IRAN RESOLUTION. In a move not likely to enhance the reputation of the Security Council, Russia and China forced the West to water down the resolution on Iran's nuclear program so that it now threatens to threaten Iran with sanctions if they don't stop enriching uranium by August 31, rather than actually threatening sanctions as such. On the other hand, Iran has already said that they'll respond to the latest Western offer by August 22 so the whole thing may be moot anyway because people will be reconsidering their positions in light of whatever Teheran says then. The genuinely ominous sign here is that the resolution passed 14-1, with the one "no" vote coming from Qatar, at the moment the one Arab nation represented on the Council. As we saw in the initial days of the Israel-Hezbollah crisis, the Arab regimes are, on the merits, actually very alarmed about Iran. But as we saw in subsequent days, they're also somewhat under the sway of Arab public opinion, which has come to be pro-...

    THE TROUBLE WITH THE IMPOSSIBLE. I don't really have new observations to offer about the war in Lebanon, which continues to be a bad business . Sebastian Mallaby does, however, have a positively Yglesian analysis in today's Post concluding that "wars are only defensible if they can be won" -- something Olmert and Bush would both do well to consider. --Matthew Yglesias

    JUST POSTED ON TAP ONLINE: JOE, KO'd. Provoked by that blistering Times editorial , Mike "Bossman" Tomasky speculates : What if Ned Lamont not only beats Joe Lieberman , but throttles him by, say, 10 points? "[I]f it were to happen, Lieberman�s career might be effectively over August 9," says Mike. He explains why here . --The Editors

    HOLY HOWELL RAINES, MARKOS! It's as though the ghost of Howell Raines has somehow snuck back into the New York Times editorial page. Who could have guessed when looking at the Lieberman / Lamont headline that The Times would ditch their establishmentarian penchant for high-minded bi-partisanship and endorse Ned Lamont ? To a political junkie, this was like Bobby Thomson 's pennant-winning shot heard round the world. Since Raines' departure from the top of the editorial page, The Times has reverted from his crusading liberalism back to a more comfortable moderation. The paper infuriated some of their liberal readers by endorsing Republican Mayor Michael Bloomberg and Representative Chris Shays (CT-R) for re-election. And, in the case of Shays, they did so in part on the grounds that having a Republican moderate in the seat was better for the country because it was good to have some ideological diversity within the party -- even though the alternative was a Democrat whose actual...

    DEMOCRACY, IF YOU LIKE IT. I don't quite know what Jackson Diehl is trying to say about Ukraine here, but his column seemed to me to partake freely of various unfortunate but all-too-common presuppositions. As you'll recall, back in 2004 Viktor Yanukovich was Ukraine's ruling party's candidate for president. He lost to Viktor Yushchenko , but Yanukovich tried to steal the election through fraud. Then came the "Orange Revolution" and Yanukovich was forced to back down and let Yuschenko take office. Between then and now, a parliamentary election and a breakdown between Yuschenko and some of his political allies has created a situation where it now looks like Yanukovich will become prime minister in coalition with a third political party. Describing that situation as a "setback" or "crisis" for Ukrainian democracy as opposed to for Yuschenko personally is a silly error. A democracy requires multiple political parties. Yanukovich's electoral victory was based on fraud, but much of his...
  • Cheap Tip

    Last quarter the markets were surprised by a stronger than expected number for personal consumption expenditures in March. I commented that the surprise was surprising because March personal consumption expenditures were embedded in the first quarter GDP data that had been released the prior week. Here's a chance to look for more surprising surprises. The consensus number for June personal consumption expenditures is an increase of 0.4 percent. My arithmetic puts the figure at over 1.0 percent. There is always the possibility of a substantial upward revision to the April and May data, but absent a large revision, June expenditures should come in much higher than "expected." Will the markets be surprised? --Dean Baker
  • Can You Say "Lower Profit Margins?"

    Apparently the reporters at MarketWatch can't. An article noting the uptick in labor compensation reported in the second quarter Employment Cost Index reported that Fed Chairman Ben Bernanke said that higher labor costs need not lead to inflation, if they are offset by rising productivity. Well, in the very next sentence Mr. Bernanke also said that higher labor costs could be offset by lower profit margins: "Whether faster increases in nominal compensation create additional cost pressures for firms depends in part on the extent to which they are offset by continuing productivity gains. Profit margins are currently relatively wide, and the effect of a possible acceleration in compensation on price inflation would thus also depend on the extent to which competitive pressures force firms to reduce margins rather than pass on higher costs." But that part didn't make it into MarketWatch . Thanks go to my friend Jared Bernstein for this tip. --Dean Baker
  • House Moves to Boost Defenses Against Martians

    The House came up with the brilliant idea of linking the partial repeal of the estate tax with raising the minimum wage. In the words of West Virginia Representative Shelley Moore Capito, this linkage made sense because, "the sustaining of small businesses by keeping their vital assets will allow those making the minimum wage to continue working. This is a jobs bill." I'm sorry, this is nuts. Only a tiny percentage of small businesses will ever be liable for the estate tax and it is paid out after they are dead. It has no obvious effect on how they would operate their business. It is hard to see how cutting the estate tax will save even a single minimum wage job. How could a reporter just put these words in print and not talk to an economist to get a comment on this statement? Surely any economist, regardless of their political leanings, would explain that a district in West Virginia is represented in Congress by a crazy person. --Dean Baker
  • The Deflation of the Housing Bubble Continues

    The weak second quarter GDP numbers were driven in part by the housing sector as noted in the NYT . See also the separate piece on the housing market. In addition to the GDP data, the Commerce Department also released data on vacancy rates for the second quarter. The vacancy rate for ownership units hit a new record. Cheap tip for the months ahead -- watch for credit card debt to soar. People who can't borrow against their homes, now that prices have stopped rising, will turn to credit cards. It isn't pretty, but that's what desperate people will do to hold onto their homes in a collapsing bubble. --Dean Baker
  • The Inverted Yield Curve and Other Economic Fads

    Remember the inverted yield curve and the hoola hoop? A few months back, the prospect of an inverted yield curve was seen as an ominous warning sign of bad times ahead. An inverted yield curve was supposed to signal an upcoming recession. This seems worth mentioning now because the yield curve is becoming seriously inverted as long-term rates have edged downward, even as short-term rates remain relatively high. For those who have better things to do with their time, an inverted yield curve refers to a situation in which short-term interest rates are higher than long-term interest rates. This reverses the normal course of events, typically investors expect to get a higher rate of return if they agree to lock up their money in a long-term bond or time-lock account rather than keeping it in a checking account where they can get immediate access. A few months back, as the Fed was raising short-term interest rates, without much increase in longer term rates, many market analysts raised the...