In one of those fascinating coincidences, I just read an article by John Cochrane, the Grumpy Economist, today on what current economic theory thinks causes inflation. Best guess: they don't know. The theory used to link employment and inflation, but the post-housing bubble US economy didn't follow the pattern, so now economists are on the search for a new theory.
Fed; Buckley; Coral; Detention
There is something sad about the amount of attention given to the Federal Reserve's interest rate policy, as the quarter-point increase announced this week illustrates. Within living memory, the federal government had a counter-cyclical tax system. When things were slow, taxes were lowered to stimulate business activity. When things were overheating, taxes were raised to prevent inflation. Some of this effect was achieved just by having a more finely-graduated tax schedule than we have now, but Congress was quite capable of raising or lowering tax rates with some attention to how the changes would affect the real world.
No one argues for that kind of system anymore, it seems. There are even crooked conservatives who argue that federal deficits have no effect on inflation. The whole burden of controlling inflation and preventing the formation of bubbles is cast on the Federal Reserve. The tax system has its faults, God knows, but the use of interest rates as the sole tool of macroeconomic policy creates its own distortions. Interest rates are a tool that cannot distinguish between exchange rates and domestic fiscal stimulus, for instance. Controlling inflation and manipulating the value of the dollar are different policies, but the Fed really has only one lever to control both (aside from buying and selling dollars to manage short-term fluctuations, of course).
In effect, the federal fiscal machine is a car in which the gas pedal is always pushed to the floor, and the only way to control speed is the brake. This is a poor design concept.
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One notes that William F. Buckley has finally passed the control of National Review to a younger generation; at any rate, this week he transferred his controlling interest in the magazine to the board of trustees, receiving an award in the process. Here is what the youngest trustee, Austin Bramwell, had to say about the founder of modern American conservatism:
"By ironic periphrasis, arch understatement and surprising deployment of familiar and of course unfamiliar words, Buckley convinced his opponents that he knew something they did not, and what's more, that he intended to keep the secret from them," Mr. Bramwell said as he presented the award. "Thus did he waken their minds to the possibility that liberalism is not the philosophia ultima but just another item in the baleful catalogue of modern ideologies."
Only Mad Magazine could do justice to prose like this; which makes sense, since Mad and National Review are genial survivors from the same era. Buckley invented the style, at least for political purposes, but I am pleased to see it can be learned. One surprising note, though: I was rather shocked to learn that National Review does not turn a profit. Surely that was not always the case?
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Speaking of ancient survivals, why is it that only I (and one Australian, to judge from Usenet) have noted that the Spirit rover on Mars found something that looks an awful lot like coral? NASA calls the hematite-bearing rock "Pot of Gold." You can find the bland press release here.
I fully recognize that it is almost certainly not coral, or any kind of a fossil. Coral on Mars is hard to posit. Coral is actually a fairly sophisticated form of life. It appeared in Earth's oceans just 500 million years ago, with the rest of the explosion of multicelluar animals. The proponents of the Blue Mars model of Martian history, however, generally say that Mars has been dessicated for at least 3.5-billion years. So, if Pot of Gold is coral, evolution on Mars must have been much faster than on Earth.
Still, it looks like coral.
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The Supreme Court's decisions that require combatant detainees to get some kind of a hearing are yet further examples of an unhappily typical pattern for the Bush Administration. In reality, the Administration won, in the sense that it got everything it might reasonably have hoped for. No way was the Court going to allow the government to hold any civilian in detention without some sort of judicial review, much less American citizens. Within that obvious constraint, however, the Court was remarkably deferential. The procedures the Court requires are minimal, little more than the right to present a claim to mistaken identity. That was the best outcome the Administration could get, and it got it.
You would not know this from press reports about the decisions, but that's not media bias. The press properly reported that, in the posture in which the cases were heard, the government "lost." That is, the Court rejected the government's maximalist arguments, and provided a predictable compromise.
Prosecutors routinely make more charges against an accused than they can ever hope to prove. They do this to create a tool for plea bargaining, or in the hope that some accusation will stick if the case comes to trial. The Administration had adopted this strategy for the detention cases, and it was lunacy. The Bush Administration did not need just to maintain freedom of maneuver with regard to detaining terrorists; it needed to restore the federal government's reputation as a protector of civil liberties.
The solution was simple enough. The sort of review procedures that the Court actually endorsed should have been put in place last year. Civil libertarians would still have challenged them, but the Court would have sided with the government. The headlines would have read: "Court Upholds Government Detention Policy," and the Administration's discretion would have been in no way impaired.
The Bush people have a knack for making victories look like defeats.
Copyright © 2004 by John J. Reilly