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  • DEPRESSING MIDEAST ROUNDUP....

    DEPRESSING MIDEAST ROUNDUP. Say what you want about the Bush administration, but they sure know how to pull off a good media stunt like Condi Rice 's surprise visit to Beirut, conducted via helicopter from Cyprus since Israeli airstrikes have closed Lebanon's airport. Fortunately for Rice, she managed not to be hit by any stray bombs during her trip into town. Compare that to eight-year-old Mahmoud Srour whose family decided to abide by the IDF's orders to vacate the city of Tyre and had their car blown up for their trouble. His mom seems to be more-or-less okay, but his dad and his uncle are dead. Mahmoun's "face was burned beyond recognition" and all three of his siblings are likewise hospitalized and suffering from serious burns. That's The Washington Post 's human interest tale of woe. Today's Times carries a similar story about a woman named Muntaha Shaito and her family, likewise bombed while fleeing Tyre. The IDF explained that strikes targeted "approximately 20 vehicles" that...
  • GORE WATCH: WAL-MART EDITION.

    GORE WATCH: WAL-MART EDITION. Amanda Griscom Little �s report at Salon about Al Gore 's recent meeting with Wal-Mart�s leadership at the Bentonville headquarters sounds like further evidence that Gore is positioning himself for a White House bid: Sporting a curiously thick Southern drawl, Gore heaped praise on Wal-Mart's green goal-setting. "...by taking this climate crisis on frontally and making this commitment, you will gain the moral authority and vision as an organization to take on many great challenges." Keenly aware of his Arkansas audience's Christian inclinations, Gore peppered his hourlong commentary with religious references. He quoted Scripture, told a Bible story, and then offered a nonapologetic apology for the sermonizing: "I don't mean to proselytize here on my religious faith...If you're an atheist or agnostic" -- dramatic pause -- "God bless you!" Gore also waded into politics. He called the partisan bickering in Washington "pitiful, seriously pitiful," and mocked...
  • Is the Washington Post Editorial Board Angry at the Paper's Inadequate Reporting?

    A Washington Post editorial this morning criticized efforts in Maryland and other states to force large employers (especially Wal-Mart) to pay for their workers' health care. The article contrasted these efforts with the approach being followed in Massachusetts, which it asserts is "a state that is trying to responsibly address rising health-care costs." This is an interesting assertion. Massachusetts recently passed a law that required all its residents to have health insurance. There were some limited subsidies in the bill plus some restructuring of the insurance market, but there was nothing that would work in any obvious way to control health care costs, or at least nothing that was reported in the Washington Post . So, if we believe (with the Post editorial) that there were important provisions for controlling health care costs in this bill, then we should be furious with the Washington Post for failing to report on them. Alternatively, we could believe that the Post editorial...
  • Cutting Back I.R.S. Enforcement Staff

    David Cay Johnston has a great piece in today's NYT reporting on the Bush administration's plan to halve the number of lawyers who audit estate tax filing. According to the article, these lawyers generate an average of more than $2,000 per hour of work in revenue for the government. This implies, that unless they are paid more than $4 million a year, the government will lose money by laying them off. --Dean Baker
  • Is the Federal Government Going Bankrupt? Maybe it Should Stop Spending Money Publishing Scare Stories

    What would the long-term federal deficit look like if the cost of the country's health care system continued to explode, so that in thirty years it costs four times as much per person as that of other rich countries? Well, if I had nothing else to do with my time, I might calculate these numbers. Fortunately, I have a busy life, so I really don't have a great deal of time for such trivia. Unfortunately, other economists are less busy and do calculate such trivia. Even more unfortunate is the fact that the St. Louis Federal Reserve Board publishes these calculations as though they are serious economics. However, the real problem is that columnists in the Times use this stuff to make the case for cutting Social Security. The story here is real simple. The U.S. has a broken health care system. If it is never fixed, it will have a devastating impact on the economy. It will also lead to severe budget problems. Any competent economist/ reporter would see these projections as another way of...
  • Bad Advice on Mortgages from the NYT

    The Sunday Times has an article reporting that many homebuyers who took out adjustable rate mortgages 3 years ago, are now refinancing to avoid higher mortgage rates. The article (actually the accompanying chart) also adds that many are refinancing with negative amortization loans, under which the outstanding principle increases through time. The chart tells readers that this could make sense, as long as house prices continue to rise. Okay, let's check the numbers here. Three years ago, homeowners were taking out adjustable rate mortgages at rates in the neighborhood of 4.5 percent. Many are now resetting at rates that are 2.0 percentage points higher, or close to 6.5 percent. The article reports that the national average for adjustable rate mortgages is now 6.28 percent. Throw in fees of 0.5 to 1.0 percent and it's hard to find the savings. In other words, simply exchanging adjustable rate mortgages will not in general save homeowners any money. Now, the point may be that homeowners...
  • Housing Appraisals: The Accounting Scandal of the Housing Bubble

    Financial bubbles breed accounting fraud. Those of us who warned of the stock bubble in the late nineties were not surprised by the Enrons and WorldComs that surfaced when the bubble deflated. Bubbles make it possible to paper over all sorts of questionable accounting or outright fraud. When the bubble deflates, these practices can no longer be hidden. The analogous problem in the housing bubble is with appraisals. The basic story is simple. Mortgage issuers make their money by issuing mortgages. Once the mortgage is issued they sell it to someone else (in many cases, the key figure is actually a broker who never holds the mortgage), so they have little interest in accurately assessing the quality of the mortgage. To get a mortgage issued, it is necessary to have a house appraised at a value that justifies the mortgage. The issuer generally chooses the appraiser. Okay, suppose an appraiser comes in with a low number and the mortgage can't then be issued? The issuer is very unhappy, no...
  • The Problems of Protectionism: Another Prescription Drug Scandal

    In econ 101, we teach that when the government intervenes in a market to keep prices above marginal costs, it will encourage all sorts of undesirable and harmful rent-seeking behavior. This is one reason that all right-thinking economists are strong opponents of tariffs and quotas that can raise the price of things like shoes, shorts, and steel by 20-30 percent above the competitive market price. Given what we teach in econ 101, it is very difficult to explain why economists are not more concerned about things like patent protection for prescription drugs. This form of protectionism raises the price of drugs by several hundred percent, or even several thousand percent, above the marginal cost of production. Drugs that would sell for $20-$30 a prescription in a competitive market often sell for $300-$500 per prescription when they have patent protection. When the government creates this sort of opportunity for large rents, economic theory tells us to expect corruption. The NYT gives an...
  • ABOUT TIME. I...

    ABOUT TIME. I finally got around to reading today's New York Times op-eds, and I have only one thing to say to Paul Krugman : "Thank you." Can we all please stop treating the neocons like serious people now? Also, in a media environment that rewards people for being provocatively wrong rather than quietly right, can we finally recognize that those who prefer attention over attentiveness are not serious actors, but clowns? Just because someone has a strong conviction, a lot of self-confidence, and some area studies knowledge does not make that person a serious thinker. It makes them dangerous. Writes Krugman : Today we call them neoconservatives, but when the first George Bush was president, those who believed that America could remake the world to its liking with a series of splendid little wars � people like Dick Cheney and Donald Rumsfeld � were known within the administration as �the crazies.� Grown-ups in both parties rejected their vision as a dangerous fantasy.... Would the...
  • JUST POSTED TAP...

    JUST POSTED TAP ONLINE: COURTS DISMISSED. So should gay marriage proponents really be grateful that the New York Court of Appeals refused to overturn the state's gay marriage ban? The argument is a familiar one: judicial interventions into hot-button public debates invariably provoke a bigger public backlash than legislative actions. Scott Lemieux says it's bunk . --The Editors

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