Monday, January 31, 2005

Iraqi election results come in...

Associated Press:
Iraqis embraced democracy in large numbers Sunday, standing in long lines to vote in defiance of mortar attacks, suicide bombers and boycott calls. Pushed in wheelchairs or carts if they couldn't walk, the elderly, the young and women in veils cast ballots in Iraq's first free election in a half-century.

''We broke a barrier of fear,'' said Mijm Towirish, an election official ... the mere fact the vote went off seemed to ricochet instantly around a world hoping for Arab democracy and fearing Islamic extremism.

''I am doing this because I love my country, and I love the sons of my nation,'' said Shamal Hekeib, 53, who walked with his wife 20 minutes to a polling station near his Baghdad home.

''We are Arabs, we are not scared and we are not cowards,'' Hekeib said...

The feeling was sometimes festive ... Entire families showed up in their finest clothes...
Financal Times:

With the tanks of the New Iraqi Army keeping watch on main roads and local paramilitaries stationed around polling centres, tightly knit Shia neighbourhoods in the Iraqi capital produced a higher than expected voter turnout yesterday...

In some districts, the relaxed atmosphere was underscored by impromptu football games on streets, bridges and even four-lane motorways left empty by a near-total ban on traffic...

Most voters in the predominantly Shia suburb of Zafaraniya ... seem to have been unconcerned by the prospect of violence yesterday.

[Ahmed] Mahjim... spoke of the elections as a "historic chance" to build a democratic, tolerant, federal state. Shia Arabs, as Iraq's largest social group, argue that they are naturally entitled to majority representation....

... some Sunni districts also witnessed high turnout. In one school in the west Baghdad neighbourhood of al-Ameriya, election officials reported that nearly 50 per cent of the voters on the list had shown up to cast their ballots by midday.

The district lies just across a highway from the headquarters of the Muslim Scholars' Front, Iraq's most influential Sunni religious authority, which had said elections under foreign occupation were invalid and called for a boycott.

Written on the walls of the polling station were guerrilla graffiti threatening voters: "We will kill anyone who goes to the elections. We will kill you for treason and spying."

Sunni residents claimed they were not swayed by these threats, even though their fingers would be dyed with indelible ink that would mark them as voters for several days to come.

"I am a suicide voter," said unemployed Ameriya resident Saad Ahmed. "We need to have steadfastness as a people, because our country needs a future."

New York Times:
Nobody among the hundreds of voters thronging one Baghdad polling station on Sunday could remember anything remotely like it, not even those old enough to have taken part in Iraq's last partly free elections more than 50 years ago...

The scene was suffused with the sense of civic spirit that has seemed, so often in America's 22 months here, like a missing link in the plan to build democracy in Iraq...

At the Darari primary school, east of the Tigris River in central Baghdad, the courtyard teemed with people of all ages, and of all ethnic and religious groups, doing what American military commanders here have urged for so long: standing up for themselves, and laying down a marker, with their votes, that signaled they could not be intimidated into surrendering their rights by the insurgents who have terrorized the country with guns and bombs and butchers' knives...

On Sunday, everything about the voting resonated with a passion for self-expression, individuals set on their own choices, prepared to walk long distances through streets choked with military checkpoints, and to stand for hours in line to cast their ballots.

"A hundred names on the ballot are better than one, because it means that we are free," said Fadila Saleh, a 37-year-old engineer...
and even Salon:
[T]he Iraqi people made a powerful statement Sunday. In cities across the country, voter turnout exceeded even the most optimistic predictions...

Driven by the country's Shiite and Kurdish communities -- accounting for 80 percent of the population -- they flooded the polls with near glee, showing their resilience and optimism after nearly two years of shattering disappointments and decades of oppression and war.

One Shiite voter, holding the hand of his 5-year-old son, told of his desire to show his son a democracy he had never before seen himself. "I want my son to see this," he said proudly...
It's looking like I guessed right, and I'm very glad that's so.

Make prostitution legal and the government unemployment office becomes your pimp.

Such is the news relayed to us by Tim Worstall from Germany, where the combination of unemployment law reform and the legalization of prostitution apparently means a woman now can have her unemployment benefits cut if she refuses to take available work in a brothel.
A 25-year-old waitress who turned down a job providing "sexual services'' at a brothel in Berlin faces possible cuts to her unemployment benefit under laws introduced this year....

Under Germany's welfare reforms, any woman under 55 who has been out of work for more than a year can be forced to take an available job – including in the sex industry – or lose her unemployment benefit...

The government had considered making brothels an exception on moral grounds, but decided that it would be too difficult to distinguish them from bars.
German government bureaucrats can't tell a brothel from a bar?

That country does have problems.

As a result, job centres must treat employers looking for a prostitute in the same way as those looking for a dental nurse...

"There is now nothing in the law to stop women from being sent into the sex industry," said Merchthild Garweg, a lawyer from Hamburg who specialises in such cases. "The new regulations say that working in the sex industry is not immoral any more, and so jobs cannot be turned down without a risk to benefits."

Miss Garweg said that women who had worked in call centres had been offered jobs on telephone sex lines. At one job centre in the city of Gotha, a 23-year-old woman was told that she had to attend an interview as a "nude model", and should report back on the meeting...

Tatiana Ulyanova, who owns a brothel in central Berlin, has been searching the online database of her local job centre for recruits.

"Why shouldn't I look for employees through the job centre when I pay my taxes just like anybody else?" said Miss Ulyanova... [Telegraph]

Smart criminal of the weekend.

What's dumber than leaving your fingerprint at the scene of your crime? How about ... leaving your finger?

A bungling burglar gave cops the finger — literally — and the NYPD is happy he did.

Franco Beaumont, 20, left a part of his severed thumb at the scene of a Canarsie theft Jan. 19, allowing cops to fingerprint the digit and find the hapless suspect ...

Police Officer Richard Collegio ... retrieved the thumb, and cops rolled it in ink, just like they do with any fingerprinting job ...

Police entered the print into a computer database and got a "hit" — the print matched one on file.

On Thursday night, cops from the 69th Precinct showed up at Beaumont's home on East 82nd Street. It didn't take them very long to know they were in the right place.

"Basically, we were looking for someone with a bandage, and once we saw this guy had a bandage on his thumb, we sort of knew he was going to be our guy," said one chuckling law-enforcement official... [NY Post]

Gee, the guy left the place loaded with stolen jeans, sneakers and jackets -- he couldn't take his own thumb too?

"People like us can do more harm than good. Except for us."
Angelina Jolie, the Tomb Raider star voted the sexiest woman alive, said Saturday that celebrities grandstanding as advocates of the poor can do more harm than good...

"Celebrities have a responsibility to know absolutely what they're talking about, and to be in it for the long run," said Jolie, 29, who has spent four years as goodwill ambassador to the UN's refugee agency UNHCR.

Celebrities have taken unprecedented prominence in the World Economic Forum, held in the Swiss ski resort of Davos. Film stars Richard Gere, Sharon Stone and Jolie teamed up with musicians Bono, Lionel Richie, Peter Gabriel and Youssou N' Dour at the business summit to plead for aid to the poor.

In October, a poll in Esquire magazine named Jolie the "sexiest woman alive." That month, she toured Sudan's Darfur region, calling the humanitarian crisis there "unbelievably horrible". [China View]
Is there an odd juxtaposition in this story? Or am I just becoming more of a cynic every day ...?

Bill Gates sucks up to his next market's regulators.

Bill Gates has high praise for China, which he says has created a brand-new form of capitalism that benefits consumers more than anything has in the past.

"It is a brand-new form of capitalism, and as a consumer it's the best thing that ever happened," Gates told an informal meeting late Friday at the World Economic Forum.

He characterised the Chinese model in terms of "willingness to work hard and not having quite the same medical overhead or legal overhead"...

Gates continued by heaping praise on the current generation of Chinese leaders.

"They're smart," he said with emphasis.

"They have this mericratic way of picking people for these government posts where you rotate into the university and really think about state allocation of resources and the welfare of the country and then you rotate back into some bureaucratic position."

That rotation continued, Gates explained, and leaders were constantly subjected to various kinds of ratings.

"This generation of leaders is so smart, so capable, from the top down, particularly from the top down," he concluded. [AFP]

Yes, more of a cynic every day, definitely.

But Bill's learning as he gets older, I'll give him that.

Sunday, January 30, 2005

The New York Times' apology of the week.

The Times's Larry Rohter recently wrote a very negative article on Chile's privatized social security program that has raised a bit of controversy, being described by some as a hit piece, and which has been deconstructed elsewhere. But enough of social secrurity!

The NY Post happily reports some of Mr. Rohter's other recent adventures in journalism...

N. Y. Times Makes Big Fat Mistake

The New York Times is in hot water again. On Jan. 13, the paper ran a story by Larry Rohter on the spread of obesity and illustrated the story with pictures snapped by freelance photographer John Maier on the fabled Ipanema Beach in Brazil.

The only problem, the "fat" Brazilians depicted in the photos weren't Brazilians at all, but were visiting European tourists...

Rohter was reportedly already out of favor with the Brazilian government for a story that discussed the drinking habits of the country's president, Luiz Inacio Lula da Silva.

The government wanted to boot him from the country and yank his press credentials, but were stymied because he is married to a Brazilian. The Brazilian Supreme Court overruled the administration.

In yesterday's story in O Globo, in Rio de Janeiro, one of the women in the photo, Milena Suchoparkova said she was born in the Czech Republic and holds an Italian passport. She visits Brazil for a few months each year.

And she says she is outraged that she was depicted as a fat Brazilian. She calls the reporter Rohter and the photographer Maier "cretins."

She said when she gets back to Prague she plans to hire a lawyer to sue to The Times...

A spokesperson for The Times said it has confidence in Rohter's reporting but plans to apologize...
The Times wouldn't be half as much fun without the Post.

Webcam of the week.

From the sports world's most eclectic football column...
Last week the new $375 million cruise ship Aurora limped back into port after its main engines failed; aboard were millionaires who had paid fares totaling $28 million for an ultra-luxury round-the-world cruise. Aurora had been scheduled to make a globe-circling tour with stops in 23 countries.

Instead the ship left home port in Southampton 10 days late, got only as far as the Isle of Wight, about 25 miles away and then returned, the cruise cancelled.

Note: Aurora has a live webcam intended to provide continuous views of its glamorous ports-of-call. Because the ship is dead in the water, the live webcam currently shows an industrial area near the docks in Southampton.
Yes, but at this moment as the night ends over there the dockyard is all lit up brightly, the morning lights are coming on in the city, and it's really very pretty.

(And it's now Bremerhafen, Germany, not Southampton.)

Turning cock fighting into an Ivy League sport

A new version of the old favorite is coming to us via legal reform and corporate innovators in Oklahoma, which apparently has a "gamefowl industry" to protect.

The participants are all bundled up so there's no possibility of any injury, with scoring done electronically by sensors that tally "hits" to determine the outcome of the match.

They're turning cock fighting into fencing!

"Who's going to object to chickens fighting like humans do?", asks State Senator Frank Shurden (D).

Friday, January 28, 2005

Paul Krugman tells a lie fib in black and white.

In today's column "Little Black Lies" Paul Krugman tries to convince us that all African-Americans die either younger than 25 or older than 65.

This is his response to assertions that blacks receive less from SS than they contribute to it (well everyone young does now, but the claim is they get even less than other people) because they have shorter life expectancies and so don't live long enough to collect as many benefits as others.

His words...

It's true that the current life expectancy for black males at birth is only 68.8 years - but that doesn't mean that a black man who has worked all his life can expect to die after collecting only a few years' worth of Social Security benefits.

Blacks' low life expectancy is largely due to high death rates in childhood and young adulthood. African-American men who make it to age 65 can expect to live, and collect benefits, for an additional 14.6 years - not that far short of the 16.6-year figure for white men. [my emphasis]

Of course, if blacks die young at a high rate before starting to work, then those who do don't pay any payroll taxes that they fail to recover. Krugman is claiming that this is the case.

But is this claim true?

Going to the National Center for Health Statistics life expectancy data ...

We find that black males right in the middle of a working life, age 40, have a 30% chance of dying by age 65. (The corresponding chance for white males is 17%.)

Now let's go back and look at Krugman's purported "high death rates in childhood and young adulthood" for blacks.

Black males alive at age 5 have only a 3% chance of dying within the next 25 years of their childhood and young adulthood, by age 30. (For white makes the figure is 1.9%)

So their death rate during their past-age 40 working years is 10 times higher than "the high death rates in childhood and young adulthood" Krugman ascribes to them. And the risk that a black male age 40 will die before reaching the Social Security retirement age of 65 -- after paying most of working life of payroll taxes but still too young to recover any of them -- is 10 times higher than the risk that one will die as a child or young adult age 5 to 30. (And 77% higher than the risk that a white male age 40 will die by age 65.)

When Krugman sure seems to have claimed exactly the opposite.

It looks to me like Krugman lied fibbed, plain and simple.

Now, as to his quoting of Social Security's chief actuary as saying...

"careful research reflecting actual work histories for workers by race indicate that the nonwhite population actually enjoys the same or better expected rates of return from Social Security" as whites...
... well, one doesn't have to be a preeminent social scientist to realize that the "the nonwhite population" does not equal "the African-American population".

The fact of the matter is that the 1994 Social Security Advisory Commission specifically asked the actuaries to generate and produce exactly this data for African-Americans -- and they refused.

So unless they have done so since then, in a manner that nobody I know of has noticed or cited, I'd say Krugman pulled a fast one here too.

Paul Krugman says Social Security is progressive and so benefits African-Americans and all low-wage workers, of course.

From his last column...
... the formula determining Social Security benefits is progressive: it provides more benefits, as a percentage of earnings, to low-income workers than to high-income workers. Since African-Americans are paid much less, on average, than whites, this works to their advantage.
Putting race aside, let's see just how much Social Security benefits low-income workers.

Numbers from the Social Security actuaries for lifetime returns on contributions, prepared for the 1994 Social Security Advisory Commission, were quoted here previously.

Let's look again at one of those number sets for the actuarial current value of both taxes paid and benefits received over a lifetime, for persons who entered the work force in 1994, in 1994 dollars...

Single males

low wage: taxes $39,024; benefits $38,004; net - 2.6%
(And, the actuaries note, these formula benefits of course are themselves 30% underfunded -- and if this funding gap is closed by tax increases and/or benefit cuts [as Krugman insists they should be] the workers' net will drop by 30% from there.)

Social Security is progressive. It benefits today's low-wage workers by making them poorer.

OK, Joe Massino fans...

On the basis of just one amusing post made way back last June, Google's algorithms have somehow today made this blog the #3 site listed among more than 1,100 produced when searching "Joe Massino" -- and searches on Joe are bringing twice as many people here as any other.

Try figuring that out.

But OK, if you're looking for the latest news about Joe here it is. And it really is kind of startling.

Never fight the public. I'll turn this site into a Joe Massino shrine if it'll bring in the blogads.

Thursday, January 27, 2005

Is the violence in Iraq enough to defeat the January 30 elections? How does it compare to violence in the US?

The answer to the first question is, of course: I don't know, we'll find out -- but in a moment I'll take a guess.

The second question is interesting. One of the most common of human failings is to make a judgment without first gaining relevant perspective. And when danger is involved people are notorious at this -- both greatly over- and underestimating risk in various circumstances. (In particular, we overestimate risks imposed on us by others while underestimating risks we incur voluntarily, right?)

A couple weeks ago the New York Times reported this...
"In the first two weeks of January, at least 202 people died as a result of the insurgency in Iraq. The killings have been indiscriminate. The dead include Iraqi officials, police officers, civilians..."
... which is certainly bad enough on its face. But how bad is it compared to, say, the risk of being murdered in a US city that its urban residents take on voluntarily by living in it every day? Or even the risk of being murdered incurred by the average American living in the average place? I meant to look it up then, when I saw that 202 number in the paper, but just got around to it today.

Now if you want to talk about a US city where there's a high risk of being murdered then of course the first that comes to mind is the seat of the our US government, Washington DC.

The first decent reference for murder rates in DC that I hit upon presents these numbers: a peak murder count of 482 in 1991 when the population was 598,000, falling to a count of 239 in 2000 with a population of 572,000. (I'm not going to bother looking up post-2000 data -- this isn't about measuring things to decimal points, only looking for scale and obtaining perspective.) OK, so these give murder rates for DC ranging from about 0.0008 to 0.0004 per resident.

As to the killings caused by the Iraq insurgency, I have no idea how accurate the number cited by the Times is, but let's trust the paper in this case and take it at face value. We see that 202 killings in two weeks amount to an annual rate of 5,252 in a country with a population of 25.4 million, for a rate of about 0.0002 per resident.

So that puts the rate of killings caused by the insurgency at one-half to one-quarter the recent murder rate that people have lived with in Washington DC, as it has served as our nation's capital and seat of government over the last 15 years.

Of course this rate is for all of Iraq -- the rate of killings is far worse in some areas, Baghdad and the Sunni triangle, than in others (just as it's worse in some parts of DC than the whole).

But that's pretty much the point. Subtract the concentrated violence that is occurring in a small portion of the country -- in parts of four of 18 provinces -- and the average level everywhere else throughout the other 14 provinces is much less.

Lets guesstimate that outside of Baghdad and the Sunni triangle the rate of killing caused by the insurgency is only half of the total rate including those areas. Then we are talking about a rate of 0.0001 per resident -- which, as it happens, in addition to being only one-quarter of the murder rate in DC in 2000, and one-eighth of the DC murder rate of 1991, is almost exactly the same as the total nationwide US murder rate of 1991, (9.8 per 100,000) -- and for that matter, pretty much the same as the average total US rate for the 15 years until 1991.

Should a level of violence experienced by most people across the nation, aimed at disrupting the election, equal to the average murder rate that we all experienced as Americans throughout 1991, be enough to defeat democratic elections among a populace that by all accounts on the whole -- in those 14 provinces at least -- wants them?

I wouldn't think so, so I'll guess "no". I'll guess that the elections will be a success in most of Iraq, in the 14 of 18 provinces that are Kurdish, Shiite, and away from Bahgdad and the Sunni triangle.

As to how the election will work out in those troubled, insurgent-infested areas, I have no idea.

But if the elections work in 14 of 18 provinces to bring into being the mid-east's first functioning democracy (apart from Israel) they won't only be a success but will risk becoming an historic success, I should think.

But we will see.

What public education is all about.

It seems that a California public school district's recent crackdown on truancy and school absences has left many parents and students speculating that it is motivated by the fact that the district loses money under the state funding formula for every absence.

To them a district official responds....
"We're being bombarded right now with 'it's about the money,' " said Nancy Danziger-Brock, an attendance improvement programs administrator for elementary schools at the San Jose Unified School District.

"Until about two or three years ago, nobody even brought that up. And for me, when I started this program, which has become my passion, it's about kids getting to school, getting fed, getting health care, getting their vision checked, getting their hearing checked, having counseling, getting their two meals a day and getting their education."... [Almaden Times]
Hey, education made the list!

This little bit of snarkiness via

Wednesday, January 26, 2005

The US Supreme Court says lawsuit plaintiffs can lose by winning -- thanks to our ever-growing friend, the Alternative Minimum Tax.

If you are planning to sue somebody, and either pay your lawyer a contingency fee or collect an award of legal fees from the other side, beware -- you'd better talk to a tax lawyer first, or you may lose to the tax man more than you win from the defendant.

The U.S. Supreme Court on Monday upheld an IRS interpretation of the tax law that can hit a court award with a tax bill larger than the amount the plaintiff wins in the case. The key here is something plaintiffs had better not overlook from now on: the Alternative Minimum Tax (AMT).

In a nutshell, the AMT was created by Congress in 1969 after it was publicly reported that on 1967 tax returns 155 people had paid no income tax in spite of having had income over $200,000 ($1.1 million in today's money) due to their use of various legal tax-reduction devices -- deductions, exemptions, credits and so on. (Congress received more complaining letters from the pubic about this that year than it did about the Viet Nam war.)

It was designed to make sure that everybody with high economic income pays some tax. Basically, it applies a flat 28% tax rate to income while not allowing most of the deductions, exemptions and other tax-reducing items allowed under normal rules. If one owes more tax under AMT than normal rules, one owes AMT instead.

Now, the thing that is introducing more of us to the AMT each year is that Congress has never indexed it to inflation -- so it affects persons at a lower income level each year. While originally targeted at persons with income over $1 million (in 2005 dollars) today the amount of income exempt from AMT is $40,250 on a single return and $58,000 on a joint return. Estimates are that by 2010 it will hit 30 million taxpayers, including the majority of those with income over $75,000.

But that will be then -- as to now, and Monday's court decision, the operative fact is that under AMT rules one of the deductions that is not allowed is that for legal fees. Under normal rules legal expenses incurred to receive taxable income -- such as a taxable court award of damages of some sort -- are deductible. But under AMT calculations they are not.

Now imagine you want to sue someone and hire a lawyer agreeing to pay a standard one-third contingency fee, so the lawyer gets one-third of any award you collect. Under the AMT you owe tax on the whole award, including the part you pay to the lawyer (even though the lawyer has to pay income tax on that too). The tax you owe relative to the part of the award you keep, using the 28% AMT rate, will be 42%. And if you live in a state that applies income tax of its own to the award you are out of luck there too -- another deduction not allowed under the AMT is the one for state and local taxes. So just slap the entire state tax bill on top. (Note that you don't just lose the deduction for state income taxes on the court award, you lose your entire deduction for state taxes -- for taxes paid on wages, property taxes, and all else.)

But things can be much worse than that. If one wins a lawsuit and also receives an award to cover the cost of legal fees that are large relative to the amount of damages received, one can find oneself owing the IRS more in tax than the damages one collected from winning the case.

In one noted example, a woman won an award of $300,000 in damages plus legal fees of $1 million and ended up owing the IRS $99,000 more than she collected from winning.

A celebrity victim of the AMT legal fees rule may well have been Paula Corbin Jones, in her case against President Bill Clinton. As James Serven of the University of Denver College of Law wrote at Tax Analysts...
" the widely publicized Paula Jones case, Jones reportedly obtained a settlement of $850,000 from President Bill Clinton but incurred attorneys' fees of almost $650,000. If she is considered taxable only on her net recovery of roughly $200,000, her regular tax liability would be approximately $72,000, and she would net $128,000 after taxes.

"However, if she must report the entire $850,000 award and deduct her attorneys' fees below the line, her AMT liability would be approximately $238,000, with the result that she would be $38,000 out of pocket for bringing the action.

"While this result seems harsh, it is simply the direct result of applying the unambiguous statute as written, a result that has been recognized by some courts as inequitable."
And it can be worse than that. Imagine that you bring a case and win on the law, but the judge finds you weren't really harmed by the wrong done and so grants you only a nominal $1 in damages. But because you were right on the law, the judge also gives you an award of all your legal fees. This happens too.

Victoria Herring, an employment discrimination lawyer in Des Moines, said she had a client who was awarded $15,000 in punitive damages and $1 in actual damages in a job discrimination case. The IRS billed him $67,791 for income taxes under the AMT, because a judge also awarded $170,000 in legal fees for Herring as a result of the extraordinary efforts the other side made to thwart her.

"My client won, but he is far worse off for having brought this case," Herring said.

These results did indeed strike some courts as inequitable, and some bought arguments that saved plaintiffs from this inequitable result while others did not. The result of that was conflicting rulings arising among the federal Courts of Appeals, leading to Monday's Supreme Court decision that resolved them.

And the gist of its decision (.pdf) was very simple: Congress made the law and if the law is broken it is up to Congress to fix it. Until it does, the law will be enforced as written. Too bad for winning plaintiffs with big legal expenses.

So now the question is, will Congress fix the law?

And the answer is: Congress has already acted on this issue -- in what seems to many a bizarrely dysfunctional manner.

In the just recently passed Jobs Creation Act of 2004 Congress explicitly recognized this problem and included new law permitting legal fees to be deducted under normal tax rules notwithstanding the AMT, but only in civil rights cases.

Hello? One blogging tax law professor compared this to having a ship sinking with 3,000 people on board, Congress receiving its SOS, and sending out rescue craft to save a few carefully selected passengers. But selected on what grounds? Campaign contributions? Having the most effective lobbyists? Setting the most effective example to encourage others who want the same treatment to make more campaign contributions?

Does this action by Congress mean it really wants other taxpayers to pay income tax on the reimbursements for legal fees they pay? No Congressional tax writer will say that (and they've been asked). But then why were plaintiffs in all other kinds of cases excluded? No Congressional tax writer will say that either.

Let's just say that judging by its actions of recent years, Congress really, really enjoys receiving the revenue it collects from the AMT in what effectively is still a surreptitious manner regarding the majority of taxpayers who remain unaware of it (until it is too late), and it isn't going to be giving up any of that revenue easily.

So the bottom line is this word of advice for any of you out there who may be considering suing anybody else: make sure you have a tax lawyer who is as good as your tort lawyer, and who is in on the case from the start. You are going to need them both.

Smart criminals of the week

A fine an example of how intelligence of a certain sort runs in families, noted for us by Roland Patrick...
Nicholas Coan, 28, was shot Friday night by his 27-year-old girlfriend during the latest of the couple's many arguments, police and witnesses said. The girlfriend was apparently angry that Coan had brought home a .40-caliber pistol and hadn't told her where he had been.

So, police said, Coan cocked the pistol and handed it to her. She took it and fired ...

Coan "looked at me and said, 'I can't believe she shot me,' " said Coan's roommate, Mathew Mitchell...
And what's Mom been up to?

Meanwhile, Coan's mother, Elizabeth Coan, 45, was arrested Sunday in a separate case and charged yesterday with solicitation of first-degree murder, solicitation of first-degree assault and solicitation of malicious placement of an explosive. She was also charged with two counts of solicitation of witness tampering, a gross misdemeanor.

According to King County prosecutors, Elizabeth Coan had asked Nicholas Coan to arrange the killing or intimidation of five witnesses in her pending identity-theft case... But Nicholas Coan, working with police, recorded several conversations with his mother ... [Seattle Times]
Hey, if you can't trust your own loving, sterling-character, flesh-and-blood son not to rat you out to the police on a murder-for-hire deal, who can you trust?

Tuesday, January 25, 2005

Homeless guy starts fire, knocks out subway service for five years

As of this morning the Eighth Avenue subway C train is out and A train service is cut by two-thirds, for up to five years. It looks like they may be changing the name of Ellington's song from Take the A Train to Wait for the A Train.

You've got to admire the strategic thinking that locates irreplaceable equipment serving 600,000 people daily where the homeless can burn it for warmth.

Five years?? It took only four years to build the entire original subway system back in the beginning.

Update: Now they are claiming they may get service back in a mere six months, although it will take five years to replace the equipment lost. Why millions of dollars worth of critical equipment was kept where a wandering vagrant could torch it, and related queries about lack of backup equipment and contingency plans, will be questions for another day.

An idea for Social Security reform that I hadn't heard before

An economist writes...
... there is only one real problem with social security: the declining ratio of earners paying in to receivers of payments.

This problem results from Congress and social security administrators treating the rules governing individual eligibility for entry into those two groups as two compartmentalized decisions, rather than the single joint decision which is necessary to make the scheme work.

In principle this is an easy thing to fix. If Congress stipulated that the ratio of earners to receivers would remain at some fixed ratio (say 3 to 1), and that eligibility to join the group of receivers would be determined by the availability of slots that did not decrease that ratio, then social security would be sustainable forever.

The beauty of this proposal is that it does nothing to diminish the importance of a national pension system for those who favor such things.

I daresay that there would even be a clamor for such a system if voters understood that receiving social security wasn't a right, but rather something that you had to wait your turn for.

[Via Carnival of the Capitalists]
At age 65, take a number and wait?

I don't know about that "clamor" -- but it sure seems like this would create an incentive towards making the idea of euthanasia more popular among the 50+ set.

I mean, I wouldn't want to be a retiree on life support with a 55-year-old doctor, lest the last words I hear be "Making room for one more!"

When good product names go bad

So much for the Toyota Tsunami. And all those companies with "Tsunami" in their names suddenly have a lot of concern about charitable giving on their home pages.

Wordlab blog has the story. [Also via the Carnival]

Monday, January 24, 2005

Americans save more for retirement than anyone else.

If the US is unprepared for the retirement of the baby boomers -- with the boomers saving too little and government retiree programs underfuned -- well, at least the relative good news is that across the rest of the world the situation is worse.

A new survey of people in 15 nations finds that Americans save more than anyone else for retirement, an average of $687 a month. Americans also start preparing earlier in life for retirement, in their mid-thirties.

In contrast, the savings figure for Italy is $208, the Netherlands $259, France $264, and Japan $381. On average people don't start preparing for retirement until they are in their 50s in Italy and Japan.

Perhaps not coincidentally, the nations where people save the least are those that promise the most generous government-paid retiree entitlement packages. While following the US at the top of the list of nations where people save the most are the other English-speaking nations of the "Anglosphere" where retiree entitlements are smaller.

Yet the much larger entitlement packages of the Continental nations and Japan don't seem to have made their people more happy with their retirement prospects.

For Americans, "the word 'retirement' evokes positive images and, compared to other countries, very few negative images". Americans are more optimistic about their level of retirement income -- and are more open to the idea of delaying retirement age if need be as a necessary reform, with only a minority objecting.

The less optimistic views in the Continental nations may result from their peoples' knowledge that they are more dependent on governmental largess (in France and Italy fewer than 10% report having a pension fund with an employer) -- and that their government entitlement programs are even more deeply underfunded and face even larger coming financial crises than the US ones.

The Continental nations are all atop the list of nations where the most people oppose reforms such as raising the retirement age -- and also atop the list of nations where the most people believe "major retirement reform" is coming.

Lincoln was gay? Well, New York's colonial governor was a transvestite.

A history lesson from the strangest place...

What a drag! The New-York Historical Society is covering up the identity of cross-dressing colonial governor Lord Cornbury.

The NYHS has a famous oil portrait of the gender-bending Cornbury, who was appointed governor of New York and New Jersey in 1701. But you wouldn't know it from the plaque mounted next to the painting, which identifies New York's original transvestite as an "unidentified woman."

Lila Luce, wife of NYHS benefactor Henry Luce III, whose Center for the Study of American Culture houses the portrait, tells PAGE SIX she noticed the omission only recently: "We were looking forward to seeing Lord Cornbury and there it was, but it said it was a portrait of an unidentified woman, which is absolutely extraordinary. He's got a five o'clock shadow! If they said this was the bearded lady, that would be one thing..."

Cornbury's lurid legend began one night in the early 1700s, when a constable arrested what he presumed was a prostitute walking along Broadway. But when the suspect was brought to the stockade, it turned out to be the governor, who enjoyed taking evening strolls in his wife's clothes.

Cornbury also had a fetish for ears, and told visitors to state functions that they were free to fondle those of his wife.

Cornbury's wacky ways eventually cost him his job. He was removed from office by Queen Anne in 1708, and was later thrown into debtor's prison until receiving a sizable inheritance from his father's estate. It enabled him to buy his way out of jail and return to England, where he served in the House of Lords.

Apparently he enjoyed not only strolling in his wife's clothes but also sitting for portraits in them. A model from history for the Christopher Street crowd.

[There is another side to the Lord Cornbury story, but this one's the most fun.]

Sunday, January 23, 2005

Social Security posts.

The most read posts on this site (apart from those on the Mafia and sex) have been the ones relating to Social Security.

Until a decent general index gets added to this place I'll be keeping a list of them here, so they remain available after they scroll off the main page.

These are in the general order of the number of views and links to them, and so presumably in the general order of interest...

[revised 5/6/05]

Social Security, future economic growth, and stock returns. (link)

Is the Social Security Trust Fund worth less than zero? Are the "savings" in it actually worsening budget deficits as we speak? (link)

You thought the 2004 federal deficit was $412 billion? How about $11.1 trillion, by the accounting rules the private sector uses. (link)

NY Times employees get a small taste of the future of Social Security and Medicare. (link)

Social Security privatization basics: How can privatization possibly help? (Or: The "transition cost" fallacy's ugly head rises once more and needs to be chopped off yet again.) (link)

Are promised Social Security benefits a real obligation of the US government, or are they not? Democrats say "yes!" as Democrats say "no!"... (link)

How much will federal income taxes have to increase by the year 2030 to fund Social Security and Medicare -- if benefits aren't reduced instead? Answer: By more than 60%. (link) ... Updated

Paul Krugman commits a cardinal sin of logic regarding Social Security, and repeats it, and repeats it... (link)

Paul Krugman Dowds Jeremy Siegel on stock returns versus bond returns. (link)

Paul Krugman tells a fib in black and white. (link)

Why does the White House keep undercutting its own case for private Social Security accounts? Isn't Karl Rove supposed to be a genius? (link)

The White House undercuts its own case for private accounts in Social Security, part II. (link)

An answer for Michael Kinsley about Social Security -- made in four points, with a question going back to him. (link)

Social Security reform: The simple reason why it's better to borrow to close the funding gap now rather than later. (link)

Social Security: The "Do Nothing Reform Plan" detailed. Feel free to attribute it to opponents of reform who have no plan of their own. (link)

On the nonsense about the Social Security Trust Fund guaranteeing payment of currently promised benefits -- or any level of benefits -- from 2018 on. (link)

How big will the US economy be relative to the rest of the world 75 years from now? Still a giant? Or merely what Sweden is to Europe today? (link)

In anticipation of Michael Kinsley's new & improved proof that Social Security privatization can't work. (link)

What Krugman forgot to mention about the cost of private accounts in Social Security. (link)

Economics lessons cribbed from other blogs. (link)

The Social Security debate's Lewis Carroll arguments, part one: the catastrophe of defaulting on one's debt to oneself. With puzzles for readers. (link)

Imperial Overreach (link)

This Social Security crisis of ours could have unexpected consequences! (link)

OK, that's it. Until I get more news of Joe Massino or pictures of Tara Reid these will have to do. Enjoy.

Saturday, January 22, 2005

Manhattan blizzard blogging

Seventh Avenue looking uptown from 16th St., around 9 pm...

and downtown...

The little white dots are snow ... the big ones too, after they hit the camera lens and melt. The snow was blowing into the camera facing uptown.

Yeah, they're not the greatest pictures -- but I'm an amateur and there's a blizzard going on. And this whole blog is only an experiment.

Around 15 inches with winds up to 50 mph predicted. But the forecasts are always wrong, in one direction or the other.

Update, following day: The NY Times has much better pictures (well, they can afford it) accompanying this story. But they seem to have misnamed the slide shows -- the "across the nation" one is NYC, and the "digging out" one is across the nation. At least as of this writing.

As to "the forecasts are always wrong", I happened to read these words in today's paper...

Mother Nature won't let the city out of her clutches until this afternoon, meteorologists predict, after dumping up to 20 inches of powder on the city and lashing those who dare to go outside with winds as powerful as 50 mph...
... while pleasantly sitting outdoors around noon under a clear blue sky, enjoying a cup of coffee, with nary a breeze to rustle the pages of the sports section.

All right -- which of you is the one trolling for a 20-year-old sexy girl with an e-mail address in Sri Lanka?

You know you're out there. Scanning through the server logs one sees the searches that bring people here, and the one of the day was a Google search...

"sexy + girls + Sri Lanka + over 20 years old + have a e-mail address."

This is not that kind of web site! Oh, wait, I guess it is since Google produced it. And the guy (presumably a guy) came here to check it out. After going through 43 pages of Google listings -- this one was 423rd on the list. I have to think he went to all of them if he clicked on this one.

You know who you are. Sorry to disappoint.

Another interesting thing was a surge of Google searches on "Alexandra Christman", Ben Kingsley's wife, which brought a whole bunch of people to this little space-filling gossip item from a while back. Why? I did a Google news search on her myself and nothing came up. But something's up with her, some gossip is circulating somewhere.

And inexplicably to me the single most lastingly popular post in this whole blog remains the one about the bumbling mafiosi posted way back last June to test cut-and-paste from the NY Post's web edition to Blogger. This just keeps drawing people, through searches and people who link to the post. But why?

Never question what the customers want. I may convert this blog to a Mafia fan site.

Is Israel threatened more by its own statist economy than by its avowed enemies and terrorism?

Somebody who might know thinks so...

Official: Economy Threatens Israel More Than Terror

The former chairman of Israel's National Security Council warned yesterday that the "real threat" to the 56-year-old Jewish state comes not from Islamic terrorists or Palestinian guerrillas but from a high unemployment rate, an insipid annual economic growth rate, corruption, social inequality, and the deteriorating quality of general education.

"The combination of these elements constitutes the biggest threat that Israel is facing - and it's time that we got our act together," the current president of the Zionist Council in Israel, Uzi Dayan, told The New York Sun in an interview.

"I am not worried about whether Israel will continue to exist. The world need not fear that our Jewish democratic state will be extinguished. What worries me is what kind of existence we are going to have, what kind of society we are going to bequeath to our children."

His worries, Mr. Dayan said, flowed from a study of statistics that suggested that Israel's economic well-being may be endangered. For example, he said, there was a cumulative drop of 6% in per capita income, starting in 2000 and continuing through the end of last year.

While living standards in OECD's seven wealthiest industrial countries - America, Britain, Canada, France, Germany, Italy, and Japan - rose by 82% between 1973 and 2003, they increased in Israel by barely 48%, added Dan Ben-David, professor of economics and public policy at Tel Aviv University. Mr. Ben-David accompanied Mr. Dayan on his trip to New York to brief policy-makers...

He said he was particularly troubled by the fact that Israel allocated more than $12 billion of its $45 billion budget on social expenditures, such as subsidized housing and welfare payments to the unemployed - almost 25% more than the figure spent on defense. The country's unemployment rate has been rising steadily since 1973, when it was 3%, to nearly 11% in 2004.

"More than one-third of Israeli families have fallen below the poverty line," Mr. Dayan said ...

Mr. Ben-David said that while it was customary in many Israeli circles to apportion the country's economic woes to the Palestinian Arab intifada ... the economic deterioration began "well before the intifada." ...

Since Israel's founding in 1948, America has given it more than $100 billion in aid, averaging around $2 billion annually. American economic assistance to Israel accounts for almost a third of the aid it provides to developing countries ...

In addition to bilateral assistance, Americans give Israel $1 billion in private philanthropic assistance, as well as another $500 million worth of Israeli bonds. Israel also typically gets short-term commercial loans from American banks of about $1 billion a year.

"The problem is not lack of public money," Mr. Dayan, who has served as an adviser to Prime Ministers Sharon and Barak, said. "The problem is a lack of direction." [NY Sun]

I can see your house. And downtown Kabul.

This new Keyhole satellite imagery-and-data program from Google is truly nifty.

Who knew that the top of the White House is brown?

Friday, January 21, 2005

Krugman Dowds Jeremy Siegel, amid other deception and foolishness.

Yet again Paul Krugman attacks private accounts for Social Security with the claim that returns in stocks will be not high enough and "risky".

And yet again he willfully fails to mention how these not-high-enough returns compare to the negative returns that are assured for today's young workers from Social Security as it is -- as per the numbers from Social Security's actuaries presented here before.

But today he tops such rhetorical misdirection with this outright ... well, what shall we call this?

Krugman invokes the Kinsley argument that going forward returns on stocks will fall and those on bonds rise -- with the diminished spread between them defeating the entire purpose of private accounts.

[reformers] point out that stocks on average were a very good investment over the last several decades ... But high returns always get competed away, once people know about them: stocks are no longer cheap...
And who does Krugman choose to invoke as an authority for his argument? Why, who could be more impressive than the academic world's most noted advocate of stocks as a long-term investment, Prof. Jeremy Siegel of Wharton...

That's why even Jeremy Siegel, whose "Stocks for the Long Run" is often cited by those who favor stocks over bonds, has conceded that "returns on stocks over bonds won't be as large as in the past."

But a very high return on stocks over bonds is essential in privatization schemes...
Yet wait a minute. With Krugman (not to mention the other NY Times op-eders) you can never trust a quote. Let's do a quick Google search.

Yes, here's what Siegel actually said ...

"I agree that returns on stocks over bonds won't be as large as in the past. But I'm more optimistic than Rob. Looking over the next quarter-century, I see a 5%-to-6% return on stocks, adjusted for inflation. I'm pessimistic about real bond returns. I think they're likely to be in the 0%-to-1% range over the next five years, and closer to 3% after that..."
My gosh! In support of his argument that the spread between bond and stock yields must close so that stocks cease to be a more attractive investment than bonds, Krugman quotes Jeremy Siegel arguing exactly the opposite in Forbes, making the case for stocks as a better long-term investment than bonds.

You know, at least Maureen Dowd puts in ellipses [...] where she cuts the words in a quote that reverse the meaning she attributes to it. Do you suppose Krugman might have put in a trailing ellipses for the part of the Siegel quote he cut...
Looking over the next quarter-century, I see a 5%-to-6% return on stocks, adjusted for inflation. I'm pessimistic about real bond returns. I think they're likely to be in the 0%-to-1% range over the next five years, and closer to 3% after that..."

And by the way, the fall to a "5%-to-6% return on stocks" that Siegel projects in that quote is a fall all the way down from 6.7%. Krugman doesn't give those numbers either.

Does "honest in argument" describe Paul Krugman?

You decide.

As to Kinsley's argument, it was recapped with a couple observations here previously (and before that, in more detail). Does it impress you as much as it does Krugman? You can decide that for yourself as well.

Thursday, January 20, 2005

An itch one can't scratch.

After a morning session with the dentist I return to my office with a jaw so novocained one could stub out a lit cigar on it without my feeling anything.

A little while passes and I get an itch on my jaw, so I scratch it. But I can't feel myself scratch it.

What's this? I can feel the itch but I can't feel the scratch!

Is this some relation to phantom limb syndrome? The itch I feel on my jaw actually is in my head while the scratching sensation that would relieve it comes from my jaw, but can't because all the nerves there are numb?

I have no idea.

But if the Pentagon really is looking for a non-violent method of torture, I have a suggestion.

Satanist is victim of bias attack.

NY Post:
A proud Church of Satan member got a hellish beating during an alleged bias attack in Queens, authorities said yesterday.

Daniel Romano, 20, of Elmhurst, was walking back from a laundry near his home on Sunday when three men drove past him and yelled "Hey, Satan!" The group leaped out of the car and jumped Romano in front of 6001 72nd Street shortly after 2 p.m., police sources said.

Romano — who dyes his hair blue, wears black nail polish and displays an upside-down crucifix at his throat — was punched, kicked and struck in the head with an ice scraper and a plumbing pipe, according to the complaint and law-enforcement sources.

A couple of months ago, Romano, who is in the process of becoming an ordained minister, had boasted to the trio that he was a devil worshipper and belonged to the Church of Satan, police sources said...

Later that night, detectives from the Hate Crimes Squad, believing Romano was targeted because of his religious beliefs, busted two suspects: Paul Rotondi, 18, of Howard Beach, Queens, and Frank Scarpinito, 18, of Ridgewood, Queens.

Rotondi and Scarpinito pleaded not guilty yesterday to charges of fourth-degree criminal possession of a weapon, second degree aggravated harassment and second degree assault as a hate crime, which carries a stiffer penalty than a traditional assault charge...
Now, once you extend legal protection against bias-motivated crimes to one group you have to extend it to other self-identified groups or, well, you are biased.

Suppose a person gets beaten up solely because he's a Communist. It's perfectly legal to have the beliefs of a Communist in this country. Even of the Stalinist variety. So that would seem a bias-motivated crime. And if it's so with a Stalinist why wouldn't it be so with, say, a Neo-Nazi?

I'm waiting to read the Post headline:

White Supremacist Victim of Bias Crime

MIT girl has hissy fit.

Harvard's President forgets to be delicate with the ladies and pays the price.

Full coverage at Scrappleface.

Steven Pinker opines.

One million Rwandans charged with genocide.
KIGALI - An estimated one million Rwandans -- an eighth of the population -- are expected to face charges in traditional or "gacaca" village courts trying perpetrators of the 1994 genocide, says an official... [Reuters]
Imagine 37 million Americans being charged with murder.

Wednesday, January 19, 2005

Question: How much will federal income taxes have to increase by the year 2030 to fund Social Security and Medicare -- if benefits aren't reduced instead?

Answer: More than 60%.

Hey, I wrote this before but some people didn't believe me. Yet the number is simplicity itself to compute, so I'll show it right here.

First, though, why the year 2030?

Well, it's right in the middle of the period in which the Social Security Trust Fund bonds are projected to be being redeemed -- from 2018 to 2042 -- during which so many defenders of the Social Security status quo tell us there will be no problem, all promised benefits are assured.

Also, it's not so far in the future, only 25 years from now. Most people reading this fully expect to be still walking around then. Which means we -- us, you and I -- will either be paying these taxes or depending on somebody else to pay them so that we can get the benefits we've had promised to us and will be depending upon and surely desire.

And, as it's not so far away, there's not a whole lot of uncertainty about it. The "what me worry?" rationalizations that defenders of the status quo produce about 75-year and "infinite" time horizon projections (who knows what will happen? it'll be our grandchildren's problem) don't apply.

Additionally, things get a lot worse after 2030, and I don't want to incite panic and hysteria.

Anyhow, here's how easy it is to figure this number -- although I'll wager you haven't read it anywhere else, not in any newspaper editorials, or in Paul Krugman's column, or from bloggers like Kevin Drum, or anywhere.

Step 1: We look at how much general revenue is spent on these programs today, in terms of GDP.

The Social Security and Medicare Trustees give this number right out (along with the other spending numbers we will use). Currently the amount of net general revenue spending for these programs is 0.36% of GDP.

This consists of -0.56% (a surplus contributing to general revenue) from Social Security, a 0.02% of GDP cost for the Hospitalization Insurance (HI) portion of Medicare, and a 0.9% of GDP cost for the Supplemental Medical Insurance (SMI) portion of Medicare.

Note that both Social Security and Hospitalization Insurance are funded with payroll taxes that have been used to finance Trust Funds that hold federal bonds to finance future benefits. The up-to-15.3% in payroll taxes subtracted from every paycheck consist of 12.4% Social Security tax on the first $90,000 of wages (in 2005) plus 2.9% of HI tax on all wages.

SMI-Medicare in contrast is funded straight from general revenue -- income taxes.

Of course, the redemption of the bonds held in the Social Security and HI-Medicare trust funds to finance future benefits will be financed straight from general revenue -- income taxes -- too, and that's part of the future fiscal rub.

But the starting-point number to remember is that these programs consumed general revenue equal to 0.36% of GDP in 2004.

Step 2: We learn how much general revenue these programs are projected to consume in 2030, in terms of GDP.

The trustees give us this number as well: 5.69% of GDP.

Breaking this down we see it consists of...

Social Security: 1.37% of GDP as the annual cost of redeeming trust fund bonds.

HI-Medicare: 1.06% of GDP as its cost in excess of payroll tax collections (the HI trust funds bonds will have long since been exhausted.)

SMI-Medicare: 3.26% of GDP.

Step 3: Taking the 5.69% of 2030 and subtracting from it the 0.36% of 2004, we find for 2030 an increase in general revenue financing needs of 5.33% of GDP from today's levels.

Step 4: We become able to convert all this into income tax terms by finding the percentage of GDP that income tax collections constitute today.

From the Bureau of Economic Analysis we learn that GDP for 2004 was $11.8 trillion at an annual rate in the third quarter of 2004 (the latest number available, and also the quarter in which the government's fiscal year ends). We also see that total personal and corporate federal income taxes were almost exactly $1 trillion. And thus we see that in our world today federal income taxes equal 8.5% of GDP.

Step 5: Finally, we figure the 5.33% of GDP increase in general revenue needed for these programs that will arise by 2030 as a percentage of the total actual income tax collections of today, 8.5% of GDP, and see the answer is 62.7% -- so we are talking of a 62.7% increase over today's level of income taxation.

Thus, to fund these programs in 2030 income taxes will have to be increased by more than 60% from their current level in the economy, or additional new taxes will have to be introduced as an alternative, or benefits will have to be cut by a corresponding offsetting amount.

QED. Simple.

For the record, here's how that 62.7% increase in needed income tax will be divvied up:

Social Security: 22.7 points of income tax (1.93% of GDP). This consists of 16.1 points of tax (1.37% of GDP) to pay down the Social Security trust fund bonds, plus 6.6 points of tax that the government will have to raise to 'stay even' by making up for the fact that Social Security no longer contributes an equivalent amount (0.56% of GDP) to general revenue after the disappearance of its surplus.

HI-Medicare: 12.2 points of income tax (1.04% of GDP)

SMI-Medicare: 27.8 points of income tax. (2.36% of GDP).

It's worth again remembering that the first two programs, Social Security and HI-Medicare, are financed by trust funds holding US government bonds -- and together they account for 34.9 points of the 62.7 point income tax hike fated for 2030.

Those trust funds are just a great help, eh?

That's our future as it stands, folks.

All this is based on the current best projections of the Social Security and Medicare Trustees. But might the fiscal future be different?

Sure it might. The fiscal condition of Social Security might be modestly better or worse 25 years from now -- but the demographics that drive Social Security are pretty much set over such a short time period, so any great shift from the projections either way is unlikely.

Medicare on the other hand is extremely complex with costs driven by demand. The Medicare Trustees are projecting future growth in expenditures per person that is below the average historical experience, and significant reductions below that seem unlikely. But there is real risk of much greater cost increases due to the uncertain economics of medical technology and potential explosive demand for it (not to mention the inefficiencies of politically directed administration and price setting and so on). Medicare is scary.

The next question is: will we all agree, well before 2030, to pay this 60%-and-steadily-rising income tax increase, to pay ourselves all the benefits we've promised to ourselves then and thereafter?

Or will we find ourselves voting to significantly cut these benefits, well before 2030, to save ourselves some of this tax cost?

Yes, voting even to cut Social Security benefits so early -- as incredulous as the defenders of the status quo and advocates of the trust fund (such as the likes of Paul Krugman and Kevin Drum and their friends and admirers and allies) are at the thought of it.

After all, if we're going to cut something -- maybe in a deal to raise income taxes by only 30% instead of 60% -- why would Social Security be sacrosanct but Medicare not?

If it was your choice, what would you rather lose -- some dollars of walking around money or your health?

And it will be your choice. So think about it now and prepare to lobby for the choice you want -- 2030 isn't so far away.

And while you're at it, you might think about prefunding today some of your Social Security benefits in a private account holding real investments that you own -- so those benefits, at least, won't be a cost to the government available to be cut in 2030.

Tuesday, January 18, 2005

See Dick and Jane sue.

NY Times...
See Dick and Jane shvitz. Shvitz, Dick and Jane, shvitz.

Pearson Education, the publishing company that owns the copyright to the Dick and Jane reading primers, has filed a lawsuit against a division of Time Warner in Federal District Court in Los Angeles claiming that the book "Yiddish With Dick and Jane" violates Pearson's copyrights and trademarks for the familiar characters.

The brisk-selling book examines adultery, drug use and other tsuris that afflict Dick and Jane as adults.
The video version on the web is pretty amusing, as was noted here previously.

When it was published in September by Little, Brown & Company, part of the Time Warner Book Group, Pearson was farmisht and did not take any action. After an Internet video promotion of the book began attracting hundreds of thousands of viewers and the book's sales topped 100,000, however, Pearson decided that the fun was over.

The book, by Ellis Weiner and Barbara Davilman, with illustrations by Gabi Payn, states on the front and back covers, spine and copyright page that it is a parody.

But the lawsuit says the book "is not a parody..."...

Bill Gates, teenage girls' pinup idol?

Did Bill Gates really do a photo spread for Teen Beat magazine in 1983?

I don't know. But that's the story circulating with these pictures, and they're cute enough for me.

Catch those sexy 5-inch disks!

Tsunami dries up local charities

New Yorkers are neglecting local charities in favor of appeals for tsunami victims, according to a new report.

Since the tsunami, contributions have all but dried up at Love Our Children, a New York group that battles child abuse and neglect, according to Crain's New York Business.

"Everything is at risk right now," Ross Ellis, the charity's chief executive told the magazine. "Wherever you turn now, it's, 'Give money to tsunami relief.' People just are not giving to anything else."

At Bailey House, a New York charity that helps homeless people with AIDS, the number of donations dropped by 50 percent since the tsunami. Executive director Regina Quattrochi told Crain's, "I hate to be put in this position of seeming like we're competing with other human tragedies for funding."

God's Love We Deliver — a charity which delivers meals to seriously ill people — lost about $5,000 from two donors who decided to instead give that money to tsunami aid... [NY Post]

We think we've found the cause of your toothache.
LITTLETON, Colo. — A dentist found the source of the toothache Patrick Lawler was complaining about on the roof of his mouth: a 4-inch nail the construction worker had unknowingly embedded in his skull six days earlier...

"This is the second one we've seen in this hospital where the person was injured by the nail gun and didn't actually realize the nail had been imbedded in their skull," neurosurgeon Sean Markey told KUSA-TV in Denver...

"The doctors said, 'If you're going to have a nail in the brain, that's the way you want it to be.'..." [AP]

Monday, January 17, 2005

Paul Krugman commits a cardinal sin of logic regarding Social Security, and repeats it, and repeats it...

That logical sin: looking at an option and condemning it without considering the alternative.

This is now the standard operating procedure of the defenders of the Social Security status quo who denigrate the higher returns that can be expected from real investments in private accounts as being "risky", "expensive" or whatever. As they do this, they never compare such returns to the expected returns from Social Security as they want to keep it. In a moment we'll see why.

Now Krugman is yet again banging out this tune on his one note drum. A little over three weeks ago he wrote in his column that the British system of private accounts is risky and has fees that are much too costly. In his most recent column he wrote that the British system of private accounts is risky and has fees that are much too costly. The difference? This time he quotes from an article in that impartial and esteemed* source of economic analysis, the American Prospect...

"Britain's experiment with substituting private savings accounts for a portion of state benefits has been a failure ...A shorthand explanation for what has gone wrong is that the costs and risks of running private investment accounts outweigh the value of the returns they are likely to earn.... Reductions in yield resulting from providers' charges can absorb 20-30 percent of an individual's pension savings."
Yes indeed. If one's investments earn a 6% average return and one pays an annual 1.5% fee -- entirely plausible -- then returns will be knocked down by 25% and the growth in one's savings will be reduced accordingly. Yes. So if you invest $1,000 when young in a private account that earns an average 6%, then 40 years later when you retire instead of having it grow to $10,286, due to that fee it will be a mere $5,816.

That's 43% less! Ouch!! We don't want to do that! But wait ... maybe we do?

To find out, let's consider the alternative -- the returns provided by the Social Security status quo -- before making up our minds.

The first thing we note in doing so is that the Social Security actuaries say that all annual cohorts of retirees after 2000 will get back from Social Security less than they contributed to it, using the federal bond rate as the discount rate. That is, all will lose money compared to if they had invested in the lowest-yielding, safest investment available, "risk free" government bonds. And this loss grows as the years pass.

Somehow, defenders of the status quo don't consider this loss a "risk" ... perhaps because it is a certainty? It is, as it results from the legislated tax contribution-to-benefit formula.

Now, within each annual cohort of retirees annual return varies according to personal situation (single, married, one-earner or two-earner couple, etc.) We can look at some specific examples.

The Social Security Administration's actuaries projected returns on contributions for the 1994 Social Security Advisory Commission. Here are some numbers for persons entering the work force in 1994 (they'd be about age 30 today).

These are actuarial present values (in 1994 dollars) for lifetime contributions to, and lifetime benefits to be received from, Social Security. Benefits include all benefits, not just retirement benefits...

Single males

low wage: taxes $39,024; benefits $38,004; - 2.6%

Does Paul Krugman, the concerned progressive, tell us that from now on even many of the poor will be made poorer by Social Security?

average wage: taxes $86,720; benefits $62,889; - 27.5%

maximum wage (taxable wage limit): taxes $208,124; benefits $99,789; -52%. Ouch!

Single females (women live longer than men, so they do a little less badly)

low wage: tax $40,778; benefits $46,025; + 12.9%

average wage: taxes $90,620 ; benefits $76,185; - 15.9%

maximum wage: taxes $217,430; benefits $120,801; - 44.4%

Note that among married couples if both spouses work and have near-comparable incomes each will receive benefits on their separate work records -- so these "single" amounts substantively apply to many married persons too.

The relative big winner under Social Security is the working husband with a non-working spouse -- the standard family structure when Social Security was created -- due to the spousal benefit that provides benefits for two lifetimes on one earnings record...

Married male with family

low wage: taxes $39,024; benefits $77,963; +99.8%

average wage: taxes $86,720; benefits $129,863; +49.7%

maximum wage: taxes $208,124; benefits $205,916; - 1.1%

.... but note that even here, less than doubling one's money over 40 years is a pitifully low return, less than 2%. One can get that difference over government bonds just by buying high-grade corporate bonds, with no risk on stocks at all.

And even the most favored person in Social Security, the male bread-winner with the stay-at-home wife plus kids, loses money to Social Security if his income is as high as $90,000 -- which isn't exactly "rich" for a person supporting a non-working wife and children.

Of course there are other personal scenarios in Social Security: if you die before retirement age you take a 100% loss on your retirement benefit. If you are married and work to bring in the family's second income, but your lifetime earnings are low enough so that you claim benefits on your spouse's earning record, you take a 100% loss on the taxes you paid. If you end a marriage in less than 10 years you may take a big loss of benefits ... (These are not risks?)

But when you wrap them all up the actuaries say everybody combined takes a loss compared to investing in government bonds, from this day forward forever more, and the loss grows larger every year.

And NOTE THIS: Even the returns given above for Social Security are all underfunded by 30%. And if this funding gap is closed on a "paygo" method -- through the mix of 'modest tax increases and benefit cuts' as recommended by Krugman, the editors of the NY Times, and other such defenders of the status quo -- then by the Iron Laws of Arithmetic those returns must drop another 30%. (For either a tax increase or a benefit cut further reduces the ratio of benefits to taxes.)

Now the low-income male instead of suffering a 3% loss suffers a more than 30% loss ... the average-wage woman scheduled to take a 15% loss takes a 40% loss ... and the high-wage workers scheduled to take a 50% loss take a 65% loss.

(Maybe now that investment earning 6% that merely quintupled one's money after being knocked down by that heavy 1.5% fee looks at little better?)

There is no way around this if Social Security remains as it is. This is its future. Indeed, there is a real risk that benefits will be reduced by more and sooner.

So perhaps we begin to see why those who condemn returns in private accounts as being too low and risky never actually compare them to the returns guaranteed to today's young workers from Social Security.

Hey, let's be considerate and do that job for them:

Historically, stocks have provided an average real return 5 points above government bonds. But let's say one's private investments earn much less than that, only 3.5 points. Perhaps one is unlucky, or diversifies across lower-return investments such as corporate bonds (even government bonds) for safety.

Now let's take a realistic annual expense rate from real-world American experience -- noting how Krugman searches the globe to cherry pick investment programs that he can most easily present (or misrepresent, various folks would say) as examples of failure, while carefully ignoring successfully managed retirement investment programs that are actually running right now here at home in the U.S. He wouldn't want anyone to form an opinion by looking at those!

Let's take as our model the Federal Thrift Savings Plan which right now manages private retirement investments for government workers with a 0.1% expense rate. If it's good enough for government employees one would think it's good enough for the rest of us.

OK, from our conservative 3.5% annual return we subtract 0.1% to get 3.4%. That's hardly the huge return from stocks that some people talk about. But still, using the bond rate as the discount rate, over 40 years: $1 invested in a government bond gives us $1 ... $1 invested at 3.4% over the bond rate gives us about $3.80 ... and $1 contributed to Social Security gives us less than $1.

Wouldn't it be nice if our low-wage young male worker could get back more than only 98 cents -- or maybe as little as 70 cents (after the funding gap is closed) -- for every $1 he pays in taxes to Social Security? Like a private account that delivers a mere $3.80 would provide?

This is the comparison that Krugman and the other defenders of the Social Security status quo never make -- and the question they never ask, as "progressive" and concerned for such low-wage workers as they pose at being.

Paul Krugman believes private investments are too risky and expensive to place in retirement accounts. It follows he must be saddened that he can't invest more of his own retirement savings in Social Security, rather than be forced to manage them himself at such great risk and expense as he does now. But I will make an offer to cheer him up!

Here's the offer: He sends me his retirement money. I will guarantee him -- pledging my home and all other assets as collateral -- that I will pay him on those funds the exact same less-than-the-federal-bond-rate return that Social Security assures today's young workers. And I will charge him no fee for this service!

Instead, I will merely invest the funds he sends me in a broadly diversified portfolio of market investments, and hope to eke out some return for myself from the difference between market returns and the sub-federal-bond-rate I must pay him. I will assume all the risk! On his behalf.

If he's serious in his beliefs, he'll e-mail me.

In fact, if Krugman is right, my offer will be universally attractive and I'll make it to anyone. I'll market it to everyone! I've found a market failure to exploit! I'll set up a mutual fund to safely duplicate Social Security-level returns, and wait for the cash to come pouring in from all those who only wish they had a safe, risk-free, efficient way to lose money on the way to retirement...

Nah, I don't think so, that's being disingenuous, I'm just kidding.

The other aspects of Krugman's non-kidding disingenuousness on this subject in his column of three weeks ago, in all its glory, were covered previously.

* fn. I'm teasing, of course. Going to the American Prospect's masthead right at the top we see the names "Robert Kuttner" and "Robert Reich" -- two fellows Krugman famously used to savage on a regular basis for what he deemed their analytical incompetence and factual ignorance regarding things economic. You'll have no trouble googling up some enjoyable exchanges.

Now Krugman recycles completely credulously -- breathlessly, even -- material they provide as the proof of his own beliefs. It seems the overwhelming liberal political imperative to assure that even low-wage workers will be made poorer by Social Security creates strange bedfellows.

Saturday, January 15, 2005

"Deep Impact" launches for real.
NASA Launches Spacecraft To Smash a Hole in a Comet

A NASA spacecraft with a Hollywood name - Deep Impact - blasted off yesterday on a mission to smash a hole in a comet and give scientists a glimpse of the frozen primordial ingredients of the solar system.

With a launch window only one second long, Deep Impact rocketed away at the designated moment on a six-month, 268-million-mile journey to Comet Tempel 1. It will be a one-way trip that NASA hopes will reach a cataclysmic end on the Fourth of July.

"We are on our way," said an excited Michael A'Hearn of the University of Maryland, the mission's chief scientist...

Scientists are counting on Deep Impact to carve out a crater in Comet Tempel 1 that could swallow the Roman Coliseum. It will be humans' first look into the heart of a comet, a celestial snowball still containing the original building blocks of the sun and the planets.

Because of the relative speed of the two objects at the moment of impact - 23,000 mph - no explosives are needed for the job. The force of the smashup will be equivalent to 4 1/2 tons of TNT, creating a flash that just might be visible in the dark sky by the naked eye in one spectacular Fourth of July fireworks display.

Nothing like this has ever been attempted before.... The resulting crater is expected to be two to 14 stories deep and perhaps 300 feet in diameter....

The scientists came up with the Deep Impact name independently of the movie studio, around the same time, neither knowing the other was choosing it, even though some members of NASA's Deep Impact team were consultants on the picture.

Deep Impact is carrying the most powerful telescope ever sent into deep space. It will remain with the mother ship when the copper-fortified impactor springs free... [NY Sun]
The NASA Deep Impact site... and cool "play with 'em" graphics over at the University.

Mom Worries

Britain hit by shortage of dwarf actors.

If you are 3'8" and looking to break into the business, this is your chance.
Doctor Who return hit by shortage of dwarf actors

Filming of the new Doctor Who series has been hit by a shortage of midget actors.

Bosses wanted them to play tiny blue aliens - but most have been snapped up for the new Charlie and the Chocolate Factory movie and to play Gringotts Bank staff in the new Harry Potter film.

Dr Who executive producer Russell T Davies said: "It's very difficult to employ persons of restricted growth when, as our producer Phil Collinson says, 'Bloody Gringotts and the Chocolate Factory are filming at the same time'."...

Peter Burroughs - whose Peterborough-based Willow Personal Management is one of just two UK agencies for dwarf actors - admitted he had been unable to supply Dr Who with a 3ft 8in star.

He said: "That was very difficult to find, especially with the other productions going on." [Daily Mirror]
Why isn't Tim Worstall reporting this?

Thinking of taking a "dream" vacation in Costa Rica?

No... Do not ... NOT!

Enough said.

Friday, January 14, 2005

On the stuff and nonsense about the Social Security Trust Fund guaranteeing payment of currently promised benefits -- or any level of benefits -- from 2018 on.

This is a quick response to an odd idea that's suddenly grown very popular among some defenders of the Social Security status quo, and is circulating among them merrily.

Namely, that the fact that the Social Security Trust Fund holds U.S. government bonds -- which on current law would be redeemed to finance currently promised benefits during the period from 2018 to 2042 or thereabouts -- somehow guarantees the payment of such benefits, because failing to redeem the bonds to fund the benefits would be an unthinkable default on US Treasury obligations.

Claims to this effect are all over the Internet and the liberal press these days. Here's two I just noticed. From Max Sawicky a couple days ago...
[Social Security] can only be insolvent, or "short of cash," if the Trust Fund assets are not redeemed, and to fail to redeem them is to default. [my emphasis]
And in the comments today over at Andrew Samwick's:
"The US government has the unparalleled record of having never missed a debt payment since the founding of the country. If you believe the US government is about to start missing those payments ... you should not be worrying about a fractional reduction in Social Security payments 20 years from now - you should be stocking up on guns and gold."
Look ... if failure to redeem these bonds to provide cash to pay Social Security benefits is an unthinkable "default" by the US Treasury on its obligations, then the Treasury is already defaulting on them every year -- because the bonds in the trust fund are 15-year bonds and none of them have been redeemed in 22 years! Default???

Why, no, not default. Because these bonds -- despite frequent claims along the lines that "they have the same status as U.S. bonds owned by Japanese pension funds and the government of China", as per Krugman -- are in fact very different from Treasury bonds held by the public (including foreigners and foreign governments) in a good number of ways.

One such way is that the trust fund bonds are demand bonds. That is, although they nominally are 15-year bonds for such purposes as setting the interest rate on them, they can be cashed in at the Treasury on demand, before they mature -- and if they aren't cashed in on demand they simply roll over for another term.

You cannot buy US Treasury bonds like this, and neither can Japanese pension funds nor the Chinese government.

Now, let's imagine that come 2018 or so Congress finds itself facing the need to pass one big honking income tax increase to pay off the $5 trillion or so of bonds that will then be in the trust fund (today's current value) over about the next 25 years. That may well be an income tax increase on the order of 20% or more (see below), on top of even larger income tax increases needed simultaneously to finance Medicare.

And let's imagine that the voting taxpaying public for some reason is reluctant to pay all of such a big tax increase -- and that Congress responds to the people's wishes by reducing, to a greater or lesser extent, Social Security benefits, thus reducing the size of the necessary tax increase.

Now fewer (if any) bonds will be presented by Social Security to the Treasury for redemption. Bonds will not be redeemed. Must this failure to redeem the bonds be default, as Max said?

Of course not. The bonds that needn't be cashed to fund current benefits will simply be rolled over -- exactly as they were last year, and will be this year and next year too. What default??

The bonds can be rolled over until the year 2500, until whenever, or until forever, without any bond default ever occurring -- just as they are being rolled over now.

So the idea that the alternative horrible consequences of a bond default somehow secure the payment of the currently promised level of Social Security benefits -- or of any given level of benefits -- until the bonds run out is simply nonsense. Among amateur observers the idea may be described as "naive." But professional economists and political observers who peddle such nonsense deserve, I think, rather harsher criticism.

(All this is just another reflection of how the strange notion that the government can default on an obligation to itself -- any more than anyone else can -- is a logical absurdity.)

OK, so Congress certainly can reduce Social Security benefits after 2018 (or at any time) without incurring the horrors of any kind of bond default, that's settled.

What are the practical, real-world chances that it will want to do so?

Well, let's look at some real-world numbers.

Come 2018 or so, when Social Security is projected to go cash-flow negative relative to the payroll tax, the trust fund is expected to hold about $5 trillion of bonds, current value. To redeem them over the period until 2042, as long as they are projected to last under current law, will take an average of more than $200 billion a year current value just to cover the principal (neglecting interest).

For perspective, total personal income tax collections in 2004 were $811 billion. Add corporate income taxes, and the total came to almost $1 trillion.

So we are talking about a general income tax increase on the order of 20%, just to redeem the trust fund bonds.

Or, alternatively, the Social Security Administration projects the cost of benefits to increase by about 2 points of GDP during the period in which the bonds will be paid off. With total federal income taxes today being a little less than 10% of GDP, this too implies a 20% increase in income taxes to fund the payment of the trust fund bonds.

Or, alternatively, the US government's unfunded liability for promised Social Security benefits over the next 75 years is $12.6 trillion current value [as per the Treasury, pdf. p. 11] This shortfall will have to be financed from general revenue over that period.

(Note that while defenders of the status quo often say the unfunded 75-year liability of Social Security is "only" $3.5 trillion, this is only the Social Security Administration's liability -- it is not the government's liability, and does not include the cost of such things as paying off the trust fund bonds.)

That liability is concentrated (more than 100% so actually) after about 13 years from now, when Social Security is projected to go cash-flow negative relative to the payroll tax. So let's say the $12.6 trillion, current value, will have to be financed from income taxes over those following 62 years.

Again, we get back to an increase in income taxes of about 20% being needed to fund benefits, starting by paying the bonds until they run out. (I'll let you do the math.)

And, unfortunately, this will all coincide with even bigger income tax increases needed to pay the unfunded liabilities of Medicare that are twice as large -- $24.6 trillion current value as of 2004.

So, sometime around 2018 the taxpaying citizenry will have within its line of sight the prospect of something like a 20% increase in income taxes to fund the redemption of Social Security trust fund bonds on top of perhaps a 40% increase in income taxes to pay for Medicare.

Will the prospect of a coming 60% increase in income taxes motivate voting taxpayers and the politicians who answer to them to look for possible reductions in benefits?

We can only say this: In 1983, when promised Social Security benefits last overran the taxes available to pay for them, Congress did significantly reduce benefits -- and the tax increase that was needed to fund promised benefits then was nothing like the increases that will be needed after 2018.

Thursday, January 13, 2005

Robert Scheer, meet Richard Clarke.

In yesterday's L.A. Times we have Robert Scheer giving us this...

Is Al Qaeda Just a Bush Boogeyman?

Is it conceivable that Al Qaeda, as defined by President Bush as the center of a vast and well-organized international terrorist conspiracy, does not exist?

To even raise the question amid all the officially inspired hysteria is heretical, especially in the context of the U.S. media's supine acceptance of administration claims relating to national security. Yet a brilliant new BBC film ... argues coherently that much of what we have been told about the threat of international terrorism "is a fantasy that has been exaggerated and distorted by politicians..."
Damn that Bush, cleverly whipping up this fantasy of a threat to scare people into voting for him.

Of course, the very day before we had Richard Clarke giving us this ...

In the next six years, Al Qaeda will launch terrible attacks on America's casinos, shopping malls, and rail lines. The federal government will intern tens of thousands of Muslims in remote facilities and issue national identification cards. The price of oil will spike to more than $80 a barrel, and rebel forces will launch a successful coup in Saudi Arabia... the American economy - not to mention civil liberties - will decline precipitously ...
Damn that Bush, ineptly bungling America's defense against the most dangerous threat ...

Hey ... Look, I’m as willing as anybody to blame Bush, the neocons, and all the damn Republicans. But as to what we’re blaming them for, can’t we get our stories close enough together so they might be considered to be coming from, you know, the same planet?

Life is full of ironies...

... but we don't want to exit our own in that mode.

At least not like this before this. "... a perfect 4.0 GPA and five different majors – economics, history, sociology, psychology and political science." How often do you see that?

What does one say?

Buy your own seat on the New York Stock Exchange, cheap.

Competition, in the form of new electronic markets, finally reaches even the NYSE itself...
The New York Stock Exchange received a dual blow as seat prices dropped below $1 million and American International Group, one of its biggest companies, said it will also list its shares on an all-electronic market.

The $975,000 sale of a seat, or membership, was the first below $1 million since 1995. It came as the Securities and Exchange Commission rewrites rules governing trading and the NYSE's chief executive officer, John Thain, develops a hybrid market to mesh electronic and manual trading - changes that may undermine the NYSE's 80% market share in its listed stocks...

NYSE seat prices have plunged 35% in a year, and by more than half since their August 1999 peak of $2.65 million... (Bloomberg)
By almost two-thirds, 63%.

Fonzie's not the only one who's jumped the shark.

The "Happy Days 30th Anniversary Reunion" will air this February 3, just in time for the show's 31st anniversary. [NY Post]

Geeze, 31 years. The premier of that show was closer to the WWII invasion of Normandy than to today. At least time-wise.

I never was a fan, but I remember actively not being a fan, and that leaves me just as old.

Wednesday, January 12, 2005

2002: The year the rich got poorer but paid higher tax rates, as the Bush tax cuts proved progressive.

Just released IRS Statistics of Income data for 2002 tax returns show that as a result of the Bush tax cuts the lower your income was as a US taxpayer the more your tax rate probably was reduced, while only the rich paid higher rates. (Hey, doesn’t this sound backwards?)

At the same time the rich got poorer, as income at the highest levels continued to plunge through the second straight year (after falling 60% at the highest levels the year before).

As the IRS explains (.pdf) ...
... The adjusted gross income (AGI) reported on [2002] returns totaled just over $6.0 trillion, a 2.2-percent drop from the previous year. This was the second consecutive year that AGI fell.

In both years, the decline in AGI reported on all returns occurred for returns with AGI of $200,000 or more. AGI reported on returns with income below $200,000 increased both years.

The principal cause of the decline in AGI between 2001 and 2002 was a large decline in net capital gain (less loss), which fell 26.9 percent for 2002...

The average tax rate for all returns also declined for 2002, by 1.2 percentage points, to 13.2 percent of AGI.

A lower average tax rate was reflected in all of the income-size classes for AGI of less than $1.5 million … The average tax rate was unchanged for returns with AGI between $1.5 million and $2.0 million. The average tax rate increased, however, for all of the income-size brackets of returns reporting more than $2 million of AGI.
The rich got poorer --
Change in total adjusted gross income at each level, 2002 from 2001:

$200,000 to under $500,000 -5%
$500,000 to under $1 million: - 6%
$1 million to under $1.5 million: - 9%
$1.5 million to under $2 million: -14%
$2 million to under $5 million: -16%
$5 million to under $10 million: -18%
$10 million and over: - 26%

Changes in tax rates --
Adjusted gross income / tax rate as % of income / point change in rate / % change in tax rate

Total : 13.2%, -1.2, -8.3%

$1 to under $10,000: 0.7%, -0.3, -30.0%
$10,000 to under $20,000: 2.6%, -0.8, -23.5%
$20,000 to under $30,000: 4.7%, -1.2, -20.3%
$30,000 to under $50,000: 7.4%. -1.3, -14.9%
$50,000 to under $100,000: 10.5%, -1.1, -9.5%
$100,000 to under $200,000: 15.8%, -0.8, -4.8%
$200,000 to under $500,000: 22.7%, -0.6, -2.6%
$500,000 to under $1 million: 27.9%, -0.2, -0.7%
$1 million to under $1.5 million: 29.2%, -0.1, -0.3%
$1.5 million to under $2 million: 29.5%, 0.0, 0.0%
$2 million to under $5 million: 29.6%, +0.1, +0.3%
$5 million to under $10 million: 29.4%, +0.4, +1.4%
$10 million and over: 25.9%, +0.2, +0.8%

Commentary will follow.

In the meatime someone call Paul Krugman, Brad DeLong and David Cay Johnston. This is not what they said was happening with tax rates.

The Cold War is over, thank you very much, now go away.

Court case of the day...
WASHINGTON - In a Cold War-era dispute that is worthy of fiction, two former Soviet Bloc defectors are asking the Supreme Court for the right to sue the American government for reneging on a secret spy deal.

The defectors, known only as Mr. and Mrs. Doe, accuse the agency of reneging on what they say was a promise by the Central Intelligence Agency to take care of them for the rest of their lives, in exchange for espionage services decades ago.

In oral arguments today, the agency's lawyers will ask the justices to dismiss the case on the grounds that any litigation would require the government to acknowledge the existence of a secret agreement. It has long been established that the government may deny any relationship if the arrangement is exposed or suspected, government lawyers argue... [NY Press]
Now that's a great term to put in a contract: if I reneg on my end of the deal and you sue me to hold me to it that's a breach of the contract and I'm released from my end of the deal.

Once. That's a great term to put in a contract and use once, because once you use it and word gets around in the newspapers and on the Internet about how that's the way you operate nobody will ever trust you in a deal again. Which, if you are operating a spy agency, one might suspect would be a bad thing.

And the details alleged do not make the CIA sound good: After it "allegedly used intimidation and coercion to convince the Does to remain at their diplomatic posts for a period of time in order to conduct espionage for the United States", it finally brought them here and paid them $27,000 a year until "John" got a job that paid more. When he later lost the job in a corporate merger he found that his CIA-falsified resume kept him from getting another one. So he went back to the CIA for help. It replied: sorry, "budget constraints", we've concluded we paid you enough before, don't call us we'll call you if the cold war breaks out again. Allegedly. [case details]

Which is all very strange. Businesses eat bad deals all the time to preserve their reputation for trustworthiness in future deal making. One would think this would be rather more important to the CIA. Especially in light of current events.

Can the CIA really not afford to pay the inflation-adjusted equivalent of the original $27,000 a year? Couldn't it just hire the guy itself for some busy work job? Is its reputation for trustworthiness among would-be defectors not worth that much? Even if not, it's got to be spending more than that in legal fees just fighting this case, having lost at two judicial levels already.

Government budget lines sometimes interact in strange ways, but this is strange indeed. It's hard to believe that even if the CIA made a very bad deal here -- maybe promising these folks lifetime pensions three weeks before the Berlin Wall came down -- it wouldn't be better off just eating it.

Unless there is something else unstated involved. But if there is, the courts aren't considering it because the CIA isn't stating it.

This will be an interesting case to watch.

Tuesday, January 11, 2005

Geeze, just how dishonest dim can a group of lawyers be?

From the ACLU web site:
It is probably no accident that freedom of speech is the first freedom mentioned in the First Amendment: "Congress shall make no law ... abridging the freedom of speech, or of the press, or of the people peaceably to assemble, and to petition the Government for a redress of grievances."
But guess what's the first freedom mentioned before the "first" freedom, in there where they put that ellipses?
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances." [Amendment #1]
Yes, it's that "freedom of religion" thing that the ACLU is not at all fond of ... so *poof* it's deleted from the Bill of Rights! [catch via Opinionjournal]

OK, lawyers are supposed to be dishonest -- but not stupid. Do the lawyers of the ACLU really believe that nobody who visits their web site has even a passing familiarity with the Constitution?

And liberals wonder why so many people shake their heads about what's happened to liberal institutions like the ACLU since their good old days. Combine dim dishonesty like this with the standard claims of moral superiority and what do you get? A Republican majority.

Al Qaeda to attack casinos, end American freedoms, says Richard Clarke.

Donald Trump and the Native Americans of Foxwoods for once agree, "Say it's not so!"

Over my morning coffee and eggs I read this alarming report in the NY Sun:
In the next six years, Al Qaeda will launch terrible attacks on America's casinos, shopping malls, and rail lines. The federal government will intern tens of thousands of Muslims in remote facilities and issue national identification cards. The price of oil will spike to more than $80 a barrel, and rebel forces will launch a successful coup in Saudi Arabia...
My gosh!

That's the vision of the future in a lengthy cover story in the current Atlantic Monthly by former counterterrorism tsar Richard Clarke, who predicts the American economy - not to mention civil liberties - will decline precipitously after a second wave of attacks that he says Al Qaeda will launch this year.

Written as the transcript for a fictional lecturer, Roger McBride, giving a 10th annual September 11 address to the John F. Kennedy School of Government at Harvard University, Mr. Clarke drives his point home when he writes, "No one could stand here today, in 2011, and say that America has won the war on terror."
Oh, this is fiction. He's aiming to crack into Tom Clancy's market.

In the concluding remarks of the fictional lecture, he takes a shot at Mr. Bush's vision to bring democracy to the Middle East: "Our haranguing Arab governments to be nicer to their citizens ended up producing a backlash against us, because our exhortations were seen as hypocritical in view of our bombing, torture, and occupation tactics in Iraq."
Of course, we're also the only ones to bring real elections to the region -- something these Arab governments aren't going to be doing for their own people any time soon. So let's put this prediction into the time capsule, look back in a few years and see.

While all of these scenarios have been discussed by counterterrorism experts in the past, Mr. Clarke may also stand to gain financially by publicizing them. In July 2003 he became chairman of the consulting company Good Harbor LLC, which among other things counsels Fortune 500 companies in protecting against terrorist and cyber attacks.
Oh, this is marketing -- one isn't going to drum up business in this business by saying risk will recede in the future because we're winning the war, eh?

It's always good to see a civil servant rewarded with a lucrative, post-civil service career. Although it was lucky for him that Osama's waited so many years to hit on the idea of toppling America by attacking casinos and his other now-potential business clients.

Here's a teaser from The Atlantic.


Richard Clarke talks about his frightening scenario of an America hobbled by terrorism — and what we can do to avoid it...

In Clarke's frightening scenario, a woman walks up to a crowded roulette table in Las Vegas and blows herself up — the first in a series of suicide bombings at casinos and amusement parks. Men with submachine guns enter five malls around the country and shoot shoppers at will. Bombs go off in subway systems in Atlanta, Boston, Baltimore, and Philadelphia. Terrorists armed with heat-seaking missiles destroy four 767s. A cyberattack on computers around the country causes nationwide chaos. And on and on.

With each new blow, the economy grows weaker and the country creeps closer to becoming a police state. By 2011 civil liberties have been harshly curtailed; the country bristles with security workers and aggressive methods of surveillance...

This article is viewable only by Atlantic subscribers...
Sorry, but in these post-Michael Kelly days I'm not buying. Clarke will have to get his money from the new clients this brings him, and the movie rights.

Pravda: "Accident aboard the U.S. sub bears stunning resemblance to the 'Kursk'"

This story hasn't been very visible in the urban East Coast press around here, but here's the gist from Guam's Pacific News...
... The USS San Francisco, one of three nuclear-powered submarines based on Guam, was on its way to Brisbane, Australia, for a routine port visit when the submarine ran aground. It made its way back to Guam and was moored at Sierra Pier on Monday afternoon.

NBC News reported yesterday, citing unnamed Navy officials, that the submarine was traveling at 40 mph at a depth of 525 feet when it hit an "undersea mound." The collision slowed the 7,000-ton San Francisco to about 5 mph instantly, the report stated. The submarine then made an "emergency blow," or rapid ascent, to the surface....

In the NBC News report, unnamed Navy officials, citing the submarine commander, said the San Francisco hit an "uncharted" mound that would have been invisible to the submarine's crew if they were running silently -- without using underwater sonar...
One sailor was killed and about 23 others injured due to the force of the collision without warning. Other reports say that these submarines routinely travel without using active sonar when in charted waters, as stealth is their most important trait and they don't want to tip either their presence or their technology to anyone who might be listening.

And I'll note: submarines now routinely travel 40 miles per hour submerged at 500 feet? To someone who grew up on WWII movies and just recently watched the CD of Das Boot, that's pretty impressive.

For these things to be built so that they can basically run head on into the side of a mountain at 40 miles an hour without experiencing any kind of hull rupture is pretty impressive too.

Now, from Pravda's report ...
Undoubtedly, American side will never reveal the details of the accident, just as we have never heard the Complete list of details concerning the Russian Kursk ... 23 crewmen got injured as a result of the collision. One of them was deadly injured. Overall, many of such reports still contain a hint of mystery...

It is also noteworthy to mention that the catastrophe (running aground could in fact be considered as a catastrophe!) occurred approximately (plus or minus a thousand mile, which isn"' [sic] so much on the grand ocean's scale) in the region of the most recent underwater earthquake (which led to destructive tsunami in South-East Asia.
Was the submarine's positioning in that particular area purely accidental? Time will show.

The following fact is also quite noteworthy: such incidents tend to occur more often in the US Navy than they do in Russian. Information agency "Russky Sever" (Russian North) assisted PRAVDA.RU in contacting several naval experts in regards to the matter.

According to the experts, first of all, our nuclear submarines tend to put out to sea more rarely. And secondly, training specifics of American crewmen could also be the reason. American submarine crewmen are taught that their main targets are coming from "above". In other words, they are being convinced that the main danger is crashing into the above-water objects. As for Russians, they on the contrary are taught to avoid running aground instead of watching out for the danger from "above".

Obviously, this is a mere opinion; it can either be trusted or completely disregarded. However, statistics speaks for itself: American subs tend to run aground more often, whereas Russian subs tend to crash into above water objects.

However, there remains one more unanswered question: why did "San Francisco" suddenly hit the bottom with such force that so many people got injured? Did something take place aboard the vessel prior to the sub running aground? It is a known fact that submarines do not tend to malfunction all of a sudden. Automated system of submergence and emergence executes operations smoothly.

It seems that the accident resembles the Kursk tragedy (at least judging by the visible signs). At first, an incident aboard takes place, then the vessel hits the bottom, thus leaving numerous crewmen injured. This time, Americans got quite lucky. Only one man died.

Undoubtedly, American side will never reveal the details of the accident, just as we have never heard the Complete list of details concerning the Russian Kursk. [grammar peculiarities in original]
In my youth I was perhaps the world's least talented student of the Russian language and had the valuable experience of spending some time in the Soviet Evil Empire. I was going to add some observations in light of that here, but now think I'll leave it for observers to make their own.

I'll just note that the Soviet experience left the Russian people even further from having a really western point of view than they were before it, and it is going to be a long time before they as a whole develop one that fits in comfortably with that of the peoples other long-developed western nations. We should remember that as we watch Putin and the other politicos over there, and in our dealings with them. The Fall of Communism did not leave them like us...

Monday, January 10, 2005

I guess it depends on who’s doing the observing.

They report, you decide...

Amid low turnout and allegations of vote fraud and voter abuse, Mahmoud Abbas, longtime associate of Palestinian leader Yasser Arafat, appeared to have won yesterday's vote ... [NY Sun]


Palestinian Gunmen Storm Election Office

Five Palestinian gunmen burst into a Palestinian election office and fired into the air in the first incident of violence during Sunday's presidential election ... the men were affiliated with the ruling Fatah movement. Fatah's candidate, Mahmoud Abbas, was expected to win the vote by a large margin. [Jerusalem Post]


Abbas Declares Victory in Vote -- Observers Call Balloting Free and Fair. [New York Times, dead tree edition.]

Has Barron’s been reading this blog?

It seems that way, as last week’s editorial about Social Security could have been put together from items posted right here...
...Opponents of privatization have started accusing the responsible side of being irresponsible, of trying to play accounting games to hide the multi-trillion-dollar borrowing that would be necessary to pay accumulated Social Security promises while also allowing workers to divert some of their Social Security taxes into private savings accounts.

Their accusation is true; it is an accounting game and we would thereby ignore a lot of relatively short-term borrowing. The good reason: Borrowing today gets us out from under much bigger liabilities in the future. The net effect is in the direction of fiscal sanity.
Prefunding Social Security obligations today will be a lot easier than borrowing or taxing to fund them 30 years from now when the deficit is headed to 20% of GDP, as noted previously. As was also noted, when General Motors borrowed last year to fund its pension obligations in just this manner, but on less favorable terms, it was praised. Only with Social Security is this claimed to be such a bad idea.

Unless, that is, one doesn't really believe that the government intends to pay everything that it has promised to baby boomers. Do you? Do certain economists, such as Peter Orszag of the Brookings Institution? ...

Orszag said that it could increase the long-term national debt because there is a big difference between the full-faith-and-credit promise that backs the interest and principal payments on a U.S. Treasury bond and the Congress-can-change-it-anytime promise that backs the payment of future Social Security benefits.

"Frankly, there's a lot more flexibility for the government to adjust future benefits than there is for it to negotiate publicly held debt," he said.
Of course, funding Social Security obligations can increase them only if the government actually is planning not to meet them otherwise -- a unique argument coming from Democrats.

But this is indeed the argument Orszag and his co-authors make, as they warn that private accounts will cause the government to become "stuck with" (their words) paying the benefits it has promised to pay. We noted their worries.

That's real progress toward a realistic appraisal of any promise to save Social Security as it is today. Social Security, as it is today, includes unfunded liabilities with a present value of $9 trillion to $12 trillion. Anyone who promises to save Social Security without changing taxes or benefits is kidding himself, or lying outright, or planning to let his successors borrow big-time. We prefer realism, truth-telling and acknowledging our present debt to Social Security beneficiaries.

Opponents of change are gradually acknowledging other truths: Social Security is "just a government program supported by a dedicated tax on payroll earnings, just as highway maintenance is supported by a dedicated tax on gasoline," as Princeton economist Paul Krugman put it recently.

We'd like to see him go on a national tour to tell that to the millions of Americans who believe it's an insurance program and that they have paid for their benefits. For good measure, he should explain to young workers that if the dedicated tax is insufficient, it should be raised.

If Krugman and his ilk were in charge they would be raising a lot of taxes over the next 35 years or so: The U.S. government's projected spending in 2040 exceeds its projected revenues by about 20% of projected GDP.
Last year’s deficit including accrued entitlement liabilities -- which weren’t counted in the "official" deficit of $412 billion -- was by the Treasury’s own measure $11.1 trillion. Most of that being Medicare, which is totally out of control, but a good $810 billion being Social Security.

For perspective, personal income tax collections were $811 billion in 2004, while adding corporate income taxes ran total income tax collections up to $993 billion. [CBO]

So just to stay even with the past year’s increase in the unfunded liability for future Social Security benefits would have required a 100% increase in personal income taxes, or an increase of more than 80% in all income taxes (with the proceeds actually being "saved" somewhere for future use – as the Social Security trust fund certainly does not do).

And no, the Bush tax cuts are not primarily to blame. The reason for the imbalance is largely a Medicare program consuming 7% of GDP, Social Security consuming 6%, the federal share of Medicaid taking more than 2% of GDP and the recent tax cuts bringing up the rear at about 2% of GDP and only if they are extended and not rescinded or reformed.

Another Princeton economist, former Federal Reserve Vice Chairman Alan Blinder, makes an argument against private accounts that bumps right up against the president's vision of the Ownership Society: "Social Security would be neither social nor provide security," he said last month. "This would be a piece of a program to expose people to more and more risk."…

No one lives without risk, except in his imagination. In the current system, for example, few recognize that they are assuming the risk of dying before they can collect benefits equal to all the taxes they put in and a decent return. People with shorter life expectancies -- African-Americans, for instance -- are exposed to this risk instead of market risk, even though market risk is a lot easier to deal with.

Blinder disagrees. Despite the existence of thousands of mutual funds, some of which actually do give the investor an even break, this economist equates the stock exchange with the casino: "There are millions of Americans who have no desire and no ability to gamble on the financial markets," he said...
Yet Blinder and all those who object to the risk of loss in financial markets are mute about the certainty of loss today’s workers will suffer from the status quo.

The Social Security actuaries say that among those who entered the labor market 1994, and so are around age 30 today, average-wage individual workers will receive back from Social Security 15% less than they contribute to it, high-wage individuals will get as little as 50% back –- and even the poor low-wage individual will receive back 2% less than he contributed.

And even these returns are 30% underfunded, so if Social Security’s funding remains "paygo" then by the laws of arithmetic the low-wage individual worker will take loss exceeding 30%, the average-wage one a loss of about 40%, and the high wage one a loss of 65%. [There will be more data on this in a future post.]

Blinder (feel free to substitute Krugman, Kinsley, etc.) while being so concerned about the risk that losses may be suffered by Social Security participants in private accounts, somehow fails to mention this "risk" of loss facing them in the status quo.

Though perhaps that's because it's not a risk but a certainty. Yes, markets are risky, but it's very hard to come up with a diversified portfolio of investments that poses a real risk of loss over a 40-year investment period. To guarantee such a loss takes a government.

Sunday, January 09, 2005

What's more dangerous than using a cell phone when driving?

One could make a list -- in fact somebody did.
The top causes of accident-causing distractions, according to a study of accidents conducted at Virginia Commonwealth University:

1. Rubbernecking (looking something on or near the road while passing it)... 16%
2. Fatigue ... 12%
3. Looking at scenery or landmarks ... 10%.
4. Attention given to a child or other passenger ... 9%
5. Adjusting a radio or changing a CD or tape recording ... 7%
6. Cell phones ... 5%.
7. Eyes just not on the road ... 4.5%
8. Daydreaming ... 4%
9. Eating or drinking ... 4%
10. Adjusting vehicle controls ... 4%
11. Weather conditions ... 2%
12. Insect, animal or object hitting or entering vehicle ... 2%
13. Reading a map, directions, newspaper or something else ... 2%
14. Medical or emotional problem... 2%
and Unknown: ... 2%
Moreover, studies show that accidents involving cell phones relate primarily not to dialing or holding them but to the distraction caused by the phone conversation itself.

My home state has made use of hand-held cell phones illegal while driving. Looks to me like maybe it should get on to banning radios & CD players, food, and perhaps children too.

Friday, January 07, 2005

Betting on this weekend's NFL playoffs.

Advice from economists and from betters.

The betters are better.

Excess flu vaccine going wasted.

Remember way back when the shortage was creating a black market?
The flu-shot shortage has turned into a surplus in some areas, raising fears that some vaccine might be wasted.

Aventis Pasteur, supplier of almost all flu-shot vaccine for the USA this year, still has about 3.3 million doses to distribute to U.S. consumers. GlaxoSmithKline is on tap to ship 1.2 million shots from Europe. And MedImmune, maker of a nasal vaccine, has supplies.

But more than a dozen states contacted by USA TODAY say they have enough vaccine to meet demand. That is because many people at high risk for the flu opted to forgo shots this season, believing other people needed them more.... A mild flu season also has eased the demand.

Arizona doctors canceled 10,000 dose orders ... Minnesota has 20,000 to 25,000 doses even after shipping some to Louisiana ... Massachusetts could get 60,000 more doses but won't take them ... Washington is eligible for 160,000 more doses, but it still has 30,000 of its original 160,000... [USA Today]

Delta launches airline price war -- and the shakeout finally arrives?

Update: The WSJ reports...
This isn't a fare war. It's a revolution. The repricing of airfares by Delta Air Lines is nothing short of a historic change in U.S. travel...

In a filing in its bankruptcy reorganization, US Airways ... reported some rather startling numbers. In the first quarter of 1998, 39.7% of its domestic passengers purchased "premium" tickets -- first-class, business-class or unrestricted coach. Yet in the first quarter of 2004, only 4.6% of domestic passengers bought "premium" tickets.
Well, that could explain why this is happening now rather than six years ago.

Delta Airlines, on the verge of Chapter 11, is making a big competitive move by slashing prices on its most expense business class tickets and restrictions on its cheaper ones -- reversing the standard practice of the "legacy" airlines.

The legacy airlines, which carried forth from the days of high government-regulated fares, have expensive cost structures and restrictive union work rules that have left then unable to match the low operating costs of post-deregulation start-ups like Southwest and JetBlue.

In response they've become perhaps the world's most expert practitioners* of price discrimination, mastering the art of charging the business traveler $1,000 more than the tourist in the next seat in exchange for a short-notice booking with few restrictions.

But even that has not been enough, and one after another -- Pan Am, TWA, Braniff, Eastern, Continental, US Air, Northwest, United -- has flown into bankruptcy or history. Delta, the least unionized and among the best managed, has lasted the longest -- but now it clearly sees that its time too has come.

With the low-cost airlines improving the quality of their service towards matching that of the legacy airlines' top-price service, the fare differential the latter have depended upon has become unsustainable -- and Delta has now decided to bite the bullet by dropping its prices from the top.

The Financial Times reports... is quite possible the price war may doom the chances of recovery for United and US Airways, respectively the country's second and seventh largest airlines, which are currently in Chapter 11.

Delta has said it will reduce domestic fares by up to 50 per cent and scrap requirements for overnight stays on Saturdays, a tactic to prevent business travellers from using discount tickets.

In the short term this will lose it revenue it can ill afford to forego. But Delta appears to be gambling that if it moves first, it may be one of the survivors in what looks like a final dogfight among the so-called legacy airlines...

No one should want to see an airline go under, with all the attendant human costs. But it is hard to see what else can restore a measure of health to the rest of the US industry.

For some time, necessary restructuring was delayed by federal government cash and loan guarantees given to airlines claiming to be suffering from the impact on air travel of the September 2001 terrorist attacks. This aid has rightly ended. It is now time for market forces to determine the industry's shape.
Competitors' responses are reported at USA Today.

[* after college and university "tuition assistance" offices, of course.]

Teen singer Aaron Carter survives assassination attempt -- would-be assassin escapes.

breaking news...
Aaron Carter managed to escape serious injury Thursday when the teen pop singer's luxury sport utility vehicle erupted into flames...

Carter, 17, was driving his 2004 Cadillac Escalade north to Orlando at about 12:30 a.m. when a mattress came loose from the cargo bed of a delivery truck in front of him, said his spokesman...

Carter drove over the mattress, which got stuck under the sport utility vehicle and caught fire, probably from the heat of the exhaust system. The singer pulled over and escaped the vehicle, then watched it explode in flames.

"Everything happened in such a whirlwind," Carter said. "It was like the mattress flew out of nowhere ... I'm still in shock."

State troopers said the delivery truck never stopped. [AP]
Ashlee Simpson next.

Thursday, January 06, 2005

Sweden's worst natural disaster.

Globalization has unexpected consequences...
There are more than 3,000 visitors from Sweden among the missing in Thailand, and the Scandinavian nation is braced for what could be the worst natural disaster toll in its history.

It is thought around 20,000 Swedes had travelled to Thailand this holiday season, to escape the harsh winter of northern Europe.

With a population of only 9 million, Sweden's expected loss of life proportionately matches that of Indonesia, and is exceeded only by Sri Lanka... [CNN]

Observation of the day, of two days ago...

David Brooks notes the fondness US liberals have for the European social insurance model – and the problem those social insurance programs are now producing in Europe ...
... To sustain these programs, European government spending will have to rise. According to the European Commission, demographic trends will push public spending up by five to eight percentage points of G.D.P. in the E.U.'s 15 richest members ...

To pay for all of this, taxes will rise and public debt will increase. A Standard & Poor's survey predicts that France and Germany could see their public debt grow to more than 200 percent of G.D.P. by 2050.

Europe may find itself locked into a vicious circle: an aging population means more public spending, which means higher taxes, which means lower growth, which means higher unemployment, which means more public spending, which means more taxes, and even lower growth.

The former Dutch prime minister, Wim Kok, recently released a scathing report that found that "the pure impact of aging populations will be to reduce the potential growth rate of the E.U. from the present rate, of 2 percent to 2.25 percent, to around 1.25 percent by 2040."

Already, high European taxes make the European model look obsolete... European economies have underperformed for a generation now.

As Olaf Gersemann has pointed out, the U.S. economy has enjoyed an annual real growth rate of 2.9 percent over the past 25 years. That's 55 percent more than western Germany, 48 percent more than France and 39 percent more than the E.U. as a whole.

Back in the 1970's, European standards of living were catching up to U.S. standards. Now American G.D.P. per capita is about 30 percent higher than Europe's and the gap, if anything, is getting wider ...

Meanwhile, we in the United States are embarking on our own debate over the future of Social Security. Many liberals are claiming that we don't need to fundamentally revamp our system because there is no crisis.

To the extent that's true, it is because we have not been taking their advice for the past 50 years...

Past returns and future performance

The true-life history of stock market returns over two different cycles.

I. The presidential election cycle.

1940 to date

Average annual change in the Dow Jones Industrial Average during the ...

First year of presidential term: +3.9% (8 loss years of 16)
Second year of presidential term: +4.9% (7 loss years)
Third, pre-election, year of term: +17.2% (0 loss years)
Fourth year of term, election year: +6.1% (5 loss years)

Conventional wisdom: Presidential Administrations stoke the economy before the election to enhance their re-election prospects, then after the election they impose restraint to wring the excesses out. If one looks at the current Administration's budget for discretionary spending for the years before and after the election, it sure seems to fit the pattern.

Ergo, this is a poor year to invest in the market. And a good number of investors take this quite seriously.

II. The years ending in 0-to-9 cycle.

1884 to 2003

Average annual change in the Dow Jones Industrial Average during years ending in...

0: -7.2%
1: -0.2%
2: +2.2%
3: +6.2%
4 : +7.4%
5 : +30.7%
6 : +6.0%
7 : -3.2%
8 : +18.5%
9 : +9.2%

[all data via No-Load Fund Investor]

Hey, this is the best year to invest in the market!

Except we disregard cycle II because there's no logic behind it as there is for the first cycle. So so we conclude it's just random chance, an example of "data mining". Some one of the ten years must do better than the rest, so if you look for one you'll find one. You'll find that with any cycle, of course, or any mix of variables one examines to find a correlation with market performance. It's just chance.

But if we add a plausible explanation, does that make it anything more than chance? In the first cycle there's a good one-in-four chance that the post-election year will have the worst return -- so does the explanation of it there actually explain anything, or is it merely a "just so" story that we made up to see logical order where there isn't any?

After all, if Administrations stoke the market to optimize their chance of getting re-elected, why isn't it the election year that sees the biggest gain, rather than the pre-election year?

And if that easily explained, visible, empirical relationship is just chance, how many other fundamental investment relationships are just chance correlations that might dissipate tomorrow? Why, I'm told that for well over 100 years it was considered an investment fundamental that because stocks are more risky than bonds they had to pay a cash dividend rate that exceeded the interest rate on bonds, and they always did -- and then one day they didn't, and they never did again.

On the other hand, that 0-to-9 cycle covers a good 120 years ... maybe there is something determining it that we just don't understand. Maybe that spooky action at a distance nobody fully grasps in quantum mechanics has unappreciated deterministic effects on investments -- and we're all passing on a sure thing just because we don't have a made-up story to explain it to ourselves...

Aw, geeze ... it's a lot easier just to buy the whole dang Wilshire 5000 and forget about it.

Chinese SUVs coming to America.

From the people who brought you the Yugo...
Chinese cars headed for U.S.

NEW YORK - A U.S.-based company plans to sell cars manufactured in China at American dealerships beginning in 2007.

Visionary Vehicles has partnered with Chinese automobile company Chery in efforts to create and import high-quality, stylish cars priced 30 percent lower than comparable models currently on sale in the United States.
That'll make the UAW's day.
The 2007 fleet will launch with five totally new models consisting of compact, mid-size and crossover sedans as well as a luxury sports coupe and a sport utility vehicle.

Visionary Vehicles is headed by auto industry entrepreneur Malcolm Bricklin, who also brought Subaru and Yugo cars to U.S. consumers. Yugo America, which imported a small hatchback car manufactured in Yugoslavia, closed in 1992...

To dispel concerns about the quality of cars made in China, Visionary announced that its cars will come with 10-year/100,000 mile warrantees.

European and Japanese design firms behind Ferrari and Lamborghini luxury sports cars have been enlisted to design the launch models... [CNN]
So why didn't Bricklin get the Lamborghini people to design a Yugo for him? It might have done better...

Wednesday, January 05, 2005

Iowahawk's 2005 Year In Review is just out

The year's best memories in advance...


6 - Steelers' Super Bowl win overshadowed by controversial John Madden "wardrobe malfunction"


15 - Massive layoffs feared at Minneapolis Star Tribune after hostile takeover by Powerline

23 - Barry Bonds passes Ruth with 17th homer; torso explodes


2 - Violence mars opening of new Filene's Basement in Bagdhad as local insurgent women battle for closeout bargains

All of 'em.

Today the kid's night light, next week the power saw.

A child ... a night light ... a pet hamster ... a class project.

Who could ask for a better combination?

For tabloid headlines, it's still the N.Y. Post.

It's been a good 21 years since "Headless Body in Topless Bar", and still nobody in the NY press can match them. Competitors even write in open admiration...
... Now, if you're a newspaper copyeditor, how do you craft a headline that will capture both the tawdry, zany flavor of this story and a would-be reader's attention? After all, as one of the investigating officers put it, "so many jokes, so little time."

Newsday completely dropped the ball ... 1010 WINS was even worse ...

The Daily News gave it the old college try, but the results weren't much better. Their struggle to out-Post the Post in recent years has usually left them with headlines that oscillate between the merely descriptive and the utterly incoherent. This time they fell in between those two...

No, this week's headline-to-headline winner is again the Post. They understood what that officer was saying, saw what they had in the story, and took it as far as they dared with:

"Hookers Relish Wieners".

Tuesday, January 04, 2005

Economics lessons cribbed from other blogs.

Steve Antler looks at the data on the exceptional productivity growth since 1995 and declares "there is no precedent" for it. Productivity is the root of all good economic things -- improvements in wages, profits and standards of living all come from continually being able to produce more value at less cost, so let's hope it keeps up!

That's the good news.

Now, do you want to know more about this "trade deficit" business, how it matters and what matters to it? Macroblog points to "A Hitchhiker's Guide to the U.S. Current Account Problem", from the Federal Reserve Bank of Cleveland. Neither good news nor bad news, just informational. Although becoming better informed is always good news.

Now the bad news...

Arnold Kling gives us Edmund Phelps explaining what may not have occurred to many about the connection between our Social Security/Medicare entitlement policies and the trade deficit/value of the dollar.

To wit (my simplification): In a "normal" world the Baby Boomers during their working years would have saved to meet their future retiree living and health care costs, and as they did the US as a whole would have saved on net and run a trade surplus, building up investment balances abroad. Then when the Boomers retired they would have drawn down those balances, and their consumption of their savings abroad would produce a trade deficit -- a balanced full cycle.

But Social Security and Medicare have given Boomers the illusion that they don't need to save, so they've saved less than they would (and should) have. And of course, the government hasn't saved either -- very much the contrary. So we as a nation are nearing the point where we should be just starting to turn from saving on net (trade surplus) to consuming on net (trade deficit) when we have in fact been under-saving and over-consuming (trade deficit) for the last 20 years. Not good.

The Boomers haven't yet realized the coming consequences of their, and the government's, under-saving. Phelps explains...
At the present time households are badly under-predicting their future tax liabilities -- or, if the U.S. government is going to cut entitlements -- over-predicting their future benefits. Either way, they are spending too much, so the current account cannot get out of deficit. Once households are better informed their spending and the dollar will both drop...
So everything will work out in the end. One just wonders how traumatic the process of households becoming "better informed" will be.
Once expectations are closer to reality -- once households expect a tax increase or a benefit haircut or both -- we will see significantly reduced consumption, thus lower imports, more output left for export, and a much weaker dollar. That is too bad. But the longer we wait to get back to reality the worse it will be.
OK, which of our politicians will do their civic duty to minimize our future problems by taking the lead in informing the public to "expect a tax increase or a benefit haircut or both", getting us all "back to reality". Any volunteers?

Crime continues to fall in New York City.

I remember when they said it couldn't be done.

1990: 2,245
2003: 596
2004: 558

1990: 3,126
2003: 1,946
2004: 1,740

1990: 100,280
2003: 25,887
2004: 23,669

Auto Theft
1990: 147,123
2003: 26,343
2004: 19,984

data via NY Sun

To see how much more crime has been reduced in NYC than nationally, go to the NYPD web site and click on "crime statistics". Of course, the plunge in the NYC rate accounts for a significant portion of the drop in the national rate, so the real difference is even larger than that.

And contrary to the situation in the rest of the U.S., the prison population in New York City and State is declining instead of rising, as noted previously. New York is now actually selling off excess prison space. There seem to be some lessons on display in New York about effective law enforcement that many other parts of the country have been reluctant to note, for some reason.

As a good news bonus, fewer people were killed in fires in NYC during 2004 than in any year since 1919.

"New York City, it's not Kansas -- Kansas is more dangerous."

"Donating cigarettes to monks is a sin." -- new cigarette warning label.

Cigarette packs in Thailand may soon carry more than the usual health warnings, with an edict admonishing the public not to give Buddhist monks a smoke.

The new label, proposed by the head of Thailand's National Buddhism Office, will read: "Donating cigarettes to monks is a sin." Chakratham Thammasak said he would ask the public health ministry to go ahead with the change.

In Thailand, like most Buddhist countries, the public donates food and money to monks, but smoking among the Buddhist clergy is generally frowned upon... [AP]

Monday, January 03, 2005

Imperial Overreach

Noted historian Niall Ferguson, author of Colossus: The Price of America's Empire, considers The United States to be an imperial power, albeit with its modern ability to project force anywhere in the world relieving it of the need to occupy foreign lands as did the empires of the past.

He notes that the word "imperialism" was created as a perjorative, but rejects the notion that empires only oppress and exploit, contending they often expand the realm of order, security and prosperity. But empires also fail and fall.

In an interview in Worth magazine (January issue, not online) the subject turns to imperial overreach....

Q.: Like Great Britain in the early 1900s, does the United States suffer from overstretch?

I do not think that is true. If one goes back to 1904, the British Empire governed roughly 25% of the world's land surface and population at a time when Great Britain's economy was significantly less than 10% of world total output.

Today the United States accounts for one-quarter to one-third of world output, but the territory it controls is relatively small. So I do not see much sign of imperial overstretch.

In fiscal terms, the United States is comfortably able to afford occasional interventions against rogue regimes and in failed states.

If there is going to be a problem of overstretch, it will come from America's ailing system of Medicare and Social Security as the baby boomer generation retires. It will be the rising cost of welfare, not warfare, that ultimately causes overstretch

Sunday, January 02, 2005

NY Times and top Democrats rally to defend tax break for the rich.

It seems there's one big tax break for the rich that top Democratic politicians really like. And when the Bush Administration talks about killing it, they and the New York Times suddenly reverse the spin mode they've been in for the last four years regarding such tax breaks, to defend it...

Bush Plan Could Imperil Tax Write-Off for New York

As the Bush administration looks to revamp the tax code, New York officials say they are particularly worried about one idea being considered: eliminating the federal deduction for state and local taxes....

The change would affect about 3.2 million households in New York, three-quarters of which are middle- and low-income, tax records indicate.

".... if they take this route they can expect a serious fight" [said] Senator Charles E. Schumer....

"We'll fight this to the death," said Representative Charles B. Rangel of New York, the senior Democrat on the Ways and Means Committee...

"Gov. Mario Cuomo practically camped out in front of the White House on this issue last time," Senator Hillary Rodham Clinton said. "We did it before and we'll do it again."...

Around 2.5 million New York households with incomes under $100,000 take federal deductions for state and local taxes. On average, these households would lose the ability to deduct about $5,600 per year.

People in the highest income brackets would also shoulder a significant burden. About 219,000 households in the state with income of more than $200,000 take federal deductions for state and local taxes. These households would lose the ability to deduct about $67,400 on average per year...
Well, as long as "three-quarters" of the beneficiaries of this tax break are "middle- and low-income" liberal Democrats have a progressive duty to defend it, of course.

But let's take just a little closer peek at the numbers.

Taking a quick look at the IRS Statistics of Income web site, the most recent readily available numbers for this deduction as taken by New York taxpayers seem to be here (.xls). These are for returns processed in 2002, but there's no reason to believe the general picture should be much different for later years.

The Times says that three quarters of the New Yorkers who take this deduction are "middle- and- low income." On the IRS table that quite closely matches with taxpayers having up to $100,000 of adjusted gross income. Yes, about 75% of those who take this deduction report income under $100,000.

But what the Times story doesn't say is that these 75% represent only 30% of all taxpayers with income under $100,000 -- 70% of "middle- and low-income" taxpayers do not take this deduction.

In contrast, among taxpayers with over $100,000 income, 96% do take the deduction.

In addition, taxpayers with under $100,000 of income who do take the deduction take a much smaller deduction on average, $3,245, than those with more income, who deducted an average $25,300.

And taxpayers with income under $100,000 who took the deduction were in a lower average marginal tax bracket, about 25%, than those with income over $100,000, who had an average marginal rate near 33%. So the former's average deduction was worth proportionately less in cash.

After working through all the numbers we see a picture like this: all amounts claimed for this deduction by taxpayers with adjusted gross income under $100,000 divided over all the taxpayers with income in that range work out to an average cash value of about $246 each -- while all the deductions claimed by taxpayers with income over $100,000 divided by all taxpayers in that income range work out to a cash value of about $8,045 each.

Or to put it more simply -- in terms Democrats themselves typically use to bash Republican tax cuts -- 78% of the cash value of the tax deduction went to the 9.8% of highest-income taxpayers, those with incomes over $100,000.

And even this overstates tax savings from the deduction to those with low income, because there's a "standard deduction" of $10,000 for married couples and $5,000 for single persons that can be claimed even if one doesn't claim any itemized deductions -- such as the one for state and local income taxes.

This means that if a couple paid $10,050 in New York taxes and the deduction for state taxes was then revoked, the resulting reduction in their deductions needn't be $10,050 -- it could be as little as $50, because they'd take the standard deduction instead. But the standard deduction obviously has proportionately very much less value in saving repealed deductions for "the rich".

So one can quite safely say that more than 80% of the benefit of the deduction for state and local income taxes goes to only the highest-income 10% of taxpayers, at least in New York.

Now isn't this exactly the grounds upon which the Times and these very same named Democrats have bashed the Bush tax cuts for the last four years -- that they disproportionately favor the rich?

And isn't the implicit grounds for justifying the deduction that the Times throws up here -- that a lot of lower-income people benefit from it, as well as the rich -- the exact same argument that the Times editorialists and these same Democrats have mocked when made to justify the Bush tax cuts, by pointing out how little benefit went to lower-income people?

Yet this deduction that they are defending here clearly is even worse by this measure, even more favorable to the rich than the Bush cuts. The Bush cuts reduced everybody's tax bracket rate, and produced the highest-dollar savings for those with the highest income simply because they paid by far the most tax to begin with.

But the deduction for state and local taxes that the Democrats are willing to go to the mat to defend produced all of exactly $0 in tax savings for 70% of taxpayers with income under $100,000.

So if Bush really wants to repeal this regressive deduction, why does Hillary Rodham Clinton say she will "camp out in front of the White House" to save it, and why does Charles Rangel say he will fight repeal "to the death"?

The answer is found way, way, down at the very end of the story, in the third-from last sentence...
New York officials also worry that the change could lead taxpayers, newly burdened with the added expense of lost deductions, to demand lower local and state taxes.
Ah ... If the 30+% reimbursement received by the rich from the federal government for the cost of their state taxes disappears, they might become less happy about paying so much in state taxes, or expect greater value received from government in return, or might even leave the state altogether and take their taxable incomes with them.

As the final two sentences put it:

For some, that is just the point. "If you believe, as I do, that the state and local deductions encourage higher spending in states," said Bruce Bartlett, a domestic policy adviser to Ronald Reagan and a treasury official for the first President Bush, "then abolishing the deduction will help bring this spending down and will also cause people to demand lower taxation."
And clearly, if you are a Democrat or the New York Times, and you face a choice of that or of giving a big tax break to the rich, you know where your priorities lie!

Judge Posner, say hello to Reverend Malthus...

... and say goodbye to any chance for that Supreme Court nomination.

Richard Posner, judge (until recently chief judge) of the Seventh Circuit Court of Appeals, leader in the field of law-and-economics, and prolific contributor to discussion on many subjects of public interest, writes on the Becker-Posner blog:

This is my response to the Becker posting on "Disease, Population, and "Wellbeing."...

Becker's posting ... does suggest that HIV-AIDS is a worthy object of "international assistance from philanthropic and other groups."

I disagree on two grounds. First, I do not think that foreign aid is a good use of public or private money. All the problems that foreign aid seeks to alleviate are within the power of the recipient countries to solve if they adopt sensible policies...

Second, I am not as optimistic as Becker is about the positive benefits of increased population in poor countries... on balance HIV-AIDS may, as argued in a recent paper by Alwyn Young,
"The Gift of the Dying" (.pdf), increase per capita incomes in poor countries by causing wage rates to rise, since the epidemic has reduced the supply of labor...
Oh, I do believe that's not politically sensitive enough to curry higher appointment. "The Gift of Dying"?

Now, have I taken words out of context here and edited in ellipses to make them read more starkly than what was actually written? Perhaps I have... But what will those politicians do?

Not that there was ever any chance judge Posner would be appointed to join the Supremes in any event, what with the paper trail as wide as an eight-lane highway that he's left behind him.

Why, he's even written that polygamy not only does not exploit women but actually benefits them -- and serves to "promote economic equality" and the "political stability" of society too.* The cad!

How does he claim this? Well, if several women voluntarily decide to become the wives of one man, it must benefit them compared to the alternatives available to them or they wouldn't voluntarily do it. Which is easy enough to visualize if the man is Warren Buffett or Bill Gates. And splitting up the wealthy man's estate among several wives and all their numerous progeny will break up that estate a lot faster than, say, the estate tax will, thus fostering economic equality.

So with polygamy the winners are the greater number of individual women who choose to marry rich, women in general since they all gain a larger number of potential mates to choose from, the rich men who happily take on more than one mate, and the proponents of economic equality.

Who loses? Well, if the male/female ratio in the population is near 50/50 then after the rich males take multiple wives there will be too few women left to go around for all the other men. So low-status males will end up without a mate, and lose.

It follows that laws against polygamy were not enacted to protect women against exploitation, but rather at the cost of women as part of a deal among men in which the high-status males (who can afford mistresses anyhow) agreed to give up the right to have more than one wife in order to pacify the low-status males who exist in larger numbers, and often with more violent tendencies.

As such laws generally were enacted long before women got the vote, that makes perfect sense. Why would men vote altruistically to stop exploiting women?

Now, have I taken the good judge's words and ideas somewhat out of context here, possibly conveying a not fully accurate impression of them? Perhaps I have...

But is anyone going to send before a Senate confirmation committee a nominee who's going to face questions along the lines of, "You believe polygamy is good for women?", and a hundred others like it that would be pulled from that eight-lane paper trail?

I don't think so, which is why judge Posner will never be a candidate to become Justice Posner. Which is too bad, if you ask me. I'd love to see him before that committee. It would be great fun.

* The Economics of Justice, pp. 164-168

Saturday, January 01, 2005

Happy New Year

How I spent my New Year's eve.

Here's hoping yours was better -- and that your whole year will be too.