Archive for September, 2006

Condoleezza Rice takes the long view–maybe too long

Published
by
Steve Darden
on 9/30/2006
in Foreign Policy
. 0 Comments

Bret Stephens interviews Condi Rice at the Wall Street Journal:

…The conversation ranges from Bolivian coca to Iranian IEDs to administration leaks. Some of what she says is bland, some of it bunk, some of it smart and some of it revealing. It all takes shape in sentences that flow one from the other, paragraphs that maintain their discipline and logic, arguments that never lose sight of their destination, even when they digress. Ms. Rice is nothing if not a pleasure to listen to, which may explain why even critics who say she’s become too much a creature of the State Department would love to see her name on the Republican ticket in 2008.

… “I don’t think that this is a battle, if you will, or a struggle that’s going to be won on George W. Bush’s watch,” she says of the war on terror. Maybe this accounts for her sang-froid–at times seeming to border on emotional detachment–in the face of all the reversals in Baghdad, Beirut, Cairo and Ramallah: She chooses to read the present as if it were already the past.

Is US debt normal?

Published
by
Steve Darden
on 9/30/2006
in Economics
. 0 Comments

Cea Images Lazear20060928 5Congressional testimony by Council on Economic Advisors chair Eddie Lazear included this chart of the ratio of publicly held debt to GDP. This makes the point very concisely that economic growth is the key parameter. Here’s a test we should give to every elected representative — as Steve Conover puts it:

The three different ways to fix the so-called problem of deficits and debt are: 1. Increase tax rates., 2. Cut spending. or 3. ______________.

I’m sure you didn’t have to think very long to say “Grow the economy:”

…That’s the choice we rarely if ever hear about, especially during political campaigns. [It’s more accurate to say “grow the economy at least as fast as the debt grows”—but political campaigns rely on sound bites and bumpersticker-length slogans, and we’ll be lucky to see the three-word version in anyone’s talking points any time soon, let alone the fully-qualified version.]

“Growing the economy” means “creating more and better jobs that yield higher and higher pay.” Growth is the third way to “fix” deficits and debt, and it’s a much better fix than spending cuts or tax rate hikes, for a number of reasons. “Fiscal responsibility”—a term nobody takes the time to define today—could at long last take on a very precise definition that would force both sides to bring economic growth into the debate:

Fiscal responsibility - The fiscal budget which results in no increase and no decrease in the ratio of debt to Gross Domestic Product.

Nonetheless, growth remains the well-kept secret. Republicans mention it only rarely, usually opting instead to talk about spending cuts. Democrats almost never mention growth; they’d rather focus on tax hikes for the undefined “rich” (…don’t tax you, don’t tax me, tax the guy behind that tree). Just listen to the speeches; “growth” is barely in anyone’s vocabulary.

The above chart stops at 2012, before the trainwreck of entitlements.

Amaranth blows up, markets quiet

Published
by
Steve Darden
on 9/30/2006
in Economics
. 0 Comments

Brad deLong via Dan Drezner:

Just after New York Fed President Tim Geithner gives a speech about systemic risk and hedge funds, Amaranth blows up following a trading strategy that either had no method at all to it or was a failed attempt to corner next spring’s natural gas market.

Yet there is not a sign of disturbance to the markets. Amaranth’s investors have lost what is now said to be $6 billion. Some other people have the $6 billion–if they can, in turn, unwind their positions. But the system cruises on with no worries about liquidity or solvency and no changes in risk premiums.

Reassuring, I think.

Let the journey begin

Published
by
Steve Darden
on 9/30/2006
in Technology
. 0 Comments

Charles sent us this link to a very cool animation of what you get for your US$200,000 ticket on Virgin Galactic’s Space Two. There does not seem to be any TSA airport security!

Pennies cost US economy $1 Billion

Published
by
Steve Darden
on 9/30/2006
in Economics
. 0 Comments

One of the surprises we get whenever we visit the US is that pennies are still in circulation [pennies went with the way of the Dodo long ago in NZ and Australia]. I’ve often wondered what the cost to the economy is. Greg Mankiw explains:

In today’s Washington Post, Sebastian Mallaby says we should get rid of the penny (I agree), and he estimates the value of this long-overdue reform:

the National Association of Convenience Stores and the Walgreens drugstore chain have estimated that handling pennies adds 2 to 2.5 seconds per cash transaction. Assume that the average citizen makes one such transaction every day, and so wastes (to be conservative) 730 seconds a year. The median worker earns just over $36,000 a year, or about 0.5 cents per second, so futzing with pennies costs him $3.65 annually.

Multiply that last figure by the number of Americans, and you find that getting rid of the penny would free up economic resources valued at about $1 billion a year.

Bush manipulates gasoline prices?

Published
by
Steve Darden
on 9/30/2006
in Economics
. 0 Comments

This should be unbelievable:

According to a new Gallup poll, 42 percent of respondents agreed with the statement that the Bush administration “deliberately manipulated the price of gasoline so that it would decrease before this fall’s elections.”…Almost two-thirds of those who suspect President Bush intervened to bring down energy prices before Election Day are registered Democrats, according to Gallup.

Unfortunately, it’s not. One important contributor is the cluelessness of journalists on economics and statistics. Even a fairly well-educated voter, untrained in economics, is saturated with so much nonsense in the media every day that it is asking a lot to expect them to understand how a market economy really works.

Education Arbitrage

Published
by
Steve Darden
on 9/30/2006
in Education and Globalization
. 0 Comments

From Chicago Boyz:

I think this is the coolest thing I’ve seen to hit the slow as morass world of education. Jonathan coined the phrase in response: “education arbitrage.” What a fantastic idea.

I agree - unlimited tutoring hours from an experienced Indian teacher for $100/month. Another example of globalization making life better for the not-rich. I can’t wait to see the teachers’ unions position on this one. Definitely read the whole thing.

Bush tax cuts: top 1% gets the least benefit

Published
by
Steve Darden
on 9/30/2006
in Economics and Media
. 0 Comments

From 2000 to 2004, the average tax rate for all taxpayers fell from 15.3% to 12.1%, representing a 21% tax cut. The tax rate of the richest 1% fell from 27.5% to 23.5%, a 15% tax cut. For the bottom 50%, the tax rate fell from 4.6% to 3%, a 35% tax cut. As a result of these changes, the top 1% paid a larger share of the tax burden in 2004 than it did four years earlier, and the bottom 50 percent paid a smaller share.

The above is how Greg Mankiw explains the impact of the Bush tax cuts. But that’s not how Wall Street Journal reporter Greg Ip framed the data:

The data show that the average tax rate for all taxpayers was 12.1% [in 2004], up slightly from 11.9% in 2003 but down from 15.3% in 2000, due in part to the Bush tax cuts. Rates fell most for those at the top. The tax rate of the richest 1% fell to 23.5% from 24.3% in 2003 and 27.5% in 2000. For the bottom 50%, the 2004 tax rate was 3%, unchanged from 2003 and down from 4.6% in 2000.

That’s just another reminder that the WSJ has a center-right editorial board, but a very left-of-center newsroom.

Which interrogation techniques for which terrorists?

Published
by
Steve Darden
on 9/29/2006
in CIA and Counter Terrorism
. 0 Comments

“Depending on who interrogates him and where, several Al Qaeda operations in the planning, preparation, and execution may be disrupted,” says Rohan Gunaratna, an Al Qaeda expert at St. Andrews University in Scotland. “As head of the military committee of Al Qaeda, he knows all the key regional leaders and assets … in at least 98 countries.”

“This arrest is likely to have profound repercussions on Al Qaeda, and perhaps even on bin Laden and his continued ability to avoid apprehension,” says Bruce Hoffman, an expert on terror at the Rand Corp. “Mohammed has been at the vortex of every major operation going back a decade - from the first bombing of the World Trade Center to 9/11 to the most recent incidents.”

The above quotations are from March 3, 2003, immediately after the capture of Khalid Sheik Mohammed. As summarized in the Christian Science Monitor:

Nabbed with two compatriots in a joint FBI-Pakistani sting, he would know virtually every operation in the planning stages - including those in the US.

Rohan Gunaratna and Bruce Hoffman are two of the most respected academics in the counter terrorism field. Their statements on the critical importance of a successful interrogation of Khalid Sheikh Mohammed are as succinct as I can image. Did Senator John McCain go on the today show in March 2003 to say “yes, it would be nice to learn what he knows, but only if you don’t use waterboarding?”

Of course not. But on “Today,” September 22, 2006, on the topic of interrogation legislation, Senator McCain said “there will be no such thing as waterboarding…You will never see that again. We stood up and said that cannot be done.”

Three years after the KSM capture, and after five years of preemption of another major homeland attack, elites and politicos seem to have completely forgotten what the stakes are. Fortunately, the US president did not forget the stakes, and a successful interrogation of KSM yielded critical intelligence on Al Qaeda networks and planned operations.

Via Powerline, I found this essay by Vasko Kohlmayer, which argues the importance of the waterboarding interrogation technique in “appropriate cases”. While I’m no expert on interrogation, I think Kohlmayer makes a persuasive argument. Neither does Kohlmayer have any professional credentials in interrogation, but he reasons well — and he is a refugee/defector from Communist Czechoslovakia [at the age of 19, now a US citizen, based in the UK]. Kohlmayer is another example of a clear-thinking mind from the lands once under the thumb of real tyranny. I think of Václav Havel as representing the class of former Soviet subjects who are very clear on priorities.

Back to the lead question on appropriate interrogation techniques — applied specifically to waterboarding. For whom and when is it appropriate? For me, the case of Khalid Sheikh Mohammed is straightforward - yes. Where lies the lower bound of past or future non-cooperating detainees who should not be subjected to waterboarding? I’m not sure how to craft that definition — further I’m not comfortable that the sort of legalistic precision appropriate for domestic criminal legislation is the guidance that should be given to front line interrogators.

My take on waterboarding has been influenced by my readings on the SERE training provided to the US military [and intelligence operatives]. When the Sen. McCain concerns surfaced I couldn’t figure out why he believed that a rather obviously non-harmful technique that is taught/demonstrated to US citizens should not be used to obtain life-saving information from people whose mission is to kill as many US citizens as possible. For readers not familiar with SERE training (Survival, Evasion, Resistance and Escape), please see this earlier post based on three reports from US military pilots on how they undergo waterboarding interrogation as part of their training.

Does Sen. McCain really want to exempt terrorists from an effective interrogation technique that is experienced by thousands of CIA and US military trainees every year?

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Quote of the day…

Published
by
Steve Darden
on 9/29/2006
in Politics
. 0 Comments

“In Washington, truth is just another special interest, and one that is not particularly well financed.”

Thanks to Greg Mankiw for that one!

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