Blogs

Core Inflation

| Thu Aug. 28, 2008 6:43 PM EDT

CORE INFLATION....Why does the Fed rely on a "core" inflation rate — one that excludes food and energy costs — when it sets monetary policy? Are they trying to pretend that food and energy, items that are more important to the middle class than to the rich, don't matter? Mark Thoma explains:

If the question is "what is today's inflation rate," the total inflation rate is the best measure. It's intended to measure the cost of living and there's no reason at all to strip anything out. It's only when we ask different questions that different measures are used.

Core inflation, it turns out, (a) does a better job of forecasting future inflation, (b) does a better job of estimating whether inflation is currently rising or falling, and (c) is the inflation target that best stabilizes the economy.

The core inflation rate you see in the news, the one that strips out food and energy, should be though of as a short-hand, quick measure of all three of these concepts. But in each case the Fed uses measures (formally or informally) designed to best satisfy these three functions. For example, when it forecasts future inflation, it uses a different concept of core inflation than it uses in setting policy.

In other words: no, the Fed isn't trying to pretend that food and energy inflation aren't important. They focus on core inflation because it's a better input to the technical models they use to guide monetary policy. Read the whole thing for the full explanation.

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Veep Rumors

| Thu Aug. 28, 2008 6:11 PM EDT

VEEP RUMORS....Will John McCain announce (or "leak") his choice for vice president tonight during Barack Obama's acceptance speech? Obama communications chief Dan Pfeiffer is willing to bet he won't: "If they do it," he told Politico, "I will pay all of McCain's mortgages next month."

Yeah, sure he will. This is just more cheap talk from liberals. Everyone knows Cindy paid cash for all their homes.

The World Is Not Enough

| Thu Aug. 28, 2008 4:07 PM EDT

THE WORLD IS NOT ENOUGH....If Walter Cronkite could manage to talk semi-intelligently for hours on end during an Apollo countdown in which, literally, absolutely nothing was happening, why can't today's talking heads find something semi-intelligent to say while they cover political conventions for hours on end? It is a mystery.

However, despite the amusing personnel meltdowns taking place on air over at MSNBC, Fox's Megyn Kelly surely deserves the idiot award of the week for this comment on Michelle Obama's speech:

Do you think that, you know, her saying that she loves America, that she loves this country, is going to do it for those who questioned her patriotism? Because she said something — what she said was, and I wrote it down, was, "The world as it is just won't do." If you replace "world" with "country," you're back to the same debate, arguably, that you have been having about Michelle Obama's feelings about this country.

Why yes! And if you replace "world" with, say, "broccoli," then Michelle is dissing the vegetable industry! We could play this game for hours, couldn't we?

Hezbollah Operating From Venezuela?

| Thu Aug. 28, 2008 4:02 PM EDT

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Eighty-five people were killed in Buenos Aires in July 1994, when a truck filled with explosives detonated outside the Jewish Argentine Mutual Association (AMIA). Since then, conspiracy theorists have had a field day speculating about who was responsible, but it is generally believed to have been the work of Hezbollah, the Iran-backed Lebanese militia group listed on the U.S. State Department's list of foreign terrorist groups. The presence of Islamist militants, including Hezbollah, in South America—in particular, in the anarchic Tri-border Region, where Brazil, Argentina, and Paraguay meet—has long been suspected. According to the Los Angeles Times, though, terrorism analysts fear that Hezbollah is expanding its base in Venezuela.

Hugo Chavez's government enjoys warm relations with Iran, Hezbollah's financial and ideological patron. The countries have established numerous business ties, and in March 2007 agreed to flights between their capitals on IranAir—flights that include a layover in Damascus. (The State Department complained early on that passengers arriving in Caracas seldom were checked against immigration databases or had their passports stamped. Venezuela has reportedly stepped up security procedures as a result.) In June, the US government accused two Venezuelans of working with Hezbollah, obtaining finances and arranging travel. Such activities may represent things to come.

From the Times:

Carbon Taxes

| Thu Aug. 28, 2008 3:13 PM EDT

CARBON TAXES....Will Wilkinson argues that, environmentally speaking, eating food produced in faraway lands isn't really that big a deal:

According to a recent study out of Carnegie Mellon University, the distance traveled by the average American's dinner rose about 25 percent from 1997 to 2004, due to increasing global trade. But carbon emissions from food transport saw only a 5 percent bump, thanks to the efficiencies of vast cargo container ships.

A tomato raised in a heated greenhouse next door can be more carbon-intensive than one shipped halfway across the globe. And cows spew a lot more greenhouse gas than hens, or kumquats, so eating just a bit less beef can do more carbon-wise than going completely local. It's complicated.

There's a lot to be said for this, and one of those things is that it's a good argument for a carbon tax (or a cap-and-trade program, which amounts to much the same thing). Trying to figure out the carbon footprint for everything you do is just too damn hard. In fact, nearly impossible, as Will's example demonstrates. A better solution is to put a tax on carbon, let prices adjust to new levels, and then let the market sort things out. Carbon-intensive products will go up in price and we'll all end up buying fewer of them. Carbon-friendly products will go down in price (relatively speaking), and we'll buy more of them. No muss, no fuss.

There's another side benefit too: guilt reduction. After all, none of us will ever live pristine lifestyles even if we'd like to: maybe you like your SUV and I like my sirloin steak and we really, really don't want to give them up. What to do? Answer: pay the carbon tax and relax. Maybe you'll keep your SUV and eat more tofu, while I'll keep eating meat but buy a Prius. We'll both cut down our carbon use, but we'll each get to do it in our own way. And that way is whatever causes us the least grief. The Prius doesn't bug me much and the tofu doesn't bug you much, so we've both cut our carbon consumption, done it with only modest sacrifice, and held on to the things that we really care about. But despite the collective modest sacrifice, we've cut our carbon consumption.

The biggest problem with all this — and the most powerful argument the climate change skeptics have — is that a carbon tax won't truly be effective unless it's worldwide. Fruit shipped from Chile won't be affected at all, for example, as long as the freighters fuel up somewhere outside the U.S. Ditto for toys made in China and textiles in India, since neither China nor India appears likely to join us in taxing carbon emissions anytime soon.

But this wouldn't be the first time that the United States took a lead in the global sphere and had to wait for others to catch up. It seems worth doing to me anyway, especially since, in the meantime, even a U.S.-only initiative would spur development of green technologies and act as sort of a proof of concept for the whole idea. If not us, who? If not now, when?

Obama's Speech Tonight: What to Expect?

| Thu Aug. 28, 2008 2:10 PM EDT

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There are some weird dynamics surrounding Obama's speech tonight. All of them, I think, point to a more subdued and workmanlike performance than many Democrats are hoping for.

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Voila

| Thu Aug. 28, 2008 1:47 PM EDT

VOILA....John Goodman, a think tank president, evangelist for Health Savings Accounts, and advisor to John McCain, offers us his solution to the crisis of the uninsured:

Mr. Goodman, who helped craft Sen. John McCain's health care policy, said anyone with access to an emergency room effectively has insurance, albeit the government acts as the payer of last resort...."So I have a solution. And it will cost not one thin dime," Mr. Goodman said. "The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American — even illegal aliens — as uninsured. Instead, the bureau should categorize people according to the likely source of payment should they need care. "So, there you have it. Voila! Problem solved."

This is, obviously, idiotic — though in an almost charming, movement conservative Tourette's sort of way — but one wonders who Goodman thinks is going to be the payer of last resort for non-emergency care? Santa Claus?

Republican Solution to Health Care Crisis: Head, Meet Sand

| Thu Aug. 28, 2008 1:26 PM EDT

Check this guy out.

Texas once again led the nation with the highest percentage of residents without health insurance, a U.S. Census Bureau report showed Tuesday...
But the numbers are misleading, said John Goodman, president of the National Center for Policy Analysis, a right-leaning Dallas-based think tank. Mr. Goodman, who helped craft Sen. John McCain's health care policy, said anyone with access to an emergency room effectively has insurance, albeit the government acts as the payer of last resort. (Hospital emergency rooms by law cannot turn away a patient in need of immediate care.)
"So I have a solution. And it will cost not one thin dime," Mr. Goodman said. "The next president of the United States should sign an executive order requiring the Census Bureau to cease and desist from describing any American — even illegal aliens — as uninsured. Instead, the bureau should categorize people according to the likely source of payment should they need care.
"So, there you have it. Voila! Problem solved."

The fact that this guy is anywhere near actual public policy is scary. He is aware, of course, that you can't get a dental exam, mental health care, or any kind of preventative care at an emergency room? He is also aware that emergency room care is the most expensive of all kinds of health care, and that we should be taking active steps to minimize it, not ignore it?

Just tuck this little nugget away: The man who helped write John McCain's health care plan believes the solution to the health care problem in this country is to literally pretend we don't have one.

Stem Cell Hell

| Thu Aug. 28, 2008 1:18 PM EDT

STEM CELL HELL....It's not clear to me how much anyone really cares about party platforms these days, but according to Stephen Spruiell the GOP platform now calls for a complete ban on all embryonic stem cell research. Publicly funded, privately funded, new lines, pre-existing lines, whatever. If it's an embryo, you can't use it for research.

This is the kind of thing that, over and over, seems like it ought to be a big deal to me. And yet, at the federal level, it never really seems to generate more than yawns. I guess everyone is used to conservative hardliners insisting on ideological purity, being humored in one way or another, and then, in the end, ignored. So no one takes it seriously.

Which, in a sense, is almost fair. Still, just for the record: the Republican Party now officially opposes all embryonic stem cell research no matter what. In case anyone ever asks you.

God Understands Irony, Part 2

| Thu Aug. 28, 2008 1:13 PM EDT

Remember when the meeting of global warming deniers in Florida was canceled due to an impending tropical storm? This might top that. President Bush's speech at the Republican National Convention may be postponed from its current Monday slot because tropical storm Gustav may hit the Gulf Coast that day.