I was going to rant about the Bush budget, and how full of misrepresentations and bad assumptions and failures to make tough choices it is. Then I realized that there isn’t enough time in the day for me to cover all that ground. So let me just point out that we all have extremely rotten luck to have such a merrily profligate president at this moment in history — one whose fixation on a lopsided tax-cutting agenda has rendered him entirely indifferent to the way he is mortgaging the nation’s future.

“We will not pass along our problems to other Congresses, to other presidents, and other generations,” Bush told us in his State of the Union. Sounded good. Only that’s precisely what his budget does. In simultaneously boosting spending and cutting taxes, Bush is putting our economy into the same train-wreck mode that we last experienced in the wake of Lyndon Johnson’s “We can fight Vietnam and have a Great Society” spending spree. It took two decades to clean up that mess.

For the past 20 years or so, observers who’ve taken the long view have pointed out that we are sitting on two demographic time bombs. When the baby-boom generation retires, we will face a federal budget crisis like we’ve never seen before. Bush’s father (“Bush 41”) and Bill Clinton both put the government on a course to begin to deal with that problem by raising taxes, and sure enough by the end of Clinton’s term we had a growing budget surplus. The Social Security problem hadn’t been solved, but it looked like the government would have some of the tools it needs to handle it. Health care costs are the other time bomb; Clinton’s good-faith effort to deal with that crashed and burned, and Bush seems unwilling to open the necessary discussion on how to fix the broken system we’re left with.

So now we have deficits as far as the eye can see, and a president who thinks it’s more important to eliminate the taxes the rich pay on stock dividends than to keep the government in the black. When Social Security and Medicare start to founder — right about when people currently in their 40s start to retire — we’ll know who to thank. Unless, of course, someone who follows Bush in the White House has the backbone to raise taxes and undo Bush’s current mayhem — just as Bush’s father and Clinton had to undo Reagan’s.

When I was in school learning about the difference between an average (or mean), where you add up the values of a bunch of items and then divide by the number of items, and a median, where you line up a bunch of items and find the value of the one in the middle, I always thought the median was sort of meaningless. What practical use would it ever have?

Watching President Bush’s State of the Union tonight I thought, Oh, this is where medians come in handy.

I’m referring, of course, to the claim — repeated yet again in the president’s speech — that his tax cut plan offers an “average” tax break of over $1000. “Ninety-two million Americans,” Bush told us with a straight face, “will keep this year an average of almost $1,100 more of their own money.”

This average is a convenient fiction; it’s a statistic that exists only because the enormous benefits accruing to the dividend-owning super-rich skew the “average” — and camouflage the fact that the cuts most middle class taxpayers will receive under Bush’s proposal are piddling. The few rich taxpayers with mega-breaks are statistical “outliers”; if you used a median rather than an average you’d end up with a far lower number — one much closer to what most of us would actually get under Bush’s plan.

Now, this claim had already been widely debunked before the speech; I’m not breaking any news here. Paul Krugman put it most memorably when he wrote, “A liberal and a conservative were sitting in a bar. Then Bill Gates walked in. ‘Hey, we’re rich!’ shouted the conservative. ‘The average person in this bar is now worth more than a billion!'”

I guess I shouldn’t be shocked at this late date that Bush and his administration would continue to use blatantly misleading “facts” to sell their policies; it’s been their economic approach from day one. Still, it’s appalling. And the very consistency of Bush’s willingness to twist simple facts in demonstrably manipulative and sometimes outright deceitful ways has a more pernicious effect than simply discrediting his policies: It leaves us with the sense that the man is deeply untrustworthy.

I wouldn’t buy a used car from anyone who I knew played so fast and loose with simple arithmetic — let alone trust him on matters of life and death, war and peace. Unfortunately, the U.S. has already made its down payment.

Today’s Wall Street Journal has a lengthy and useful lead article about California’s $35 billion budget shortfall and how it happened. Like all articles on this subject, it talks about how California ratcheted up spending during the tech boom and is now facing tough choices.

And also, like all articles on this subject, it makes absolutely no mention of the fact that California spent many billions of its citizens’ money during the energy crises of a couple years ago to keep our lights on. As we’ve learned since, these shortages and price hikes were the direct result of market manipulation by companies, including Enron, that were engaging in fraud.

Why isn’t this connection being made? I doubt the energy dollars alone would fill the budget gap but they might have made a significant difference. The silence here remains puzzling.

No, you weren’t hallucinating — that was an op-ed in the Wall Street Journal, right before Christmas, arguing for universal health insurance – Find a healthy life on Amazon – The president of Johns Hopkins pointed out that the advent of genetic screening will make the old model of health insurance untenable, as insurance companies’ business imperative to refuse service to people who test positive for major disorders clashes with society’s moral imperative to provide health care for as broad a population as possible. “Genetic testing is health insurance’s iceberg.”
The piece is online here.

Brad DeLong’s scathing analysis of White House economics adviser Larry Lindsey’s ouster. Choice quote:

Today we know that it never crosses the minds of the powers-that-be in the Bush White House that good economic policies might be worth pursuing because good economic policies lead to a stronger economy. To the powers-that-be in the Bush White House, economic policies are way to reward favored groups of constituents. And their effect on the economy? They don’t need to think about no stinking effect of policy on the economy.

Does anyone else find it odd that, when it came time for the Bush administration to replace Treasury Secretary Paul O’Neill — a CEO of an old-line industry who worked with Dick Cheney in the Ford administration days — it chose John Snow: CEO of an old-line industry who worked with Dick Cheney in the Ford administration days? (It seems the answer is yes: Business Week asks a similar question.) Snow, we’re told, is smoother than O’Neill, who quickly developed a reputation as a loose cannon. If that’s wrong, and Snow turns out to be another O’Neill in this regard too, we have a new nickname for the Bush White House: Cheney’s zanies.

Well, let’s see: Republicans take full control of every branch of government. Alan Greenspan whacks the federal funds rate again. And the stock market takes a big dive.

Could it be that Wall Street really wants Harvey Pitt back?

Or does the market see the combination of likely fat tax cuts and an expensive war with Iraq as leading to a deadly combo of Big Government and big federal debt — with no brakes?

I think investors may quickly come to miss the stalemates of split government.

Let’s replay the sorry recent saga of the SEC’s accounting oversight board debacle:

(1) Back in September, SEC Chairman Harvey Pitt told John Biggs of TIAA/CREF — according to Democratic members of the SEC and Biggs himself — that Biggs would be appointed to head a new accounting board, one promulgated in the wake of the past year’s scandals to restore some sense of trust in the profession.
(2) Biggs was perceived as being too tough on big accounting, and Pitt got cold feet or succumbed to pressure (he denies the latter) and pulled the plan to nominate him.
(3) Pitt chose former FBI chief William Webster to head the accounting board and rammed the appointment through the SEC in a party-line 3-2 vote. Webster’s lack of experience in corporate accounting was not, the world was assured, a problem.

Today, we learn that Webster actually told Pitt before the vote about what seems like a serious and highly relevant matter: Webster had till recently headed the audit committee of a corporation, U.S. Technologies, that was being charged with fraud.

Read this from the New York Times account:

The small publicly traded company, U.S. Technologies, is now all but insolvent and it and its chief executive, C. Gregory Earls, are facing suits by investors who say they were defrauded of millions of dollars. The suits contend the misconduct occurred in late 2001 and this year. That was after the three-person audit committee, headed by Mr. Webster, had voted to dismiss the outside auditors in the summer of 2001 after those auditors raised concerns about internal financial controls.

So Webster told Pitt about this, and the response of Pitt’s SEC staff was “that the staff concluded that there was nothing worthy of passing on to other commissioners or that would disqualify Mr. Webster.”

Nothing worthy of passing on to other commissioners, who were about to enter a hotly contested vote on Webster’s appointment? When the SEC reviews the behavior of corporate officers and finds, for instance, that they have withheld key information from shareholders before a vote, the commission calls it “fraud.” This is why corporate reports, when prepared responsibly, are so full of disclaimers and disclosures of risk.

Pitt, who has always seemed barely conscious of the ethical dimensions of his role, can now legitimately be charged with having rigged a fraudulent vote on the accounting board position. The only seemly thing for William Webster to do now would be to refuse to serve. The only seemly thing for Pitt to do would be to resign.

Instead it seems that there is to be an investigation into the affair by — who else? — the SEC itself.