The Sky Was Yellow and the Sun Was Blue

Since the election of GWB and the administration's application of the philosophy deemed "compassionate-conservatism" by the practitioner-in-chief (i.e., Big-G Republicanism), the Republican Party, or the conservative-wing thereof, has all but abandoned it's limited government and quasi-libertarian roots. As I've been saying for quite some time, the Bush-Rove-Republicans are the antithesis of the Goldwater/Reagan party. So it goes. Two articles in this week's Newsweek present two more stark examples of the current upheaval, or inversion, taking place within and between the 2 parties.

Fareed Zakaria contrasts the foreign policies of McCain and Obama:

...[w]hat emerges is a world view that is far from that of a typical liberal, much closer to that of a traditional realist. It is interesting to note that, at least in terms of the historical schools of foreign policy, Obama seems to be the cool conservative and McCain the exuberant idealist...

George Will takes the Bush administration to task on its recent devotion to New Deal-like economic bailouts:

Today's conservative corporatism of the Republican administration might "work," meaning it might minimize the duration of, and damage from, the current crisis. It is, however, complicating McCain's task of depicting Obama as a reckless enlarger of government. McCain is losing recourse to conservatism's core message about the rationality of governmental minimalism that allows markets to inflict their rigors.

Perhaps this only means there are no longer any real philosophical differences between the 2 major parties; but, rather, only a matter of degree. Bleh.

The Warrior

Johnny Mac, in his own words:

Barr on Judicial Appointments

BB on McCain's judicial philsophy in the WSJ.

An Economist's Wish List

The NY Times has published an eight-plank platform (drafted by American Economic Association) designed to attract economist voters:

1. Support Free Trade

2. Oppose Farm Subsidies

3. Leave Oil Companies and Speculators Alone

4. Tax the Use of Energy

5. Raise the Retirement Age

6. Invite More Skilled Immigrants

7. Liberalize Drug Policy

8. Raise Funds for Economic Research

Moral Hazards and Corporatism

This WSJ piece on Freddie and Fannie is a must read. The current debacle is a classic example of the problem created by state interventionism into the economy; and now "we" have created a situation with no good outcome.

Tom Smith's commentary seems pretty much right on:

There is so much wrong with the setup now it's hard to know where to start. Because F and F have their special status as GSE's, they have crowded out the private market players and grown to monstrous size. This means you have poor institutional diversification. Instead of many banks financing our houses, you have two gigantic ones. They get cheap, subsidized money because they are GSEs and use it to buy risky assets, and so have a money printing machine. What a deal! Except the risky assets were mispriced because the risk was poorly understood, but why should F and F care since they are not really spending their own money anyway. They are not subject to SEC rules and generally nobody knows what the heck their portfolio is worth anyway, and nobody's too worried anyway. Everybody is willing to play along because we all know the US Treasury stands behind them, except that it is a $5 trillion (or more?) off balance sheet debt for the federal government, probably the biggest off balance sheet liability in the history of the universe, barring profligate ET's we don't know about. They're probably up there in their flying saucers, throwing down Antarian roobles on when the shit is going to hit the fan.

As a first approximation, you could do something like give all the equity holders of FF (that's Fannie and Freddie) debt junior to the outstanding debt, and make the US government the 100% shareholder. Then set up a board under a special charter subject to the supervision of the Fed, the SEC and the Treasury, so nobody gets too powerful, especially not the Fed, which is a scary bunch. Perhaps establish by statute some status for the debt such as "Not guaranteed by the United States, but in fact, actually, fully guaranteed by the United States," and let the market sort it out. Just kidding on that. I really think it has to be fully guaranteed, at least for now, until some privatization scheme can be worked out, in the post-Obama era, around 2017 or so. But how to move to a full guarantee without making T-bills look like the fully subordinated notes of Rub-A-Dub Car Wash, I don't know.

So just to sum up, what we have here is a gigantic federal program nobody authorized to lend mind-boggling amounts of money we don't have for people to buy houses they could not afford.

Damn Thee Masters of War

Whatever happened to the anti-war Right?

Christopher Hitchens on Waterboarding

From the pen of true-believing neo-con:

1. Waterboarding is a deliberate torture technique and has been prosecuted as such by our judicial arm when perpetrated by others.

2. If we allow it and justify it, we cannot complain if it is employed in the future by other regimes on captive U.S. citizens. It is a method of putting American prisoners in harm’s way.

3. It may be a means of extracting information, but it is also a means of extracting junk information. (Mr. Nance told me that he had heard of someone’s being compelled to confess that he was a hermaphrodite. I later had an awful twinge while wondering if I myself could have been “dunked” this far.) To put it briefly, even the C.I.A. sources for the Washington Post story on waterboarding conceded that the information they got out of Khalid Sheikh Mohammed was “not all of it reliable.” Just put a pencil line under that last phrase, or commit it to memory.

4. It opens a door that cannot be closed. Once you have posed the notorious “ticking bomb” question, and once you assume that you are in the right, what will you not do? Waterboarding not getting results fast enough? The terrorist’s clock still ticking? Well, then, bring on the thumbscrews and the pincers and the electrodes and the rack.

Entire must-read article here.

Patronage

Will Wilkinson on federal back scratching:

After the tech bust of 2001, incomes in Silicon Valley and New York City drifted closer to the national average, and inequality between American counties declined. But then with the advent of the Global War on Terror, the District of Columbia and surrounding counties began to enjoy outsized gains in average incomes.

So far, the "military-industrial complex" is the one clear winner in what has been a $1 trillion war. But it's not only security and defense contractors, and the lobbyists who love them, who've been pulling ahead on the taxpayer dime.

According to the U.S. government, compensation for the average federal civilian worker in 2005 stood at over $106,000. That's double the average for private workers. That's top 5 percent of the personal income distribution. And average wages for a federal worker rose 5.8 percent that year, compared to a 3.3 wage hike in the private sector.

But who knows? Maybe all these new federal office buildings really are hives of extraordinary productivity. In San Jose, they make software, in Detroit, they make cars, and here in D.C., we make memos about meetings about regulations -- very efficiently. Maybe we Washingtonians deserve our good fortune.

Politics is a dirty game. Will BO clean the place up? I'm sure that none of his 1.5M donors expect any sort of quid pro quo.

Gramm on Stuff

Phil Gramm on CEO-pay:

In economics, we define labor exploitation as paying people less than their marginal value product. I recently told Ed Whitacre [former CEO of AT&T, who retired with a $158 million pay package] he was probably the most exploited worker in American history because he took Southwestern Bell, which was the smallest of the former Bell companies, and he turned it into the dominant phone company on earth. His severance package should have been billions.

[There is] a lucrative premium for talent. When we were all hunters and gatherers, and you were better with a bow and arrow than I was, there were limits on how much more game you could kill than me. Today, CEO decisions about whether to acquire or not acquire a company, to shut down one part of the company or not shut it down, get into a market, get out of a market, where those decisions mean billions of dollars, is it surprising that people are willing to pay tremendous amounts of money for people who make those decisions right?

And on the primary problem with the US Economy:

Now many of the largest IPOs in the world are occurring on other markets. In the six years that I have been a banker, I have seen decisions made to open functions in London rather than New York because of a better regulatory climate. Every American should worry a lot about this. We have benefited enormously from New York being the financial capital of the world because we had a more efficient regulatory structure than other nations did.

We can't possibly compete with a 35% corporate tax rate that is so punitive that if a company opens a plant in Ireland it costs them a billion dollars less than in the U.S. over 10 years because of the difference in corporate taxes.

Why is America the richest country in the world? It's not because our people are more brilliant; it's because we have a better free-market system. Why has Texas created 1.6 million jobs in the last 10 years whereas Michigan has lost 300,000 jobs and Ohio has lost 100,000 jobs? Because governance matters, taxes matter, regulation matters. Our opponents in this campaign are so dogmatic in their goal of having more government because they love the power it brings to them that they're willing to let it impose costs on the working people that they say they want to help. I am not.

Sounds right to me (on everything other than John McCain). Whole fabulous piece here.