Economics and Alaska

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How would Noam Chomsky and Howard Zinn critique Tolkien's history of Middle Earth?

MARVIN APPELBAUM AND IAN PINKNER imagine Chomsky and Zinn, sitting around, watching the movie, and analyzing about the different scenes, here: "Unused Audio Commentary by Howard Zinn and Noam Chomsky, Recorded Summer, 2002 , For The Fellowship of the Ring (Platinum Series Extended Edition) DVD, Part One.".

...Chomsky: Notice too that the "war" being waged here is, evidently, in the land of Mordor itself — at the very base of Mount Doom. These terrible armies of Sauron, these dreadful demonized Orcs, have not proved very successful at conquering the neighboring realms — if that is even what Sauron was seeking to do. It seems fairly far-fetched...

I learned about this from the blog of Mark A. R. Kleiman, here "IT'S ALL ABOUT PIPE-WEED!".

Revised 5-2-03.


posted by Ben Muse at 12:05 PM

 
Productivity growth in government

Has productivity stagnated in the government sector? Arnold Kling posts on "cost disease," that is, productivity "stagnation" in the service and government sectors, here "Cost Disease".
posted by Ben Muse at 12:24 PM

 
Medicare Scare

The Congressional Budget Office (CBO) is projecting enormous Medicare expenses in the future. The figure below shows CBO projections of Medicare costs as a percent of gross domestic product (GDP) through 2075. Costs, which are about 2.5% of GDP now, rise to 9.2% in 2075. Eyeballing the figure, I'd estimate they'd be about 5% of GDP about 2030 (towards the end, or maybe a little after the end, of my life). These projections don't include the impact of the prescription drug benefit that is currently under consideration.

You can see that the CBO divided the estimates into two parts, the "effects of an aging population" and "per capita growth [of medical expenditures - Ben] in excess of GDP growth." Most of the increase is due to an increase in the per capita cost of medical services, but a significant amount is due to the aging population.



There are problems with making projections like this that far out; this diagram gives a misleading impression of precision. However, it does indicate that reasonable people using plausible projections, see a big problem. How are we going to pay for this? Current projections of demographic changes see the ratio of workers to beneficiaries dropping from about 3.7 today, to 2.4 in 2030 and 2.0 in 2075 (again, estimates like these are very rough and incorporate a lot of assumptions that may be turn out wrong). How are we going to pay for anything else? If Medicare accounted for 9% of GDP today, it would take up half of the federal budget. Expenditures at that level are going to put tremendous pressure on discretionary federal spending.

Obviously some sort of changes are going to have to be made to the program. The eligibility age could be raised from 65 to 70. The CBO projects that this would produce savings equal to 0.7% of GDP in 2075. The Supplementary Medical Insurance (SMI) premiums could be doubled - the CBO projects that this buys us savings equal to another 1% of GDP by 2075. These are both big changes in the program, but the change in the growth of program costs is disappointingly small. We face hard choices - the CBO points out that the sooner we begin to make them, the better things will be.

Source: This note summarizes parts of the testimony of CBO Director Douglas Holtz-Eakin before Congress' Joint Economic Committee on April 10, 2003. The full, very readable, testimony may be found here: "Holtz-Eakin Testimony".
posted by Ben Muse at 6:55 PM

 
How to deal with Iraq's debts after the war

Alan B. Krueger points out that Iraq's foreign debts are enormous in relation to its short run economic potential in this New York Times column: "What Will Be the Model for Peace in Postwar Iraq"

"Iraq's total potential obligation — from war-related compensation claims, foreign debt and pending contracts — is $383 billion, according to Frederick D. Barton and Bathsheba N. Crocker of the Center for Strategic and International Studies in Washington...

"To gain some perspective on the crushing financial burden facing the Iraqi people, note that with a population of 24 million, pending obligations work out to $16,000 for every man, woman and child. The Central Intelligence Agency estimates, probably optimistically, that Iraq's per capita gross domestic product is $2,500. So, for the average person, financial obligations exceed income by a ratio of more than six to one.

"If 50 percent of Iraq's future export income is diverted to paying down the debt — more than three times the percentage extracted for German World War I reparations — it would take more than 35 years to pay off current obligations fully, even after allowing for reasonable growth in oil exports."

An Iraqi default would be a deter the investment Iraq will need for reconstruction.

"To give Iraq's economy a chance to recover, Mr. Barton and Ms. Crocker recommend a five-year moratorium on external debt, along the lines that the Paris Club creditors agreed to for Yugoslavia in 2001. They also call for an immediate halt to the United Nations deduction of oil revenues to compensate claimants.

"Michael Kremer and Seema Jayachandran, two Harvard economists, go even further. They propose that debts incurred by all illegitimate, repressive regimes should be made nontransferable to successor governments. Because Iraq has the potential to generate foreign exchange, unlike Rwanda or Haiti, a debt moratorium or write-down could generate short-term investments to help the economy get back on its feet.

"Relieving Iraq's debt crisis is a particularly delicate diplomatic challenge, however, because Russia — with its own economic problems and veto on the Security Council — is owed $64 billion by Iraq. Ms. Crocker cautions that the United States should not unilaterally cancel contracts executed between other sovereign nations; this should be left to a multinational body."

Krueger points to a report by Barton and Crocker prepared under the auspices of the Center for Strategic and International Studies. The Center has several reports on reconstruction problems at this web page: "Post-Conflict Reconstruction".
posted by Ben Muse at 11:13 PM

 
State tobacco revenues

Daniel Gross points to the enormous revenues states receive from tobacco taxes and the 1998 state-tobacco company settlement. That settlement alone generates between $8 and $11 billion a year for the states over the next 25 years. States like New York and California are selling bonds to be paid with future tobacco revenues to help close their budget deficits this year. Gross notes that this puts the states in an awkward position - their dependence of the tobacco revenues gives them a vested interest in the health of the tobacco companies: "Cigarette Burns. State governments learn the cost of their addiction to tobacco revenues". (In Slate)
posted by Ben Muse at 10:55 PM

 
Rumsfeld the poet

Hart Seely, in Slate, has some selections from the poetical works of Secretary Rumsfeld, here: "The Poetry of D.H. Rumsfeld. Recent works by the secretary of defense." For example:

"The Unknown
As we know,
There are known knowns.
There are things we know we know.
We also know
There are known unknowns.
That is to say
We know there are some things
We do not know.
But there are also unknown unknowns,
The ones we don't know
We don't know.

—Feb. 12, 2002, Department of Defense news briefing"

posted by Ben Muse at 10:39 PM

 
Report on Hussein's manipulation of the arms inspections process

The Iraq arms inspections process depended on Iraqi cooperation. This past fall and winter that cooperation fluctuated, depending on the stances of different parties in the Security Council. The "Volokh Conspiracy" reports the perceptions of an inspector in this translation from a German news story: "GERMANY, FRANCE, AND RUSSIA ARE RESPONSIBLE FOR THE WAR...".
posted by Ben Muse at 9:35 AM

 
Donald Sensing with an important reminder about GIs and Tommy Atkins

" 'Teenage boys, armed and in uniform' All armies are not the same"
posted by Ben Muse at 4:59 PM

 
The Office of Advocacy plans for the future

The Small Business Administration (SBA) provides a wide range of services to small businesses. Its Office of Advocacy makes sure that Federal agencies meet the requirements of the Regulatory Flexibility Act when they promulgate regulations. The Reg Flex Act requires agencies to evaluate the impacts of rulemaking on small entities, including small businesses, non-profits, and small governments. The Office takes its responsibility seriously, and is aggressive in pursuing its mandate, and aggressive as well in promoting itself with its constituency.

The current Administrator of the SBA is supportive of the Office, but evidently there is concern that future Administrators may not be as supportive. The Chief Counsel of the Office, Thomas Sullivan, testified to Congress today that the Office should have its own line item in the SBA's budget. The presumption is that this would give the Office necessary independence, because the Administrator would have less discretion over the Office's budget. A quick look at the SBA budget suggests that it has five or so major accounts, including one for the Office of the Inspector General. The Inspector's office is one that could certainly benefit from the independence provided by its own Congressional appropriation.

Sullivan's testimony is here: "Sullivan Testimony"

I"None of the above would be possible without the flexibility to react and shift resources based on the changing needs of small entities and the economy. Moreover, none of it would be possible without an independent voice to say what is right or wrong about government policies or regulations. The long-term viability of our office depends on preserving our unique statutory mandate.

"Yet a conundrum exists that may threaten the future of Advocacy and the important role it plays. Under the current budget process, the chief counsel must rely on the budget decisions of the SBA Administrator. To put it more bluntly, each year, the chief counsel must go hat-in-hand to SBA’s Administrator for a portion of SBA’s overall budget appropriation.

"I am pleased to report that the current SBA Administrator, Hector Barreto, is one of our strongest supporters. His budget decisions reflect the President's priorities and the critical role our office plays in helping small business. However, a day may come when future SBA administrators and chief counsels do not get along as well. The current budget process is a dangerous one because the Office of Advocacy's budget is too easily pillaged when administration priorities change.

"When you examine the statutory mandate of my office and the authority we have to defend small business, it becomes obvious why our office is independent. The Office of Advocacy is supposed to be critical of government that treats small business unfairly. SBA is a regulatory agency. And my office treats SBA the same as we do the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Department of Transportation (DOT), the Internal Revenue Service (IRS), and the other agencies. We make sure that SBA adequately considers their impact on small business before they finalize rules (the basic requirement of the RFA and SBREFA). The system is flawed when the Office of Advocacy's budget is determined by a part of government we hold accountable for compliance with the RFA...

"A budget line-item for Advocacy would certainly help address the problems identified above. A line-item would provide assurance to small entities that they can continue to count on the Office of Advocacy as a strong and independent voice on their behalf.

"Last year, in my testimony to the full Committee, I registered my strong support for S. 395. That particular bill, introduced by Senator Kit Bond, cleanly and simply used a line-item approach to bolster Advocacy’s independence. As I stated last year, this approach would be preferable to language that creates an altogether separate budget process specific to the Office of Advocacy. In other words, Advocacy would have a line-item just as SBA’s Office of the Inspector General currently has. Advocacy currently has a line-item for its economic research budget. The line-item (which has come and gone over the years in both report and statutory language) has “protected” the funds from possible reductions and enabled our office to plan its research activities with greater certainty."

So maybe the way to view the Office is as a sort of "regulatory inspector general."


posted by Ben Muse at 6:47 PM

 
Advice from General McCaffrey

Phil Carter at the "Intel Dump" blog quotes some extracts from an op-ed in today's Wall Street Journal by retired General Barry McCaffrey on where we are in Iraq, and what we need to finish the job, here: "Words from an old soldier".

"...We should be fighting this battle with three U.S. armored divisions and an armored cavalry regiment to provide rear area security. We also have inadequate tube and rocket artillery to provide needed suppressive fires for the joint team. However, the 100,000 troops en route to the battle will give the operational commanders the ability to control the pace and tempo of the fight if we sense trouble...

"We are overextended and at risk. It is time to call up at least three U.S. Army National Guard Divisions for 36 months service along with significant Marine, Navy, Coast Guard and Air Force reserve elements. Getting these reserve elements truly ready to fight is a six-month training challenge."

Carter provides commentary, including a brief resume on McCaffrey which suggests that McCaffrey's worth listening to.
posted by Ben Muse at 6:29 PM