Mourning In America
Friday, August 01, 2003
Bad Advice ... It's Not Just for Intelligence Anymore! President Bush followed up his cabinet meeting with some comments on the economy. Not unlike his recent comments on the Uranium issue, they came across as very defensive. Maybe he just needs a vacation (and indeed, he jets off to Crawford today). But, frankly, I don't think the comments on either of these issues represent his own core feelings.
Given the chronological recitation of dates he engaged in, you have to believe he was repeating the explanations he himself received from his economic team. What's surprising is that he is unable or unwilling to recognize the deficiencies in these explanations and to demand that his advisers come up with answers that work (perhaps because they might challenge the usefulness of his "tax cuts today, tax cuts tomorrow, tax cuts forever" economic policy).
The silliest line was this one:
...the country went into a recession, which would be the first quarter of 2001. And we acted. We called the Congress together and passed a significant tax cut ... Some would probably say, well, maybe you shouldn't have acted and let the recession go deeper, which would have made -- may have made for a more speedy recovery. Our attitude is that we're worried about people's lives; a deep recession would have meant more people would have been out of work.
If the White House press corps had been allowed to ask follow-up questions, which they were not, they might have asked who the "some" were. I'm not aware of any economic philosophy that calls for amplifying the severity of the business cycle. On the other hand, I can easily see a political adviser musing that "voters have short memories -- it would have been better to get the pain over with earlier in our term." That's a big part of the current conventional wisdom on tax hikes to close budget deficits, but there's no evidence it applies to the business cycle.
Either way, the observation is pap -- since, while the GDP is on the rise (fed to a large extent (70%!) by military spending), we have continued to lose jobs even since the recession "officially ended" in November. People who are looking for work don't need a "speedier" recovery -- any recovery will do!
Voting With Their Feet Expect to hear a lot of boasting in the coming days, as the Bush Administration hails the July decline in the nation's unemployment rate -- from 6.4% to 6.2% -- as a sign that the economy is rebounding. It ain't that simple.
The number they won't talk about was the accompanying 44,000 drop in the overall payrolls -- that was a big disappointment for Wall Street, which had expected a gain in net jobs, which would be a nice first step towards recovering some of the more than 2.3 million jobs that have been destroyed since Bush took office (1 million of those since the recession officially "ended").
How, then does the unemployment rate fall even as jobs are being destroyed? Because the unemployment rate only compares the number of people actively looking for work with the number of people working. When the pool of job-searchers declines faster than the pool of workers, the rate falls. That's exactly what happened this month.
Why does that matter? Well, the Bush administration and its apologists used a large increase in the pool of job searchers last month to minimize the importance of the unemployment rate's surge to 6.4%. They claimed that more people were entering the job market because they were heartened by the imminent tax cuts and trusted the Bush team's promises that prosperity was just 'round the corner. They went so far as to contend that their optimism was actually a leading indicator of economic recovery.
At the time, I predicted that the optimism wouldn't last long if they perceived their search to be futile. Unfortunately, it seems that that's exactly what's happened -- the Bureau of Labor Statistics report found that the "labor force participation rate" (workers plus active searchers) fell to its lowest level since March.
DISCLAIMERS: None of this means that, definitively, the economy is still weakening, or that there aren't some signs of improvement. In fact, new claims for unemployment insurance were below the key 400,000 level in each of the past two weeks, which generally means that the economy is, on net, creating jobs (those late-month gains may simply have been too weak to overcome the early-month losses). At the same time, Fed Chair Greenspan and others have contended that the July (and possibly August) employment stats may not be very reliable because they are skewed by industrial plants that close for retooling during the summer. Still, take the cheers about the unemployment rate with a grain of salt.
Thursday, July 31, 2003
Bringing It I know this is a bit late, but you can check out this and other editorial cartoonists' takes on the President's taunt here.
And They Say Liberals Obsess Funny column in the LA Times featuring a conservative explaining why he supports his local NPR outlet:
Last week, I was stuck in traffic, listening to an inane NPR report about the proposed prescription drug giveaway to the elderly. When they began to interview an old guy who complained about the cost of drugs, the reporter started using her "sad, concerned" voice with the "things are better in Scandinavian countries" overlay filter. (You know the voice.)
Call me a bleeding-heart, but I feel sorry for this guy. It's gotta be exhausting to go through life and constantly see loathsome enemies confronting you at every turn. Somebody should start a radio program that he could listen to in the car and truly relax -- a place where liberals are derided as the treasonous, misguided, wishy-washy, communists that they are. It's outrageous that conservatives don't have easy access to radio airwaves!
Tuesday, July 29, 2003
Texas Dems Depart In their continuing struggle to block House Majority Leader Tom DeLay's hand-drawn Congressional redistricting plan, 11 of 12 Texas Senate Democrats have decamped for Albuquerque, denying the Senate a quorum. They say they'll stay for at least 30 days, or until the state's GOP apparatus abandons its plan to railroad through the new districts, which have been criticized for slashing minority and rural representation, as well as for violating a long-held tradition that redistricting is done once a decade, for the election immediately following the Census (The Texas GOP's original redistricting plan was thrown out by the courts for violating the Fair Voting Rights Act, and DeLay isn't happy with the court-imposed solution).
The most interesting thing in the story is this claim:
New Mexico state police guarded the hotel, partly out of concern that "bounty hunters" might show up to whisk the lawmakers away.
Not sure whether to take that seriously or not. Presumably a forcible effort to return the lawmakers to Austin would draw nationwide approbation and derision to the GOP. However, it's not clear whether they care.
Between the June decision to enlist the Department of Homeland Security to track down Texas Assembly members who fled to Oklahoma in a similar effort to deny the redistricting plan a quorum to House Ways and Means Committee Chairman Bill Thomas' recent call to the Capitol Police to break up a meeting of his committee's Democratic minority, there is a fresh and growing track record of the GOP misusing government law-enforcement resources for political ends.
Grown-ups Return: The NY Times just moved a headline announcing that the Pentagon will abandon its terror futures market (see next item). Not shocking, although it is disappointing -- I had already asked for Friday off so I could day-trade in some "King Fahd Devoured by Locusts" futures...
There They Go Again The Pentagon office led by retired Adm. John Poindexter, which previously gained unwelcome notoriety for its "Total Information Awareness" effort to build a massive Internet-monitoring database is now asking for $8 million to design and build a "futures market" for people who think they can predict future terror attacks.
I'm not totally floored by this. Having been exposed to a bunch of graduate-school classes on Finance theory and plenty of people with a blind devotion to the power of markets, I can see where this idea came from. There's a clear logic in the idea that people with insider knowledge of pending attacks might try to capitalize financially on this knowledge -- and in so doing, might tip us off to a pending horror.
The logic gets muddied fast, though -- so fast, that it should have been obvious to anyone who heard about it that the proposal could never work (and I'm not even going to deal with the international diplomacy problems, detailed in the Times' piece, that arise from the government's decision to sponsor what amounts to a "betting parlor" that looks exclusively at the possibility of horrible events in other countries).
Before they'd use a market to try and trade on their "insider" information to work, the "informed parties" would want to have some expectation of anonymity, lest they be arrested before they get to cash in on their windfall. Despite the Pentagon's promises of anonymity, an "exchange" owned and operated by the US government would never carry such an expectation -- in fact, the well-publicized post-9/11 effort to identify stock traders who made winning bets in the days leading up to the attacks should have made it clear to terrorists that there's no anonymity on Wall Street.
Then, add in the fact that the government will be using these bets to try and head off attacks, actively reducing the value of the "futures contracts." One would expect a pretty quiet marketplace.
Even if you did think the terrorists would be willing to trade on their information, you'd still have to go a long way to justify spending $8 million of government money on building a marketplace, when the U.S. financial sector is already the most developed in the world. If a single-payor health care program is "socialized medicine," than this is a "socialized capital market" (the same could be said about the Social Security Privatization proposals, but I digress).
Rather than building a government-owned market, this should be privatized or at least be the focus of a public-private partnership. For instance, you could engage in some "scenario planning" -- to identify existing financial instruments that would rise in value as a result of certain types of attacks (i.e., stocks of companies that provide chemical-decontamination services), and then to monitor activity in them, trying to find patterns that signal a threat. If that doesn't work, you could surely work with an exchange to craft financial contracts that apply directly to the issues you'd want to study.
The Total Information Awareness effort was derailed by opponents in the Senate, and was later renamed "Terrorism Information Awareness" -- click here for a critical look at its activities and a recap of that battle. That engagement should have taught the Pentagon a lesson in the value of making sure its ideas "pass the sniff test" before they are made public.
I'm not sure what's worse -- that no one in the Pentagon recognized how absurd this idea was, or that people did, but didn't have the guts/authority to block it before it got past the earliest stages of consideration. I thought this administration prided itself on providing "adult supervision." Either way, there are wasted resources in the Pentagon, and the White House should be demanding improvement.