Minimum Wage and Maximum Wealth, Part 1

As noted before, some Republicans seem to think that they did something clever when they coupled a hike in the minimum wage with a reduction in the estate tax in H.R. 5970, which came to the House floor late Friday night. Congressman Zach Wamp (R-Tennessee) cackled, "You've seen us really outfox you."
Apart from the legislative manuevering, how do we compare the economic value of these two very different proposals?
The question is not very interesting on the bumper sticker level. Democrats cry that Republicans care only about rich folks. Republicans accuse Democrats of class warfare.
The two proposals represent opposite visions of what good economic policy should be. In its starkest terms, the argument of opponents of the minimum wage and the estate tax is:

1. There should be no floor on wages.
2. There should be no limits on wealth.

In this new series, we will more fully explore the economics and politics of these issues. Stay tuned.

Great Movie Endings

When BoingBoing posted this comment, I found my way to Filmcritic.com which put out a list of "The Top Fifty Movie Endings of All Time" including undeniable classics like Chinatown, Memento and Dr. Strangelove.
I took issue with some of their selections and came up with my own list of ten movie endings that belong in the top fifty:
10. Network (1976) One of the great punch lines in the movies: “This was the story of Howard Beale, the first known instance of a man who was killed because he had lousy ratings.”
9. The Sixth Sense (1999) A rare metaphysical thriller that actually caught me unawares until the very end.
8. Platoon (1986) At the end, when Charlie Sheen puts several bullets into corrupt officer Tom Berenger, my body jerked as though I had been hit myself. Samuel Barber’s Adagio for Strings provides a compelling coda.
7. Beat the Devil (1964) In John Huston’s shaggy dog story, a ragtag collection of misfits travel to Africa trying to scam each other. At the end, when it all unravels, Humphrey Bogart just laughs.
6. Kind Hearts and Coronets (1949) When he learns that he is a distant heir to the title of Lord D'Ascoyn, Dennis Price carries us through his scheme to murder those ahead of him with aplomb. At the end, he leaves us wondering which of his two paramours he’ll pick, but what of his memoirs?
5. Notorius (1946) Who can forget Cary Grant carrying Ingrid Bergman to the car leaving Claude Rains to explain to his colleagues how their circle had been broken?
4. Throne of Blood (1961) Akira Kurosawa sets the story of Macbeth in medieval Japan. Toshiro Mifune, his body riddled with arrows and still defiant, is a force of nature.
3. Broadway Danny Rose (1984) The critics picked the sweet ending of Hannah and Her Sisters, but for me the best ending to any of his flicks (also set on Thanksgiving Day) is Woody running out into the street in the snow to catch Mia Farrow in front of—where else—Carnegie Deli.
2. Crouching Tiger, Hidden Dragon (2000) This movie creates such a poetic tone that by the end, when Zhang Ziyi leaps into the mists from the cliffs of Wudan Mountain, it somehow makes romantic sense.
1. Vertigo (1958) For me the most emotionally shocking ending of all time. The movie takes its time building intensity as we explore Jimmy Stewart’s obsessive love. The twists at the very end left him with his life shattered in this DeChirico inspired frame and me standing with my mouth open.

GE CEO Immelt: "Surprising Bedfellows" on the Environment

GE CEO Jeff Immelt, who spoke last night at the Carper Roundtable, remarked that changing views on energy and the environment make for "surprising bedfellows" among NGOs and business.
Immelt was asked about Dick Cheney's infamous comment, "Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy." His response: Cheney's "view is dated."
Immelt, as it turns out, played with Lt. Gov. John Carney on Dartmouth's football team in the 1970s.
By the way, when asked, Senator Carper told me that increasing the minimum wage has no business being linked to a further cut of the estate tax.

Minimum Wage Increase Coupled with Estate Tax Reduction

House Republicans, feeling pressure to allow a vote on raising the minimum wage, passed a stinker of a bill. H.R. 5970 (the text of which is not available as this is written) combines an increase from $5.15 to $7.25 an hour over three years with a reduction in the estate tax that would cost $268 billion in revenue over ten years. More specifically, the bill would raise the minimum estate subject to taxation from $2 million to $5 million ($10 million for married couples).
Understanding what increasing the minimum wage has to do with cutting the estate tax requires logic that works only in an election year. The bill provides cover for GOP moderates (including Mike Castle who voted Aye) who want to go on record supporting an increase in the minimum wage.
As the Washington Post reports, some lawmakers seem to think they did something clever:

"I know why you're mad," said Rep. Zach Wamp (R-Tenn.). "You've seen us really outfox you."

Perhaps outpork would be a better way of putting it. The bill was larded up with special interest breaks for coal and timber companies that would further cost the federal government:

Against the wishes of Senate Budget Committee Chairman Judd Gregg (R-N.H.), they included a measure that would shift costs of health care and environmental reclamation from coal companies to the federal government at a cost of nearly $4 billion over the next decade. Another measure, aimed at Washington state's two Democratic senators, would give timber companies a tax break worth $428 million over five years.
In total, the tax package would cost the Treasury nearly $310 billion through 2016.

Hopefully this unwieldy mess will collapse under its own weight when it gets to the Senate.

Blacks, the GOP and Gated Communities

Lieutenant Governor Michael Steele has almost certainly increased his name recognition after his scathing (and anonymous) comments about George Bush and the Republican Party were reported Tuesday in the Washington Post.
It took less than a day for the media to smoke him out, and as TPM's Daily Muck reported, Steele responded by making nice with Bush (calling him his homeboy) and complaining that the interview was supposed to be off the record. A subsequently published email showed that Steele understood that the interview was conducted on background, meaning that quotes were allowed "under the condition that he be identified only as a GOP Senate candidate."
Had Steele provided reporter Dana Milbank with the usual bland blather, no one would care about the terms of the interview, but Steele was nothing short of incendiary:

The response to Katrina was "a monumental failure," he continued. "We became so powerful in our ivory towers, in our gated communities. We forgot that there are poor people."

The News Journal reports that Steele repeated some of the same themes last night to a group of black Republicans that calls itself the Underground Republican Party of Delaware.

Poverty and disempowerment, he said, was evident in the fallout after Hurricane Katrina.
"It was the first time in a generation we saw poor people," he said. "We forgot they existed. We pulled into our gated communities and flipped on FOX ... and we forgot. And on that fateful day, we woke up to reality."

So why is Michael Steele running for the Senate as a Republican? A comment from his interview with the Post offers a clue:

"You don't go to Congress to become the party that you've been fighting for 40 years."

Former Philadelphia 76er Charles Barkley, who has never been shy about speaking his mind, has long considered running for office in Alabama. As ABC reports, his ambition hasn't changed, although his party affiliation has:

For years, former Philadelphia 76er Charles Barkley has discussed running for governor as a Republican in his home state of Alabama.
This month, Barkley refueled talk about his future candidacy, except there was a change: He would run as a Democrat.
"I was a Republican until they lost their minds," the man once known as the "Round Mound of Rebound" said at a celebrity golf tournament earlier this month.

Americans Are Pessimistic about Iraq and the Middle East

The more gung-ho supporters of President Bush would have you believe that his critics aren't in favor of defending our country. The far more uncomfortable truth, as expressed in this New York Times poll, is that a majority of Americans don't think it's in our national interest to be bogged down in the Middle East:

Americans are overwhelmingly pessimistic about the state of affairs in the Middle East, with majorities doubtful there will ever be peace between Israel and its neighbors, or that American troops will be able to leave Iraq anytime soon, according to the latest New York Times/CBS News poll.

According to the poll, a majority of Americans want out:

A majority of respondents, 56 percent, said they supported a timetable for a reduction in United States forces in Iraq, a question the two parties have been sparring over, with the White House and most Republicans in Congress taking the position that setting a timetable would send the wrong message. More than half of that group said they supported a withdrawal even if it meant Iraq would fall into the hands of insurgents.

As to whether our Iraq misadventure been worth it:

More than twice as many respondents — 63 percent versus 30 percent — said the Iraq war had not been worth the American lives and dollars lost. Only a quarter of respondents said they thought the American presence in Iraq had been a stabilizing force in the region, with 41 percent saying it had made the Middle East less stable.

Bumper Sticker Economics: Back at the Deficit

In our continuing series, we look at the U.S. Treasury Department's report titled "A Dynamic Analysis of Permanent Extension of the President’s Tax Relief," which may not make for dynamic reading. But the analysis (available here) is instructive.
First, as Dave at First State Politics points out, the report doesn't cater to political fashion:

You can't cut taxes and increase spending and expect the deficit to remain steady solely on the back of the requisite growth in the economy. This is contrary to the opinion of many Republican lawmakers that they can continue to spend, spend, spend and that we will continue to have 4% growth to pay for the spending. It's simply not the case. At some point, you have to make the hard decisions.

What I find interesting about the analysis is what it doesn't cover:

The analysis reveals that the long-run effects of these policies depend crucially on whether they are financed by lower spending or higher taxes in the future and are sensitive to assumptions on underlying parameters.

Left out of the analysis are the economic consequences of continuing on the current course of borrow and spend.

Made-for-TV Political Scandal Right Here in Delaware

It's been a hot topic of summertime gossip that former Tom DeLay crony and Jack Abramoff bagman Michael Scanlon spent his summers as a lifeguard in Rehoboth Beach. Back in May, the News Journal published this lengthy piece by Cris Barrish on the eyebrows raised when this boyish lifeguard started paying cash for pricey beach properties:

Anthony Wiles became suspicious four years ago when a lifeguard named Michael Scanlon offered to pay cash for Wiles' $4.8 million home in Dewey Beach.
Wiles insisted that the baby-faced 31-year-old prove he could afford the 7,000-square-foot oceanfront compound built in the 1940s by philanthropist Alexis Felix du Pont Sr.
So Scanlon produced a bank statement showing he had "around $10 million," Wiles recalled.

He wasn't the only one who wondered at Scanlon's good fortune:

John Hughes, former Rehoboth mayor and now Delaware's environmental protection chief, said that when he dined at Big Fish, he often saw Scanlon, who usually sported a baseball cap.
"I was amazed that such a young guy who looked like a skateboard rat had so much money," recalled Hughes, a close friend of McMahon's parents. "I've spent a lifetime trying to pay for my house and this guy had made a great fortune in a short time."

He didn't make it by saving up his summer earnings:

In contrast to his jet-setting Beltway lifestyle, Scanlon spent his summers in the sand. He worked as a full-time lifeguard from 2002 through 2005, manning a stand six days a week from Memorial Day to Labor Day.
Last year he earned $11.35 an hour, for a total of $5,126.

Barrish details Scanlon's rapidly growing real estate portfolio. But it's the personal backstory reported by Justin Rood at TPM Muckraker that may catapult this story into a made-for-TV movie:

In 2002, Scanlon was engaged to Emily Miller, a press secretary for DeLay. But at Rehoboth's Big Fish Grill, another woman caught his eye: 24-year-old waitress Brandy McMahon.

So a heavyweight lobbyist dumps his politically-connected fiance for a waitress named Brandy? You can't make this up.
But wait, there's more. This jilted fiance may have had a role in breaking the Abramoff scandal:

Details are sketchy, but the upshot is this: Scanlon called off his wedding to Miller and began dating McMahon. Miller, feeling jilted, got together with Scanlon's first wife, Carrie Anne, and compared notes. Where did his money come from? How could he afford multi-million-dollar homes, a private jet? They began asking questions and piecing the story together for themselves. From there, word leaked out -- no one's said exactly how -- and in early 2004, Abramoff's (and Scanlon's) misdeeds landed in the Washington Post.

And here's the front page Post article from February 22, 2004 that broke the Abramoff story:

A powerful Washington lobbyist and a former aide to House Majority Leader Tom DeLay (R-Tex.) persuaded four newly wealthy Indian gaming tribes to pay their firms more than $45 million over the past three years for lobbying and public affairs work, a sum that rivals spending to influence public policy by some of the nation's biggest corporate interests.
Touting his ties to conservatives in Congress and the White House, lobbyist Jack Abramoff persuaded the tribes to hire him and public relations executive Michael Scanlon to block powerful forces both at home and in Washington who have designs on their money, according to tribe members.

This wouldn't be the first story Cris Barrish has covered that made it to made-for-TV. He covered the Tom Capano story for the News Journal with considerable tenacity, and published a book on the case, titled Fatal Embrace. Cris, call your publisher.

Photo: Justin Rood, TPM Muckraker

Ramping Up the Rhetoric Won't Do It Anymore

Having thought it through, the White House has decided that describing a majority of the U.S. Congress as accessories to murder might be going a bit far.
The Washington Post reports that White House press secretary Tony Snow said yesterday that he "overstated the president's position" in using the word "murder" in describing the stem cell research bill Bush just vetoed:

Snow described Bush's position last Tuesday, the day before the veto. "The president believes strongly that for the purpose of research it's inappropriate for the federal government to finance something that many people consider murder. He's one of them," Snow said from the White House. "The simple answer is he thinks murder's wrong."

There is something about how the brain is wired that leads some politicians to ramp up the rhetoric when things aren't going their way. Simple minds seek simple answers.
Take Newt Gingrich, who has a rather sophisticated political mind, but tends towards the simplistic in his rhetoric. Our Iraq misadventure drags on, 1,181 days after Mission Accomplished Day. So what does this statesman suggest we do? As reported in the Seattle Times, he thinks that we double down and declare World War III.

"This is World War III," Gingrich said. And once that's accepted, he said calls for restraint would fall away.

Of course, this isn't merely a matter of statecraft:

There is a public relations value, too. Gingrich said that public opinion can change "the minute you use the language" of World War III. The message then, he said, is "'OK, if we're in the third world war, which side do you think should win?"

Gingerich wants to take us back to the rhetoric of previous election cycles, when Republicans kept telling us that Democrats either don't have the spine to protect our national interest or just couldn't be bothered. The trouble with this line of argument is that Bush, Cheney, Rumsfeld and their ilk have made a mess of things and can hardly blame those who dared to disagree along the way for the way things have turned out.
If you're in power, it's not enough to say who you think ought to win. It's your job to see to it that our national interest is advanced by designing and executing a winning strategy.
The Washington Post's Dana Milbank writes of one (anonymous) Republican senator understands the difficult position his party is in:

The candidate, immersed in one of the most competitive Senate races in the country, sat down to lunch yesterday with reporters at a Capitol Hill steakhouse and shared his views about this year's political currents.
On the Iraq war: "It didn't work. . . . We didn't prepare for the peace."
On the response to Hurricane Katrina: "A monumental failure of government."
On the national mood: "There's a palpable frustration right now in the country."
It's all fairly standard Democratic boilerplate -- except the candidate is a Republican.

More bellicose rhetoric isn't going to help when the problem for Republicans is that they've been in charge, and they are facing an electorate increasingly inclined to hold them accountable for the way they've run the country.
Update: ABC News has the story that Michael Steele of Maryland is the anonymous GOP Senate candidate.

Paul Krugman on Bush and the NAACP

Paul Krugman's comments on Bush's speech to the NAACP can be found at Economist's View:

Mr. Bush also never used the word “poverty,” a condition that afflicts almost one in four blacks.
But he found time to call for repeal of the estate tax, even though African-Americans are more than a thousand times as likely to live below the poverty line as they are to ... leave a taxable estate.

IRS Axing Its Most Productive Employees While a Cabinet Secretary Works the System

David Cay Johnston of the New York Times reports that the IRS is cutting the staff that investigate fraud and abuse among the wealthiest taxpayers.

The federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.
The administration plans to cut the jobs of 157 of the agency’s 345 estate tax lawyers, plus 17 support personnel, in less than 70 days. Kevin Brown, an I.R.S. deputy commissioner, confirmed the cuts after The New York Times was given internal documents by people inside the I.R.S. who oppose them.

Okay, some deadwood federal employees don't want to lose their jobs. Could it be these public servants aren't pulling their own weight?

Estate tax lawyers are the most productive tax law enforcement personnel at the I.R.S., according to Mr. Brown. For each hour they work, they find an average of $2,200 of taxes that people owe the government.

Knowing that the federal government is bleeding money, one might think that our MBA president might conclude that those rare federal employees who actually generate net revenue might be considered valuable.
Could this be one of those mid-level management decisions and not indicative of the mindset of those running the federal government? Consider this Washington Post report on the family foundation set up by Bush's Secretary of Health and Human Services:

Health and Human Services Secretary Mike Leavitt and his relatives have claimed millions of dollars in tax deductions through a type of charitable foundation they created that until recently paid out very little in actual charity, tax records show.
Instead, much of the foundation's money has been invested or lent to the family's business interests and real estate holdings, or contributed to the Leavitt family genealogical society.
The Leavitts used nearly $9 million of their assets to set up the foundation in 2000 under an obscure provision of the federal tax code. But unlike standard private foundations, which are required to give away at least 5 percent of their assets to charitable causes, the Leavitt organization donated less than 1 percent of its assets in 2002, 2003 and 2004. The donations jumped to 6.3 percent of total assets last year, after the sale of family water interests that also allowed the foundation to increase its lending to Leavitt business interests.

Those who think this story is just one of those partisan attacks that come so naturally in Washington, might want to read this follow-up story from the New York Times:

Senator Charles E. Grassley, Republican of Iowa, the chairman of the Finance Committee, and Senator Max Baucus of Montana, the senior Democrat on the panel, expressed their concern in a letter to President Bush.
“It is not enough to encourage charitable giving,” the senators wrote. “We have to make certain that the money given actually goes to help the community and those in need.”

Are they going overboard? Perhaps this is one of the tax code's grey areas:

The tax structure used to create the foundation is called a Type III supporting organization. The Internal Revenue Service has said the category is rife with abuse, designating "supporting organizations" this year as one of its "Dirty Dozen" top tax scams, along with Internet identity theft and offshore banks. Use of the tax structure could be significantly reined in under a tax provision that was inserted into pension legislation passed by the Senate and now under negotiation with the House.

We report. You decide.

Obama, Biden and Colleagues Push for Higher Fuel Economy

The Detroit Free Press reports that Senator Barack Obama has introduced a bill to increase fuel efficiency for cars and light trucks by one mpg annually:

"It is clear that the Achilles heel of the most powerful country on Earth is the oil we import and cannot live without," Obama said in a statement, noting that Al Qaeda and Osama bin Laden have advocated attacking oil infrastructure to disrupt American society.
The Alliance for Automobile Manufacturers, the industry trade group that includes General Motors Corp., Ford Motor Co., DaimlerChrysler AG and Toyota Motor Corp., said it opposes the proposal because the auto industry is rolling out fuel-efficient technologies as fast as it can.

Having given oil companies the energy bill it wanted, our federal government woke up to discover that Americans don't like paying more than $3 a gallon for gas. Promoting fuel economy won't bring down the price of gas, but it will help provide citizens a better range of options for buying efficient vehicles.
Cosponsors on the bill are Richard Lugar, R-Ind.; Joseph Biden, D-Del; Gordon Smith R-Ore.; Jeff Bingaman D-N.M.; Tom Harkin, D-Iowa; Norm Coleman, R-Minn., and Dick Durbin, D-Ill.

Landis Recovers; Bush Still Bonking

A reader asks how the astonishing recovery of Floyd Landis in the Tour de France affects my extended sports metaphor in yesterday's post.
Floyd Landis today brought himself back to within 30 seconds of the yellow jersey after losing ten minutes to the winner of yesterday's stage.
He went out on a breakaway early in the stage and clawed his way back into contention on the Tour's last day in the Alps. Having learned his lesson yesterday, he was constantly dousing himself with water (shorting out his 2-way radio in the process) and taking nourishment to keep himself going.
It is not unheard of for a rider to mount such a breakaway, but usually it comes from a rider who has no chance of working his way into contention. But today Floyd Landis simply rode off leaving the peleton gasping in admiration. It was a stirring display of indiviual prowess and determination--a rare instance when one man on a bike could simply outdistance the entire field.
As for my metaphor and the international disorder we face, I am afraid that no individual act of heroism is likely to bring order to the chaos. The mess we're in today isn't the result of one bad day in the saddle and can't be rectified with a good night's sleep and a fresh start in the morning.
As I said yesterday, Bush has not measured up to the job of patron. He thought he could transform the Middle East with a display of shock and awe. His premature declaration of "Mission Accomplished" 1,176 days ago would be like a rider declaring the season a success after winning a one day race in March. It's a long way from a quick victory early in the season to mastering the grinding ordeal of three weeks riding over mountains in the heat of summer.
Nearly five years after 9/11, the U.S. has failed to bring those who attacked us to account. Bush, who would claim to be the patron who imposes order on the world, seems to be struggling up the hill as the world erupts with ever more virulent outbeaks of violence.

Photo: Roberto Bettini/www.bettiniphoto.net

Bush Bonking?

Floyd Landis bonked big-time today in the Tour de France, losing ten minutes to the stage winner and falling to 23rd place overall.
Following the retirement of Lance Armstrong and the disqualification of the top contenders, it has been unusually hard to make sense out of the Tour, let alone guess who might win. With no clear leaders (in the sense of contenders) a number of top teams have been forced to improvise their strategies. (As for Landis, he clearly doesn't have a team that can protect him in the mountains.)
The Tour lacks a boss or patron to impose order on the peleton (a role Armstrong filled over the last seven years), making it much harder to predict what will happen next.
Which suggests a metaphor for the current state of the world.
Back in 2003, the neocons pushing us into war in Iraq suggested that this bold move would galvanize the Middle East, promote democracy and get the region's headstong governments to behave. Like Lance Armstrong riding tall in the saddle, his fellow Texan in the White House would be the world's patron, imposing his will on the international scene.
But Bush is bonking and, as the Washington Post reports, the neocons aren't happy at all:

Conservatives complain that the United States is hunkered down in Iraq without enough troops or a strategy to crush the insurgency. They see autocrats in Egypt and Russia cracking down on dissenters with scant comment from Washington, North Korea firing missiles without consequence, and Iran playing for time to develop nuclear weapons while the Bush administration engages in fruitless diplomacy with European allies. They believe that a perception that the administration is weak and without options is emboldening Syria and Iran and the Hezbollah radicals they help sponsor in Lebanon.

Where did the swagger go?

Former House speaker Newt Gingrich, who is considering a bid for president, called the administration's latest moves abroad a form of appeasement. "We have accepted the lawyer-diplomatic fantasy that talking while North Korea builds bombs and missiles and talking while the Iranians build bombs and missiles is progress," he said in an interview. "Is the next stage for Condi to go dancing with Kim Jong Il?" he asked, referring to Secretary of State Condoleezza Rice and the North Korean leader.
"I am utterly puzzled," Gingrich added.
Kenneth Adelman, a Reagan administration arms-control official who is close to Vice President Cheney, said he believes foreign policy innovation for White House ended with Bush's second inaugural address, a call to spread democracy throughout the world.
"What they are doing on North Korea or Iran is what [Sen. John F.] Kerry would do, what a normal middle-of-the-road president would do," he said. "This administration prided itself on molding history, not just reacting to events. Its a normal foreign policy right now. It's the triumph of Kerryism."

To take charge as the peleton's patron and win the Tour de France requires endurance, smart strategy, a team that remains strong over the lang haul and the ability to win over allies along the way. Show weakness in any of those categories and things fall apart. Ask Floyd Landis.
To be the world's patron requires endurance, smart strategy, a team that remains strong over the lang haul and the ability to win over allies along the way. Show weakness in any of those categories and things fall apart. Ask George Bush.

Photo: AFP Photo

Cringing

Talking on camera with his mouth full of food (never mind the expletive), and now this "impromptu massage" of a foreign leader:
I'd be embarrassed if my boss displayed such behavior.

Photos via Talking Points Memo

Alpe d'Huez

After 16 days and 2,451 km (more than 1,500 miles) of racing, the Tour de France climbs l'Alpe d'Huez today. At the end of today's 187 km ride, and two other mountains, the cyclists will tackle 21 switchbacks and an estimated 500,000 rabid fans, who love to get in their faces, as with Jan Ullrich in this picture from 2003.
It's a spectacle unlike any other in sports.

Photo: www.carbonsports.de

Linkin' Blogs: Delaware

This being Delaware, I will occassionally link to conservative blogs. Today, I am adding First State Politics, the work of Dave Burris.
Astute readers will note that I recently plunged into the deep end of macroeconomic policy thanks to this post from Dave last week:

This chart from the Treasury Department says it all:

I've been doing my best to put Dave right on the topic, starting with the observation that the chart actually says very little. To his credit, Dave (who had already linked to this site) is taking it all with considerable sportsmanship.

Bumper Sticker Economics: Can We Balance the Budget?

In Part 5 of our series, we start with the aphorism that the first step to changing is to admit there is a problem. We previously looked at federal revenues and expenditures. What is the result of the recent federal budget deficits?
Deficit spending is sending the national debt, as a percentage of GDP, back to the heights (or depths) of the Reagan/Bush era. And with no end in sight to deficit spending, the national debt will continue to grow.
As I said, changing course requires an admission that there is a problem. Instead we hear various expressions of denial.
The first is to maintain the fiction that tax cuts will lead to higher revenues and erase the deficits. This form of denial can take the form of dynamic scoring, supply-side economics and the Laffer curve (fondly embraced by Dave of First State Politics). The common thread of these beliefs, that tax cuts pay for themselves, has been refuted by the Congressional Budget Office in this report analyzing the effects of a 10 percent income tax cut:

CBO finds that such a cut in taxes might increase output by amounts roughly in the range of zero to 1 percent on average over the first 10 years, among other economic effects. Under various assumptions, those macro-economic effects are estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years.

In other words, the best-case scenario is that a tax cut will result in a loss of 78 percent of revenue in the first five year and a loss of 68 percent of revenue in the second five years.
The second form denial takes is to emulate Dick Cheney and simply state that deficits don't matter--end of discussion.
Robert Rubin, who knows a thing or two about global capital markets, clearly lays out the reasons why we should pay attention to the federal deficit:

Virtually all mainstream economists agree that, over time, sustained deficits crowd out private investment, increase interest rates, and reduce productivity and economic growth. But, far more dangerously, if markets here and abroad begin to fear long-term fiscal disarray and our related trade imbalances, those markets could then demand sharply higher interest rates for providing long-term debt capital and could put abrupt and sharp downward pressure on the dollar.

The good news is that we know that the federal deficit can be brought under control--because it was done not so very long ago. But "Rubinomics" has been a pejorative in the West Wing since the current regime took over.

Bumper Sticker Economics: Are Budget Deficits Sustainable?

In Part 4 of our series, prompted by Dave at First State Politics, we look at the question of how long we can continue the current deficit spending.
One interpretation of Dick Cheney's comment that deficits don't matter is that cutting taxes can provide a short term benefit and that the long term consequences can take years to be felt. Put another way, real men cut taxes and leave the job of cleaning up the fiscal mess to the next guy, providing he's a fiscally responsible wimp like Bill Clinton or the first President Bush.
My macroeconomics textbook was authored by Gregory Mankiw of Harvard, who also served in the younger Bush's White House. Let's see what Professor Mankiw had to say about Reagan's fiscal policy, from page 64 of Macroeconomics (Fourth Edition):

One of the most dramatic economic events in recent history was the large change in U.S. fiscal policy in 1981. In 1980 Ronald Reagan was elected president on a platform that promised increases in military spending and reduced taxes. The result of this combination of policies was, not surprisingly, a large imbalance between government spending and revenue. The federal budget deficit skyrocketed in the 1980s and the government borrowed at a rate unprecedented in peacetime.
As our model predicts, this change in fiscal policy led to higher interest rates and lower national savings. The real interest rate (as measured by the yield on government bonds minus the inflation rate) rose from 0.4 percent in the 1970s to 5.7 percent in the 1980s. Gross national savings as a percentage of GDP fell from 16.7 percent in the 1970s to 14.1 percent in the 1980s.

The real interest rate (using May's CPI of 4.2 percent and Friday's 13 week t-bill) is 0.7 percent. While not an alarming figure, keep in mind that the national debt has climbed from $5.6 trillion in 2000 to $7.9 trillion last week. As for the national savings rate, we are getting numb to news stories about our negative national savings.
One reader mentioned the work of Boston University economist Laurence J. Kotlikoff, who sounded the alarm in the July 2 issue of Time magazine:

Let's face it--Uncle Sam is broke. The gap between the U.S. government's future expenses and tax receipts is $63.3 trillion.

The piece is more about the need forpersonal savings rather than fiscal policy. This projected gap, which makes forgreat headlines, can vay greatly depending on the methods used to calculate future expenditures and revenues. For instance, if future revenue and obligations are calculated in perpetuity, the numbers become very large indeed.
In a more practical sense, the U.S. government is not bankrupt in that it has the cash to meet current obligations and can easily borrow money at reasonable rates. The problem is that borrowing money will eventually become more expensive as the national debt grows.
Tomorrow: How did we balance the federal budget in the 1990s, and can we do it again?

Bumper Sticker Economics: Do Deficits Matter?

In Part 3 of our series, we look at the budget deficit, which was declared irrelevant by Dick Cheney, as quoted on page 297 of Ron Susskind's The Price of Loyalty:

"Reagan proved deficits don't matter."

Was he right? Let's look at the numbers, taken from the Office of Management and Budget:
The chart shows federal revenues and expenditures as a percentage of GDP. The Reagan/Bush era generated deficits so enormous that the first President Bush decided to break his "Read my lips. No new taxes." pledge. (James Carville called it "the most famous broken promise" in political history.)
The Clinton era gave us four consecutive budget surpluses and the prospect of budget surpluses "as far as the eye can see." But that was too good to last.
George Bush came into office and started cutting taxes. Revenues plummeted while expenditures climbed. The OMB projections show a drop in the deficit in the next several years, based on sharply lower federal spending--which hardly seems realistic to me.
So do deficits matter? Last year, I quoted former Treasury Secretary Robert Rubin on the question:

Virtually all mainstream economists agree that, over time, sustained deficits crowd out private investment, increase interest rates, and reduce productivity and economic growth. But, far more dangerously, if markets here and abroad begin to fear long-term fiscal disarray and our related trade imbalances, those markets could then demand sharply higher interest rates for providing long-term debt capital and could put abrupt and sharp downward pressure on the dollar.

When Cheney made his infamous declaration in the days following the 2002 midterm elections, he wasn't taking the long view. Instead, Susskind reports, he saw it as a matter of raw politics:

"We won the midterms. This is our due."

Summer Sizzle

You think it's hot here. Cosmic Variance has this remarkable ultraviolet image of the sun from NASA:

It’s a false-color image of the Sun in ultraviolet (click for better resolution). Put together using data from TRACE, a NASA Small Explorer satellite. You’re seeing the bubbling gas of the solar corona looping along magnetic fields.

Keep cool.

Bumper Sticker Economics, Part 2

My previous post has drawn comments ranging from wonky to snarky and back again. I seem to have hit a nerve. There's enough material in your comments for a week's worth of posts, which means I've got to get busy.
To help us get started, here's a bit of fun titled "Left Behind Economics" from Paul Krugman, via Economist's View, which helpfully posts the Shrill One's columns in a free (if obscure) forum:

I’d like to say that there’s a real dialogue taking place about the state of the U.S. economy, but the discussion leaves a lot to be desired. In general, the conversation sounds like this:
Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.”
Informed economist: “But it’s not a great economy for most Americans. Many families are actually losing ground, and only a very few affluent people are doing really well.”
Bush supporter: “Why doesn’t President Bush get credit for a great economy? I blame liberal media bias.” ...

In the coming week, we'll do out part to further the national dialogue on the economy. Stay tuned.

Bumper Sticker Economics

Dave at First State Politics, who has developed a fixation on the Laffer Curve, reprinted this graphic with the comment:

This chart from the Treasury Department says it all:

Actually, the chart says very little. It has six data points with two dates superimposed, to give the impression that a single event in 2003 can be considered the cause of the revenue number in 2005.
A more instructive chart might include a second set of data points for expenditures, which would then (inconveniently) yield the record deficits racked up under President Bush.
For those interested in something a little more sophisticated than bumper sticker economics, try the site Economist's View, which today features a critique of what is referred to as "dynamic scoring," in which revenue projections are goosed upwards to include the magical restorative effects of tax cuts:

Tax cuts do not pay for themselves. Economists of all stripes have consistently found that tax cuts do not generate enough growth to fully pay for themselves. In fact, cost estimates that incorporate macroeconomic feedback from tax cuts are reasonably close to conventional cost estimates that ignore such feedback. ... The Administration’s own estimates published in the Mid-Session Review indicate that, even with favorable assumptions, dynamic feedback would pay for less than 10 percent of the cost of making the tax cuts permanent.

For those who wish to understand the effects of tax cuts on revenues, I recommend this Congressional Budget Office report with the ungainly title, Analyzing the Economic and Budgetary Effects of a 10 Percent Cut in Income Tax Rates.
Or if you prefer the bumper sticker version, try this comment from fellow blogger Stygius:

Deficit spending increases the deficit. There.

Protecting our Flea Markets from Terrorists

You will be gratified to know that the Department of Homeland Security maintains a list of potential targets. But, as the New York Times reports, the National Asset Database reads more like the itinerary of a whimsical summer road trip:

WASHINGTON, July 11 — It reads like a tally of terrorist targets that a child might have written: Old MacDonald’s Petting Zoo, the Amish Country Popcorn factory, the Mule Day Parade, the Sweetwater Flea Market and an unspecified “Beach at End of a Street.”
But the inspector general of the Department of Homeland Security, in a report released Tuesday, found that the list was not child’s play: all these “unusual or out-of-place” sites “whose criticality is not readily apparent” are inexplicably included in the federal antiterrorism database.

There seems to be little rhyme or reason to the database. Indiana tops the list with 8,591 sites followed by Wisconsin with 7,146 sites. New York ranks third with 5,687 potential targets.
Remember when the Department of Homeland Security stiffed Washington and New York in its grant program? A look within asset categories reveals how the department's decision-making could be so counter-intuitive:

New York, for example, lists only 2 percent of the nation’s banking and finance sector assets, which ranks it between North Dakota and Missouri. Washington State lists nearly twice as many national monuments and icons as the District of Columbia.

Many of the sites on the list sound like the off-beat, charming road attractions that enliven a long drive through the heartland:

In addition to the petting zoo, in Woodville, Ala., and the Mule Day Parade in Columbia, Tenn., the auditors questioned many entries, including “Nix’s Check Cashing,” “Mall at Sears,” “Ice Cream Parlor,” “Tackle Shop,” “Donut Shop,” “Anti-Cruelty Society” and “Bean Fest.”
Even people connected to some of those businesses or events are baffled at their inclusion as possible terrorist targets.
“Seems like someone has gone overboard,” said Larry Buss, who helps organize the Apple and Pork Festival in Clinton, Ill. “Their time could be spent better doing other things, like providing security for the country.”
Angela McNabb, manager of the Sweetwater Flea Market, which is 50 miles from Knoxville, Tenn., said: “I don’t know where they get their information. We are talking about a flea market here.”

An Urge to Purge? I Don't Think So

A comment in response to my previous post raised the question of whether activists are purging the Democratic Party by challenging incumbent Connecticut Senator Joe Lieberman.
My answer is no.
First, I've taken part in my share of Democratic primaries, challenging an incumbent and fending off challenges. I've yet to see the winner purge the Party of the losers. In every primary campaign I've played a role in, the losers invariably supported the winner.
Second, as my many loyal readers have found, I love to highlight evidence that the Democratic Party is broadening its base, including welcoming former Republicans (such as Jim Webb in Virginia and Ned Lamont in Connecticut) as candidates.
Third, the netroots (meaning Democratic bloggers) are not driving the Party to the left. Among the netroot's favorite Senate candidates in this year are Webb in Virginia and Jon Tester in Montana. The netroots have shown consistent interest in former Virginia governor Mark Warner and retired general Wes Clark.
Steve Clemons of The Washington Note has probably forgotten more about foreign policy than I will ever know. I agree with him that the Iraq mess is harming our national interest. I disagree with him that Joe Lieberman should be purged from the Party. In my experience, losing a primary is not the same as being purged from the Party. Instead, I wish that if he lost the primary, Joe Lieberman would support Ned Lamott.

The Difference Between "Anti-War" and "Anti-Iraq War"

Over at The Washington Note, Steve Clemons offers some needed clarity amid the furor surrounding Joe Lieberman's support of the Iraq debacle:

Going after bin Laden and toppling the al Qaeda-harboring Taliban made sense and could have furthered American interests. Expanding this legitimate fight into the invasion of Iraq and a broader crusade in the Middle East has punctured the mystique of American power in the world and harmed America's security.
...
Opposing Lieberman has nothing to do with being "anti-war", it has everything to do with being "anti-Iraq War" and trying to prevent the same kind of dangerous calculus from being followed in the future. If Lieberman helps empower thinking so potentially dangerous to American national security interests, he should be purged from the party.

The Tour de France, In Search of a Story Line

Lance Armstrong retired after winning seven in a row. The riders who finished second through fifth last year are out because of a doping scandal. So what's the story with the Tour de France?
The Tour, which covers more than 2,000 miles over three weeks, is an event that requires a narrative arc. Watching men ride their bikes day after day for three weeks isn't humanly possible without a coherent story line.
For seven year Lance Armstrong provided the narrative drive: Cancer survivor beats the odds. Lance and perennial runner-up Jan Ullrich. I'm clean and you can't prove otherwise. Lance and rock star girlfriend Cheryl Crow. Lance against the world.
Like a movie epic that takes its time getting to the point, the Tour has yet to develop a compelling narrative. Part of this is by design: The Tour spends its first week on the flat stages, giving the sprinters, who rarely compete for the yellow jersey, a chance to strut their stuff. As for the contenders, the first week only serves to eliminate some, lost to crashes or poor conditioning. Saturday's time trial did weed out the field to a certain degree. Only in the second week, when the riders encounter the mountains, do we get down to the question of separating the contenders from the survivors and the fallen.
American Floyd Landis of Phonak (pictured) may provide the drama cycling fans are seeking. He is in second place by one minute after eight stages. (Serquei Gonchar of T-Mobile, the current leader is not considered a strong climber.)
Until recently, Landis has been cast more as a character actor. He was raised a Mennonite in rural Pennsylvania, and doesn't mind being thought of as an outsider. After several years escorting Armstrong up mountains with considerable verve, he stepped into a leading role last year with Phonak. Perhaps concious of the need to provide a compelling story, Landis yesterday let the world know that he plans to undergo hip replacement surgery later this year, as reported in the New York Times:

Describing the pain, he said in an interview at his team hotel in Châteaubourg before the Tour's eighth stage, "It's bad, it's grinding, it's bone rubbing on bone.
"Sometimes it's a sharp pain," he continued. "When I pedal and walk, it comes and goes, but mostly it's an ache, like an arthritis pain. It aches down my leg into my knee. The morning is the best time, it doesn't hurt too much. But when I walk it hurts, when I ride it hurts. Most of the time it doesn't keep me awake, but there are nights that it does."

A contrasting character is that of George Hincapie, who rode along Armstrong for each of his seven Tour victories. Last year Hincapie, was able to put aside his chores escorting Armstrong to break away and sin a stage for himself. Hincapie v. Landis would make a good story: the loyal sidekick against the guy who left to make his own fortune.
But Hincapie doesn't yet have the leading role on his team, Discovery Channel. His teammate, Paolo Savoldelli stands 2:10 back, 20 seconds ahead, while Yaroslav Popovich, Jose Luis Rubiera and Jose Azevedo are all within 4:09 of the leader. Unable to declare a clear team leader at this point, Discovery may simply keep them together in the mountains and wait to see who last longest, which would resemble the team's strategy when riding for Armstrong. Then they would have three or four riders escort him up the slopes, dropping a rider now and then until no one else could stand the pace. The difference would be that the team doesn't know which rider to expect to be leading at the summit.
A similar succession drama is playing out at T-Mobile, Jan Ullrich's team. Andreas Kloeden was expected to ride in support of Ullrich's attempt to win a second Tour. But at only 1:50 back, Kloeden looks likes a genuine contender. His team mate, Michael Rogers, who is actually ahead of him, has said that the team will likely ride for Kloeden.
Within a few days, we should see the contenders sort themselves out, and a coherent narrative break away from the peleton.

Photo: Eric Gaillard/Reuters

Global Warming Debate: Solved?

The UPI has published this snippet from President Bush's interview in People magazine on what he calls "a worthy debate" on global warming:

"It's a debate, actually, that I'm in the process of solving by advancing new technologies, burning coal cleanly in electric plants, or promoting hydrogen-powered automobiles, or advancing ethanol as an alternative to gasoline," he said.

You're not alone if you think that "solving" a "debate" is a non-sequiter bordering on the poetic. I guess we can add "solver" to his job description along with "decider."
As for what he is solving:

Bush said the major question on climate change is whether it is caused by human activities.

Apparently, solving the the debate means not answering the question, followed by a recitation of techonologies designed to give the impression that he's actually doing something.

Public Enemy Whatever

Osama bin Laden is still at large, 1,760 days after he mounted the attacks on the World Trade Center and the Pentagon.
National Public Radio reported on Monday that the CIA unit devoted to hunting bin Laden, created in the Clinton administration, has been disbanded:

Nearly five years after the Sept. 11 terrorist attacks, Osama Bin Laden is still a free man. U.S. officials are not sure where he is, although it has long been assumed that he is hiding in the Afghanistan-Pakistan border region. Although the U.S. government says the hunt is still on, the CIA recently closed its Bin Laden unit.

We found Saddam Hussein. We found 500 spent shells of chemical weapons left over from before 1991. Since when has catching Osama bin Laden become a less than top priority?

When in the Course of Human Events

In CONGRESS, July 4, 1776
The unaminous Declaration of the thirteen united State of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. --That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security. —Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain [George III] is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.

He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.

He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.

He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.

He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.

He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.

He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.

He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.

He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.

He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.

He has kept among us, in times of peace, Standing Armies without the consent of our legislatures. He has affected to render the Military independent of and superior to the Civil power.

He has combined with others to subject us to a jurisdiction foreign to our constitution and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:

For Quartering large bodies of armed troops among us:

For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:

For cutting off our Trade with all parts of the world:

For imposing Taxes on us without our Consent:

For depriving us, in many cases, of the benefits of Trial by Jury:

For transporting us beyond Seas to be tried for pretended offences:

For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:

For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:

For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.

He has abdicated Government here, by declaring us out of his Protection and waging War against us.

He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.

He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty and perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.

He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.

He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our British brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by the Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

[New Hampshire] Josiah Bartlett, William Whipple, Matthew Thornton
[Massachusetts] John Hancock, Samual Adams, John Adams, Robert Treat Paine, Elbridge Gerry
[Rhode Island] Stephen Hopkins, William Ellery
[Connecticut] Roger Sherman, Samuel Huntington, William Williams, Oliver Wolcott
[New York] William Floyd, Philip Livingston, Francis Lewis, Lewis Morris
[New Jersey] Richard Stockton, John Witherspoon, Francis Hopkinson, John Hart, Abraham Clark
[Pennsylvania] Robert Morris, Benjamin Rush, Benjamin Franklin, John Morton, George Clymer, James Smith, George Taylor, James Wilson, George Ross
[Delaware] Caesar Rodney, George Read, Thomas McKean
[Maryland] Samuel Chase, William Paca, Thomas Stone, Charles Carroll of Carrollton
[Virginia] George Wythe, Richard Henry Lee, Thomas Jefferson, Benjamin Harrison, Thomas Nelson, Jr., Francis Lightfoot Lee, Carter Braxton
[North Carolina] William Hooper, Joseph Hewes, John Penn
[South Carolina] Edward Rutledge, Thomas Heyward, Jr., Thomas Lynch, Jr., Arthur Middleton
[Georgia] Button Gwinnett, Lyman Hall, George Walton

Some Great July 4th Music

Even the wonkiest among us need to kick back and crank up the stereo sometimes. So here are five great songs (and a bonus track) for the Fourth of July:

1. Bruce Springsteen, "4th of July, Asbury Park (Sandy)"
A close to perfect song about growing up on the shore from his second record, The Wild, the Innocent & the E Street Shuffle.
2. Dave Alvin, "Fourth of July"
A heartrending song about personal pain on our national holiday from King of California.
3. Neil Young, "Captain Kennedy"
A folksy, surreal take on American mythology from Hawks and Doves.
4. The Waterboys, "Has Anybody Here Seen Hank?"
From Scotland, a tribute to Hank Williams from Fisherman's Blues.
5. Ray Charles, "America"
Simply the most soulful, stirring version of any patriotic song ever.

Bonus track: Jimi Hendrix, "The Star Spangled Banner"
For those who remember when our national anthem was adopted as a protest song. The Woodstock verson is the best known, but his studio version from Rainbow Bridge showcases his creativity and virtuosity on electric guitar.