If you needed any convincing that a payroll tax holiday was a form of fiscal stimulus that Republican just might buy into, Bruce Bartlett’s opposition to the idea is probably prima facie evidence:

Pete Domenici and Alice Rivlin have proposed a one-year payroll tax holiday to stimulate the economy. I have previously explained why I think monkeying around with the payroll tax is a dreadful idea and won’t repeat my argument here. Today, I just want to ask one question: What are the odds that Republicans will ever allow this one-year tax holiday to expire? They wrote the Bush tax cuts with explicit expiration dates and then when it came time for the law they wrote to take effect exactly as they wrote it, they said any failure to extend them permanently would constitute the biggest tax increase in history.

I strongly suspect that most Democratic opposition to a payroll tax holiday would be along just these lines—branding it an assault on Social Security.

I don’t have quite the opposition to letting Social Security become a welfare program that Mr. Bartlett has. So, for example, I think that means-testing Social Security is a perfectly reasonable idea and that’s another step on the road to letting Social Security become a welfare program. I understand the argument.

For the umpteenth time my views on fiscal stimulus are that I’m prepared to believe that a well-timed and well-designed spending package can produce more growth in the near term than it costs, i.e. it has a multiplier greater than 1. I’m just skeptical that the Congress is capable of enacting a well-timed and well-designed spending package.

If monetary policy is tapped out and another spending spree is out of the question, tax cuts are about the only game in town for fiscal stimulus and as tax cuts go a payroll tax holiday is a lot better than reducing marginal income tax rates.

I’ve just published a foreign policy-related post at Outside the Beltway:

“Bernanke’s Reply to China”

In this post I consider the retort that Dr. Bernanke made to Chinese criticisms of his latest foray into quantitative easing to the effect that China’s currency manipulation is impeding recovery of the global economy. While we have virtually no ability to influence the behavior of the Chinese authorities, have we no ability to change our own?

The IPO of GM stock is going well:

General Motors Co. shares rose modestly in their first day of trading Thursday after the car maker’s historic initial public offering gave investors their first chance to buy and sell GM stock in more than 18 months.

The shares opened 6% higher as GM Chief Executive Danieal Akerson rang the opening bell on the New York Stock Exchange. In midday trading, the shares were ahead almost 7%.

GM was on pace to sell $18.1 billion in shares in what likely will be the second-largest U.S. initial public offering ever, capping a remarkable two-year turnaround in which the car maker went from begging for a government bailout to posting its first steady profits in more than six years.

However, I’m not really sure for whom:

With Wednesday’s sale, including the overallotment, the Treasury lost roughly $4.5 billion on GM shares it acquired at an effective cost of $43.84 apiece. The Treasury would need to reap $26.4 billion, or an average of $52.79 a share, on its remaining stake to break even.

Unless the government is expecting GM’s stock price to rise to over $52 a share or fall significantly below $33 per share this doesn’t sound like a particularly good deal to me.

Speaking of interesting and amusing videos here, via Zero Hedge via Scott Kirwin of The Razor is an explanation of quantitative easing so simple that even a child can understand it.

I’m pretty openly skeptical about the prospects for education as a means of reviving America’s economic prospects. Every so often somebody says something to the effect that we need to be graduating a lot more engineers in this country. My invariable retort is to do what? Let’s look at some numbers, these from the Bureau of Labor Statistics.

Engineering, generally, is not a growth profession. According to the IEEE, the number of electrical engineers in the U. S. in 2000 was around 450,000. Now it’s around 151,000. I’ve published statistics around here before demonstrating that overall we’ve lost about 500,000 engineering jobs in the U. S. in the last ten years.

According to Monster.com the top three best paying degrees for 2010 were Petroleum Engineering (average offer $86,220), Chemical Engineering (average offer $65,142), and Mining Engineering (average offer $64,552). Rounding out the top 10 were various other computer and engineering fields. These are all very decent wages. How do you reconcile that with the decline in the number of jobs?

The snippy answer to that question is that I don’t have to: the numbers speak for themselves. But I’ll try to give a more responsive answer. Most engineers are either civil engineers, electrical or electronics engineers, industrial engineers, or mechanical engineers. They account for something like 90% of all degreed engineers. The specialties that are paying the best aren’t paying it to a lot of engineers. You’ve got to look at the area under the curve, not just how high the curve is in one dimension.

There are only 6,310 mining engineers in the country total. Degrees in the field are only offered in a handful of schools. When I was in school there were only four mining schools in the United States. I suspect there are fewer now. Similarly with petroleum engineers. There are only 26,000-some odd of them in the country. How many total new jobs for petroleum engineers were there in the United States last year? 1,000? 2,000?

About 20 schools offer programs in petroleum engineering, producing about 1,000 graduates all told per year, including masters and doctorates. Even if that number were to double or quadruple it would still be a drop in the bucket compared to the number of engineering jobs being lost.

As I’ve said before here, engineering jobs inevitably follow production and unless we see production ramping up in the United States, which seems pretty unlikely at this point, it doesn’t appear to me that engineering will become anything like a safe harbor.

Engineering draws its members from the same pool of people that the other professions do: people with IQs one to two standard deviations above normal, i.e. IQs of from 115 to 130. That’s the same pool as lawyers, doctors, and so on. The bottom line on this is that if you’re smart enough to be an engineer you’re probably smart enough to be a physician and physicians make a heckuva lot more money. It takes a pretty dedicated prospective engineer to work as hard as engineering students do to pursue a dwindling pool of jobs when you can set your sights on being a physician or medical technician.

While healthcare may offer bright prospects for those in it, I don’t see the idea of everybody being employed in that sector as a bright one for the economy for a simple reason: 60% or more of the dollars spent on healthcare come from tax dollars. We’d be back to the cat and rat farm I’ve written about before.

I’d like to draw your attention to an amusing video from Reuters financial columnist Felix Salmon on what to do about the economy. It’s sort of Schoolhouse Rock meets Monty Python meets Business Week in Review. It doesn’t appear to be embeddable or I’d embed it. It’s short so cruise on over there and take a look.

Essentially, his message has the same core message as Federal Reserve Board Member Kevin Warsh’s op-ed in the Wall Street Journal I commented on a bit ago: monetary policy as effected by the Federal Reserve is no substitute for action by the Congress. Unlike Mr. Warsh, Mr. Salmon’s view is that the preferred action would be another spending bill but he’s skeptical that will happen given the likely mood in the next Congress so he’s willing to settle for a tax cut.

That’s essentially the reasoning I’ve been using when pitching the idea of suspending (or eliminating) FICA, what’s usually referred to as a “payroll tax holiday”. The way the tax code is structured at this point people in the two lowest income quintiles don’t pay much in income taxes so cutting marginal tax rates mostly benefits the top two income quintiles, hence “tax cuts for the rich”.

Preserving the “Bush tax cuts” will at best preserve the status quo. Only in Washington, DC would anyone characterize maintaining the status quo as a stimulus.

According to the Department of Labor employment is, essentially, moving sideways.

Suspending FICA would immediately reduce the cost of employing workers earning at or below FICA max (currently $106,800) by 15%. In rough terms that means you could employ seven workers for what you used to pay to employ six workers. I think that at least at the margins that would itself increase employment. But that’s where the critique of those who say that our (only) problem is aggregate demand comes in. Without more sales or the prospect of more sale there won’t be any work for additional workers to perform. Without adequate work for the prospective new workers to perform, employers won’t hire. That’s why the AD boosters, whose dean is Paul Krugman, insist on more and larger federal spending programs. Other than for reasons of their non-economic preferences, I mean.

By nearly anybody’s reckoning the first stimulus package was a disappointment. Only by handwaving and strained apologetics can it be construed as a success: whatever statistics you muster to defend it, it did not have the results that its proponents predicted.

IMO that tepid, at best, success was entirely predictable. Funds that were directed at state and local governments were used to prop up the status quo. Cuts in taxes were saved or used to pay down debt, and what is referred to as “infrastructure spending” mostly went to earners in the highest income quintiles and were saved or used to pay down debt. We don’t build roads and bridges the way we did 80 years ago with large gangs of unskilled and semi-skilled workers and animals. We use much smaller teams of skilled and semi-skilled workers (and a few unskilled workers) and lots of machines. The machines have already been bought and capitalized—we have enormous over-capacity in construction.

The Fed hasn’t fared a great deal better. Interest rates have been near zero for some time and appear likely to stay there for the foreseeable future. The first round of quantitative easing was, at best, a qualified success. The second round may have the perverse consequence of stimulating employment in places other than the United States:

Chairman Ben S. Bernanke and his colleagues appear to be fueling a foreign-investment surge, underscoring the difficulty of stimulating the economy through monetary policy with interest rates already near record lows.

“You’re seeing leakage from quantitative easing,” said Stephen Wood, chief market strategist for Russell Investments in New York, which has $140 billion under management. “That leakage is going into emerging markets, commodity-based economies, commodities themselves and non-U.S. opportunities.”

U.S. corporations have issued more than $1.07 trillion in debt so far this year, according to data compiled by Bloomberg. Foreign companies also are tapping U.S. markets for cheap cash, selling $605.9 billion in debt through Nov. 15 compared with $371.8 billion for all of 2007, before the Fed cut the overnight bank-lending rate to a range of zero to 0.25 percent.

To the extent that QE2 increases commodity prices it may actually reduce employment.

It’s not entirely clear to me what sort of spending program would create jobs here in the short run. There are plenty of ideas for creating jobs in the long run but, as I’ve said before, God send us a cure—the disease is already here. More consumer spending might create a few jobs in retail but most of the jobs created would probably be in China. Boosting business spending might have the same effect.

“Infrastructure spending” (which I think we should start referring to as “mid-20th century infrastructure spending”) won’t create lots of jobs. As people finally noticed there just aren’t that many “shovel-ready projects”, and, worse, there aren’t very many qualified vendors and those vendors have incentives to space the work out so they can execute it with the staff they have rather than taking on new staff.

Healthcare spending won’t create lots of jobs. Employment in that sector is relatively inelastic. Under the circumstances pouring more money into that sector just pays the people who are already in that sector more and may have the perverse effect of increasing the cost of future healthcare.

Wishing that we could return to the days of the housing bubble probably won’t create a lot of jobs, either, if only because wishing won’t make it so.

Kevin Warsh was right: we need to make substantial changes to our trade, fiscal, and regulatory policies. We need to reorient the relationship between business and government so that it’s more productive and less adversarial and cozy by turns.

The preferred solutions appear to be dreaming of winning the lottery, hoping that human nature will change, and phantasizing that the Fed will pull a rabbit out of its hat.

Scientists at the Large Hadron Collider at CERN have reportedly created, captured, and released antimatter in the form of anti-hydrogen, a positron orbiting an antiproton nucleus:

Scientists working on the big bang machine in Geneva have done the seemingly impossible: create, capture and release antimatter.

The development could help researchers devise laboratory experiments to learn more about this strange substance, which mostly disappeared from the universe shortly after the Big Bang around 14 billion years ago.

Trapping any form of antimatter is difficult, because as soon as it meets normal matter — the stuff Earth and everything on it is made out of — the two annihilate each other in powerful explosions.

In a new study, physicists at the European Organization for Nuclear Research (CERN) in Geneva were able to create 38 antihydrogen atoms and preserve each for more than one-tenth of a second. The project was part of the ALPHA (Antihydrogen Laser PHysics Apparatus) experiment, an international collaboration that includes physicists from the University of California, Berkeley and Lawrence Berkeley National Laboratory (LBNL).

Investigating its properties should be fascinating.

More here including how they did it and what they plan to do next.

Does it strike anyone else as strange that in the gallery of “most dangerous dog breeds” in this post at The Daily Beast, several of the pictures in the gallery are not of the breeds they claim to be? So, for example, the bull mastiff is not a bull mastiff (it’s a Dogue de Bordeaux) and the malamutes aren’t malamutes (they’re Alaskan huskies).

The collie doesn’t look much like a collie to me. More like a BC.

There are some other factual errors in the gallery. For example, counting registrations severely undercounts the actual number of dogs of some breeds, e.g. greyhounds, border collies. Racing greyhounds are almost never registered and a significant number of the greyhounds you see out and about are retired racers.

Additionally, there are some subtleties that are elided. Chows have very poor peripheral vision. If you come at them from the side, they’re pretty likely to snap at you. Is that a problem of the breed, ignorance of people approaching chows, or stupid owners who shouldn’t have chows in the first place?

I think this highlights the problems with breed-specific laws: too many people aren’t able to report the actual breed of the dog that attacked them. How many people can distinguish between a pit bull, an Am Staff, a Cane Corso, and an Argentinian Dogo?

Former Republican Senator Pete Domenici and former CBO and OMB director Alice Rivlin propose an approach to balance the budget (and boosting the economy) somewhat different from the one floated by the chairmen of the president’s task force:

To ensure a more robust recovery, we propose a one-year “payroll tax holiday” for 2011, suspending Social Security payroll taxes for employers and employees. We also would phase in the steps to reduce deficits and debt gradually beginning in 2012, so the economy will be strong enough to absorb them.

We would stabilize the debt held by the public at less than 60 percent of gross domestic product, an internationally recognized standard; reduce annual deficits to manageable levels; and balance the “primary” budget (everything other than interest payments) by 2014.

We would dramatically simplify the tax system, establishing individual tax rates of 15 and 27 percent (from the current high of 35), cutting the corporate tax rate to 27 percent (from 35 today), ending most deductions and credits while simplifying the rest, and ensuring that nearly 90 million households no longer have to file returns. To reduce the debt, we would supplement our spending cuts with a 6.5 percent “debt-reduction sales tax.”

We would strengthen Social Security so it can pay benefits for the next 75 years by gradually raising the amount of wages subject to payroll taxes; slightly reducing the growth in benefits for the top 25 percent of beneficiaries; raising the minimum benefit for long-term, low-wage workers; indexing benefits to life expectancy; and changing the calculation of cost-of-living adjustments to better reflect inflation. We would not raise the age at which senior citizens can begin receiving benefits.

We would control health-care costs – the biggest driver of long-term deficits – by reforming Medicare and Medicaid while, starting in 2018, capping and then phasing out the tax exclusion for employer-provided health care. We would reform medical malpractice laws and help address the health costs tied to rising obesity by imposing a tax on high-calorie sodas.

We would freeze domestic discretionary spending for four years and defense spending for five, both at 2011 levels, and then limit their future growth to the rate of growth in the economy.

Finally, we would cap domestic and defense discretionary spending (with tight exceptions for true emergencies) and trigger across-the-board cuts if the caps are breached; enact a strict pay-as-you-go statutory rule for tax cuts or expansions of entitlements; and enact long-term budgets for major entitlements while creating a Fiscal Accountability Commission that would recommend policy changes every five years if entitlements are exceeding their budgets.

while debt reduction commission member Congresswoman Jan Schakowski has her own alternative to the plan offered by commission chairmen Simpson and Bowles:

The Schakowsky plan is based on five key elements:

1) Increased economic stimulus to spur growth in the immediate term

· Provide $200 billion to invest over the next two years in measures to create jobs and spur economic growth, including passing the Local Jobs for America Act; and funding for education and law enforcement; Unemployment Insurance, Federal Medical Assistance Percentages (FMAP) and Supplemental Nutrition Assistance Program extensions; and infrastructure.
· Adopt the President’s proposals to eliminate overseas tax havens and incentives for outsourcing

2) Smart, targeted spending cuts

· Non-Defense Discretionary – $7.55 billion in savings through increased efficiency and cuts to programs that benefit large corporations that don’t need assistance.
· Defense Discretionary – $110.7 billion in cuts from the 2015 defense budget, including efficiency savings, reducing our troop levels, cutting weapons systems we don’t need, and scaling back the wartime increases in the size of the military.

3) Mandatory spending cuts
Health Care – at least $17.2 billion in savings by implementing measures to bring down the cost of health care to the federal government and lower health care inflation overall.
Other – $7.7 billion in savings by cutting agriculture subsidies in half, and redistributing federal support to offer greater benefits to small family farms reduce subsidies to large corporate agribusiness.

4) Reductions in tax expenditures
Raise $132.2 billion by closing tax subsidies for companies that ship American jobs overseas.

5) Increases in revenues
Raise $144.6 billion in revenue through progressive reforms to the estate tax, treating capital gains and dividends as regular income, and enacting a cap and trade proposal that includes protections for lower-income people.
Enact President Obama’s budget proposal to let the Bush tax cuts for the top 2 brackets expire and return to 2009 estate tax levels.
Non-tax revenue – raise $7 billion by addressing places where the private sector is currently under-paying.

I think that both of these plans have some serious flaws but of the two I prefer the Domenici-Rivlin approach. Among other things I think that a payroll tax holiday is more likely to spur both spending and employment than other forms of stimulus.