Archive for July, 2010

The release of the terminally ill Abdelbaset al-Megrahi, convicted of involvement in the Lockerbie airplane bombing, is in the news again, due to the oil spill, of all things. The U.S. Congress wants to know whether there was a quid pro quo: whether BP lobbied the Scottish government to release Megrahi so that Libya would conclude a deal allowing BP to drill in its offshore waters. Having followed the Megrahi situation since 2008 because of its relevance to the Nationalist government in Scotland, whose policies and performance I have been following, I have some little expertise on this question. In my view, the posited quid pro quo is the least likely explanation for Megrahi’s release. Consider the following facts:

1) The evidence against Megrahi is less than rock solid. The case against him was built on the testimony of a single witness, later found to be unreliable. Later allegations of prosecutorial misconduct provided a foundation for appeal. In the event, his illness allowed the Scottish government to release him on compassionate grounds instead.

2) Releasing Megrahi allowed the Nationalist government of Scotland, which favors independence for Scotland, to flex its powers on the international stage. Scotland has less autonomy than an American state, but the current government has been trying to make the most of it.

3) Releasing Megrahi allowed the Scottish National Party to burnish its left-wing, peacenik credentials, important given that they have seen an electoral challenge on their left flank from far-left nationalists Solidarity and the Scottish Socialist Party, and given that the SNP’s main electoral rivals are the Labour Party. The SNP has consistently tried to make inroads into the vote-rich Labour constituencies of Scotland’s Central Belt.

4) There was no reason for the SNP or the Scottish government to want to please BP or the British government, who did engage in diplomacy with Libya over the Megrahi issue. If anything, the British Labour government’s desire to release Megrahi would have given the Scottish government some opportunity to twist their tail over the issue and do the reverse.

Unfortunately, media coverage here in the U.S. has done little to elucidate the context behind the decision, which is likely to leave Americans to conclude that skullduggery was involved.


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Rants and Raves

1. The state government of Massachussets is engaged in a brinksmanship battle over gambling: how many casino resorts to allow, how many slots-only casinos, etc.  Why is this up to the state government? I don’t think there is any compelling state interest here. If the owners of the relevant property, which is apparently properly zoned already, want to build casinos, why shouldn’t that be up to them? And if people want to patronize the casinos—or not—why shouldn’t that be up to those people as well?

2. I recently heard a professor of rhetoric lecturing her students about proper argument form. Her example was: The Arizona immigration law is morally wrong because it was motivated by “bias and bigotry.” I don’t presume to know what was in the hearts and minds of the people who support that law, though they are almost unanimous in denying that bias and bigotry are what motivates them. Putting that aside, I don’t think her example argument works. A law or policy might be morally right or wrong regardless of the motivations of the people who support or believe in it. People might support a good law for either the right or the wrong reasons; similarly, they might support a bad law for either as well. In fact, I would say that people’s motivations should be irrelevant to our judgment of the law: the law is good or bad all on its own—and that’s quite enough to let us judge it, without requiring us to engage in ad hominem speculations.

3. It turns out that Americans have recently been cutting back on their use of health services, apparently because they are worried about rising costs and their effects on their household budgets. Good for them! They are recognizing, as rational agents should, the price signals, relating them to their subjective schedule of values and the relative scarcity of their resources, and adjusting their behavior accordingly. If we let people be exposed to more of the costs of their own health care, similar rational allocations would further take place. Remember a couple years ago, as oil was heading north of $100 per barrel, and there was apocalyptic talk about what would happen? Then, people, as if led by an invisible hand, began spontaneously reducing their consumption. They started giving up their SUVs, buying higher-mileage vehicles, reducing their unnecessary trips. People respond to incentives. That is why markets work, if only we let them.

4. Finally, one of the most depressing and disheartening articles I have read in a long time is the cover article in the July/August issue of The Atlantic, entitled “The End of Men.” The article details just how thoroughly women are coming to dominate life in the United States, in everything from earning the majority of college degrees to dominating most aspects of family life. That’s perfectly fine by me. What I find so distressing about the article is its further claim that men are therefore increasingly irrelevant—as fathers, as breadwinners, as protectors, as moral exemplars, as defenders of honor. Men are accordingly increasingly lapsing into listlessness, immaturity, and lassitude, exactly what one would expect from a group of people who have no real purpose in life. 

Some of the choicer passages from the article:

Fathers, roughouse all you want. But we, gatekeeper moms, are in charge of the rest. We could give you detailed instruction, and you still couldn’t possibly do it as well. […] The bad news for Dad is that despite the common perception [that he is necessary or at least important to the family], there’s nothing objectively essential about his contribution.

The increasing expectation of male incompetence is, the article alleges, leading to the increasing reality of male incompetence. This is from a female college admissions officer:

Maybe these boys are genetically like canaries in a coal mine, absorbing so many toxins and bad things in the environment that their DNA is shifting. Maybe they’re like those frogs–they’re more vulnerable or something, so they’ve gotten deformed.

That is a particularly offensive claim, I think. Men are “deformed”? The article’s author, Hanna Rosin, adds helpfully:

But again, it’s not all that clear that boys have become more dysfunctional—or have changed in any way. What’s clear is that schools, like the economy, now value the self-control, focus, and verbal aptitude that seem to come more easily to young girls.

Why are men dropping out and, as the article puts it, simply “drifting away’? The answer, I think, is embedded in this line from the article:

The women don’t want them as husbands, and they have no steady income to provide. So what do they have?

What indeed. How have we come to this sorry state? Not all is lost, of course, but growing numbers of pointless and purposeless men is bad for everyone—men, women, and children. As one of those men, and one who believes and wants to believe his life has meaning and purpose, I cannot but greet an article like this with a combination of outrage, offense, and even foreboding about the future.

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In 2006, Speaker-elect Nancy Pelosi (D-CA) famously pledged to “drain the swamp” of corruption” and to “turn this Congress into the most honest and open Congress in history. That’s my pledge — that is what I intend to do.”  Time for an update on Operation Drain the Swamp.

Following the resignation of Rep. Eric Massa (D-N.Y.) and the just announced  trial deal with Rep. Charlie Rangel (D-N.Y), Politico is reporting that the  Ethics Committee’s next stop is Rep. Maxine Waters (D-CA).

Following the recent flurry of ethics problems, one might assume that the Speaker is feeling the strain of Operation Drain the Swamp. But, sounding a bit like Yoda, Speaker Pelosi proclaimed at this week’s press briefing: “Drain the swamp we did, because this was a terrible place.” (WaPo)

My guess: the Swamp is still full. If the events of the past decade are any guide, this is anything but an issue of partisanship—if you have any doubt, just ask  Rep. Jim Traficant (D-OH),  Rep. Tom DeLay (R-TX), Rep. Nick Miller (R-MI), Rep. Candice Miller (R-MI), Rep. John Conyers (D-MI), Rep. Jim McDermott (D-WA), Rep. Tom Feeney (R-FL), and Rep. Curt Weldon (R-PA).

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The Summer Recovery Tour has just completed its scheduled stop at Yellowstone National Park, as the touching account on the White House Blog informs us.


  • The Beige Book, released yesterday, “underscored the Fed’s view that the recovery, while still moving forward, is progressing at a slower pace than earlier in the year.” (BusinessWeek)
  • James Bullard, president of the St. Louis Fed, warned yesterday “that the Fed’s current policies were putting the American economy at risk of becoming ‘enmeshed in a Japanese-style deflationary outcome within the next several years.” (NY Times)

If the AP survey  of economists is correct, VP Biden may have to extend the tour, since the real recovery summer may be  scheduled for 2010 2011…2015?

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Well, it looks like an Atlas Shrugged movie is going to get made after all.  Reason TV has a short clip with the director and the actor playing Hank Rearden here.  In case you haven’t heard, the plan is for this to be a trilogy – so we’ll only get the first 127 pages in Part I.

I have mixed feelings about this particular attempt.  I’ve heard the budget is relatively low and the project was put together quickly – which are red flags for such an epic story (especially one in which a crumbling America could be depicted in an interesting way with modern but likely expensive movie techniques).  I’m also not quite sure that this interview with the director lends a lot of confidence (but it is only 5 minutes, so I’ll cut him some slack).  It would be a shame if fans of Shrugged had to wait 53 years for a movie version that doesn’t match the grandness of the novel.*   

On the other hand, wouldn’t it be great if this turns out to be more like Star Wars I than, say, Starship Troopers (yeah, I know, it is really Star Wars IV I am talking about but I don’t wear Yoda ears nor do I dress up to be Darth Vader for kicks – though I do a pretty mean Vader voice/breathing for my kids)?  I also think it is a good sign we are not seeing big names playing the main characters.  Like with Star Wars, this will allow us to lose ourselves in the story rather than thinking about whether Angelina Jolie is right as Dagny or seeing her other characters on the screen instead of Dagny.  And maybe Big Hollywood is right:

No one, including the “Atlas” producers, can predict how a project will ultimately turn out, and that’s true whether your budget is $5 million or $200 million. And no one would argue that the challenges involved in bringing such an ambitious and epic story to the screen aren’t made that much more difficult with limited resources, including taking a chance on a director making his theatrical feature debut. However, from all we’ve seen and from our discussions with the producers, director, and cast, there’s no doubt that everyone involved is passionate about telling this story and most importantly, dedicated to remaining true to Ayn Rand’s philosophical vision — which would’ve likely have been compromised bigtime by a major studio.

* Before I hear from the many Rand critics out there, I am not an Objectivist nor do I think Shrugged is literary excellence of the first order.  However, I do think it is an enjoyable, wonderfully told story (at least up to the Galt speech where it turns into a long-winded Randian philosophy lesson) that is underrated by its critics.  Moreover, it provides a much-needed moral defense of capitalism.  It is at least as good as a lot of the books we are told we ought to admire.

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As commentators begin to read the Dodd-Frank Wall Street Reform and Consumer Protection Act, they are discovering some hidden gems. The most recent discoveries:

Diversifying the Portfolio (via Carrie Budoff Brown at Politico):

Congress gives the federal government authority to terminate contracts with any financial firm that fails to ensure the “fair inclusion” of women and minorities, forcing every kind of company from a Wall Street giant to a mom-and-pop law office to account for the composition of its work force.

Maintaining Transparency (via Ed Morrissey at HotAir):

Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.

Controlling the Market in “Conflict metals” (via Michael Tennant at NewAmerican):

it includes language compelling American-listed “companies to certify whether their products contain minerals from rebel-controlled mines in Congo and surrounding countries.”

Since gold is on this list of “conflict metals,” conspiracy theories are beginning to blossom.

What readers will NOT find: reforms of Freddie Mac and Fannie Mae, the two government sponsored enterprises that were embroiled in the financial meltdown (see Colin Barr, Fortune). Not to worry…hearings are scheduled.


Congress, in its infinite wisdom, is prepared to provide  the Financial Crisis Inquiry Commission an additional $1.8 million to continue its work. Daniel Indiviglio (the Atlantic) wonders why, given that Congress leapfrogged the commission:

At a time when both sides of the aisle are worried about excessive government spending on waste, it’s hard to justify providing more funding to a commission whose purpose has become questionable, at best.

Michael Smallberg and Rick D’Amato (the Project on Government Oversight) are concerned about the burdens that the new rules and mandated studies will place on regulators:

we’re concerned that Congress may be burdening regulators and watchdogs with unnecessary studies, rather than putting hard-and-fast rules in place. Many of these studies will simply provide another avenue for the financial services industry to exert its influence on the process, and in the meantime, the studies could impose a significant burden on regulators and watchdogs that are already short on funding, staff, and resources.

Of course, one man’s burden is another’s opportunity. The new regulations this should provide a great source of employment opportunities, thereby contributing to the ongoing success of Recovery Summer. As Julie Steinberg notes:

With the passing of the financial reform bill, the SEC, CFTC and FDIC are all on the hiring warpath. The new CFPB and the beefed-up OCC are also expected to join hiring fray once they figure out staffing needs. The creation of at least 1,343 jobs across two of the agencies has already been announced (SEC and CFTC), and more hiring announcements are expected to follow.

Undoubtedly, there will be thousands of more jobs to come. Ms. Steinberg provides useful information on how to snag a job as a regulator.  What is unclear is whether currently unemployed Census workers will have a suitable skill set. If they do, the last month of Recovery Summer may fulfill the administration’s promises.

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I don’t remember that much from my public finance class in graduate school except one thing: all taxes (except politically irrelevant lump-sum taxes) cause market distortions.  In other words, they all cause dead weight losses.  This is true of payroll taxes, consumption taxes, income taxes, capital gains taxes.  Indeed, a popular exercise in public finance is playing with models to show the basic equivalence of different types of taxes.    I support a regime based primarily on consumption taxes because I think that the less we tax labor and investment, the more of it we get in the long-run, and the more we grow.  I favor growth over the fool’s errand of trying to massage business cycles.  But in the end, all taxes are distortionary, and it is not clear one type of tax is vastly superior to another.  What I like most is low taxes and low spending.

So, if I were a political consultant, my message to the GOP would be this: soak the rich.  Republicans are trying to convince people that we have to continue the Bush tax cuts to the rich because we need to grow.  Why not take this issue (which almost cost Bush the election against both Gore and Kerry), combine it with the populist feelings out there, and generate support among voters who will decide this (and future) elections: middle-class independents?  This group is not doing well, is angry at both parties, and is unlikely to be convinced by arguments that lowering taxes on the rich will make the lives of the ordinary Joe better off.

If I were a Republican politician, I would do the following:

  • Mostly extend the Bush tax cuts for upper-income people (a sharp increase in their marginal rates at this time is bad idea–both politically and economically). This is not the time for that. Actually, there is no time for that.  Point out that Democrats are in favor of this very bad idea.  Even an honest Keynesian wouldn’t recommend a sharp increase in marginal tax rates for anyone, even the rich, at this point in time.
  • Completely extend the tax cuts to the rest of the country and even add a few highly visible ones targetted at increasing labor demand among small businesses and at letting working people keep a little more of their earned income (something like a series payroll tax holiday for both firms and workers).
  • Argue for structural change in the long-term deficit picture that would fall mostly on the rich, such as a modest means-testing of Social Security and Medicare.  This is going to have to be done eventually because these programs are unsustainable otherwise.  And such a change now is particularly advantageous because Democrats hate means-testing.  They want to maintain the illusion these programs are “social insurance” funded by “contributions”  rather than ordinary entitlements funded by coercive taxes.   Making the Democrats publicly oppose having the rich pay more puts them in an uncomfortable position.  Ross Perot got some mileage from this issue.  The GOP could, too.

Something big, like shifting to a consumption-based system, isn’t in the cards.  But trying to shed the label as the party of the rich would have great benefits in both the short and long term.

During the Bush years, Republicans lost their street cred on being the party of fiscal responsibility with extravagant pork, expensive wars, and no real attempt at fiscal discipline.  Whereas Democrats remain the party of “tax and spend,” Republicans have become the party of “don’t tax, but spend anyway.”   So why not turn the tables on the Democrats and steal one of their issues?

I think (I welcome support or refutation of this claim) that the rich have mostly-hardened political opinions.  These changes won’t move many opinions among the rich.   Yes, you will make part of your base–the part that gives you a lot of money, I know–pretty ticked, but their numbers are small and you will also neutralize a key Democratic issue and regain many of the independents that abandoned you for Obama last time around.

Conservatives don’t like penalizing those who create wealth and economic growth.  I don’t either.  In the long run we need to have pro-growth policies and cut back government spending.  But we also need to keep politics in mind.  And the lesson every revolutionary has to remember is there are more of us than there are of them.

The adage that a rising tide lifts all boats is generally true, economically speaking.  But I’m OK if we sink a few yachts along the way.


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