Calhoun

It starting to look like Calhoun's hospitalization had more to do with stress over the pending story as opposed to cancer.

It seems like UConn co-operated fully with the Yahoo story, which seems odd, tho I guess legally mandated.

The timing of the story, of course, stinks.

Miles is evidently, quite the talent:

Commenting publicly on Nate Miles for the first time since the expulsion, Calhoun said, "The young man was the best offensive player in this program. So I'll just leave it at that. He's the best offensive player in the program. ... He's a terrific kid and learning. What happened was more than unfortunate."

He may well be a poster boy for the consequence of trying to force kids who don't belong to go to college.

It seems somewhat likely now that this is Calhoun's last year. I will not be sad to see him go. Consider the following list:

Doug Wiggins:

“I completely respect Doug’s decision,” Calhoun said. “He has contributed to many successes for us in his time here. We will do everything we can to help him finish school in good standing this semester and move on to a place where he will be happy. I appreciate him for the time that he was here with us and wish him the best of luck in the future.”

Curtis Kelly:

“Curtis and I met over the last several weeks and, although he loves the program, he would like more playing time,” said Calhoun. “He and I both agree that he may have more opportunity for that playing time in another program. We wish Curtis the best of luck and success at wherever he decides to continue his college career.”

Rob Garrison

"Rob and I have had several conversations during the course of the year and he has expressed an interest in pursuing his options for the future," Calhoun said through the press release. "Rob is a good person and has been a true team player over the past two years. I will do whatever he needs to assist him as he plans for the future."

Antonio Kellogg:

"We worked hard over the past year to assist Antonio through both the academic and athletic transition to life as a college student-athlete," Calhoun said. "Unfortunately, it did not turn out as we had hoped or expected.

"We wish Antonio the very best in his future endeavors and hope that he will continue his education in an environment in which he can be successful," Calhoun said.

The freshman was kicked out of school after running into the law on two separate occasions.

On March 30, Kellogg was charged with possession of less than four ounces of marijuana after a police officer approached him and several friends at an off-campus apartment complex. Kellogg, in an attempt to hide the marijuana, dropped a bag after police said they had detected the smell of burnt marijuana.

On April 9, Kellogg was charged with attempting to assault a police officer, first-degree criminal trespassing and interfering with an officer after an incident in Hale Hall - a Hilltop dormitory...

Kellogg had no prior criminal record before coming to UConn.

(On an ironic note, Kellog transferred to USF, where, in 2007:

Kellogg played in 28 games, with 25 starts. He led the West Coast Conference in scoring during league play (17.2 ppg.) and in steals (2.4 avg.) in overall action, and paced the squad with 3.6 assists. He will be remembered for his 37 point effort in an overtime win over San Diego in which he sent the game into overtime on a long three-pointer at the buzzer.

San Diego being the team that bounced UConn from the NCAA tournament)

Marcus Johnson:

"Marcus came to see me today and told me that he felt it was in his best interests to find another school to attend and to play basketball," Calhoun said in the press release. "I know he has a desire to maximize his playing time and also to get closer to home, so he felt this was the best decision for him at this time. I wish him nothing but the best as a person and as a basketball player."

Ben Eaves:

"Ben and I met this week and he let me know that he has decided to continue his college career at another institution," said head coach Jim Calhoun. "While I am sad to see Ben leave, I completely understand his feelings and will do everything I can to help him transfer to a school where he can enjoy the best experience for him as a student and as a basketball player. I wish him nothing but good luck in the future."

And of course there is Stanley Robinson:

University of Connecticut head basketball coach Jim Calhoun says forward Stanley Robinson will spend at least one semester away from Storrs. The Day reports that Robinson, who is one of the Huskies' top-ranked 2006 recruits, plans to take courses at a junior college near his home in Birmingham, Ala., while addressing academic and personal issues...
He says Robinson wants to return to UConn, and that he asked Calhoun to turn back calls from other schools seeking to recruit him...
Calhoun told the paper he believes Robinson, who averaged 10.4 points and 6.5 rebounds per game, could develop into a top-25 NBA draft pick.

Robinson was evidently too talented to allow to transfer, but with Nochimson associates Nate Miles and Ater Majok needing scholarships, there was no room for him on the roster either. His academic and personal issues magically resolved themselves once it became clear that neither Miles nor Majok were going to play for the 2008-09 huskies.

Were we to acknowledge that college basketball was simply a business, then there would be nothing reprehensible about the list above. But then, players would have to be paid, they would be allowed to hire sophisticated advisors to guide them through the "admissions" process, it would violate anti-trust laws to force transfers to sit out a year, and so forth.

Instead we allow the NCAA to exploit these kids on the pretense that there are higher values involved. At the very least those higher values ought dictate that players are not commodities to be disposed of when the Coach discovers he has better use for their scholarships.

To put not too fine a point on it, however grateful I am for the program he built, I find Calhoun's behavior in this regard reprehensible, his cancer well-deserved and his coming dishonorable retirement long coming.

It continues to sicken me tho that the scandal which promises to bury him involves making a few extra phone calls and not exploiting kids he had responsibility towards.

Babies With Candy 3/16

A Continent Adrift

...the situation in Europe worries me even more than the situation in America.

Just to be clear, I’m not about to rehash the standard American complaint that Europe’s taxes are too high and its benefits too generous... they’re actually a mitigating factor.

The clear and present danger to Europe right now comes from a different direction — the continent’s failure to respond effectively to the financial crisis...

On the fiscal side, the comparison with the United States is striking... America’s actions dwarf anything the Europeans are doing.

The difference in monetary policy is equally striking. The European Central Bank has been far less proactive than the Federal Reserve; it has been slow to cut interest rates (it actually raised rates last July), and it has shied away from any strong measures to unfreeze credit markets.

The only thing working in Europe’s favor is the very thing for which it takes the most criticism — the size and generosity of its welfare states, which are cushioning the impact of the economic slump... these programs will also help sustain spending in the slump.

But such “automatic stabilizers” are no substitute for positive action.

In previous columns, Krugman has questioned positive action being able to lift us out of the crisis (noting, for example, that it took a world war to get us out of the great depression). He also has expressed concern for long-term costs. Expectations of efficacy and cost aside, he never wavers from cheer-leading such policy.

Why is Europe falling short? Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany’s finance minister you have to listen to, well, Republicans.

This is an odd mirror to the run-up to the iraqi war. Then, in the eyes of Democrats, Europeans were wise friends whose council and co-operation we ought never reject unilaterally. To Republicans, they were weak and mushy and incapable of responsibility. Now, the views are reversed. The commonality may be a lack of decisiveness.

But there’s a deeper problem: ...unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.

This is a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to run up large debts to finance a stimulus that will convey many if not most of its benefits to voters in other countries.

...there is a European Central Bank. But the E.C.B. isn’t like the Fed, which can afford to be adventurous because it’s backed by a unitary national government — a government that has already moved to share the risks of the Fed’s boldness, and will surely cover the Fed’s losses if its efforts to unfreeze financial markets go bad. The E.C.B., which must answer to 16 often-quarreling governments, can’t count on the same level of support.

Europe, in other words, is turning out to be structurally weak in a time of crisis.

It turns out, somewhat ironically, that we have the state dominated economy we thought Europeans had, and they have the divided government we thought we had.

To Krugman this is a factor in our favor.

The biggest question is what will happen to those European economies that boomed in the easy-money environment of a few years ago, Spain in particular.

For much of the past decade Spain was Europe’s Florida, its economy buoyed by a huge speculative housing boom. As in Florida, boom has now turned to bust...

In the past, Spain would have sought improved competitiveness by devaluing its currency. But now it’s on the euro — and the only way forward seems to be a grinding process of wage cuts. This process would have been difficult in the best of times; it will be almost inconceivably painful if, as seems all too likely, the European economy as a whole is depressed and tending toward deflation for years to come.

This argument assumes that there is a pain free path out of a Spain, or Florida, style bust. There may well be not, and all the positive expensive attempts to avoid any pain may, in the end, only serve to radically increase it.

An economist like Krugman should welcome different governments pursuing different policies in response to the crisis as that will produce more and better data for economists to study. The partisan political commentator in Krugman may fear the tale that data will tell.

AIG

I have mixed feelings regarding the AIG bonus todo.

My first impression was one of non-sympathy for the AIG employees. Yes, many of them worked very hard and profitably, and had nothing to do with bringing AIG down. On the other hand, was AIG allowed to go under, they would have received nothing from AIG.

On the other hand, the abdication of rule of law is near revolting. State Attorneys General ought not be implicitly threatening extra-judicial violence to get their way.

In the end, this will all have two predictable consequences, neither of particular benefit to the taxpayer.

The first and narrower is that taxpayers are likely to lose more then they gain. Employees that could have generated profit for taxpayers will leave for employers willing to pay them.

The second and more general is that no sensible company with options will take a dime of government money. One has to imagine that had Bank CEOs knew what was coming many would have simply told Paulson "No" when he demanded they accept government money. Legitimate firms are going to shy away from any public-private proposal the administration puts forth.

Babies With Candy 3/22

Catching up Financial Policy Despair

This is a mostly repetitive column. Krugman's tone getting increasingly more shrill as it appears Obama will not adopt the policy he prefers.

...Tim Geithner, the Treasury secretary, has persuaded President Obama to recycle Bush administration policy — specifically, the “cash for trash” plan proposed, then abandoned, six months ago by then-Treasury Secretary Henry Paulson.

This is more than disappointing. In fact, it fills me with a sense of despair.

...now Mr. Obama has apparently settled on a financial plan that, in essence, assumes that banks are fundamentally sound and that bankers know what they’re doing.

These plans, as observed here previously assume no such thing. Rather, they assume that the economy would be healthier if the banks were healthier, that the banks would be healthier if they had more cash and fewer toxic assets, that the cash the private sector is currently willing to provide in exchange for those toxic assets is not enough to restore the banks to help, but that with government incentives the private sector will provide sufficient cash.

There are good reasons to be skeptical about a number of these assumptions, but they are all far more solid then "bankers know what they are doing"

...Right now, our economy is being dragged down by our dysfunctional financial system, which has been crippled by huge losses on mortgage-backed securities and other assets.

This is a semi-truth. For a good 10 years before our economy was dragged down by a supposed dysfunctional financial system it was inflated by a government encouraged hyper-functional one. We have 10 years of economic growth that may well be every bit as real as Madoff profits.

Given that, its not clear to me that the financial system is entirely dysfunctional. What would be the response of a functional financial system to the recognition that it was flooded -- from housing, to student loans, to credit cards, to corporate financing -- with bad debt?

Put differently: Are our economic troubles a symptom of the financial system clamping down on credit dragging or is the credit crunch an inevitable consequence of an economy in which the repayment of too much debt was entirely dependent on increasingly easy credit?

If it is the former, the policies being pursued to "ease" credit are sensible. If it is the latter then such policies will prove cataclysmic.

As economic historians can tell you, this is an old story, not that different from dozens of similar crises over the centuries. And there’s a time-honored procedure for dealing with the aftermath of widespread financial failure. It goes like this: the government secures confidence in the system by guaranteeing many (though not necessarily all) bank debts. At the same time, it takes temporary control of truly insolvent banks, in order to clean up their books.

That’s what Sweden did in the early 1990s. It’s also what we ourselves did after the savings and loan debacle of the Reagan years. And there’s no reason we can’t do the same thing now.

Its not clear to me that governments have, for centuries, been pursuing these policies.

As argued here before, one reason why doing this now might now might not be sensible is scale. Does the government really have no reason not to want to put all that bad debt on the federal balance sheet?

Also, given the scale, if the government takes "temporary" control over citibank it will likely find itself in long term control of Morgan Stanley.

Truly insolvent is a fuzzy word in this context. It will be a long time till we know the true value of many of the toxic assets and, so, whether or not a given bank was insolvent. On the other hand, a bank that loses the confidence of the market and so can't raise capital is, simply, insolvent. The more banks the government nationalizes the less confidence the market will have in the survivors and, therefore, the less solvent they will be. In other words, a policy of nationalizing banks will render banks that are absent that policy solvent, trully insolvent.

The temporary notion is downright silly. Control can be temporary if there are markets to sell assets into. But if the government seizes the largest banks there will be no such markets. Control, therefore -- even without the likely political meddling -- will be inevitably long term.

...The common element to the Paulson and Geithner plans is the insistence that the bad assets on banks’ books are really worth much, much more than anyone is currently willing to pay for them. In fact, their true value is so high that if they were properly priced, banks wouldn’t be in trouble.

And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels... Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.

Again, this assumption is besides the point. None of these plans care about the true value of these assets as much as getting them off the balance sheets of banks at a price that won't bankrupt all the banks.

I am, certainly, giving Geithner a bit of the benefit of the doubt here. But as much as I am skeptical of his competence, I have a hard time imagining the he hasn't figured out that the value a market assigns is a strong function of the financing available to market participants. He has to know that, by the terms of the offered financing, he -- more than the expertise of the market -- will be substantively setting the price. The idea then, must be to get these assets of bank balance sheets and into private hands better suited to hold on to them.

But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.

This is an oversimplification and misrepresentation of the payouts. Depending on how much investors have to put down, they won't walk away if it simply goes down a little. The investors therefore own the first chunk of loss. On the other side, the Government, by virtue of being owed interest payments, owns the first chunk of gain. The Government even profits if the value decreases slightly.

While this seems a reasonable deal for the government -- especially given the primary goal is to clear assets from bank balance sheets, not profit from financial transactions -- I suppose one could argue. It borders on mindless, however, to brand it a one way bet.

...By my count, this is the third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive.

The technical term for this, I think, is projection. The administrations flip flopping policy is anything but obsessive. Krugman's commentary on the other hand.

The administration flip-flops are likely a result of the politics. The administration would prefer avoid the political cost of another expensive bank bailout. On the other hand, the administration cannot bear the political cost of the DOW dropping to 6500 and below. When the markets are in free fall these plans are introduced, when they stabilize they are shelved.

But the real problem with this plan is that it won’t work... the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact...

I do love Krugman-the-economist who, in most every column, feels the need to undermine Krugman-the-political-columnist.

It was not merely a few financial executives that bet their banks on the belief that unprecedented levels of household (and corporate) debt were no problem, it was the industry as a whole. In fact, it wasn't simply private industry, but government policy makers. They, we, all lost that bet, and are left with a truly insolvent economy as opposed to just a few banks that are truly insolvent.

Given the real problem, then, Krugman's partisan proposal solves little.

Chopping Block

Not sure what to make of the fact that one of the couples competing is from the look of it, a gay couple, but identified on the show as being merely "friends".

Also, two weeks running now a contestant basically quit.

Brackets

The National Collegiate Athletic Association appears to be confused with geography, what with UConn in the West, playing in Philadelphia.

Policy Proposal: Seeds 10 and down should be reserved for non-major conferences. If you are a team from a major conference, and you aren't better then a 10 seed, you don't deserve to be in the tournament PERIOD.

The committee loves putting the Connecticut and Washington Huskies in the same bracket.

As nobody coaches the chip on the shoulder like John Calipari, the committee did him a favor.

UConn played Memphis last year. Memphis opened up a 20-5 lead. UConn, on the back of Jerome Dyson's defense, came back and led 41-40 at halftime. It was tied 60 all with 9 minutes left, before Rose and CDR (who scored 70% of their teams points) pulled Memphis away. AJ Price had, perhaps, the most impressive game of his career.

Uconn matches up somewhat poorly to this years Memphis. Without Dyson, they have no one to guard Evans (Witness Sam Young vs UConn). On the other hand, in as much as UConn's most dangerous set is the missed shot, defending UConn is really difficult.

I remain convinced that the key to UConn's tourney progress is Scottie Haralson who brings a bigger body on Defense and the only pure shooter on the team.

The Mind of Obama

Brooks, a bit back When Obamatons Respond

On Tuesday, I wrote that the Obama budget is a liberal, big government document that should make moderates nervous. The column generated a large positive response from moderate Obama supporters who are anxious about where the administration is headed. It was not so popular inside the White House. Within a day, I had conversations with four senior members of the administration and in the interest of fairness, I thought I’d share their arguments with you today.

In the first place, they do not see themselves as a group of liberal crusaders. They see themselves as pragmatists who inherited a government and an economy that have been thrown out of whack. They’re not engaged in an ideological project to overturn the Reagan Revolution, a fight that was over long ago.

There are, no doubt, those within the administration that do not see themselves as liberal crusaders. There are also, equally certain, those within the administration that do.

It would almost be comforting if Obama was among the latter. I am starting to suspect that he is amongst the former. He likes thinking of himself as thoughtful and moderate. It would be a reflection of the bubble in which he lives, if he views as thoughtful and moderate policies which Americans increasingly see as being hard left.

...Second, they argue, the Obama administration will not usher in an era of big government. Federal spending over the last generation has been about 20 percent of G.D.P. This year, it has surged to about 27 percent. But they aim to bring spending down to 22 percent of G.D.P. in a few years... I was invited to hang this chart on my wall and judge them by how well they meet these targets. (I have.)

As Brooks suspects, this is very likely bs. Even Krugman expects the over. Which argues that "Obamatons" responding were -- less than effectively -- in the business of dis-information.

I suspect that they understand that if the economy is doing well in 3 years, they will be able to persuasively argue "see 30+% is good for the economy" and if the economy is still doing poorly, they will be able to persuasively argue "We obviously can't now cut programs Americans are depending on to get them through crisis". Leaving Brooks' chart politically meaningless.

Third, they say, Republicans should welcome the budget’s health care ideas. The Medicare reform represents a big cut in entitlement spending. It amounts to means-testing the system. It introduces more competition and cuts corporate welfare. These are all Republican ideas...

I agree with this. Obama has shown a willingness to measure the efficacy of government programs. I think this a process Republicans ought to embrace and ought to ensure that the metrics used are as objective and comprehensive as possible.

We believe that free people making free decisions produce better results then centralized, politicized, bureaucrats making decisions for everyone else, and we should welcome initiatives that offer to provide data which demonstrates that.

Fifth, the Obama folks feel they spend as much time resisting liberal ideas as enacting them. The president resisted union pressure and capped pay increases for government workers. He resisted efforts to create mandatory veterans’ health benefits. The administration plans to tackle the suspiciously large increase in the number of people claiming disability benefits.

Obama was the candidate of ivy-league, not blue collar, liberals. That he is resisting pressure from blue collar liberals, while enacting, virtually wholesale, the agenda of ivy-league liberals, is hardly comforting to moderates.

I didn’t finish these conversations feeling chastened exactly... Nonetheless, the White House made a case that was sophisticated and fact-based. These people know how to lead a discussion and set a tone of friendly cooperation...

If these conversations where, in fact, sophisticated and fact-based, Brooks failed to do them justice. What these people understand, I more suspect, is how to humor a somewhat conservative columnist.

In-equality

A friend of mine sent me The Obama Rosetta Stone

Barack Obama has written ... a book that will touch everyone's life: "A New Era of Responsibility: Renewing America's Promise. The President's Budget and Fiscal Preview" (Government Printing Office, 141 pages, $26; free on the Web). This is the U.S. budget for laymen, and it's a must read.

Turn immediately to page 11. There sits a chart called Figure 9. This is the Rosetta Stone to the presidential mind of Barack Obama. Memorize Figure 9, and you will never be confused. Not happy, perhaps, but not confused.

One finds many charts in a federal budget, most attributed to such deep mines of data as the Census Bureau or the Bureau of Labor Statistics. The one on page 11 is attributed to "Piketty and Saez." ... Thomas Piketty and Emmanuel Saez, French economists, are rock stars of the intellectual left. Their specialty is "earnings inequality" and "wealth concentration."

Messrs. Piketty and Saez have produced the most politically potent squiggle along an axis since Arthur Laffer drew his famous curve on a napkin in the mid-1970s. Laffer's was an economic argument for lowering tax rates for everyone. Piketty-Saez is a moral argument for raising taxes on the rich.

As described in Mr. Obama's budget, these two economists have shown that by the end of 2004, the top 1% of taxpayers "took home" more than 22% of total national income. This trend, Fig. 9 notes, began during the Reagan presidency, skyrocketed through the Clinton years, dipped after George Bush beat Al Gore, then marched upward. Widening its own definition of money-grubbers, the budget says the top 10% of households "held" 70% of total wealth.
...
The White House says its goal is simple "fairness." That may be, as they understand fairness. But Figure 9 makes it clear that for the top earners, there will be blood. This presidency is going to be an act of retribution. In the words of the third book from Mr. Obama, "it is our duty to change it."

The knee-jerk conservative reaction to all this is, of course, utter revulsion. I tend, however, to believe that we ought not completely abandon this sort of conversation.

The argument for inequality: There is a certain amount of inequality which is healthy for society. Progress requires achievement. Achievement requires reward. As achievement will not be equally distributed, reward ought not be (or rather: reward can only be at high cost). Additionally, attempts at imposing fairness come at a high cost. The great example of that for me are the public buses outside Giants Stadium after a football game. They are usually loaded serially instead of in parallel. This is nominally fairer in that it is first come first serve, but the average rider is forced to wait (out in the often freezing cold) much longer.

On the other hand, we need to recognize that there is some amount of economic inequality which makes political equality -- democracy -- untenable. Additionally, to the degree that we justify rising income inequality by claiming that it reflects achievement inequality: In as much as a society of citizen-achievers is preferable to a Randian leech-ridden dystopia, this increasing inequality should be a concern.

Its also far from clear to me that the increasing income inequality reflects some actual achievement. It is increasingly difficult to suasively argue that people like Stan O'Neal or Steven Schwartzman made their fortunes creating value. Quite the contrary. Obama is not wrong in arguing that we have been failed by those at the commanding heights.

In other words, I think even conservatives ought be concerned about increasing income inequality.

On the other hand, the response Obama has in mind -- increasingly progressive taxation -- reflects the limitedness of both his imagination and his proclaimed faith in markets. A more serious response would take the problem more seriously. His response is also likely less then timely: if inequality rose on the way up, it is likely to fall on the way down.

As a conservative, I rather suspect misguided Government intervention in markets is a big part of the story behind rising wealth inequality. To the degree increasing economic inequality is not coming from increased achievement, it comes from being able to fix the game. The ability to fix the game, these days, is mostly in the hands of government.

To give an easy example: We now understand that outsized wall street bonuses were driven more by 30+ to 1 leverage then achievement. The 30+ to 1 leverage was, arguably, only made possible by the then implicit (now more explicit) Government guarantees. Another easy example is how the investments of the rich were protected by fiscal policy which artificially propped up asset values by lowering interest rates. And so forth...

For Obama -- and, perhaps, the political class in general -- a crisis is less an invitation to carefully examine the causes and courses of action then an opportunity to sell idealogy-driven policy.

UConn Seeding

It appears that UConn will not be a #1. Lunardi who felt on Friday that UConn was a #1 inexplicably changed his tune to Memphis on Saturday. Or rather, the only explanation is that he spoke to people on the committee.

By right, Memphis ought not be in the same conversation as UConn.

UConn has one bad loss this year -- to Georgetown, a team that, ironically, also beat Memphis (along with Tourney teams Syracuse and Villanova). It has two losses to Pitt, a likely #1 seed (and a team that matches up particularly well to UConn) and the tourney loss Syracuse, a top 15 RPI team, in six overtimes -- only after three key players fouled out in earlier overtimes -- that ought count, for seeding considerations, as a tie. They beat 8 different top 50 RPI teams -- @Wisconson, @Gonzaga, @West Virginia, @Louisville, Villanova, Michigan, Syracuse and @Marquette.

This is a #1 seed's body of work. The main contra-argument, that UConn's season should be discounted because of the Dyson injury, is patently unfair.

UConn's record is remarkably similar to, and no less impressive than, Pitt's: 1 bad loss @ Providence along with quality losses @ Louisville, @ Nova and vs West Virginia. Quality wins against Sienna, @Florida State, Syracuse, @ West Virginia, UConn (x2) and Marquette.

Likewise UNC: Borderline losses to BC and Maryland. Quality losses to Florida St (down Ty Lawson) and Wake Forest. Quality wins vs Michigan St, @ Florida St, Clemson, Maryland and Duke (x2).

Lousiville, their tourney win aside, should be a borderline #1. They have bad losses to UNLV and @Notre Dame. They also lost vs Western Kentucky and vs Minnesota -- borderline top 50 rpi teams -- and to UConn. They have quality wins against UAB, Nova (x2), Pitt, Cuse (x2), West Virginia(x2) and Marquette.

Memphis lost to vs Xavier, @Georgetown and Syracuse. With quality wins against only UAB (x2), @Tennessee, @Gonzaga. They certainly should be in contention for a number 1, but their body of work does not compare favorably to UConn.

At the end of the day, they have 1 bad loss, 4 quality wins and nothing close to a signature win such as UConn's @Louisville, UNC vs MSU and Duke (x2), Louisville against Pitt, and Pitt against UConn (x2).

On one hand, its not fair to penalize Memphis for playing in an inferior conference. On the other hand, they ought not profit from it.

That said, what it comes down to, perhaps, is recent tournament performance. UConn has not won a post-season game since 2006, when, as the most talented team in the nation, it was upset by George Mason. The committee -- for good reason -- may be most afraid of UConn embarrassing them with an early exit.

Its also not irrelevant, that Calipari, not Calhoun, is on the air now lobbying for his #1.

This all gets to the reason I believe its time for Calhoun to go. There was a time when nobody wanted to win more then Calhoun, which was reflected in the performance of his teams. One gets the strong sense that this is no longer the case. He is hardly be the first coach to suffer from resting-on-laurel-itis -- Coach K fell victim 10 years ago (which is how Calhoun won his first NCAA championship) -- but the players and the State of Connecticut deserves a Coach who wants, above all else, to win.

Purim

Purim is a transitional holiday. It is the first post-biblical holiday. The Megilla is, I believe, the last book the Talmud credits the Eternal Author. The story is, perhaps, the first in sacred history fully situated in exile.

There are many themes to the Megilla but the most pronounced might be Law. One of its most oft-used words is Da'ath, which in modern Hebrew usually means "religion", but in the Megilla means "Law".

The King's law, in the Megilla, is universal. It is sent to every nation, in every language and script. Once issued in the King's name and sealed with the King's ring, it cannot be withdrawn. Haman argues for the destruction of the Jewish people by describing them as a people dispersed amongst the nations who do not follow the King's laws. The Talmud reads the King in the Megilla as referring (also) to the King of Kings.

In contrast to the rule of the King, is the leadership of Mordechai and Esther. Mordechai cannot compel Esther to appeal to the King, he must persuade her. Esther similarly must persuade the King. (Persuasion, in its different flavors, is another prominent theme of the Megila.) Even in victory, they cannot annul the King's decree, the letter of its law must stand. Instead, they issue a supplementary law, which, reading between the lines, people understand as fundamental change. Finally, they must persuade the Jewish People to accept the holiday and rituals of Purim. The Talmud understands that acceptance to be not narrowly of the new holiday but, rather, of the entire Jewish Law, the prior adoption of which the Talmud views as having been co-erced.

These competing senses of Da-ath would seem to reflect the difference between biblical and contemporary Judaism. Differences which are not simply of-necessity: The tradition views Purim as one of the few holidays that will be celebrated after the ultimate redemption.

On a different note:

Haman describes the Jewish people as not-obeying-the-king's-laws. The main law of the King previously mentioned in the Megilla is that women defer to their men. The Talmud sees Haman himself suggesting the law. The law -- and the Jewish disregard of it -- must have been of particular personal concern to Haman as the Megilla describes him as having a un-deferential wife.

Babies With Candy V

Krugman opines The Big Dither

Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.

Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.

Why do officials keep offering plans that nobody else finds credible? Because somehow, top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as “toxic waste,” are really worth much more than anyone is actually willing to pay for them — and that if these assets were properly priced, all our troubles would go away.

While Krugman may not find the plans credible, there are certainly informed commentators who do. He is certainly not the only political commentator dismissive of those who disagree with him.

A more rigorous analyst would question the process.

While it may well be true that bold steps are required, its hard to imagine that any set of bold steps will be greeted without resistance by "informed commentators". To give "informed commentators" a policy veto is to preclude adopting bold steps.

Its clear that the administration is attuned to the politics. It is natural for political policy makers to be attuned to the political implications of policy. It also may reflect sympathy for the school of thought which believes recessions to be, above all, crises of confidence and the way out of recessions to restore confidence. Bold steps, in that view, are less medication than placebo; The actual steps are less important that the public's confidence in them.

Krugman, to my mind, also mis-states the motivation behind the policies. The concrete problem that the administration is trying to address is the banks have on difficult to price, and therefore "toxic", assets on their balance sheets that impair their ability to serve their nominal economic role. Were we to price these assets at their current, fire sale, market price most of these banks be seriously under capitalized, if not insolvent. Its reasonable to believe that getting these assets off bank balance sheets at an non-ruinous price will go along way towards pushing our troubles away.

Thus, in a recent interview Tim Geithner, the Treasury secretary, tried to make a distinction between the “basic inherent economic value” of troubled assets and the “artificially depressed value” that those assets command right now. In recent transactions, even AAA-rated mortgage-backed securities have sold for less than 40 cents on the dollar, but Mr. Geithner seems to think they’re worth much, much more.

And the government’s job, he declared, is to “provide the financing to help get those markets working,” pushing the price of toxic waste up to where it ought to be.

Geithner is certainly right to a point.

These assets being loans, have a long-term value: Some amount of money will be paid back. In healthy, liquid markets, the market price is the best estimate available of the expected long-term-value. The current market prices are almost certainly depressed, as they more reflect fear of short term price fluctuations. An investment manager who has to mark her portfolio to market and report P&L to clients on a monthly, or quarterly, basis and whose clients are likely to substantively withdraw money in response to paper losses, is rationally more concerned with short-term-price rather than long-term-value expectations.

To the degree that our economy depends on these markets functioning, the government has a responsibility to help get those markets working again.

Financing buyers, however, is not, to my mind, really a means to get these markets working again. The price will be dependent on the terms of the financing. To work, I think, Geithner will have to set the terms such that the price approaches the long-term-value. A price set too high will save the banks, but not restore investor confidence in price stability. Krugman is right to question Geithner's -- any individual's -- ability to gauge that long-term-value.

A more thoughtful policy would be to adjust tax policy to encourage investment pools with longer lockups, and with P&L measured in cash returns not market values. The price managers of those pools would be willing to pay for assets will be far more based on expectation of long term value.

That said, if the goal is getting these assets off bank balance sheets as quick as possible, subsidizing buyers may well be the most sensible policy.

...The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly.

Take the plan’s latest incarnation: a proposal to make low-interest loans to private investors willing to buy up troubled assets. This would certainly drive up the price of toxic waste...

But would it be enough to make the banking system healthy? No.

Think of it this way: by using taxpayer funds to subsidize the prices of toxic waste, the administration would shower benefits on everyone who made the mistake of buying the stuff. Some of those benefits would trickle down to where they’re needed, shoring up the balance sheets of key financial institutions. But most of the benefit would go to people who don’t need or deserve to be rescued.

And this means that the government would have to lay out trillions of dollars to bring the financial system back to health, which would, in turn, both ensure a fierce public outcry and add to already serious concerns about the deficit...

Krugman's argument appears to be: Subsidizing private investors will not make the banking system healthy because benefit will be going to undeserving people. While, perhaps, rhetorically appealing, it is logically empty.

Krugman believes that de-zombification will make banking system healthy (I am skeptical). If these toxic assets on zombie bank balance sheets are replaced with enough cash, the banks will be de-zombified.

That cash can come from the government -- per Paulson's initial plan or proposed nationalization schemes -- or from subsidized, if undeserving, private investors (the subsidy is required because private investors are not currently willing to pay sufficient cash).

So why has this zombie idea ... taken such a powerful grip? The answer, I fear, is that officials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable.

Krugman has yet to explain how nationalization is a panacea. In a vanilla nationalization model, the government will replace these toxic assets on zombie bank balance sheets with sufficient public capital, then sell the recapitalized banks and toxic assets separately into the market over some period of time.

This seems to me, on the surface, to be far a more complicated, risk laden and expensive means to the same end as a well calibrated buyer subsidy. Which more simply explains this idea's powerful grip.

One suspects that Geithner, with a much better view of the matter, understands the dire state of major financial institutions far better then Krugman. And it may well be the very dire-ness and attending expense of recapitalization, that precludes Geithner, as Paulson before him, from considering a public-capital-only solution.

TO

Dallas Cowboys release Terrell Owens

From ESPN, Jerry Jones didn't initially plan to fire Owens, but was pressured to do so by OC Jason Garrett, QB Tony Romo, and TE Jason Whitten.

It seems like, oddly, TO was particularly popular amongst defensive players (for example Terrance Newman), while disliked by some offensive players and coaches. His supporters credit his unmatched heart, work-ethic and talent. His detractors point to his divisiveness -- being a "cancer" -- in the clubhouse. This divisiveness stems from his demands on how he is used in the offense. In his defense, one often hears quotes along the lines of "Show me a WR who does not want the ball more and I'll show you a WR who doesn't belong in the NFL."

Its worth noting that TO is extra-ordinarily divisive to the degree that team-mates buy his arguments. It is precisely because many of the Dallas players believed that Garrett, Romo and Whitten were under-using TO to the team's detriment, that TO had to be cut. A lesser player making similar comments would be less divisive and, therefore, more tolerable,

It is not clear to me that Romo is an winningNFL QB. He certainly has the talent, but thus far has yet to develop the judgment, especially under pressure. Given his central role in TO's dismissal, he will playing this season under a tight microscope. While talent left in DAL, far exceed that which Garcia and McNabb were left-with post TO, offenses have not improved with a TO departure.

ESPN reports that OAK is the team most interested in TO. This would be a good move for OAK, given their investment in JaMarcus Russell. It might be good for TO as Al Davis is not afraid to spend money.

Baltimore would be a great fit for TO personel-wise. With TO, if they can keep their defense mostly intact, they may well be the pre-season favorite for the super-bowl. Cameron -- who knows how to use stars -- must be salivating at the prospect of coaching TO. Harbaugh tho, was on Philly when TO disrupted there and may hold it against him.

A more interesting option mentioned may be IND. TO has arguably never played with a great QB. He need not fear insufficient attention to the passing game in Indy. If he could come to terms with it mentally, he would only benefit statistically from being a #2 WR.

With either IND or BAL, TO stands a better chance of winning a ring next year then Jerry Jones has.

A dark horse team may be MIA. On account of his heart and work-ethic, I've always seen TO as a Parcels sort of guy. On the other hand, Pennington does not seem to have the arm to take real advantage of TO.

In the end, I see TO's exit from "America's Team" as a metaphor for the general decline of America. TO exemplifies those qualities that used to be most identified with American greatness. He was a late third round draft pick from a forgettable school, initially buried behind more gilded players. But he had god-given talent buttressed by uncompromising work-ethic and all-encompassing commitment and heart, alongside a willingness to speak the truth as he sees it.

Romo and Garrett represent what America is becoming. Garrett was tagged as future head coach while still a backup QB. Romo famously took a mini-vacation with his pop-singer girlfriend days before a playoff game (which he lost). Neither has done much to indicate they really have what it takes to get going when the going gets tough. For example, as TO did putting up a MVP caliber performance in the super bowl, with a panic-ridden QB, on a strained ankle and against doctors orders.

Jerry Jones, an oilman, in his heart of hearts must identify with the old America TO still stands for. Which is why he has stood by TO this long. There is a note of tragedy in his finding his hand forced by the new America's Team.

Red Herrings

from the WSJ, Buyers Should Pay for Bond Ratings:


By ERIC DINALLO

There has been a great deal of justified criticism of the credit-rating agencies that gave triple-A and double-A ratings to billions of dollars of debt securities that clearly did not deserve these high ratings. Everyone agrees that something needs to be done to prevent inflated ratings. But what?

A recent report by the Group of 30 (international financial experts led by Paul Volcker) recommended that regulators encourage the development of payment models that "improve the alignment of incentives" and permit rating users to hold rating providers accountable. Similarly, Securities and Exchange Commission head Mary Schapiro recently called for an examination of " how the rating agencies are compensated, how they manage conflicts of interest, and what role they should play in our markets."

The insurance industry and its regulators can lead the way by implementing the only effective proposal: self-funded, independent buy-side ratings. Ratings, that is, that are paid for by the investors who use them.

Rating agencies' failures are not rooted in a lack of talent or insight, but rather in a fundamentally flawed business model. Those who issue the securities also pay for their ratings. This structure has created powerful incentives to bias ratings to keep debt securities' sellers satisfied and the rating fees flowing.

It is certainly true that agency mis-ratings and misaligned incentives are big parts of the story of the financial system meltdown. On the other hand, the claim that mandating that buyers pay for bond ratings will solve anything withstands little scrutiny and betrays a stunning ignorance about the manner in which regulation and markets work and interact.

The argument, simply put, is that so long as rating agencies are paid for by sellers, sellers will pressure agencies to artificially inflate ratings. If only agencies were paid by buyers, there would be no such pressure.

The problem with this argument is that buyers well know that rating agencies are paid for by sellers, and if they perceive or suspect that a seller is in the habit of pressuring or an agency is responsive to such pressure, they will question the accuracy of the rating, which -- if buyers are basing purchasing decisions on their faith in the rating -- would reduce demand and therefore profits. Agencies and Sellers knew, then, that they were playing a dangerous game if they pressured and responded to pressure.

While it is certainly imaginable, it is not clear to me that this pressuring and being pressured actually happened. We have seen emails from dealers about pushing products they knew to be crap, but if there has been similar from rating agencies, I missed it.

If it did happen, the question is why sellers and agencies -- rightfully it turns out -- where unafraid that the perception of tainted ratings would not affect demand. Phrased differently: Buyers too saw what was going on and were unconcerned. Which argues that buyers were more interested in getting the high rating then whether or not the high rating was meaningful. If that is the case, ratings will be no more reliable if buyer purchased.

It is, of course, hardly true that rating agencies' failures were not rooted in a lack of talent or insight. As compensation at the agencies substantively lags that of both the buy and sell side, people with more talent and insight are (to put it mildly) less likely to choose to work for a ratings agencies. Given the talent gap, it would be surprising if an investment manager -- constrained by regulatory and, perhaps, client mandates which gave ratings weight in portfolio construction -- was not simply interested in getting the high rating, and less concerned about whether or not that rating reflected some reality.

Even we pretend that agency raters are as insightful and talented as investment managers, given any reasonably liquid market, savvy investor managers are going to trust the rating implied in the price far more then the agency ratings.

Finally, and above all, no amount of resolving conflict of interest gets to the heart of the square, the regulatory regime is trying to circle: Risk, by definition, defies easy measurement and management. As noted previously on this blog, were that not the case, we would be better off with command economies rather then free markets. It does not strain the imagination, of course, to suspect that a regulator, in his heart of hearts, prefers command economies to free markets.

Consider that in 2003, on the equity side, regulators entered into settlements with Wall Street firms to resolve conflict-of-interest issues between their research and investment banking divisions. Like the rating agencies, equity research analysts held themselves out to be objective in their analysis. But they were paid by the issuers and their bankers. The regulators' investigations demonstrated that the firms and their client-issuers pressured equity analysts to provide bullish recommendations on their worst stocks.

This analogy is illustrative. Reasonably informed investors understood that Blodget's advice was tainted, and took it with an appropriate grain of salt. Given the decline in equity research since these conflict of interest issues were resolved, its reasonable to claim that the value of the "research" to the market was, all along, to the sell, not buy, side.

In the case of ratings, their value to the market is likely to regulators, not investors. It gives regulators some measure of the safety of the companies they regulate. Investors who trust rating agencies to measure risk better then their investment managers, ought hire a different manager.

The solution is for investors to buy and control publicly available bond ratings. Insurance regulators, who use ratings to determine capital reserves for insurance companies, can contract with rating agencies on a competitive basis to provide public ratings of issuers and their securities. This approach would solve the conflict-of-interest problem, because the primary users of the ratings are the ones who will be paying for them.

To fund a buy-side proposal, insurance commissions could collect a small fee from insurance companies that hold nearly $3 trillion in rated bonds, making them the largest industry sector that relies on credit ratings. The New York State Insurance Department estimates that for less than two basis points (0.02%) per year on that $3 trillion, insurers in partnership with insurance regulators can purchase transparent, conflict-free and cost-effective ratings. Buyers have a strong incentive to pay into a system that ensures the independence and accuracy of their ratings.

This paragraph is near perverse, Dinallo substitutes himself for the buy-side. His proposal, unsurprisingly, is to give himself -- a regulator -- control over selecting rating agencies. He would fund this control via a tax hike.

Rating agencies, of course, are already a (federal) regulator construct. His proposal then is less about buyers taking control from sellers and more about state regulators seizing control from federal regulators -- who currently govern rating agencies.

There is no reason to believe that state regulators will be more effective in policing rating agencies then federal regulators.

And, Dinallo's claim that his system would be conflict free is so obviously untrue it is unlikely he really believes it. Rating agencies, after all, rate public debt as well. States and municipalities have long complained about what they see as unfair treatment from rating agencies. The more control state regulators have over rating agencies the more positive rating agencies are likely to be toward state issuances.

Ratings will never be flawless -- no institution can have perfect foresight. But buy-side ratings will be conflict-free, and the process will be controlled by the investors that bear the long-term risk of the rated securities. Rating agencies with poor track records, errors or conflicts will not be trusted to serve and protect policy holders. And rating agencies will bid for contract renewals based on merit, so that they remain independent of the issuers they evaluate.

The largest obstacle to effective market regulation is, to my mind, regulators -- like Dinallo -- who, simply, do not believe in markets, and do not take seriously the choices of market participants. One has to have precious little faith in markets to believe that companies with poor track records will be trusted or long survive.

Killing The Goose

Lawmakers want Calhoun reprimanded:

HARTFORD, Conn. -- The leaders of the Connecticut General Assembly's higher education committee say UConn coach Jim Calhoun should be reprimanded for his tirade at a freelance journalist who questioned his $1.6 million salary.

Sen. Mary Ann Handley, D-Manchester, and Rep. Roberta Willis, D-Lakeville, say Calhoun's outburst Saturday does not reflect well on him or the state's flagship university.

"His recent behavior was unacceptable and we request that the university take appropriate disciplinary action to reinforce the high ethical standards we have come to expect from our flagship institution," the lawmakers wrote in a letter to UConn President Michael J. Hogan...

In a statement, Hogan called Calhoun a "valued member of the UConn community" and said the reporter was also to blame for the controversy.

"The question he was asked about his salary was perfectly fair, although the reporter, as Coach Calhoun suggested, might have found a more appropriate and less provocative setting for his inquiry," Hogan said. "I am sure that we all regret the controversy, including Coach Calhoun, and I can assure you that we will continue to encourage all members of the UConn community to resist temptation and treat others in a judicious and respectful manner, no matter what the circumstances."

Calhoun won his 800th career game Wednesday when the No. 2 Huskies beat Marquette. He is the highest-paid state employee in Connecticut.

Late Thursday, Calhoun issued a statement and said his comments were "misinterpreted" as being insensitive to the current economic climate.

"I believe I have a duty, responsibility and obligation to support the state I love and the many people and organizations of Connecticut that are in need," Calhoun said. "I look forward to continuing with the same amount of passion and commitment to assist people and causes that are important to me and my family."...

Ken Krayeske, a political activist and freelance reporter, questioned Calhoun at a news conference following Saturday's 64-50 win over South Florida. He asked why the coach of a public university collects a salary of $1.6 million while the state has a budget deficit of more than $1 billion this fiscal year and up to $8.7 billion over the next two fiscal years.

Calhoun first responded with a joke, then grew angry as Krayeske continued the line of questioning.

"My best advice to you is, shut up," Calhoun said.

"Quite frankly, we bring in $12 million to the university, nothing to do with state funds," Calhoun said. "We make $12 million a year for this university. Get some facts and come back and see me ... Don't throw out salaries and other things."

Earlier this week, Connecticut Gov. M. Jodi Rell told reporters that she believed Calhoun regrets his outburst and called the tirade an "embarrassing display."

I suppose Coach Calhoun could have responded with a more appropriate tone. The question about his salary, however, was not at all perfectly fair, neither in the context -- a press conference to discuss Basketball -- nor content -- Calhoun is not over paid relative to market, and he is a net earner for the State of Connecticut.

He is a Hall of Fame coach, who built that program from scratch. As a Huskies fan, I have been increasingly dis-enamored with the manner in which Calhoun treats his players and not sure his best coaching days are behind him. That said, given his popularity in-state, if he was to announce his retirement after the season due to the criticism and lack of support from the administration and politicians, they would likely bend over backwards begging him to return, and would lose their jobs if he didn't.

Babies with Candy IV

Krugman's latest Climate of Change:

...Obama’s new budget represents a huge break ... with policy trends over the past 30 years ... he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats ... fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

Obama, it seems, after studying Clinton's failure to enact health care reform, appears to have identified the problem: Clinton made the mistake of announcing he was setting off to reform health care, with town halls and committees and negotiations. Obama has, evidently, decided fundamental change is best attempted under-the-table. Hidden in fiscal stimulus bills and buried in budgets.

He has also, apparently discovered the generally un-acknowledged reality that we already have nationalized health care. The government already -- via tools such as existing regulatory authority, Medicare policies, etc -- fundamentally controls our health system. Sweeping changes can be made without dramatic new legislation and attending political debate.

His approach may be a blessing in disguise for his political opponents in that it will make it easier for them to argue that the problems we have had with health care all along were due to too much, not too little, government control+interference.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

As far as I can tell the only benefits a cap-and-trade system has over a carbon tax are political -- allowing democrats to misleadingly claim they are not creating new taxes. The costs are likely to be substantive. Government created artificial markets exist to be gamed by savvy players. All sorts of perverse economic incentives are inevitable. And from what I've read, these systems don't actually do a particularly good job of reducing emissions.

I tend to support a Carbon Tax. Conservatives, at least, are willing to acknowledge that when the government taxes an activity it discourages it. In as much as the Government needs revenue, it therefore ought be taxing activity we would benefit from discouraging. Whether or not one believes the earth will be destroyed by melting ice caps in 2012 unless we act RIGHT THIS MINUTE, its not hard to imagine that reducing our environmental footprint is a good idea. Ergo, taxes on environmentally destructive activities make sense.

It says a lot then about the administrations reading of public opinion that they prefer a less effective under the table policy, to a more effective above board policy.

In any case, Krugman should not be over-heartened. The administration has to project what revenue it can to project a semblance of fiscal responsibility.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page...

Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.

Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.

So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.

Krugman notes that this years deficit is about 7 times the average deficit from 2005 to 2007 and that Obama aspires only to "reduce" the deficit to twice what it was then by 2013. Krugman describes the assumptions required to achieve even Obama's limited fiscal responsibility goals as being "Big ifs" yet somehow he lauds their plausibility.

The politics of war open a bit of a can of worms for Obama. He campaigned on the need to draw down in Iraq more to re-focus on Afganistan then to save money to spend on health care. If he does recognize substantial cost savings, he will be politically vulnerable if one or both of those wars goes poorly. On the other hand -- and this may be his calculation -- so long as the economy is awful in 2012, foreign policy will not be high amongst voter's priorities.

Which actually gets to the heart of Obama's re-election calculus. He and his advisors have to recognize that the economy is unlikely to recover by 2012. He needs to figure out, then, how to get re-elected having presided over economic catastrophe. His apparent strategy seems to be taken from FDR's playbook: create spending programs that people grow dependent on, associated with you, and which your defeat will jeopardize. The more people he can make more dependent on his programs the next four years the better his chances of re-election.

...What’s not to like about this budget? Basically, the long run outlook remains worrying.

According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.

Furthermore, the Obama budget only tells us about the next 10 years... But America’s really big fiscal problems lurk over that budget horizon...

I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class...

But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

In summary then, Krugman describes a budget which, in its favor allocates $600 billion over 10 years to healthcare reform, expects to raise a similar amount from a cap and trade scheme and whose plausibility is merely highly suspect unlike those damn bush budgets which insulted the intelligence.

On the other hand it will likely require middle class tax-hikes down the road to pay for it, it doesn't address America’s really big fiscal problems, which lurk past its horizon, and it projects to stabilize public indebtedness at record levels which leave us with considerably reduced room for maneuver in facing those problems.

I think an ordinary observer, given those trade-offs, would be substantively less enthusiastic then Krugman apparently is.