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A running commentary on the news and ideas affecting Washington, Wall Street, and the world beyond.
The Toxic NCAA Bracket
Eleanor Stables 03/24/2009

Arnold Kling supposes what would happen if he was doing poorly in a March Madness pool that he entered for $10 and Treasury Secretary Tim Geithner came along with a fistful of taxpayer dollars.

“The way his plan works, you can put up a nickel to get a share of my bracket, and Tim will lend you forty-five cents, which you do not have to pay back if you lose. If you win, you and Tim split the proceeds. You’re happy, because for a nickel you're picking up half a share of a bracket worth fifteen cents. I’m happy, because I sell my toxic bracket for fifty cents instead of fifteen cents. Somebody should be unhappy. Guess who?”

Wilson on Race
Eleanor Stables 03/16/2009

James Q. Wilson writes, "There are countless efforts all over the country to reduce the chances that a child will become a criminal. These attempts, however, take hold only slowly because of three problems. First, many of the best prevention programs cost a lot of money for each child, and so we have to devote them to at-risk children if communities will be able to pay for them. But defining some children as ‘at-risk’ means talking specifically about black and Hispanic children in welfare homes, a task that our politically correct society finds it hard to do. Second, the programs that work are typically small, intense efforts that may or may not work if they are scaled up to be state-wide or nation-wide efforts run, not by skilled therapists, but by ordinarily folks. Third, good programs often lose out to bad ones because the latter, though equally devoted to prevention, lack supportive evidence but have political muscle."

Read the whole thing.

Giving Charity a Break
Eleanor Stables 03/15/2009

Richard Posner writes, “Total American charitable giving abroad is more than half as great as total U.S. governmental foreign aid, of which almost a third goes to Israel and Egypt. Americans do not receive an income tax deduction for giving to foreign charities, but they do for giving to domestic charities that donate abroad (provided they don’t just donate to foreign charities). Should they? I am inclined to think they should not.” However, Gary Becker supports at least some tax deduction for giving to foreign charities. Elsewhere in The American, Leslie Lenkowsky is concerned about the Obama administration’s threat to philanthropy.

Meltzer on Capitalism
Eleanor Stables 03/12/2009

We cannot escape criminality by choosing Socialism,’ Allan H. Meltzer said in an AEI lecture this week. ‘Freedom allows people choices that violate someone’s idea of social norms or right conduct; Socialism restricts choice to those that officials permit. Capitalism accepts that some dislike the outcomes resulting from choice in a market economy. It does not seek utopia because it recognizes that individual tastes and desires differ.’

In Pursuit of Happiness
Nick Schulz 03/09/2009

On March 11, AEI scholar Charles Murray will deliver a lecture on "The Happiness of the People." The phrase, once used by President Madison to convey the aim of good government, has been a central theme of Murray’s life and work.

Reaganomics vs. Keynesianism
Eleanor Stables 03/06/2009

“The false dilemma of Reaganomics-or-Keynesianism shouldn’t be allowed to slide by unchallenged.... It’s not an either-or choice. There’s a time for stop-the-bleeding economics, and a time for invent-the-future economics.”


Doubling Nothing
Nick Schulz 03/05/2009

During his address to Congress last week, President Barack Obama declared, “We will double this nation’s supply of renewable energy in the next three years.” But that would only keep pace with his predecessor, and “even if he matches Mr. Bush’s effort by doubling wind and solar output by 2012, the contribution of those two sources to America’s overall energy needs will still be almost inconsequential,” Robert Bryce writes.

Read the whole thing.

The New FCC and Net Neutrality
Nick Schulz 03/04/2009

The announcement of Julius Genachowski as President Obama’s choice to head the FCC is not a surprise. Genachowski helped guide Obama’s tech policy during the campaign and is a highly respected technology lawyer and venture capitalist. As this Wired magazine piece points out, the proponents of federal net regulations are thrilled with the choice as they anticipate an activist FCC under his tenure. It is still unclear at this point why, however, net neutrality regulations are necessary. There has been no serious market failure to which regulation proponents can point. The burden will be on Genachowski, should he choose to create and advance new regulations, to explain their necessity. The remarkably successful growth and evolution of the Internet has proceeded without a lot of top-down mandates from the federal government. The FCC can be a useful facilitator of dialogue between ISPs and content and application providers who rely on the network. But Genachowski would be wise to proceed slowly and cautiously.

Let Startups Bail Us Out
Eleanor Stables 03/03/2009

The founder and chief executive of LinkedIn argues for letting startups bail us out.

Forgiveness and Irony
DUNCAN CURRIE 02/13/2009

“Forgiveness and irony lie at the heart of our civilization,” says Roger Scruton.

Evans on the Economy
DUNCAN CURRIE 02/13/2009

From a February 11 speech by Charles Evans, president and CEO of the Chicago Fed:

“The factors that produced the sharp decline in output in the second half of last year are still in play today. Consequently, I expect real GDP will fall markedly in the first half of 2009. I am currently projecting that GDP will begin to expand some later in 2009, but not enough to offset the declines in the first half of the year. In part, this expected pickup reflects the support from both traditional and nontraditional monetary policies, fiscal actions already taken to address the strains in financial markets, and progress that financial markets themselves make in working through their difficulties. In addition, the new fiscal stimulus package will boost output. However, its full size and impact are still unclear, and our forecast could need some recalibration as we gain knowledge on how the package is affecting the economy. Looking out a bit further, I expect the pace of GDP growth to move back up in the neighborhood of potential as we move through 2010. However, I do not see growth as being strong enough to make much progress in closing resource gaps over this period. Indeed, the unemployment rate—the main resource gap measure in the labor market—is likely to rise into 2010.”

Read the whole thing.

Bye Bye, Dubai
DUNCAN CURRIE 02/13/2009

From The New York Times:

“With Dubai’s economy in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills). Some are said to have maxed-out credit cards inside and notes of apology taped to the windshield.

“The government says the real number is much lower. But the stories contain at least a grain of truth: jobless people here lose their work visas and then must leave the country within a month. That in turn reduces spending, creates housing vacancies and lowers real estate prices, in a downward spiral that has left parts of Dubai—once hailed as the economic superpower of the Middle East—looking like a ghost town.”

Silicon Valley Obamacons
DUNCAN CURRIE 02/13/2009

“It’s time for Silicon Valley Obama supporters to step up and make themselves heard,” writes Forbes publisher Rich Karlgaard. “John Doerr, Eric Schmidt, Marc Andreessen—you did not get the candidate you voted for! He is off to a catastrophic start on economic issues. Obama will not listen to the likes of me. But he will listen to you. So start talking.”

Who Do You Trust?
NICK SCHULZ 02/13/2009

Will Inboden and Ryan Streeter say that “Americans trust those with whom they interact on a daily basis, but their level of trust for people they do not personally know is low.”

The Yuan Debate
DUNCAN CURRIE 02/06/2009
The Future of the News Business
DUNCAN CURRIE 02/06/2009

Walter Isaacson examines “the crisis in journalism.”

Dealing with Financial Crises
DUNCAN CURRIE 01/23/2009

From a new paper by economists Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard:

“Broadly speaking, financial crises are protracted affairs. More often than not, the aftermath of severe financial crises share three characteristics. First, asset market collapses are deep and prolonged. Real housing price declines average 35 percent stretched out over six years, while equity price collapses average 55 percent over a downturn of about three and a half years. Second, the aftermath of banking crises is associated with profound declines in output and employment. The unemployment rate rises an average of 7 percentage points over the down phase of the cycle, which lasts on average over four years. Output falls (from peak to trough) an average of over 9 percent, although the duration of the downturn, averaging roughly two years, is considerably shorter than for unemployment. Third, the real value of government debt tends to explode, rising an average of 86 percent in the major post–World War II episodes. Interestingly, the main cause of debt explosions is not the widely cited costs of bailing out and recapitalizing the banking system. Admittedly, bailout costs are difficult to measure, and there is considerable divergence among estimates from competing studies. But even upper-bound estimates pale next to actual measured rises in public debt. In fact, the big drivers of debt increases are the inevitable collapse in tax revenues that governments suffer in the wake of deep and prolonged output contractions, as well as often ambitious countercyclical fiscal policies aimed at mitigating the downturn.”

Read the whole thing.

Helping Credit Markets
DUNCAN CURRIE 01/23/2009

“If the time has come to spend hundreds of billions to restart bank credit flows and prevent unwarranted foreclosures, let’s spend the money using mechanisms that are likely to achieve our objectives,” writes Columbia Business School economist Charles Calomiris, a visiting scholar at the American Enterprise Institute.

Paying for the ‘Troubles’
DUNCAN CURRIE 01/23/2009

From The Times of London:

“The price of dying as a direct result of the violence of Northern Ireland’s Troubles has been fixed at £12,000 by two former churchmen designated by the Government to come up with a solution to dealing with the province’s conflict-riven past.

“Lord Robin Eames, a former head of the Church of Ireland, and Denis Bradley, a former Catholic priest, have briefed Gordon Brown on their conclusions that families of every single victim of the Troubles, regardless of their status of civilian, member of the security forces or terrorist, should be given a ‘recognition’ payment of £12,000.

“If the Prime Minister accepts the recommendation by the Consultative Group on the Past it will mean that the family of the IRA member Thomas Begley—the ‘Shankill Bomber’ who blew himself up while planting a bomb inside a busy fishmongers store in Belfast in October 1993—would receive exactly the same sum as the nine innocent civilians he murdered in the attack.

“It would also mean that the same ‘recognition’ would go to the family of another notorious murder, Lenny Murphy, the so-called Shankill Butcher, who ran a loyalist gang that abducted dozens of innocent Catholic civilians from the streets of Belfast and tortured them before murdering them.”

Read the whole thing.

Obama and Healthcare Reform
DUNCAN CURRIE 01/23/2009
Carlos Slim and the Times
Duncan Currie 01/22/2009

From The New York Times:

“The New York Times Company said Monday it had reached an agreement with the Mexican billionaire Carlos Slim Helú for a $250 million loan intended to help the newspaper company finance its businesses.

“Under the terms of the deal, Mr. Slim, who already owns 6.9 percent of the Times Company, would invest $250 million in the form of six-year notes with warrants that are convertible into common shares, the company said in a statement. The notes also carry a 14 percent interest rate, with 11 percent paid in cash and 3 percent in additional bonds.

“The deal comes as the Times Company looks to raise money amid flagging advertising sales and approaching deadlines to pay back $1.1 billion in debt in the next few years.

“The company will use the proceeds from the transaction to refinance its existing debt. One of its two $400 million revolving credit lines is set to expire in May. The $250 million investment should help free some of the company’s borrowing capacity.”

Solving the Banking Crisis
Duncan Currie 01/22/2009
Obama’s Speech
Duncan Currie 01/21/2009

The full text of the 44th president’s inaugural address can be found here.

Giving Bush His Due
Duncan Currie 01/21/2009
Bush and the Economy
Duncan Currie 01/21/2009

A balanced perspective from the Wall Street Journal editorial page.