so.

In sum, if I were Mr. Bush, I wouldn't be crossing Mr. Greenspan off my Valentine chocolates list just yet.

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Dirt Under The Desert Sheets?

One theory that has gained some currency as to why France and Germany are opposing an Iraq incursion, even to the point of endangering their memberships in NATO, is that an incursion would result in the release of evidence that both countries have unseemly and/or illegal dealings with Iraq not already known.

This theory seems improbable, to say the least, although such dealings might well exist beyond what the public knows.

But it is highly likely that the United States and British intelligence services are already aware of any such dealings - which would have to be recorded in both Iraq and Europe. If the United States already knows of such dealings, then persistent Franco-German intransigence only increases the risk that Washington or London will release the information to the public. Such a move would delegitimize the arguments of both countries and, more importantly, create a high risk that highly placed individuals in French and German governments - including Messrs, Chirac and Schroeder - would be disgraced and/or displaced.

So any relevant clandestine dealings would have to be so secret that neither Washington nor London could know about them. But such dealings are presumed to be commercial in nature, not defense secrets or the like. Maintaining airtight security on a major commercial project to the point of deceiving both the United States and Britian is a fools errand. For example, are all the project's communications supposed to evade monitoring and be kept in strictest code? Iraq couldn't even manage that for the United Nations inspector burlesque. One could go on and on.

In my view, the proponents of such theories should dream a better dream.
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Saint Kenneth, Holy Fool II

Tom Maguire asks whether Kenneth Lay and Enron may have legal problems separate from the allegations of insider trading against Mr. Lay from which the New York Times and, apparently, the Justice Department have now backed off.

Of course they could, technically. Even the Times article points out, for example:

None of this means Mr. Lay may not ultimately face criminal charges. Prosecutors may decide that he structured his selling to hide his actions improperly from the market or was aware of nonpublic information that should have led him to halt his trading. They could also conclude that he is criminally liable for some other element of Enron's collapse. But prosecutors are said to be close to a decision on whether to charge Mr. Lay, and there has been no indication that they have pursued other avenues.

The point here is not that Mr. Lay or Enron is now shielded from all possible criminal liability. What the Times is saying is that there is no evidence that Mr. Lay didn't think that Enron was every bit the company he said it was in his public statements. Technically, Enron has its own disclosure obligations under the Exchange Act, as a public company, for example. Enron's Exchange Act reports (including the financial statements with those now notorious footnotes) essentially contain what the public knew about Enron - up to materiality. An "insider trading" charge is nothing more than a charge that Mr. Lay knew material facts that the public didn't know. Mr. Lay read those Exchange Act reports. So in the real world a conclusion that Mr. Lay didn't engage insider trading is practically the same as saying that Mr. Lay thought the facts contained in the Exchange Act reports were materially correct and complete. And, practically, that means that he cannot be charged criminally with causing Enron to lie to the public. Other possible charges against Mr. Lay also fall apart practically in the dame way - even the ones that aren't technically tied to the "insider trading" allegations.

That's probably why the Times reports: there has been no indication that [prosecutors] have pursued other avenues against Mr. Lay. And it's also probably why John C. Coffee Jr., a securities law expert at Columbia University told the Times that "This would be a case that the government would normally shy away from." That's an understatement. In fact, if the Times story is accurate, further action against Mr. Lay would be evidence of government obsession.

And, speaking of obsession, all those silly Paul Krugman allegations go out the same practical window the same way:

Mr. Lay should be indicted? Really? Why should a man who personally believed that his company's reports to the public were correct be indicted? Is it possible Mr. Lay committed some crime which warrants his indictment? Of course it is. It's also possible that Herr Doktorprofessor Krugman committed some crime which warrants his indictment. But there appears to be no substantial evidence that either of these men committed any such crime. So I will not call for either of them to be indicted.

Enron may have "defrauded" its investors while breaking no law? If so, then its Chairman and Chief Executive Officer got defrauded in the same way - and lost a lot of money because of it. Are new laws necessary to protect the public from public companies employing devices that "fool" their own top management? Please. Life is too short and even angels have to prioritize which pin heads they use for ballrooms.

Enron bought "split dollar" insurance on Mr. Lay, which may protect some of his assets from his creditors now that Enron has gone "belly up" (to use the technical Krugmania term)? The whole point of the Times article was that Mr. Lay believed in his company and didn't think it was anywhere near going "belly up" - so this is highly unlikely to have been a motivating factor in the decision to by the policy, a very common perk. Mr. Lay lives in Texas - which has an unlimited homestead exemption. yet he maintained second homes in Colorado and other places. If he wanted to shelter assets against a possible "belly-upping" of Enron, why didn't he sell those other homes and buy or build a bigger primary home in Texas? Also, Herr Doctktorprofessor doesn't mention any split-dollar insurance on Mr. Fastow. But he would have been the first to know that Enron was at risk of "belly upping" and his assets were and are the most exposed.

But, more centrally, how does Herr Doktorprofessor Krugman justify demonizing a man who believed in his company? Of course, technically the Krugmania charges may be able to survive for the moment. Many of Enron's finanical footnotes and structured finance transactions technically may have complied with disclosure standards.

It is still possible that Mr. Skilling or Mr. Fastow or even other board members or officers may have caused Enron to lie to the public. Mr. Fastow is by far the most exposed. But, as I point out in a prior post, letting Mr. Lay go is probably making Mr. Fastow and his lawyers very happy indeed. For example, if Mr. Fastow caused Enron to defraud its investors and violate its Exchange Act disclosure requirement, then he must have done it in a way that eluded Mr. Lay's knowledge and securities trading pattern. But regardless of whether a Chief Financial Officer thinks his company os going "belly up," it's not usually considered a career-advancing strategy for the Chief Financial Officer of a public company to keep his Chairman in the dark and cost him lots of money while exposing him to potential criminal and civil actions under the securities laws. That's not a conclusive argument, of course. But it probably is "reasonable doubt."

But, as I have pointed out previously, the most significant aspect of current coverage of the Enron matter is that Enron failed. That means there are very few people now with incentives to defend Enron or its operatives. The money in such activities is scarce - so even where good arguments exist, they don't get out very well or quickly. It's a lot easier for most people just to condemn Enron and argue that whatever economic entity or interest that is providing one's incentives isn't like Enron at all.

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