The Review
July 4, 2003
July 3, 2003
IS this Really something we want?
(Review) Joseph Goeller writes that, while the Germans aren't all that keen on military cooperation with the US, they appear to be increasingly keen on military operations elsewhere. Indeed, since Germany amended its Basic Law (constitution) a decade ago to remove the ban on German troops being sent outside of Germany, they have constantly increased the number of German troops abroad.
Something that has gone unnoticed lately is the fact that Germany now has the second largest international troop deployment abroad, behind the US. For the last seven years, the German Army Bundeswehr has kept the peace in the Balkans, with 1,500 troops in Bosnia and Herzegovina and 4,400 troops in the Serbian province of Kosovo. It's the largest contingent of international troops in the region. In neighboring Macedonia, 225 German soldiers are protecting the international monitors overseeing implementation of the peace process. Further east, a small contingent of German officers patrols the Caucasus mountains in the rebellious Georgian province of Abchazia. Germans are also part of the coalition against terrorism. While 1,336 German troops operate in Afghanistan, another 1,135 mostly naval troops are serving in Operation Enduring Freedom at the Horn of Africa, patrolling the straits between Somalia and Yemen. In Africa, Germany is being drawn into more and more action mainly by its European neighbor, France. With the exception of Somalia, in most of the countries where German troops have been deployed they have stayed or increased their number over the years.Call me crazy, but I'm pretty sure I liked it better when Germany was banned from sending troops outside of Germany. One is reminded of the French politician during the Cold War who stated, "I Love Germany so! Each day I thank God that there are two of them!" The current French attitude now seems to be how to find ways to entice the German army to serve French--uh, I mean European interests abroad. But, based on the increasing comfort that Germans seem to be feeling about deploying their military strength, one wonders what might happen if the Germans begin to decide that instead of pursuing French-defined interests, they should begin to pursue more...parochial ones.
Wanted: Dead or Alive
(Review) Twenty-five million smackers. That's the reward the US is offering for Saddam Hussein's head. Uday and Qusay are going for 15 mil a pop.
Bad News for job Seekers
(Review) The econoboys were unpleasantly surprised by the weak employment numbers this morning.
The nation's unemployment rate (search) shot up to 6.4 percent in June, the highest in more than nine years, in an economic slump that has cost nearly a million jobs in the last three months. Businesses slashed 30,000 jobs just last month, with cuts heavily concentrated on factory assembly lines, the Labor Department reported Thursday. Last month's 6.4 percent rate--the highest since the aftershocks of the September 11, 2001 terror attacks--was up 0.3 percentage point from May. That surprised analysts who had predicted a slight rise to 6.2 percent. The last time the rate was higher was in April 1994.You have to look a bit deeper into this report to try to divine any good news out of it, but there is some. It turns out that much of the reason for the large jump in the unemployment is that people are once again returning to the job market. The Bureau of Labor Statistics (BLS) only considers you to be part of the workforce if you are employed or actively seeking work. A lot of people have re-entered the job market, and are actively seeking work again, so they are counted as part of the labor force this month, whereas in the last few months or so, they were not counted. What that tells us is that there is a general feeling that the economy is rebounding, at least to the point that it's encouraging people to return to the job market. OK, it's not much, but there it is. Other effects of the report this morning have been a selloff of dollar-denominated securities, mainly in favor of euro-demoninated ones. It also appears to have stemmed the selloff in the bond market, at least temporarily.
July 2, 2003
Destroying black youth
(Review) Economist Walter Williams writes that all the affirmative action programs in the world won't be of much help to minority youths whose opportunities are squandered by a failed primary and seconday education establishment.
The bottom line is given the day-to-day destruction of education for black students at the primary and secondary levels of schooling, most will never be able to compete academically. The fact that the affirmative action crowd demands discriminatory admission practices for post-graduate education such as in law and medical schools confirms something else. Black performance on admittance exams, such as the LSAT, MCAT and GRE, is stark testament that four years of undergraduate education cannot erase the damage of 12 years of fraudulent primary and secondary education. Black politicians and civil rights organizations' loyalty to the education establishment means academic doom to black youngsters. Washington, D.C,. politics and its schools, among the worse in the nation, are a case in point. Rep. Eleanor Holmes Norton, along with most members of the Congressional Black Caucus, use private schools to educate their children. But, when D.C. Mayor Anthony Williams broke ranks with most black elected-officials and endorsed recently proposed education vouchers, Norton blasted him as being "a sell-out." Whom do you think Frederick Douglass would deem the sell-out: those who seek an alternative to rotten schools that cost taxpayers $13,000 a year per student or those who support the status quo?I am continuously mystified by the black leadership's slavish devotion to the failed policies of the Left.
How do our soldiers do it?
(Review) Victor Davis Hanson asks how our soldiers do it.
At this point, I must ask, how do our men in arms do what they do? We so often forget that their dilemma is not just age-old material challenges of time and space--Iraq, remember, is 7,000 miles away, hot, dry, and surrounded by overt enemies and canny neutrals--but the exasperating conditions of both postmodern warfare and fighting in the Middle East in general. Both combine to diminish, if not apologize for, the idea of victory, military prowess being defined not as proof of heroism, discipline, and elan, but almost a shameful admission of outdated bellicosity and abject imperialism or colonialism. Indeed, the restraint on the enormous firepower at our military's disposal has almost earned contempt for hesitancy rather than ensured appreciation of magnanimity. Various explanations come to mind for the unshakeable nature of our soldiers put into such impossible circumstances. Of course, there are the age old motivators in play: unit morale, group loyalty, ingrained training, chain of command, democratic idealism, patriotism, and simple self-survival all play their roles--and an understandable desire to return as quickly as possible to the United States. But there is also transcendence at work; such soldiers believe in their role of doing something good for millions in dire need. It seems just as true that the military has somehow distilled from the rest of us Americans an elite cohort with the most direct ties to the old breed of the sort who fought at Okinawa, rolled with Patton, and reconstituted Japan. Such soldiers somehow remain oblivious to unfounded criticism, confident in their own prowess, and convinced that their nation and its military are clear forces for good. Because of such men and women, and despite so many other forces beyond their control, Iraq will not be lost to gangs and criminals, much less to Baathists, pan-Arabists, and Islamicists, who are not so much fueled by ideology as the desire for power and its accompanying material benefits for a tiny few.To tell you the truth, even though I did it for ten years, I can't even answer that question. You just do it. You do it because there's a job that has to be done, and you are trained to do it. You do it because your friends--and your country--is counting on you to. You complain about it. You gripe about it to your buddies. You get sick of the heat, the dirt, and the sweat. And you do it anyway.
Getting the party started
(Review) James Pethokoukis, writing for US News, notes that the stock market rally looks like it may be the real deal.
But a broader trend seems to be afoot, confirmed by the fact that even with the sell-off, many stocks still were showing positive gains from the rally that began in March. Investors seem to have mentally moved past many of the noneconomic events that spawned financial uncertainty during the past two years: 9/11, Enron, and the war in Iraq. "In the past we've had false starts which were clearly interrupted by factors beyond the control of fiscal or monetary policy," says Ned Riley, chief investment strategist at State Street Global Advisors in Boston. "This rally is clearly different." Record-low interest rates, in turn, have made the yield on bonds less desirable as an alternative to stocks. Solid companies now pay dividends that are higher than yields on cash or short-term debt. About the only missing element is evidence of the much-anticipated economic rebound. Still, a quick analysis of the market upturn shows it to be a pretty powerful beast that gives reason for further optimism--and gains.And there's also more than $1 trillion in money market funds. Just sitting there. Waiting. But, of course, if the US economy doesn't turn around, that $1 trillion may just keep waiting.
And it's about time, too
(Review) Gordon Adams writes in the Financial Times that Europe should face the fact that it's time for them to strike out on their own.
For a growing number of influential Europeans, US actions - the Iraq war, name-calling about "old Europe", scoffing about European defence capabilities, base relocation plans and a childish obsession with insulting France - all point towards a deliberate effort to hinder European unity and carve out a zone of friendly countries in the new democracies of central Europe. The truth is even more disturbing. In reality the current administration is ignoring Europe. It has switched its attention to the fractious disputes in the "arc of conflict" that stretches from North Africa to Indonesia. Europeans need to face up to this change, not hanker after a return to more "normal" days.That's right. Time to cut the apron strings, Europe. The US spent most of the last half century providing the security umbrella under whose protection you built your comfortable, 35-hour-work-week, socialism. Now let's see how you like fending for yourself. And paying for your own security.
More Photos
This weekend, Chris and I spent all day Saturday taking pictures along the San Diego coast. A couple of good photos came out of it. Click on the thumbnails below to see the full picture.
 | This is an extremely odd flower. No idea what it is. |
 | Don't know what this flower is either. But it's both less wierd and more pretty than the one above. |
 | This is the Mormon Temple in La Jolla. Never been inside,what with being a "Gentile" and all, but from the outside, it is perhaps the most architecturally distinctive building in San Diego. |
 | This is downtown San Diego viewed from across the bay on Coronado Island. Which isn't really an island at all, but a peninsula with a really fat head and a really thin neck. |
 | This is the Coronado Bridge, shot from the underside. |
 | The Hyatt Regency hotel at night. One of my favorite buildings in San Diego. |
 | A panoramic view of the city. |
 | Why, yes, I do like to shoot nighttime photos. Why do you ask? |
 | Coronado Bay Bridge at night. |
 | Downtown San Diego just looms right over the bay, as this photo shows. |
 | The Hyatt again. This one was taken on the ferry between San Diego and Coronado. |
 | Buildings. At Night. Very exciting. |
 | These are boat-shaped houses in Encinitas. No, not old boats turned into houses. Houses shaped like boats. All of the other houses on the street are depressingly normal. |
 | The beach and shoreline in La Jolla. |
'Road map' to nowhere
(Review) Max Boot's thesis about the Road Map can be summed up in one sentence: "Successful negotiations are impossible when one side won't recognize the other's right to exist."
You can't put it any simpler than that.
The Crackup of the Arab Tyrannies?
(Review) Amir Taheri writes that Arab governments have tried every bad political idea of the 20th century, an effort that has led to unremitting Arab failure. Maybe, he says, it's time to give liberal democracy a try.
The Arab Middle East is one of the few parts of the world as yet untouched by the wave of democratization that eventually swept away the Soviet empire and numerous dictatorships in the Third World. The liberation of Iraq provides a historic opportunity to open the entire Arab world to democracy. For the liberators to allow tactical concerns to distract them from that strategic opportunity would be a grave mistake. To sell the democratic ideal, it is important to draw on the experience of past generations of Arabs and Muslims who struggled for democracy and in some places--Turkey, Iran, Egypt, Iraq, and elsewhere--achieved certain victories against tyrannical regimes. It is essential to show that the ideal of self-government is not alien to Islam and that, given a chance, many Muslims will reject the despotic model in favor of one respectful of human rights and popular participation in the political process.One thing is certain. Unless the Arab world liberalizes and reforms, it will remain a cesspool of political and economic failure.
July 1, 2003
The other crisis
(Review) Lawrence J. McQuillan & Andrew M. Gloger write that, even though California's other crises1 are at the top of the news, it's the hidden crisis of Workmen's Comp that may be the real killer for California's economy.
California Insurance Commissioner John Garamendi has approved a 7.2 percent premium increase effective July 1. A state bureau believes that a 22-percent increase may eventually be needed to cover rising medical costs. This is terrible news for California employers who have already seen their workers' comp costs triple since 1997, prompting many firms, including 3Com, Countrywide Financial, and Fidelity, to seek greener pastures outside the state. Even more discouraging for employers is that top officials are not focusing on reforms that would provide the greatest relief.Yes, that's right, workmen's comp premiums have tripped over the last 5 years. Businesses are starting to leave the state in droves. The problem is fraud and abuse, and it's not going away under the current system in place. ===== 1 Currently, we have a Power Crisis, a Recall Crisis, and a Budget Crisis, with the latter getting rapidly worse as the legislature failed to get a budget passed, and the fiscal year started yesterday.
Note to Black America: Liberals are not your friends
(Review) Dennis Prager succinctly explains how Affirmative Action harms black Americans.
The first and most important reason affirmative action hurts blacks is that it renders black achievement suspect. Every campus that practices race-based affirmative action places every black student and professor there under a cloud: Did this individual really merit getting in? Or did the university lower its standards? The second way in which race-based affirmative action injures blacks is that it perpetuates the racist myth that race is significant. The notion that racial diversity is important is itself based on this racist idea. It confuses cultural diversity -- a great asset to a university -- with racial diversity. It tells the black student that the rest of us regard him first and foremost as black. Yet, no white or Asian student thinks of himself this way, or is seen this way by others. Yet universities chisel this racist absurdity into students' hearts, minds and souls. Thanks to liberals, it will take yet another generation to identify people by their achievements and personalities rather than by their color. Third, affirmative action tells blacks that America is so racist that they cannot achieve anything significant without having rules bent on their behalf. This is a libel on America, and it is utterly dispiriting to blacks. Fourth, it discourages self-reliance and hard work. If you knew that wherever you went in life, you would be given special consideration because of your ethnicity or color, would you work as hard? Of course not. Affirmative action is race-based welfare.You can't put it any clearer than that.
Not as bad a Nick Kristoff seems to think
(Review) Ralph Peters writes that we shouldn't take counsel of our fears about how things are going in Iraq. They are evidently going a lot better than the big media reporters are telling us.
How bad is it in Iraq? It's terrible - if you're a former Saddam loyalist, ex-secret policeman or Ba'ath Party muckety-muck on the wrong end of Operation Sidewinder. The party's over for Baghdad's bully-boys, and they don't much like it. As one pal of mine serving in Iraq puts it, the attacks on U.S. forces are foolish acts of desperation. The last hardcore loyalists - those whose futures and fortunes were tied to Saddam - have recognized how unexpectedly smoothly the U.S. occupation has been going (Saddam's guys don't read the Western press, so they don't realize we're doomed to failure). And they're trying everything they can to disrupt things. We shouldn't be surprised that the last embittered thugs are engaging in occasional acts of terrorism against us - on the contrary, we should be relieved that we see so little continuing resistance. After toppling a totalitarian regime that ruled a population of 25 million for over a generation, it's amazing that we face only one or two attacks every few days. We could be suffering hundreds of incidents daily, if the population stood behind Saddam & Co. On our worst day last week, when two convoys came under attack, more than 600 other U.S. convoys didn't hear a single shot. Two patrols got into firefights. The other 500 patrols didn't even get hit with a water balloon.Reporters, in general, know absolutely nothing about military operations. Nor do they apparently have enough judgment to discern that between the two stark options they present, total victory or complete quagmire, there is a vast scale of of measurement, and that on that scale, we appear a lot closer to the "total victory" end than we do to the "complete quagmire" end. Journalists seem to be programmed with a hardwired "Vietnam" circuit. Unless our enemies are completely prostrate at our feet, the J-school boys are painting it as a Tet Offensive.
Read 'em and Weep, Gray
(Review) It's a done deal for the Gray Davis recall election. The recall campaign has collected 1.1 million signatures, of which, about 766,000 have been turned into the various county clerks.
A Hidden Stash?
(Review) According to Business Week, the moaning about federal budget deficits "as far as the eye can see" may turn out to be hogwash. Evidently, no one is factoring the future tax payments from tax-deferred savings, such as IRAs and 401(k)s.
Long-term forecasts from the nonpartisan Congressional Budget Office show federal spending soaring from 18% of gross domestic product today to 24% in 2040 -- way ahead of expected tax revenues. In order to avoid colossal budget deficits, many economists say, the U.S. will need to slash benefits, raise taxes, or both. But that budget forecast is incomplete and perhaps overly pessimistic because it doesn't take adequate account of the growing wealth -- and future tax payments -- of America's Investor Class. Ordinary Americans and their employers are socking away huge sums in tax-deferred accounts such as Individual Retirement Accounts, 401(k)s, and traditional pensions. The total in such accounts is roughly $11 trillion today, with hundreds of billions in new contributions pouring in every year. Under current law, retirees will pay ordinary income taxes as they withdraw money from these accounts. Surprisingly, official long-term budget estimates ignore most of these projected tax receipts -- and the amounts are simply staggering. In a new, as-yet-unpublished paper, Stanford University economist Michael J. Boskin estimates that the value of these deferred taxes through 2040 is roughly $12 trillion in today's dollars. By comparison, the official estimate of the unfunded Social Security liability is $3.5 trillion in today's dollars, while the unfunded Medicare liability for hospital insurance is $5.9 trillion. Boskin, who served as chief of the Council of Economic Advisers in the first Bush Administration and was a key economic adviser to George W. Bush in his 2000 campaign, concludes that much of the anticipated long-term budget gap may not exist -- if current tax laws remain on the books. "Deferred taxes already accrued are large and will likely grow substantially in the future," Boskin told BusinessWeek, "and they are not appropriately accounted for in long-run budget forecasts and academic studies that rely on them."Boskin's report can be found here. It is long (131 Pages), but quite interesting reading, in that it implies some very important things are being overlooked in the way the government looks at future revenues. Boskin writes,
Generally conservative assumptions imply that 1) the deferred tax vehicles have already recouped foregone revenue and interest costs; 2) the deferred taxes already accrued in tax-deferred saving vehicles amounted to about $3 trillion at the start of 2003, about equal to the privately held national debt; 3) the real present value of the net budgetary impact of future deferred taxes is likely to amount to an additional five to ten trillion dollars, more than the actuarial deficit in Social Security and Medicare; 4) withdrawals from tax-deferred accounts will increase so dramatically relative to wages and salaries in coming decades that, cet. par., government forecasts of projected deficits are seriously overstated; 5) the deferred taxes add a major new element with a strong interest in lower tax rates, at least on their withdrawals, to the future political economy of budget policy.If Boskin is correct, then it means that most of the current debate about lower taxes and the deficit is simply irrelevant. Tax-deferred savings amount to a huge--and unacknowledged--asset in terms of government revenues. Over 50% of all Americans are invested in the capital or bond markets through tax-deferred savings vehicles. As soon as they retire, and begin withdrawing that money from their 401(k) or IRA, it is taxable income, i.e., tax revenue. With such a large percentage of the population utilizing tax-deferred savings plans, knowing how much future revenue this represents is vitally important. Indeed, it is a central issue in nearly every area of public finance, but it appears that no one--or, at any rate, very few someones--is looking at it at all.
Analyzing the economic effects of government debt, deferred taxes lie at the heart of the matter. Estimating the effects of changes in private wealth on consumption, deferred taxes are a sizeable part of the story. Evaluating the reach and success of personal saving incentives in the income tax, deferred taxes are center stage. Forecasting future income tax revenues, deferred taxes are of rapidly growing importance. Measuring the sectoral composition of the nation's wealth and/or the government's balance sheet, deferred taxes are among the largest items. Debating intergenerational equity, the adequacy of retirement savings, the unfunded liabilities in social security, the sustainability of the fiscal program or the size of long-run fiscal gaps, government investment in equities, fiscal history and/or the political economy of social security reform, deferred taxes are essential to an accurate conceptual and empirical framework for the debate. So it is surprising, perhaps disconcerting, that virtually no information on deferred taxes beyond short-run historical flows is currently available in any form, anywhere. Not in the Fed's Flow of Funds sectoral balance sheets. Not in Treasury Financial Statements of the U.S. Government. Not in OMB's Analytical Perspectives on the Budget. Not in academic research.If Boskin is correct, then this may just change the entire framework of the Social Security, taxation, and Medicare debates. (Thanks to reader Audioboy for the link)
June 30, 2003
Hello, Chickens. Welcome home. There are some very comfortable roosts waiting for you right over here.
(Review) Today is the day that California lawmakers are required to produce a budget. So far, the state has a $38 billion deficit, and they've agreed on $7 billion in budget cuts. So, they've got the rest of the day to come up with $31 billion.
Since tax increases in California require a 2/3 vote of the legislature, and Republicans are adamantly opposed to tax increases in this, one of the most highly taxed states in the country, I suspect we won't have the budget done by midnight. Especially since the Democrats are equally adamant that a 1/2% rise in the state sales tax, already 7.5%, is necessary.
If there is no budget agreement very, very soon, state workers and contractors of all stripes will start getting canned.
Over the past 4 years, the state budget has increased spending by 40%. Over that same time, inflation and population increase has been 21%. Yet, Democrats--who have been in complete control of the legislature during this time--say that the budget crisis isn't because they've increased spending so much. Instead, they say the problem is that the national economy went south, and an additional 3 million immigrants came north, adding a huge load to the health care costs.
You see, it isn't their fault at all, so you should just give them your money.
You can start by pouring cash directly into my pocket
(Review) Graham Turner argues in the Financial Times that the Fed Should adopt a more aggressive policy of easing by opening the cash spigots at the discount window. His study of Japan's slide into deflation leads him to feel that the danger of deflation is greater than the Fed is willing to admit.
The decision by the Federal Reserve to cut short-term interest rates by a quarter-point last week was a missed opportunity. Share prices may have rallied well since their low on March 11. Signs of a cyclical upswing in the US economy have begun to surface. But the cut was not enough. The Fed should have committed itself instead to a policy of quantitative easing - expanding the money supply base through market operations - to ensure that long-term interest rates remain low. With a number of economic indicators turning up, there is a risk that the bond market will continue to sell off, driving borrowing costs back up and ultimately short-circuiting the recovery. The next economic downturn could be the one that sends the US into deflation and could raise the spectre of a full-blown Keynesian liquidity trap.The problem, as John Maynard Keynes pointed out 60 years ago, is that bond investors' preference for liquidity can prevent changes in short-term interest rates from doing their job, by preventing short term interest rates from being reflected in longer-term interest-bearing interests. As investors sell off bonds, the price drops, and the interest rate rises. During the past few weeks, the interest rate on the 10-year treasury has risen by more than 1/2%, even as short-term interest rates dropped, thus steepening the yield curve. In a bond market as large as ours, a rush to liquidity by bond investors hampers the ability of the Fed to ease monetarily by preventing the transmission of lower interest rates to the long end of the yield curve. This means that simply lowering the Fed Funds might not do the job. To keep monetary policy accommodative, the Fed should start buying back bonds at the discount window, injecting cash directly into bank coffers.
No Alternative to Reality
(Review) Vaclav Smil writes that, while the idea of a hydrogen-powered economy is an extremely attractive one, reality makes it more difficult than its proponents believe.
Giving Peae a Chance
(Review) The Israeli pullout from the Gaza Strip is practically complete, and Palestinian security forces have taken over responsibility for regulating traffic.
Israeli and Palestinian commanders shook hands following a troop pullout from the northern part of the strip Sunday night, part of the U.S.-backed plan being implemented in the Middle East. Israeli troops are to be withdrawn from the West Bank town of Bethlehem Wednesday. But the killing of a Romanian truck driver in the West Bank Monday, and bullets fired at workers hours later, showed that not all armed groups had swung into line behind the cease-fire proclaimed Sunday by the three main Palestinian militant organizations.As the second paragraph indicates, this relaxation on Israel's part is risky. Up to now, similar Israeli actions have resulted in an increase in terrorism, and the concomitant rise in the number of dead Israelis. Still, the Israelis seem willing to take the risk that the cease-fire will hold, and promise to move out of the West Bank over the next six weeks. But, if this cease-fire turns out--as I think it will--to be nothing more than a chance for Hamas, Islamic Jihad, et al., to re-arm and reorganize prior to hitting the Israelis with more terror, this will look like a bad decision in retrospect.
