New School Politics

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From the NYT, regarding his proposals on taxes and spending:

The problem is that the campaign has been far, far more detailed about its tax cuts, which would worsen the deficit, than its spending cuts, which would reduce it. Mr. McCain has proposed the elimination of the alternative minimum tax (at a cost of $60 billion a year), new child tax deductions ($65 billion), a corporate tax cut ($100 billion) and faster write-offs for corporate investments in new equipment ($50 billion to $75 billion).

On the spending side, the senator talks broadly about cracking down on pork barrel projects and holding agencies accountable for their budgets. These steps, Mr. Holtz-Eakin told me, could eventually bring $150 billion a year in savings. He added that given Mr. McCain’s history of fighting against wasteful spending, he deserved the benefit of the doubt.

It would be easier to give him that benefit, though, if he weren’t so vague. For decades presidential candidates have been promising to cut waste, fraud and abuse, and no one has yet made a noticeable dent in the federal budget.

As Mr. McCain’s plan currently stands, The Economist magazine concluded that it “will not come anywhere close to paying for the tax cuts.” Most telling, I spoke over the past week with several other economists who admire Mr. McCain and have advised him over the years. None would defend his current fiscal package (or be quoted).

Neadless to say, there is a hole at least $150 billion wide in McCain’s economic agenda. At least, however, McCain isn’t using the old “the tax cuts will pay for themself” defense–didn’t work so well in the past eight years.

For a myriad of reasons though, I have relative confidence that McCain will attempt to control spending proportionately to the Bush and would-be McCain tax cuts. However, it will take much more than crusading against pork barreling, which accounts for about $30 billion of the budget if my memory serves me.

What it will take is addressing much, much bigger programs including the great third rails–Social Security and Medicare, whose costs are rising at an alarming rate (already SS is the biggest government program in the history of mankind). On his website he at all specific about how he will address these issues or control spending other than eliminating earmarks and freezing non-military discretionary spending.

Much of McCain’s credibility centers around the idea that he speaks his mind and does what he believes regardless of the political convenience. In this case, he is not living up to that. We have seen McCain’s specifics on tax cuts, but that’s the easy stuff. What really matter’s is how–and if–he will cut spending, but it is also not a very popular topic.

If McCain really believes what he says about spending and the size of government, he will begin thinking hard about how he will squeeze the budget. After all, if you don’t propose any cuts in spending, you shouldn’t expect the deficit to narrow any time soon.

Popularity: 17% [?]

Moments ago outlets called Pennsylvania for Hillary Clinton. This however was not much of a surprise. The real test will be at the margins. Polls had Clinton winning by around six points, but earlier today, exit polls had the race closer.

But to clue you in on what the final margin may be tonight, the following blogger takes note of how initial exit polling has consistently favored Obama by five to eight points relative to the final outcome going back to New Hampshire.

Given that, exit polls such as the following one released at 5pm indicated Clinton winning by four. If that was the average exit poll numbers, it would mean that Hillary may win by more than 10 pts. tonight.

But what really matters in the grand scheme is the delegate count, which Obama leads by around 150. Even if Clinton wins big tonight, she probably wont even be able to net 20 delegates.

When you consider that PA is a big state and that Hillary is bound to win big, and will not even dent Barack’s lead by 15%, it shows how difficult it will be for her to retake the delegate lead before the madness is over.

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Just prior to closing my computer tonight I had remembered I wanted to share an article I read from the front page of today’s Wall Street Journal.

Russian oil production, for years a vital source of new supplies for world markets, is showing signs of a slump, adding to uncertainties that have helped push oil prices to record highs.

Russian output fell for the first time in a decade in the first three months of this year, according to the International Energy Agency, which represents industrialized oil-consuming countries. It said Russian production averaged about 10 million barrels a day, a 1% drop from the first-quarter of 2007.

The article also contained a troubling comment by CitiGroup analysts, “Russian oil production growth is no longer to be taken for granted.”

Bloomberg is showing that oil closed on the New York Mercantile Exchange at $113.58. Current crude prices seem to be out pacing Goldman Sach’s March predictions for future oil prices.

Tacking on $15 a barrel to all of its oil estimates, Goldman now sees average selling prices of $95 a barrel for 2008, $105 a barrel for 2009 and $110 a barrel for 2010. The high end of its range is now $135 a barrel — but Goldman hinted that prices could be headed even higher.

While Goldman believes their oil forecast to be bullish, compared to current market trends they may actually have been quite conservative. Only time will tell where future commodity prices go, but I would be highly skeptical of anyone who anticipates a large slump in demand or a sudden miraculous increase of supply.

To read the rest of the WSJ article please follow this link, you will however need a WSJ account to access it and other pieces located in the online archives.

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It appears that the US press is finally beginning to catch onto the global food crisis. I have been following the situation since last year seeking alpha sent me an email regarding the rise in commodity prices. Indeed, within certain industries and areas of interest (foreign policy and human development) the rapidly rising global commodity prices have been troubling for some time.

Until this past week, however, the only two sources I found even covering the ever worsening situation were Foreign Policy Magazine, and the Financial Times (which in my estimation is one of the best papers in the world). The global food crisis has many route causes, one of which is overpopulation. In fact the emerging food shortage is occurring because of rising living standards and increased demand (mainly fueled by growth in Asia).

In addition, climactic events such as droughts and flooding (whether or not they can be associated with climate change is irrelevant) are also decreasing the amount of arable land, along with political instability are only intensifying problems. Finally, energy prices are also undercutting production capabilities by raising prices in everything from cultivation to transportation.

In fact, ForeignPolicy.com has been posting almost daily updates about food related riots happening around the world.

Now the FT is reporting that the situation has worsened:

“The global food crisis intensified on Tuesday as Kazakhstan, one of the world’s biggest wheat exporters halted foreign sales and rice prices shot to a record high after Indonesia stopped its farmers from selling the grain abroad.”

“Indonesia – which joins Vietnam, Egypt, China, Cambodia and India in banning foreign sales – was expected to export the grain this year due to a bumper crop. Corn futures prices in Chicago last week hit a record $6.16 a bushel, up 30 per cent in the past three months.

Indonesia’s export ban boosted the price of rice futures in Chicago to a all-time high of $22.17 per 100 pounds, up 63 per cent since January. Wheat prices moved higher to $9.11 a bushel and traders warned prices could rise further as the Kazakhstan ban together with restrictions in Russia, Ukraine and Argentina have closed a third of the global wheat market.”

The rising commodity prices and the trillion dollar financial industry meltdown are bad enough, add a global food crisis to the mix and we could find ourselves within the midsts of a full fledged depression.

To stay up to date on the worsening news I suggest www.FT.com, www.foreignpolicy.com, and the only two US news sources that have been covering the situation for some time-Bloomberg and the Wall Street Journal.

On a related note-it may be worth following the worsening water situation. If the world finds itself struggling for capital and credit along with shortages of food and potable water, we will be in an awfully poor situation.

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Recently I wrote a letter to the editor of the Greenwich Time regarding administrative regulation of student media at my high school, but especially of the student newspaper. Here’s a fraction of it:

The systematic, bureaucratic censorship of The Beak (the name of the paper), as well as all other student media at GHS, severely hamstrings the intellectual and informational quality of its product. A myriad of regulations are enforced on a whim by a single faculty adviser who has the pressure of school administration on his shoulders. Similarly, other publications, such as the satirical Weekling, and any organization wishing to disseminate information are unilaterally censored by the overbearing student activities office.

In the three years that I have written for the paper I have had three editorials censored–one on abortion, one on Islam, and one criticizing a myriad of invasive laws including bans on steroids, prostitution, marijuana, and the drinking age. In addition, I have witnessed a list of columns not published because of the whimsical regulations on what is “appropriate” for young adults.

The case I am trying to make is not one a moralistic, first amendment one. To the contrary, I do not think that the first amendment holds much weight in this situation. Thus, I am not disputing the Supreme Court decision from Hazelwood School District v. Kuhlmeier, which essentially says that because the school is essentially the property of the government, the school administration has the right to regulate student speech to their liking.

However, whether the school can and whether the school should regulate speech are two different issues. Call me a romantic, but I thought that the goal of a school was to maximize the body of knowledge and curiosity of students (although I think that makes me more rational than romantic). I do not see how schools could at once be promoting an intellectual environment when they are systematically stifling various issues and opinions.

Take the issue of teen pregnancy, for instance, which was the disputed topic in the Hazelwood case. Few would dispute that it is a touchy subject. But what audience better to address it with than teens? The article in question contained primary sources discussing the reality of the issue. I don’t see how talking about the matter in an open and honest manner could hurt students. To the contrary, I can only imagine that talking about it would inform students and prevent pregnancy for those who are informed by the newspaper article.

Similarly, one of my censored columns was a critical examination of certain aspects of Islam. While conventional wisdom tells us not to discuss religion in public, not discussing religion freely and in a philosophical manner does nothing to reduce “intolerance” (which is what my editorial was labeled). The more informed and rational people are and the more they understand that it is okay to disagree even on matters as fundamental as religion, the more rounded and tolerant our educational institutions will be.

The saddest part about the censorship, which I should also mention is not practiced nearly as much as it is practiced in colleges, is that it muffles the creativity of students. While schools should be attempting to teach their kids as much about the world as possible, they only have so much time. The greatest reflection on educators is when they can foster the creativity and passion of individual students. Such initiative is manifest in students who examine fringe and risque issues in a scholarly manner. And while these cases are rare, the last thing that should be done by in response is censor them.

Popularity: 20% [?]

Here was a good article that I found in today’s Op-Ed section of the NYT.

“I haven’t read much Karl Marx since the early 1980s, when I taught political philosophy at the University of Pennsylvania. Still, it didn’t take me long this weekend to find my copy of “The Marx-Engels Reader,” edited by Robert C. Tucker — a book that was assigned in thousands of college courses in the 1970s and 80s, and that now must lie, unopened and un-remarked upon, on an awful lot of rec-room bookshelves.”

“My occasion for spending a little time once again with the old Communist was Barack Obama’s now-famous comment at an April 6 San Francisco fund-raiser. Obama was explaining his trouble winning over small-town, working-class voters: “It’s not surprising then that they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.”

To read the rest of this article please follow the link to the NYT page.

Another take on the Obama controversy comes from Peter Wehne. It takes a slightly different take than the one written by Bill Kristol but provides an equally important analysis.

Senator Barack Obama finds himself in the midst of a controversy in the aftermath of comments that he made at a private fundraiser in San Francisco on April 6, during which he explained his difficulty appealing to working-class voters in Pennsylvania. He said, “It’s not surprising that they get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment. . . .”

Senator Obama’s words are significant because they were said off-the-record, meaning they provided a more authentic glimpse into the attitudes of Obama than a carefully scripted event. Nonetheless, his words were not merely careless; his comments were based on a carefully constructed, if deeply condescending, explanation.

To read the rest of the article please follow the link to the National Review Online.

Popularity: 24% [?]

Not unexpectedly, there has been a sufficient amount of crowing from the left about the need for more financial regulation in light of the credit crunch. Their reasoning seems to encompass little more than the idea that deregulation or underregulation was the source of our current problems (which makes even less sense when you consider that there is no significant repeal in mortgage or lending laws to my knowlege).

This essay, however, directly refutes that idea:

The most striking fact about the ongoing financial mayhem is that it is concentrated not in lightly regulated hedge funds but in more heavily regulated commercial and investment banks. It is banks that created subprime mortgage securities. It is banks that mispriced them. And it is banks that filled their own coffers with this toxic paper, losing hundreds of billions of dollars. A somewhat breathless March 31Financial Times article proclaimed the closing of the worst month for hedge funds since the collapse of the infamous Long Term Capital Management in 1998. But the average fund tracked by the Chicago-based firm Hedge Fund Research declined by a mere 2.4 percent in March, bringing the cumulative fall for the first quarter of 2008 to 2.7 percent. By contrast, the bank-heavy financial services component of the S&P 500 fell 12.3 percent in the first quarter.

Hedge funds, for the most part, have weathered the storm remarkably well.

Simply put, if underregulation was the problem we would logically see worse performance from hedge funds than investment banks seeing that hedge funds are relatively unregulated financial vehicles.

While I blame the present problem on years of overly exuberant credit expansion by the Fed, I think it is an economic mystery why loose credit disproportionately funded a bubble in the mortgage market versus any other area of the economy (in the same way that it is mysterious why technology was overextended in the late ’90s). Put simply, we do not know why the mortgage markets bore the brunt of the Fed’s policy, but hopefully we can at least be resolved to do two things: a) not let the central banks devalue our money to the extent they have been doing this decade and b) avoid government bail-outs participants in these financial markets, which will create the same incentives to make bad investments that cause the problem in the first place.

Popularity: 24% [?]

The great actor Charlton Heston died this weekend at the age of 84. Why he was rightfully best known for his prolific career as an actor, including his heroic rolls in The Ten Commandments, Planet of the Apes, and Ben-Hurr, there is also something to be said about his political activism which went strongly against the Hollywood grain. For five years he served as the president of the NRA, and the video linked shows his most famous moment in that capacity as he responded to efforts by the Clinton administration to curtail gun-ownership rights.

Popularity: 20% [?]

Any student of modern history can attest that the cold war era saw an international system structured in a bi-polar manner. On the right was the United States, its satellite states, and its allies; on the left was the Soviet Union with its satellite states, and its Communist allies. After the collapse of the Soviet Union, the international system that the world had become accustomed to suddenly collapsed. Like all current affairs, to fully comprehend the nature of today’s international system we must first analyze those of the past.

Lire le reste de cet article »

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