March 2004 Archives

I feel very sad that we have lost Lou Dobbs, a man who used to understand how free markets work, to the side of darkness and demagoguery. I'm not sure why--perhaps it is all about ratings. Lou, if you are out there, know that we will welcome you back to the side of truth and light, lovingly and with open arms, when you decide to come down from your latest journey into space.

Apparently Marc Andreessen was on Lou Dobbs and fought the good fight. I missed it but a friend recounted it (harshly but humorously) and I thought it was worth sharing:

It was about three weeks back on Dobbs' CNN show; Andreessen was superb. I did a double-take; only knew of Andreessen’s policy interests from the MSFT antitrust case (!). But he had the economic arguments down pat, and had a nice way of putting up with Dobb's condescension while repeatedly harpooning him. Dobbs was far too stupid to know how thoroughly he was sliced and diced, but had an inkling that things were amiss, as demonstrated by his relentless interruptions to bait Andreessen with these pathetic "can't we just shed a tear for the workers?" faux sympathies (as if Dobbs does not despise the poverty-stricken Indian working hard to climb the ladder).

Andreessen's best was that he understands that every penny spent on Indian outsourcing was in US currency that came back to buy US goods, services, or investments; i.e. he passed Econ 101. Dobbs didn't have a clue and then, a couple of nights later, savagely misquoted Andreessen when he told another guest: "Guess what Marc Andreessen says the best part is? He says the best part is that we're creating an Indian middle class!" Of course, a twist -- but it is surely a bonus that a developing country is getting wealthier, something that Dobbs takes to be an American defeat. His take, rather, is clear evidence of the bile lurking just beneath Dobbs' porcine surface.

Now, as for the question -- what am I doing watching Dobbs on CNN? -- I have this to say: time to get back to work.

UPDATE: Here's the transcript from the show. Thanks Marc.

DOBBS: In a moment, I'll be talking with a California lawmaker who says outsourcing has devastated her constituents in Silicon Valley. I'll be joined by State Senator Liz Figueroa. But, first, Marc Andreessen is an Internet pioneer. He co- founded a Silicon Valley firm that helps companies outsource work overseas. He's the chairman of the company Opsware. He also, of course, co-founded Netscape.

Marc Andreessen joins us tonight from Mountain View, California.

Marc, good to have you here.

MARC ANDREESSEN, CHAIRMAN & CO-FOUNDER, OPSWARE INC.: Great. Thanks, Lou.

DOBBS: There are very few issues right now that are more difficult for corporate America to deal with than the issue of outsourcing. You support it.
You support it vigorously. Why?

ANDREESSEN: Yes.

I think it's purely good for the American company and it's good for American workers. It's part of the natural process of creating new jobs. I think job destruction and job creation go hand in hand. In the last 10 years, this economy has destroyed 325 million jobs and created 342 million new jobs. And, in general, those news jobs are better jobs than the ones that were destroyed.

And I think, in the next 10 years, we're going to destroy another 400 million, create another 430, 450 million new jobs, and those jobs will be better. I think it's blue skies.

DOBBS: Mark, I quite appreciate job destruction, job creation and the net effect. And that argument is advanced considerably. But that argument doesn't really work if the net result is not a higher value job and that has not occurred in this country now for three years, and perhaps more, actually.

That being the case, why should we accept it as a matter of faith that we can destroy lives -- and it is looking as though -- some estimates range as high as three million jobs have been outsourced now to cheap overseas labor markets.

ANDREESSEN: Right.

DOBBS: Why should we take it as an article of faith that that kind of pain results in better jobs, when we're not seeing it demonstrated in any of the data anywhere?

ANDREESSEN: Right. So, first of all, nobody cares more about the pain caused by job destruction than I do.

I grew up in Wisconsin. And, as you know, in Wisconsin, there have just been a huge number of jobs lost over the last 80, 90 years from agriculture. And when I was growing up, that process was continuing. The flip side of that is, new jobs were created and in general people in Wisconsin have a higher standard of living and higher per capita income now.

(CROSSTALK)

DOBBS: I understand that, Marc.

(CROSSTALK)

ANDREESSEN: That exact same thing...

DOBBS: But what I'm asking you for, why should we take it as an article of faith when we have not seen this happen for four -- nearly four years?

ANDREESSEN: Right, because, for four years, we've been in a recession. If you look at the impact of the recession, it's almost entirely responsible for what is going on.

So let me give you a couple other numbers. In the last 15 years, the number of Americans employed by foreign companies has gone up from 2.5 million to 6.5 million. Offset against that is, yes, American companies now employ 10 million people overseas. But do you think we pay overseas people more or less than foreign companies are paying the American workers?

(CROSSTALK)

DOBBS: That's a different issue, Marc.

(CROSSTALK)

DOBBS: I have got to interrupt you, Marc.

ANDREESSEN: OK.

DOBBS: That is not outsourcing. That is not exporting jobs overseas.

ANDREESSEN: Sure, it is.

DOBBS: If I may finish, then I'll

(CROSSTALK)

ANDREESSEN: Cars are now being manufactured in the United States by Japanese car companies like Toyota. They're outsourcing to us all over the place.
There's all kinds of jobs. Siemens is manufacturing new jobs to the United States.

(CROSSTALK)

DOBBS: Are they doing that, Marc, to produce products for this market?

ANDREESSEN: Sure, absolutely, they are doing that.

(CROSSTALK)

DOBBS: That's right. And that's the distinction. And that's the distinction here.

The service jobs, the high-value jobs that are being exported to various countries around the world are not being exported so -- for entry to those markets of those countries, but rather for the return of those services and products to this market. That is the distinction in outsourcing, Marc.

(CROSSTALK)

ANDREESSEN: Actually, that's not entirely true.

(CROSSTALK)

DOBBS: Well, no, it's actually -- it's entirely true.

ANDREESSEN: Well, the data doesn't actually show that. So, for example, let's look at it a different way.

DOBBS: What data? I would like to know.

ANDREESSEN: It doesn't make any economic sense.

So, for example, I guess the implication is, we're shipping dollars overseas and those dollars are staying overseas and they're never coming back. We're creating economic growth in the U.S. We're creating economic growth overseas.
When we put jobs in India, we're paying Indians in U.S. dollars. Those dollars are being turned around and spent on American goods and services. The new middle class in India that's emerging as a result of the I.P. offshoring...

(CROSSTALK)

DOBBS: Oh, I assure you..

ANDREESSEN: They're buying Levi's jeans. They're buying Nike shoes. They're buying Apple iPods. They're buying Merrill Lynch financial services. We are creating new markets all over the world as a process in doing this.

DOBBS: It's -- that is absolutely true. Markets are being created.
Middle-class jobs are being created in India, as you suggest.

ANDREESSEN: Yes.

DOBBS: There is just one problem with that.

ANDREESSEN: And those -- and those people are consuming American products and services.

DOBBS: They are assuming about half what we're buying from them right now.

ANDEREESSEN: Actually that's not true.

DOBBS: Actually it is exactly true. The deficit with India is -- for this instance is precisely twice.

ANDEREESSEN: For manufactured products that's true. Look at services.

Do you think we run a services deficit or surplus?

DOBBS: Marc, you were saying what?

ANDEREESSEN: We run...

DOBBS: Were you not talking about buying products?

ANDEREESSEN: Products and services. We run a deficit on products. The difference in the dollar comes back in investing America. We run a surplus in services. Lou, we run a $75 billion a year services surplus. $75 billion...

DOBBS: Are you talking about globally, Marc.

ANDEREESSEN: Yes, globally.

DOBBS: Oh, absolutely not, Marc. We have $550 billion current account deficit in this country.

ANDEREESSEN: Right, I'm telling you...

DOBBS: That is services that is products in -- I mean, Marc, let's -- let's go back to the issue of outsourcing. If you prefer.

ANDEREESSEN: Well, hold on a second. The president's economic report that just came out in 2002 we ran a $75 billion surplus in services.

DOBBS: In 2002?

ANDEREESSEN: We benefited services trade.

DOBBS: In 2002?

ANDEREESSEN: In 2002.

DOBBS: Do you release...

(CROSSTALK)

DOBBS: Marc, we can sit here and not really edify anyone including ourselves by trading statistics. The fact is it is 2004, the fact is in the most event report on trade we show for the first time negative numbers in the area in which you live, that is technology which is supposed to be bringing us all of these wonderful jobs that so far are not materializing.

ANDEREESSEN: Look, technology took a big hit in the last four years due to recession. When I was involved in creating the first Internet browser in 1993, I can tell how many Internet jobs there were, there were 200. I can tell you how many there are now, there's two million now. We created new jobs in the next 10 years. I'll tell you what, we're going to create a huge number of new jobs in the next 10 years.

DOBBS: I expect you to do so. What I don't expect you to understand is that there is no one listening to us that should take -- has any reason to take as you an article of faith that by moving jobs overseas simply to acquire cheap labor that in any way adds to innovation to this country.

ANDEREESSEN: Absolutely it does. It compounds innovation, allows American companies to invest both overseas and the U.S. It allows American companies to hire more people in the U.S. It allows American companies to sell their products and services into a larger global market. I tell you another thing, it encourages peace and stability worldwide. The best thing that can happen to us from a national security standpoint we determine to develop the middle classes in India and China. And in fact the really best thing we could do is to start offshoring to the Middle East.

If you want to systematicly go after global security and peace, figure out how to bring everybody into this world of increasing returns from economic, increasing returns from trade...

DOBBS: Marc, you surely not suggesting that we create a middle class anywhere in the world at the expense of our own?

ANDEREESSEN: Of course not. It's not at the expense of our own.

DOBBS: That's precisely the effect of what is happening.

ANDEREESSEN: No it's not.

DOBBS: No, sir, it is.

ANDEREESSEN: Trade has been win-win for 200 years.

DOBBS: Win-win. Marc, you are too smart for this. You are absolutely too smart for this. When you hear win-win, what do you think of, a software salesman, right?

ANDEREESSEN: Not at all.

DOBBS: Come on. If it's -- thank you. I also have a sense of humor like you do, Marc. You know what, I don't think we should have too much a sense of humor about what we're doing to hardworking men and women in this country.
Please, would you take as an article of faith if you were sitting there driving code that you are going to get to a result or would you want to empiricly be able to demonstrate it?

ANDEREESSEN: Absolutely.

DOBBS: Here are the empirical demonstrations of what we're dealing with right now.

We have a half trillion dollar trade deficit. I'm sorry, go ahead.
ANDEREESSEN: Empirical demonstration is over 200 years of standard of living has risen massively. We created 140 million net jobs. They say we created 342 million jobs in the last 10 years alone.

DOBBS: You do understand we have to talk in net terms.

ANDEREESSEN: Per capita income. We're up 17 million net new jobs in the 10 years, including the impact of the recession.

DOBBS: The last 10 years.

ANDEREESSEN: The last 20 years we're up 38 million net jobs. And those jobs per capita income, in that period of time, since World War II to today, per capita income is up. Everybody is better off.

DOBBS: By the way, if you are trying to convince me, our viewers, that it's good to live in America, that really isn't the issue. The fact is how do we preserve and improve on the quality of life for our middle class, for all Americans.

ANDEREESSEN: Economic growth is the key.

Would we agree economic growth is the key?

DOBBS: We -- I would agree absolutely that economic growth is the key.

ANDEREESSEN: We agree job creation is the key?

DOBBS: Absolutely.

ANDEREESSEN: Right, and this is what happens. We create jobs, grow, innovate, exploit new markets, we develop new markets.

DOBBS: But you haven't accounted for the experience of the past four years nor the failure of this economy through two and a half years since the recession ended to generate jobs and that is the critical issue, Marc.

ANDEREESSEN: Let's separate out. No. 1 in IT we had a big recession, right. We had a big bubble. We had a dotcom bubble.

DOBBS: Marc, I got to be honest with you. We have taken far more time than we should have. Come back, we're going to argue some more, do me a favor -- watch that, you know, faith based economics, will you?

hit's dangerous stuff, macro economics as well as it is in technology. You can reciprocate with counsel to me as well, Marc. You get the last word.

ANDEREESSEN: I reciprocate to you with exactly the same counsel, for 200 years the standard of living in this country has risen. and it's going to continue rising for the next hundred, I don't think there's any question about that.
DOBBS: I admire your faith and we appreciate your time.

ANDEREESSEN: Thank you.

Good news: it looks like the Bush team has decided to have some courage this election season and defend outsourcing on its merits: Treasury chief calls outsourcing a plus for US. Excerpt:

Snow told The Cincinnati Enquirer that outsourcing "is a part of trade . . . and there can't be any doubt about the fact that trade makes the economy stronger." The comment echoed those made recently by two of President Bush's top economic advisers, N. Gregory Mankiw, chairman of the Council of Economic Advisers, and Stephen Friedman, director of the National Economic Council, who also suggested that shifting some jobs overseas would benefit the United States.

Political analysts said yesterday that the administration has apparently decided to address the issue of outsourcing head-on by arguing that free trade in the long run means greater choice for consumers, lower prices, and greater prosperity. Many economists, including the Federal Reserve chairman, Alan Greenspan, say the competition leads to the type of innovations that drive the US economy forward and ultimately create far more jobs than are lost.

Stanley Kurtz in Policy Review makes the case for "democratic imperialism" and provides a "blueprint." Long piece but here's the conclusion:

As a way to encourage democratization, an extended American occupation of Iraq would be just policy. Would a long-term occupation also be wise policy? That is the more difficult question. Since democratization will be more lengthy and difficult in Iraq than in postwar Japan, America will have to marshal its will and resources for a stressful and challenging enterprise. If the Iraqi returnees turn out to be poor democratizers, or if America finds it difficult to exercise great and lasting influence without quite seeming to do so, the chances of an Arab nationalist reaction or internal American divisions are high. Certainly, one reasonable response to this scenario is refusal to engage in a long-term occupation at all.

Yet the argument for a venture in democratic imperialism is also strong. In the long term, it may be our best insurance against the deadly and ever-spreading combination of terrorism and weapons of mass destruction. Particularly in the early stages, such a venture should concentrate on building up a modernizing and liberal class through education. An end-run around traditional structures will be more successful than direct assault. Someday, however, the time for a limited assault will come. Shifting administrative strategies are a feature of successful democratic imperialism. Only circumstances can dictate the balance between relatively indirect rule and reformist transformation.

Above all, should America undertake an extended occupation of Iraq, the dichotomy between realist caution and reformist liberalism will have to be transcended. Authentic democracy develops slowly. The trick is to encourage electoral experiments on the local level while still keeping hold of national power. Gradualism is not a betrayal of democratic principle. On the contrary, it is an insight bequeathed to us by the founders of liberalism itself.

Former Secretary of State George Shultz makes the case in the WSJ that this was "An Essential War." Mostly a refresher on the history and the justification for the Iraq war, but also makes the case that the system on states must be preserved. Some excerpts:

The civilized world has a common stake in defeating the terrorists. We now call this what it is: a War on Terrorism. In war, you have to act on both offense and defense. You have to hit the enemy before the enemy hits you. The diplomacy of incentives, containment, deterrence and prevention are all made more effective by the demonstrated possibility of forceful pre-emption. Strength and diplomacy go together. They are not alternatives; they are complements. You work diplomacy and strength together on a grand and strategic scale and on an operational and tactical level. But if you deny yourself the option of forceful pre-emption, you diminish the effectiveness of your diplomatic moves. And, with the consequences of a terrorist attack as hideous as they are -- witness what just happened in Madrid -- the U.S. must be ready to pre-empt identified threats. And not at the last moment, when an attack is imminent and more difficult to stop, but before the terrorist gets in position to do irreparable harm.

Over the last decade we have seen large areas of the world where there is no longer any state authority at all, an ideal environment for terrorists to plan and train. In the early 1990s we came to realize the significance of a "failed state." Earlier, people allowed themselves to think that, for example, an African colony could gain its independence, be admitted to the U.N. as a member state, and thereafter remain a sovereign state. Then came Somalia. All government disappeared. No more sovereignty, no more state. The same was true in Afghanistan. And who took over? Islamic extremists. They soon made it clear that they regarded the concept of the state as an abomination. To them, the very idea of "the state" was un-Islamic. They talked about reviving traditional forms of pan-Islamic rule with no place for the state. They were fundamentally, and violently, opposed to the way the world works, to the international state system.

One of the strongest points made against Richard Clarke, IMO, was made by Greg Easterbrook on The New Republic Online.

This brings us to Richard Clarke, man of the hour. Before September 11, he made many general warnings about terrorism, as he should have, but he never specifically cautioned of anything like what actually happened. Clarke spent a lot of time talking about computer-hacking and cyber-attacks, not a lot of time talking about airport screening. That is to say, he had no idea what was coming, either.

Now Clarke depicts himself as the one person who knew it all along. Now he also claims that he knew after September 11 it would be a colossal mistake to pursue Al Qaeda and attack Iraq simultaneously. It's not clear this is correct, but assume it is: Why didn't he say so at the time? If Clarke believed that attacking Iraq was a colossal error, he should have resigned from the National Security Council before the attack began and issued public criticism. Had the president's own chief terrorism adviser resigned and publicly warned against the Iraq attack, this might have had tremendous impact on U.S. policy.

But wait--Clarke did resign before the attack on Iraq! Clarke left government in February 2003, when there was still a chance the Iraq war might not happen. Do you remember the intense international news coverage of the speeches and the "60 Minutes" interviews Clarke gave in early 2003, warning that attacking Iraq would divert attention from the war on Al Qaeda? Of course you don't remember, because it never happened. When he might have changed policy, Clarke kept quiet. Now that he's got a book to sell, he claims he knew it all along.

My sense of Richard Clarke is that while he believes what he is saying, he clearly has an agenda here and is in the service of that agenda above the "truth" or any more noble purpose such as opening a national debate. I think he's a guy who after 30 years as a bureaucrat, making modest pay, found himself at a dead end, Peter-principled out in a Bush Administration that didn't respect his POV as much as the Clintonites. He figured out shrewdly that he could leverage 9/11 to make a nice nest egg for himself.

But what of the substance of his message? In terms of the first main argument, that the pre-9/11 Bush team was less concerned about terrorism than Clinton I believe this may in fact be the case. The Clinton team over 8 years had experienced numerous attacks on US targets and had grappled with millennium issues, the Olympics, the African embassies, the Cole, etc. Bush, on the other hand, came into office with a virtually isolationist sensibility. So while I don’t know, there may be a case to be made on this point. However, Clarke concedes that it wouldn’t have made a difference--even if we had used pre-emption in Afghanistan (imagine what John Kerry would have said!) we wouldn’t have stopped it. In the end, those that wish to judge to Bush team on it’s pre-9/11 anti-terror strategy may do so, but I think it’s far more relevant to gauge their strategy AFTER the wake-up call to all that was 9/11.

On the second point, that Iraq was a distraction, there seems to be a fair amount of rhetoric but zero actual evidence that Iraq has either slowed our pursuit of terrorists elsewhere or has created more terrorists even more determined that they were at 9/11.

Clarke seems to be like Goldilocks--he thought the pre-9/11 Bush strategy was too cold, while the post 9/11 strategy was too hot. Clarke, it appears, preferred the warm strategy that he was so influential in developing in the Clinton administration (and before) of treating terrorism more narrowly--eschewing bolder ideas that the war on terrorism should be a broad campaign focused not just on prior and imminent perpetrators but to regimes that were the most threatening to the US. Clarke has made his case for the Goldilocks strategy and I think he’s right to complain about the Bush team going after his credibility. The Bushies should instead use this as an opportunity to point out that the warm Clinton era strategy wasn’t working, and it is time for a new, bolder approach.

A guidefrom MSNBC to the some of the Valley's "techno-political elite."

Reuters News Agency; Date: 03/23/2004 7:47:17 AM Pacific Standard Time

Sent from the Internet

API and UPI report that the French Government announced today that in light of the Madrid bombing, France has raised its terror alert level from "run" to "hide."

The only two higher levels in France are "surrender" and "collaborate."

From Charles Krauthammer:

It is only March but the 2004 Chutzpah of the Year Award can be safely given out. It goes to Richard Clarke, now making himself famous by blaming the Bush administration for 9/11 -- after Clarke had spent eight years in charge of counterterrorism for a Clinton administration that did nothing.

For anyone concerned about deficits and "fiscal responsibility" this piece by Wayne Angell, member of the Federal Reserve Board of Governors from 1986 to 1994, and a former Bear Stearns chief economist, is a MUST read. It may very well significantly alter how you view the relationship among taxes, spending, debt, and deficits.

It starts by making the case, as Robert Rahn has done, that the policies of the Clinton administration were responsible for the recent recession:

Robert Rubin will never admit it, but the recession that began in the third quarter of 2000 was the direct result of the Clinton administration's attempt to pay down the federal debt. The Clintonites did this, you'll remember, by leaving tax rates high enough from 1995 to 2000 so as to direct a larger and larger share of the surge in growth of personal income to be paid in federal taxes. In the four quarters from the second quarter of 1999 to the second quarter of 2000 individual income tax receipts of the federal government increased by 11.4% -- exactly twice the 5.7% growth rate of personal income.

Angell then points out the relationship between federal debt and business and household debt:

The "pay down the federal debt" advocates, led by Mr. Rubin, apparently did not understand in 1996 and do not understand in 2004 the first principal of macroeconomics -- output growth is not sustainable without a growth of total credit and debt. If federal debt grows more slowly than total debt then household and business debt must compensate by accelerating their growth rate above the desired rate of output growth. If federal debt is to be paid down the necessary increase in household debt would sooner or later increase household debt as a share of GDP to levels that would not be conducive to a continuation of the growth of household spending on goods and services. Whenever financing household debt becomes too burdensome to sustain household spending then a reduction in the rate of household spending would be followed by a plunge in the rate of increase in business debt.

In other words, when we retire federal debt we essentially shift the debt burden from federal to household and business debt--as has been demonstrated by the data. By diverting revenue to pay off federal debt that could have otherwise gone to taxpayers in the form of tax cuts, the Rubin/Clinton team were responsible for the slowed GDP growth, that bottomed in the recession, and merely shifted the debt burden from the federal level to the household and corporate level. As Angell puts it: "Does it make sense for politicians to say we must not leave this federal debt to our children and grandchildren when in fact it is only a question of whether the debt is federal, household, or business debt?"

Angell goes on to say "For the sake of my children and grandchildren I hope for a less hysterical view of debt -- an understanding that high debt levels compared to the ability to service the debt is a disadvantage to households as well as to governments." In other words, what matters most is not the debt levels but our ability to handle the debt. And this means fostering economic growth. Therefore Angell's real area of concern is federal spending because "Government spending tends to crowd out private spending whether it is financed by taxes or by borrowing."

What matters is the relationship between federal debt and household debt, which was thrown out of whack by the Rubin policies. As Angell puts it: "The concern for now is that interest rates are likely to remain too low to motivate more thrifty responses."

Far too many people, in my opinion, including conservative, are hysterical about the deficit, to an irrational extent in which they believe that tax increases are the desirable solution. But this is a solution that is worse than the problem. As Angell concludes:

Only hysteria, an outburst of emotion and fear, could produce the irrational response of the Congress and the public to the supposed danger of federal debt left to our children and grandchildren. Save your outbursts for reining in the growth rate of government spending. Then we will be able to keep tax rates conducive to faster increases in output and thereby add to both the well-being of our people and to future tax receipts available to the Congress.

Glenn Hubbard sheds light on what few in the Kerry campaign will admit:

John Kerry has a fiscal surprise in store for voters -- a massive tax increase or a ballooning federal deficit. The latest calculations show that the total of Sen. Kerry's spending and "investment" pledges runs to about $1.7 trillion over ten years. That's $1.7 trillion on top of what the government already plans to spend over the same time period.

If you are worried about the deficit beware of John Kerry: his spending proposals, that far outpace anything Bush has proposed, will either make the deficits worse or require major tax hikes. For example:

So far, the senator's tax-hike proposals include: raising the top tax brackets, forcing individuals and small business owners to pay higher taxes; resurrecting the death tax, so that farmers and entrepreneurs will be forced to pay the government before they can pass on their life's work to their children; and rolling back the tax cuts on dividends and capital gains, so that Americans will have to pay higher taxes when they save and invest for the future. Such tax increases would be an unwise unraveling of the tax relief signed by President Bush. Even after a recession, the worst terrorist attack in our history, two wars, and major corporate accounting scandals, our economy is the fastest growing of all major industrialized nations.

And if you believe that only the "rich" will pay for this spending, do the math:

[Kerry] claims he can raise taxes on upper-income earners and small business owners to pay for all of his spending plans. But the numbers show otherwise. If you add up all of his proposed tax increases, the extra revenue would be at most $700 billion over 10 years. That leaves a hole of $1 trillion.

Laws of math cannot be repealed -- one cannot increase federal spending by $1.7 trillion over 10 years, slash the deficit over four years, and raise taxes only on those earning $200,000-plus to pay for the rest. More Americans would pay higher taxes under John Kerry's administration than John Kerry is willing to let on. Fully funding his promises would require repealing the entire Bush tax cuts, implying large tax increases for lower- and middle-income workers.

If you think that the federal government is too small and are willing to endure hefty tax increases, and a slowed down economy, to accomodate that spending, then vote for Kerry. I suspect that many would support this position: this is classic Democratic tax and spend and it is a perfectly legitimate platform--one that many in Europe have adopted. So why is Kerry misleading people to suggest that he can not only massively increase spending but also cut the deficit and ONLY tax the richest? The math just doesn't work.

Robert Levy, senior fellow in constitutional studies at the Cato Institute in Washington, D.C. writes in Cato's TechKnowledge Newsletter (and in the Financial Times) that "Far from promoting consumer interests, the latest EU order [against Microsoft] transforms antitrust regulation into a corporate welfare program for market losers. The implications will not be confined to the Microsoft case. Without some semblance of regulatory consistency, companies competing globally will not be able to satisfy the dictates of divergent legal regimes. That means special interests pursuing their favorite antitrust forum in an effort to exercise the most political clout. The real costs: fewer jobs, less innovation, inferior products and higher prices."

Arnold Beichman points out in National Review Online that no one complains about businesses outsourcing from state to state. "Why is outsourcing to Mississippi to escape tax and high-wage burdens in California acceptable but outsourcing to India or Bangladesh is not?" THIS is the kind of outsourcing that California should be worried about--far more businesses are moving employees to Texas than to India. Excerpt:

The California Business Roundtable has described California's business climate as "atrocious." The Roundtable surveyed more than 95 percent of the state's industry sectors, including both small and large businesses.

Despite high worker productivity, a high concentration of science and technology workers (think of Silicon Valley), and available venture capital, companies seeking to expand or relocate avoid California even with a conservative governor like Arnold Schwarzenegger in office.

Here's what the Roundtable survey found:

1. The cost of doing business in California is 30 percent higher than the western-state average.

2. Almost 40 percent of the California decision-makers participating in the Roundtable survey plan to "outsource" jobs from California to other western states, preferably Texas.

3. Half of the companies have "explicit policies to halt employment growth in California while less than five percent of companies have retention policies in place to keep jobs in California."

4. Last, California's "regulatory environment is the most costly, complex and uncertain in the nation." Regulatory costs are 105 percent higher in California than in other western states.

In addition to often distorting the truth, big media can also distort the English language. I've had a pet peeve about the abuse of the word "enormity" for some time now--it is a wonderful synonym for great wickedness or a monstrous evil but has been abused by those who think it means enormousness. It doesn't, even though modern dictionaries have had to acknowledge its use to mean of great size.

There are plenty other examples but one that I just noticed recently is the abuse of the word "fulsome." See how Tim Russert misused this word on Meet the Press: "Should the president not give more fulsome testimony before the full commission?" Fulsome is a great word for unctuous (also a great word), excessive flattery. Fulsome has the connotation of being offensive--and while it can be used to simply mean "abundant" it really doesn't fit the context of Russert's question. Rather, like those who use "enormity" to try and sound more erudite than if they said "enormousness," Russert was most probably trying to come up with a more literate sounding way of saying "fuller." Actually he should have just said "full testimony" since you can't get fuller than full, and used "whole commission" instead of "full commission" to avoid the double usage.

Do readers have other examples of our language under attack? Please leave them in the comments.

Marc Andreessen makes the case for open source. He outlines 12 main reasons.

Marc Andreessen, co-founder of trailblazer Netscape Communications, can spot a long-term trend. So when Opsware Inc.--another company Andreessen co-founded and chairs--introduced its Opsware System 4 software on Linux in December, some of his faithful fans doubtless took the move as a sign of things to come.

Blogarama

Daniel Drezner tackles the "Outsourcing Bogeyman" in the latest edition of Foreign Affairs.

Summary: According to the election-year bluster of politicians and pundits, the outsourcing of American jobs to other countries has become a problem of epic proportion. Fortunately, this alarmism is misguided. Outsourcing actually brings far more benefits than costs, both now and in the long run. If its critics succeed in provoking a new wave of American protectionism, the consequences will be disastrous -- for the U.S. economy and for the American workers they claim to defend.

Daniel W. Drezner is Assistant Professor of Political Science at the University of Chicago and the author of "The Sanctions Paradox." He keeps a weblog at www.danieldrezner.com/blog.

This piece by Thomas Hazlett, Would last TV station turn out the lights?, shows how silly FCC regulations are hurting entrepreneurialism to the benefit of vested interests. Excerpts:

Broadcast stations’ volunteering to go dark sends a clear signal. Over-the-air transmissions are becoming useless, not worth the cost of firing up the transmitter.

Yet the spectacle of digital television (DTV) is most incredible because radio spectrum — the use of which constitutes the overwhelming majority of station costs — is provided to stations free of charge. Because the government awards frequencies and bars unauthorized uses, licensees have no opportunity to divert bandwidth to new services. By protecting a video delivery system mapped out in the 1940s, regulators spike the emergence of advanced networks that could revolutionize communications. ...

Allowing the TV band to be tied up for another decade ignores the enormous social value of spectrum. Wireless networks could productively use the frequencies to expand and improve cellular service, with added airspace dramatically decreasing costs. Entrepreneurs lust for access to the rich VHF and UHF frequencies to unleash mobile Internet-based applications offering consumers a cornucopia of fresh choices for voice, data, video and applications yet to be dreamed.

Here's where to find Amazon.com's RSS feeds and a critique of them by David Galbraith. Excerpt:

RSS is a very good way to syndicate links with clean titles (believe me, this solves a big problem for news aggregation), but until it regularly uses fundamentally important metadata such as prices, then it hasn't really grown out of the news and weblog ghetto.

A comparison of PostgreSQL vs MySQL. While this leans towards MySQL we are favoring PostgreSQL. Here's part of the reason why:

Here PostgreSQL has the upper hand. The stable version of MySQL does not support subqueries, stored procedures, subqueries, cursors or views, all of which PostgreSQL does. One of their more serious mistakes was for the MySQL developers to justify the exclusion of many of these features (and even more fundamental features such as referential integrity, still only partially integrated) by claiming that they were not necessary. Of course this is true in many cases, but to hardened DBA's many of these features are vital, and this lack gave MySQL a reputation as a 'toy' database, from which it is still recovering today.

Why do they hate us? Thomas Sowell suggests an answer: "Maybe it is because the alternative to hating us is to hate themselves."

I'm very concerned about the personnel changes happening on the Bioethics council. But the bottom line is that the more we separate medical research from federal funding--and thereby federal oversight--the better.

Despite very impressive economic figures, pessimism persists in this country--perhaps in part goaded on by those who want to make the case, reality be damned, for political advantage that we are in a decline. The Economist urges Americans to take a deep breath: we've rarely had it better. Some excerpts:

As for outsourcing, it is implausible now, as Lawrence Katz at Harvard University argues, to think that outsourcing has profoundly changed the structure of the American economy over just the past three or four years. After all, outsourcing was in full swing—both in manufacturing and in services—throughout the job-creating 1990s. Government statisticians reckon that outsourced jobs are responsible for well under 1% of those signed up as unemployed. And the jobs lost to outsourcing pale in comparison with the number of jobs lost and created each month at home. Even here, the rate of job “churn” has, for unclear reasons, been falling since mid-2001.

Waiting for the job recovery might be a good time to take a broader measure of the material well-being of Americans. Their condition is widely held to be perilous. The economy, it is said, is being “hollowed out” by international competition and the connivance of business and political elites, creating “two Americas”, one rich, one poor. Median income of American households, commentators often say, has been stagnant, though census figures give a rise of one-fifth since 1980. Lou Dobbs, on CNN's “Lou Dobbs Tonight”, is just one media fabulist who makes his living by claiming that, as America is being “exported”, so the well-being of middle Americans is in a parlous state.

It is a good story, but false on many levels. For a start, this slow growth in median income overlaps with a scale of immigration into America outpacing all immigration in the rest of the world put together. Many immigrants have come precisely to take up the lowest-paid jobs. As a result, in the 20 years to 1999 some 5m immigrant households were added to those defined as below the poverty level. Yet among native-born Americans, poverty rates have declined steadily since the 1960s. In the case of black families, median incomes have recently been rising at twice the pace for the country as a whole.

Strip out immigrants, and the picture of stagnant median incomes vanishes. Indeed, for the nine-tenths of the population that is native-born, middle-income trends continue their improvement of the 1950s and 1960s. For these people, inequality is not rising, but falling.

Thomas Sowell on outsourcing, writing in The Washington Times. Makes several interesting points. For example, one of the reasons the "Great Depression" was so "great" was due to protectionism of the sort some politicians are now advocating:

During the Great Depression of the 1930s, when U.S. unemployment hit a high of 25 percent, one of the many foolish things the government did was restrict international trade to save American jobs. Other countries around the world created similar restrictions to save their workers' jobs.

Net result: World trade in 1933 was one-third what it had been in 1929, making everybody poorer and therefore less able to create jobs. Many economists have blamed these restrictions for making the Depression worse and longer-lasting.

And on the political expediency, but overall damage, of condemning outsourcing:

Whether with international trade or anything else, the political temptation is always to do something that looks good right now, with no thought of its repercussions -- especially if those repercussions will not be noticeable before the next election.

The government can always save 10,000 jobs -- at a cost of 50,000 other jobs. If the jobs saved are in one industry represented by vocal spokesmen, and the 50,000 lost jobs are spread thinly across the country in two's and three's here and there, then this is a good deal for the politician who becomes a hero to those 10,000 voters whose jobs he saved.

And a refresher in basic economics for how efficiency, while causing some uncomfortable dislocations, is a good thing:

Anything that increases economic efficiency -- whether by outsourcing or a hundred other things -- is likely to cost somebody's job. The automobile cost the jobs of people who took care of horses or made saddles, carriages and horseshoes.

Computers sent typewriter manufacturers into bankruptcy.

Whole political movements are based on a refusal to accept that benefits have costs. Protectionism is just one of these movements.

And finally a dig on those politicians who seem to pick and choose when they want to outsource:

Ironically, those politicians who complain most loudly about the outsourcing of jobs often advocate the outsourcing of the job of making foreign policy and safeguarding American national security to the United Nations or to our allies in Europe.

Thomas Hazlett, writing in Slate, makes the case for why the FCC should scrap its absurd rules for satellite radio. Excerpt:

But in this era of industry consolidation, relatively speaking, there are fewer small, independent broadcasters left to protect. And the FCC's regulations, no matter what their original intent, now serve mainly to spare incumbent broadcasters--tiny or huge--the effort and expense of competing with their satellite rivals.

Yet another case of big business using the regulatory hurdles to forestall innovative competition.

Spain's prime minister-elect, Jose Luis Rodriguez Zapatero, vowed to withdraw troops from Iraq and declared "The war in Iraq was a disaster, the occupation of Iraq is a disaster." We should all send Prime Minister Zapatero a thank you note when Al Queda, now convinced that terror works (because, in fact, it did) redoubles their efforts to attack the US in order to sway the upcoming US election, and the Europeans--especially the Brits and Italians, one would think--should do the same as Zapatero has just painted a large red bulls-eye on their countries. But while Zapatero is convinced the war has been a "disaster" it seems that the Iraqi people take a different view.

This BBC poll of Iraqi sentiment should make even the most fervent opponent of the war take pause. Worth reviewing in full but among the findings:

* 80% say they feel they are better off than (57%) or the same as (23%) before the--less than 20% feel they are worse off.
* 70% say things are quite good or very good overall
* 71% expect that things will be better in a year
* More Iraqis say the US was right to invade than say the US was wrong to invade

While it is clear that there is a fair amount of humilation felt among the population and that the Iraqis want the Iraqi government to take charge and solve their problems (though there is no clear leader), they don't want the US to leave just yet and they are hopeful about their future--perhaps for the first time in decades. Also, my interpretation is that while security remains the largest single issue of concern, when that is addressed economic issues will be the dominant areas of concern. Democracy is important, but poor democracies are very frail. What Iraq needs is economic revival and to nuture a free commercial middle-class. While the Iraq still needs US military aid now, they will need commercial trade in the near future.

The socialists in Spain are helping no one with their threats of adandoning the Iraq--and are doing quite a lot of harm. I wonder whether the Spanish people will stand for it.

I enjoyed this quote from the editorial page of the WSJ. All too few people grok this simple concept:

"Alas, Mr. Buffett seems to have forgotten what every economist knows, which is that corporations don't pay taxes. They merely collect them. The actual cost of whatever taxes a corporation collects is passed along to others in some combination of lower dividends or profits for shareholders, higher prices for consumers, or lower wages and benefits for employees."

The search for the next Google is underway. Excerpt:

Below the radar, Google also faces Lilliputian threats from a fast-growing group of start-ups that hope to replicate its own meteoric rise from unknown upstart to Internet powerbroker. While most of these companies are long shots, a handful have begun to garner attention from analysts and investors thanks to new technologies that expand on Google's formula and take it in entirely new directions.

Jeff Jarvis makes some good points: "RSS needs to be enabled for traffic and audience stats and auditing."

Terribly, terribly sad: "BOB ZANGAS was killed last Wednesday in an ambush south of Baghdad. He was a Marine Corps Reservist working in a civilian capacity for the Coalition Provisional Authority."

A petition from Public Knowledge: "Sign onto a filing telling the Federal Communications Commission (FCC) that tech mandates restrict innovation and entrepreneurship in the industry."

Debra Saunders in the SF Chronicle opines after meeting with Kerry on that candidate's delicate dance to explain his yes vote on the war by blaming it on Bush: "So Kerry was 'misled' because he believed that Bush didn't mean what Bush said."

Bill Whalen makes the case for Bush in the SF Chronicle, arguing that the Bush bashing obscures some of the key reasons why the Bay Area should be more supportive of Bush. Excerpts:

Yes, Bush and San Francisco have serious policy divides: Iraq, same-sex marriage and the Patriot Act, to name but three. But is the president's agenda so desperately out of touch with 415-ers as to merit rejection by 6 out of 7 voters, plus thousands of angry protesters taking to streets anytime the president comes within driving distance of the Bay Area?

Not exactly. There's room for common ground, and here's where:

Homelessness ... AIDS ... Nanotechnology ... Free Trade ...

And there's more. Though roundly criticized in the Bay Area as anti-green, the Bush administration's has called for $105 million in habitat restoration and water improvements for the Klamath River Basin, to accelerate habitat rehabilitation for endangered fish and spur water quality and quantity improvements for the Oregon-California watershed. Mr. Bush also earmarked $760 million for his Healthy Forests Initiative, to improve forest and rangeland management, restore lands to their more natural conditions, and reduce the risk of catastrophic wildfires.

The Bush budget also includes Muni's proposed $764 million Central Subway, extending the Third Street light rail line from SBC Park and China Basin to Clay Street and Chinatown.

As for the tech sector, Mr. Bush signed an extension of the federal Internet tax moratorium, and during his tenure the FCC eased restrictions on broadband deployment.

The Bush White House also created a President's Council of Advisors on Science and Technology to study new approaches to fighting terrorism, the nation's research and development needs, and greater energy efficiency. That panel includes a pair of Bay Area financial stalwarts: Intel founder Gordon Moore and venture capitalist Floyd Kvamme. ...

Time will tell if and when Mr. Bush ends this self-imposed Embarcadero embargo . Meanwhile, the city that demands tolerance should practice what it preaches. That begins with learning to better tolerate a president whose record doesn't merit the overblown rhetorical attacks and abject rejection.

Good to see that Thomas Friedman gets it: see his latest column: The Secret of Our Sauce. This is why we should not fear outsourcing, but rather fear policies that retard America's ability to innovate. Excerpt:

The Narayanans are worth listening to at this time of rising insecurity over white-collar job losses to India. America is the greatest engine of innovation that has ever existed, and it can't be duplicated anytime soon, because it is the product of a multitude of factors: extreme freedom of thought, an emphasis on independent thinking, a steady immigration of new minds, a risk-taking culture with no stigma attached to trying and failing, a noncorrupt bureaucracy, and financial markets and a venture capital system that are unrivaled at taking new ideas and turning them into global products.

"You have this whole ecosystem [that constitutes] a unique crucible for innovation," said Nandan Nilekani, the C.E.O. of Infosys, India's I.B.M. "I was in Europe the other day and they were commiserating about the 400,000 [European] knowledge workers who have gone to live in the U.S. because of the innovative environment there. The whole process where people get an idea and put together a team, raise the capital, create a product and mainstream it — that can only be done in the U.S. It can't be done sitting in India. The Indian part of the equation [is to help] these innovative [U.S.] companies bring their products to the market quicker, cheaper and better, which increases the innovative cycle there. It is a complimentarity we need to enhance."

That is so right. As Robert Hof, a tech writer for Business Week, noted, U.S. tech workers "must keep creating leading edge technologies that make their companies more productive — especially innovations that spark entirely new markets." The same tech innovations that produced outsourcing, he noted, also produced eBay, Amazon.com, Google and thousands of new jobs along with them.

Writing in the WSJ, George Gilder urges the Bush Administration to "Stop the Broadbandits."

Unfortunately, instead of exploiting the failed policy of its political rivals by changing course, the Bush administration embraced the Clinton-Gore policy and made the telecom crash its own. Compounding the Clinton administration's errors, President Bush's FCC balkanized local-loop policy among 50 different state public-utilities commissions. The 10,000 members of the communications bar, most of them around K Street in Washington, can give you 10,000 reasons why the local loop should continue as a carnival of litigation and lobbying across the country. But last-mile technological progress has stopped as a result, replaced by pettifoggery and politics. By this time next year, Verizon's 38 million wireless customers will have faster Internet access on their mobile phones than Verizon's wireline customers have to their desktop PCs. Only the most severe regulatory disincentives to invest could have resulted in such an outcome, which defies the laws of physics.

Now within reach for Americans are new telecom applications such as voice-over-the-Internet, video conferencing, and rich entertainment and education that have already proven both feasible and popular in Asia. But this democratic diffusion of entrepreneurial power across the Internet cannot happen without broadband connections to homes and businesses. Although by conventional measures the U.S. now ranks 11th among nations in broadband penetration, by Asian standards the U.S. has no household broadband connections at all. South Koreans and Japanese enjoy links some 10-to-50 times faster than our fastest connections to homes, and the Koreans now have 40-times more last-mile bandwidth per capita than the U.S.

Though the Internet is potentially a fountain of innovation and key driver of productivity and employment growth, the current administration has no coherent policy on telecom or technology. President Bush appointed the astute and forward-looking Michael Powell to chair the Federal Communications Commission. But the White House then appointed Kevin Martin to join him as a commissioner, and sat idly by while Mr. Martin sandbagged his own chairman and voted with the Democrats on the decision now thrown out by the Court of Appeals.

...on the obvious and key issues affecting the transformation of the nation's copper telephone network into a broadband fiber optic one, the commission has bogged down in politics and corporate subterfuge.

Flawlessly executing one of history's consummate campaigns of political lobby-gagging of rivals, AT&T has blocked Internet advance in the U.S., where both the Internet and fiber optics were invented, largely at Bell Labs. A moribund company long propped up by regulatory contraptions, AT&T has surrounded the White House with highly paid friends-of-George, good Republicans who are sound on most issues, like taxes, but out of their element on telecom and technology. ...

While Mr. Hundt now urges an "industrial policy in favor of broadband," the U.S. does not need an industrial policy. It needs to end its anti-industrial policies that punish telecom with higher taxation than on any industry except tobacco and alcohol. Propelled by President Bush's supply-side tax cuts, the economy is improving fast. But in a world where the U.S. is no longer shielded from competition by the socialist failures of its global rivals, our leading industry cannot survive as a political casino. ...

Although the FCC made a feeble gesture in this direction in its previous ruling, the emancipation of broadband must cover all broadband, not just "green field" projects or "new fiber" or wireless in the high microwave bands. Dissolved must be the entire artificial and litigious distinction between local and long distance communications that assigns the local loop to local regulators and long distance to lobbyists and litigators.

From Andrew Sullivan:

Here's a word that deserves to be entered into the political lexicon. The blogger Mickey Kaus coined it. It's "pandescender." It stems from John Kerry's remarkable political ability to both pander and condescend to voters at the same time. In a word, it's what's obviously wrong with the Kerry candidacy for president of the United States, and, even in the early post-primary glow of his anointing, is troubling even die-hard Democrats as they confront president Bush in the fall.

CNET reports that Broadband powerline service gains backers:

Current Communications Group and Cinergy Broadband, a subsidiary of a Midwestern utility with the same name, announced on Tuesday one of the first large-scale rollouts of broadband over power line (BPL) technology in the United States. The service promises lower prices and more convenience by allowing consumers to access the Internet simply by plugging into an electrical outlet in their house.

This makes the regulaitons forcing RBOCs to share their network facilities (forced open access) with would-be competitors all the more silly. It's time to do away with those regs.

Please vote against Prop. 56--it is a sham that is intended to lower the bar for the CA legislature to raise taxes.

Prop. 57 and 58 are trickier, but Hoover Fellows George Shultz, John Cogan and Michael Boskin make the case that 'Yes' and 'Yes' are the Best Way to Deal With the State Debt. Excerpt:

What would happen if voters rejected the bond initiative? Strictly speaking, the governor and the Legislature would be required to pay off the state's entire accumulated debt and close next year's projected budget gap in a single year.

The inevitable result would be a truly massive tax increase. Why? Because eliminating the inherited debt in a single year by cutting spending alone would require an across-the-board cut of about 30%. We know of no government entity — federal, state or local — that has ever managed to make such a reduction. And it is hard to imagine such cuts coming from the current Legislature, which is not exactly full of Ronald Reagans. So a vote against the bond authorization would be a vote for a tax increase.

I have to challenge my friend Om on this one. He asks How to be a billionaire without any real cash? and makes the point that Forbes may have prematurely ranked the Google duo as billionaires because their company is not public--hence their fortunes aren't very liquid. So, Om asks, "Are the toothsome twosome worth a billion each then?" Yes, they are.

First, I bet many of the billionaires on the Forbes list have fortunes in non-publicly traded assets (think of the ones in real estate, for example). Of course, assets can certainly have value even if they are not publicly traded so Google ownership is certainly worth SOMETHING, even though it is illiquid at the moment. So the question is whether there should there be a discount applied for the fact that Google shares aren't publicly traded? Of course. But I don't think enough to bring the "toothsome twosome" down from, at least temporary, billionairehood. Whether Forbes valued Google properly is something I don't know, and frankly don't care, but it is not a "new kind of math" for one to be a billionaire (for real) without owning a share of public stock.

It's worth remembering too that there are many former billionaires who owned (or own) publicly traded securities. Being public is scant protection from the "what ifs" that Om posits. In fact, I don't think ANY of Om's list of what could go wrong apply only to private companies:
* another new cool search engine comes to the market and takes away traffic form Google
* someone discovers that Google is in patent infringement or something like that
* the stock market tanks

Would a public Google be protected from any of these things? In fact, one could argue that public companies face many more risks (can you say Sarbanes Oxley or class action suit?) that don't tend to threaten private companies.

Private company value is more secure, and public company value less secure, than Om would have us believe in this piece.