Paul Ryan: No Rubber Stamp Debt Ceiling Increase

January 6th, 2011

Many or even most Congressmen are conscientious after a fashion. However, the most important skill set for re-election is not wonky immersion in policy details, but the ability to walk into a crowded room and create an immediate rapport with constituents. While some politicians nurture core beliefs or at least dispositions, they often rely on aides and especially a few fellow Congressmen who have the aptitude and the seriousness to study policies in detail. Representative Paul Ryan (R-WI), now Chair of the House Budget Committee, is one of the followed Congressmen.

This afternoon, Paul Gigot, Chief of the Editorial Board of the the Wall Street Journal interviewed Congressman Ryan at the National Press Club in a forum sponsored by and the Manhattan Institute

The reader can obtain their own impression of the exchange by viewing the interview on C-SPAN. However, it was clear that Representative Ryan believes that substantive budget discipline can only be obtained if President Obama compromises. This is in not likely to happen. Hence, much of the work of this Congress will be to set the stage for Americans to make a choice in 2012.

The first real test between the President and Congress will occur when the debt ceiling has to be increased this spring. While it is clear that no one wants the US to default on its debt, Ryan says that Congress will not be a “rubber stamp.’’ There will not be a naked debt ceiling increase bill. Any bill that increases the debt ceiling will include as many spending concessions as Congress is able to negotiate

Gigot reminded Ryan of the fact the government shuthown in 1995 backfired on the Republican Congress and in large measure guaranteed the election of President Bill Clinto. Doesn’t this mean that Congress is likely to blink in any budget showdown. Perhaps the one bit of news this afternoon, is that Ryan suggested that Congress willl pass a debt ceiling increase bill with budget cuts and try to arrange it so that President Obama will either have to sign the ceiling increase or he will shut down the government. Unlike 1995, Ryan believes people understand that budget discipline is needed now to forestall greater austerity in the future as the Baby Boob generation retires.

If experience ins any lesson, Ryan and Congress will not be able to phrase the budget question to their benefit. The press will be happy to make it appear that it is Congress that is holding the government hostage. The best the Republican Congress can hope for is to make it clear that Obama refuses to cut the budget.

Keep Your Hands Off My Social Security

January 2nd, 2011

He who permits himself to tell a lie once, finds it much easier to do it a second and third time, till at length it becomes habitual; he tells lies without attending to it, and truths without the world’s believing him. This falsehood of the tongue leads to that of the heart, and in time depraves all its good dispositions. — Thomas Jefferson, 1785.

Last year during the protests by the Tea Party, some on the Left smugly mocked the protesters who wanted the government to keep their hands off their social security. At face value, this appeared to be hypocrisy or stupidity. On one hand, one of the key themes of the Tea Party is limited government. On the other hand, some Tea Party followers wanted to make sure that the government program they benefited from was unaffected by any new government action.

However, the confusion of some of these protesters can be traced to the fact that they have bought into the government’s myth of Social Security. It is not portrayed as an income transfer program paid for by taxes, but rather as a social insurance program into which people invest, much like any retirement program. Many social security recipients are convinced they are just getting out what they put in. Hence, they believe they own the same proprietary interest another person might have in their 401(k) investment. The Roosevelt Administration and successive administrations have deliberately cultivated this view of Social Security so that people would not feel that it was an income redistribution program which might loose popularity. The government wanted Social Security recipients to feel an entitlement to the payments rather than the an embarrassment about being beneficiary of welfare program.

While the Franklin Roosevelt Administration described Social Security one way in public, they were forced to argue something else entirely in court. The Federal Government does not have the Constitutional authority to institute a mandatory social insurance program, so they argued that payments into the social security system were really taxes. Even so, it was not clear that the Federal Government had the authority for this tax. In Helvering v. Davis an intimidated Supreme Court acquiesced to this large increase in Federal power.

At present, there is a similar misrepresentation about the nature of the medical reform package passed last year. During the 2008, presidential campaign, then Senator Barack Obama made a “firm pledge” to not raise taxes on those making less than $250,000 per year.

The final medical reform legislation included an “individual mandate’’ compelling people to pay for some form of health insurance. In an seminal interview George Stephanopoulos challenged President Obama on whether this mandate constituted, in effect, a tax increase on those at all income levels, including those making less than $250,000. Here is the exchange:

STEPHANOPOULOS: That may be, but it’s still a tax increase.

OBAMA: No. That’s not true, George. The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase…

Recently, there have been a number of suits challenging the constitutionality of the individual mandate. The Administration has now argued in court that the mandate is essentially an exercise of Congress’s power to tax.

If a policy requires one public face and a contradictory legal argument to buttress it in court, even if wise, such a policy serves to undermine trust in government and weaken the moral authority important for the implementation of that policy.

Economic Statistical Hackery

December 19th, 2010

Economies are gigantic beasts, growing, shrinking and wreathing in sometimes unexpected ways. Government policies can have a profound effect on employment and growth, but the best policies can be thwarted by external effects or the natural business cycle. Similarly, the winds of growth can mask even the poorest steering of the ship of state. Part of the skill of political operatives is to spin economic statistics to make political opponents look foolish and political allies appear wise. The creative use of economic statistics is often internally inconsistent and often unintentionally humorous.

A comparison of the Democratic rhetoric during the President Bush and President Obama Administrations is illustrative. The graph below shows the actual non-farm payroll from the tail end of the 1990’s to the present.

A equitable description these data was that strong economic growth during the Clinton years drove employment numbers steadily upward. This growth was buttressed by the Internet “Dot Com’’ boom. This boom collapsed at the end of Clinton’s term. During the early months of the Bush Administration, a recession began. The recession was exacerbated by the uncertainty following the 9/11 attacks. Whether because of the Bush tax cuts or not, a couple of years later employment, a lagging economic indicator began a steep rise. This rise continued unabated until 2008. The severe financial crisis associated with collapse of the housing market and credit default swaps initiated the steep decline we are in now. When President Obama came into office we were still in a steep decline. The employment numbers stopped their drop, but there has yet to be significant increase. Whether Obama’s policies accelerated or abated this decline is not directly answered by the graph.

Judging presidents by the change in economic conditions as measured from the moment they entered office is usually not fair. Most times the earliest time a president can directly impact an economy is his first year budget, which will not go in effect until October following inauguration in January. New tax law usually does no go into effect until the following January. The consequences of the policy will take some time to be felt through the economy. Even though Barack Obama had his stimulus package enacted in February after inauguration as an emergency measure, one would still expect there to be some lag time before effects are observed.

In light if the graph above, it is interesting to return to 2003 to see what Democrats were saying about Bush’s economic policies. According to the Democratic Senate Staff Budget Committee:

“Under the Bush administration, we are seeing the slowest economic growth of any administration in 50 years. Economic growth has averaged an anemic 1.6% since the President took office.’’

Measuring, as the Senate Staff Budget Committee did, from the beginning of the Obama Administration as the Democratic Senate Committee, we could note that the Obama Administration achieved even slower growth average of 1.3%.

That same committee wrote in 2003:

“Disturbingly, 3.1 million private sector jobs have been lost since January 2001, and more than 300,000 jobs have been lost in five consecutive months of decline from January 2003 to June 2003. Between January 2001 and June 2003, the unemployment rate has climbed by 2.3 percentage points. The Bush administration is on track to be the first administration in 70 years – since Herbert Hoover during the Great Depression – to experience a decline in private sector jobs over its term in office.”

If we were to indulge in similar hackery we could accurately write that: Under Obama, the unemployment rate as climbed to a high of 2.4% above what is was when he entered office and remains 2.1% above what he inherited. A total of 3.9 million jobs have been lost (more if we count only the private sector). The US will have to experience extraordinary economic growth for the Obama Administration to achieve a net increase in jobs over this term.

Perhaps it is unfair to pick on the Democrats in this regard, except for the fact that they often generate the factoids that are picked up uncritically by the press. The Democratic Senate Staff Budget Committee was certainly aware that they were deliberately spinning the facts in an unfair way. There is no excuse for such hackery for either party.

Palin Derangement Syndrome Spreads

December 12th, 2010

In his book Up From Liberalism, the late and sainted William F. Buckley observed that most liberals were sane and nobel souls, unless one struck upon their mania. He wrote, “that in most respects the Liberal ideologists are, like Don Quixote, wholly normal, with fully developed powers of thought, that they see things as they are, and live their lives according to the Word; but that, like Don Quixote, whenever anything touches upon their mania, they become irresponsible. Don Quixote’s mania was knight errantry. The Liberals’ mania is their ideology.’’

In the last Administration, commentator and lapsed board-certified psychiatrist Charles Krauthammer coined the term “Bush Derangement Syndrome’’ (BDS). This new Liberal mania, as defined by Krauthammer, is “the acute onset of paranoia in otherwise normal people in reaction to the policies, the presidency — nay — the very existence of George W. Bush.’’ This condition is probably rooted in lingering anger over the perceived lack of legitimacy with regard to Bush’s presidency. Bush was never forgiven for winning the 2000 election with a majority in the Electoral College, but not in the popular vote. This anger and BDS persisted, indeed intensified, after Bush won the presidential election over Senator John Kerry, this time with a popular majority as well.

There now appears that some Liberals are suffering under an analogous “Palin Derangement Syndrome’’ (PDS). The best guess is that this mental condition is the result of the fact that Governor Sarah Palin is an attractive women, who has clearly managed to juggle successfully work and a family, is a Conservative Republican. This fools the internal barometer of Liberals who believe that such women are the natural constituency of Democrats. Their only explanation is that she must be an hick from the sticks. She had no right to run for vice-president.

One measure of the severity of this condition, is how normally clever and learned people make foolish mistakes whenever the subject of Sarah Palin comes up. For example, Richard Wolfe, MSNBC commentator and Oxford graduate made smug fun of the statement by Sarah Palin that she receives divine inspiration from reading C. S. Lewis. Perhaps Wolfe had forgotten that Lewis was a famous though deceased member of the Oxford faculty. Perhaps Wolfe had forgotten the Chronicles of Narnia was not just a series of children’s book made into modern moviesbut a religious allegory. Perhaps Wolfe had forgotten that C. S. Lewis had written Mere Christianity a classical work of Christian Apologetics. The only plausible explanation is that in his hurry to prejudge Palin as somehow shallow he reveal that he was only up to his ankles in the literary pool.

Not be out done, MSNBC’s Chris Matthews dissed Palin for reading for the news. (He excused her for reading the Wall Street Journal.) Though Newmax has a clear, strong Right-ward tilt, it is no further Right than MSNBC is Left. Moreover, if Matthews ever ventured to the Newsmax site, he would realize that a large section is devoted to straight AP News releases. I dare say if one read only Newsmax daily, they would likely be better informed than if they only watched MSNBC.

One may like or dislike TLC’s television series Sarah Palin’s Alaska but the Huffington Post’s Aaron Sorkin, famous for his production of the Left-wing fantasy television series West Wing can’t distinguish Sarah Palin hunting a caribou from a “snuff film.’’

Now I am sure that Wolfe, Matthews, and Sorkin are smart likable people who even pet their dogs at night when they return home, but Palin has made them bananas. The irony in all this is that such symptoms of Palin Derangement Syndrome are likely to make Palin more popular. Nothing pleases Conservatives so much as see Liberals angry and befuddled and Palin seems the bring those qualities.

Unemployment Unabated

December 5th, 2010

The unemployment rate is a lagging economic indicator. When the economy enters a downturn, employers are reluctant to let go of workers. As the economy recovers wary employers, the pain of releasing workers still fresh, are slow to re-hire until they are certain the economy is in recovery.

The unemployment rate is also affected by the fact the only workers who are actively looking for employment are counted. As the economy picks up, more formerly discouraged workers enter the labor pool. Ironically, a recovering economy, in the short term, can face increased unemployment rates.

Despite these caveats, the current monthly increase to unemployment to 9.8% is worrisome, and suggests that current economic policies are not sufficient. Unemployment rates seems flat with little signs of significant reductions in the near future. Current employment rose rapidly in 2009 about has remained stubbornly high for about two years. Usually, when the unemployment rate rise quickly, it retreats quickly. This is not the case for this recession.

Consider the included graph. It represents the monthly unemployment rate for the current recession and the last recession with similar unemployment rate in the early 1980s. We have shifted the time so the month 17 represents the peak unemployment rate. The current recession has shown a flat unemployment rate, while at this point in the recession of the early 1980s, the unemployment was rapidly falling.

By most measures, the recession of the early 1980’s occurred under less favorable economic conditions. Inflation was at double digit levels. To reduce inflation the Federal Reserve had to impose double-digit interest rates. Currently, both inflation and interest rates are at historically low rates. The economy ought to be primed for a much faster rebound than occurred in the 1980’s.

The difference is that in the 1980’s recession, President Ronald Reagan slashed taxes and tried to easy regulatory restraints on growth. By contrast, the current Administration simply spent nearly $1 trillion dollars and focused its attention to health care reform. Whatever, the merits of the Democratic health care changes, its institution during a recession has introduced so much uncertainty that hiring for small businesses has been frozen.

If newly elected Republicans can manage to keep tax rates low, and at least mitigate the worst effects of Obama’s health care legislation, they may help the economy sufficiently recover that it will insure an President Obama re-election. If the Left has its way, and tax rates increase and spending continues unabated, and “Obamacare” is implemented unchanged a one-term Obama presidency will probably be secured.

Freedom and DNS

November 28th, 2010

Any time the Motion Picture Association of America, the US Chamber of Commerce, and the Screen Actors Guild agree on a piece of legislation, it is time to grow concerned. On November 18, the Senate Judicial Committee reported out the Combating Online Infringement and Counterfeits Act (COICA) to the full Senate for consideration, by 19-0 vote. The bill represents an overt disregard for due process, probably violates the First Amendment, and is an embarrassing surrender to monied interests.

The COICA grants the Attorney General the discretion to determine if the primary purpose of a website is the illegal distribution of copyrighted material and to force Internet service providers (ISPs) to remove the site from domain name servers (DNSs). A DNS is the service that maps the name of a site to its IP address. For example, if you want to visit the web site to find a copy of this malicious bill, your computer asks a name server what the IP address for this site is (in this case Your computer then connects using this number. Without DNS services most people would not be able to find the sites they are interested in.

The bill is wrong on many levels and at best will only make it difficult for innocent non-copyright infringers to navigate the Internet. First, the COICA grants authority for the Attorney General to punish the owners of a site without any judicial determination of wrong doing. The rough equivalent would be if the Attorney General could arbitrarily remove your listing out the phone book or refuse to grant you access to highways without bothering to have to prove to a court that you had committed a crime.

One can conceive of useful sites like Dropbox that let people share files for legitimate purposes being effectively unreachable if an Attorney General decides that such sites are too useful for copyright infringers. The genius of our democracy is that does not allow individuals such summary authority. The COICA ignores this principle.

Removing a site’s DNS listing might make it difficult for average people to find the site, but IP addresses could easily be transferred between people serious about illegally passing around copyrighted materials. The bill would not even be effective at stopping the most serious part of the problem it is purported to alleviate. It is the honest who will be most inconvenienced.

Perhaps most significantly, without a judge in the process, an unscrupulous Attorney General could effectively silence a site to the general public by using charges of copyright infringement as an ostensible excuse. It is, therefore, not likely that the bill would survive First Amendment scrutiny, especially in an age when more and more content is moving to the Internet.

Oregon Democratic Senator Ron Wyden has said that he will block the bill from coming to a vote this year, so perhaps the bill’s submission to the full Senate was just a costless way for Senators on the Judiciary Committee to offer up a bill for powerful constituencies. If this was their motivation, we should not be quick to forgive them. Rather than engaging in pandering, the Judiciary Committee should be especially sensitive about such overreaching bills

There are already legal and effective remedies available to stop copyright violations. The First Amendment and the principle of “innocent until proven guilty’’ should not be scarified at the altar of the Motion Picture Association of America or even the US Chamber of Commerce.

Palin’s Problem

November 21st, 2010

It is hard for Conservatives to not like Sara Palin. It is not so often that there is such a match between Conservative ideology and charismatic appeal. Sarah Palin is a political rock star. She demonstrated this by her ability to raise funds and draw crowds for candidates in the mid-term elections a few weeks ago. Though the historic Republican sweep cannot be said to be her doing (there was substantial help from President Barack Obama and Speaker of the House Nancy Pelosi), Palin deserves credit for vigorous labor on the behalf of candidates. She certainly was able to make substantial deposits in her bank of political favors, ready for withdraw later.

It is also easy for Conservatives to feel protective of Palin. She has been unfairly depicted as being a dim bulb by people of limited wattage themselves. This line of political attack is part of a broader critique of middle-class America by the self-anointed elites of the blue states. However, is precisely because Palin has been somewhat successfully caricaturized as unserious that she should spend more time as a policy wonk and less as a lightning rod.

Palin should learn from the experience of Ronald Reagan. He changed careers from actor to politician, and was dismissed as “just an actor’’ for his entire political career. Overtime the criticism lost its saliency because Reagan led a large state for eight years. Palin unfortunately withdrew from the governorship of Alaska, probably for personal financial reasons. The decision may benefit her family, but not her prospects for higher political office.

Reagan spent years providing regular radio political commentary where he thought through his ideas and nutured his political voice. Sarah Palin has exploited the new social media with a presence on Twitter and Facebook, but in not quite the correct way. She needs to twitter less, and use Facebook more as Reagan used radio.

Palin would be well-served by thinking through and regularly writing serious political pieces on Facebook and perhaps even delivering her ideas on a regular podcast. Palin has the star power, she needs to persuade others that she can back up with policy credentials. She should use social media in much same way as Congressman Paul Ryan does: less for political attention and more for explaining ideas. The public elected a novice pretty political face for president in 2008, who hid is political radicalism. In 2012, the public will be more concerned with ideas.

Palin took a step backward this week with Sarah Palin’s Alaska: a show on the TLC channel. If the show had focused entirely on Alaska in documentary fashion, it might have helped Palin.

Instead of “Sarah Palin’s Alaska,’’ the show would be more aptly named “Alaska’s Sarah Palin.’’ There was beautiful scenes of Alaska and Palin’s family in Alaska. Unfortunately, program devolved too much into a reality show. Sarah Palin may be attractive to look at walking in shorts around her expansive new house, but the view of her family was just too intimate. It was not that there was any pathological present. On the contrary, the Palins were dealing with children and other family issues, much as we all do, in an appealing – if contrived – manner.

However, we want leaders who, as in Kipling’s phrase, “can talk with crowds and keep [their] virtue, [and] walk with kings’’ while not losing, “the common touch,’’ there needs to be an emotional distance for leadership. Sarah Palin’s Alaska shrinks that distance.

There is a saying that no man is a hero to his valet. Similarly, it is hard to entrust weighty issues to your next door neighbors, no matter how appealing. Palin’s show is making her more a neighbor we might like, and less a leader we would believe in.

It’s Not Self-Regard But Condescension

November 14th, 2010

A healthy sense of self-regard and confidence are necessary personal attributes for any successful leader. Under what other circumstances would anyone desire the scrutiny and loss of privacy associated with becoming an national leader?

However, even given the high bar set by recent leaders, President Barack Obama’s self-regard approaches a historical highs.

In 2008, Obama explained, “I think that I’m a better speechwriter than my speechwriters. I know more about policies on any particular issue than my policy directors. And I’ll tell you right now that I’m gonna think I’m a better political director than my political director.’’ Either he selected a mediocre speechwriter, policy advisers and a political director or Obama is apparently convinced he is always the smartest person in the room.

When it looked liked the Republicans might enjoy a hugely successful mid-term election in 2010 that rivaled 1994 when Republicans earned a majority in the House of Representatives for the first time in a generation, Obama dismissed these concerns by saying, “Well, the big difference here and in ’94 was you’ve got me.’’

Whatever, on thinks about former President Bill Clinton’s policies, he is universally acknowledged as the most masterful politician in memory. For Obama to cavalierly declare that he could avoid political losses that Clinton could not, betrays self-regard bordering on what others have called “narcissism.’’

Obama’s self-regard may eventually prove politically fatal, but his recent problem is not been the regard in which he holds himself, by the dismissive and condescending regard with which he holds his fellow Americans. We received a glimpse of this during the 2008 election, when Obama said of Pennsylvanians in hard times, “they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations’’’

While Obama now concedes that his party suffered a “shellacking,’’ he chalks it up to a recovery that has not yet really kicked in. Obama has only acknowledged that perhaps he has not been able to explain to Americans the soundness of his policies. The implications is that if only Americans were smart and aware enough they would appreciate Obama’s efforts.

When Americans were focused on the pain caused by a struggling economy, Obama and the Democrats thought that it was necessary to pass a sweeping and costly health care reform bill. They crammed it through despite the fact that a clear majority of Americans were against it and now want its repeal. In addition, Obama and the Democrats increased the debt by trillions to stimulate the economy while most people believe that the policy has not worked. Obama was saying, in essence, we know better than the American people, so we are going to pass the health care reform and stimulus bills anyways.

Americans will tolerate and perhaps even celebrate a leader with overweening self confidence, but not one who has comparable low regard of Americans as a whole.

Election Prediction Recap

November 7th, 2010

In trying to model any phenomenon, it always possible to bring in too many correlated independent variables. With enough variables, it is always possible to fit past data. However, the question is whether the true dynamics have been captured. The simplest model that can reasonably explain the data is usually the safest.

The professionall analysts in this past election did not fair too well. As it looks now that there will be a net 65-seat pickup for Republicans in the House of Representatives. Larry Sabato, Director of the University Center for Politics, predicted a gain of 55 seats. Nate Silver, political statistician supported by the New York Times, used elaborate simulations to predict a 54-seat gain. The Rothenberg’s Political Report faired better with a 55-65 seat gain prediction.

Using a simple linear regression model, we were able to predict a 69-seat gain with a +/- 10 seat standard deviation. The plot below shows the advantage in the actual Democratic vote versus the pre-election Gallup generic preference poll. The indicated point shows the result of this past election. Note that the linear fit very closely predicted the outcome. We submit here the humble thesis that some rather simple models have been adequate to explain events like the House election, where the 435 seats available allow the statistical means to prevail.

Final Prediction

November 1st, 2010

Using their traditional model for the generic preference between Democrats and Republicans, Gallup finds a 15% advantage for Republicans as of 2010 Nov 1. This result is outside the experience of Gallup polling in previous elections. However, using a linear fit between Gallup generic poll and outcomes for all midterm elections since 1950, we make the following prediction:

Republicans gain 69 seats in the House. The standard deviation on this estimate is 59 to 79 seats. That is, there is a 60% chance the final value will fall in this range. The 95% range is 39 to 99 seats.