Most instant pundits missed the cagey phrasing of the two sound bites that made headlines the next morning. "America is addicted to oil, which is often imported from unstable parts of the world," President Bush declared in his State of the Union message Tuesday night. But new technologies, he went on, will allow us to "replace more than 75% of our oil imports from the Middle East by 2025." ...The U.S. annually consumes about seven billion barrels of oil (BBO), and 11 BBO equivalents (BBOE) of coal, gas, uranium and hydroelectric power. Over 80% of the total comes from North America. The U.S., Canada and Mexico -- our three largest suppliers, in that order -- supply about 60% of our oil. Persian Gulf states send us less than one BBO. To reach the president's 75% target today, we would have to shift only about 5% of our consumption from the oil to the not-oil side of the 18 BBOE energy ledger. We could do that quite easily.

...The one BBOE of natural gas currently used to generate electricity could instead be powering heavy trucks, delivery vehicles and buses -- which currently burn about 1.5 BBO of oil. These vehicles can easily be modified to run on natural gas; quite a few already have been. We use another one BBO of natural gas for industrial, commercial and residential heating -- much of which can be replaced with electrically powered heaters, microwave systems, lasers and other high-intensity radiators. By pushing natural gas off the grid, out of the factory and onto the highway, coal and uranium in the power plant substitute for oil on the street. As the White House supplement makes clear, natural gas -- not ethanol, wind or solar -- is the core of the administration's oil strategy.

Mr. Rubin [Robert Rubin, in an op-ed last week] erred when he claimed that supply-side theory failed to predict the effects of tax policy in the 1990s. Supply-side theory predicts that tax hikes will not result in commensurate gains in tax revenues. The Clinton tax hike of 1993 sharply increased rates on personal incomes. As supply-side theory would predict, compared with revenues expected by the Congressional Budget Office in 1992 before the hikes were enacted, actual tax receipts were lower in 1993 and 1994, the same in 1995, and only 3% higher in 1996.

Supply-side theory also predicts that tax cuts will not result in commensurate losses in tax revenues, and may even result in gains thanks to increased economic activity. In 1997, the tax rate on capital-gains income was cut by the Republican Congress. As supply-side theory would predict, compared with revenues expected by CBO in 1996 before the cuts were enacted, actual tax receipts were 5% higher in 1997, 10% higher in 1998, and $12% higher in 1999.

I respectfully submit that supply-side theory, in fact, perfectly explains the effects of tax policy in the 1990s.

Donald L. Luskin
Chief Investment Officer
Trend Macrolytics LLC
Menlo Park, Calif.

Alaska Senator Ted Stevens says there is no need for earmark reform.

What is needed, the senator says, is a better public understanding of how the process works. Stevens made his statements yesterday in reaction to President

Supporters say the record shows that capital gains tax cuts won't add to the deficit.

Don Luskin, chief investment officer at TrendMacrolytics, points out that the Congressional Budget Office forecast in 2003 that $125 billion would come to the Treasury from capital gains taxes incurred over the next two years.

That was before the 2003 tax cut.

After those cuts, in January 2004, the CBO predicted just $98 billion in revenues.

Actual tax revenues ballooned to $151 billion over the past two years.

That's the predictable outcome of economic forces being unleashed by lower tax rates, Luskin said.

"Taxes on investing are a disincentive to invest, a disincentive to take risk, a disincentive to save," he said.

Saving provides business with the capital to invest in equipment that boosts productivity and raises wages, he said.

If Congress reverses the 2003 capital gains cut, stock prices will suffer, said Standard & Poor's chief economist David Wyss.

"Letting the tax cut expire would hurt after-tax returns, and that's bad for the value" of investment assets, Wyss said.

The result is likely to be slower economic growth, he said. "If you're looking for ways to increase revenue, capital gains are not the first place to look," Wyss said.

As many as 240,000 people around New England may have been victims of last weekend’s distribution blunder, it said.

Globe subscribers’ names, addresses and credit card numbers were inadvertently sent out with 9,000 bundles of the Worcester Telegram & Gazette’s Sunday edition after internal reports were recycled as routing slips or “toppers” placed on top of bundles.

In Washington, Baltimore, Atlanta and elsewhere in the country, union organizers are scouring shelters and recruiting homeless people to staff their picket lines, paying just above minimum wage and failing to provide health benefits... A demonstrator in Washington, Nicey Howards, said the temporary protesters earn $8 an hour -- just a dollar above the legal minimum wage in Washington [note: this is less than the average pay for a full-time WMT associate] -- with no benefits. While she felt the job wasn't ideal [note: not ideal? mark that as the understatement of the year], Howards was glad she could earn a little money while looking for something better.

Each week, Howards said, she works 20 hours, the maximum time allowed by the carpenters' union, bringing home $160. The union organizers allow the hired protesters to take two-minute breaks, Howards said, but dock their pay for the time off.

...as the senior adviser to two investment funds managing public pension funds, Bill Clinton has himself promoted an investment fund that promises to put money into "lower-income urban and rural communities" — but instead devotes its cash to Al Gore's upstart cable channel and his wife's financial supporters.

At first glance, it seemed the perfect fit: Bill Clinton, corporate reformer, signing on as a senior adviser (and "active adviser," according to a company press release) to the Yucaipa Corporate Initiatives Fund and the Yucaipa American Fund. Both get all their cash from pension funds from public-school teachers and government workers in California and New York state.

CALPERS, the huge California public-employee retirement fund, has agreed to commit $500 million to Yucaipa, and the California State Teachers Retirement System (CALSTRS) another $150 million. Millions more are to come from the New York State Common Retirement Fund.

Clinton's job, when he joined Yucaipa in April 2002, wasn't just to help make the rich richer: These were to be "investment funds that specialize in lower-income urban and rural communities," as The New York Times reported. Yucaipa managing partner Carlton Jenkins told Black Enterprise magazine that the funds were seeking out "urban-based minority or female-owned businesses."

And Clinton's role in the fund, Yucaipa head Ron Burkle made clear, would not be passive. "He's invaluable," said Burkle, explaining that Clinton would help raise money and offer investment advice to the funds.

But a venture that was supposed to help minority businesses and secure the future of pensioners in two of America's biggest states seems to have done anything but.

The Yucaipa Corporate Initiatives Fund has already poured millions into Al Gore's new cable channel, Current Television. Gore's venture is headquartered in a tony neighborhood of San Francisco, which certainly doesn't seem to fit the definition of a "lower-income urban" community. Nor is it minority-owned — indeed, all the major investors are white males. (Indeed, by a who's who of major Democratic Party money people — including Joel Hyatt, former Democratic National Committee finance chairman, Rob Glaser of Realnetworks and Bill Joy of Sun Microsystems.)

Yucaipa told the San Francisco Weekly that Gore's enterprise "has a strong commitment to increase the representation of women and people of color." But the upper management of the network is completely white.

Indeed, one of the few signif icant minority-owned busi nesses that the funds have invested in is Sean John, the clothing enterprise run by that struggling representative of the "lower-income urban community," rap mogul Sean "Puffy" Combs. (A contributor to Hillary Clinton's campaigns with the potential of raising enormous sums for Democrats, Combs is likely to play a prominent role in supporting a Hillary run for the White House in '08.)

"It's not an exact science...If it was, a whole lot more people would be rich."

[Paul] Krugman [link] wants the media to harp on the fact that the current lobbying scandal is a Republican scandal and argues that those journalists who don’t “are acting as enablers for the rampant corruption that has emerged in Washington over the last decade.”

The truth is, as Mises showed, that corruption is an inevitable by-product of an interventionist economy....If one is serious about fighting corruption, the first and most important thing that must be fought is all discretionary power on the part of the government and its officials. The powers of Congress, state legislatures, and city councils must be strictly limited to protecting the citizens against the initiation of physical force (including fraud), and nothing else. The more the government is pressed back within these limits, the less will be the problem of corruption, because the less discretionary power will the government and its officials have to inflict harm or bestow benefits, and thus the less will be the need and the opportunity for citizens to bribe them. As part of the same process, elections will cease to be bidding wars between pressure groups. The pressure groups will dissolve once the government loses the power to harm or benefit them.

The Offices of U.S. Senator Patty Murray
and
U.S. Senator Maria Cantwell

invite you to a
Federal Funding Symposium

Session #1
Wednesday, February 8th, 2006 – 2:00 pm –4:00 pm
Parker Room, Yakima Valley Community College
Yakima, WA

Session #2
Thursday, February 9th, 2006 – 9:00 am – 11:00 am
East Auditorium, Washington State University-TC
2710 University Drive
Richland, WA

Session #3
Thursday, February 9th, 2006– 2:00 pm – 4:00 pm
WSU Spokane Riverpoint Auditorium
Spokane, WA

This invitation is extended to any government or non-profit agency who would like to be educated in the intricacies of accessing federal funding.

Topics to be covered include:

How to identify and apply for federal grants
How to request federal funding
The realities of the availability of federal funds
Please RSVP to:
RSVP@cantwell.senate.gov Subject: Federal Funding 101

For questions please contact:
Sarah_McKinstry@murray.senate.gov 206-224-2621
Or Lee_Lambert@cantwell.senate.gov 1-888-648-7328

In 2002, Dave Winer of Scripting News and Martin Nisenholtz of the New York Times made a Long Bet about the authority of weblogs versus that of NY Times in Google:

In a Google search of five keywords or phrases representing the top five news stories of 2007, weblogs will rank higher than the New York Times' Web site.

I decided to see how well each side is doing by checking the results for the top news stories of 2005. Eight news stories were selected and an appropriate Google keyword search was chosen for each one of them. I went through the search results for each keyword and noted the positions of the top results from 1) "traditional" media, 2) citizen media, 3) blogs, and 4) nytimes.com. Finally, the scores were tallied and an "actual" winner (blogs vs. nytimes.com) and an "in-spirit" winner (any traditional media source vs. any citizen media source) were calculated. (For more on the methodology, definitions, and caveats, read the methodology section below.)

So how did the NY Times fare against blogs? Not very well. For eight top news stories of 2005, blogs were listed in Google search results before the Times six times, the Times only twice.

I asked Paul Krugman what he thought of the new Fed chairman, Ben Bernanke. “He’s very good,” he said. “But we won’t really know for sure until he faces a real crisis, which could happen at any time.”

“Two years ago,” I said, “you predicted a ‘Great Unraveling’ under President Bush. Yet the economy is booming and the stock market is hitting new highs. Where did you go wrong?”

“What? No, no, my book is not about the economy, it’s about Bush’s politics. It’s spot on.”

Krugman apparently has a short memory. His book is mostly about the economy, and how Bush was destroying it in short order through tax cuts and deficit spending. Then I asked:

“Are you concerned that the price of gold is moving up sharply, and is now approaching $550?”

“Are you kidding?” Krugman said warmly. “Gold is a ‘barbarous relic,’ as Keynes said. It means nothing! I am, however, concerned about a collapse in real estate. It could be a disaster when it happens.”

“Are you selling your home?”

“Well, no.” And he walked away.

RF: Which economists have influenced you the most?

Kroszner: In terms of people's writings, I think Hayek was the greatest influence. He had a very broad perspective and thought very much about the fundamentals of equilibrium concepts in economics. Another person whose work has been of great influence and whom I have met a number of times is Milton Friedman. He made extremely important contributions to economic science and also had a very good sense of how to bring economics to bear on important practical questions. That is very much the Chicago tradition. Economics is not just a set of analytical tools — economics is a way for us to understand how people behave. It's a framework for looking at behavior individually, in the family, in the firm, and in politics.

Taking as a model the research techniques that Steven D. Levitt displays in his best-selling book, "Freakonomics," graduate students in economics are focusing on small insights about the economy rather than broad theories that explain how the overall system works. In doing so, they are withdrawing in effect from political debate.

On Thursday the Congressional Budget Office released its annual Budget and Economic Outlook, and buried in one of its nearly impenetrable tables of numbers is a remarkable story that has gone entirely unreported by the mainstream media: The 2003 tax cut on capital gains has entirely paid for itself.

Maybe you don't consider Bloomberg "the mainstream media," but to assert that CBO's numbers on cap gains went entirely unreported" by MSM is erroneous.

The study [sic] says investors may choose to sell holdings before 2009, when the tax cuts are scheduled to expire... The higher capital gains tax rates may "alter the timing of realizations by encouraging taxpayers to speed up the sale of assets," CBO said. Asset sales after 2009 "will be slightly lower as a result of the higher tax rates," the report said.

Update [1/30/2006]... "Donny Baseball" has more.

Posted by Donald L. Luskin at 7:56 PM | link