The other day I watched a motion picture I have avoided watching for decades: Peeping Tom. I have avoided it largely because of its bad advance press and because I’m so crazy about so many others of Powell’s pictures, several of which are among my very favorite films.

Peeping Tom is a creepy little picture about a young focus puller, somebody who tends the camera when a movie is being shot, who, abused by his psychologist father becomes a scopophile (a word you probably only know if you’ve seen this movie or are a psychiatrist/psychologist dealing in abnormal psychology) and serial killer, literally killing with his camera. I won’t summarize the film for you. There are plenty of places you can find the plot summary.

Peeping Tom was released in 1960, just a few months before Alfred Hitchcock’s Psycho, and both critics and the public loathed it. It was pulled just a few weeks after it was released and more or less disappeared until it was resurrected by the movie’s most prominent fan, Martin Scorsese. It is said to have destroyed Powell’s career. He was only 55 when the film was released and should have been at the peak of his creative career. After PT he did a bit of television, directed one German picture and a couple of Australian pictures. It’s pretty clear that he was ostracized, blacklisted.

My question is why did this happen to Michael Powell on the basis of this film? It is no more distasteful than Psycho which enhanced Hitchcock’s reputation and career, if anything, possibly less so.

One frequently encountered explanation of the reaction to PT is that it draws the viewer into it and involves the viewer, enlisting the viewer as an accomplice as it were. Unlike Psycho’s sterile (but beautifully shot) television-style black and white it’s shot in that gorgeous, saturated British technicolor, the technicolor of Alexander Korda and lots of highbrow movies of the forties and fifties. It’s shot in the style of a movie with loving closeups, follows, and pans rather than in the three camera television style in which Psycho is shot.

The main character of the movie, played by Austrian actor Carl Boehm with just the tiniest hint of accent, is damnably sympathetic. We know why he does what he does, that it’s not his fault, and we’re rooting for him right to the very last shots. There is a path to sanity for him. Can he mend? Can he escape? Will he be caught? Will he live?

Boehm has the same soft, blond, angelic beauty of any number of young leading men at the time—Tab Hunter, Troy Donahue, even the young Robert Redford. That’s another similarly with Psycho. It’s hard to imagine it now but Tony Perkins was a teen idol in the 1950s, an intense, sensitive young actor somewhat in the fashion of James Dean without Dean’s panache. Perhaps that’s another quality that repelled the public.

Peeping Tom has a number of intriguing features beyond grand technicolor and its shooting and editing. Much of it takes place on a sound stage (including one of the murders in which, ironically the heroine of Powell’s The Red Shoes, Moira Shearer, is slain almost in a symbolic slaying of Powell’s earlier work) or in a film workroom, surrounded by film editing and processing equipment. With the over the shoulder camera work, the sound stage and workroom Powell is almost inviting you into his world, disquietingly so in a theme reminiscent of Rear Window, as if to say “There’s something not quite normal in spending your life peering through a viewfinder”. Or watching a screen for that matter.

BTW don’t miss Moira Shearer’s wonderful jazz dance sequence. She really was a mesmerizing dancer.

Also, too, there’s a highly appealing performance by a very young Anna Massey, daughter of Raymond.

With the exceptions of the opening and closing credits all of the music in PT is provided realistically in the the form of music taped or played on the radio.

In the end I’m mystified as to why Hitchcock prospered by his “ahead of its time” film while Powell was destroyed by his. The difference may have been in the characters of the two men and how the public and people in the industry felt about them.

Suggestion of the day. when the shuttle lands, everybody wear ape suits. Hat tip: Tigerhawk

I do not submit this as proof that President Obama’s policies are wrong but, rather, as evidence that business leaders at the very least believe that the uncertainty created by the “political climate” in which I would include both the White House and Congress is motivating them to undertake fewer new ventures than they otherwise might. From an interview with Las Vegas CEO Steve Wynn, who purportedly voted for Obama in 2008 (that his wife was an Obama supporter is a matter of record):

Well, here’s our problem. There are a host of opportunities for expansion in Las Vegas, a host of opportunities to create tens of thousands of jobs in Las Vegas. I know that I could do 10,000 more myself and according to the Chamber of Commerce and the Visitors Convention Bureau, if we hired 10,000 employees, it would create another 20,000 additional jobs for a grand total of 30,000. I believe in Las Vegas. I think its best days are ahead of it. But I’m afraid to do anything in the current political environment in the United States. You watch television and see what’s going on, on this debt ceiling issue. And what I consider to be a total lack of leadership from the President and nothing’s going to get fixed until the President himself steps up and wrangles both parties in Congress. But everybody is so political, so focused on holding their job for the next year that the discussion in Washington is nauseating. And I’m saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems — that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration. And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America. You bet. And until we change the tempo and the conversation from Washington, it’s not going to change. And those of us who have business opportunities and the capital to do it are going to sit in fear of the President. And a lot of people don’t want to say that. They’ll say, “Oh God, don’t be attacking Obama.” Well, this is Obama’s deal, and it’s Obama that’s responsible for this fear in America. The guy keeps making speeches about redistribution, and maybe we ought to do something to businesses that don’t invest or holding too much money. We haven’t heard that kind of talk except from pure socialists. Everybody’s afraid of the government, and there’s no need to soft peddling it, it’s the truth. It is the truth. And that’s true of Democratic businessman and Republican businessman, and I am a Democratic businessman and I support Harry Reid. I support Democrats and Republicans. And I’m telling you that the business community in this company is frightened to death of the weird political philosophy of the President of the United States. And until he’s gone, everybody’s going to be sitting on their thumbs.

At the margins uncertainty is reducing economic growth.

Some selections from an op-ed by Lawrence Summers in the Financial Times on saving the eurozone:

“ First, the maintenance of systemic confidence is essential in a financial crisis. Teaching investors a lesson is a wish not a policy.”

“Third, there must be a clear commitment that, whatever else happens, no big financial institution in any country will be allowed to fail. ”

These two sentences are admittedly excerpted from a much longer op-ed but I don’t think I’m cherry-picking. I don’t find a scintilla in the op-ed about what caused the problems, the responsibilities of lenders, or how to prevent a future recurrence.

Given those two sentences what strategy should a large, institutional investor follow? Isn’t it to grow large enough to be too big to be allowed to fail and then take on the most profitable investments without regard to risks or potential consequences? What is the governing mechanism for such an institution? Destruction of the world economy?

IMO too big to fail means too big to exist; failing that we must be willing to discipline large institutions. Relying on their skill, prudence, or good will has no reasonable basis in experience. It is against human nature. It is a formula for an even greater disaster.

Dr. Summers appears to be reassuring primarily German bankers who should have known that Greece was unable to meet its debt obligations that the party will be allowed to go on indefinitely. That isn’t a plan for saving the eurozone. It’s a plan for bringing down the world economy.

Update

Felix Salmon picks up on the bizarre prescriptions of the op-ed, too:

The implication here — although Summers doesn’t quite spell it out — is that the debt of a country’s banks can and should be safer than the debt of the sovereign. That’s something which has never worked in the past, and it’s very hard to see how it could possibly work in the future. After all, if you look at the assets of any given country’s banks, sovereign debt in one form or another constitutes a huge proportion of that number.

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There’s more results on the genetic contribution that Neandertals, Homo neanderthalensis, made to modern day human being:

If your heritage is non-African, you are part Neanderthal, according to a new study in the July issue of Molecular Biology and Evolution. Discovery News has been reporting on human/Neanderthal interbreeding for some time now, so this latest research confirms earlier findings.

Damian Labuda of the University of Montreal’s Department of Pediatrics and the CHU Sainte-Justine Research Center conducted the study with his colleagues. They determined some of the human X chromosome originates from Neanderthals, but only in people of non-African heritage.

“This confirms recent findings suggesting that the two populations interbred,” Labuda was quoted as saying in a press release. His team believes most, if not all, of the interbreeding took place in the Middle East, while modern humans were migrating out of Africa and spreading to other regions.

It wasn’t all that long ago that the idea of interbreeding between H. sapiens (our species) and H. neanderthalensis was rejected out of hand. Since sequencing the human and Neandertal genomes, that such interbreeding took place has become the prevailing view. Quite a turnaround.

I wonder how long it will be before the view that H. neanderthalensis is actually H. sapiens neanderthalensis, a human subspecies, fully takes hold? It seems to me that you’ve either got to do that or revisit the idea that differing species cannot produce fertile offspring.

And what about H. erectus? I seem to recall that from time to time there have been some suggestions of interbreeding between our species and erectus. Doesn’t that suggest that H. erectus, too, was a human subspecies? Does the redating of the findings from the Javan Solo River site cast doubt on that or disprove it altogether?

More companies moving from Illinois to neighboring Wisconsin:

A Crystal Lake, Ill., metal fabrication company is moving its operations to Kenosha County to be closer to its primary business partner, which itself moved to Wisconsin from Illinois.

The Metal Shop, which has 11 employees and plans to add a few more, plans to complete its move to Pleasant Prairie’s LakeView Corporate Park by August.

The Metal Shop will be located a mile from its largest client: Catalyst Exhibits. Catalyst Exhibits also is moving to Kenosha County and expects to complete its move next month.

“We’re coming because of Catalyst,” said Todd Swift, vice president of operations for the Metal Shop.” “We’re their sole supplier for the exhibit side of the business.

A domino effect. Apparently, neither company was large enough to warrant a sweetener from the state.

It adds up. They can tell that they weren’t wanted.

There’s an op-ed from Stanford economics professor Michael Boskin in the Wall Street Journal today bemoaning the prospect of an increase in the marginal tax rates:

It would be a huge mistake to imagine that the cumulative, cascading burden of many tax rates on the same income will leave the middle class untouched. Take a teacher in California earning $60,000. A current federal rate of 25%, a 9.5% California rate, and 15.3% payroll tax yield a combined income tax rate of 45%. The income tax increases to cover the CBO’s projected federal deficit in 2016 raises that to 52%. Covering future Social Security and Medicare deficits brings the combined marginal tax rate on that middle-income taxpayer to an astounding 71%. That teacher working a summer job would keep just 29% of her wages. At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.

Nobody—rich, middle-income or poor—can afford to have the economy so burdened. Higher tax rates are the major reason why European per-capita income, according to the Organization for Economic Cooperation and Development, is about 30% lower than in the United States—a permanent difference many times the temporary decline in the recent recession and anemic recovery.

Earlier today I promised a post on marginal tax rates and this is it. There has been a persistent claim from one side of the bench that the effective tax rate is near historic lows and an equally persistent claim from the other side that raising taxes during an economic downturrn would be disastrous. That there is marked and strident difference of opinion is nothing new; I remarked on it in the context of the war in Iraq in one of my earliest posts here now nearly seven years ago.

Both claims remind me of nothing so much as a remark attributed to Herb Stein about supply side economics that there was nothing wrong with the claims that couldn’t be cured by dividing by ten. The claims are probably both true as far as they go. That federal tax revenues as a proportion of GDP have fallen to historic lows is neatly illustrated by this graph from calculated risk. I think that most of those who favor increasing marginal rates interpret that graph as proof positive that we need to raise the rates. I see it more as an indication that we need more economic growth and that excessive dependence on high income earners, able to avoid W-2 wages, is not realizing the revenues that it did during the Clinton Administration.

That reducing private consumption in favor of public consumption dollar for dollar results in less overall economic activity is fairly self-evident due to deadweight loss. Just how severe you think that decline in economic activity is depends on how great you think the deadweight loss actually is.

What would the actual outcome of an increase in marginal nominal federal tax rates on singles earning $200,000 or more and couples earning $250,000 or more be? The truest answer to the question is that nobody knows.

To understand why you’ve got to consider how federal income taxes are calculated. What’s being discussed is an increase in taxes on net W-2 wages. The simple description of how that’s calculated is by taking the amount on an individual’s W-2 or summing the amounts on a couple’s W-2s, subtracting deductions, and applying the new tax rate to amounts over $200,000 or $250,000, respectively.

I’ll need to define some of my terms next. I think that “the rich” are the top 1% of income earners and that “the ultra-rich” are the top .1% of income earners. Based on today’s incomes that’s roughly families earning more than $350,000 and families earning more than $1 million, respectively.

There are two sticking points in calculating how much revenue would be derived by an increase in tax rates on those income earners. The first is how much will be deducted? Only historic norms can be used to estimate that and the IRS is a mite cagey on releasing that information. The second is that it applies to W-2 income. Taken together I take that to mean that to the extent that this change would raise more revenue most of that revenue would be derived from those who derive most or all of their income from W-2 earnings. I strongly suspect that will largely consist of families with more than two or more income earners, particularly in a handful of urban areas. E.g. a doctor and a lawyer, a dentist and a schoolteacher, a firefighter and a high school teacher in New York, Boston, Chicago, Los Angeles, and so on. I also strongly suspect that those are precisely the people who are likely to consume a sizeable portion of their incomes rather than saving them.

The ultra-rich will shift their income away from W-2 earnings to something taxed at a lower rate, transfer their income offshore, or otherwise shield their incomes. Rather than taxing Daddy Warbucks, lighting his cigar with 20 dollar bills, we’ll be raising the taxes on people who are struggling to maintain an upper middle class lifestyle in a difficult economy, effectively a transfer from private consumption to public consumption.

The key problem with the strategy of returning the marginal tax rates to what they were under Bill Clinton is that the distribution of income isn’t the same as it was under Bill Clinton and, as a consequence, won’t realize the revenues that it did under Bill Clinton.

Don’t get me wrong. I opposed the reductions in the highest personal income tax rates in the early Aughts and I opposed their extension last year. I see that as a one-time political move rather than as an incremental strategy for raising taxes until the budget is balanced. In my view one increase and you’ve shot your wad. Trying to raise taxes in continuing approximation will become increasingly politically difficult and decreasingly credible. I favor the 3:1 cuts to revenues formula of the Bowles-Simpson commission and I’ve already given my preferences for cuts in previous posts.

However, I’m beginning to re-evaluate my views of increasing the marginal tax rates. Let’s apply the analytical approach of the post of mine I linked to above to the problem that we’re trying to solve. I understand the problem we’re trying to solve as one of increasing federal revenues without decreasing private consumption (and without appeals to rosy scenarios of unrealistically high economic growth to ease the pain). What strategy would effect that objective?

Please don’t propose that we can solve our fiscal dilemma on the basis of cutting expenditures alone. I find that strategy relies on a definition of “can” as mathematical or accounting equivalence. Not all spending reductions are equal and some have pretty severe economic consequences of their own, e.g. as far as I can see the Ryan plan for Medicare just drives present Medicare recipients into Medicaid and makes the state and local governments go bankrupt all the faster.

Update

Related: Does Washington Have a Spending Problem or a Tax Problem?. My answer: both. And raising the marginal tax rates on “the rich” won’t have nearly as much positive effect as its advocates suppose.

Pat Lang proposes a trio of measures for balancing the budget that at least to me sound eminently reasonable:

1. Return marginal tax rates to the levels that they were prior to 2001.
2. Repeal Medicare Part D.
3. End our nation-building exercises in Iraq and Afghanistan.

and bemoans the Congress’s inability to arrive at an agreeement:

Collectively, these three things would bring the budget into balance. Can we do these things? Evidently not. The theological wars under way in the Congress seem to prevent such solutions.

While I agree with the general thrust of Pat’s suggestions, I think he would be bitterly disappointed by what his proposals would accomplish. The deficit this year is expected to be something like $1.4 trillion. Even the most generous estimates of what would be realized by those three measures alone fall far short of $1.4 trillion. Would those three measures alone over time cause the budget to be brought into balance? I think they’d barely cover the interest on the debt that we’d preparing to incur.

I’ll consider the effects of increasing marginal tax rates in a post later today. Medicare spending is rising at the rate of 9% per year; the entirety of Part D outlays barely covers the deficit in Medicare overall let alone for a future in which Medicare spending continues to grow. According to the CBO, the total Part D outlays will only be about $30 billion this year. Eliminating Medicare Part D is not nearly enough.

How much closer will we get by withdrawing our troops from Iraq and Afghanistan? We’re spending about $200 billion a year there now so eliminating those expenses is not nearly enough.

It should be clear to everybody now that the CBO’s estimates were hopelessly unrealistic. Goldman-Sachs just downgraded their estimates and further downgrades are likely to come. We won’t be seeing 4% growth any time soon (it wasn’t that long ago that the Fed was predicting 4% growth for 2012). The implication of this is that revenues are likely to be even lower than anticipated, that we will be borrowing more, and that interest payments stretching into the indefinite future will be higher and, possibly, much higher.

Interest payments on the debt are expected to be just under $500 billion this year alone.

I’d meant to post on this earlier but better late than never. Chicago Mayor Rahm Emanuel has made good on his threat to Chicago’s public employees unions:

Mayor Rahm Emanuel is sending pink slips to up to 625 city employees Monday and privatizing many of their jobs to finish closing a $30 million budget hole, but union leaders said the mayor jumped the gun and never gave them time to negotiate.

Nearly 130 seasonal transportation workers will be told to leave immediately. That means fewer sidewalks, curbs and gutters will be repaired.

Emanuel said he intends to get private companies to clean the city’s airports and libraries, work now done by city employees. Operators at the city’s water-bill call center and employee benefit managers also will see their jobs outsourced. Those union workers will receive 30- and 45-day layoff notices.

The mayor followed through on his threat to lay employees off because, he said, organized labor failed to offer concessions or cost-cutting ideas to close a budget hole left by the expiration of a deal with City Hall unions to take unpaid days off.

“It has been two weeks and despite ongoing talks between leaders of organized labor and my administration, none of the changes yet have been embraced or agreed upon,” Emanuel said.

“My duty as mayor is to protect our city’s taxpayers … not to protect the city’s payroll.”

That’s certainly a novel theory of Chicago city government. The late Mayor Daley cultivated a reputation as a brilliant negotiator largely by bringing the union leaders into a room and giving them whatever they wanted. His son cultivated a similar reputation by negotiating concessions from the unions but, generally, dealing with them cautiously. I guess now we’ll see if hardball works.