An ongoing review of politics and culture

Dud of Personality

Barron YoungSmith pulls the file on Mr. Congeniality:

The lede of a June 28, 2000 piece in the New York Times:

Gov. George W. Bush of Texas said today that if he was president, he would bring down gasoline prices through sheer force of personality, by creating enough political good will with oil-producing nations that they would increase their supply of crude.

And today:

Saudi Arabia’s leaders made clear Friday they see no reason to increase oil production until customers demand it, apparently rebuffing President Bush amid soaring U.S. gasoline prices.

It was Bush’s second personal appeal this year to King Abdullah, … But Saudi officials stuck to their position that they will only pump more oil into the system when asked to by buyers, something they say is not happening now, the president’s national security adviser told reporters.

Either the original theory was wrong, or George isn’t as charming as he thinks he is…

Charm is a great way for the otherwise powerless to gain power, but when the powerful lose power, charm is often useless at getting it back. (Bill Clinton once disproved this rule, but then he lost his charm.) Elsewhere I just finished observing that

the only reason why Bush’s request was begging was that Bush is pathetic and nobody needs to listen to him anymore, even our bosom Saudi buddies. Any President with an ounce of clout and gravitas could have discovered a way, by hook or by crook, to get even a symbolic increase in oil production with at least his public honor intact. Not George.

Is Harvard Just a Tax-Free Hedge Fund?

According to the Wall Street Journal, Massachusetts legislators are studying a plan to levy a 2.5% annual tax on the portion of college endowments that exceed $1 billion. The high-wage union workforce with lifetime employment contracts and restrictive work rules tenured faculty is not amused.

Harvard’s official response is pretty funny:

Kevin Casey, a spokesman for Harvard, said the proposal would hurt Massachusetts and colleges because it would damage “stable bedrock institutions” that have helped shield the region from the worst of the economic slowdown.

But why isn’t this statement true of, say, Akamai, Biogen and Raytheon?

I’ve purposely picked companies with close ties to MIT and Harvard, because one could argue that universities create spin-offs that ultimately create corporate profits to be taxed. But large tech companies do the same; many successful companies are in the fourth or fifth generation of this process. Should Fairchild Semiconductor be free of paying corporate income tax because employees left to create Intel, or should this tax benefit revert to AT&T because a group of employees left Bell Labs to start Fairchild?

Which brings to mind another obvious question: why do endowed universities get tax breaks that other corporations don’t get in the first place?

Consider Harvard.

It claims to be in the business of serving humanity through the creation and dissemination of knowledge, but Biogen claims to “transform scientific discoveries into advances in human healthcare”. That sounds pretty good, too.

If you think of Harvard as a corporation, it had an income statement in FY 2007 with about $2.2 billion of revenues (tuition, sponsored research contracts, and so on) and about $3.2 billion of expenses, and therefore had to move about $1 billion from the endowment to make up the difference in order to run at basically break-even. In other words, it’s a big institution, but hey, it doesn’t make any money and has to survive on the kindness of donors, even if these donations are channeled through an endowment.

But this isn’t quite the whole picture. The overall Harvard corporation gets to make money through investment returns on its endowment (or, more precisely, the General Investment Account, which currently includes about $6 billion of investable assets in operational accounts in addition to the $34 billion endowment) that doesn’t get reported as revenue. Last year, Harvard made more than $7 billion of tax-free investment income.

So if you just think about how much cash went into the shoebox and how much came out of it, a more accurate accounting for Harvard for FY 2007 would, in rough numbers, be a lot more like the following:

Receipts = $2 billion of operating revenue + $7.3 billion of investment income + $0.6 billion of gifts to the endowment = ~$10 billion.

Operating costs = ~$3 billion.

Profit = $10 billion – $3 billion = ~$7 billion.

This explains why Harvard’s net assets increased about $7 billion in 2007, from about $35 billion to about $42 billion.

Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.

The trick is that this hedge fund can’t remit earnings to investors, and has to keep them in the company’s account, renaming these retained earnings as an “endowment”. So how do the insiders extract value from this business? One way is by giving themselves cushy jobs that pay a ton of dough. Those who manage Harvard’s money are well-paid. The prior investment head, Jack Meyer, left after criticism of a compensation plan that paid some investment management professionals more than $35 million each in a single year. In spite of this, investment professionals often leave the Harvard Management Company because they can make yet more money as partners in private equity groups or hedge funds. Of course, the qualification of running Harvard’s pool of assets can be leveraged to get exactly such jobs – those who do this are called “Crimson Puppies” – while in the meantime enjoying a somewhat more relaxed work-life balance, and not having to do the hard work of actually raising the fund.

The worker bees in the marketing department (i.e., the faculty) are also quite well-paid. The average Harvard professor now has a salary of about $185,000 per year. Professors in the right disciplines, such as business, can reportedly double their salaries through outside consulting and other income sources. In 1980, the salary of a Harvard professor was about 5.5 times the average US per capita income; today, $185,000 is about 7 times the average national per capita income, and can often be leveraged into much higher actual annual compensation.

When tax-advantaged non-profits start to accumulate billions of dollars of cash through investment gains, and the insiders seem to be doing very well, it creates legitimate pressure for some legal changes. There is a broad range of alternatives: capital gains taxes on investment income, directly taxing the endowment, placing limitations on employee compensation, and forcing the distribution of a fixed percentage of the endowment are all obvious choices. Sanctimonious talk about “the mission of the university” is not likely to stop this; unfortunately, giving lots of money to Democratic politicians very well might.

( cross-posted at The Corner )

Italogermania

Not sure why — perhaps because I am a deracinated cosmopolitan — but I found this notion of Dani Rodrik’s intriguing:

If the Eurozone was a country rather than a loose grouping of countries, workers would be migrating en masse from Italy to Germany.

This led me to think about Klaus Wowereit’s line about Berlin being poor but sexy, and the general population collapse in eastern Germany. What if a horde of Italians flooded booming Munich, and then headed north to cheap accommodations in Berlin and lesser eastern cities? Enterprising Somalis and Bengalis and Senegalese would soon follow. I realize that this wouldn’t be terribly appealing to the neofascists and even to some of my fellow cultural conservatives, even if new arrivals were exempt from cradle-to-grave welfare protections and they brought intact families in tow. But surely Germany’s dying cities would be far better off. Some on the German right have called for “Kinder statt Inder,” i.e., children and not Indians, but Kinder aren’t always on offer, even if you accept that they are the superior alternative, which is not always obvious (though I have my pro-natalist sympathies). Economic power is shifting away from parts of Germany and Italy; surely they can shift population around in such a way as to make the best of what they have, and perhaps revive moribund cultures in the process.

Of course, it could be that I want Europe to become a continent-wide melting-pot because this is the highest expression of my American chauvinism, so Europeans should be wary.

Clone Harvard

Matt Yglesias and I both went to Harvard as undergrads, and I liked it a lot more than he did. In part, this is because I was a transfer student — my three years at Harvard were, for a lot of reasons, a lot more fun than my one year at Cornell. And I happened to make a lot of really good friends, mostly due to happenstance. Also, like Brad DeLong, I liked Social Studies. But a couple of things have soured me in the years since I left: the Summers incident, which was painful to watch; the (temporary) end of transfer admissions, which is a scandal, particularly as we see Harvard draw on its alternate list; and Brad DeLong’s minor masterpiece on Harvard-as-socialist-Yugoslavia.

So how can Harvard redeem itself?

There is no way that Harvard will pick up and move, sad to say. I’d be stoked if Harvard moved to Palm Springs or Monterey. But it also can’t scale itself up enough to effectively use its resources to improve the quality of education around the world while tethered to Cambridge. Yes, there is something to be said for providing a small, elite cadre of international students with a top-notch education and sending them home to spark fruitful change. In reality, a large swathe of these would-be change agents will assimilate into US elite culture, and there’s nothing wrong with that. It is a good, natural development.

But what if Harvard cloned itself in India, China, and elsewhere, perhaps through deep partnerships with existing, cash-poor universities in those regions? Something like this happens on a very small scale. Harvard can do better, by farming out faculty and by handing out healthy heaps of cash. Perhaps Harvard could also partner with HBCUs in the American South that focus on, for example, on training teachers and healthcare professionals.

Follow You Down

While we’re sharing guest posts, I have two more for you, both from TAS reader Kristoffer Sargent. This first one is on Fareed Zakaria, who, for the record, is getting a little bit of a bum rap in my view. Zakaria did make a major factual flub, but there’s something to his deeper point, but more on that to come. RS.

Reading the cover of Fareed Zakaria’s The Post-American World, I found myself wondering, “When do power shifts lead to war?” Remembering that this is, in fact, the 21st Century, I thought, hey, why not see if I can find the answer online.

Two minutes later (I know, but I had to go to the bathroom), I found what I was looking for: When Do Power Shifts Lead to War?, by Woosang Kim and James D. Morrow.

Zakaria II: Am I Crazy?

Here is the paragraph that has one of the competing lists that Ross mentions in his post on Fareed Zakaria:

Look around. The world’s tallest building is in Taipei, and will soon be in Dubai. Its largest publicly traded company is in Beijing. Its biggest refinery is being constructed in India. Its largest passenger airplane is built in Europe. The largest investment fund on the planet is in Abu Dhabi; the biggest movie industry is Bollywood, not Hollywood. Once quintessentially American icons have been usurped by the natives. The largest Ferris wheel is in Singapore. The largest casino is in Macao, which overtook Las Vegas in gambling revenues last year. America no longer dominates even its favorite sport, shopping. The Mall of America in Minnesota once boasted that it was the largest shopping mall in the world. Today it wouldn’t make the top ten. In the most recent rankings, only two of the world’s ten richest people are American. These lists are arbitrary and a bit silly, but consider that only ten years ago, the United States would have serenely topped almost every one of these categories.

One of these facts struck me as surprising. I was pretty sure that the biggest oil refinery in the world has not been in the US for some time. I looked into it, and I don’t think it was. Then I started to look more of these facts. In about an hour on Google, I found that US did not top the list by 1998 or earlier in lots of these categories.

Iran already had the world’s largest oil refinery by 1980.

Russia had already built the world’s tallest Ferris wheel in 1995, topped by Japan in 1997.

Canada had already built the world’s largest mall by 1986.

Malaysia had already built the world’s tallest building in 1998.

I couldn’t find any data on Bollywood in 1998. Using this data for 2001 and estimating back three years, it looks like Bollywood was already larger than Hollywood in 1998 in terms of films produced and total number of tickets sold. Hollywood remains much, much larger than Bollywood in 2008 in terms of revenues (which seems like it would be the default metric for “bigger”). So it’s hard to find the metric by which Hollywood was bigger ten years ago, but has now been overtaken by Bollywood.

This was using quick-and-dirty sources like Wikipedia, so somebody please tell me if I’m wrong. But this seems crazy – surely the guy has fact-checkers for something this high-profile?

And doesn’t it seem kind of weird to produce a list like this and say that ten years ago the US “would have serenely topped almost every one of these categories”? [itlaics added] I mean, if you made the list, wouldn’t have you checked to make sure it was true for every category?

Can anybody expert on any of these topics let me know where I’m wrong?

A Post-American World?

Ross Douthat has pretty negative take on Fareed Zakaria’s argument that “The world has shifted from anti-Americanism to post-Americanism.” I agree, and think it’s important to amplify why.

Zakaria claims that the last twenty years has seen the rise of the rest of the world relative to the United States. He says:

We are living through the third great power shift in modern history. The first was the rise of the Western world, around the 15th century. It produced the world as we know it now—science and technology, commerce and capitalism, the industrial and agricultural revolutions. It also led to the prolonged political dominance of the nations of the Western world. The second shift, which took place in the closing years of the 19th century, was the rise of the United States. Once it industrialized, it soon became the most powerful nation in the world, stronger than any likely combination of other nations. For the last 20 years, America’s superpower status in every realm has been largely unchallenged—something that’s never happened before in history, at least since the Roman Empire dominated the known world 2,000 years ago. During this Pax Americana, the global economy has accelerated dramatically. And that expansion is the driver behind the third great power shift of the modern age—the rise of the rest.

I am always suspicious of these three-part schemes of historical epochs, the three parts of which seem to contract precipitously in length as we approach the current day. According to Zakaria, the first of these phases lasted abut 400 years, the second lasted about 100 years, and we’re now in one that has, at least in large past, happened in 20 years.

Zakaria goes on to say that this “This will not be a world defined by the decline of America but rather the rise of everyone else.” But the only way that sentence makes sense to me is if it means relative American decline.

Here’s the only problem with Zakaria’s thesis:

US share of global economic output (on a purchasing power parity basis) has declined very slightly over the past twenty years – from about 21% to about 20%. But what has really happened over this period has been the rise of China and the rest of non-Japan Asia at the relative expense of Western Europe and Japan.

At the start of each of the last two recessions there has been a lot of hand-wringing about whether current problems are symptomatic of terminal US decline. Zakaria in his article tells a story of how twenty years ago Indians were culturally fixated on the US, but are now more inward-looking. He goes on to cite recent economic growth rates for China and India, and makes the point that if we were to extrapolate these out for some decades the world would be a very different place. Just replace China and India with Japan and Korea, and this is an almost a word-for-word recitation of the kinds of articles you could find every week in every major American newspaper and magazine twenty or twenty-five years ago.

What Zakaria misses is that the relative decline of the US is real, but that it already happened. US share of world GDP in 1945 is estimated to have been about 50%; this more than halved between 1945 and 1980. The US economic crisis of the 1970s was largely the result of this decline. I’ve argued at length that the Reagan economic program was a creative and successful response to that crisis that has prevented the US economy from going the way of Europe. This program was focused on two things: sound money and deregulation, broadly defined. It’s ironic that, despite the rhetoric, Reagan’s program was premised on a very clear-eyed recognition of relative American decline. (It’s interesting, by the way, to see Reagan’s take on foreign policy commitments in this light.)

The ability of the US economy to defy historical gravity for the past 25 years has not been automatic: it was earned in a set of pivotal political battles that were pretty much complete by 1984. The next twenty years were, within the American economy, a Twenty Years War to implement this less-regulated system that has now reached maturity. We live in the new economy that it has created. The danger of misdiagnosis of our current situation is that we will fail to understand the sources of our advantage and unwittingly throw them away.

( cross-posted at The Corner )

Is 8 Ball Inflation-Proof?

Following on Peter’s post about whether alcohol is or is not an inferior good, I noticed at the gas station this morning that malt liquor prices appear not to have changed much since I was a consumer in the mid-1990s. A 40 oz of Old English or Colt 45 costs between $1.50 and $1.75, which seems close to what I remember as the going rate. According to the BLS, $1.50 in 1992 has the buying power of $2.28 today, so malt liquor prices appear to have escaped inflation. This even though at -0.79, price elasticity of demand is fairly inelastic, presumably for all the obvious and depressing reasons.

Is 80 Proof Recession Proof?

The folk wisdom I’ve always heard is that the one business that never suffers in a recession is alcohol. You’re never too poor, apparently, to rack up a bar tab, and if you are, well, all the more reason to order another round.

The New York Times, however, suggests this might not be the case:

Not even beer is immune. Sales of inexpensive domestic beers, like Keystone Light, are up; sales of higher-price imports, like Corona Extra, are down, the firm said.

Some are skipping drinks altogether. The number of people ordering an alcoholic drink fell to 31 percent last month from 42 percent last summer, according to a survey of 2,500 people conducted by Technomic, a restaurant industry consulting firm.

Is this a new trend, or is my understanding just economic folklore? I don’t know, but I suspect either Tyler Cowen or Baylen Linnekin might.

The Case for Infosocialism

When Ed Felten says you’re wrong, you are almost certainly wrong. For those of you who don’t know, Ed Felten is a computer scientist and technology policy guru who, along with my friend David Robinson, runs Princeton’s Center for Information Technology Policy. I just wrote a short piece for Slate advancing the decidedly unpopular Terry Fisher notion that the feds should compensate copyright holders directly for the use of creative works through a kind of music tax. This is an idea I first toyed with here at TAS, and it received some withering, very sound criticism from fellow _TAS_er Tim Lee during at informal chat at my first soup party.

To Felten’s concluding question,

This is the fundamental problem of copyright policy in the digital age. It’s easy for people to get copyrighted works without paying. So either you forgo payment entirely, or you give somebody the mandate to collect payment. Who would you prefer: record companies or the government?

I have a couple of first-cut responses. First, as Tim has suggested, I think forgoing payment is not the end of the world. I allude to alternative revenue streams (live performance, Kevin Kelly’s brilliant notion of the 1,000 True Fans), and this may well be the future. Second, I tend to think the government would be preferable to the record companies — at least in theory, we have some degree of democratic accountability. Perhaps that is naive of me, and I’m more liberal than that implies (classically liberal, that is). My secret agenda, an agenda that would have taken too long to situate and explain in the piece, is what the RPG Transhuman Space calls “nanosocialism.”

Only at The American Scene will you hear such insanity. Bear with me. I feel the need to stress this in part because some may have mistaken me for a Big Music of pro-copyright patsy, which couldn’t be further from the truth.

Nanosocialism, in the Transhuman Space world, is an offshoot of infosocialism.

The core of the ideology is that information is very different from material goods in that it can be given away without the former holder losing anything. And since information can be used for the good of humanity no one should be able to claim the rights to an idea. Simply put – if someone figures out a cure for cancer, every cancer patient has the right to it.

In an ideal world, every idea would belong to humanity as a whole. Since this is impossible as it is an infosocialist would argue that ideas should be owned by the government or an overreaching entity that could make sure that anyone got the info they needed. This same entity would also pay the thinkers who come up with the ideas/write the songs/write the theses.

I’d add that we’d want copyrights to lapse very quickly, as in The Economist‘s excellent proposal. The reward system would pay out for the life of the copyright. I must say, I’m also sympathetic to the David Levine view.

If I produce a cup of coffee, I have the right to choose whether or not to sell it to you or drink it myself. But my property right is not an automatic right both to sell you the cup of coffee and to tell you how to drink it.

Read the whole essay — Boldrin and Levine quote Heinlein, which is always a promising sign.

I think my core ideology is a marriage free market economics in stuff and infosocialism in ideas (using Fisher-style reward systems and other unconventional methods). To the extent we want to engage in meliorist projects, we should try to get prices right. Given that the government is bad at getting prices right, we should be very humble about the effort, and very reluctant to pursue carbon taxes, etc.

“But Reihan, these schemes are unworkable!” You could be right, for now. We need to think creatively about institutional design.

Slippery Richard Florida

After Paul Krugman dismissed Florida’s mega-region musings (appropriately), Florida replied very politely and very oddly.

I’m in good company: Krugman’s also also skeptical of the new paper on place-making policy by Ed Glaeser and Joshua Gotltlieb (unfortunately gated by Brookings).

That’s not actually true. Rather, he was endorsing Glaeser and Gottlieb’s humble, decidedly un-sweeping approach. I realize this matters to no one but me. Still, I need to get this off my chest. At the risk of being rude, I don’t think Florida is qualified to shine Glaeser’s shoes, or Krugman’s. As for me, I don’t think I’m qualified to shine my own shoes, currently a dingy pair of weathered moccasins that are destined to fall apart as I walk through some massive, heroin-filled rain puddle.

Re-regulate the Friendly Skies?

In Monica Prasad’s brilliant The Politics of Free Markets, she describes the changing ideological valence of “deregulation,” which began as a pro-consumer cause identified with the left to a pro-business cause identified with the right. Yes, it can be pro-market and both pro-consumer and pro-business. But as Prasad explains, the early champions of deregulation, led by Ted Kennedy, Stephen Breyer (yes, that Stephen Breyer), and Ralph Nader were primarily interested that entrenched the power of particular corporations. During the Reagan administration, the emphasis of deregulation shifted to what Prasad calls social regulations, to which all firms were subject — thus, in theory, not lending a competitive advantage to some firms over others. Now, I actually think this view is a little confused. Large, well-capitalized multinationals are better able to bear the brunt of social regulations, right? There are subtleties here, but regardless, it’s an interesting view about how deregulation meant one thing at one time and an entirely different thing at another time.

So I was struck by Richard Posner’s latest, in which he mulls over what to do about airline service, in particular the epidemic of delays that plagues airline service. After offering a pretty persuasive explanation, he proposes — shockingly! — bringing back the Civil Aeronautics Board, the obliteration of which was the first great triumph of deregulation during the Carter era. One senses he’s not entirely serious. Posner ends with a more plausible and less unappetizing fix.

A better alternative than any I have discussed thus far would be a heavy tax on airline transportation, with the tax rate varying according to the contribution of a particular route, time, or type of plane to congestion (for example, in general large planes would be taxed less heavily per passenger than small ones, because for a given number of passengers there are fewer big planes to clog the airways and runways than there would be small ones). To the extent effective, the tax would eliminate the deadweight cost of congestion.

And of course this would also have environmental benefits. I like it. Naturally I wonder if our regulators will be capable of making the fine-grained decisions necessary, but my sense is that the likely alternatives are even more intrusive.

That's Rich

Ezra complains that $200,000 a year in gross income is not middle class:

[…] the fact that even a family making $200,000 can’t live a lifestyle free from all prudence does not make them middle class. Rather, it’s just a reflection of the extraordinary wealth that’s concentrated into a few hands in this country, and the degree to which inequality has mixed with economic segregation to produce a wildly skewed vision of what constitutes the economic norm. One has to wonder, though, how a media that thinks $200,000 is “middle class” could possibly do a serious job of reporting on a country where the median household income is around $60,000.

But the same basic criticism — that 200K is ‘rich’ — fosters a different line of argument, too, namely, that rich ain’t what it used to be. I’ll begin with the cheeky but effective argument that a gross income of $200,000 is particularly not what it used to be after a run in with the 50% tax bracket. But the main point I’d like to raise is that ‘extraordinary wealth’ as Ezra defines it has become more necessary for increasing, not decreasing, numbers of Americans who want their children to succeed in the nationwide (indeed global) competition for jobs and resources. A family that wants to have four children, have them well-educated, and have them raised by a stay-at-home parent does not have to be imprudent to fail to do this with $200,000 gross — especially if the single breadwinner in the household has just started making that kind of money, and still has a large amount of debt from the many years in which he or she struggled to become successful.

A major culprit here appears, to me, to be our educational system. College and law school are now places where the cost of a premium education is basically pegged to earning power of a student that immediately enlists in the officer class of the corporate corps upon graduation. Not all top-shop schools are sitting on vast endowments, though many are. Yet what will inspire legions of America’s best-socialized to work rotten jobs for great compensation, if not a debt burden that makes that compensation necessary to maintain their social class — to say nothing of remaining solvent?

The United States is trying all but consciously to create a society in which there are no elites who are not ‘rich’, and in which a maximum number of the ‘rich’ carry a maximum amount of debt. One of the best ways to achieve this fugly situation is to push all four of incomes, consumer spending, credit, and taxation into the red zone. I see where Ezra is coming from, and where he suspects we have to begin to break the cycle of perversity that blights the American political economy, but I’m convinced that the only way we can do it is to allow people to amass enough wealth to emancipate themselves from the debt regime that makes us the kept pets of an unsustainable and frivolous financial scheme. And that in turn requires that we not soak ‘the rich’. It also requires that we trust people who keep the money they make not to blow it on disposable luxury goods. The moral weight of what I’m arguing now shifts into view.

Formalism Still Running Amok

Tyler Cowen has a post up, vis-a-vis the global warming debate, linking to a paper that argues for negative discount rates for environmental goods.

Early in the paper the author argues that since greenhouse gases create a massive externality, then some action on climate change must be Pareto efficient (ie., economist-speak for a good idea). Of course, in addition to a lot of other considerations, there are already large taxes on, for example, gasoline (about 50 cents per gallon in the typical US state and several dollars per gallon in Europe), so this is not so obvious to me.

More broadly, I’ve never seen a counter-argument to my early post that it doesn’t make sense to argue over discount rates when we should really just look at the raw projections for effects and odds by year out into the future and compare alternatives directly without trying to use a function to convert this comparison of vectors into a comparison of scalars for us.

W.W.J.R.D. (What Would John Rawls Do?)

I’m not often inclined to retreat behind the veil of ignorance to decide policy questions, but every now and again it makes sense to take out one’s less-favored philosophical tools and see how they handle a difficult problem. Today, we’re going to take global warming behind the veil of ignorance, and see where it gets us.

Is it Foolhardy to be Family-Friendly?

I need to write a proper response to Stephen J. Entin’s critique of family-friendly tax policy. For now, I suggest you read it and see what you think.

Ending many deductions and fringe benefits would greatly expand taxable income, which would bump millions into higher tax brackets. Unless marginal tax rates came down a lot, marginal disincentives to work and save could rise for millions of households.

If the tax change is revenue neutral, and much of the revenue is devoted to large tax credits for families with children, then other taxpayers must pay a higher tax bill – and tax rates at the margin on saving, investment and work must increase for most taxpayers.

This is almost certainly true. But is it still worth it? Ramesh anticipated many of these objections, and my sense is that he offered pretty convincing rebuttals. Then there is the question of political psychology, which Ramesh tackles in the context of what sociologists call the life-course perspective. More to come.

Free Trade for Me, but Not for Thee

Outsourcing manufacturing work to China has changed Cushla Reed’s life for the better. She was driven out of New Zealand by red tape and other headaches at home in New Zealand. Yet she opposes freer trade with China, and she seems to think it’s bad news that Chinese workers expect better wages and conditions. That makes sense coming from a heartless employer — but doesn’t she oppose an FTA out of compassion and goodwill? I’m confused. My head hurts. Also, I’m sick again. Washington is a petri dish of disease right now. My eyes are throbbing and my head is spinning. No more computer.

Revolt of the Gawkerites?

Jordan Golson doesn’t think he’s being treated fairly by Nick Denton’s media empire.

Putting a Certain Finger in the Upright and Locked Position

That’s my reaction to the abomination I encountered for the first time flying around the USA this week: ads on tray tables. I challenge anyone to support this move, which resulted, on my flight, not in a hoisted middle finger (that’s l’esprit d’escalier talking) but in my trembling hands folding up the offending plastic platform and holding my drink myself. Which, after all, I have every right to do. The TV obscenity principle — if you don’t like it, just turn it off — extends, I presume, to advertising? We’re to be thankful, I presume, that the ads are placed on something we can hide from ourselves? Well, just wait: if you don’t like the ads of the future, placed directly on the seat back in front of you, you can always just close your eyes. This will work for the ads on your oxygen mask, too.

Mend It, Don't End It: Affirmative Action for The Penny

The penny is obsolete and inefficient, or so they say. What is to be done? Junking the penny has its merits. But consider these four most important items from Owen’s article:

*nickels, despite their silvery appearance, are 75% copper

*producing a penny now costs about 1.7 cents

*many people are quite attached to one-cent coins

*the nickel […] now costs almost a dime to make

The clear solution derived from these key points is not to eliminate the penny but to kill of the nickel and make pennies worth five cents. The penny is a far superior aesthetic and historical object than the nickel, which has lost even the mystique of being the only piece of American currency ever to bear a (bison’s) penis. Nickels, unlike both pennies and dimes, do not fit in glass beer bottles, making them impossible to accumulate stylishly. And the awful Ms. Skeletor portrait of Jefferson adorning the new nickels is an affront to American tradition third only to the shape of the Susan B. Anthony quarter and the peekaboo papoose of its Sacagawea replacement. Pennies, by contrast, sport Honest Abe in elegant profile. They fit in beer bottles and even out unsteady wooden furniture. And, of course, they’re far cheaper to produce than nickels. Pennies are a much more affordable currency to give your children to play with and save than nickels. And so on.

The nickel is a misshapen fraud with a beastly portrait of a godless slaveowner. The penny is a pure classic that bears around the world billions of images of the Great Emancipator in all his Christian mercy, from the filthiest whorehouse to the bedsides of tykes. After all the work it’s done for us, now it’s our turn to give the penny a leg up. Ditch the nickel. Promote the penny to five-cent status.