The Republicans' jobs proposal

Paul Krugman and Ezra Klein are right, the Republican party is really bereft of ideas. Here's the Republicans' new jobs plan (the one they've rolled out to make everyone forget last week's Medicare plan). A summary:

Empower Small Business Owners and Reduce Regulatory Burdens:

• Require congressional review and approval of any government regulations that have a significant impact on the economy or burden small businesses.
  


• Audit existing and pending regulations to identify and address those that hinder economic growth.

Fix the Tax Code to Help Job Creators:

• Increase American competitiveness to spur investment and create more American jobs by streamlining the tax code and lowering the tax rate for businesses and individuals including small business owners to no more than 25%.
  


• Reform the tax code to allow American businesses to bring back their overseas profits without having to pay a tax penalty so they can invest in our economy and create American jobs.

Increase Competitiveness for American Manufacturers:

• Pass the three pending free trade agreements with Colombia, Panama, and South Korea to create up to 250,000 jobs.
  


• Continue to open new markets to American made products.

Encourage Entrepreneurship and Growth:

• Modernize our patent system to protect our nation’s innovators, discourage frivolous lawsuits, and expedite patent reviews.
  


• Re-Authorize and improve federal programs and approval processes to streamline development of new products. Remove barriers to building a first class workforce so that the United States can compete in the global marketplace and lead the way in technological development and growth.

Maximize Domestic Energy Production to Ensure an Energy Policy for the 21st Century:

• Promote lower energy prices through increased domestic production. Encourage all forms of energy production.

Pay Down America's Unsustainable Debt Burden and Start Living Within our Means:

• Build upon the House Republicans’ Budget by enacting significant spending cuts.

Only #2 (tax cuts) is what I would call a major policy proposal. It might have some impact on employment and growth in the long run, but it's not going to help the economy here and now. None of the other proposals could be expected to have a substantial impact on employment (the one number cited, 250,000 jobs created from trade pacts, is the equivalent of one good month's job creation; a drop in the bucket). The last element (spending cuts) would surely reduce employment considerably.

A serious proposal to stimulate growth now would include: support for another round of quantitative easing by the Fed, creation of an infrastructure bank, federal government support for state government budgets, and most importantly, somehow resolving the foreclosure crisis that continues to depress the housing market.

Some random thoughts on Medicare

1. It's not the "Ryan plan," it's the Republican plan. The Medicare privatization plan has been endorsed by the Republican party. Overwhelming majorities of Republicans in the House and Senate voted to make it law. Every Republican presidential candidate has come out in support of it - except Newt Gingrich, and that didn't turn out so well for him. Every Republican candidate should be forced to spend the next two years on the hustings with that plan stapled to their chest like a big ol' scarlet A.

2. I think most Americans would say that the Medicare problem is, how do we ensure that retirees have decent healthcare at a cost that doesn't bankrupt us. That problem has no easy answers. Any reasonable proposal ends up with panels of experts, bending of curves, and other pieces of impenetrable jargon. The Republicans, however, have managed to come up with a simple solution: transform the Medicare program into a voucher system. How have they done this? Simple: their plan is a solution to a different problem. For Republicans, the problem is not how to provide good health care at a reasonable cost, it's how to have the government spend less money on health care. And so the solution is a simple one - just spend less. But the plan does not actually address the problem that most Americans have in mind when they think of the challenges facing Medicare.

3. Under the Republican plan, are retirees required to buy the insurance that the government is going to subsidize or is participation voluntary? If participation is voluntary, then if the plan is implemented large numbers of retirees are not going to have health insurance for the first time since 1965. That's a pretty big deal. If buying insurance is mandatory, then is the plan constitutional? I thought that this was the kind of thing (no, this is exactly the thing) that Republicans thought the 10th Amendment forbade.

[Update: It appears that under Ryan's plan the purchase of health insurance is voluntary. I say "appears" because the Ryan plan actually does not exist as a concrete legislative proposal. The budget resolution that contains the proposal, which the House passed and the Senate did not, describes the changes to Medicare in broad terms. The Congressional Budget Office analyzed the plan. For the purpose of making its cost estimates it assumed that everyone eligible for the premium support would purchase health insurance. There's no good reason that I can think of for this assumption - the CBO ought to be able to estimate the price elasticity of demand for health insurance and come up with an estimate of the number of senior citizens who would go without. This number would probably be large: the average recipient would pay 2/3 of his/her health care costs under the Ryan plan compared to 20-25 percent now. It's therefore fair to say that under Ryan's plan, X percent of people who now are depending on Medicare will lose their health insurance coverage. X to be determined.]

Congressman Rob Woodall "Because it's free"

The backstory from Gail Collins:

Meanwhile, over in the House, videos were surfacing of a town hall meeting in which Rob Woodall, a Georgia Republican, argued health care with a Democratic activist who wanted to know what she was supposed to do without Medicare when her employer didn’t provide coverage for retirees.

“Hear yourself, ma’am. Hear yourself,” Woodall responded, rather triumphantly. “You want the government to take care of you because your employer decided not to take care of you. My question is: When do I decide I’m going to take care of me?

More ways to stamp out bad teaching

In a previous post I suggested using a strengthened faculty evaluation process as a tool to reward good teaching and punish bad teaching. But how do we know which faculty and departments are doing a lousy job teaching? Well here's an idea, something that I would imagine is being done at other colleges and universities but not, as far as I am aware, here.

Suppose the Provost's office were to collect evaluations from every course every semester in digital form. (This would require all of us to have students do course evaluations on line, or use Scantron sheets for in-class evaluation.) Data on course grades are compiled every semester as well. Staff in the Provost's office - preferably people with an NSA background - sift through the data looking for outliers: courses, faculty members or departments with an unusually high concentration of A's and A+'s; with an unusually high number of students giving overall instructor evaluations of "poor"; with low scores on a "degree of difficulty" question; etc.. A message goes out to the chair of the department concerned: look into this course or instructor to see if there's something wrong and report back to the Provost. Faculty are given an opportunity to address whatever problems are found; if they are not addressed in future semesters, the wrath of God is called down upon them as I suggested earlier.

One concern with this plan would be catching too many faculty in the dragnet. Student evaluations are notoriously unreliable indicators of quality of teaching. I would not want the Provost to be calling chairs every time an instructor got a few below-average course evaluations. So the process would have to be focused on rather extreme outliers. If half the class rates the professor "poor", my guess is there's a real problem that needs to be addressed.

Data-gathering in this way could help deliver a more positive message as well. The Provost's office could post summary statistics on course evaluations so that individual faculty could see how they match up to college averages. How many hours a week do students say they spend on my class relative to the college average? How difficult do they find my class? How good an instructor do they think I am? What are the cross-correlations between "difficulty" and "overall evaluation" scores? Obviously one would need to take this information with a grain of salt, but I for one would find it interesting and potentially useful, and it might help establish norms for what qualifies as effective teaching.

Academically Adrift

So I read the book and attended the Johnson Center workshop. My main beef with the book is that the authors seem intent on confirming every preconceived bias people have of higher education. Students go to college primarily for social reasons rather than academics and they don't spend enough time studying. Faculty focus too much on research and not enough on teaching. Administrators worry more about the US News rankings and providing students with all the comforts of Club Med rather than strengthening the academic program. Some of this is undoubtedly true, but too often the authors make the claim (e.g. about faculty focusing on research) and don't bother to substantiate it.

The empirical results are confusing. The last third of the book is tables of regression results, but they are reported in an inconsistent fashion so I don't know what they actually say. Are the numbers below the estimates standard errors or T statistics? They look like T statistics, but why is there an asterisk indicating significant at the 5 percent level for one coefficient with 4.2 in parentheses but no asterisk for one with 4.5 in parentheses?

The study is based on a sample of 27 or so schools, but the authors don't tell us what they are. It looks like only a small number of them are small highly selective liberal arts colleges like Gettysburg; many seem to be large state schools. This matters for us at Gettysburg, because most of the alarming results don't apply to the most selective schools in the sample. Apparently our class of schools is not doing a terrible job of getting students to learn, though of course we could do better.

The JCCT&L workshop was just fine. It was energizing, got me thinking about how to improve the learning environment in my classes. The organizers put on a fine show. But here's the problem. Suppose our goal is to increase the amount of learning that the average student achieves at Gettysburg College. One way we do this is to improve the way we teach, another is to create a more academically focused environment at the institutional level. Workshops like this might help by giving faculty who are interested in exploring new teaching techniques some tools and resources. But the benefits are likely to be marginal: I already teach pretty good, demanding classes (usually). I and the other attendees at the workshop are not really the problem. The low-hanging fruit in this endeavor, it seems to me, are the faculty members and departments that currently are not challenging our students. Fix those problems and we might see some real progress.

Who am I talking about? I'll never tell. But when I talk to smart students in Economics they will tell me horror stories about particular professors in particular (other!) departments. Like the professor who told her students at the beginning of the semester that they were pretty much guaranteed an A or a B as long as they showed up to class. I've had students tell me that the five minute conversation I just had with them over lunch on the last day of class had more intellectual content than any course they'd ever had in Department X. I've had senior majors in Department X tell me that they regret having chosen that major because they never felt challenged. I know of departments where senior faculty regularly teach classes with just a handful of students because they create such a hostile environment in class. I know of very popular professors who are popular precisely because their courses lack any kind of intellectual rigor.

So, how about we try to change the practices of those professors in those departments? In theory the Provost has all sorts of tools he could use to make faculty accountable. Unfortunately we have a really crappy evaluation system: senior faculty are evaluated only every three years, so they can get away with murder for too long. The ratings are too coarse and subjective. I would imagine it is very difficult for a chair to slap a colleague with a "needs improvement" on teaching unless there's a real smoking gun, and at any rate the difference between "needs improvement" and "meritorious" is completely subjective. I'm pretty sure the teaching practices that Department X considers "meritorious" would be considered "NI" in Economics, but beauty is in the eye of the beholder, right? And suppose a faculty member gets a bad evaluation. What is the consequence? He or she will still get the standard cost of living adjustment and only misses out on a couple hundred bucks in merit pay.

If we really wanted to make some inroads on learning and the intellectual climate, the Provost would open a can of whup-ass on certain departments and faculty members. I say if you don't perform, you see a reduction in your salary. Is there anything in the AAUP guidelines that prevents a school from demoting a faculty member? Sorry, you used to perform like an Associate Professor but now you're acting like an Assistant, so that's your rank now. I hope that one of the outcomes of the credit hour committee's deliberations will be that we as a faculty settle on a fairly concrete set of criteria for what types of assignments and activities make a Gettysburg College course worth a full credit. I will bet that when we present a list of the kinds of things that every course needs to contain, three quarters of faculty here will see that they already do this but the other quarter will scream bloody murder. Let them scream sez I - it's high time all the faculty on this campus taught the kinds of engaging and demanding classes that those of us in the JCCT&L workshop provide on a regular basis.

Power broker? Your words, not mine

I'm not saying I'm a power broker, but judging from last night's primary results you don't stand a chance in the Democratic primary for county commissioner unless you stop by my house for dinner or at least a long chat. For borough council, best treat me right when I stop in your coffee shop. Your chances of winning a school board seat are enhanced if you invite me to your Christmas parties. And if you want to be a district magistrate, it helps to be the ex husband of the current wife of my golf and poker buddy.

Is the US in a fiscal crisis?

Over at the WSJ, James Freeman reports on an interview with "legendary investor" Stanley Druckenmiller about the US's fiscal problems. Mr. Druckenmiller, via Freeman, argues that a postponement of payments on US debt as a result of the current budget impasse would not be a catastrophe, but failure to solve our fiscal crisis would be. Hence he supports the Republican strategy of brinkmanship over the debt limit to achieve the goal of long-term deficit reduction.

But how serious is our fiscal problem anyway? Is it a "crisis"? We often hear that the Social Security or Medicare system has a long-run funding shortfall measured in the trillions of dollars, but what does this mean? Bruce Bartlett puts everything into perspective here. According to his figures the total shortfall in Social Security and Medicare - that is, the present value of the gap between what the government promises to spend on these programs and what it takes in in tax revenues dedicated to them, over the infinite horizon - is $56.4 trillion. That seems like a lot of money, but (a) it's small relative to the present value of US GDP, that is the resources our society has at its disposal to fund these programs, over the infinite horizon, and (b) it's really an accounting fiction since if the tax revenues dedicated to these programs are insufficient we can always fund them from other sources.

As an illustration of (b), consider another program that has a serious unfunded liability problem: national defense. We as a society have decided we need to have the world's strongest military, requiring us to spend as much on defense as the next 19 highest spending nations combined. We want to be able to wage war simultaneously in Iraq, Afghanistan and Libya, while maintaining a troop presence in countries like Germany and Korea, and also defending our homeland. That defense posture costs us about $700 billion, or 5% of GDP, every year. Yet we have no revenue dedicated to support it. That means, assuming 2.5% real GDP growth, 2.5% inflation, and a real interest rate of 4.5%, the present discounted value of the shortfall in defense funding is... hmm, let me see, ... $37.45 trillion. Yikes! Surely only a massive overhaul of defense spending, beginning right now, can save us from certain disaster! No? Well, then that's my point.

A more meaningful measure of the shortfall in Medicare and Social Security is the amount taxes would have to be raised every year to cover the financing gap. According to Bartlett, this is 3.8 percent of GDP (every year), i.e. we'd need the current economy equivalent of about $550 billion in new tax revenues every year. That's a lot. But it could be achieved by increasing the federal income tax from the current 6.2 percent of GDP to 10 percent of GDP (about what it was at the peak of the stock market boom in 2000 and in the year before the Reagan tax cuts). It could be achieved by making large cuts in defense spending, or a combination of the two. The need to raise that much money could be reduced by imposing cost controls like those in the health reform law passed last year and those proposed by Obama in his latest budget address. Bartlett says we can go a long way simply by not implementing the "doc fix" every year as has been Congress's wont since reimbursement rates were lowered in 1997.

So Medicare and Social Security face some big problems, but it's not not a crisis. And bond market participants seem to agree. As Paul Krugman notes today, despite fears of "invisible bond market vigilantes" warning us of fiscal ruination, the yield on ten-year US Treasury securities is now at a near record low of 3.11 percent. Nonsense, says Druckenmiller - the Treasury bond market is not a free market because the Federal Reserve has been intervening to stabilize prices. "The market isn't saying anything about the future. It's saying there's a phony buyer of $19 billion of Treasurys a week." Excuse me, $19 billion? Daily trading volume in the US bond market is in the area of $400 billion, so $19 billion a week is less than one percent of the total. Most estimates of the cumulative effects of the Fed's quantitative easing programs put the effect on yields between 50 and 100 basis points - even Treasury yields of 4 percent would not signal any kind of concern about a crisis. So no, the bond markets are indeed telling us that the people managing the world's wealth are not concerned about default risk on US government debt. Not that they've never been wrong, mind you, but there's certainly no evidence to support the alarmist claims of the Freemans and Druckenmillers among us.

Vindication

For years I've been frustrated that my students lack the historical and political context that makes economics so interesting. Hard to get them worked up about supply-side versus Keynesian theories when they have no memory of the Reagan years; hard to talk about financial crises when 2008 is the only experience they have (and that only vaguely). So this semester I took matters into my own hands and taught an introductory-level course on economic issues, 1962-2010. The course essentially covered my lifetime in economics. It was billed as a rollicking mid-life crisis of a course. From the beginning, however, it was plagued with problems. There were only five students (perhaps the goofy title - "Talkin' 'Bout My Generation", a reference to a song that I think none of them was familiar with, had something to do with this). I had a hard time coming up with readings that were broad and accessible, with the result that I resorted to my patented method of "just-in-time reading assignments," aka the "living syllabus." That is, Thursday of this week I'll tell you what next week's readings are. I took a lot of grief from my colleagues about the ad hoc nature of the course, especially the frequent films (Eyes on the Prize, Commanding Heights) and use of Youtube videos (how are students to understand the depravity of the 1970s if they've never seen Captain and Tennille singing "Muskrat Love"?). But my course evaluations vindicate me. I'm going to put this one on the syllabus next time:

"It's the only class I've found on campus that even remotely touches recent American poltiical history. Everyone just assumes we know all about the country from 1960-now... not true! They don't teach it in high school so why should I be expected to tell you what Richard Nixon did that was so evil if I've never been taught about him? This class starts to fill that gap!"

Thank you, students. The checks are in the mail.

Holy crap

Apparently Mike Huckabee is selling videos of "unbiased" historical lessons for kids. Oog, I think I'm going to be sick.

A way out for Greece

Mark Weisbrot says the only solution for Greece's economic and financial woes is to leave the Euro zone. Paul Krugman applauds Weisbrot for the sentiment but argues that in doing so Greece would give up numerous benefits from being a member of the Eurozone such as access to cohesion funds from the rest of Europe and the "hard to quantify but probably important things like the stabilizing effect, economically and politically, of being part of a grand democratic alliance." Is there an alternative? I think so.

First, a recap of Greece's problems. Greece has an excessively large government sector and byzantine system of commercial and labor market regulation that retards the efficient allocation of resources and investment. It needs structural reform. Greece has a high internal price level that makes its goods uncompetitive in the rest of Europe. It needs a devaluation, but it can't as long as it's in the Euro system. The alternative to devaluation is "internal devaluation," i.e. a recession big enough to push down prices and wages so that the economy is competitive once again. No one wants that. Greece has a monstrous foreign debt that it is unlikely every to be able to repay. It needs significant debt relief. But foreign lenders don't want to offer the relief, especially if Greece is going to continue to manage (if that's the right word for it) its economy as it has in the past.

Ok, so how about this. Greece stays in the Euro system and retains all the benefits thereof. The Greek government implements a law mandating a uniform reduction in prices and wages by, say, a third, or whatever amount is necessary to regain international competitiveness, followed by a temporary price freeze. This stimulates the economy, which improves the government's fiscal situation and gives it breathing room to implement some much needed product and labor market reforms. To reward Greece for these efforts (in an explicit quid pro quo - this won't work otherwise) Greece's creditors forgive a large portion of Greece's foreign debt (as much as a third, or the amount of internal devaluation Greece is implementing). Voila, we have a more flexible, competitive, and most importantly growing economy, still a member of the Euro zone, working through its remaining debt problems.

Crazy? Quite possibly. But there's plenty of historical precedent for price controls during times of economic crisis. Price controls worked well in the US during World War II, not so well in 1971-73. They've also worked with mixed success as part of Brazil's and Argentina's stabilization programs in the 1980s. Price controls have typically occurred in an inflationary environment. When they haven't worked it's tended to be because the monetary authorities continued to expand rather than contract, resulting in suppressed inflation that burst out when controls were lifted. This is a different environment - the problem is deflation rather than inflation, and monetary policy is in the hands of the ECB rather than the Greek government.

Furthermore, all of the other possibilities seem worse. Desperate times call for desperate measures.

The missing fifth

David Brooks comments on a serious economic problem: the large fraction of American men of prime working age who are not working:

As my colleague David Leonhardt pointed out recently, in 1954, about 96 percent of American men between the ages of 25 and 54 worked. Today that number is around 80 percent. One-fifth of all men in their prime working ages are not getting up and going to work.

According to figures from the Organization for Economic Cooperation and Development, the United States has a smaller share of prime age men in the work force than any other G-7 nation. The number of Americans on the permanent disability rolls, meanwhile, has steadily increased. Ten years ago, 5 million Americans collected a federal disability benefit. Now 8.2 million do. That costs taxpayers $115 billion a year, or about $1,500 per household. Government actuaries predict that the trust fund that pays for these benefits will run out of money within seven years.

Part of the problem has to do with human capital. More American men lack the emotional and professional skills they would need to contribute. According to data from the Bureau of Labor Statistics, 35 percent of those without a high school diploma are out of the labor force, compared with less than 10 percent of those with a college degree.

This is indeed a serious problem. But Brooks goes loopy when he adopts his trademark "a pox on both their houses" approach to competing Democratic and Republican solutions:

This is a big problem. It can’t be addressed through the sort of short-term Keynesian stimulus some on the left are still fantasizing about. It can’t be solved by simply reducing the size of government, as some on the right imagine.

Fantasize? How come Republicans get to imagine while Democrats fantasize? At any rate there's nothing fantasmagoric about the Keynesian stimulus solution. As Andrew Samwick argues, this country has a crumbling infrastructure. Our government can borrow at historically low rates to fund infrastructure investment. And [he does not say] that infrastructure investment can create jobs that will stimulate the economy and employ some of the missing fifth. Suppose we spent $100 billion more on infrastructure every year for the next ten years than we have currently planned. Back of the envelope calculation is that we create a million new jobs every year (at $100,000 per job; that's wages, benefits, supporting equipment). Say half of them go to men of prime working age. That reduces unemployment among that group from 4.5 million to 4 million, bringing the unemployment rate for that group down from 8.2 percent to 7.3 percent. (Data from the BLS employment situation report.) The CBO assumes a multiplier on this kind of spending of as high as 2.5, so as long as the economy is below full employment (which is likely for the next five years or so) the employment effects would be even bigger. We get economic stimulus, jobs and work experience for a big chunk of the missing fifth, and shiny new infrastructure. Why is that a fantasy?

If my grandmother had wheels...

Donald Boudreaux wrote a piece in the WSJ asking "If Supermarkets Were Like Public Schools: What if groceries were paid for by taxes, and you were assigned a store based on where you live?" We would be subject, Boudreaux writes, to all sorts of indignities: families would have to buy groceries only from the store in their district; they would pay taxes to finance the store and get a standard weekly ration "for free". Unionized supermarket workers (horrors!) would demonize the noble advocates of reform. And so on.

This is just the kind of insightful economic analysis we expect from America's great financial newspaper. No need to ask why it might be appropriate to provide some goods through competitive markets and others publicly. Well, two can play at that game:

What if national defense were provided by supermarkets? Imagine a world where each of us got to order our own specialized weaponry and position our military forces where they would most benefit us. Doesn't the individual know better than big government how to protect his property?

What if health care were sold by hotdog stands? Impaled by an I-beam, I am being wheeled to the nearest emergency room. Not there, says I, the hotdog stand across town has jumbo franks and we can have my surgery done in the park across the street.

What if used cars were sold in voodoo ceremonies? The car salesman would be dressed in a grass skirt rather than a plaid jacket. Instead of haggling over the price of the car I would be sent out to the jungle in a trance to bring back a car of the priest's choice in my teeth - and it would be the perfect car for me!

What if brain surgery were sold at Gower's Drug Store in Bedford Falls New York? A large-eared teenager would take your order and you would whisper in his ear, "I want you to be my brain surgeon for the rest of my life," but he wouldn't hear you because that's his bad ear on account of falling through the ice to save his brother in 1919. Then he'd whip out a copy of National Geographic and say "listen brainless, don't you know where coconuts come from," which is when you'd start to cry because after all that's why you're there in the first place.

April employment

Calculated Risk reminds us of the big picture: as far as employment is concerned, this recession dwarfs all others since the Great Depression and the recovery has been considerably weaker than the recoveries from other deep recessions.



April's Employment Situation report seems like a mixed bag. Good news: payroll employment rose by 244,000, way above what forecasters were expecting. The BLS revised February and March's estimates upward by 41,000 in February and 5,000 in March.

Bad news: the unemployment rate rose from 8.8% to 9.0%. Had this occurred because of an increase in the labor force (discouraged workers returning to the job search) there'd be no problem. However, according to the household survey employment fell by 190,000 and the number unemployed rose by 205,000, for a net labor force gain of only 15,000. The employment-population ratio actually fell a bit from 58.5% to 58.4%. In April 2010 it was 58.7% - so this number has actually been drifting down for a year. That's not good at all.

In other news, remember that 3.0% GDP forecast I made a couple of weeks ago? Admitting no special knowledge of anything, I simply added growth a reasonable guess for productivity growth to growth in hours between 2010Q4 and 2011Q1. Well, the BLS has reported its estimates of productivity for 2011Q1 and shows that hours rose by 1.4%, productivity rose by 1.6%, and therefore nonfarm business output rose by 3.1%. Bullseye! (In the same sense that Aaron Rodgers can pump his fist in the air when he underthrows Donald Driver but the ball hits Greg Jennings right in the numbers by accident.)

I don't know why the BLS numbers on nonfarm business output differ from the BEA's numbers for GDP. I don't think changes in the growth of the government sector are big enough to explain the difference. The BLS figure shows 4.4% growth in 2010Q4 versus a GDP growth rate of 3.1%, and a growth rate for 2010 overall of 3.7% versus a GDP growth rate of 2.8%.

Why does the US have a debt problem?

In 2001 the Congressional Budget Office looked at the federal government's enormous budget surpluses and projected that the government's debt would be eliminated entirely by the end of the decade. By 2011 debt is at 70% of GDP, a level not seen since shortly after World War II. Republicans would have us believe that the reason is the Obama Administration's irresponsible spending policies. This graph, from Brad DeLong's blog, tells the real story: (1) Part of the surpluses in 2001 were a mirage due to inflated incomes at the top end during the internet bubble of the 1990s (2) The Bush administration cut taxes in 2001 and 2003, fought a couple of wars, increased other defense spending, introduced Medicare Part D without any means of funding... and as a result the debt reversed course. (3) The Obama Administration programs played a small role; ARRA for example is only 6% of the problem (and may actually have had a smaller impact on the debt because it increased GDP and therefore tax revenues beyond what they otherwise would have been).

Really nice graph.

Exercise in Monday morning quarterbacking

Suppose back in 2002 bin Laden hunters had exploited two pretty good theories about Osama bin Laden's likely whereabouts:

1) He was likely (in fact, with probability 88.9%) to be found close to where he was last sighted and in a town rather than a cave.

2) There would be no cellphone or internet activity at his location.

Then suppose they had used satellite and communications technology to locate cellphone and internet deadzones in towns and cities within a 300 km radius of Tora Bora. Focus east of Tora Bora rather than west (toward Kabul). Would they have found his mansion in Abbottabad?

What next after bin Laden?

I'm with those who believe that the killing of Osama bin Laden will make it easier for the US to withdraw from Afghanistan (relevant articles here and here). It's been clear for a couple of years now that, surge or no surge, the US cannot "win" in Afghanistan, if winning means wiping out the Taliban as a serious military force and establishing a functioning government that denies sanctuary to terrorists. The best we can do, it seems to me, is to negotiate a deal by which the Taliban remains an important player but perhaps not (for the time being) the dominant force in Afghanistan, with some assurances that Afghanistan won't (for the time being) allow al Qaeda back in. I think Obama recognizes this and his inclination is to stick with his originally stated goal of beginning a withdrawal this summer. I think even Republicans understand this, which is why Afghanistan was not a political issue in 2010 and is not on anyone's radar in the runup to 2012. Bin Laden's killing lets us strike a crappy deal with the Taliban and begin the withdrawal of our forces while declaring victory on the way out.

But there's another possibility that's not as pleasant. That is that our military-industrial / national security-counterterrorism complex will use the success of the bin Laden operation as a pretext for an expansion of our special operations capabilities. Bigger budgets, more of those exciting cloak-and-dagger operations. Why not go after Qaddafi next, will go the argument, and then the slippery slope takes us into operations in Syria, Iran, who knows maybe some day Venezuela or Cuba. This one ended like the final episode of 24, but the next one could end like Black Hawk Down. I hope that ten years from now we don't look back on this and regret the turn in national security policy that the killing of Osama bin Laden engendered.

He's The Man

Via Informed Comment:

Bad Education

From "N+1". Interesting insights on the cost of education and the looming crash in student loans.