I Love This Guy

Are Europeans Lazy? No, just overtaxed. (EDWARD C. PRESCOTT, October 24, 2004, Wall Street Journal):

Why do Americans work so much more than Europeans? The answer is important because it suggests policy proposals that will improve European standards of living (which should give a boost to its gross national happiness, by the way). However, an incorrect answer to that question will result in policies that will only exacerbate Europe's problems and could have implications for other countries that are looking for best practices.

Here's a startling fact: Based on labor market statistics from the Organization for Economic Cooperation and Development, Americans aged 15-64, on a per-person basis, work 50% more than the French. Comparisons between Americans and Germans or Italians are similar. What's going on here? What can possibly account for these large differences in labor supply? It turns out that the answer is not related to cultural differences or institutional factors like unemployment benefits, but that marginal tax rates explain virtually all of this difference. I admit that when I first conducted this analysis I was surprised by this finding, because I fully expected that institutional constraints are playing a bigger role. But this is not the case. (Citations and more complete data can be found in my paper, at www.minneapolisfed.org.)

Let's take another look at the data. According to the OECD, from 1970-74 France's labor supply exceeded that of the U.S. Also, a review of other industrialized countries shows that their labor supplies either exceeded or were comparable to the U.S. during this period. Jump ahead two decades and you will find that France's labor supply dropped significantly (as did others), and that some countries improved and stayed in line with the U.S. Controlling for other factors, what stands out in these cross-country comparisons is that when European countries and U.S. tax rates are comparable, labor supplies are comparable.

And this insight doesn't just apply to Western industrialized economies. A review of Japanese and Chilean data reveals the same result. This is an important point because some critics of this analysis have suggested that cultural differences explain the difference between European and American labor supplies. The French, for example, prefer leisure more than do Americans or, on the other side of the coin, that Americans like to work more. This is silliness.

Again, I would point you to the data which show that when the French and others were taxed at rates similar to Americans, they supplied roughly the same amount of labor. Other research has shown that at the aggregate level, where idiosyncratic preference differences are averaged out, people are remarkably similar across countries. Further, a recent study has shown that Germans and Americans spend the same amount of time working, but the proportion of taxable market time vs. nontaxable home work time is different. In other words, Germans work just as much, but more of their work is not captured in the taxable market.

I would add another data set for certain countries, especially Italy, and that is nontaxable market time or the underground economy. Many Italians, for example, aren't necessarily working any less than Americans--they are simply not being taxed for some of their labor. Indeed, the Italian government increases its measured output by nearly 25% to capture the output of the underground sector. Change the tax laws and you will notice a change in behavior: These people won't start working more, they will simply engage in more taxable market labor, and will produce more per hour worked.

This analysis has important implications for policy--and not just for Europeans, but for the U.S. as well. For example, much has been made during this election season about whether the current administration's tax cuts were good or bad for the economy, but that is more a political question than a policy consideration and it misses the point. The real issue is about whether it is better to tweak the economy with short-lived stimulus plans or to establish an efficient tax system with low tax rates that do not change with the political climate.

What does this mean for U.S. tax policy? It means that we should stop focusing our attention on the recent tax cuts and, instead, start thinking about tax rates. And that means that we should roll back the 1993 tax rate increases and re-establish those from the 1986 Tax Reform Act. Just as they did in the late 1980s, and just as they would in Europe, these lower rates would increase the labor supply, output would grow and tax revenues would increase.

I've been saying this for years. It's always nice to have a Nobel Laureate have the same opinion after having done extensive research.

Is Kerry Smarter than Bush?

I wouldn't count on it (John Tierney, 10/24/04, NY Times):

To Bush-bashers, it may be the most infuriating revelation yet from the military records of the two presidential candidates: the young George W. Bush probably had a higher I.Q. than did the young John Kerry.

That, at least, is the conclusion of Steve Sailer, a conservative columnist at the Web magazine Vdare.com and a veteran student of presidential I.Q.'s. During the last presidential campaign Mr. Sailer estimated from Mr. Bush's SAT score (1206) that his I.Q. was in the mid-120's, about 10 points lower than Al Gore's.

Mr. Kerry's SAT score is not known, but now Mr. Sailer has done a comparison of the intelligence tests in the candidates' military records. They are not formal I.Q. tests, but Mr. Sailer says they are similar enough to make reasonable extrapolations.

Mr. Bush's score on the Air Force Officer Qualifying Test at age 22 again suggests that his I.Q was the mid-120's, putting Mr. Bush in about the 95th percentile of the population, according to Mr. Sailer. Mr. Kerry's I.Q. was about 120, in the 91st percentile, according to Mr. Sailer's extrapolation of his score at age 22 on the Navy Officer Qualification Test.

Linda Gottfredson, an I.Q. expert at the University of Delaware, called it a creditable analysis said she was not surprised at the results or that so many people had assumed that Mr. Kerry was smarter. "People will often be misled into thinking someone is brighter if he says something complicated they can't understand," Professor Gottfredson said.

Gore was mostly likely smarter than Bush. From everything I've seen, Kerry and Bush are very close. This demonstrates the difference between being intelligent and being intellectual. Kerry is clearly more intellectual. However, I think that Bush would consider being called an intellectual and insult while Kerry would consider it a complement.

flu vaccine

This from Frontpage Magazine's war blog of October 22, 2004

WHY THIS FLU CRISIS IS HAPPENING
...

Almost half of the nation's flu vaccine will not be delivered this year. Chiron, a major manufacturer of flu vaccine, will not be distributing any influenza vaccine this flu season.Chiron was to make 46-48 million doses vaccine for the United States.Chiron is a British company. Recently British health officials stopped Chiron from distributing and making the vaccine when inspectors found unsanitary conditions in the labs. Some lots of the vaccine were recalled and destroyed.

Why is our vaccine made in the UK and not the US?

The major pharmaceutical companies in the US provided almost 90% of the nations flu vaccine at one time. They did this despite a very low profit margin for the product. Basically, they were doing us a favor.In the late 80's a man
from North Carolina who had received the vaccine got the flu. The strain he caught was one of the strains in that years vaccine made by a US company.

What did he do?

He sued and he won. He was awarded almost $5 million!After that case was appealed and lost, most US pharmaceutical companies stopped making the vaccine. The liability out weighed the profit margin.Since UK and Canadian laws prohibit such frivolous law suits UK and Canadian companies began selling the vaccine in the US. By the way...the lawyer that represented the man in the flu shot lawsuit was a young ambulance chaser by the
name of John Edwards.

I rest my case.

If not intelligence then what?

I've obviously had some fun deriding intelligence. It is helpful within limits. Knowledge, temperment , emotional maturity can all be more important at the individual level. As an entrepreneur, I value persistence. Hence, my fondness for this quote from silent Cal.


Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'Press On' has solved and always will solve the problems of the human race.
Calvin CoolidgeUS politician (1872 - 1933)

Intellectual Morons

Intelligence can be a helpful human trait. It is useful to remember that many other traits are important in the evolution and effective functioning of civilization. Genius can be very fragile, society needs robustness in order to be sustained. Traditions and trial and error approaches are far more robust than intellect.

Some liberal writers have pointed out, with disdain, that some conservative writers display a degree of anti-intellectualism in their works. There is some truth to the claim. Perhaps there is a good reason for this. First exhibit, this George Orwell quote, "There are some ideas so wrong that only a very intelligent person could believe in them."

There may be some intellectuals infected by a right wing ideology, but many more are infected by a left wing ideology!

Additional exhibits are provided in this Frontpage Magazine interview with Daniel Flynn, author of the book Intellectual Morons. (emphasis mine)

Flynn: My purpose in writing Intellectual Morons is to get more people to think with their brain rather than their ideology.
The endless stream of recent scandals involving intellectuals rationalizing dishonesty in the service of a cause—Rigoberta Menchu, Betty Friedan, Michael Bellesiles, etc.—motivated me to write the book. It’s one thing for used car salesmen or politicians to lie. It’s
sort of a staple of those trades. But the mission of the scholar is to find the truth. Unfortunately, truth has taken a back seat to political agendas among intellectuals.

Flynn: The main idea behind Intellectual Morons is that ideology acts as a mental straitjacket. It blinds adherents to reality, breeds fanaticism, and rationalizes dishonesty. It makes smart people stupid.
It doesn’t matter how intelligent you are if you don’t use your
brain. Intelligent people aren’t necessarily rigorous thinkers. In fact, many of them are mentally lazy. Ideology provides a way for lazy people to respond to issues, ideas, people, and events without thinking. For the ideologue, ideology is the Rosetta Stone of everything. Why think when the system provides all the answers? Ideology is attractive to smart people because it flatters them by suggesting that a single idea from the mind of an intellectual has the power of explaining all of history or ordering the affairs of whole nations. No person is that smart; no idea that good.

My book is about how ideology overrides common sense among intellectuals.

FP: The Left continues its pathology in the War on Terror. Now we have leftist feminists showing up at demonstrations nude, wearing Saudi head-gear, and protesting Bush. Yet if they lived under the cultures and societies they are siding with, they would be exterminated within 30 seconds just for showing an ankle.

Overall, the Left has sided with a fascist enemy that extinguishes all supposed leftist values themselves: women’s rights, gays’ rights, separation between religion and state, etc. etc.

The Left's reflexive hatred for America and its allies overrides its genuflections to human rights. That's why they don't cheer human rights advances in Afghanistan, or Israel's tolerance of Arab homosexuals who would be severely punished for their behavior in their homelands.

FP: What would be your definition of "intellectual
moron"?
Flynn: An intellectual moron is someone who squanders his superlative cognitive abilities by relying on ideology rather than his mind to do his thinking. Next to this definition is a picture of Noam Chomsky.

In academia, Hollywood, the judiciary, and other strongholds of the Left, the prospects for conservative progress may appear bleak. But we've seen freedom triumph over totalitarianism, and conservative ideas gain at least a beachhead in the media. Progress has been made when concerted action has been taken. If conservatives focus on the campuses, for instance, in the way that they focused for many years on media bias, I think great things will happen. I'm an optimist.

FP: I hope you are right. But overall, as long as humans remain
who they are -- fallen and flawed -- I think the socialist impulse will never go away, and will remain the easiest thing for people to cling to. Indeed, as long as inequality exists, so will the impulse toward equality, and so millions more humans will be tortured, starved and exterminated.

Flynn: The idea that man can be perfected is the most dangerous delusion. Whether it's an Islamic terrorist attempting to establish Allah's earthly kingdom, a Nazi believing that a perfect race of men can be created, or a Communist looking to make Heaven on Earth, the motivation of these fanatics is the same. They are all utopians.

...I don't think the Left can ever really be defeated,
because the desire in many humans to believe in utopia on earth is stronger than acknowledging the limits of human hope.

At Least They Have a Sense of Humor

The Guardian, a left leaning British rag, decided that the the U.S. presidential election is too important to the rest of the world to be left to chance, so they decided to do something about. They got a list of voters in Clark County, Ohio, and set up a campaign for Guardian readers to mail letters to convince those on the list to vote for Kerry. While this sounds like a very creative, innovative, even brilliant idea, it hasn't necessarily worked out all that well.

The first problem was that the letter writers didn't seem to have a good handle on what sorts of things might convince those in Clark County to vote for Kerry. Here's one excerpt from such a letter, by a "Professor of the public understanding of science at Oxford University":

Now that all other justifications for the war are known to be lies, the warmongers are thrown back on one, endlessly repeated: the world is a better place without Saddam. No doubt it is. But that's the Tony Martin school of foreign policy [Martin was a householder who shot dead a burglar who had broken into his house in 1999]. It's not how civilised countries, who follow the rule of law, behave. The world would be a better place without George Bush, but that doesn't justify an assassination attempt. The proper way to get rid of that smirking gunslinger is to vote him out.

For someone who's into public understanding, it's stunning that he doesn't understand that folks in Clark County have never heard of Tony Martin and that the odds are good that the letter's recipient may well believe in the right to defend one's home from intruders. Europeans are always claiming that Americans know nothing about Europe. The ignorance is mutual, I guess.

Or how about this excerpt, written by editor of "the Muslim lifestyle magazine emel":

I can see that you must be furious at the way the current administration has not only catapulted the US into a state of social decline, but has plunged your great nation into a state of perpetual insecurity. I know that you will not stand by and observe your country being hijacked by a select group of neo-conservative extremists who spread fear and loathing. I don't expect you to stand for the haughty suppression of your civil liberties threatened by the proposed Domestic Security Enhancement Act, which will enable the government to detain in secrecy anyone who supports a "terrorist" group and strip them of their citizenship.

If this happens to go to someone who already hates Bush, not much damage would be done to the Kerry campaign. But if you were a swing voter from Ohio and didn't happen to notice the social decline, perpetual insecurity, hijacking by neo-conservative extremists (whoever the hell they are), fear and loathing, and haughty suppression of civil liberties, you might wonder who the hell this muslim bitch is anyway, and why the hell she thinks it's okay to stick her nose into your business.

Almost needless to say, the Guardian's campaign doesn't seem to be particularly successful. Even the Kerry campaign is none too grateful:

Even John Kerry's own Democrats expressed horror at the campaign.

"We all feel it is not a good idea. I think it was unwise. It is so poorly thought-out," said Sharon Manitta, spokeswoman in Britain for Democrats Abroad.

But on the upside, at least the Guardian has enough of a sense of humor to print some of the responses. The title of the Guardian's article containing the responses is "Dear Limey Assholes". Note that some of the responses were positive:

Thank you, thank you, thank you! What a wonderful idea! I am a US citizen who is scared to death that Bush and Klan will get back in. We need all the help we can get to ditch this bunch of maniacs.
United States

So not everybody thought it was a bad idea. This next sample isn't so positive but it is friendly, subtle, and polite:

Dear wonderful, loving friends from abroad,
We Ohioans are an ornery sort and don't take meddling well, even if it comes from people we admire and with their sincere goodwill. We are a fairly closed community overall. In my town of Springfield, I feel that there are some that consider people from the nearby cities of Columbus or Dayton, as "foreigners"- let alone someone from outside our country.
Springfield, Ohio

Next, a rather sarcastic response:

My dear, beloved Brits,
I understand the Guardian is sponsoring a service where British citizens write to Americans to advise them on how to vote. Thank heavens! I was adrift in a sea of confusion and you are my beacon of hope!

Feel free to respond to this email with your advice. Please keep in mind that I am something of an anglophile, so this is not confrontational. Please remember, too, that I am merely an American. That means I am not very bright. It means I have no culture or sense of history. It also means that I am barely literate, so please don't use big, fancy words.

Set me straight, folks!
Dayton, Ohio

There are some, shall we say, less patient responses:

Go back to sipping your tea and leave our people alone.
Ohio

It starts to degrade quickly:

Hey England, Scotland and Wales,
Mind your own business. We don't need weenie-spined Limeys meddling in our presidental election. If it wasn't for America, you'd all be speaking German. And if America would have had a president, then, of the likes of Kerry, you'd all be goose-stepping around Buckingham Palace. YOU ARE NOT WANTED!! Whether you want to support either party. BUTT OUT!!!
United States

And some respondies thought the Guardian's actions way, way, way beyond the pale (where is that damn pale anyway?):

KEEP YOUR FUCKIN' LIMEY HANDS OFF OUR ELECTION. HEY, SHITHEADS, REMEMBER THE REVOLUTIONARY WAR? REMEMBER THE WAR OF 1812? WE DIDN'T WANT YOU, OR YOUR POLITICS HERE, THAT'S WHY WE KICKED YOUR ASSES OUT. FOR THE 47% OF YOU WHO DON'T WANT PRESIDENT BUSH, I SAY THIS ... TOUGH SHIT!
PROUD AMERICAN VOTING FOR BUSH!

So call me crazy, but I don't think the Guardian's idea turned out to be universally positive. Nice try though!

UPDATE: Here's some more:

Dan Harkins, a political activist in the vital swing state of Ohio, was excited when he first heard that the Guardian newspaper was recruiting readers to write to voters in his state in the hopes of giving foreigners a voice in the American election.

Yesterday, the first of about 14,000 Guardian readers' letters started arriving in the mailboxes of Clark County, Mr Harkins's home region - chosen by the British paper as a pivotal election district where President George W Bush and Senator John Kerry are neck and neck.

The first letters to be made public all urged Clark County voters to reject Mr Bush. As he watched the reaction of friends and neighbours, Mr Harkins was delighted.

He is the chairman of the Clark County Republican Party, and his neighbours' reaction was outrage. "It's hysterical," laughed Mr Harkins, showing off sheaves of incensed e-mails and notes from local voters.

The Republicans' delight compares with the gloom among local Democrats, who fear that "foreign interference" is hurting Mr Kerry.

Why is it that the Left worldwide has no marketing sense whatsoever?

Supply Siders Win Again

The United States federal deficit is going to be smaller than predicted due to supply side effects (strong corporate profits in particular):

The latest budget numbers closing out fiscal year 2004 show slower spending growth, stronger tax receipts, and a $413 billion deficit that came in about $100 billion less than the Office of Management and Budget predicted at the start of the year and $64 billion lower than the Congressional Budget Office estimate.

Overall, according the Treasury Department, tax receipts increased 5.5 percent in fiscal year 2004, compared to a 3.8 percent decline in fiscal year 2003. Income-tax withholdings gained 2.5 percent versus a loss of 2.2 percent in the prior year. Corporate tax collections exploded 43.7 percent on the shoulders of near-record corporate profits.

What's going on? It's clear: At lower marginal tax rates, the rising economy is throwing off a lot more tax revenues. Score one for the supply-siders.

Overall budget outlays increased 6.2 percent in the recent fiscal year, which is less than last year's 7.3 percent. Excluding spending for defense and homeland security, as well as entitlements for healthcare and Social Security, federal spending increased by a very moderate 3.4 percent in fiscal year 2004. If you remove net interest, then the budget increase was only 3 percent -- just a bit higher than the inflation rate.

As a share of gross domestic product, the deficit came in at 3.5 percent. That's the same fraction of national income as last year. This deficit share of GDP is also lower than Europe's and only about one-third of Japan's. This is more than acceptable. In the early 1980s, the deficit share of the economy was over 6 percent, but that didn't stop the Reagan boom, which followed large-scale tax cuts and deregulation measures.

There are lots of reasons not to vote for Bush, but tax cuts and deficits aren't among them, in my opinion.

Amusing tidbit

A young student is speaking passionately in his high school social studies class. After making it clear that he is against the war in Iraq because he is a pacifist, he goes on to say, "I hate George Bush. If I met him, I would kill him". My sixteen year old daughter raises her hand and says, "let me understand this. You're a pacifist but you want to kill a man you don't know and have never met"? The teacher, who is an independent, nearly hits the floor laughing. The Bush bashers in the class sit in silence. True story!!

Statistical Will

The purpose of an election in a democracy is to elect leaders according to the "will of the people". The definition of "the people" is limited; only adults who aren't felons who registered to vote in time for the election and who actually bother to show up and vote are considered. So it's a bit limited to start with, and that's ignoring further constraints like election rules, the electoral college, primaries, etc.

Those who vote provide a measurement of the "will of the people". Like all real-world measurements, it's not perfect. People accidentally mark the wrong candidate, chads are left hanging, ballots jam in machines that read them, ballot boxes get lost, and there's general election fraud (by Democrats and Republicans alike). I've seen error rate estimates by credible sources of one to five percent with the median being around two percent.

How many times have you heard someone state that Al Gore won the popular vote in 2000 and therefore it was certainly the "will of the people" that Gore be president? I've heard it lots of times. But with a two percent error rate, the likelihood that the popular vote count as measured meant that the majority of voters actually intended for Gore to be President is only about 85%. In other words, there still about one in six chance that the "will of the people", according to the popular vote, was for Bush to be President.

Of course, the popular vote doesn't matter in our current election system. I only mention it as an example of how there is never certainty in an election process, and in a close election there is a lot of uncertainty. Once you look at Florida and other close states in the 2000 election, the only thing that's certain is that nobody can realistically be anywhere near certain what the "will of the people" was in the 2000 election.

Since it's clear that the "will of the people" can't really be known with much confidence in a close election, and that fraud (from both sides) may have overwhelmed the accuracy of the election measurements (counts), what's the best way to resolve the outcome of the election? Clearly the best way is for one side to concede the election to the other. That didn't happen last time. Neither Gore nor Bush had the grace to do so.

The only other ways to resolve the election are the courts and violence. Assuming the upcoming election is as close as I currently expect it to be, I wouldn't be surprised to see quite a lot of both.

Update: Here is a good article on vote fraud and contested elections.

Dirty Tricks

A couple of libertarian/conservative bloggers have recently threatened to vote Republican because of alleged dirty politics by the Democrats. First up is Eric Raymond, very well known in the Open Source movement, who writes:

For the first time in my life, I find that I am seriously considering voting Republican in a presidential election. What has pushed me to it is this report of shots being fired into a Bush-Cheney campaign HQ in Knoxville. TN.

It's not the first shot fired at the Republicans. And it comes on top of a frenzy of anti-Republican hate speech ...

Yes, shots were fired at Republicans, but nobody knows for sure whether or not it was Democrats who fired the shots. In fact, it could even be Republicans who wanted to elicit this sort of response.

Vodkapundit complains of a different set of Democratic tactics identified in the Drudge Report.

If Drudge has it right, then the Kerry-Edwards campaign is going to do its damnedest to turn our fine nation into a banana republic. [...]

[F]or the first time in 16 years, I'm going to vote Republican straight down the line.

The Drudge Report article claims that a manual for Democrat operatives contains instructions to call attention to past Republican frauds. The following is the "offending" page:

I look at it and still can't figure out what has Vodkapundit so upset. It just tells Democrats to call attention to past Republican abuses. I can't see why that's so terrible.

Even if it were terrible, it's hard for me to believe that either of these guys is so naive that they believe that Republicans as a group are any better. Have they never heard of Nixon and Watergate? Maybe they're not old enough to remember it.

There are lots of unethical people in the world. Some of them go into politics. Some of those end up Democrats and some end up Republicans. I doubt that one party breeds corruption substantially more than the other. To hear of one or a few incidents like those described above and change your vote because of it seems somewhat short sighted to me. Punish those that commit crimes through the legal system, not the political party they happen to belong to. Make your vote count.

It gets even better...

In this post Bret points out that newly minted Nobel Economist Edward Prescott points out that the Bush tax cuts should have been even bigger. Apparently several other Nobel Economists prefer Bushonomics over Kerrynomics as this article serves as witness:

Leading economists have a message for America: “John Kerry favors economic policies that, if implemented, would lead to bigger and more intrusive government and a lower standard of living for the American people.”

That was the conclusion released in a statement Wednesday by 368 economists, including six Nobel laureates: Gary Becker, James Buchanan, Milton Friedman, Robert Lucas, Robert Mundell, and — the winner of this year’s Nobel Prize in Economics — Edward C. Prescott. The economists warned that Sen. Kerry’s policies “would, over time, inhibit capital formation, depress productivity growth, and make the United States less competitive internationally. The end result would be lower U.S. employment and real wage growth.”

Perhaps they know what they are talking about!

Economic news not being emphasized by the media - the good kind!

Here is the whole Lawerence Kudlow article from today's WSJ.

It's the Economy, Smarty Pants

By LAWRENCE KUDLOWOctober 13, 2004; Page A16

You'd think that a high-performance economy, producing above-average growth and below-average inflation, would be a re-election ace. After all, during the 10 recovery quarters since the end of the 2001 recession, real GDP -- the most comprehensive measure of the economy -- has averaged 3.4% growth, in line with the average post-World War II expansion rate. Since the supply-side tax cuts were passed in Spring 2003, real economic growth has jumped to 4.8%, putting it at the head of the class of the past 20 years.

Somehow -- blame it on many media outlets -- this message is muted. Yet over the past year:

• Inflation-adjusted consumer spending is up 3.6%.
• Residential housing investment is up 13.2%.
• Capital-goods investment by businesses is up 13.9%.
• Spending on machine tools for heavy-industry manufacturing is up a whopping 54.2%.
• Exports and imports are up nearly 11%.
• After-tax corporate profits are up 19.5%.
• Industrial production is up 5.2%.
• High-tech production is up 23.7%.
• Productivity has reached an astonishing 4.6% rate.
• Household wealth is up 11.1%, hitting a record high of $45.9 trillion.
• The GDP deflator is up only 2.2%.
• The core consumer-spending deflator (excluding food and energy) is up only 1.4%.
• Interest rates are at 45-year lows, with short-term rates at less than 2%.
• 15-year mortgage rates are just above 5%.
• Home ownership stands at a record 69.2%.

Impressive? No, remarkable, considering the economy was up against an inherited recession, a busted tech bubble, corporate scandals, 9/11, two wars and an oil-price shock. The strong performance also sharply contrasts with ongoing weakness in Europe. John Kerry may love Europe, but GDP there is growing at less than 2%, with unemployment between 9% and 10%.

Despite all this, the Kerry campaign has managed to define the economy in terms of a relatively weak set of jobs numbers taken from the non-farm payroll survey of established businesses. Team Kerry has flogged George W. Bush with the fact that payrolls have fallen (by 585,000) since the beginning of the president's term. Kerryites talk of a "Hoover" economy, even though two million payroll jobs have been recovered in the past 13 months.

In his own defense, Mr. Bush should highlight the household survey (the number of people actually working), which shows that 1.69 million more are employed today than when he took office. An additional 3.4 million have gone to work since the end of the recession, with 140 million Americans currently employed -- a new record. With all these new job entrants, the unemployment rate has dropped to 5.4%. This is no Hoover economy. But to make this point, Mr. Bush must use numbers on GDP and household employment. He must also stress personal income -- the best gauge of family spending power -- which is growing at a 5% pace. And he cannot be bashful about defending his tax cuts.

Mr. Kerry has already agreed with Mr. Bush on middle-class tax cuts. But when the senator from Massachusetts launches his class-warfare attack on tax cuts for the rich, Mr. Bush should inform debate watchers that taxpayers in the top 1% earn only 14.8% of the nation's income but pay 34.4% of individual income taxes. Similarly, taxpayers in the top 5% -- the biggest income losers during the downturn -- make a quarter of the income but pay over half the income taxes. Why not share tax relief with those who pay the most taxes?

Punishing successful earners and investors, as Mr. Kerry would do, is no way to grow an economy. Tax hikes on dividends and capital gains are nothing but tax hikes on the whole stock market and the 50% of households that own shares. And what good will it do to set up tax barriers for those who wish to climb the ladder to $200,000 salaries ($146,000 for single earners)? Mr. Kerry may say he likes jobs, but he doesn't seem to like the businesses that create them. By taxing capital investment more, business financing will shrink, as will the jobs that businesses create. (Who's the Hoover candidate now?) Mr. Bush will find that a few well-placed facts will go a long way in tonight's debate.

Mr. Kudlow co-hosts CNBC's "Kudlow & Cramer."

URL for this article:http://online.wsj.com/article/0,,SB109763214580043832,00.html

Who's the totalitarian?

I sometimes think of freedom as consisting of a trilogy: economic freedom, political freedom and civil liberties. The importance of preserving civil liberties often receives great emphasis. My take is that economic and political freedom are root and branch of the tree of liberty. Civil liberties are more of a blossom or flower. Complaints about the administration's real or imagined infringement on civil liberties while ignoring some groups attacks on free speech really miss this crucial point. It is particularly misleading when the President is compared to Hitler. The implication, I assume, is that somehow he is a totalitarian facist. This misses by a mile as the excerpt below demonstrates. (emphasis mine)

In this best of the web, James Taranto excerpts a Washington Post article.

The Democratic National Committee is attempting to use the McCain-Feingold campaign finance law to suppress a documentary critical of John Kerry. Sinclair Broadcasting, which owns 62 TV stations nationwide, plans next week to air "Stolen Honor: Wounds That Never Heal," which features interviews with former prisoners of war who feel betrayed by Kerry's antiwar activism. The Washington Post reports:

Sinclair's decision . . . is drawing political fire--not least from the Democratic National Committee, which plans to file a federal complaint today accusing the company of election-law violations. "Sinclair's owners aren't interested in news, they're interested in pro-Bush propaganda," said DNC Chairman Terry McAuliffe, whose complaint will accuse the firm of making an in-kind contribution to the Bush campaign.

If this is an in-kind contribution, what is "Fahrenheit 9/11"? How about Bruce Springsteen's pro-Kerry concerts, or for that matter newspaper editorials endorsing one candidate or another?

All these things of course are constitutionally protected free speech, as is "Stolen Honor." McAuliffe's complaint is frivolous, though it does underscore the absurdity of campaign finance laws that attempt to silence some political speech while carving out an exception for the media.

As well, it underscores the authoritarian nature of the political left when it comes to political speech. Liberals are quick to cry"censorship" when others merely criticize far-left or anti-American speech (remember the Dixie Chicks?), but they are eager to use the force of government to silence those with whom they disagree.

Who's the totalitarian?!

Nobel Prize for Economics and Tax Cuts

This years Nobel Prize for Economics went to Edward Prescott and Finn Kydland "for their contributions to dynamic macroeconomics: the time consistency of economic policy and the driving forces behind business cycles." These are two economists who have specialized in the area of how economic policy such as tax cuts affect the business cycle. Here's what Edward Prescott has to say about tax cuts:

Edward Prescott, who picked up the Nobel Prize for Economics, said President George W. Bush tax rate cuts were "pretty small" and should have been bigger.

"What Bush has done has been not very big, it's pretty small," Prescott told CNBC financial news television.

"Tax rates were not cut enough," he said.

Lower tax rates provided an incentive to work, Prescott said.

Prescott and Norwegian Finn Kydland won the 2004 Nobel Economics Prize for research into the forces behind business cycles.

The American analyst, who is a professor at Arizona State University and a researcher at the Federal Reserve Bank of Minneapolis, said a large tax cut in 1986 had lowered rates while collecting the same revenue.

But "in the early '90s the economy was depressed by the tax increase in '93 by about four percent, and it's right at that level now," Prescott said.

Bush, who is fighting to get re-elected November 2, has cut taxes by about 1.7 trillion dollars during his term.

The US leader accuses his Democratic rival John Kerry (news - web sites) of favoring tax increases, despite Kerry's promise to cut taxes for everyone earning less than 200,000 dollars a year.

So now we have an economist, who specializes in economic policy and won the Nobel Prize, who says that Bush's tax cuts were too small. There is now nobody with equal stature and specialization who takes the other side.

Bad News for Kerry

John Howard easily won re-election in Australia, even picking up a few seats. I think this makes life harder for Kerry for two reasons. First, Howard is a devoted ally in the War on Terror and a close ally of Bush. His re-election, as one of the groups described by Kerry as the alliance of the coerced and the bribed, makes it harder for Kerry to argue that Bush has no allies. Or, conversely, if Howard had lost, it would have provided a golden opportunity for Kerry to show that Bush had alienated even the Australians, our most loyal ally for the past 150 years. Kerry will now be unable to utilize that argument.

The second reason that Howard's re-election is bad news for Kerry is that the polls and media in Australia were predicting a very close race, with several of the them predicting a Howard loss. Instead, it was a strong Howard win.

The bloggers at Polipundit.com do extensive poll analysis and have shown numerous examples of polls and media predictions favoring democrats only to have the republicans do far better in the actual election. I've always taken their analysis with a grain of salt since they want Bush to win. However, in the light of seeing something similar occur in Australia, I'm begining to wonder. I'm not sure why this phenomenon exists, if it does, but it may be that the Left does better in polls and the media than they do in actual elections. That would imply that Bush is doing better than the polls are telling us.

The Bush futures contract on Tradesports rallied yesterday and today, perhaps reflecting the Australian election news. Of course, the elections in Afghanistan also occured yesterday and seem to me to be moderately successful, though it will take months before the full impact is known.

Good News for Kerry

Weak employment numbers in this mornings payroll survey as described by an Associated Press release:

Employment rises by 96,000 in September as jobless rate holds at 5.4 percent

WASHINGTON (AP) Companies added 96,000 jobs to their payrolls in September, fewer than economists forecast for the last employment report before Election Day. The figures underscored the modest hiring pace that has become an issue in President Bush's re-election bid.

The four hurricanes striking Florida and other coastal states the past two months appear ''to have held down employment growth, but not enough to change materially'' the overall jobs picture in September, the Labor Department said Friday.

The nation's civilian unemployment rate remained at 5.4 percent.

Job growth was weighed down by losses in manufacturing, retail and information services. September's net increase of 96,000 payroll jobs was less than August's rise, which was revised down in Friday's report from 144,000 to 128,000.

''I wouldn't want to be in President Bush's shoes. He had better prepare himself for an onslaught,'' said private economist Ken Mayland of ClearView Economics, noting Friday night's second presidential debate. ''The reality is that a 96,000 increase in a work force of a 131 million base is an anemic rise, and is in no way a satisfactory increase.''

The economy should be creating 250,000 jobs or more per month by now, he said. Economists predicted that about 150,000 new jobs would be added in September.

On Wall Street, the lackluster report pushed stocks lower. The Dow Jones industrial average was down 19 points in late morning trading, and the Nasdaq dropped almost 13 points.

With the new report, Bush heads into next month's election with a jobs deficit. Though 1.8 million jobs have been added to business payrolls in the past year, there are 821,000 fewer nonfarm jobs in the country than when Bush took office in January 2001. [...]

While very few people change their vote based on government statistics (and I personally view these particular statistics as practically meaningless), these statistics provide an opportunity for Kerry to hammer Bush in tonight's debate.

Perhaps that's why Tradesports' Bush presidential futures contract is trading down today, dropping below 60% chance of Bush winning. That's ironic because Donald Luskin has a column in the Nation Review Online that states:

Here's the record. From 1884 to 1940 -- the heyday of organized election betting -- there were 13 elections. In nine of them, the betting markets strongly favored one candidate by setting the odds at a 60% or greater probability a month before the election -- the favorite won in nine out of ten elections. Also, there were three very close elections, and the betting odds correctly put all three near fifty/fifty. For the remaining election, 1908, regulatory issues kept the betting markets from functioning until just before election day -- but the odds did call the winner correctly. [...]

Right now the election betting market makes George Bush the favorite to win re-election, with a probability of about 62%. That's above the threshold at which, a month out from the election, betting markets have only been wrong once in 116 years.

Today the dominant election betting market is Tradesports.com, a Dublin, Ireland-based web site where you can bet on all manner of sporting, political and current events. Presidential bets at Tradesports.com take the form of online futures contracts.

Now, of course the contract is below that threshold of 60% on the futures market, making it not such a sure thing that Bush is re-elected. In other words, Kerry's chances look better than they have in months. Bush is still favored, but maybe Kerry really is the strong closer everybody says he is. We'll see.

Environmental Extremism and Global Warming

"All radicalisms are variations on the story of Babel. They are people trying to reach heaven (or build a heaven on earth) by human means. That is why they end in such misery and horror. Leftism is a form of idolatry in which human beings worship themselves as though they were gods and saviors. I am an agnostic. I don't know whether God exists or not, but I do know that man is not God and that makes me a conservative." David Horowitz (FYI Horowitz uses the label "conservative" but most of his views are libertarian)

Socialism/Communism, Facism and nowadays an unbalanced environmental extremism are examples of radicalisms.

When I was a consultant inside EPA in the early 1980's there were some real "true believers" (Eric Hoffer). My understanding is that they have now overrun the place. An administration that challenges the bureaucracy and provokes them into finding some balance is doing a good thing, even if they are clumsy.

When it comes to environmental issues, global warming being an example, intellectuals are often in bed with leftist extremists. Everything is presented as a crisis that they will save us from...

As Thomas Sowell reminds us:

Sowell: There's something Eric Hoffer said: "Intellectuals cannot operate at room temperature." There always has to be a crisis--some terrible reason why their superior wisdom and virtue must be imposed on the unthinking masses. It doesn't matter what the crisis is. A hundred years ago it was eugenics. At the time of the first Earth Day a generation ago, the big scare was global cooling, a big ice age. They go from one to the other. It meets their psychological needs and gives them a reason for exercising their power. Many intellectuals' preoccupation with the poor is very much the same thing. The thing that gives it all away is that after they say, "We must have this program because the poor can't afford medicine, or can't afford housing," they will splutter if you say, "OK, let's have a means test so it really goes to the poor." If they were really concerned primarily about the poor, they would agree to it. But they are bitterly opposed to that, because the poor are a lever to reach other, political, goals.

Ironically, many of these intellectuals reject traditional religion and mock the blind faith of such little people but they adopt a blind faith of non-traditional beliefs related to the environment! Who knew that were actually so religious?

Here is an excerpt from a memo at the margin.

The reason I write to you about Dixy Lee Ray, who I would guess you never heard about, is that Mother Nature reminded me about her when it decided to stir up the volcano at Mt. Helens in the state of Washington. Dixy Lee, who died in 1994, happened to be governor of that state in 1980 when Mt. Helens erupted. Governor Lee, a marine biologist by professional training, had been chairman of the Atomic Energy Commission before she decided to go into elective politics and had a firm grounding in the physical sciences. What I remember about her now is a book she wrote, "Trashing the Planet," which debunked a number of myths about the environment. In it she had the following line: "The eruption of Mt. St. Helens in 1980 dumped more greenhouse gases into the atmosphere than all that has been released since the industrial revolution. Volcanoes have been erupting for millions of years with the same result. If this really effected climate, don't you think it would have happened by now?"

Here are more excerpts from another memo at the margin showing that our science was very corrupted long before GWB took office and why this is so!

I submit that if you took a fresh look with a fresh team, you would find the science is settled. Mankind does not contribute to global warming and the billions of dollars being spent by governments and the private sectors around the planet can be saved by admitting as much. Why? For well over a decade the global-warming computer models have been predicting higher temperatures and the satellites that measure the upper atmosphere find zero change. Revkin never brings this up, but instead points to temperature changes at ground level.

I've been so mystified about why this hoax is not buried for once and for all that I called Pat Michaels of the University of Virginia, who has been in the forefront of those scientists debunking global warming over the years. For goodness sakes, I asked, how is this possible? It's like we know the earth revolves around the sun, but there are still scientists, politicians, businessmen and serious journalists who are insisting it is the other way around. Dr. Michaels said: "I'm glad you asked. I've just written a new book, 'Meltdown,' that covers all the science and adds a chapter at the end to explain what's going on." Here are pages 237-241, which explain a lot. Please at least note the last paragraph:

The Predictable Distortion of Global Warming by Scientists, Politicians, and the Media

Chapter 12. Breaking the Cycle

This book details a natural process. As explained in Chapter 11, scientific paradigms compete with each other for a finite outlay of taxpayer funding. Paradigms, resistant to change to begin with, become even more calcified by the support structure that has evolved for science, largely a consequence of the federalization of science created by Vannevar Bush's Science: The Endless Frontier published in 1946. In this environment, scientists are rewarded and promoted in the academy largely on the basis of research productivity that must be funded from within existing paradigms. Those who do not support the existing paradigm are therefore not likely to be funded sufficiently for promotion. [...]

How do we stop this spiral of exaggeration?

1. Break the Government Monopoly
...
There is no way that science will ever be pure. Steven Schneider is right. Scientists are "human beings as well," and the way to take advantage of our humanity is simply to offer a wider choice of bias. That approach may not be pretty, but it is realistic.

As even a child would know and say, "well, duhhh!!!"

2. Change the Peer-Review Structure
...
Here's the modest proposal. Drop secrecy from peer review. Rather, at the end of each article, the reviewer names and institutions should be prominently featured, as well as highlights (just a few sentences) from the reviews. Right now the opposite situation persists. Not only are reviewssecret, but also some academic journals are so bold that they will allow an author to submit a list of reviewers that he or she would not want the article sent to, although editors are not bound to abide by their wishes.

3. Abolish Academic Tenure
...
Given the nature of modem science and its attendant biases, a person might be tempted to argue for strengthening the tenure system to protect individuals who may call attention to these issues. But that paradigm, too, has changed. The fact of the matter is that the academic world has increasingly evolved in a diverse fashion, with the proliferation of a large number of university-like environments of various philosophical hues. These include the plethora of think tanks that pride themselves on academic research, ranging in Washington from very liberal to very conservative, as well as "neither," which is to say libertarian (such as the Cato Institute, the publisher of this book). The scholar is now much freer to choose than he once was.More important, however, is that the tenure process in fact stifles dissent. Promotion and tenure are largely determined by academic publications that require massive research support, which mires the young scientist in the paradigm-political process. As long as the primary funding source remains a necessarily politicized federal monopoly, a lack of scientific diversity anda biasing in the lurid direction become predictable and unavoidable.

And the concluding paragraph in this chapter of the Patrick Michaels book:

The costs of inaction will be dear. Vannevar Bush's legacy is that science issues tend to be distorted by competition for a single federal source of funds. The resultant exaggerations become tiresome, and life goes on. Decades of doomsaying about global warming collide with decades of prosperity. People notice and increasingly disregard science and scientists, a process that has already invaded several aspects of our lives. That is the ultimate tragedy that this predictable distortion of global warming causes: A society that can no longer rely on the wisdom of science can only be governed by irrationality and fear.

Images

I think I finally have the capability to add images such as photos, drawings, and graphs to post. I'll store them at flickr (see new link on the sidebar) and link to them from here. I've wanted this capability for several other posts in the past and I'm sure I'll want it again in the future.

As a test, here is a virtual reality orange grove (actually a lemon grove with orange lemons):

Correction Regarding "Time to Dismount Your High Horses"

Oops. I definitely blew the math on that one. The data trends do show the effects of progressive taxation.

Total Terrorist Effectiveness

The doves claim that the Afghanistan war and especially the Iraq war are counterproductive. The concept is that these wars have greatly increased Arab humiliation and anger, and as a result, for every terrorist we've killed or captured, ten more take his place.

The hawks claim just the opposite. Arabs may be angered, they say, but the Islamic extremists attacked us because they thought we were weak and decadent. Like anyone else, Arabs prefer to bet on the "strong horse" so it's imperative that we show we're stronger than the terrorists.

Unfortunately, this is the wrong debate. It doesn't really matter how many terrorists there are. It only matters how effective they are cumulatively. For example, if our foreign policy causes ten times as many terrorists, but each terrorist is only a hundredth as effective, then that foreign policy is a resounding success. On the other hand, if our approach gets rid of all the terrorists but one, but that terrorist has a nuke and sets it off in New York or some other densely populated area, then that approach was a total disaster.

So, don't worry about how many terrorists there are. Think instead about the total damage that can be inflicted by the set of all terrorists as a result of our foreign policy. It's a much harder analysis, but at least it's a more useful question.

The Snooze Button

The Belmont Club writes:

Herbert Lottman, describing the last days of Paris before it fell to Germans in 1940 describes the strange mixture of urgency and lassitude, of obsession with long term schemes counterpointed by an indifference to the immediate in a nation that had just weeks to live. It was the perfect portrait of a country which did not know it was at war. Not really. The French Communists continued to call for "Peace Government" to mollify a Germany wronged by defeat in the First War. Parisian authorities forbade the private purchase of firearms by citizens anxious to protect themselves. Bread was rationed to 30 grams per meal at de luxe restaurants though 100 grams could be obtained at a bistro meal. The French cabinet pinned its hopes on more aircraft from neutral America as if they had any prospect of receiving any future shipments. Nero fiddled. Rome burned. When the Nazi columns finally marched into Paris, there was a widespread feeling of betrayal and a search for a scapegoat. But they had betrayed themselves.

9/11 was the wakeup call, we know we should probably get up and go to work, but it's so, so tempting to hit that snooze button. Yaawwwn! John Kerry is the snooze button. Oh, can't we just go back to sleep for four more years or so. Until the alarm goes off again - then we'll get up. We'll still make it to work on time, won't we?

I really like most of the Belmont Club's posts, but I think this one is a little too pessimistic. I think we're more lazy than divided. I think much of the intense mudslinging between republicans and democrats during the last ten years is more of a function of the democrats realizing they're soon to lose power forever and the republicans smell blood - they're so close to having a filibuster proof majority. You got more bipartisanship in the past when a party (in this case the republicans) were stuck as the minority party. Since they weren't going to win power and everybody knew it, they might as well be mostly cooperative. Once the democrats are the permanent minority party, cooperation will increase once again.

Hate Fatigue

Patrick Hynes writes in the American Spectator:

I believe I have stumbled upon one underpinning phenomenon driving this trend. I call it "Hate Fatigue." The theory is this: the Democrats wasted their hate for George W. Bush on movies, books, blogs, meet-ups, commission hearings, and protests over the last three years and they have just about run out of steam. And now that the election is upon us, their potent venom has run dry. [...]

If some voters are still undecided after learning that George W. Bush is actually Adolf Hitler, knew about 911 before it happened, and alternately has Osama bin Laden in secret custody and has no interest in apprehending him at all, what more information could John Kerry possibly give them to push them over the edge?

I wrote a tongue in cheek post about this earlier. But I've found this to be a really serious problem when I've talked to people who I've tried to convince to vote for Kerry. In fact, I've found it to be a far more serious problem than the blunders of the Kerry campaign. Each of the above claims has innoculated Bush and provided powerful protection against other, potentially more persuasive criticism.

Whereas I don't personally agree that Bush is worse than Hitler, I've followed the thought processes of those that do believe that, and I find that those thought processes are rational, given their underlying beliefs and assumptions about the world. However, the thread of logic leading to the Bush worse than Hitler conclusion starts from a different set of assumptions and beliefs about the world than those I hold, so I personally don't end up with the same conclusion. The majority of Americans don't hate Bush (his approval rating is greater than 50%) and also would not arrive at the conclusion that Bush is worse than Hitler based on their beliefs about the world and the information available to them.

That's not a problem in and of itself. People disagree on things all the time, yet remain open to persuasion in other areas. The problem with many of the meme's that the Bush hating left put forward is that they are so unbelievable and/or unpalatable to everybody else that they discredit other criticisms of Bush in the eyes of those who don't hate him. Even this wouldn't be devastating except for the sheer volume of such memes. People have been pelted by so many criticisms of Bush which they will not or can not believe, or which have been at least put into serious doubt (e.g., Dan Rather and his forged National Guard memos). At this point, everybody except the Bush hating left assumes that all criticisms of Bush coming from democrats and the left are suspect.

This situation has been compounded by the fact that many from the left consider anyone who disagrees with their conclusions as stupid and are very vocal in their insults. Even worse, many on the left are so frustrated with the rest of the "stupid" people that they are not even willing to engage in conversation with them.

So we have the left putting forth non-credible criticisms, calling everybody stupid for not believing them, and then refusing to continue the conversation about topics that might persuade voters to vote for Kerry. As a result, Bush has been successfully innoculated from criticism from the very people who most want to unseat him.

Re: Lets' get fiscal

I nearly completely agree with article posted by Howie. Indeed, I've posted similar articles to this very blog. Nonetheless, I've gotten questions from others regarding this subject matter that I haven't been able to adequately address.

Deficit spending stimulates the economy. There's little argument about that. So the fact the Bush's fiscal policies have been followed by robust economic growth is not surprising. It's also not surprising that during previous eras, when the debt has been "paid down", economic growth has been relatively anemic.

But the counter argument is that if we run high enough deficits for long enough, eventually we have to pay the piper, which means reducing (or at least not increasing) the debt as a percentage of GDP. This will require lower deficit spending, and therefore less stimulus, and therefore lower GDP growth rates. Thus, everything Mr. Verjee says is true, yet leaves this whole in his argument for deficit spending.

Howie, I was wondering if you had any comments, arguments, or observations regarding this counter argument.