Thursday, November 15, 2012

Legal Marijuana

I live in Washington State, one of two states (the other is Colorado) that recently legalized Marijuana at the state level.  The process has been and will continue to be "very interesting".

I was a teenager in the '60s when Pot, as it is colloquially known, first became popular.  Before then a few beatniks (fringe musicians) were known to smoke Pot.  Rumor had it that it was fairly popular in what is now referred to as the "black community".  But at that time blacks were ghettoized in places like Harlem.  Unlike today, the rest of society had little overlap and contact with black culture.  So whatever was going on there was generally invisible to the culture at large.  Today blacks are trend setters in many areas of culture and trends that are incubating in the black community quickly break out into mainstream consciousness.

Anyhow, at the time there was a lot of turmoil as a result of the Civil Rights movement and later the Vietnam Antiwar movement.  Youth were feeling rebellious to an extent unimaginable today.  That led to a lot of experimentation and one of the things that got experimented on was Pot.

As part of a reaction to this unrest politicians like Richard Nixon came to prominence.  One of his themes was that the country was going to Hell and "law and order" needed to be restored.  Part of the law and order agenda was to crack down on drugs.  Pot was certainly one of the high profile drugs that Nixon and other like minded politicians went after but it was not the only one.  The other two drugs whose popularity rapidly increased were Cocaine and LSD.  Cocaine is still with us but LSD has largely faded from the scene.  So let me talk about it a little.

LSD was the first big psychoactive drug.  If you "dropped" LSD, also commonly referred to as Acid, it did strange things to your perceptions.  For some people the otherworldly experience was very enjoyable.  But for others it was very scary and horrible.  It took several years for LSD to become popular enough that a lot of people had taken it.  Once this had happened large numbers of people concluded that for enough people the bad far outweighed the good and its popularity declined, again over several years.

The LSD experience is informative.  In effect, a large scientific experiment was run.  It answered the question: is the typical experience with this drug a good one or a bad one.  This experiment was run with a large "sample size" (all the people who tried LSD) and the consensus was that the bad far outweighed the good.  And for this to be true there had to be a lot of bad.

In the last decade or so we have run a similar experiment.  In this case the drug is Methamphetamine, or "Meth" for short.  The popular form is now referred to as "Crystal Meth".  Again, one way or the other a lot of people have now taken Meth.  And the results have been similar to that of LSD.  Most people agree that on balance Meth is a bad thing.  The problem with Meth is that it appears to be very addictive.  So it appears that for whatever reason, a lot of people try Meth.  They quickly figure out it is a bad thing but it is too late.  They are addicted.  Fortunately for that previous generation, LSD was not addictive.  So when people decided it was a bad thing it disappeared pretty completely.

We have been running a much larger experiment with Pot.  Far more people have taken it.  If it was going to turn out to be another LSD, or worse yet, another Meth, we would long since all be aware of that.  But there are no large populations of Pot users suffering severe problems in our mental hospitals.  There are no "Pot heads" with severe physical problems in our regular hospitals.  There are lots of Pot smokers in our criminal justice system but few if any in our health system.  Pot is just not in a class with LSD or Meth.

Does that mean that Pot has no negative effects.  No!  But where people get into trouble is with making absolute comparisons rather than relative comparisons.  Compared to some hypothetical standard of physical, mental, and emotional health, are there negative effects associated with Pot?  Yes!  But that's the wrong comparison.  A more appropriate comparison is with tobacco and alcohol.  The process of smoking Pot is very similar to the process of smoking a tobacco cigarette.  Cigarettes are addictive because one of their main ingredients is addictive.  By some measures Nicotine is more addictive than Meth.  And the tars and other ingredients in cigarettes smoke causes lung cancer.  So cigarettes have very bad effects.  And these bad effects are well known.  Yet cigarettes are legal.

Alcohol also has many well known negative effects.  It impairs your ability to drive well.  It causes personality changes that may be very destructive.  The cost of purchasing alcohol can have a bad economic effect on a family directly through the cost of the alcoholic beverages and indirectly due to the personality changes and physical changes that may result in reduced employment or complete unemployment.

This country experimented with a legal ban on alcohol.  The many negative effects formed the basis for the case for it being outlawed.  But the result was disastrous.  Lawlessness became rampant.  Availability became even more widespread even though it was now illegal.  In this environment, the negative effects became even more pronounced compared to the old days when it was legal.  After about a decade Federal efforts to make Alcohol consumption illegal were abandoned.

The country has gone down the same path with Pot and other drugs as with alcohol.  In the late '60s a crackdown was initiated on Pot, Cocaine, and other "recreational drugs".  Part of this program involved classifying Pot as a "Schedule 1" drug.  Schedule 1 drugs are the most dangerous.  They are drugs like Meth which are both addictive and destructive.  But 50 years into our Pot science experiment it is obvious to everyone that Pot is not a Schedule 1 drug.  It is not addictive to any extent and it is not destructive either physically or mentally in the way Meth is.  It is not possible to characterize putting Pot on the Schedule 1 list or, as time has passed, keeping it on the Schedule 1 list as anything but stupid.  Based on the actual characteristics of Pot it should be in the Schedule 5 list along with cough syrups that contain small amounts of Codeine.  If you smoke Pot once a month it will have no long term effects.  But you probably shouldn't drive until the effect wears off.  If you smoke Pot frequently the negative effects will likely be similar in intensity to taking a cough syrup that contains small amounts of Codeine frequently.

Frankly, only a tiny minority of people, experts or otherwise, believe that Pot is highly dangerous, e.g. that its negative effects are on a par with Meth.  There are a large group of people, frequently heavy Pot smokers who believe that Pot is all good.  There is a very large group that believes that occasional Pot smoking is either a good thing or that the harm is small.  Many people think that even heavy Pot smoking has, at worst a small amount of negative effect.  The anti-Pot people have expended a large amount of effort ensuring that little or no large scale scientific research is done on Pot.  It turns out there is a very good reason for this.

As I said, a lot of people have smoked a lot of Pot over the years.  If there was a large negative effect associated with Pot this effect would be noticeable enough to be generally known.  But the argument I am now making is unscientific.  The conclusion is not based on properly done scientific experiments so it is suspect.  This leaves intact the argument that "there is no scientific basis for saying that Pot is reasonably safe".  More importantly, this active hostility to any scientific efforts to study Pot have meant that there is no well founded scientific research that Pot has beneficial effects.  But if we remove the phrase "well founded" from the previous statement things change drastically.  There are a number of small scientific studies that indicate that Pot makes a very good anti-nausea drug.  This is also supported by a large amount of unscientific experimentation by the general public.  Lots of people claim that Pot is a much better anti-nausea drug than anything available legally.

We have gotten ourselves into a spiral.  As a society we have invested a tremendous effort in the idea that Pot should be illegal.  We have spent fantastic amounts of money.  We have put vast numbers of people in jail solely because they smoked Pot or sold small amounts of it.  This incarceration and criminal record activity has ruined the lives of many people.  The U.S. incarcerates more people as a percentage of its population than any other country in the world.  And most of these inmates are behind bars directly or indirectly because recreational drugs are illegal.  The largest subgroup of these drug criminals are only criminals because Pot is illegal.

The U.S. had a bad experience with making alcohol illegal.  Beyond the direct effects it had a toxic effect on the criminal justice system.  There was lots of money in the booze business.  A lot of that money was deployed paying off cops, judges, lawyers, politicians, and otherwise doing harm directly to the criminal justice enterprise.  But it also harmed it indirectly.  Citizens lost trust in its operation.  And "law abiding" citizens broke the law in large numbers over and over.  The law was thrown into disrepute.

All this has happened as a result of the enforcement of the anti-Pot laws.  Drug cartels have lots of money.  It has been spent in part on bribery.  We have large numbers of "law abiding" citizens breaking the law, in many cases over and over.  And, as in the case of liquor, the effort to suppress Pot has been a complete failure.  Pot is more broadly available, at higher quality, and at lower cost, than it ever was.  The whole idea has looked stupid for a long time.

This has resulted in a novel work around.  With some evidence to support the beneficial effects of Pot we have seen a "Medical Marijuana" movement.  Washington has been one of the many states who have passed some kind of Medical Marijuana legislation.  At the state level, it is more or less legal to consume Pot "for medical purposes".  The specific rules and regulations vary considerably from state to state.  But Pot consumption, even for medical purposes is still illegal according to federal law.  This has led to some truly "Alice in Wonderland" situations.

For instance, the Washington State legislature decided that Medical Marijuana was getting out of control.  Pot dispensaries, police, pretty much everyone in the state agreed.  So the legislature set about crafting regulations to govern the Medical Marijuana business in the state.  Everything was going fine until the Feds, in the person of the local Federal Prosecutor stepped in and started making  threats.  Specifically the Federal Prosecutor threatened to throw various state employees in jail if they engaged in the activities (e.g. inspections, issuing licenses, collecting taxes, etc.) that the legislature was laying out as part of the comprehensive law.  As a direct result of this threat the Governor vetoed large parts of that law leaving a mess behind.  Her logic was flawless.  If she vetoed any less of the law she was asking state employees to perform duties that would result in them going to jail in Federal Prison.

The result of all this was that a group of people got together and created an Initiative.  The pro-Pot community was divided on the result.  They felt there were too many restrictions.  For instance, you had to be over 21, you could get a "drunk driving" type ticket if you failed a test for how much Pot you had in your system. etc.  But in the end the measure passed anyhow.  It passed largely because of the support of people like me.  I don't smoke Pot.  I'm sure I know people who smoke Pot but I don't know who they are.  But I think we need to end the insanity.  And voting to legalize Pot was something I could do.

I don't know what is going to happen next.  The Federal government has not said anything.  They haven't told the state it is OK to proceed.  They haven't told the state they will oppose implementation.  They haven't said anything.  And, trust me, a number of state officials have asked a number of Federal officials what they should expect.  So far all of the Federal officials have provided absolutely no guidance.  I think this is because no one at the Federal level has any idea how to deal with this.

In its first term, the Obama Administration has been very pro law and order.  They aggressively enforced the immigration laws until Obama issued his executive order on the "Dream" people.  The Obama Administration has not proposed any laws tightening gun laws.  In fact, they have loosened gun laws in a couple of small areas.  Threatening the Governor of our state is not the only action the Obama Administration has made on the drug front.  Generally these actions have been in the direction of more enforcement of existing drug laws.  They have gone after Medical Marijuana dispensaries and Washington State and in California that I know of.  They have not tried to move Pot from the Schedule 1 list to one of the lower schedules.

So I don't know how this is going to play out.  I know it is a good thing that two states made this move at the same time.  It removed the "it's only one nutty state" argument from the table.  Lots of states are going to be watching to see what happens.  Oregon defeated a "legalize Pot" law.  If Washington and Colorado end up having a positive experience as all this shakes down I expect Oregon to come back with a law closely modeled on the Washington or Colorado model.  And I expect it to pass.  That is likely to open the floodgates.

We need to move to making Pot legal and regulated.  Frankly, I don't know what to do with Cocaine.  It seems more dangerous and less popular to me than Pot.  But ultimately drug cartels make almost all their profits from Pot and Cocaine.  They now make a significant amount of money off of Meth.  But imagine a world where all the law enforcement effort is taken away from the current targets of Pot and Cocaine?  Vast amounts of money and, more importantly, cover will be removed from these organizations.  There is general agreement that Meth is bad stuff.  Only bad people would involve themselves in the Meth business.  So the political cover is gone.  The resources available to the cartels are vastly diminished.  And, even if we cut way back on the law enforcement resources dedicated to going after Meth, the amount of resource focused on Meth will be greater than it is now.  In that environment it might even be possible to have some success.  Once the liquor money was taken away from the mobs they became a much smaller and much more manageable problem.  And government stopped putting out a lot of money trying to stop the liquor trade and was able to bring in a lot of money in the form of taxes and fees.  There isn't enough drug money out there to single handedly close the current Federal deficit.  But a little "Pot tax" revenue wouldn't hurt. 

Wednesday, November 14, 2012

James Bond Martini

The new James Bond film "Skyfall" just came out.  I saw it yesterday and liked it.  The imminent release of a new James Bond film got me into a Bond frame of mind so I recently reread the first James Bond book, "Casino Royale".  This book introduced the subject of the Martini into the Bond cannon.  As the books and movies rolled on we all became familiar with the James Bond take on the Cocktail Lounge classic.  It is a standard Martini but made with Vodka instead of Gin, and "shaken not stirred".  But the original "Bond Martini" specified an entirely different recipe.  I haven't reread the rest of the books that Ian Fleming wrote so I don't know where or when the above recipe came to dominate.  And the change might be traceable to the movies.  But when Bond tells a bartender early in the book he wants "a dry Martini" here is the recipe he specifies:
  • In a deep Champagne goblet
  • Three measures of Gordon's (a Gin)
  • One measure of Vodka
  • 1/2 measure of Kina Lillet
  • Shake until very cold then pour into the glass
  • Add a slice of lemon peel
  • Finally, he advises the use of "grain" Vodka, not "potato" Vodka
My question is:  Is this really a Martini?  In support of the idea that this is NOT a Martini, Bond opines later in the book that perhaps the drink should be called a "Vesper" after the name of the girl in the book.

"Casino Royale" was originally published in 1953.  Then and now the design of a "Martini Glass" has remained the same.  But in 1953 Champagne glasses looked very different than they do today.  Then they were had a very shallow bowl.  Think of a Martini glass.  But instead of a funnel shaped bowl think of a bowl of about the same depth but with a rounded bottom.  That was the long accepted proper shape for a Champagne glass.  You can see it in "Fred and Ginger" movies from the '30s.  In fact, my mother had some Champagne glasses from the '40s that differed only in that they had a hollow stem.  The stem was of a fairly narrow diameter but the very center was hollow.  This created a narrow tube of a couple of inches in length.  The tube facilitated the creation of a stream of bubbles that rose in a nearly straight line up the center of the glass.  But the bowl shape was the long accepted one.

Champagne glasses are now much taller and considerably narrower.  Why?  Nose.  The best glass for a drink that has an aromatic component is one that requires you to put your nose into a semi-enclosed space above the surface of the liquid while you are taking a sip.  The classic example is Brandy.  Some components of Brandy start evaporating as soon as it is exposed to the open air.  If you pour Brandy into a balloon glass then the volume above the surface of the Brandy is ideal for collecting these aromatic components.  Then you put your nose into this volume when you are sipping the drink.  This makes it easy for your nose to get a nice strong dose of these aromatic components.  As a result, the Brandy "tastes" wonderful.

Gin has little or no aromatic component.  So putting Gin, the principal component of a Martini, into a glass that does not have a semi-enclosed volume above the surface of the liquid works fine.  Apparently, people used to put Champagne into this same non-aromatic category.  So the proper glass was one that did not have the semi-enclosed volume.  Somewhere, well after the 1950's, someone wised up.  So we saw a shift in design to a glass that had a semi-enclosed volume.  A modern Champagne glass is not as well designed for this purpose as a Brandy snifter but it's not bad.  So, if you are drinking Champagne and you don't have access to a modern Champagne glass, go for a Brandy snifter rather than a martini glass or a classic Champagne glass.

And this brings to the end a long digression whose bottom line is that I don't know exactly what the shape of the glass Bond was recommending but it is definitely not a classic Martini glass.  That's one difference.  To see what other differences there might be let's look at the recipe for a standard classic Martini:
  • Into a small pitcher pour Gin and Dry Vermouth in appropriate proportions.
  • A small amount of ice may be present in the pitcher to keep everything cool.
  • Stir the ingredients together.
  • Decant into a cold Martini glass leaving all the ice behind.
  • Add a Green Olive on a toothpick as a garnish.

Historically, a Martini was referred to as a "Dry Martini" because it used Dry Vermouth rather than Sweet Vermouth.  But over time the use of Sweet Vermouth was discontinued in favor of Dry Vermouth and "Dry" came to mean a high proportion of Gin and a low proportion of Vermouth.  By the usual definitions of what now constitutes "Dry", Bond's recipe qualifies.  The ratio of Gin+Vodka to Vermouth is 8 to 1.  So to that extent Bond's recipe is in line with a standard Martini.  But:
  1. As noted above Bond specifies a non-standard glass.
  2. He specifies a mixture of Gin and Vodka.  A standard Martini contains only Gin.
  3. He specifies Kina Lillet, a very unusual and uncommon Vermouth.
  4. He specifies "shaken not stirred".
  5. He specifies a Lemon Slice rather than the traditional Green Olive.
This is a lot of deviation from the standard recipe.  I don't think what you end up with can properly be called a Martini.  But wait.  It gets worse.  I have given Fleming the benefit of the doubt by calling Kina Lillet a Vermouth.  But there is some controversy about that.  The original formula for Kina Lillet contained a lot of Quinine, which made it quite bitter (think Gin and Tonic).  Also, the Lillet company had been using the name "Lillet Dry" to refer to their Vermouth-like product well before the time the book came out.  And shortly thereafter, they reformulated the product to make it less bitter.  So you couldn't find "Kina Lillet" at the time Fleming wrote the book and you can't even find its modern equivalent under any name now.

Then and now, the most popular brand of Vermouth is Martini & Rossi.  And we now have lots of super premium brands of Gin.  My mother is partial to Diamond Sapphire, for instance.  And there is a whole cult around Vodka now.  The most well known super premium brand now is Stolichnaya.  I don't know if Bond would have been down with trading with the enemy.  But if he had specified "Stoli", as it is popularly referred to now, and especially if he had asked for "Stoli Elit", he would been happy to know that it is a grain Vodka (wheat and rye) and not a lowly potato Vodka.

Finally, I am not a Martini drinker but that hasn't stopped me from collecting a couple of recipes for how to make a really dry "Dry Martini".  Try them and see what you think:

Forbin Martini - This comes from the book and movie of the same name, "The Forbin Project":
  • Fill a funnel with ice.
  • Hold the Ice filled funnel over a pitcher and drizzle Vermouth over the ice.
  • Hold the funnel over a chilled Martini glass and pour Gin through the ice and into the glass.
  • Add the traditional Olive garnish.
  • Serve.
  • (Discard the Vermouth in the pitcher and the ice in the funnel).
The only Vermouth in the final product is what stuck to the ice between the Vermouth and the Gin steps.

Tugboat Martini - I got this from an old family friend:
  •  A week or more before the Martini will be served drain all the liquid out of the bottle containing the Green Olives.  Discard the liquid.
  • Fill the bottle with Vermouth instead.
  • Refrigerate the bottle with the Olive and Vermouth combination for at least a week.
  • Remove a chilled Martini glass from the Freezer.
  • Pour the Gin (hopefully also chilled) straight into the glass filling it most of the way to the top.
  • Using a toothpick skewer one or more Olives from the jar in the refrigerator and add as a garnish.
  • Serve.
Here the only Vermouth in the final drink is what sticks to the Olives.

Both of these drinks are easy to prepare.  Enjoy.

Update (08/30/2015) -

I have now reread the Bond cannon through "Dr. No" (#6 - published March 31, 1958).  At this point Bond is specifying a Martini that conforms to pretty much what we now expect.  It consists of Vodka (Polish or Russian - no more talk of potato versus grain), Vermouth, "shaken - not stirred", and the "twist of Lemon".  The proportion of the ingredients is no longer specified (apparently left to the discression of the bartender) and he has apparently left behind the Gin and the Kina Lillet of the original recipe.  If one is an aficionado of modern bar culture when it comes to Martinis it is now routine to specify Vodka instead of Gin and various twists ,including but not restricted to Lemon, are ok as a substitute for the olive.  So Bond is now main stream (except that pretty much nobody thinks the "shaken - not stirred" specification is a good idea).

And at this point in his evolution Bond's choice of other potables is now also pretty middle of the road.  The brands he specifies are a step up from bottom of the line "bar" brands but they are not anything special.  A modern Bond should be drinking some kind of super-premium single malt scotch.  The same would be true of his Vodka preference.  There are now lots of quite fancy Vodkas.  If you want to avoid Eastern Europe, for instance, you can go with Grey Goose, a French brand.  The basic version is several steps above a "bar" Vodka.  But Grey Goose also has a "VX" super-premium version that goes for about three times the price of the regular version.  If super-premium booze existed at the time, Bond (or more likely Fleming) was not familiar with it.

And, thanks to work by my brother Mike, I can also report some results on what Martini drinkers think of the Tugboat recipe reproduced above.  Neither he nor I are Martini drinkers but he has friends who are.  He prepared some Tugboat Martinis and had them do a taste test.  The results were not good for the Tugboat concept.  No one was a fan.  From this I conclude that Martini drinkers are not just looking for an excuse to drink straight Gin.  Both the Tugboat and the Forbin recipe result in a super-dry drink that is only a tiny step away from straight Gin.  For most Martini drinkers the step is not far enough.  Apparently there is such a thing as a Martini that is too dry.  Dry is good.  Super-dry is bad.

Saturday, November 10, 2012

Off the Cliff

Now that the election is over there is now a lot of talk about the "Fiscal Cliff".  Discussion of this general subject actually goes back to at least to the "lame duck" congressional session that happened between the midterm elections of early November of 2010 and the new congress being seated in early 2011.  There has been some talk among politics junkies in the run up to the election that just took place on November 6, 2012.  But with the election out of the way this subject has moved to center stage.

So what is the Fiscal Cliff all about?  Well, the "scare" version of the story is that on January 1, 2013 all kinds of bad things will immediately happen causing the economy to crash causing the immediate end of all we hold dear. As you might imagine this is not an accurate characterization of the situation.  A more accurate characterization of the situation is that if no laws are changed between now and January 1 then federal taxes will go up somewhat and federal spending will go down somewhat.  So why is this the end of life as we know it?  Because the CBO (Congressional Budget Office) estimate is that this will stall the current anemic rate growth that the U.S. economy is now experiencing and throw us into a very mild recession.  Do we know for sure this is going to happen?  No!  It's just a best guess by a usually reliable source.

So, assuming politics in our nation's capital continues to gridlock, what actually happens?  Several things:
  • The Bush tax cuts expire.  This will cause tax rates to be raised on pretty much everybody.  If you currently pay income taxes, those taxes will likely be higher.
  • The Obama Social Security withholding rates go back up to the rates they were a few years ago.  This means that an additional two percent of most people's salary will be withheld.
  • The "sequester" will kick in.  The Defense Department budget will be cut by $55 billion per year.  Funding for "non-defense discretionary spending" will be cut by $55 billion per year.  These are characterized as "draconian" by the people who passed the bill that causes these cuts.
These are the major provisions.  There are also a whole bunch of provisions that have less impact or apply only to small groups of people.  It is also important to realize that the Fiscal Cliff is not a single event.  Provisions of several bills expire at the end of 2012.  Several other bills have provisions that take effect in 2013.  They all get lumped together because they all affect either taxes or spending and they all take effect within a day or two of each other.

Finally, there is a theoretically unrelated event that will affect the federal budget that will happen at roughly the same time and often gets lumped in with everything else.  The U.S. has a "debt ceiling" law.  The federal debt is only allowed to raise to a certain level.  We are near that level.  There are various tricks and gimmicks that can be used to keep things going once the limit is reached.  But this trickery will only work for a short period of time, a few months.  The best current estimate is that the debt ceiling needs to be raised by February 2013.  There was a big fight the last time the debt ceiling needed to be raised.  There is no reason to think that this time around will be any different.  Many people have suggested that a debt ceiling increase be rolled into the same legislative package that would address the fiscal cliff.

So how did we get here?  It actually goes back to the early part of the Bush '43 Administration.  They wanted to do a big tax cut.  But whenever a tax cut is under serious consideration the CBO does an analysis of the impact over a 20 year time horizon.  Had the CBO done this the number would have been truly scary and it would have been harder for the bill to pass.  So the Bush tax cut was made "temporary".  It would expire in 2010.  Since taxes and, therefore, revenues would revert to the old amounts, the cost of the tax cut was way less scary and the bill was passed and was signed into law.  This worked so well that the Bush Administration pulled the same trick with s second tax cut they put through a couple of years later.  They also made it expire in 2010.  Now notice that 2010 is after the end of a two term Bush Administration.  It becomes someone else's problem.  And the cynical calculation was that the tax cut would never actually get repealed so the Administration got to have their cake and eat it too.  So far the prediction is working out.  A deal was done in the 2010 "lame duck" session to extend all provisions of both tax cuts for two more years.  So now they expire at the end of 2012.

When the Obama Administration came in they were faced with an economy that was truly a disaster.  Their first response was to pass a "stimulus" bill.  One of the provisions of this bill was a "temporary" reduction in Social Security withholding.  Normally 6.2% of an employee's salary is withheld for Social Security.  This is matched by the employer, except that self employed people have to pay the "employer" part too.  The "stim" reduced the employee amount to 4.2%.  This saved an individual making $50,000 per year $1,000.   As part of the deal that was made in the 2010 lame duck this provision was extended for 2 years so it expires in 2012 now too.

As a result of a political deal made a couple of years ago a "super committee" consisting of equal numbers of Democrats and Republicans and equal numbers of Senators and Representatives was formed.  To encourage them to come to a bipartisan deficit reduction deal a provision in the enabling legislation was included that said if they failed then starting in 2013 "draconian" (that was the design objective) cuts would be automatically mandated.  To spur on Republicans one of the cuts was $55 billion per year to the Defense budget.  To spur on Democrats the other cut was $55 Billion per year to "non-defense discretionary" programs.  What is in and out of this latter category is spelled out but it is complicated.  It's things like the NASA, Education, etc.  Social Security and Medicare were specifically exempted.  Needless to say, the super committee failed so the cuts are scheduled to go into effect if something is not done right away.

I have left out a lot of detail and I'm sure I have put most of you to sleep anyhow.  So let's just move on to what should be done.  We are now living in a political world at the federal level where everything is pushed to the limit so what should be minor or routine actions are blocked or delayed to the last minute and beyond.  If we had a functioning political system many of the components of the fiscal cliff would have long since been taken care of.  I lay almost 100% of the blame for this brinkmanship on the doorstep of the Republicans.

As a simple example, they forced a confrontation the last time the debt ceiling need to be raised.  This has historically been a routine activity.  There is usually some posturing but neither side does anything to stop the ceiling from being raised in a timely and predictable manner.  The last time around the Republicans brought the entire country to within hours of a total default of the government.  And that was after the Treasury pulled every trick and gimmick that anyone could think of to stave off what would normally have been the default date.  I could cite several other examples of Republican brinkmanship.  But if you don't want to agree with my characterization of the "debt debacle" then you aren't going to buy my analysis of the other events.  And, if you agree with my "debt debacle" analysis, then you can take my word for it that the other events are there and happened too.

So it is important to recognize that we have not only a "fiscal cliff" problem but we also have a Republican intransigence problem.  If we don't do something about both of them we don't make any real progress.  So what should be done?

Option 1 is to do what the Republicans say they want.  That would be to continue all the tax cuts (the Bush tax cuts, the Obama tax cuts, and the other tax provisions I haven't gone into).  They would also repeal and replace the "sequester".  They would make no cuts to the Defense budget.  Instead they would make very large cuts to "non-defense discretionary" and additional cuts to Social Security, Medicare, and Medicaid.  That is what they would do as best I can make it out.  They have not been very specific.

Option 2 is to do what President Obama wants to do.  He too has been pretty vague.  He would increase taxes on people making more than $250,000 per year.  He would preserve all the tax cuts for people making less.  As far as I can tell, he would leave the sequester in place.  This is good as far as it goes.  I am all in favor of the increase in taxes on rich people.  The problem is that it does not raise enough money.  I think we should raise taxes on the wealthy anyhow on fairness grounds.

Option 3 is to go off the cliff.  Let everything expire or go into effect.

Before continuing, let me state the obvious.  All of these pure positions are seriously flawed.  It is a bad idea to do any of them in their purest simplest form.  But they give us a starting point for discussion.  So let's discuss.

Option 1 is the most ridiculous.  The oratorical way the Republicans square the circle on this proposal is they offer to close loopholes in the tax code.  I am all in favor of this as a general principle but the devil is in the details.  And so far the Republicans have provided no details.  Well that's not completely true.  One Republican or another has taken pretty much all the big loopholes off the table.  My idea of "low hanging fruit" is various loopholes that favor the Oil industry.  Democrats have put together bills that close one or more of these loopholes.  None of these efforts has garnered a single Republican vote.  Two big loopholes that affect individuals are deductions for education expenses and mortgage expenses.  Various Republicans have taken both of these off the table.  There is the "carried interest" loophole.  This allows Hedge Fund managers to treat their multimillion dollar bonuses as Capital Gaines taxed at 15% rather than as ordinary income taxed at 35%.  Republicans have shot down the idea of closing the carried interest loophole.

In fact, you can find various Republicans taking all the big loopholes, corporate and individual, off the table at one time or other.  And no Republican has publicly supported eliminating a single specific loophole.  I am absolutely convinced that had Mitt Romney won the election and succeeded in getting his tax and budget programs enacted into law then no loopholes would have been closed, defense spending would have gone up, tax rates might have been cut, discretionary spending and entitlements would have been cut, and the deficit would have grown enormously.  That's what history says Republicans do when they get into the White House.

Option 2 is better but not by a lot.  The President has been short on detail in public.  As I have indicated above, raising rates on high income people is a good idea but it only solves a small part of the problem.  Apparently the President tentatively agreed to a package that included entitlement cuts (styled as "reforms") and cuts to discretionary programs.  But we don't know the details.  If the Republicans actually came up with some loopholes to close, and they were reasonable loopholes, I'm sure the President would go along with them.  Besides the ones listed above, there is another loophole I would like to see closed.  I would like for mortgage interest to be only deductible on a singe primary residence, as in you would have to live in the house for it to be deductible.  This would not bring in a lot of money but I still think its a good idea.

Now lets talk about options 3.  Actually, I want to talk about two variants.  Option 3a is the "limited" version.  We let everything go into effect.  That defines a new base case.  Then, after the new congress goes into session in early January, we enact legislation reversing or modifying the components we don't like.  This is the version advocated by Lawrence O'Donnell of MSNBC, for instance.  Why would we want to do this?  In a word (actually two) Grover Norquist.  Norquist put together a "no tax increases, ever" pledge and got almost all Republicans to sign it.  Increasing the tax rate on rich people counts as a violation of the pledge and would result in bad things happening to the Republican in question, if the past is any guide.  Enacting tax increases on rich people (i.e. the Obama plan) violates the pledge if it is done before January 1.  But after January 1 all those higher rates have already gone into effect.  So leaving the rate high on rich people is not a violation of the pledge.  And cutting the rates on non-rich people is fine and dandy.  Finally, if the new laws are passed and put into effect in the first month or two of 2013 the damage to the economy is tiny.  And many provisions can be made retroactive to January 1, causing even less harm to the economy.

The other version, option 3b, is to let the various provisions expire or go into effect and then do nothing.  This is supposed to be very bad for the economy.  But it might not be.  I cite the example of the first couple of years of the Reagan Administration.  Reagan fired the Air Traffic Controllers in a labor dispute.  The Fed drove up interest rates.  These, combined with some other actions, drove the economy into recession.  But it was a short sharp recession.  The economic problem at the time was a wage/price spiral that resulted in high inflation.  The recession cured the inflation and within two years the economy started growing robustly.

The Republican view is that the economy is doing poorly for two reasons.  First, the deficit is too high.  Second, there is a lot of economic uncertainty.  Option 3b attacks both of these issues.  It would cut the deficit  by more than in half in the short run and put us on track toward a balanced budget in the long run.  That's what the Republicans say they want.  Since this plan requires no new legislation is it definitely feasible in this "gridlock" political environment.  So uncertainty is removed.  People may be unhappy with the higher taxes but they know what the future looks like and can plan accordingly.

Large U.S. corporations are literally sitting on more than a Trillion dollars of cash.  If, due to the certainty of the budget and tax situation, they start spending this pile of cash then the economy could take off and quickly.  The CBO analysis of this option assumes there will be no change in corporate behavior and that individuals will cut back on their spending because they will have less disposable income.  But if the economy picks up due to higher corporate investment then this will put money directly into the pockets of people hired by these corporations.  Their income will go up so their spending will go up.  If the economy picks up in general then the income of the employees that are not directly involved in this increased corporate spending may well see their income go up more than enough to compensate for their higher tax load.  So we could easily see spending rise rather than dip and the economy growing rather than shrinking.

So option 3b may not be as bad as the CBO estimates.  But let's say the CBO is right.  Everyone will adjust.  So I predict a short mild recession.  After we exit from the recession we have a federal government that is on a sound and sustainable course.  So growth should be robust and sustained.  So even the bad version of options 3b is not so bad.

I find it very unlikely that either options 1 or 2 will happen.  It is possible that some blend of options 1 and 2 will come out of a genuine effort by the Republicans to compromise.  But it is very hard to imagine such a deal coming together quickly enough to be implemented before the end of the year.  So I see option 3 as what we will see.  And I don't see it as all that scary an option.  So what will we actually see, option 3a or option 3b?  I actually favor some version that is much closer to 3b than 3a.  I have skipped over a bunch of details when outlining the situation.  And, while I am comfortable about all of the major provisions that I outlined above, there are several minor provisions that I think need addressing.

One is the AMT, Alternative Minimum Tax.  This was a good idea when it was first enacted.  It was designed to close some loopholes used only by the rich.  But the provisions were not indexed.  As inflation has worked its magic more and more middle class people, people not intended as targets of the AMT provisions are effected.  Congress had dealt with this by enacting a series of annual AMT "patch" laws.  But the AMT needs to be fixed or repealed.  The problem is a political one.  A permanent AMT fix is scored by the CBO as a big tax cut as the CBO is forced every year to assume AMT is part of the baseline and, since it hits a lot of people, it theoretically raises a lot of revenue.  So the political problem is getting beat up about the high theoretical cost of fixing it.

Another problem is the "doc fix" to Medicare.  A few years ago it became obvious that doctors wouldn't take Medicare patients because the compensation rate was too low.  So the rate was raised, again temporarily, by 27%.  It needs to be permanently raised.  Again, on one has wanted to take the political hit for "blowing up the medicare budget" that a permanent fix would entail.

I have mentioned the debt limit above.  It needs to be raised.

The implementation of the "sequester" is a robotic "cut everything by the same amount".  I think it would be healthy to cut the Defense budget by $55 Billion a year.  But I would like a more intelligent approach to how the money is cut.  Barney Frank has suggested we can scale back our overseas commitments, especially troops in Europe and Japan, by a lot safely.  I agree.  This also cuts the money shipped over seas, where it doesn't help our domestic economy much.  There are weapons systems (e.g. tanks) that can be cut and bases that can be closed.  The money is there.

I am less happy about the "non-defense discretionary" cuts.  But if they are the price for the rest of the package I can live with them.  But again the "cut everything by the same amount" rule needs to be replaced with cuts that total to the same amount but are applied more intelligently.  Personally, I would like to take a big whack out of farm subsidies.  Almost all of the money goes to large corporate farms.  And, at the other end, I see no reason to subsidize small hobby farms.  Most farms that are small enough to look like a traditional family farm are actually hobby farms.  The group in the middle, relatively small farms that do support the rural lifestyle, are too hard a target to hit.  And a lot of them are already in some commodity that is not part of the farm subsidy program.  The only parts of the system that look like they might be a good investment to me are the extension service and research programs at "ag" colleges.  I don't know where the Department of Homeland Security fits in all this.  But I think there is more "waste, fraud, and inefficiency" in this department than in the Department of Defense, normally the "waste, fraud, and inefficiency" poster child.  I think a big whack can be taken out of the Homeland Security budget and, if done intelligently, would result in an increase in the security of the homeland.

There are numerous fixes that should be made to other items affected by the fiscal cliff.  But you have to ask yourself:  Are these fixes more or less likely to happen if we avoid going off the cliff?  I find it extremely hard to believe that they will be approached in an intelligent way if some grand bargain is made and going off the cliff is avoided.

So let's all go off the cliff.  It should be a hell of a ride.