Russia will cut its army of bureaucrats by more than 100,000 within the next three years, saving 43 billion rubles ($1.5 billion), Finance Minister Alexei Kudrin said on Monday. “We assume more than 100,000 federal state civil jobs will be cut within three years. The government has already included a schedule for cutting the number of federal civil servants in the draft budget for the next three years and coordinated it with ministries and agencies,” Kudrin told President Dmitry Medvedev, who in June ordered a 20 percent cut in the number of bureaucrats. Under the government plan, ministries and agencies will have to sack five percent of their staff in 2011 and 2012, and 10 percent in 2013. …In the last three years, the number of bureaucrats in the federal government had increased by nearly 20,000, in regional governments by 60,000 and at municipalities by 50,000, he said.

As an economist I am the first to admit that sometimes the methods and practices of economics can end up creating confusion rather than understanding. The National Bureau of Economic Research’s (NBER) recent announcement that the recession ended in June 2009 is one such example.

At the heart of this confusion is a difference in how the public sees a recession and how NBER defines it. Most importantly, NBER views recessions as contractions. Simply, “Is the economy growing or not?” NBER uses that framework to then date business cycles from their peak to their trough. For this reason, NBER will often date the beginning of a recession during a time when the economy feels strong (at its peak) and date the end of a recession when it feels weak (when it’s at the bottom).

Since this method seems at odds with how the public views the economy, why do economists use it? Quite simply, it is a lot easier to spot, and agree on, turning points in the economy than it is to agree on when growth moves from weak to moderate to strong.

OK, enough on definitions. Did we actually hit bottom in Summer 2009? Looking at a variety of economic measures, I think it’s clear we hit bottom earlier–more like Spring 2009. Again, I must emphasize: Hitting bottom is not the same thing as “everything is fine” — just ask anyone who’s personally hit bottom. Just two examples of why I believe the contraction ended in early 2009; first: consumption, as one can see from the chart, actually hit bottom hear the end of 2008.

One of the defining characteristics of the current recession has been continued weakness in the labor market. I would go as far as to say there has almost been a disconnect of the labor market from the general economy. All that said, looking at the trend in layoffs and discharges indicates that separations from the labor force peaked near the end of 2008. The graph below also illustrates why some are worried about a double-dip, as layoffs spiked again in the middle of 2010, although most of that is driven by the 2010 Census hires.

The point to all this is not to argue that the economy isn’t weak. It obviously still is. However, the economy has been growing, for at least a year, and under many measures, longer. Interestingly enough, most measures of the economy hit bottom before a dime of stimulus money was spent. The above charts are from the Federal Reserve of St. Louis FRED website. Don’t take my word on these two charts. Look at lots of other measures. Not all, but most other measures seem to tell the same story.

Today POLITICO Arena asks:

Does the Republican Party have a sore-loser problem?

My response:

Lisa Murkowski is Exhibit A of the GOP sore-loser syndrome. Poor little thing: She thought she was entitled to the seat. After all, Daddy gave it to her.

But she’s not alone: Charlie Crist, Bill McCollum, Bob Bennett, Bob Inglis, Mike Castle, Dede Scozzafava — all sitting on the sidelines, running against the primary opponents who beat them, or even endorsing the Democrat in the race. They confirm the Tea Party contention: They have no clue about the changes taking place beneath their feet. Lisa Murkowski talks about the bacon she’s brought back to Alaska. But unlike the people marching in Paris to protest moving the retirement age from 60 to 62, the growing Tea Party movement is marching across America with signs that say “We Want Less!” In other words, get out of the way so we can be free to plan and live our own lives.

Matt Kibbe of FreedomWorks, co-author with Dick Armey of the new book Give Us Liberty: A Tea Party Manifesto, has it exactly right when he says: “What you’re seeing in the Republican primaries amounts to a hostile takeover of the Republican Party – and I mean that in the technical sense of replacing a failed management and tired ideas.” It began, one could say, with slowly growing opposition to the two Bushes, who squandered the Reagan Revolution. It continued with the rejection, ultimately, of the Republican Congress that came to office in 1995, which in time forgot why it was elected as members grew far too comfortable in office. Today, the opposition to “business as usual” — to Republicans as “Democrat Lite” — has a full head of steam. A two-party system works only if the parties are distinct, standing on different principles. It’s taken a long time — since the New Deal — but that’s what we’re moving toward, and that’s good, because it gives voters a real choice.

Here is the test of whether we still live in a society governed by the rule of law: Will anyone at the FBI be fired over the latest report out of the Office of the Inspector General?

Let’s review. Earlier this year, a comprehensive OIG report revealed that for years the FBI had ignored the paper-thin procedures demanded by our National Security Letter statutes to obtain sensitive telecommunications records of thousands of Americans, not just without a court order—because apparently we’re fine with that now—but without any kind of legitimate process at all. With nothing more elaborate than a Post-It Note requesting the data. As far as the public record is concerned, nobody has suffered any consequences for this massive abuse of the public trust.

Now we learn that an FBI supervisor, in an exercise of spectacularly poor judgment, sent a rookie out to monitor an antiwar rally—evading the charge of monitoring Americans based exclusively on the basis of First Amendment protected activity only because of the laughable pretext that said rookie was there to eye the crowd for any international terrorists who might be in attendance. Fine. But when Congress got wind of this and began to inquire into why this had occurred—and why said rookie had filed a report on “antiwar activity” that focused on whether any persons of apparent “Middle Eastern descent” had been involved—the OIG found that someone at the FBI had utterly fabricated a retroactive justification for the investigation, involving dubious “terror suspects” that nobody had actually believed at the time might be present at this rally.

According to the FBI, this fabrication was then offered up by FBI Director Robert Mueller before the Bureau’s overseers in Congress. This leaves us with a limited number of possibilities. One is that the head of the FBI was aware of and welcomed what the OIG determined to be a complete invention designed to cover up for an improper investigation. If that’s what happened, the head of the FBI committed perjury and should be prosecuted for it. But the OIG doesn’t believe that’s how it went, and I’m inclined to believe them: It would be irrational to risk perjuring oneself before the Senate Judiciary Committee over a minor error like this, however foolish.

But then someone gave the FBI director a pack of lies to feed to Congress, and the OIG was inexplicably unable to trace this fabrication to its source—which even allowing for the FBI’s massively dysfunctional computer systems seems implausible. So now we have a pressing question: If we don’t think the head of the FBI decided to lie to Congress, who concocted the lies he told them? Are we to believe that the nation’s top cops are either so inept or so indifferent to the question that they can’t answer it? I suspect they very well could find out if they were so inclined. If they don’t, and if there are no consequences for this clumsy cover-up, why should we believe that congressional oversight of intelligence will ever discover or check abuse of investigative power? The message will be clear: Concoct lies to protect your bosses, and your colleagues will wink at your deception, perhaps grateful for having been spared the obligation of making up their own lies. One lie out of a hundred might be called out in an OIG report—they only have so much time and so many resources—but even if it is, no harm will come of it. The investigators will be mysteriously unable to identify the liar, and everything will blow over. Why risk telling the truth? The initial fuss will subside, and Americans will soon enough be distracted by the next episode of Jersey Shore.

I think we’ve had quite enough of that. Someone at the FBI decided that it was a good idea to lie to Congress in order to cover up improper monitoring of an unpopular political group. In this case, it was pacifists, but who knows who’ll be next. If brazen lies aren’t punished the one case out of a dozen or a hundred that draw the attention of the overseers, why should they ever bother to observe the rules? So watch the Department of Justice. If someone is fired over this, maybe we still live in a country governed by the rule of law. If not, they’re convinced we’re so dim and besotted by reruns of Friends that they no longer even feel obliged to put up a good show.

Thanks to the Obamacare legislation, we already know there will be a new 3.9 percent payroll tax on all investment income earned by so-called rich taxpayers beginning in 2013. And the capital gains tax rate will jump to 20 percent next year if the President gets his way. This sounds bad (and it is), but the news is even worse than you think. Here’s a new video from the Center for Freedom and Prosperity that exposes the atrociously unfair practice of imposing this levy on inflationary gains.

The mini-documentary uses a simple but powerful example of what happens to an investor who bought an asset 10 years ago for $5,000 and sold it this year for $6,000. The IRS will want 15 percent of the $1,000 gain (Obama wants the tax burden on capital gains to climb to 23.9 percent, but that’s a separate issue). Some people may think that a 15 percent tax is reasonable, but how many of those people understand that inflation during the past 10 years was more than 27 percent, and $6,000 today is actually worth only about $4,700 after adjusting for the falling value of the dollar? I’m not a math genius, but if the government imposes a $150 tax (15 percent of $1,000) on an investor who lost nearly $300 ($5,000 became $4,700), that translates into an infinite tax rate. And if Obama pushed the tax rate to almost 24 percent, that infinite tax rate gets…um…even more infinite.

The right capital gains tax, of course, is zero.

Canada’s private air traffic control system, Nav Canada, recently received its second “Eagle Award” from the International Air Transport Association. The Eagle Awards “honor air navigation service providers and airports for outstanding performance in customer satisfaction, cost efficiency, and continuous improvement.”

In naming Nav Canada “the best” ATC, the IATA said the following in its press release:

Nav Canada is a global leader in the efficient implementation and reliable delivery of air traffic control procedures and technologies. It actively engages its customers at all levels in regular and meaningful consultations. “The performance of Nav Canada has been enhanced by the right technical and operational investments following extensive cost/​benefit analyses. Nav Canada’s effective management has allowed the company to reduce its charges in 2006 and 2007, and freeze them at that level ever since,” Bisignani said.

Unlike the government-run ATC system in the U.S., Nav Canada is a privately run, not-for-profit corporation. As a Cato essay on privatization explains, the U.S. system leaves a lot to be desired while the private Canadian system has been a tremendous success:

The Federal Aviation Administration has been mismanaged for decades and provides Americans with second-rate air traffic control. The FAA has struggled to expand capacity and modernize its technology, and its upgrade efforts have often fallen behind schedule and gone over budget…The GAO has had the FAA on its watch list of wasteful “high-risk” agencies for years…Canada privatized its ATC system in 1996. It set up a private, nonprofit ATC corporation, Nav Canada, which is self-supporting from charges on aviation users. The Canadian system has received high marks for sound finances, solid management, and investment in new technologies.

Critics of privatization claim that it’s “too risky” to place such activities in the hands of the private sector. Canada’s success undermines that argument. In fact, air traffic control is far too important for such government mismanagement and should therefore be privatized. In doing so, policymakers should look to our neighbors to the north as a model for how to get the job done right.

See this Cato essay for more on airports and air traffic control.

The U.S. Senate may vote in the next few days on a piece of legislation known as the DREAM Act. The Development, Relief and Education for Alien Minors Act would offer legal status to as many as 2 million students who are currently in the United States without authorization, many of them Hispanic immigrants who entered the country illegally with their parents.

The act would legalize students who entered the United States at least five years before its passage and were under the age of 16 when they entered. A practical effect would be to make many of these students eligible for in-state tuition at colleges and universities.

The DREAM Act is not a perfect call for those of us who believe in limited government, but in our less-than-perfect world, the act would make a bad situation better. As I wrote earlier this year in a post on the Cato on Campus web site:

Ideally, there would be no reason to propose the DREAM Act if there were more opportunities for legal immigration and if the government were far less involved in providing higher education. Far fewer minor children would enter the country illegally if more work visas were provided for their parents to enter the country legally. In-state tuition and government aid would cease to be a major issue if responsibility for providing higher education shifted more to a competitive private sector.

Given our current system, however, the DREAM Act would somewhat improve a bad situation. It would extend legal status to a group of people who have completed high school, typically speak English well, and are thus able to pursue higher education or better support themselves in the labor market. It would help to maintain a healthy growth rate of the U.S. labor force and provide entrepreneurial spirit associated with immigrants.

The DREAM Act would also extend more equitable treatment to students whose lack of legal status is no fault of their own. Their parents, although undocumented, have usually paid the same sales and property taxes paid by legal residents with similar incomes. The DREAM Act would lift thousands of students out of a legal netherworld and allow them to improve themselves while at the same time contribute to a more productive United States.