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    1. The Naked Novelist and the Dead Reputation
      Algis Valiunas
      September 2009
    2. Why Are Jews Liberals?—A Symposium
      David Wolpe, Jonathan D. Sarna, Michael Medved, William Kristol and Jeff Jacoby
      September 2009
    3. The Art of Obama Worship
      Michael J. Lewis
      September 2009
    4. Clyde and Bonnie Died for Nihilism
      Stephen Hunter
      July/August 2009
    5. The Path to Republican Revival
      Peter Wehner and Michael Gerson
      September 2009
  1. Why Are Jews Liberals?—A Symposium
    David Wolpe, Jonathan D. Sarna, Michael Medved, William Kristol and Jeff Jacoby
    September 2009
  2. The Naked Novelist and the Dead Reputation
    Algis Valiunas
    September 2009
  3. The Art of Obama Worship
    Michael J. Lewis
    September 2009
  4. The Path to Republican Revival
    Peter Wehner and Michael Gerson
    September 2009
  5. The Path to Republican Revival
    Peter Wehner and Michael Gerson
    September 2009

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« Previous Entries

Friday, Nov 06

Not Quick Enough?

John Steele Gordon - 11.06.2009 - 2:55 PM

It seems as though the Democratic leadership in the House doesn’t have the votes to pass the health-care bill tomorrow and it may have to be postponed until Sunday or even later. The longer the delay, the less the chance of its passing, so every delay is very good news.

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Quick, Before the Suckers — Sorry, Voters — Find Out

John Steele Gordon - 11.06.2009 - 11:49 AM

As Jennifer pointed out, Nancy Pelosi has broken her pledge to have the final health bill posted on the Web for 72 hours before a vote. The Rules Committee has not yet produced a rule, which legislation in the House needs before it can move to the floor. The rule sets the terms of debate and what amendments can be brought forward for an up-or-down vote. This time, the rule itself is likely to contain a series of substantive amendments, which are automatically adopted if the rule itself is.

One can see why the Speaker has broken her word. The longer the time before her members vote, the more difficult it will be to force them to vote her way. The election returns on Tuesday and the unemployment figures just out this morning are very bad news for members who want to keep their jobs after next November.

But an even more important reason for Pelosi to rush the vote at all costs is the fact that more and more items, hidden in the 2,000 pages of the bill, are being revealed.

The latest is that neither the surtax on those with incomes above $500,000 nor the 8 percent payroll tax on companies that don’t provide health insurance to employees will be indexed for inflation.

Politicians love unindexed tax rates because as compensation rises to offset inflation, the taxes on that compensation rise even faster, thanks to the progressive income tax (another reason for a flat tax, of course). That gives the government more money — in real terms — to spend without members of Congress having to vote to raise taxes. Of course the public, not being stupid, caught on to this sleight of hand in the inflation-ridden 1970s, and Ronald Reagan rode the issue right into the White House.

So if the health-care bill passes as now written, the surcharge will hit not only the rich but also, like the nonindexed alternative minimum tax, slowly but surely more and more of the middle class. Meanwhile, the 8 percent payroll tax will hit everyone who works for firms that pay it, as that tax will be paid for with lower wages and fewer jobs created.

So it is not only Nancy Pelosi who is breaking her word to the American people but Barack Obama as well, who pledged that no one earning less than $250,000 a year would pay a dime in more taxes.

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Monday, Nov 02

Interagency Pain Research Coordinating Committee, Anyone?

John Steele Gordon - 11.02.2009 - 4:15 PM

The House Republican Conference spent the weekend laboring over the unenviable task of reading the Pelosi health-care bill, all 1,990 pages of it. While they were at it, they noted the new federal boards, bureaucracies, commissions, and programs that the bill would establish. The number — are you sitting down? – is 111. These include everything from a “Telehealth Advisory Committee,” whatever that might be, to an “Independence at home demonstration program” to a “Comparative Effectiveness Research Trust Fund” to a “Public health workforce loan forgiveness program” to a “University centers for excellence in developmental disabilities education” and on and on and on and …

You can get the full list over at PowerLine.

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Saturday, Oct 31

A Different Plan

John Steele Gordon - 10.31.2009 - 12:00 PM

The Republicans in the House are presenting their plan to reform health care. It could hardly be more different from the plan presented this week by Nancy Pelosi, which would reorganize health care in this country along what, as John Hinderacker at Power Line points out, are national socialist economic principles. At the heart of the Republican plan are four simple — not to mention obvious – reforms that would actually, well, reform how health care is paid for in this country and greatly reduce its cost, all without compromising care in any way. None of the four would cost the federal government one dime — probably one more reason these ideas are anathema to the Left, which measures “progress” by how much the federal budget is increased.

What they would also not do is turn control of health insurance over to the federal government, which has shown itself utterly incompetent in managinh such an enterprise. See here and here.

Number one: let families and businesses buy health insurance across state lines. Number two: allow individuals, small businesses, and trade associations to pool together and acquire health insurance at lower prices, the same way large corporations and labor unions do. Number three: give states the tools to create their own innovative reforms that lower health-care costs. Number four: end junk lawsuits that by increasing the number of tests and procedures that physicians sometimes order not because they think it’s good medicine, but because they are afraid of being sued, contribute to higher health-care costs.

I would add one more: require health-care providers to publicly post prices for standard services, procedures, tests, etc. This is already beginning to happen but it needs to be standardized in ways that allow easy comparisons. This would force health-care providers to simplify what are often incredibly complex pricing systems, allow easy comparisons between providers, and force prices to converge towards the low end of the range. (If hospital A will do a particular procedure for $900, why go to hospital B and pay $3,200? Such price spreads are possible only because prices are not easily determined.)

As Bill Kristol writes, the Pelosi plan may well collapse of its own weight. If it does, the Republicans are now ready with a cheap, easy, and economically logical alternative.

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Friday, Oct 30

The Model for ObamaCare

John Steele Gordon - 10.30.2009 - 11:51 AM

Have you ever gotten a call or an e-mail from a credit-card company asking if a recent charge on your account was legitimate? Credit-card companies are on the hook for fraudulent charges for amounts over $50, even if the customer doesn’t report the fraud. So it is in their powerful self-interest to spot phony charges quickly. That’s why they have programmed computers to alert the company to charges that are out of pattern. Say your American Express bill usually runs between $400 and $600 a month, with the usual bump at Christmas time. Suddenly there is a spate of charges for expensive clothes, electronic equipment, airplane trips, etc. You can bet you’ll be getting a jingle from Amex to make sure things are on the up and up.

If they are not, they cancel the card, send you one with a different account number, and try their best to track down the bad guys.

Such obvious precautions, it seems, are beyond the capacity of Medicare, which pays out half a trillion dollars a year to medical-service providers. At least $60 billion — one dollar in eight — of that is paid out for claims that are not legitimate. CBS’s 60 Minutes, not exactly a member of the vast right-wing conspiracy, ran a story on it last Sunday that you can find here (h/t Instapundit). The reporter, Steve Kroft, warns that the report will raise your blood pressure. That it certainly will.

As the report shows, Medicare fraud is ridiculously easy to carry off, little effort is put into preventing it, and few resources are committed to catching suspected attempts at it. All you need is a physical address, a list of Medicare recipients (available on the black market for about $10 a name), and a list of Medicare billing codes. Medicare is required by law to pay these claims within 30 days. Every few months you shut down the ABC Medical Supply Company and open up the DEF Medical Supply Company at a different address. Medicare direct deposits the money you bill them right into your bank account — none of those annoying $100 bills to launder — and you don’t have to worry about being gunned down in a parking lot by a rival criminal. No wonder the FBI thinks it is now a larger criminal enterprise in South Florida — where the report was filmed — than cocaine-trafficking.

How bad is it? One woman interviewed says that she has been reporting an endless stream of false charges on her Medicare statement for six years. Medicare keeps saying they’ll look into it, and the phony charges just keep coming and just keep being paid. A retired federal judge who has his God-given arms, reports that Medicare was billed for two artificial ones for him at the same time. Medicare paid the bill without question, despite the fact that losing two arms simultaneously is, to put it mildly, a rare medical event.

And this is the model for ObamaCare. The mind boggles.

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Telling It as It Is — New York Times Style

John Steele Gordon - 10.30.2009 - 10:39 AM

In the September 24 article on the Honduran matter, the New York Times wrote: “Norma C. Gutierrez, an international law specialist who prepared a legal analysis for American lawmakers last month, criticized both sides. Her bottom line: the case against Mr. Zelaya was rooted in constitutional and statutory law. His removal from the country was not.”

This morning, reporting on the agreement, the Times writes, “Mr. Zelaya was ousted in a military coup on June 28 and flown to Costa Rica.”

As near as I can tell, the only coup in Honduras happened today, when a group of diplomatic thugs, led by the United States State Department and the OAS, offered the legal government of Honduras a deal they couldn’t refuse, forcing it to restore to power a man who had been legally removed from office (and, perhaps, illegally sent into exile instead of legally sent to jail).

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Thursday, Oct 29

Fortunate Timing

John Steele Gordon - 10.29.2009 - 10:40 AM

The Commerce Department reported this morning that the economy rebounded in the third quarter of 2009, growing at a 3.5 percent annual rate. That is the first quarter of growth since the second quarter of last year and so may signal the end of the Great Recession, especially if the fourth quarter continues the trend. To be sure, a considerable part of that growth was from the cash-for-clunkers program, which helped drive up durable-goods purchases by an astounding 22.3 percent last quarter. It will be interesting to see how much of that automobile-buying was borrowed from the future by the federal subsidies, retarding growth in the current quarter and the first quarter of 2010.

What is unlikely to rebound is employment, which is always a lagging indicator. Worse, as I explained here, the rebound in employment has been taking longer and longer after each recession, as the microprocessor revolution rolls on. It is, perhaps, lucky for the Democrats that preliminary quarterly GDP figures are released on the last Thursday of the month following the end of the quarter and that monthly unemployment figures are released on the first Friday of the next month. Because of the vagaries of the calendar this fall, that means that the good news on GDP was released five days before the election and the likely bad news on unemployment will be released three days after the election.

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Wednesday, Oct 28

Republicans: Listen to Paul Krugman

John Steele Gordon - 10.28.2009 - 3:40 PM

No, really, they should. At least they should listen to what he has to say in one sentence of a blog post from 10 days ago.

In the post, Krugman sees no “wave election” on the horizon for next year. That, to be sure, is partly wishful thinking and partly ahistorical argumentation. He writes, for instance, that the election of 1994, when the decades-old Democratic status as the majority party crashed and burned, came about because “back in 1994, slogans about free markets, get government off peoples’ [sic] backs, etc. still had some popular resonance.”

They still do. But what turned 1994 from an ordinary off-year election, in which the party in the White House usually loses seats, into an election in which Democrats in Congress, governorships, and state legislatures from Maine to Hawaii got creamed, was the Contract with America. In it, the Republicans promised specific reforms of government. Those reforms entailed real limits on the powers of Congress members, such as term limits for committee chairmen, and of Congress itself, including giving a line-item veto to a Democratic president to help control spending.

Today, Krugman points out, “Republicans don’t have anything positive to sell.” That is all too true. They are against the health-care bill, cap-and-trade, card-check, etc. So is much of the country, and for the same reasons: we can’t afford them, and unions are a major cause of the government’s fiscal irresponsibility already.

What should Republicans be for? How about running on a platform that thoroughly reforms the budget process in specific ways; abolishes earmarks; takes the power to cook the federal books away from politicians and forces honest accounting; limits increases in federal salaries and benefits until they are, once again, in line with the private sector; and ends gerrymandering?

This would greatly limit the power of the members of the political class — of the Left and Right, Democratic and Republican, liberal and conservative — to ensure their own re-elections in the future. It could also produce a wave election that would make Paul Krugman weep.

Oh, and by the way, it would ensure American economic power and prosperity for the foreseeable future by ending the threat of the fiscal train wreck that has been looming ever nearer and is now — if the Obama administration gets it way — but a few election cycles away.

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Tuesday, Oct 27

Pardon Me, but Your Sycophancy Is Showing

John Steele Gordon - 10.27.2009 - 12:52 PM

According to a story — unconfirmed by me — a reporter was interviewing Albert Einstein shortly after Chuck Yeager broke the sound barrier in 1947. In the course of the conversation, the reporter asked Einstein what the speed of sound was at sea level. The physicist said he was sorry, but he couldn’t remember exactly. The reporter expressed surprise that the world’s greatest scientist didn’t know something like that. Einstein looked at him balefully over the top of his reading glasses and said, “I know where I can look it up.”

It’s amazing how many people seem not to know where to look information up, or perhaps don’t care, as they have things other than accuracy on their agenda. Take Rocco Landesman, the new head of the National Endowment of the Arts. In a speech in Brooklyn last week, he said of Barack Obama, “This is the first president that actually writes his own books since Teddy Roosevelt and arguably the first to write them really well since Lincoln.”

Oh, dear, where do I begin? Well, let’s start with grammar. It’s “the first president who,” not “the first president that.”

Second, he implicitly accuses Presidents Clinton, Bush 41, Reagan, Carter, Ford, Nixon, Johnson, Kennedy, Eisenhower, Truman, Hoover, Coolidge, and Wilson of having had their memoirs, autobiographies, and other works ghosted. Many of them received research assistance (one could hardly write a modern presidential memoir without it), and many, no doubt, also received a good deal of editing. Presidents are not usually professional writers. But research and editorial assistance is by no means the same thing as resorting to a ghost writer. I can’t imagine Harry Truman using a ghost writer. Herbert Hoover wrote sixteen books in his life, including Fishing for Fun — and to Wash Your Soul, published three years after his death, and a translation (with his wife) from the Latin of De re Metallica. Just a guess, but I don’t think there are many ghosted 640-page translations around.

Woodrow Wilson was a college professor and president before entering politics.  Congressional Government: A Study in American Politics, his best known work and one that ran through many editions, was not ghost written.

Third, Landesman implicitly accuses Theodore Roosevelt of being, unlike Barack Obama, a second-rate writer. Roosevelt wrote a total of 38 books in his life (not to mention countless magazine articles and thousands of letters, all while holding a day job and living only sixty years). His first, The Naval War of 1812, written when he was 23, is considered a basic historical text on that subject and is still both highly readable and in print. Will The Audacity of Hope be in print a 125 years after it was published?

Fourth, Landesman seems ignorant of even the existence of The Personal Memoirs of Ulysses S. Grant. They were written in the last months of Grant’s life (he died in agony from throat cancer three days after he finished the manuscript). They are universally regarded as the greatest military memoirs since Caesar’s Commentaries, and among the genuine masterpieces of American literature. Perhaps Mr. Landesman should give them a try if he doesn’t object to reading memoirs written by someone who had actually done something (like — you know — save the Union) before writing them.

Fifth, Lincoln never wrote a book.

What is it about Barack Obama that causes such cringe-inducing butt-kissing?

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Roger Ailes Should Send Obama a Thank-You Note

John Steele Gordon - 10.27.2009 - 10:06 AM

On October 11, Anita Dunn, White House interim communications director, declared war on Fox News. “Let’s not pretend they’re a news network the way CNN is,” she said. David Axelrod and Rahm Emanuel promptly chimed in on the Sunday talk shows (but not, of course, on Fox News Sunday with Chris Wallace, which is being boycotted). “Other news organizations like yours ought not to treat them that way,” Axelrod told ABC’s George Stephanopoulos. “We’re not going to treat them that way.” The president doesn’t want “the CNNs and the others in the world [to] basically be led in following Fox” said Emanuel to CNN.

So, how’s the war on Fox working out for the White House? Not too good it seems. It didn’t work with the news media. When the administration tried to freeze Fox out of a pool interview with Kenneth Feinberg, the other networks refused to go along.

And it sure didn’t work with the public. The ratings of FNC are up nearly 10 percent in the past two weeks. Among the 25-to-54-year-old demographic that advertisers love, it’s up 14 percent. Fox has the top 11 shows in that demographic, and the top 13 shows in all demographics. Glenn Beck, a particular bête noire of the Obama White House, is in the No. 2 slot, despite being on at 5:00 p.m. instead of in prime time.

This rather reminds me of the old Catholic Legion of Decency, which used to rate films for their moral content. At first (the group was formed in 1934) a C rating (C for “condemned”) could hurt a film, as many Catholics pledged not to attend such films and not to patronize movie theaters that showed such films. But by the 1950s, with people less likely to automatically defer to authority, the disapprobation of the Legion could actually help at the box office. People wanted to see what the fuss was about and make up their own mind. By the 1970s, the Legion had faded away.

Perhaps the War on Fox is another example of just how retro this White House actually is.

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Sunday, Oct 25

Turning Off the “Mother’s Milk of Politics”

John Steele Gordon - 10.25.2009 - 1:28 PM

Washington is consumed right now with health-care reform. But the population at large is far more concerned with the budget deficit. Indeed, a recent Rasmussen poll found that while 38 percent of the country thought cutting the budget deficit in half in the next four years should be the country’s top priority, only 23 percent thought health-care reform should be.

Of course, health-care reform involves spending (other people’s) money, while cutting the budget deficit involves making tough choices and making enemies. So it’s not surprising that Washington’s priorities are exactly the reverse of the country’s. As the California state politician Jesse Unruh famously explained, “Money is the mother’s milk of politics.”

There is not much, constitutionally, that we can do about this on the federal level. But there are many states that allow initiatives and referendums, and two of them, on opposite coasts, are holding referendums on limiting increases in state spending. Both Maine and Washington State are Blue States — Obama carried each of them by 17-point margins–but both are holding referendums that would freeze state spending per capita in real terms. (In other words, state spending could only increase to reflect population growth and inflation.) Any tax increase would have to be presented to the people in a referendum.

As the Wall Street Journal’s inimitable John Fund explains, the politicians and public employee unions are fighting these referendums tooth and nail, but both seem to be ahead in the polls (with, however, large undecided votes).

If both should pass, it would be as politically significant as the governor’s races in New Jersey and Virginia. Another Rasmussen poll shows that only 15 percent of Republican voters think their Republican representatives in Congress are doing a good job and 73 percent think they have lost touch with the Republican base. A win for both referendums in these two deep blue states would get their attention big time.

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Friday, Oct 23

Just Like Herbert Hoover

John Steele Gordon - 10.23.2009 - 12:16 PM

President Obama has a habit of letting Congress shape legislation, and the result has not been pretty. The stimulus bill turned into a liberal wish list that stimulated only the national debt. Cap-and-trade is stalled. And the health bills (there are, I think, five at the moment) are a mess, with no clear way to enactment (which is, of course, just fine with me).

This is reminiscent of one of the great legislative disasters in American history. In 1928, as Herbert Hoover was running for president, farm prices were low and going lower, and rural depression was deepening. He promised American farmers protection from foreign competition. Keeping his promise, he asked Congress to raise tariffs on farm products. Farm-state congressmen and senators were, naturally, all for this. But Congress works by log-rolling (I’ll vote for what you want if you’ll vote for what I want), and the Smoot-Hawley tariff bill (named for its chief sponsors, Sen. Reed Smoot of Utah and Rep. Willis Hawley of Oregon) soon turned into a special-interest feeding frenzy.

No fewer than 20,000 products, including tombstones (who knew that imported tombstones were a threat to American prosperity?), had their tariffs raised, and the overall level set by the new tariff was the highest in American history. Economists knew this was economic lunacy, and more than 1,000 signed a petition asking for a presidential veto. So did the international banking industry. Thomas Lamont of J.P. Morgan and Co. wrote: “I almost went down on my knees to beg Herbert Hoover to veto the asinine Hawley-Smoot Tariff. That Act intensified nationalism all over the world.”

It sure did. Other countries immediately slapped on retaliatory tariffs, and world trade began to collapse. It was $36 billion in 1929. In 1932, it was $12 billion. American exports declined 78 percent between 1929 and 1933, falling below the 1896 level if inflation is factored in.

The Smoot-Hawley Tariff was one of the three big government mistakes that converted an ordinary recession and stock-market crash into the economic catastrophe of the Great Depression, now forever linked to Herbert Hoover’s historical reputation.

One has to wonder why President Obama seems to have chosen Hoover as his role model. Wouldn’t Lyndon Johnson have been a better choice?

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Tuesday, Oct 20

Re: A Tale of Two Races

John Steele Gordon - 10.20.2009 - 12:32 PM

As an addendum to Jennifer’s post regarding New Jersey’s governor’s race, I was struck by something on Fox News Sunday, at the end of Chris Wallace’s interview with Terry McAuliffe and Karl Rove. The interview was essentially over, but McAuliffe and Rove were engaging in some good-natured banter, and lost in the crosstalk were two predictions regarding that race. McAuliffe said Corzine by 7. Rove responded with Christie by 2.

We’ll see.

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Sunday, Oct 18

$13 Billion Here, $13 billion There . . . .

John Steele Gordon - 10.18.2009 - 2:49 PM

If you need an example of how deeply embedded the spending culture of Washington is, just consider the administration’s latest proposal.

A recent Fox News Poll reveals that more than three-quarters of Americans think the national debt is so high that it endangers the future of the country. Even 65 percent of Democrats agree with that. The majority has some powerful facts on their side. Fiscal year 2009, which ended on September 30th, had an official (translation: phony bookkeeping) budget deficit of $1.42 trillion, equal to ten percent of the economy. But the national debt actually increased by $1.80 trillion, which is over twelve percent of GDP. You have to go back to World War II to find such figures. The Congressional Budget Office expects the debt to double over the next five years and possibly triple over the next ten, even if the proposed health-care reform doesn’t add to it (which is about as likely as the sun rising in the west tomorrow morning).

The one bright spot in these dismal figures is that, because there was a slight deflation in fiscal 2009, no cost-of-living increase is needed this year for Social Security recipients to have their real income remain constant. Indeed, because of the deflation, they are better off today than they were a year ago, as cost-of-living adjustments only ratchet up, not down.

So how has the administration handled this rare piece of fiscal good news? It has suggested sending everyone on Social Security a check for $250 to compensate them for there being no cost-of-living increase. That would add another $13 billion to the national debt. To be sure, that is a mere bagatelle compared to the rate at which the national debt is increasing. It rose by twice $13 billion just in the first 15 days of this month. But, to update Senator Everett Dirksen’s famous dictum, $13 billion here, $13 billion there, and the first thing you know is you’re talking about real money.

The fact that the Social Security cost-of-living increase this year would be negligible if not nonexistent has been obvious for months. It would not have taken a PR genius to present this as the good news it is and note that it helps reduce the growth of the national debt. It’s amazing how well people react when you tell them the truth.

Instead, the Obama administration has proposed sending seniors their grandchildren’s money.

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Friday, Oct 16

A Graphic Depiction of Job Losses

John Steele Gordon - 10.16.2009 - 11:22 AM

As Jennifer points out, the liberal spinners are having trouble dealing with the fact that “we’ve lost millions of new jobs since January, and unemployment is at a 26-year high.”

If you’d like to see just how bad it is, try this remarkable graph showing how employment has grown and shrunk since January 2004. Republican spinners should have no trouble making devastating TV ads out of animated graphs like this one, which allow the instant comprehension of complex data over time.  As Glenn Reynolds points out, the last few months look “like some sort of nuclear-war animation.”

Ronald Reagan won the White House by asking, over and over, the simple question “Are you better off now than you were four years ago?” With the new technology of animated graphs, it is now possible to pound the answer home as never before.

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Tuesday, Oct 13

Overpromising and Underdelivering

John Steele Gordon - 10.13.2009 - 9:22 AM

Jennifer refers to the New York Times lead article this morning on a brewing civil war among Congressional Democrats as they struggle to get a health-care reform bill through the legislative process. This, of course, is what happens when you promise, as President Obama has repeatedly, to put in place a new health-care system that covers more people, costs less money, provides more services, and allows all who like the status quo to continue with what they have.

This is why I like engineers more than I like politicians. Engineers live in the real world. What they design has to actually function as advertised. So they don’t promise an airplane that is extremely fast, extremely fuel efficient, extremely quiet, and extremely safe. Those goals, each desirable individually, are mutually incompatible given the laws of physics. Politicians live in the political world and need only make sure that the bridges they build and the aircraft they design don’t crash in ruins before the next election. So they blithely ignore the laws of economics and human nature in designing programs. The political press corps equally pretends these laws don’t exist.

But sometimes they slip up and allow a glimpse of the truth to peek through. The Times article, for instance, notes that,

The tax [on "Cadillac health plans"], a provision of the bill to be voted on Tuesday by the Senate Finance Committee, is one of the few remaining proposals under consideration by Congress that budget experts say could lead directly to a reduction in health care spending over the long term . . .

If one of the “few remaining proposals” that would actually help reduce spending is eliminated, what will reduce spending? Nothing to see here, folks, just move along. Pay no attention to that man behind the curtain . . .

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Monday, Oct 12

Deficits and the Debt

John Steele Gordon - 10.12.2009 - 5:18 PM

Lawrence Kadish has a good article in today’s Wall Street Journal, pointing out that the national debt is on an unsustainable path. Interest payments already consume more than 18 percent of federal revenues, and if the debt rises as predicted by the Congressional Budget Office (which has invariably underpredicted in the past), it will consume a lot more than that. And that’s assuming investors don’t require higher rates to compensate for a perceived increased risk of a default and/or an induced inflation. During the great inflation of the 1970s, the government had to pay as much as 15 percent interest to get investors to buy its longer-term paper. Rates even half that high would be disastrous.

Mr. Kadish makes one error. He writes that “except for a few years in the late 1990s, for decades Washington has spent more than it has taken in each year and borrowed the rest.” Alas, it borrowed in those years, too. Those were the years between 1998 and 2001, when the government ran “surpluses” totaling $559.3 billion. And yet the national debt increased every one of those years, for a total of $400 billion.

How does your income exceed your outgo (the definition of “surplus”) by $559.3 billion, and yet your net indebtedness increases by $400 billion? Simple: You cook the books. The money was taken from various trusts funds operating in surplus, principally Social Security, and replaced with federal bonds. But the money received was counted as “income” for budget purposes. There are former corporate executives playing volleyball this very minute at Club Fed for less than that.

There can be no long-term cure for Washington’s spending addiction until the politicians have taken away from them the power to keep the government’s books as they please, just as corporate management had it taken away more than a century ago. That won’t be easy because the politicians — aided and abetted by their water bearers in the media — will fight it tooth and nail, and because most people regard accounting as a boring, even an eye-glazing subject.

Watching the United States go the way of 17th-century Spain, with its power to defend its interests crippled by debts it can’t pay and its enemies emboldened by its weakness, won’t be boring. It will, however, be tragic for all mankind.

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American Exceptionalism

John Steele Gordon - 10.12.2009 - 9:13 AM

The winners of the Nobel Prize in economics were announced today. They are two Americans, Elinor Ostrom of Indiana University and Oliver Williamson of UC Berkeley.

So now that all the 2009 prizes have been awarded, let’s recap: The Nobel in medicine went to three Americans. The Nobel in physics went to three Americans. The Nobel in chemistry went to two Americans and one Israeli. The Nobel in literature went to a German. The Nobel Peace Prize went to an American, and now the Nobel in economics has gone to two Americans.

Thus, of the 13 winners this year, 11 are Americans. A country with 4 percent of the world’s population produced 85 percent of the winners. To be sure, we are to some extent playing with numbers here. After all, Israel, with .08 percent of the world’s population, produced 7 percent of the winners. But over the 108 years they have been handing out Nobel Prizes, the number won by American citizens is exceptionally large.

I wonder if that fact embarrasses this year’s Nobel Peace Prize winner.

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Friday, Oct 09

An “Absurd Decision”

John Steele Gordon - 10.09.2009 - 10:46 AM

The Times of London gets it exactly right, I think.

. . . the prize risks looking preposterous in its claims, patronizing in its intentions and demeaning in its attempt to build up a man who has barely begun his period in office, let alone achieved any tangible outcome for peace.

Two previous sitting presidents have won the Nobel Peace Prize. Theodore Roosevelt won it in 1906 for brokering the peace treaty that ended the Russo-Japanese War, and Woodrow Wilson in 1919 for struggling so hard — if unavailingly — to build a lasting peace after World War I. Wilson spent six months in Europe, sailing on December 8, 1918, and leaving for home on June 28, 1919, the day after the Versailles Treaty was signed. Returning for only two weeks in February, it was by far the longest time an American president has ever been out of the country.

Now a third sitting president has won it for . . . what? For “capturing the world’s attention.” As the Times says, “The achievements of all previous winners have been diminished.”

I agree with Noah Pollak that Obama would be wise to respectfully decline the prize, pointing out that the prize should be given for achievements, not aspirations. But that, alas, would be an even bigger surprise than his being awarded it in the first place.

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Thursday, Oct 08

Public-Employee Unions vs. the Public

John Steele Gordon - 10.08.2009 - 3:08 PM

Public-employee unions are quickly becoming a major and, indeed, imminent threat to American democracy, but one that will be very difficult to correct.

It used to be that few government employees were unionized, as few governments allowed it. But in 1958, Mayor Robert F. Wagner of New York City signed an executive order allowing city workers to organize. The son of the author of the Wagner Act, still the basic federal labor-law in the United States, believed in unions. But he also believed in re-election and calculated that he would receive a lot of votes from New York City’s vast bureaucracy and teachers if he promised to let them organize. He did indeed. Other politicians made the same calculation, and other state and municipal governments followed suit. In 1962, President John F. Kennedy allowed federal workers to organize.

While union membership has been declining for more than 50 years in the private sector as the economy moved away from manufacturing and into services and high-tech industry, union membership among government employees has soared.

There are two big problems with this. The first is that both management and labor are deciding not how to divide the profits that they create by their mutual efforts, as in a corporate labor negotiation, but how much of someone else’s money (yours, to be precise) should be paid to workers. The tendency to cut a favorable deal rather than endure a protracted and difficult negotiation and possibly a disruptive strike (most public employees are barred from striking, but the laws are often enforced by a slap on the wrist) is strong. Because big salary increases might result in unfavorable publicity, it has often been the benefits that have been increased, such as allowing workers to retire with a full pension after 20 years and giving them gold-plated health insurance. (Why do you think labor unions are so opposed to taxing Cadillac health plans?) Today federal workers earn twice as much on average as their private-sector counterparts.

But as Fred Siegel and Dan DiSalvo point out in the Weekly Standard, there’s an even bigger problem than politicians being generous with other people’s money. While a union can call a strike against a company it feels has not been generous enough, it can’t fire the CEO and the company treasurer. But they can, and have, worked hard to fire politicians who don’t knuckle under, using their immense financial and manpower resources to elect others they thought would do their bidding. As a result, many politicians forget whose interests they are paid to uphold. Governor Jon Corzine of New Jersey, addressing a rally of 10,000 public workers in Trenton in 2006, the year after he was elected governor, promised them that “we will fight for a fair contract.” Of course, it was Corzine’s own administration that was negotiating with the workers.

The stronger the public-employee unions, the worse shape governments tend to be in — just ask Jon Corzine’s constituents. Democrats, the beneficiaries of $400 million in union largesse in the last election cycle, aren’t about to do anything, so it is up to Republicans to work to rein in a situation that is rapidly running out of control.

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Sunday, Oct 04

Annals of (Climate) Science

John Steele Gordon - 10.04.2009 - 1:59 PM

It is looking more and more as if there has been a major case of scientific fraud in the data supporting the idea of anthropogenic global warming. The famous “hockey stick” chart shows a major increase in average global temperatures in recent decades and one of the major contributors to the data underlying the chart is Keith Briffa, a dendrochronologist from the University of East Anglia.

While widely published in such prestigious publications as Science, Briffa has consistently refused to release the raw data on which his studies have been based. That alone should have been enough to disqualify him, as that is about as serious a breach of the scientific method as you can commit. But, perhaps because his studies undergirded the received wisdom regarding climate change, he got away with it. Until he published a paper in a publication of the Royal Society. The society has a policy:

As a condition of acceptance authors agree to honour any reasonable request by other researchers for materials, methods, or data necessary to verify the conclusion of the article… Supplementary data up to 10 Mb is placed on the Society’s website free of charge and is publicly accessible. Large datasets must be deposited in a recognised public domain database by the author prior to submission. The accession number should be provided for inclusion in the published article.

Steve McIntyre, a statistician and noted climate-change skeptic who has been repeatedly denied access to the data by Briffa for 10 years, wrote the Royal Society, which was embarrassed that this requirement had not been enforced. Briffa was eventually forced to comply (the details of McIntyre’s pursuit of the data he should have been given freely can be found in narrative form here). It appears (and I am no statistician, let alone a dendrochronologist) that the data was seriously cherry-picked to produce a desired result. When a larger and more logical data set is used, the hockey stick disappears (scroll down to see the chart). The late 20th century does not look any different from earlier times.

If this turns out to be the case, it will be interesting to see how long it takes the mainstream media to begin reporting what should be a huge story. The great Piltdown fraud of the 20th century is probably the most famous scientific fraud, but it had few real-world consequences. It just led human paleontology down the wrong path for four decades. But climate change fraud could have trillions of dollars of real-world consequences, the cap-and-trade bill now stalled in Congress by no means the least of them.

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Saturday, Oct 03

Congress at Work

John Steele Gordon - 10.03.2009 - 12:03 PM

If you want a perfect example of what is wrong with Congress as an institution, you need look no further than a bill now making its way through the Senate. The bill, sponsored by four Democrats (Schumer of New York, Menendez of New Jersey, Landrieu of Louisiana, and Hagan of North Carolina) is called the Avoiding Life-Endangering and Reckless Texting by Drivers Act, or “ALERT Drivers” (Act, for short — I wonder how long it took Senator Schumer’s staff to think that up). It would effectively ban texting while driving. Schumer also wants to ban texting by public-transit drivers.

Now I’m all in favor of banning the use of hand-held cell phones while driving, especially for texting, which requires the driver to look away from the road. But exactly where in the Constitution is the authority for the federal government to enact such a law? The police power belongs to the states. Aware of this problem, the bill would actually require the states to enact such laws (14 states already have them) on pain of forfeiting 25 percent of their federal highway money. This is the same method used by Congress to force states to set the drinking age at 21. (When I was growing up in New York City, you had to be 18 to drink and 21 to vote. Now you have to be 21 to drink and 18 to vote. This is progress?)

Meanwhile, Congress is so busy minding what is the business of state legislatures that of the 12 annual appropriation bills for fiscal 2010, which began last Thursday, needed to fund government operations (you know, stuff like the Army, the State Department, national parks, etc.), Congress has passed exactly one: the one to fund Congress, giving itself a nice 8 percent increase over fiscal 2009. The rest of the government is operating under a “continuing resolution” that allows spending at the same level as last year until Congress gets around to doing its most important job.

This is not the most egregious use of a federal fiscal gun to the head of the sovereign states. When the ERA amendment to the Constitution was faltering, Rep. Bella Abzug actually proposed withholding federal moneys from those states that had not ratified it. Fortunately for the republic, that profoundly unconstitutional mischief got nowhere in Congress and the ERA died.

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Friday, Oct 02

RE: The Limits of Egomania

John Steele Gordon - 10.02.2009 - 2:56 PM

Well, I hate to be an old I-told-you-so, but . . . Rio got the Games and Obama got humiliated. I must say I wish I were on Copacabana Beach right now celebrating along with a gazillion Brazilians. They sure know how to party, and Copacabana (and Impanema) have more stunningly beautiful people wearing less clothing than any other place in the world.

More seriously, there is this from the Times of London:

Chicago’s dismal showing today, after Mr Obama’s personal, impassioned last-minute pitch, is a stunning humiliation for this President. It cannot be emphasised enough how this will feed the perception that on the world stage he looks good—but carries no heft.

I am no fan of President Obama (still less of his agenda), but I also don’t want my president making a fool of himself before the world as, I’m afraid, he did in this instance.

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RE: More Than a Quarter Million New Unemployed

John Steele Gordon - 10.02.2009 - 12:38 PM

As Jennifer has pointed out, the just-released employment figures are pretty dismal, with unemployment rising a tick to 9.8 percent and a significant rise in jobs lost, to 263,000 last month. This is, of course, bad news both for those who have lost their jobs and for the Obama administration. For while the economy is recovering from its winter lows (the job losses in January were a horrific 741,000) and many sectors are now growing, unemployment—always a lagging indicator—has been lagging more and more in the past two decades.

As a chart in a 2003 report by the New York Federal Reserve (scroll down to find Chart 1) shows clearly, job growth after the 1990-91 recession was much slower than the average of earlier recessions, a fact that contributed considerably to George H.W. Bush losing the White House a full year and a half after the recession had ended. The recession of 2001 was followed by even more dismal job growth–in fact it was job loss. There is no reason whatever to think that this recovery will not continue that trend.

Needless to say, the jobless recoveries after the recessions of 1990-91 and 2001 were blamed on Bush, père et fils, respectively. The mainstream media will be far more reluctant to blame Obama for this new jobless recovery, I’m sure. It should be noted, however, that the unemployment rate, 5.7 percent when the 2001 recession officially ended, remained steady and even rose as the recovery continued. It was at 6.1 percent in May 2003, when those dreadful Bush tax cuts for the rich were enacted. But then the unemployment rate immediately began to decline, falling as low as 4.4 percent and staying under 5 percent until March 2008. It was either the Bush tax cuts that ended the jobless recovery from the 2001 recession or it was a remarkable coincidence.

The underlying reason for increasingly jobless recoveries in recent decades can be found in Chart 5 of the New York Fed’s report. In the early 1980s, 51 percent of industries were undergoing structural change as opposed to merely cyclical change. By the 1990s, that percentage was 57. In 2003, it was fully 79 percent. It is undoubtedly even more now, six years later. The fact of the matter is that the microprocessor is remaking the economy from top to bottom—just as the steam engine did two centuries earlier—but it is doing so much faster. One result of this profound economic revolution is that productivity—the amount of output per unit of input—is rising quickly, and the largest input in most industries is labor. Thus the need to hire new workers as the economy begins to grow again is less and less urgent. It increasingly makes a lot more business sense to invest in new, highly productive equipment instead.

The unemployment rate fell below 5 percent in July 1997 and stayed below until September 2001 (it was actually at 3.9 percent in the last four months of 2000). If the Democrats allow the Bush tax cuts to expire in 2010, it’s going to be a very jobless recovery indeed.

Maybe the mainstream media won’t blame President Obama, but I suspect the voters will.

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Wednesday, Sep 30

RE: The IOC on 9/11

John Steele Gordon - 09.30.2009 - 3:37 PM

I certainly agree with Ted Bromund that the IOC is as pompous and self-important as only an international bureaucracy can be and that the 9/11 quote from them is disgusting. But I wonder if President Obama is going to personally present the case for Chicago despite the quote or because of it. After all, apologizing if not actually groveling before anti-American countries and NGOs seems to be an important tactic of his foreign policy. It will interesting to see what he says on Friday.

It also seems to me that he’s fighting an uphill battle, which makes putting his personal prestige on the line even more problematic. The summer Olympics have been held in the United States four times, in St. Louis (1904), Los Angeles (1932 and 1984), and Atlanta (1996). The winter games have also been held in the United States four times, in Lake Placid (1932 and 1980), Squaw Valley (1960), and Salt Lake City (2002).

Brazil’s government is pushing hard for the 2016 summer games to be held in Rio de Janeiro and they have a very good case. Rio’s dazzling setting makes Chicago’s utter flatness dreary. More important, Brazil is rapidly emerging as a major power, with the world’s eighth or tenth largest economy—depending on which statistical source you choose. It is thus economically larger than Canada, which has hosted the Summer Games once and the winter ones twice. But not only has Brazil never hosted the Olympic Games before, neither has the entire continent of South America. It would seem to be their turn.

So I’m betting on Brazil getting the nod. I’ll also bet that Obama’s speech on Friday will be one more variation on the theme of (with apologies to Alexander Pope):

America’s goodness lay hid in night. God Said “Let Obama be!” and all’s now right.

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