What Are You Going to Run ‘Em On? Tomato Soup?

I thought this scene from the 1940 Gable-Tracy-Colbert movie Boom Town might change some views about what people were thinking about oil 75 years ago.

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To Commemorate or Not to Commemorate?

With all of the fulmination about President Obama’s declining to attend the anniversary of the liberation of Auschwitz, I don’t think there’s enough consideration of why some of the countries whose heads of state will be in attendance are commemorating the event at all. After all, it was the Red Army that liberated Auschwitz. Putin has declined to attend because of his busy schedule. I can understand why Israel might want to commemorate the liberation.

However, Germany, France, Belgium, the Netherlands, and Italy (among others) all sent their own citizens to the death camps. Those murdered at Auschwitz were mostly Germans, Poles, and Russians. I know that the prevailing view in Europe is that “the Nazis” were responsible for the murders in death camps. Quite to the contrary I think that France and the Netherlands in particular eagerly sent their Jewish fellow citizens to die in them. I’m not sure why they would be commemorating the liberation. So that they don’t forget? They’ve already forgotten.

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Delenda Est Carthago

The Latin phrase that forms the title of this post is usually translated “Carthage must be destroyed”. That doesn’t really convey the force or conviction of the Latin phrase. According to Livy, Plutarch, and Pliny the Elder, in the 2nd century BC when Rome contended with Carthage for control of the Mediterranean (or, as the Romans humbly called it mare nostrum, “our sea”), Cato the Elder ended every speech with the phrase.

And, ultimately, Rome did destroy Carthage, completely and finally.

My point is that repeated rhetorical flourishes have power and meaning and should be taken seriously. Keep that in mind the next time you hear a report that some Iranian leader declared that Israel will be destroyed, presumably accompanied by the editorial disclaimer that he didn’t say that they would destroy it. The Romans didn’t say that they would destroy Carthage, either.

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Putting the “Fun” In Dysfunctional

That is one messed-up family.

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How Much Income Inequality Is Too Much?

There’s an interesting post by Robert Litan on the WSJ’s blog about a study that calls a few of the assumptions about income inequality in the United States into question:

How bad is it? Thomas Piketty, writing with economist Emmanuel Saez, has estimated that those in the bottom 90% of the income distribution received only 9% of the income gains between 1979 and 2007 (the year before the onset of the Great Recession).

But their estimate ignores government transfer payments, and it doesn’t take into account the aging of the population, among other things. When these adjustments are made, a much less pessimistic result emerges.

This is the finding of a wonky but remarkably detailed essay that deserves much more attention than it has received. Written by George Washington University research scholar Stephen Rose and published by the Information Technology & Innovation Foundation last month, the essay uses income data compiled by the Congressional Budget Office, which Mr. Rose argues is more accurate than the income data on which Mr. Piketty and Mr. Saez relied.

The better estimate, Mr. Rose suggests, is that the bottom 90% captured 42% to 47% of the income gains, depending on the definition of income and price deflator used. Yet Mr. Rose acknowledges that even his estimate indicates widening inequality. Furthermore, in Mr. Rose’s calculations, most of that gain is income gains by the “upper middle class,” or families in the 81st-to-90th percentile.

Also, see the bar chart at the top of the post. That’s what inspired the title of this post. What proportion of income growth should the highest quintile be capturing?

The bottom line seems to be:

  • The topmost income quintile has a lot more income than the lower four.
  • The topmost income quintile is capturing more of the increase in income than the bottom four are.
  • When you adjust the results for age and consider total income rather than just wage income, the results aren’t as skewed as you may have been lead to believe.

Now, I happen to be one of the hardy few who believe that the change in income equality in the United States is a consequence of policy rather than occurring despite it and, as seems likely at first glance, would respond to a change in policy. I don’t think the changes that are necessary are that we need more unions or that we need higher taxes. I think we need to make some adjustments to our trade, immigration, healthcare, and education policies. All of those have constituencies that are benefiting mightily from our present lousy policies so the headwinds are substantial.

Hat tip: RealClearPolicy

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Why I Don’t Think That Negotiating With Iran Is Worthwhile

There’s quite a bit of fulmination over the Obama Administration’s negotations with Iran, the Congress’s threats to tighten sanctions, and so on and I thought I’d repeat my own view. From one perspective it might be considered an Alfred E. Newman strategy.

Either Iran can be trusted to honor its commitments or it can’t. If it can, Iran has already promised not to develop nuclear weapons and we don’t need to negotiate anything with them. If they can’t and they do test a nuclear weapon, I think we should take it very, very seriously. Can an Iran that can’t be trusted be trusted to manage their nuclear weapons responsibly? At that point we would also have proof positive that negotiations with Iran is meaningless.

So, what, me worry?

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Partners

The editors of the Washington Post note that the president’s strategy of recruiting “partners” to achieve his foreign policy goals isn’t faring too well:

In devoting 250 of the 6,800 words of his State of the Union address to the fight against “violent extremism,” President Obama offered a boilerplate description of his policy. “Instead of sending large ground forces overseas,” he said, “we’re partnering with nations from South Asia to North Africa to deny safe haven to terrorists who threaten America.” As he spoke, his strategy was crumbling in a nation he failed to mention: Yemen, home to the branch of al-Qaeda that claimed credit for the recent attacks in France and has repeatedly attempted to strike the U.S. homeland.

No Arab country other than Iraq was willing to commit ground troops to oppose DAESH there. Despite the administration’s claims, to my eye most of the gains against DAESH in Iraq have been made by the Kurdish peshmerga, those have been fairly minor, and the role that the U. S. played is unknown and probably unknowable.

Iraq appears to have broken into three parts and there’s no way to know whether that condition is permanent or not. Whatever the case that partner is no longer what it once was. Libya is in chaos. Afghanistan is unable to support a military capable of defending its borders without substantial U. S. support and IMO the prospects for that support continuing long after we’ve removed our troops from the country are slim.

Now Yemen, where our drone strikes have frayed whatever partnership we’ve managed to cultivate there, is undergoing its own dramatic change. Some partners.

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The Four Feathers

Fareed Zakaria describes a four-part strategy for dealing with radical Islamist terrorism:

Over the past few decades, this radical Islamist ideology has been globalized. Initially fueled by Saudi money and Arab dissenters, imams and intellectuals, it has taken on a life of its own. Today it is the default ideology of anger, discontent and violent opposition for a small number of alienated young Muslim men around the world. Only Muslims, and particularly Arabs, can cure this cancer.

That does not leave the United States and the West helpless. Washington and its allies can support Muslim moderates, help their societies modernize and integrate those that do. But that’s for the long haul. Meanwhile, Washington and its allies must adopt a strategy that has four elements: intelligence, counterterrorism, integration and resilience (ICIR).

I’m in mild agreement with his prescription but I think he’s missing a number of elements. For one thing I believe we’ve got to adopt a much lower profile in the Arab world than we have for the last several decades, particularly a much lower military profile. We need to end Saudi support for the radical imams in the United States which will be a particularly hard nut to crack and undoubtedly provoke heated debate about freedom of religion, prejudice, and so on. There are a few other elements, mostly dealing with matters in the United States that we could control if we had the will to do it.

However, I take grave exception with one of his points:

The Paris attacks were barbaric, as were those in Ottawa, Sydney, London, Madrid and Fort Hood. But one way to gain perspective might be to keep in mind the numbers. According to the Global Terrorism Database, in the 12 years between Sept. 12, 2001, and the end of 2013, the number of Americans who died on U.S. soil due to terrorism was 42. (And six of those were from the gruesome attack on a Sikh temple in Wisconsin in 2012.) Meanwhile, in one year alone, 2011, the Centers for Disease Control and Prevention reports that 32,351 Americans died because of firearms. The number who died in traffic accidents was 33,783. So “keep calm and carry on” is more than a slogan to wear on a T-shirt.

The problem here is that people are not potatoes. They aren’t measured by the bushel but by the individual. There is no perspective to gain. If we were to place things in perspective perhaps we should consider that there are about the same number of traffic fatalities per year and the same number of homicides. There are far, far fewer killings of black men by police officers, the killing of just one provoked months of demonstrations and several days of riots and yet I didn’t hear Mr. Zakaria calling for perspective in that case.

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They’re At It Again

For sheer entertainment value you might want to read Jeffrey Snider’s scathing critique at RealClearMarkets of:

  • The European Central Bank
  • Swiss banks
  • European bankers, generally
  • American banks and bankers
  • Phil Gramm
  • Gramm-Leach-Bliley (the law that repealed Glass-Steagall)

His basic points are a) the Europeans are responsible for the boom and bust cycles we’ve experienced for the last 20 years and b) the financial economy is no substitute for the real economy, something with which I agree.

Here’s the conclusion of his post:

The end result of such highly destabilized systems is that they tend to consume themselves and fail. But central banks and economists operate under the assumption of discrete events unrelated by longer terms. In other words, the ECB somehow views the problem of today as of today rather than being seen, properly, as the practical outcome of many years of corrupting and artificial work. Indeed, these same people seem to believe that low interest rates, even as negative as they possibly can stretch, are somehow a positive factor for economic function when it is the opposite. Ultra-low interest rates are indicative of total economic disarray not “stimulus”, and the further they depress across global yield curves the further from true economic salvation we all travel. Time value is supposed to be meaningful, but the seeds of the ultimate obliteration of time value were sown in the late 1990’s concurrent to elected governments enthusiastically welcoming the first of the serial bubbles.

As far as the ECB’s decision to launch its own program of quantitative easing, I don’t think I can say it any better than Jeremy Warner at The Telegraph:

Belief that the fast devaluing euro will provide both a life-saving boost to European exports and a surge in free spending tourism is similarly just wishful thinking. External demand will not solve Europe’s economic ills, nor will a few more American tourists. And it’s most unlikely that more Germans will holiday in Greece, Spain and Italy this year simply because of the weak euro. They share the same currency these days, or did no one notice. This is rather the nature of the problem. The market-based adjustment mechanism that free-floating currencies provide has been lobotomised in Europe in the name of sovereign integration.
The trouble is that having decided on a common currency, Europe has failed to develop the collective approach to fiscal policy needed to make it work. Crisis has been almost deliberately courted in the hope of driving structural and fiscal reform, but it has only succeeded in giving voice to radical populists, from Greece’s Syriza to Spain’s Podemos. Not since the break up of Yugoslavia has Europe looked so dangerously unstable.
Into this quagmire stumbles the European Central Bank, with a belated copycat version of what’s already been tried in the US, Britain and Japan. There’s no one else to step up to the plate, so we can only wish Mr Draghi luck. He must surely know, however, that it scarcely amounts to a solution.

As long as Germans remain convinced that the reason for Germany’s prosperity is the hard work and thrift of Germans and the reason for Greece, Portugal, etc.’s economic woes is that they’re all lazy spendthrifts, a mainstay of German politics and economic thought, Europe’s economic problems will not be solved. It’s a problem we solved long ago so that New York State could use the same currency as Mississippi and it requires New Yorkers supporting Mississippi’s economy.

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Not Inexplicable At All

In Peter Suderman’s commentary at Reason.com on the HHS IG’s critique of the process that lead up to the flawed debut of Healthcare.gov, he characterizes the decision to let the contracts for the website on a “cost-reimbursement” basis as “inexplicable”. It’s not inexplicable at all. You’d need to be crazy to accept the contract on a fixed bid.

The basic problem was the policy team, i.e. the agency bureaucrats and regulators. The rules were being made on the fly. There was never a fixed scope for the work and, consequently, any fixed bid would have needed to be so sky-high that nobody in his right mind would have accepted it.

This just highlights the point I’ve made for years. The federal government procurement process makes it very difficult for it to manage IT projects reasonably and the loosey-goosey way the PPACA was written made it even harder.

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