Breaking News

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Budget Office Highlights Bush Deficit Disaster

Not much to add here. The Congressional Budget Office now reports that Bush’s budget plans would add about $1.2 trillion to the national debt over the next decade. The New York Times has a report here: Bush Plan Would Raise Deficit by $1.2 Trillion, Budget Office Says

The only thing we have going for us here is that Bush has lost so much support amongst Republicans that his budget plan is never going to see the light of day. The problem is that these same spineless Republicans, who are so keen to fall into line over things like the (un)Patriot Act, have no alternative plans. These are the fools who voted in all those tax cuts, along with the biggest spending spree in the country’s history (remember the bridge to nowhere?). They can hardly claim to be heroes trying to hold the red ink at bay.

Dick Cheney may be right when he says that deficits don’t matter, at least in the short run, but where he has it all wrong is when the sea of red ink now washing over America stops it doing things it mights want to do. There just isn’t enough money to have the size defense (offense?) spending the Republicans love to have and simultaneously have those social programs. Something’s going to have to give.

There’s a budget crisis just over the horizon and the Republicans deserve all the blame.

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Can Condi Read?

Just asking. This is liberating, I can say whatever I want about Condi Rice without any fear of reprisal because she won’t read it. I don’t think she reads anything. So here goes: Condi Rice is fat! There I said it. Now let’s wait for the response ……. nope nothing.

Just a little fun at Condi’s expense. But why am I so certain she doesn’t read? Take a look at this:

“I don’t know anyone who wasn’t caught off guard by Hamas’ strong showing,” said Secretary of State Condoleezza Rice, referring to the landslide victory of the Islamic Hamas party in the January 25 Palestinian elections. Hamas won 76 out of 132 seats in the Palestinian legislature, compared to 43 seats for the ruling Fatah party.

“I’ve asked why nobody saw it coming and I hope that we will take a hard look, because it does say something about perhaps not having had a good enough pulse on the Palestinian population,” she told reporters on January 29.

The problem is that her own State Department’s intelligence analysts predicted exactly that Hamas was so popular that it could win an election. Here is what they said in a January 2006 pre-election assessment:

“When the parties [Hamas and Fatah] are directly compared, likely voters tend to see Hamas as more qualified to clean up corruption, resist occupation, and uphold societal values”

That’s pretty clear. How about this:

“A lack of hope in the peace process may also contribute to support for Hamas. Likely voters who have little or no hope that there will be a peaceful resolution to the conflict clearly prefer Hamas (30%) to Fateh (12%).”

Or this:

“The likely success of Hamas at the polls reflects the long-term rise of public trust in the party. The proportion in the January survey who say they trust Hamas matches the historic high of 27%, first seen in spring 2005, and represents a 6 point increase since November.”

Now none of this actually predicts a Hamas win, but you’d have to be pretty thick not to get the idea that a Hamas win was possible. And our Condi’s not thick.

Clearly she just doesn’t read.

BTW: Thanks to Secrecy News at the Federation of American Scientists Project on Government Secrecy for the quotes given above!

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Returns to Education … a Myth?

I feel I should comment very briefly on the rising debate about “returns to education”. The issue is that, for a few years, the accepted wisdom has been that the American economy has become subject to a widening meritocracy. Workers who have an education are widely reported to earn significantly more than their less educated fellow workers. This position has gone largely unchallenged. Indeed, the opposite is true, the value of an education is taken for granted: these supposed “returns to education” [in economist speak!] are used to urge us all to encumber ourselves with ever more expensive education, and to encourage socio-economic policies that favor so-called knowledge workers over and above other workers. In many ways returns to education have become a rallying cry for advocates of the post industrial globalized economy that we find ourselves entangled in.

There are problems with the argument that are only now surfacing.

First, there is the small problem of education cost inflation. Most of the studies that purport to prove that educated workers outearn their compatriots are dated. They were conducted before the prolonged run-up in education prices we have seen over the last decade. Education costs have surged way ahead of earning power, so we can assume safely that the earning advantage has been eroded somewhat, if not eliminated at least temporarily. Further, the run up in costs has not discernibly been associated with a concomitant improvement in education quality: we are paying far more for the same old thing which implies a drastic loss of productivity in the education sector.

Second, the laws of supply and demand presumably still apply to educated workers: as people became more aware of the advantages of education [real or not], more of them pursued an education. This created a flood of educated workers. The question then to be asked is whether the economy generated enough jobs to absorb this new supply, or is there now an over-supply which would result in the bidding down of the returns to education? Anecdotal evidence suggests the latter.

Third, there is now new research to show that the empirical evidence was misinterpreted. Returns to education, it seems, are heavily concentrated on the very highest educated. Those with sophisticated educations from better quality schools gain a disproportionate share of the returns. This is intuitive. All those Ivy Leaguers are clearly getting better returns than their community college friends, and the post-grads are getting more than the B.A. crowd. So there is a return to education, but it is focused on the very top of the tree. For the rest the effort and the expense are scarcely worth it: wages for college graduates have barely risen over the last few years.

So is a policy to encourage education misleading? I don’t think so. I have to agree that America will need to compete more on its guile than on its brawn as globalization removes many of the advantages it was able to hide behind before. This means making sure that its workforce is competitively educated. But will this mean that the workforce will be better off because it is educated? Not necessarily. Unregulated consequences of globalization will enable a small elite to garner most of the returns: they are the cosmopolitan, “trans-national” types [e.g. the New York – London bankers and fashion designers etc who we call ‘NYLONS’!] who have skills in demand world wide. Globalization will put downward pressure on general wages for years to come . The educated middle class will not be immune to that pressure. So returns to education, a concept we adopted because it appeared to be true during the immediate post World War II era, will most likely be diminished for the majority, but enhanced for the few. Sounds like a lot of other things going on around here.

Lucky few!

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Incompetence

The more I think about it the more I conclude that the malaise the current administration finds itself in is due to ineptitude rather than malice. Sure many of its policies have had a hard anti-social edge: cutting health care payments to poor children can hardly be postioned as pro-social, even this regime’s spin masters would have a hard time with that. No, I am beginning to think that the nation’s problems stem from incompetence. There is a rot in our government that starts at the very top.

The Iraq war was started for all the wrong reasons: we were duped because we allowed ourselves to be driven by fear instead of our ideals. We were exploited. The Bush regime recklessly went looking for a fight to divert our attention away from its failure to bring bin Laden to heel. Bush’s complete incompetence then took over: he deliberately ignored anyone who dared question whether he had thought through the consequences of his actions. He particularly scorned anyone who suggested that the war would open up more problems than it solved. He simplisticly followed the rosy advice of his neo-con advisors. He was naive and stupid. The mire that is now Iraq is Bush’s to own. As Powell said: “you break it you own it”, and boy, does Bush own it.

Then there is Katrina. We now find out, via the video tape of a briefing session held before the storm hit, that he was completely aware of the situation, including the threat to those infamous levees. As a result we know he lied when he said that “no one could have predicted the failure of the levees”. He heard what we heard on the video tape: the failure was widely discussed as a strong possibility. We now know that his Homeland Security team was more interested in making Power Point presentations about organization charts than about disaster relief planning. We know that no one dared tell him the truth lest they be tarred as unpatriotic pessimists. And we saw, on the video tape, his complete disinterest in events: he failed to ask a single question. He had nothing to add to the discussion. He made no comment on the brief being given to him. He provided no leadership, no guidance, no insight, no energy, no anything. He disappeared right at the onset of one of the nation’s biggest natural disasters. He became a dwarf when we needed a giant. Nothing could so effectively strip him of the mantle of “wartime leader” than this video taped vapidity.

Then there is the recent prescription drug plan. The pattern is the same: critics are scorned, pragmatists are laughed at for being naysayers, experts are ignored, rosy scenarios are adopted and no effort is made to work for or on behalf the people, in this case the elderly infirm. The result: a completely fouled up execution of a willfully rotten piece of legislation.

No. This man deserves his place at the very bottom of the heap. His actions, rather than his words, are his measure. His monument is one of unrelenting and uncaring incompetence. He is in way over his head. Hopefully the body politic can withstand his presence at the helm for the rest of his term. Mercifully we will be done with him in a couple of years. Given his lack of popularity and inability to change he has made himself irrelevant. Let’s hope he is sufficiently stupid to stay that way, lest he does more damage before he goes.

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Fed Report on Family Incomes

For those of you who follow these things the Federal Reserve Borad has just published a report based on the 2001 and 2004 surveys of family incomes. The report can be found here: Board of Governors of the Federal Reserve System

The headline making nugget of information is that average incomes, after inflation, fell 2.3% between 2001 and 2004 to $70,700. Meanwhile the median rose slightly, by 1.6%, over the same time to $43,200. The good news is that the median level of net worth rose slightly also: up 1.5% to $93,100 [although that rise is dwarfed by the 10.3% gain during the period 1998 to 2001].

This is a depressing result given that the economy has generally performed well over that same period. It is more evidence to support the notion that the Bush administration has skewed things away from returns on wages and salaries towards returns on capital. Which is great if you own tons of stock, but isn’t if you work for a living.

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