More on South Ossetia

I'm really starting to worry about this situation.

Recent reports suggest that Russian troops are pushing beyond South Ossetia, into central Georgia - perhaps towards the Georgian capital, Tbilisi. I think it's notable that the first city to be seiged outside of South Ossetia is Gori, which lies between Ossetia and Tbilisi - not Ossetia and Abkhazia - Georgia's other breakaway republic.

It seems like Medvedev is preparing to defend against an assault from or prepare for an attack on Tbilisi, rather than solidify his advances into the separatist regions. That's disconcerting for two reasons -

1. It would mean that this really is an invasion of Georgia, rather than a crackdown on Georgian interference in the breakaway republics, and

2. The U.S. is currently transporting Georgian troops from Iraq to Georgia to fight the Russians.

So Russia is invading Georgia proper, and the U.S. military is going to be in Georgia too... bringing Georgian troops so that they can fight Russian troops. Is it just me, or is this a recipe for disaster??? Why the hell are we getting involved in this??? What if there's a stray bomb that kills American troops helping the Georgians out? How many options is Bush really going to have to respond to something like that? And even if it doesn't come to that, what will Medvedev and Putin think? How are they going to interpret us transporting Georgian troops to the battlefield?

I don't know if this will mean war with Russia. Even I have enough faith in Bush and Medvedev and Putin to think that this is probably a slim possibility. But why are we toying with it? Why can't the Georgians transport their own damned troops. I know they've provided a bunch of troops in Iraq, but who cares! We're the United States of America - we're not obligated to play chauffeur to a Central Asian republic that sent 2,000 soldiers to Iraq. I applaud their enthusiasm, but I hardly think it qualifies them to ask anything of us.

I don't know for sure if the Russian move on South Ossetia is justified or not. My impression is that there is substantial justification for what Russia is doing in South Ossetia and Abkhazia. That does not justify an invasion of Georgia. The United States needs to think straight on this conflict and not treat Russia like another Hitler in the Sudetenland - we need to treat them like the Greaet Power that they are. And maybe they overstepped their bounds here, but we can't just blunder our way into this war - we need to proceed cautiously.

We also need to remember that Russia has something in South Ossetia that we never had in Iraq - an actual smoking gun. Whoever started it several iterations back, the fact is Georgia moved troops against South Ossetia on August 7th. I know this was disputed at first, but it seems to be reported universally now. I don't want to see Saakashvili fall, and I don't want to see a Russian occupation of Georgia. But tell me - how the hell is that different from what we did in Iraq? It's different for one reason - in Georgia, Saakashvili made the first move and Russia responded. In Iraq we made the first move and Saddam responded. I would rather watch Russia take Georgia than get the U.S. into a direct conflict with Russia over a standard of international relations that we can't even hold ourselves to. If we try to do that, we're going to have egg on our face - I guarantee.

Call for Papers

Urban Affairs Association, Spring 2009 in Chicago

Southern Sociological Society, Spring 2009 in New Orleans

Chinese Wine

An interesting Slate article on the demand for and supply of wine in China.

In other news:

We opened a Merlot from Prince Michel yesterday - a confidence booster for Kate's job interview today. Very smooth merlot.

About a week ago we also opened a Viognier from La Grange. It was a 2007 - very good year for Virginia wines. Viogniers are on the sweeter side - "grapefruits and honeysuckle" is what you usually hear, but I tasted some pineappley notes in this as well. Definitely a honey quality to it, too.

In beer news, about a week ago I got a six-pack of Gold Ale from Clipper City Brewing Company, based in Baltimore. A pretty standard ale - very malty. Not too dark or heavy. I like their McHenry Ale better.

China Data

So as I often do, I was trolling the internet for interesting data sources today, and came across China's national statistics site. They are surprisingly up front with a lot of statistics going back over a decade. I was really impressed and interested. Not sure how accurate the stats are - that probably merits a little investigation - but they have neat stuff.

I'm especially interested in data they have on "scienitifc research institutions", number of staff at these institutions, funding of the institutions, and % government expenditures on the institutions for each province each year since 1995. I'm kind of curious to see how balanced their investment in science and technology is - because a criticism often leveled against China is that it does not balance development between the country and the urban areas. I wonder if that holds true in science and tech too.

Russia in South Ossetia

So Russia has tanks on the roads and boots on the ground in South Ossetia, Georgia's northern breakaway province. My wife, a Russia expert, alerted me to this. She also points out that the Russian stock market is not taking the news well . Oil prices have also been dropping, which can't make the Russians happy either - but their dollar reserves are doing better.

A frequent poster on my blog who has his own blog about security issues seems to be writing about this as well.

I don't know the background of this conflict, so I can't really support or scold Russia... I just know I really don't want another armed conflict in Central Asia. Feel free to share your thoughts - having talked about this with my wife, I've been familiar with the issue - but I still don't feel like I know enough to have any firm thoughts on it.

New Research 2

OK, so the second paper that's been emerging is going to be called something like "Unemployment in the Upper Tidewater: A Job Flows Approach".

Background: Northern Virginia and Southern Maryland have had impressively low unemployment rates for the last two decades or so. I've read reports in the business press (which I should really track down again for this paper) refering to the region as "recession-proof". Oft-cited reasons are government contracts and the IT boom in the region, and the explosive population growth which keeps construction and service workers employed as well. It's very insightful to look at the BLS's LAUS (local area unemployment statistics) maps. Maps for 1999 and 2000 - before the last recession - are especially instructive. Northern Virginia is one big patch of white on the map's color scale - under 2% unemployment. The largest area of land in the country that had unemployment under 2% at the time. Not far to the west, West Virginia is dark purple - one of the largest contiguous areas of high unemployment in the country.

So lots of justifications for why Northern Virginia does so well have been forthcoming - one other explanation I want to explore is the relationship between job flows and unemployment. There are two job flows that people look at: job creation, and job destruction. Job creation occurs when a firm expands its workforce. Job creation statistics are different from hiring and firing statistics. A firm of 50 employs can hire 25 employees and fire 25 employees, and they've added nothing to job creation statistics. Job destruction is just the opposite - the number of positions a company has eliminated. So job creation and job destruction tell a slightly different story from employment, hiring, firing, and unemployment statistics. Net change in employment has to equal job creation minus job destruction - but the job flow dynamics in an economy may differ from their employment dynamics.

John Haltiwanger, of the University of Maryland, has lead the way in research on job creation and destruction. In his most famous book on the subject (creatively called "Job Creation and Destruction"), Haltiwanger identifies many properites of job flows, and in one chapter explores the relationship between job flows and unemployment. The overarching conclusion is that during periods of high unemployment, job destruction spikes and job creation remains relatively constant. It sounds fairly straightforward, but it's an important finding with policy implications. The policy response to this finding would be different, for example, from the policy response if job destruction stayed relatively constant during recessions, and job creation declined significantly.

The problem with Haltiwanger's research is that he primarily looks at aggregate job flow and unemployment statistics. However, the Census's Quarterly Workforce Indicators provide county level job flow data to track whether these relationships occur at the local level. The problem is, these data are only available for certain states at certain times. Very important states - like Massachusetts, Ohio, and New York haven't even produced any. Some, like Maryland, produce the statistics as far back as 1990. So it's a crapshoot. I've been poking around each state's website to see how good their statistics are, and I've discovered that every state in the Fifth Federal Reserve District (Virginia, Maryland, West Virginia, DC, North Carolina, and South Carolina) have data going back to at least 1998 - in other words, covering the last recession.

My plan is to run Haltiwanger's basic analysis on every state in these counties, and determine whether high unemployment counties have a different relationship between job flows and unemployment than low unemployment counties in the district. In other words, does the Upper Tidewater behave just like Haltiwanger's national statistics - only with a smaller increase in job destruction - or does it show different patterns entirely? Perhaps the Upper Tidewater sees a spike of job creation and job destruction during recessions - a sort of "creative destruction" a la Schumpeter. I think it should be interesting.

If things work out, all these stats are available by industry as well.

I envision this being presented at a brown bag at work, where I'll refine it, and then submitted to a minor labor economics journal. Perhaps the Journal of Labor Research, which is published by George Mason. I want a good shot of getting in and publishing something in a journal for once - that's all. I think it's a decent idea - and it would be useful for policymakers in schizophrenic states with areas of very high and very low unemployment. Or even for whole countries where this occurs, like Belgium... in fact, I wonder if Belgium publishes gross job flow statistics....

New Research

OK, I'm far enough along on two "back burner" research projects that I think it's worth talking about them here.

The first is a paper that I'll be presenting at the Southern Economic Association conference in D.C. this November. It addresses the issue of "skills mismatch" in the United States, or more accurately - it computes an index of skills mismatch suggested by Petrongolo and Pissarides (2001) that I haven't seen estimated empirically anywhere and was curious about.

There are lots of "matching functions" out there that try to describe frictions involved with matching one party to another in any of a variety of transactions. The matching I'm concerned with is job matching. A job matching function is usually of the form: M = z(U, V). The number of matches is a function of the number of unemployed workers, the number of job vacancies, and a matching technology z. I won't get into the weeds here, but there is a variation on this model called the "ball-urn model" that looks like this: M = V(1-e^(U/V)). Petrongolo and Pissarides (2001) mention a variation of the ball-urn model that includes "K" - an index of skills mismatch: M = V(1-e^(KU/V)). With a little math, you can solve for K (although they don't). K is the percent of unemployed workers who are qualified for a job vacancy. As K goes up, the second equation I presented converges to the first equation. Anyway, its a nifty, easy little index they suggest that even this public policy grad student can understand - so I thought, why not calculate it for the U.S., and see what I can say about (1.) whether this is even a valuable index, and (2.) trends in skills mismatch in the U.S.

I use the Job Opening and Labor Turnover Survey (JOLTS) data produced by the Bureau of Labor Statistics, along with unemployment figures. The JOLTS data are relatively new - going back only to 2000 - but it is produced monthly, so there's a fair amount of data points. My calculations for K are below:
Conclusions so far? K is clearly very cyclical - it goes up in the summer and down in the winter. Not sure why this could be yet - I don't know much about the seasonality of unemployment. But basically that says that unemployed workers are more qualified for summer jobs than they are for other jobs. I guess that's believable... What is kind of neat is that K is not responsive to the U/V ratio (the red line above). The U/V ratio (also known as the Beveridge Curve) is an index of labor market tightness. When the ratio is high, it means that there are a lot of workers chasing very few jobs. If it is low, it means that there are a lot of jobs out there available for workers. U/V is also the denominator of K when you solve the matching function I presented above. So you would expect that when U/V increases dramatically (as it does in the first few months of the graph), K will decrease. Maybe you could convince me there's a slight drop at that period in time, but not really. K stays very consistent. This is probably a good thing. I don't think many people would be covinced by the idea that skills shortages in the US economy swing dramatically over time. If there are too many workers chasing too few jobs or too few workers chasing too many jobs, you would think the skills ratios among workers and jobs should stay pretty constant.

Next on the list:

(1.) measuring a standard Cobb-Douglas matching function (M = b0 + b1ln(U) + b2ln(V)), allowing b0 to vary over time. b0 is equivalent to the matching technology "z", that I mentioned above. It's an index of general frictions in matching. I'll then chart K against z to determine whether K is really picking up skills mismatch, or whether its just "the share of workers who have a tough time matching to jobs."

(2.) The American Community Survey collects information on the time it takes to travel to work, which could be a proxy for spatial mismatch - one of the most common types of mismatch discussed in the literature. Its an annual survey, unfortunately, so I won't get nearly as many data points - but I want to compare changes in spatial mismatch to K to make sure K isn't picking up those changes accidentally.

(3.) I'm going to reestimate K after differentiating between full time and part time job seekers. In effect, the equation will look like this: M = V(1-e^((-KFT + PT)/V)). This version of K assumes that all part-time job seekers are qualified for whatever jobs they may seek, but some full time job seekers may not be. High paid consultants aside, this seems like a reasonable assumption... and it may get some different dynamics for K.

OK, I need to get a few things ready for work now, so I won't talk about my second research project right now - but here's a teaser title for you:

"Unemployment in the Upper Tidewater: A Job Flows Explanation"... using Quarterly Workforce Indicators data from Census.

Virginia in the News

Virginia has been in the news lately. The Washington Post is once again touting it as a battleground state in the presidential election. A new fact I was not aware of is that McCain is apparently considering Rep. Eric Cantor as his running mate. Cantor is a four term Congressman from Virginia, and (like the author of this blog) a graduate of both The College of William and Mary and George Washington University. Seems like a small fish to me - I doubt he'll get picked - but that's an interesting tidbit. It's notable that McCain isn't going near any of Virginia's bigger name Republicans - like George Allen.

Forbes magazine also reported its annual ranking of states in terms of their competitiveness. For the third year in a row Virginia ranked first, but the runners up closed the gap from last year. In fact, the first two paragraphs are dedicated to the fifth-place state - Georgia - without mentioning Virginia at all until the third paragraph! The Bacon's Rebellion blog, on my blog roll, reports on this as well.

You have to take these rankings with a grain of salt - the underlying point is that we're doing well. Lots of rankings like this exist (maybe I'll do a blog post on it some day), so you have to look at where you fall out in the distribution across several of them.

Finally, yesterday's Post reported on a number of new wind energy projects that are set to go up in the western part of Virginia over the next several years. This is very exciting, but there seems to be some opposition from... not Big Coal... not state Republicans... but ENVIRONMENTALISTS! Yes folks, wind turbines can kill birds and destroy the tranquility of the mountain forests where they will be built. Good grief. I fancy myself an environmentalist for all intents and purposes - but these people are going to have us living in caves pretty soon. An environmentalist opposing wind energy? I was dumbfounded.

Apparently Virginia passed a law in 2007 that made the state very friendly to the development of wind energy, which got a lot of firms interested in new projects. Kudos to Richmond! The article did not talk much about the state's coal options. We have a lot of coal left in Virginia, and we really need to look into how to burn it AND extract it cleanly. A lot of people scoff at the idea of "clean coal", but my understanding is there's something to it. It's certainly worth checking it out since we're sitting on so much of the stuff.

"America's Decline" in Becker and Posner's Blog

Becker and Posner have a new blog post up on "America's Decline". Becker leads, and Posner responds. It doesn't delve too deeply into anything, but these are smart guys, so it's always interesting to hear what they have to say.

I responded to Posner's comment - which I think is a little better - with much the same argument that I use in my "Folk Economics" post from a couple weeks back.

In other news, "The Dark Knight" is an amazing movie - I highly recommend you see it in theaters. Very dark, as everyone is saying. I've also heard people say that it wouldn't be as big of a deal if Heath Ledger hadn't died. This is not true either, by any stretch. This movie would have launched Ledger's career out of the "pretty boy" roles he's used to and into a whole new range of potential characters. They said that "Brokeback Mountain" demonstrated that Ledger could play weightier roles than he had in the past, but trust me - gay cowboys don't hold a candle to this new Joker. He stole the show.

I also saw the preview for "The Watchmen". I've never read the graphic novel, but now I'm intrigued. It's really confusing to understand exactly what's going on from the preview, though. I'll need to educate myself.

Brewing Updates

So there has been some activity on the beer brewing front - thought some of you might be interested...


I'm down to my last two bottles of Czech Pilsner, which I brewed two or three months ago at this point. The last time I had a bottle was about a month ago, and the flavor had really matured and melded by then, so these two bottles should be great. My brother had a bottle of it last week and seemed to think it was good as well. We're having a crock-pot BBQ farewell party to a friend who was in D.C. for a law internship this summer, and I'll serve up the last two bottles there.


I just bottled a classic American lager last week - the plastic bottles I put it in are already rock-solid, which bodes well for good carbonation and a substantial head. It looks a little darker than I would like, but that's not surprising with the homebrew ingredients I've been using. They've always turned out darker than pictured. Oh well - should be on the lighter side in terms of taste, which is the idea. I'm going to bring all two gallons of it to the Outer Banks, where I'll be lazing on the beach with my wife, sister in law, her fiance, and two other friends for the last week of August. It's my birthday week and you're allowed to bring plastic bottles on the beach, so I plan on enjoying my homebrewed American lager on the hot sand.


Last night I brewed my next batch - "Blonde Bombshell" - a honey wheat beer that my brother and his wife got me for Christmas. I have high hopes for this one. It has a wheat base to the wort, plus the recipe called for adding honey which means it will be nice and sweet. It also called for additional hops, which means it should be a moderately spicey beer. I think the spice, with the softness of the wheat and the sweetness of the sugar will make for a really great Autumn beer combination (it should be ready to drink at the end of September... I've found that four weeks of fermenting and four weeks of carbonation is ideal to get things fully fermented without any odd residual sweetness or yeastiness).


When this is done fermenting, at the end of August, I'm going to start brewing two other Autumn batches I just got from my homebrew supplier: "Dutch Apple Ale" and "Full Moon Marzen". Dutch Apple Ale is a cider, with an English Nut Brown wort. The recipe calls for brown sugar and cinnamon to be added, which should taste great. The other neat thing about this recipe is that instead of adding water to the wort, it calls for adding apple juice! The yeast will eat that in addition to the brown sugar and wort, and give it a really great apple taste. My wife loves hard cider - one of the few beers she'll drink - so we like to have cider on hand in the Fall.


Marzen is another typical Autumn beer, despite it's name. The beer is called "Marzen", because it would be the last batch of beer the German brewers would make, in the month of March. After that, it would be too warm to brew. They would brew their Marzen, and then store it in cool cellars all summer. The casks wouldn't be cracked open until September or October, making it a traditional Autumn brew with strong associations to Oktoberfest, especially.


So I'm torn on which to brew first of these - the Marzen or the cider. The wheat ale should be done at the end of September, which means one batch would be done at the end of October and one at the end of November. After both these I'll brew a darker winter/Christmas batch.

I also got equipment to bottle the beer in glass bottles with crimped caps! - none of this plastic coke bottle stuff any more (despite its convenience for drinking on the beach).

We're going off to the store soon, and I need to restock beer anyway. Now that I'm in a beer mood I think I'm going to get something good... no JW Dundees, despite the fact that its a really tastey value-buy.

Misleading Washington Times Article

The Washington Times published an article this morning by Stephen Dinan discussing how the campaign has turned nasty - with both candidates trading insults...

What's telling is that in every McCain example, he actually accuses Obama of "playing the race card", and being a lightweight celebrity like Paris Hilton.

And what is the Washington Times' Obama example? "Obama ridiculed McCain for depicting him as a lightweight celebrity". Ridiculed him indeed... what Obama said was:

"So far, all we've been hearing about is Paris Hilton and Britney Spears. I mean, I do, I do have to ask my opponent, is that the best you can come up with? Is that really what this election's about? Is that what is worthy of the American people?"

... not really ridiculing John McCain here, is he? Certainly not in a way that could be construed as an "insult".

The worst thing Obama is catalogued as saying is:

"Nobody really thinks that Bush or McCain have a real answer for the challenges we face, so what they're going to try to do is make you scared of me: You know, he's not patriotic enough. He's got a funny name. You know, he doesn't look like all those other presidents on those dollar bills, you know. He's risky. That's essentially the argument they're making."

But that's not really accusing McCain of anything! He's not saying "you're a racist, McCain", as the McCain campaign suggests he is.

So basically we have a situation where McCain has been running some strange - and I would argue uncharacteristic - negative ads that are heaping insult and name-calling on Obama. Obama is responding and saying they are ridiculous without accusing McCain of anything. When Obama speaks the worst he does is say "McCain called me [blank], and that's wrong". He never says anything like "McCain is [blank]". And yet the Washington Times and lots of other media sources are saying that insults are coming from both sides!

Strange...

I've been amazed at Obama's restraint. I really hope he doesn't go negative.

Jobs and China

The Economic Policy Institute released a policy brief yesterday which claimed that 2.3 million American jobs were lost between 2001 and 2007 as a result of the trade deficit with China.

Granted, the report is really talking about gross job loss, not net job loss. They don't talk about how many jobs were created by trade with China. Still, the story is pretty clear cut. With trade deficits as massive as the ones we're running with the Middle Kingdom, jobs and money go over there and products come over here - there's not much arguing with that.

We can't slip into mercantilism, as I've warned before - we can't cut off trade out of fear, because we do indeed benefit from cheap products and a more efficient use of the global labor supply... but...

Let's not hollow out the American economy in a free-trade frenzy. You can be a patriotic free trader that prefers to buy American and invest in American economic infrastructure - there's nothing anti-market about that.

Breaux Vineyard 2003 Cabernet Sauvignon

Quite simply, one of the best wines I've had in a long time.

Aged 30 months in oak barrels, unusually long contact maintained with the grapes skins - this is what they mean when you hear people talk about "tannins". Still, eminently drinkable. This was our only bottle - now I want to go back up to Leesburg and buy one or two more to save.

Breaux Vineyards itself is really a gem. Everything we had there was great - easily one of our favorites.

We also recently had a Sterling Vineyards Chardonnay - its a California winery that you can find in most grocery stores. Very good as well - it has that buttery/vanilla character to it that chardonnays aged in oak get (wines aged in stainless steel don't get the same contact with oxygen, giving it a "crisper" taste... I like to think of it in beer terms: "oak aged wine : ales :: stainless steel aged wine : lagers").

In terms of beer... haven't had anything new lately, but I have bottled my beach lager, and the bottles are already rock hard - which means the carbonation has begun! Soon I'll brew the "blonde bombshell" wheat ale that Evan and Tricia got me.

Principles, Agents, and Bacon's Rebellion

OK - so my recent post on Tim Kaine and Obama got me feeling like I should re-emerse myself in Virginia state politics after somewhat of a hiatus, so I looked up some Virginia policy blogs and added one - "Bacon's Rebellion" - to my list...

... and I'm already frustrated with one of the posts.

James Bowden had a post on a court decision on public prayer. It's a pretty mundane argument on his part - standard church/state stuff - except for the principle/agent dimension of the court decision that I think he's ignoring. Plus he's doing this and trying to hold himself up as a "strict constructionist" at the same time. He promotes strict constructionism in a way that distorts what most constructionists actually believe. Anyway - weel free to read my comments. I come away from this experience with two insights:

1. Every intelligent person should have an understanding of contracts and the concept of principles and agents, and

2. So-called "strict constructionists" need to understand that just because you don't come up with a phrase in your keyword search of the Constitution doesn't mean that it's unconstitutional or inconsistent with the intent of the founders. Even a restrictive, Jeffersonian interpretation of the Constitution is viable without assuming that.

Obama-Kaine

So the Washington Post is reporting today that Kaine is on Obama's short list... and Bill Kristol is suggesting it as well. As readers may know, I was strongly behind Mark Warner as a potential VP, but I think Kaine would do good as well. Kaine, like Warner, is a centrist Democrat from Virginia with a strong focus on bread and butter issues: balancing the budget, improving transportation, and investing in education. Neither are afraid to stand up to the Republican rank and file who cannot countenance any taxes (I say "rank and file" because the Republican leadership actually agreed with the Warner administration when they raised taxes). But neither pursue "pie in the sky" Democratic platforms like universal health care or same-sex marriage either. And that's not to say that I like taxes, or that I oppose same sex marriage - it's just to say that Warner and Kaine (and Webb, for that matter) take a "first thing's first" approach that is very refreshing.

As most of you probably know, Warner is set to destroy former Republican Governor Jim Gilmore in the race for John Warner's Senate seat. I eventually came around to the logic that a sure-thing Webb-Warner Senate delegation was probably better for Virginians than a toss-up VP bid. Since I've resigned myself to that logic, I'm like this Kaine idea more and more. I honestly don't think Kaine is the "strongest" VP. In many ways someone like Biden would probably be more appropriate. But he is a good leader who brings an "outside the Beltway" perspective. Moreover, I think he could be a much more forceful, charismatic leader like Warner or Webb if he had the chance - and this may be that chance. The excitment around an all-Democratic Virginia Senate delegation and a Virginian working in the White House would be overwhelming. Virginia is already leaning towards Obama in a way that they haven't for any Democratic presidential candidate for decades. I think an Obama-Kaine ticket would push it over the top.

Kaine also appeared at the Brookings Institution's "Hamilton Project" last Friday, at an event I really wanted to attend, but couldn't. The forum was on investment in infrastructure, from "bridges to broadband". I haven't listened to the recording of Kaine's talk yet, but it's encouraging to see him on a national stage with such luminaries as Larry Summers and Robert Rubin.

So who knows - we may see another Virginia Triumvirate in Washington again! I have no illusions that Kaine would have been as strong of a match as Warner or Webb in electoral terms, but I think he would be a brilliant addition to the Obama administration nonetheless. And if the Democrats take Congress this Fall (which they oughta), I can assure you that Warner and Webb will be front and center, pushing Obama's agenda through the Senate.

Call for Papers

IZA (Instituts zur Zukunft der Arbeit - Institute for the Study of Labor), one of the most important labor research groups in the world, issued a call for papers for its first annual meeting on the economics of risky behaviors, which will be held in Washington, D.C., in the spring of 2009!

I'll hopefully be submitting (pending approval from the Department of Health and Human Services) the Vulnerable Youth project we've been working on at the Urban Institute.

This is really great because most of IZA's activities go on in Bonn, Germany.

Samuelson, etc.

Robert Samuelson is always fantastic for providing big-picture perspective on all matters economic. In some cases, like today's column, he's highlighting the fact that the 2008-2009 recession is not going to be a doomsday depression... he provides a moderating influence. In other cases - such as when he talks about the aging of the baby boom generation and it's effect on entitlements - his big-picture perspective is a call to action from the complacency that grips the country. Either way, he always has something good to say (even if I don't agree with it 100% of the time), and I thought I'd share today's article.

One thing he highlights that is important - the fundamentals of the American economy are strong. We have strong financial institutions (despite the credit crisis), strong housing markets (despite the subprime crisis), and strong labor markets (despite recent job loss). I think if anything is going to unleash a system-level crisis like the Great Depression, it will have to be external. Particularly it might be:

1. Depressions in other major economies (ie, China) that cannot deal with shocks like fuel price increases spreading to the U.S. The series of financial crises that wracked Mexico, Brazil, Russia, Indonesia, Thailand, and South Korea in 1997-98 demonstrated that as economies get more integrated, it's easier for them to spread ailments.

2. A loss of faith in the U.S. dollar, leading to massive dumping of dollar reserves by central banks around the world.

The scary thing is that (1.) both of these scenarios would come up on us fast, and (2.) they both will emerge outside the U.S. economy. BUT - we can do things to prevent both of them as well, and that's where policy should be directed.


In other news, this is a new Urban Institute Tax Policy Center report on the candidates tax plans. It projects that both candidates plans will continue fiscal deficits, but that McCain's will be substantially greater than Obama's. I was just at a release event for the report where the senior economic policy advisors for both campaigns commented on it - the Obama guy disputed the baselines that the TPC report compared their plans to, but came out with the same basic point - even if you use a more reasonable baseline, the difference between the McCain and Obama plans are maintained. I'm a little slow when it comes to tax policy, so I can't comment much more on that - but I've gotta say I was impressed with a lot that both sides had to offer. As Urban analyst Len Burman said at the event - both sides could benefit from borrowing a few policies from the other.

Some fun...

OK - I admit it's childish - but the "George W. Bush Sewage Plant" is pretty funny and very clever.

Nice tribute, 'Frisco!

Empire and Liberty

So I'm reading a book called "The Pentagon's New Map" by a guy that's worked in the Center for Naval Analysis and the Office of the Secretary of Defense... it's a very poorly written book but it has an interesting thesis that both intrigues and infuriates me. Basically, the author argues that the world is divided between "the Core" and "the Gap" - and that the primary difference between these two worlds is that acceptance of a certain "rule set". Most of the rule sets he talks about are security rule sets - rules of war and peace, etc. - but economic rule sets ultimately play a role as well. "The Gap" includes all the usual suspects - the Middle East, Africa, Southeast Asia excluding India and China, South America excluding Mexico, Argentina, Chile, and Brazil, etc. The author advocates an active and preemptive military policy in "the Gap" with the explicit goal of bringing them into the Core's rule set on security, the economy, good governance, etc. At times, he seems to advocate a loosely confederated global empire operating on the same basic principles. He makes this very explicit in one point, where he suggests that the U.N. operates very much like the world's legislative branch, and the United States federal government operates like it's executive branch. We use our military to execute the law of the land (in this case, the law of the planet), and put bad guys away.

At first glance, that's obviously scary - and it seems like a blank check for the military. But at some point, we will have a global polity - I'm convinced of that as well. We've seen tribes and city states organize from bands of hunters. These far flung groups have organized into clans and then nations, and now we're starting to see national confederacies emerge. I don't think its unreasonable to assume that we will have a single, sovereign, planetary government in fifty years or so. It may not happen - but its certainly conceivable. And if it did - how would that work? Probably in a way that's very similar to how "The Pentagon's New Map" is laying it out - with international bodies like the WTO, the ICC, and the UN laying out the rules of the game and the U.S. bringing belligerents into the fold.

With that in mind I'm going to offer two quotes from a Founding Father:

In 1780: "We shall divert through our own Country a branch of commerce which the European States have thought worthy of the most important struggles and sacrifices, and in the event of peace on terms which have been contemplated by some powers we shall form to the American union a barrier against the dangerous extension of the British Province of Canada and add to the Empire of liberty an extensive and fertile Country thereby converting dangerous Enemies into valuable friends."

And lest you think that was a slip of the tongue, in 1809 the same founding father repeated: "We should then have only to include the north [Canada] in our Confederacy, which would be of course in the first war, and we should have such an empire for liberty as she has never surveyed since the creation"... this was after his excitement about the prospect of obtaining Cuba for the United States.

Who was it? None other than the libertine Thomas Jefferson! The first was in a letter to George Rogers Clark, and the second in a letter to President Madison. This sounds pretty close to Hamilton (Jefferson's political rival) who advocated taking Spanish posessions in Mexico.

It seems so counterintuitive, but now that we're really forced to deal with the idea of empire we should think hard about what it means to be an "empire of liberty" and whether that even makes sense conceptually. Certainly we didn't have an issue with it throughout hour history, but since the closing of the frontier we've pretended that empire and America are antithetical. Are they? I don't know. Our founders consistently compared us to Rome, and at some point Rome made the leap from Republic to Empire. Interestingly enough, Rome's acquisiton of territory was not what made it an "empire" in the eyes of historians - I think we should take note of this. Rome became and empire when Julius Caesar crossed the Rubicon - when he entered the captiol and took power from the Senate.

These are dangerous times and we have an obligation to use our strength for the good. But we need to think hard about what we're doing. Where is our Rubicon? Who is our Caesar? What does the "American Empire" mean. Can we polinate the world with our "rule sets" and set the stage for a lasting, unified, powerful planet - or would this very act rob us of what makes us so unique? I don't know - and I don't think these choices will be made in the near future. But make no mistake - with the Soviets gone our generation is the first in American history to be confronted with Empire - and we're going to need to think about it and deal with it. Moreover - our generation is the first in the history of the species that is confronted with a Planetary Empire. What in the world do we do with that?

Swedenburg Rose

So several weeks back, Kate and I went to Swedenburg Estate Vineyard, and several other wineries in Middleburg, VA. We opened the first bottle from Swedenburg yesterday - a rose that I insisted on buying after we tried it. Normally I don't like roses much - they're basically like a white zinfandel for people not familiar with them. Usually not very exciting - they're not as crisp and fresh to me as a white, and they don't have the full experience of a red. This one was different, however - it had some strawberry notes (again something I usually don't like too much - strawberry flavored wine reminds me too much of "Arbor Mist"). In this case, I think the strawberry really complimented the alcohol that came out because it was so dry. That's the other problem I have with "berry notes" in wine. Usually you see it more with super-sweet wines, and its all just too much. But this wine was drier, so the strawberry went well with it. I liked it a lot.