Friday, May 27, 2005

Hear hear

I'm with James. I'm tired of the cold. I'm tired of the rain. I'm tired of the high cost. I'm tired of having to run out at 8 in the morning and look for parking on street cleaning days, only to find none, and then having to decide whether to suck up the parking ticket (again) or feed a meter and run out at 10 to do it all over again.

Like the rest of New England, I'm moving South. And/or West.

Thursday, May 26, 2005

Deterrence, Game Theory, and the Geneva Conventions

Most laws exist to thwart people's natural inclinations, usually with the threat of punishment. You want something, but if you take it (ie. steal it) you will go to gaol.

The Geneva Conventions are not like that (as detailed in this excellent thread -- be sure to read through the comments). Firstly, it is not like that because there is no enforcement mechanism beyond the parties in conflict. Groups like the International whatever Court are not an enforcement mechanism because they have no coercive power. The Geneva Conventions are not like a Law because there is no police.

Instead, the Geneva Conventions are like a game theory rule set, designed to lay down mutually beneficial parameters for combat, along with escalation threats to act as the deterrent. If you are not a Geneva Convention signatory, your opponent is not bound by the rules either. If you are a signatory but break the rules, your opponent can break the rules as well. This gives every party and incentive to 1) become a signatory and 2) play by the rules. The alternative (ie. the Conventions always apply) while seeming stronger actually undermine them by reducing the incentive to sign-up in the first place.

Moreover, it's worth realizing that the Conventions are playing the "protect civilians" game. It does this by endangering combatants who endanger civilians by hiding amongst them. Civilians are protected under the Conventions. Soldiers are protected under the Conventions (under POW status). Fighters who hide amongst civilians (by not wearing uniforms, by not bearing arms openly, etc.) are "unlawful combatants" and so are not covered by Geneva Conventions. These rules recognize that 1) fighters will fight, 2) civilians will accidentally be killed, and 3) it is good to try and limit the number of accidental civilian deaths.

Again, the incentives are set appropriately, and it is up to combatants to decide whether the tactical advantage offered by hiding amongst civilians is worth the disadvantage of losing POW protections. But extending POW protections to unlawful combatants undermines the civilian protections upheld by the Geneva Conventions by reducing the deterrent for fighters to hide amongst civilians.

Wednesday, May 25, 2005

Deficits and housing bubbles

I think it's pretty clear to folks that at least parts of the US are in a housing bubble. NY, CT, MA, CA and some other coastal states have experienced dramatic run-ups in selling prices while rents remain stagnant or in decline. This is a bubble and it will correct.

Part of the reason for the housing bubble is low interest rates, but just because housing prices are too high is not to say that interest rates are too low. Some folks say that interest rates are too low because Asian banks (including China) are running current account deficits and trade surpluses with the US (i.e. they are lending the US money at discount interest rates so the US can buy Chinese goods).

Since these loans contain (some) free money, the rational thing for the US to do is to 1) accept the money, and 2) use it to buy stuff. This means running current account surpluses and trade deficits (which it is). It seems that some of this free money is being squandered by bidding up real estate prices. So even though people have more money in their pocket, in part they are no richer because they've just used that extra cash to make real estate more expensive for themselves and everyone else. If they buy other stuff, like TVs, that spending is probably efficient.

The US should also run fiscal deficits. If interest rates are too low, then anything that 1) takes advantages of low rates and 2) pushes them higher is a good thing, which means fiscal deficits. I don't for a moment think that the US is running deficits because it thinks rates are too low -- I think the recession of 2000, the War on Terror, and a unified Executive, House, and Senate have driven spending -- but it is true that the low cost of running deficits comes from low interest rates. Once rates rise, the deficit will become much more expensive and unsustainable.

Besides, the long run fiscal imbalances in the US come from entitlement programs, and Bush has made the Medicare entitlement worse and is trying to make the Social Security entitlement better.

But what would happen if the government stopped running fiscal deficits, as some people clamour for? I guess interest rates would be lower, which means the housing bubble would be even worse. Lower rates may also reduce the capital account surplus because lending to the US is no longer such a good deal. But since China is counting on exports to create jobs at home, it would continue running trade surpluses with the US, maintaining the capital account surplus.

So, I guess the key question is why do rates remain too low? One group says its because China is giving the US free money so they can import stuff. Another group says its because the US saves too little, driven partly by consumer spending but also by government spending. If China stopped giving the US free money, rates would increase. If the US government stopped running fiscal deficits, rates would decrease. If consumers stopped going deeply in hock to buy overpriced housing, rates may or may not decrease depending on whether the savings went to investment or were spent on non-overpriced goods.

Given that rates currently seem to be too low, I find it hard to understand why reigning in the fiscal deficit would be helpful (although I would like to see overall spending lower).

Monday, May 23, 2005

The interesting politics of social security

I was discussing a popular Democratic talking point with one of my buddies ("Bush's social security plan is bad because its cuts benefits for 70% of workers") which uncovered an interest fact about SS. The FICA tax cap (which kicks in at $90K) limits the amount rich people contribute to SS, but this also limits the amount that rich people take out of SS. Someone who makes $1M a year puts in, and gets out, exactly the same amount as someone who makes 10 times less. (See details here.) This means that you cannot soak the rich to save social security (at least, not in terms of benefit cuts) because the rich don't participate much in the system -- they don't put much in and they don't get much out. In essence, social security transfers money from young, middle class working people to old middle class working people. If you are going to cut benefits, you need to cut them for the middle class.


I am very excited about this BBQ series in Slate. When I was in KC, I visited BBQ joints religiously. I went to the Oklahoma Joes mentioned in this article, but the old gas station one, not the new strip mall one they mention. It was *great*.

Arthur Bryants was also fantastic, but I liked the brisket there more than anything else (and I tried everything). It was the best brisket I found in KC. (I went to the original Arthur Bryants closish to the airport).

Also highly recommended -- Fiorella Jack Stack's. Best burnt ends. Best lamb ribs(!)

There was another Jack Stack's out in KC that is quite different from the one above -- much less fancy. Their ribs were awesome.

Gates was the most authentic KC, but I'm not a big fan of their sauce. I went to at least 3 others, all of which were better than anyplace in Boston, but they did not beat out the ones I listed above. For BBQ in KC, Oklahoma, Arthurs, Jacks, and Jacks II are the quadfecta.

Friday, May 20, 2005

More Cramming Needed

I don't know if anyone who knows much about finance or economics bothers reading Slate's Daniel Gross, but it's worth doing just for the chuckle. His latest spectacle has him berating corporations for reneging on their pension obligations (by cutting benefits when the fund runs dry and/or the business hits the rocks) and then gets the obvious parallel between that and social security exactly wrong. Get this:
Indeed, the mother of all cram downs is shaping up this decade in Washington. For the past four years, as Americans have gone to work, played by the rules, and paid their taxes, Republicans in the White House and Congress have engineered a fiscal disaster. Every year, they take money that was supposed to be used for planning for retirement and spend it on other things. That's one of the reasons we have a crisis in Social Security. But like some of the private-sector corporate pension crises, this crisis is entirely discretionary. It's not that Congress and President Bush can't adequately fund Social Security. It's that they just don't want to. Instead, they want to cram us down.
This, of course, is exactly wrong. Social Security, and all pay-as-you-go pension plans, is a ponzi scheme and thus was a financial disaster from the very start. It may shock, shock Gross to learn that money going into social security was spent from the very start because social security is not a trust fund, has no trust fund, never had a trust fund, it's a pay-as-you-go system that taxes current workers to pay current retirees.

The crises in social security will come when retirees start to dramatically out number workers, resulting a budget shortfall that will require some combination of benefit cuts, higher taxes, lower spending, or borrowing. The fact that people are aging also has nothing to do with the Republicans, no matter what Gross may assert.

Bush's fix, of course, is to cut benefits to rich people. This is a cunning plan because the only thing Democrats like more than taking from rich people is giving them less. The best argument I've heard for why this is a bad idea is summed up by Berkeley dweller Brad DeLong, and it's lame:
by late in this century the odds are that—at least for the upper middle class—the standard Social Security check would be zero. Social Security would no longer be a universal program: It would be a program in which the half of America that is richer and more powerful and more likely to vote sees large chunks of its money going in and nothing coming out.
Of course, it's hard to see how to avoid this without cutting benefit for poor people or just taxing the bejeesus out of anyone who dares try to work for a living. Remember, the alternative plan of raising the social security tax cap also turns it into a program where the rich see themselves getting taxed a lot in return for practically nothing, unless their benefits also increase when the cap is lifted (pay more in, get more out) in which case there is no savings. A combination of dropping the cap but not raising the benefits leads to exactly the same problem Brad described--rich voters see their money being taken and not being given very much back.

I find it funny that the same people who strain to take every cent of Paris Hilton's money now scream bloody murder when someone suggests giving her less government aid in 40 years when she retires. [I don't want to pick on Paris, but for some reason she seems to be the current embodiment of all that is unearned and unjust in the wealth allocation arena, even though she probably works harder them most other trust fund babies, not that that's a particularly high bar to clear.]

Thursday, May 19, 2005

Rock and a hard place

My struggle with the importance of the US trade deficit (and by extension current account deficit) continues. The Economist has a good article outlining these deficits, interest rates, and the role of the yuan:
The political logic of [US and EU] tariffs is clear; the reasons for pressuring China to revalue, less so. China’s currency peg, at around 8.28 to the dollar, is widely believed to be keeping the yuan undervalued by 15-40%, making Chinese exports artificially cheap. But it also subsidises a great deal of America’s profligate spending. In order to maintain the peg, China is forced to buy loads of dollars, which are then dumped into US Treasury bonds, financing America’s hefty deficits. A sudden decline in Chinese demand for Treasuries would raise America’s borrowing costs, curbing Congress’s ability to dole out pork to constituents. Some economists fear that this would push interest rates up sharply enough to cause a sharp contraction in the debt markets (including the mortgages that are fuelling America’s housing boom) and the economy.
But the dollar is too strong, esp compared to the yuan. It should fall. Similarly, US interest rates should go up, and the real estate bubble should pop. All of these "negative adjustments" outlined by the Economist are neccessary adjustments that will happen sooner or later. If it happens sooner and more gradually, the negative shocks to the economy will be lower, but none of these consequences are negative in my book.

The Chinese POV is not so sanguine:
Either way, revaluation looks tricky for the Chinese government. It believes that for the sake of political and social stability, it needs 15m-20m new jobs a year. Increases at that level will be enough to absorb population growth, plus displaced workers from the agricultural sector and China’s ailing state-owned firms. And the export sector is seen as a crucial vehicle of job creation.

But this is not the only reason that Chinese politicians are reluctant to revalue. By some estimates, as much as three-quarters of China’s foreign-currency reserves are held in dollars; if the central bank allows the yuan to rise against the dollar, it will also in effect be allowing the value of its reserves to depreciate. Moreover, if slowing the flood of dollars that China’s central bank is pouring into American debt markets causes those markets—and the American economy—to contract, China’s exporting firms will have worse problems than a more expensive yuan. And problems for those firms could translate into big trouble for China’s frail banking system.
Firstly, the article points out that the Chinese economy is too reliant on foriegn consumption. The cure to this is to increase domestic consumption, which requires less investment and less saving at home. Moreover, if the Chinese central bank has so many dollars that they fear a devaluation, pumping up the dollar is not going to meet that goal long term because the US is simply going to inflate its way out of the debt its piled up. The long term forecast for both inflation and interest rates is higher than either of those are today. Fundamentally, the Chinese banking system does a poor job of disciplining investment, consumption, and savings, which is the point of a bank.

So yeah, the US risks a contraction as rates rise, real estate falls, and the economy finds something new to bubble up, the Chinese seem to risk violent revolution, which is much worse. Therefore, because of domestic weakness, the Chinese are forced to gift money to the US. Good for the US, bad for China. It is much cheaper for American borrowers to indulge themselves than it is for Chinese lenders. Expect actions to follow from incentives.

Wednesday, May 18, 2005

NYTimes asks money for its op-eds

Blogs have proven how cheap punditry is, and how lousy the quality of our old, newspaper punditry was. Most op-ed writers don't know much about their subject, and it's hard to be good week after week. Individual blogs may vary in quality, but on any given day someone will have written something thoughtful on a topic they are expert in, and their efforts will 1) be widely linked to and 2) better than anything ever seen on the pages of a newspaper.

So, just as the quantity and quality of the competition has leaped, the Times increases the price for their product by putting it behind a subscription wall.

I guess they need to do something as their subscription rates keep falling.

IBM Blogs

IBM has launched a corporate-wide blogging initiative. They did this, I think, because someone thought it was a good idea. Here are their guidelines
- Know and follow IBM's Business Conduct Guidelines.
- Blogs, wikis and other forms of online discourse are individual interactions, not corporate communications. IBMers are personally responsible for their posts. Be mindful that what you write will be public for a long time—protect your privacy.
- Identify yourself – name and, when relevant, role at IBM – when you blog about IBM or IBM-related matters. And write in the first person. You must make it clear that you are speaking for yourself and not on behalf of IBM.
- If you publish a blog or post to a blog and it has something to do with work you do or subjects associated with IBM, use a disclaimer such as this: “The postings on this site are my own and don’t necessarily represent IBM’s positions, strategies or opinions.”
- Respect copyright, fair use and financial disclosure laws.
- Don’t provide IBM’s or another’s confidential or other proprietary information.
- Don't cite or reference clients, partners or suppliers without their approval.
- Respect your audience. Don't use ethnic slurs, personal insults, obscenity, etc., and show proper consideration for others' privacy and for topics that may be considered objectionable or inflammatory – such as politics and religion.
- Find out who else is blogging on the topic, and cite them.
- Don't pick fights, be the first to correct your own mistakes, and don't alter previous posts without indicating that you have done so.
- Try to add value. Provide worthwhile information and perspective.

Tuesday, May 17, 2005

Interstate Commerce done right

The Supreme Court finally interprets the interstate commerce clause correctly and declares it illegal for states to prohibit only out-of-state vineyards to sell directly to consumers. States will now have to either ban all wine sales, or allow all wine sales, but cannot protect local distributors and producers.

Monday, May 16, 2005

The Next Big Thing

The Next Big Thing on the internet will be (is) personal project and productivity management. It will span from individual level productivity, to light-weight project management, although the projects themselves can get quite large. The key elements to the system are:
- Standardized workflow procedures
- Internet enabled synchronization
- New tools, both online and offline
- Common vocabulary

The core to the work flow itself is basically what's is outlined in Mark Hurst's Good Easy or David Allen's Getting Things Done. Concerns become projects, projects are broken down into tasks, tasks are distributed to where they will reveal themselves to you at the most appropriate moment.

Synchronization will tie up things like address books, to-do lists, reminders etc. between multiple computers and multiple users. Mac OS X new Tiger features, combined with a .Mac account, demonstrate how this sharing and synchronizing is is being implemented. Since one key to the GTD system is centralizing tasks, it's important that I can update my calendar from anywhere.

New online tools to facilitate this are encapsulated in the wonderful 37Signals web-applications Basecamp, Backpack, and Ta-da list. Simple, light-weight, easy to integrate in GTD. (That's Getting Things Done -- see above).

43Folders is a GTD fanatic, and sites like this will form a common vocabulary that will be useful and so will spread. I don't now if everyone will one day know what "tickler file", "GTD", "Hipster PDA" will mean, but I do think that people will mail things to themselves in the future, have names for systems of project management, and will migrate to-do lists off PDAs and onto paper (and formalize the paper systems so they integrate better with new, electronic tools).

But hey -- we all hate project management, right? And it doesn't work, so why should this time be different? This is why:
1) Old bloated project management was hard to use and complex. Look at MSFT Project. Look at whatever Canadian PM company IBM bought (terrible tool!) This made people not want to use it. New project management is light, and light PM can deliver 90% of the benefits of complex PM with 1% of the effort.
2) PM is useful. Lowering the cost increases the net value so expect it to spread.
3) Blogging counts as a Next Big Thing, although in any reasonable sense it remains totally marginal. Yes yes yes, newspaper people read it, but who reads newspapers anymore?
4) We have to do something to claw some productivity back from spending all our time reading (and writing) blogs.

Quote of the day

"Then Suharto looked at [James] Wolfensohn. "You know, what you regard as corruption in your part of the world, we regard as family values."

From Sebastian Mallaby's The World''s Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations. (via Marginal Revolution)

But this is, of course, exactly right. Corruption is merely putting family and friends above strangers. People who care about the benefit of strangers and refuse to help their friends and family are (rightly) considered odd. The rise of institutions which delegitimise the natural, humane impulses of nepotism and favoritism is not well understood.

Friday, May 13, 2005

imranWhat from where?

It's good to know exactly what the US imports, and where it comes from. Angrybear helpfully tabulates this for us. Key things to keep in mind:
1) The US doesn't import very much. The US economy is mostly closed, not because of high tarrifs, but because most of the things ppl consume (healthcare, housing, etc.) is produced locally.
2) The US imports more from Canada than from China.
3) The US imports from from Mexico than from Japan.
4) The US imports more from Canada than from France, Germany, the UK, or really any single European country. If all 13 or 14 EU countries are added together, they sum to slightly more than the US imports from Canada and about twice what the US imports from Mexico.

Thursday, May 12, 2005

Irrational exuberance

Next to this CNN article on a hot US housing market getting hotter, they have a little survey on what people think will happen to prices. It seems ~ 70% of respondents are expecting higher prices. They will be disappointed.

Tuesday, May 10, 2005

Update on marginal tax rates

winterspeak reader JK has a good follow-up post on my recent note on marginal taxes. He notes that the Times adulterated the original graph published with the report -- here's the original:

Note how the Time's adulterated copy left out the far left. The negative marginal income tax you see there is the earned income tax credit, a popular anti-poverty program that I beleive was introduced under Clinton and has been supported under Bush. EITC is a good program.

One unfortunate negative consequence is that people exiting extreme poverty, and losing their EITC eligibility, see their marginal tax rates go from -40% to +20%. This 60% increase is the highest increase in marginal tax rates in the entire tax system and it falls on those who are just exiting from poverty. Talk about disincentives! But taxes cannot be both progressive and not discourage work. This is why I think taxes are a terrible way to transfer wealth.

Update I was wrong about the EITC. Reader JT kindly corrects me:
The EITC long predates Clinton. It dates back to 1975, and became permanent in 1978. It was introduced by Sen. Russell Long (D-LA), and has strong bipartisan support. It was substantially increased in 1986, 1990, and 1993. (Brief overview here: ) You may be thinking of the last expansion when associating it with Clinton; it was also part of the 1986 and 1990 tax changes.

It's much more popular with Republicans than other antipoverty because it gives money to people who are working, instead of to people who aren't, and thus encourages work.

Schneier on Real ID

Wisconsin Rep. Sensenbrenner wants to introduce a National ID in the US as an anti-immigration measure (it's goal is to stop states from giving illegal alients driving licenses). Bruce Schneier makes the idiocy of this, from a security perspective, clear.

Muslim Integration

Just as the key goal of the War on Terror is to integrate the autocratic Muslim world into the broader global democratic community, it will be a key goal in Europe to integrate its unassimilated Muslim minorities into the broader liberal community.

Monday, May 09, 2005

Criminal Camera

Chicago has installed 30 cameras across the city to record, prosecute, and deter crime. This article makes the system sound like the type of super-spy system seen in movies, but having worked with enough large, networked databases it's probably *much* more kludgey than described. David Brin has written at length about this sort of ubiquitous surveillance in "The Transparent Society" and its interesting to see it get rolled out in the US. Brin would like to see the cameras go up, but then make the feeds open to everyone via a browser. That way the police and civilians can use the camera to track each other.

I wonder if recorded surveillance footage can be called up for a trial on police brutality. Having the incident recorded will help secure a conviction in those cases, as well as making them rarer.

Sunday, May 08, 2005

When is discrimination OK?

It is difficult to answer when discrimination is and is not OK. You are stuck between "never", "always", and "when I feel like it". Unsurprisingly, and perhaps sensibly, the courts have gone for the "when we feel like it" option which enables them to do the politically appropriate and personally comfortable thing.

The cases in point are "Boy Scouts of America vs Dale", which says that the Scouts can discriminate against gays, and the Law Schools (what, universities again!) vs the Solomon Amendment, which is arguing whether or not the Federal Government can withhold funds from Law Schools which discriminate against the military by not allowing their recruiters on campus.

The problem is that those who do not want the Scouts to be able to discriminate would like to see Law Schools discriminate because of their idealogical biases. And vica versa. The result is likely to be a tangle of legal reasoning, all of which could more simply and accurately be boiled down to "when I feel like it".

Personally, I take the "always" discriminate side. If the Scouts want to discriminate against gay people they should be allowed to do so -- and suffer the approbriam that such action would engender. Moreover if Law Schools want to deny the military, that's fine, but the Government is likewise free to distribute Federal funds as it pleases. It's not like Law Schools do not have other sources of money, and it's not like lawyers who want to join the military can't pick up a phone and call recruiters directly.


Grrr. Giacomo won 50-1. My outside bets (Closing Argument, Don't Get Mad) also did well. My top pick -- second to last!

Friday, May 06, 2005

Great Picture

I think this is a *great* picture. I actually did not think marginal taxes looked like this, I thought that EITC and other means tested programs meant that people going from $20K->$30k actually faced the highest marginal taxes in the country. I'll need to read more details.

Angry Angry Bear

I may be wrong in reading a sarcastic and angry tone in Angry Bear's post on social security, but he does call himself Angry Bear after all. After quoting Bush explain his plan, Angry Bear says
Granny is too smart to think her checks will not be mailed. What makes granny upset is how the White House is flat out lying to her smart granddaughter who is working hard in college. Granny might even be smart enough to know that with no reforms, the kid’s Social Security checks will be only 80% of what is currently promised but that beats the 50% of what is currently promised that would come from the Pozen plan. Let’s also imagine that the kid’s parents are both 45 years sold working hard at jobs paying $45 a hour. The parents have paid a lot into the Trust Fund for 20 years and will continue to pay a lot into it over the next 20 years, but would receive a modest benefit cut relative to what is currently promised if the Pozen plan goes into effect.
But this is true. Grandma is OK. Mom and Dad are less OK. Daughter is toast. Angry Bear also sounds incredulous when he says
So if I own a Treasury bond, that is a real asset but it is not a real asset when a Trust Fund owns a Treasury bond.
But again, this is true. When you hold a treasury bond it is your money. When the government holds a treasury bond for you it is their money, and you may or may not get something depending on various political decisions.

At its heart, the muddle over social security reflects the muddle over other, basic questions, such as "should people save for themselves or should the government save for them", "should the government take money from rich people and give it to the poor or not? If they should, how much?". As social security stands, it saves for no one, and takes from both rich and poor young people and gives to rich old people.

Thursday, May 05, 2005

More housing bubble

Angry Bear notes that construction spending is higher as the housing bubble continues. But of course housing spending is higher, the demand for owning houses continues to grow (as evidences in higher prices) and the natural response to increased demand is increased supply. Until prices begin to flatten and fall, construction will continue to expand.

The common wisdom is that rising interest rates will choke off the bubble. But bubbles, and their popping, are very unpredictable -- what caused the sudden cooling in the UK?

Update Of course I don't think anyone could have predicted that the interest rate decreases after the tech bubble popping in 2000 would have resulted in the housing bubble of '05. This argument (that the US is becoming more specialized in housing) is wrong in that the US is such a diversified economy that the current housing boom has effectively no impact on the make-up of the economy, but correct in that this seems to be where all the extra money is going. The big macro question right now is "where is inflation?"

I don't think that relying on export/import for growth in the US makes any sense -- the American economy is far too closed (only 10% of GDP comes from trade) and its trading partners (Canada and Mexico) are too correlated and integrated with the American economy to really be any kind of growth engine.

Active Media

An excellent post by Wretchard of the Belmont Club. Worth reading.

Wednesday, May 04, 2005

Getting public airways wrong

There is nothing like lacking political influence to make one a fan of smaller government. Here is a piece on Slate that says government support of broadcasting should be scaled back because the government is Republican and not Democrat. The article notes that while (currently) worthy public radio and television is appropriately poor in (filthy) cash, it is rich in public airwaves, and if it could sell some of those public airwaves then it would be rich and could continue to do its good work.

The issue though is that those airwaves are "public", which means they "belong to the people", aka the current administration. Given that the US is struggling with budget deficits, any privatization of public airwaves ought to be through an auction with the money raised flowing back to general revenue. I understand why the Slate writer wants a large transfer of money from public coffers to his favorite TV and radio stations. I don't understand why he thinks that's in the public good.

Tuesday, May 03, 2005

Brad, right and wrong

Brad gives his arguments on why a Kerry presidency would be more fiscally responsible than a Bush presidency:
1)Bush is bad
2)Kerry is responsible about budget discipline
3)Kerry's team is really smart, just like Clinton's.
I like Clinton's economic team a lot, and was very impressed with Bob Rubin when I met him (certainly compared to that Bush joker who used to run Alcoa and when to Africa with Bono). But I will note that the US's long term budget situation is in jeapardy because of entitlement programs and it is Bush that wants to trim those entitlements by making them more progressive. Does Brad praise Bush for progress on this front?

Update Brad has a piece on the same topic in Slate. Here, he argues that Bush is bad to make social security solvent by means-testing it, because means-tested programs are unpopular. But as things stand, social security is "means-tested" for age, because it benefits old people at the cost of young people. If Bush truly has partisan Democrats saying "let's help old people and hurt young people instead of helping poor people and hurting rich people", then politically he's done very well.

Just to be clear, I am very open to any Democrat plan that makes social security solvent. They just haven't done this yet. I am even more open to a Democrat plan that fixes the incentive problem (like private accounts do). Social Security is not a partisan thing, it effects all Americans, and I think all Americans want it fixed. If Pozen does little more than goad the Democrats to coming up with good alternatives, I think he's contributed to the debate.

IOUs for dummies

Mindless cannot understand why people do not understand that Government money is fungible. Mindless' point is that the overall solvency of the government as a whole (which is what matters, since it is the government as a whole that issues debt) is the sum of all its different parts, and individual surpluses and deficits do not matter. The notion of a social security "trust fund" suggests that one part of the government can be kept solvent even if other parts of the government fall into ruin, and this is false. Moreover, this is false as a matter of accounting, not a matter of whether you can trust government, or whether government is accountable to voters, or whether democracy is a good idea or any of the other crazy notions raised in the comments thread.

I think it was smart for Bush to propose means tested social security benefits. It is amusing to see Democrats (publically) fight to give more money to rich people.