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17 апреля 2013, 05:50

Marathon

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I posted all I can say publicly at Skippy. And even that wouldn't work at a family blog like this one. The rest are jokes that I am told--undoubtedly correctly, but lapsed traders are difficult to retrain*--are "too soon." The Phantom Scribbler came out of her retirement (first post in more than eleven months), though, so you should Go Read Her. _______________ As for the other Issue of the Day, I repeat what I said chez Duy (whose summary here is concise and informative): If I told you just those three "Stylized Facts": 1. Average of -0.12. Median of 1.03. Positive:Negative ratio is 5:2 would you (a) immediately start talking about the "clear lack of growth"? or (b) even more immediately say, "There must be an outlier in the data. What's the kurtosis? I don't believe I know anyone who would do (a). If I were teaching Econ 301 and someone presented R&R's data--see the Konczal link above--and came to their conclusion, they would be lucky to be told to do the assignment over.*What's the difference between a bond and a bond trader?  A bond matures.

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17 апреля 2013, 02:37

Migration will be Wed. early morning.

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After taking care of some technical stuff, MEV thought it best to migrate during slower traffic time than this afternoon's faster pace.

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16 апреля 2013, 07:47

Doggett fighting for fairness on Tax Day!

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by Linda BealeDoggett fighting for fairness on Tax Day! On Monday, Congressman Lloyd Doggett, a long-time member of the House Ways and Means Committee, releases a GAO report showing the continued advance of corporate tax expenditures that allow corporations to pay little or no taxes year after year. “Of the many Americans who are right now getting their taxes ready to file, I doubt there are very many that think they will be able to pay a mere nickel on the dollar.  But there are many of America’s largest corporations that continue lobbying the Administration, and this Congress to let them pay a nickel on the dollar in taxes on a significant portion of their earnings.  Over a three-year period, 30 Fortune 500 companies devoted more of their monies to lobbying this Congress than they did in paying taxes to the Treasury. Some have a negative tax rate. Many of our largest corporations are paying effective rates that are single digits.  On Monday, he will again propose legislation to deal with the way corporations can so easily avoid tax liabilities in the US. A press release from Doggett's office lists the following pieces of legislation to be introduced:The Stop Tax Haven Abuse Act aims to close several different loopholes by deterring the use of tax havens for tax evasion and strengthening the enforcement of our tax laws.  The bill would also require SEC-registered corporations to report annually on the number of employees, sales, financing, tax obligations, and tax payments on a country-by-country basis, shedding more light on the extent of use of tax havens.  This bill also provides for additional penalties for failing to disclose offshore holdings and for promoting abusive tax shelters. The International Tax Competitiveness Act addresses a large and growing area of tax abuse: the practice of developing a trademark, patent, or copyright in the U.S. and then transferring that intellectual property abroad to avoid taxes on the vast income it generates.  This bill would treat income from the U.S. intellectual property as U.S. income and tax it accordingly.    The Fairness in International Taxation Act would end the current practice of treaty shopping to avoid U.S. taxes.  The United States has tax treaties with a number of trading partners that reduce the amount of taxes that a U.S. based entity owes on interest and royalties paid to a foreign parent.  Since many of these foreign parent companies are set up in tax havens, these companies now bypass U.S. taxes by routing the payment through a tax-treaty country that then just transfers the funds to the tax-haven parent.  This bill would end that legal fiction and say that you only get the tax-treaty discount if the parent company is actually located in a tax-treaty country. Doggett has tried to get Congress to act on corporate loopholes for more than a decade.  The lobbying money has enormous influence.  Just as in the gun control arena, where a majority of Americans want stronger gun controls but the manufacturer of weapons want lax provisions, most Americans think that corporations ought to pay a larger share of taxes but Congress is heavily influenced by lobbyists who wine and dine staffers and provide numerous purported "educational" briefings on what Big Business wants. Each of these legislative proposals has merit.  Of particular interest is the "international competitiveness" provision, which would finally make some inroads in corporations' ability to move intangible properties developed in the US into tax haven countries in order to eliminate taxes.  We have for too long relied on an outdated transfer pricing mechanism for this kind of transfer.  It doesn't work, since no company would ever actually sell intellectual property that is the core of the company's business.  These cross-border transfers of IP are shams, and we should finally legislate to prevent this . cross posted with ataxingmatter

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16 апреля 2013, 05:50

Farm subsidies and entrenched wealth

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Lynne Kiesling writes Farm subsidies and entrenched wealth at Knowledge Problem:Veronique de Rugy has a great argument for ending farm subsidies in the April issue of Reason (and yes, do read the whole thing, well worth your time). Farm subsidies are the canonical example of the dynamics of Mancur Olson’s Logic of Collective Action — concentrated benefits and dispersed costs lead to the persistence of inefficient government policies. So canonical, in fact, that I used them just last week in my micro principles class to teach my students about public choice theory and applying economic tools and reasoning to studying decisions we make collectively through political processes. One feature of Vero’s argument that distinguishes it from others is that it follows this process to its logical, disturbing conclusion for income distribution. Farm subsidies have existed for 80 years, and while their initial intent was to assist struggling farmers during the Depression, their success at doing so has created an entrenched group of land-owning farmers who are now wealthy, but fight against attempts to reduce their subsidies. While the number of farms is down 70 percent since the 1930s—only 2 percent of Americans are directly engaged in farming—farmers aren’t necessarily struggling anymore. In 2010, the average farm household earned $84,400, up 9.4 percent from 2009 and about 25 percent more than the average household income nationwide. What’s more, a handful of farmers reap most of the benefits from the subsidies: Wheat, corn, soybeans, rice, and cotton have always taken the lion’s share of the feds’ largesse. The Environmental Working Group (EWG) reports that “since 1995, just 10 percent of subsidized farms—the largest and wealthiest operations—have raked in 74 percent of all subsidy payments. 62 percent of farms in the United States did not collect subsidy payments.”

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16 апреля 2013, 01:57

Boston Marathon bombing

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My son has been called in where he works in Boston for triage of injuries . My thoughts and prayers go to the injured.   I and family were there just yesterday. Visit NBCNews.com for breaking news, world news, and news about the economy

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15 апреля 2013, 21:09

Okay Fine, Let's Call Investment "Saving." Or...Not

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I really like Hellestal’s comment and linguistic take on this whole business: I’m comfortable changing my language in order to communicate. I have very little patience for people who aren’t similarly capable of changing their definitions. This discussion is really about the words we use to describe different accounting constructs. Nick totally gets that as well. So I’m ready to say, “fine, let’s call investment saving.” That’s perfectly in keeping with the very sensible understanding found in Kuznets, father of the national accounts. He characterized real capital — the actual stuff we can use to create more stuff in the future — as “the real savings of the nation.” (Capital in the American Economy, p. 391.) So when you spend money to produce something that has long-lived (and especially productive) value, you’re “saving.” But still, I gotta wonder: why don’t we just call it…investment? Because this S=I business confuses the heck out of everyone. Some of the smartest econobloggers on the web have spilled hundreds of thousands of words over the last several years trying to sort out this confusion. I’ve read most of them, and I’m still confused. And I’m quite sure that all non-economists who’ve looked at this (and many or even most economists) are as well. And that’s not a surprise. Here are a few reasons why: 1. When you invest in real assets, you’re spending. That’s why it’s called investment spending. So spending = saving. Really? 2. When you pay someone to build you a drill press, you’re saving. When you don’t eat some of this year’s corn crop, you’re saving. When you pay off some of your money debt, you’re saving. When you don’t spend some of the money in your checking account, you’re saving. Each of these is true within a given (usually implicit) balance-sheet/income-statement accounting construct. But are they anything like the same thing? 3. As I showed in my last post, f you look at the “real” domestic private sector — households and nonfinancial businesses (most people’s implicit default context) — the amount of saving (income minus expenditures) has absolutely no relationship to the amount of investment spending. Saving is always insufficient to “fund” investment. And the changes in the two measures don’t move together, either in magnitude or direction. (Aside from the long, multi-decadal growth in both as the economy grows.) 4. When you “save” by investing, you decrease the amount of money on the left-hand (asset) side of your balance sheet, while increasing the amount of real assets on that tally. Your total assets are unchanged. Have you saved? 5. When you pay someone to write a piece of software, you get a long-lived real asset. You’ve saved. But the money you gave them is income for them, so it contributes to their (money) savings as well. Do you double-count those savings, or did “the economy” get that software for free? 6. Investment means “gross investment” — all the money spent on long-lived goods, including replacement of long-lived assets that have been consumed in the period (through use, decay, and obsolescence, and — for inventory of consumer goods — actual consumption). But in KuznetsWorld, shouldn’t we be talking about net investment — the additions to our stock of long-lived assets? Gross consumption minus consumption of fixed assets (and inventory changes)? Shouldn’t we call net investment “saving”? I know: there’s (at least apparent) confusion in some of these, but that’s rather my point. And there are answers to all of these in the context of S=I. (All of them, I think, based on the flawed [neo]classical accounting constructs embodied in the NIPAs. That’s my next post.) I’ve read them all, every which way from Sunday. But do they help anybody understand how the economy works, or…quite the contrary? If they do, why do all those econobloggers feel the need to worry at this, constantly? I’m not sure this really solves the problem, but I’d like to suggest that saving should mean what everybody in a monetary economy means when they use the word: money saving. Monetary income minus money expenditures. In dollars, or whatever. (And while we’re about it, when you take out a loan or spend out of your savings, let’s call those “borrowing” and “spending,” not “dissaving.”) Meanwhile investment (in economics discussions) should mean what economists mean when they use the word: “spending to create fixed assets and inventory.” (Because the national accounts only count spending on structures, equipment, software, and inventory as investment.) And actually, that’s what it already means. Why do we need to call it saving? Cross-posted at Asymptosis.

15 апреля 2013, 20:14

Wow. Seriously, Chris Cillizza and Sean Sullivan? Seriously??

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Am I misunderstanding (certainly a possibility), or do the Washington Post’s Chris Cillizza and Sean Sullivan write an entire article based on a really obviously ridiculous conflation of two separate concepts: what tax law is, and what tax law should be? The article, titled “Mitt Romney was right (on taxes),” chastises the public for hypocrisy in believing, on the one hand, by wide poll margins, that people should do whatever they can to legally reduce their taxes as much as possible, yet on the other hand disapproving of politicians (especially wealthy ones) doing exactly that.  These writers use two examples: the respective cases of Mitt Romney and Barack Obama, the latter who just released his newly-filed tax returns for last year showing that he and his wife paid federal income taxes at a rate of 18.4%.   About Romney, they write: The two-time presidential candidate, whose considerable wealth made the release of his tax returns a focal point of the 2012 campaign, insisted that he paid what was required but no more. “I pay all the taxes that are legally required and not a dollar more,” Romney said at a debate in January 2012 just prior to releasing his 2010 and 2011 returns. “I don’t think you want someone as the candidate for president who pays more taxes than he owes.” Eighty-five percent of the American public should have agreed with Romney. But, of course, they didn’t. Romney was cast as trying to game the system for the benefit of he and his wealthy friends. In a February 2012 Washington Post-ABC News poll, two in three Americans said Romney did not pay his fair share of taxes (the public was split over the question in the fall). And a majority of voters in the 2012 exit poll said that Romney’s policies would generally favor the rich and he lost that portion of the vote overwhelmingly. About Obama, the say, “The Drudge Report, a popular conservative-leaning aggregation site, quickly went with a banner expressing incredulity at the 18 percent rate. Conservatives on twitter were similarly disgruntled.”  As if it’s the general public rather than the far-right starve-the-beast crowd that’s shocked.  And as if it’s even clear that the Drudge Report writer’s incredulity is about Obama’s paying only the legally required amount rather than the lowness of the legally required amount.  The headline, which is not attached to a story, best as I can tell, but instead simply links to the Wall Street Journal news report about Obama’s tax return, reads, “Obama only pays tax rate of 18%?”  Well, yes.  That’s what Obama is actively trying to change: the lowness of the federal income taxes paid by the wealthy. That much is obvious.  Obama campaigned on a promise to raise federal tax revenues obtained from the wealthy.  Romney campaigned on a promise to lower the tax revenues obtained from the wealthy, who are, y’know, jobs creators who took risks.  Risks!  Including, for many of them, such as Mitt and Ann Romney themselves and, especially, their sons, being born into a wealthy family.  Warren Buffett is not a politician, but it’s a safe bet that he paid no more income taxes than he owed under current tax law, even though he has been in the vanguard of high-profile people who openly plead with politicians to raise tax rates for the wealthy and also remove the outrageous loopholes available to them. It’s also a safe bet--even safer than, say, betting on Berkshire Hathaway stock--that Warren Buffett has never had a retirement-savings account in a Cayman Islands bank that has between $20 million and $120 million (or the deflationary equivalent) in it, achieved almost certainly by stated initial gross devaluation of equities placed into the account.  And that he did not avail himself of the IRS’s 2009 tax amnesty program for people who were shielding income from the IRS in Swiss banks because he did shield income from the IRS in Swiss banks.  Romney likely did both, which probably is why he refused to release to the public tax documents that would dispel those inferences.  The only other reasonably possible motive for his failure to release those documents is that they would have highlighted the outrageousness of legal tax loopholes that Romney did not want to draw attention to--also a possibility, although, I suspect, not the actual, or at least not the predominant, one), but in any event not one that supports these journalists’ characterization of the public’s poll responses as hypocritical. What’s really remarkable, in my opinion, is that at least one of these two Washington Post political writers, one of them very high-profile--and as a regular reader of their blog, The Fix, I suspect it is Cillizza, the high-profile one, rather than Sullivan--thinks that a poll question using the phrase “pay their fair share of taxes” references not preferred tax policy but instead actual, current tax policy. The poll question almost certainly was intended to address, and was understood by the poll respondents to be asking about, the voter’s preferred tax law, not about how the voter thinks people should act, by choice, under current, existing tax law.  With the caveat, of course, that most people don’t think wealthy people such as the Romneys should violate tax law, as many, many people who followed the specifics of the Romney-tax-returns controversy last year did conclude.   There is, in other words, nothing even slightly hypocritical in believing that people are morally entitled to avail themselves of legal tax breaks but that tax law should be amended to remove some of those tax breaks, to raise tax rates on the wealthy, to tax investment income at the same or near-same rate as investment income, and to tax large estates.  Or to do at least some of these things.  The belief that the law in its current form does not exact payment of a fair share of tax revenues from the wealthy, and the belief that it’s fine for people to employ current tax law to lower their own taxes, irrespective of their views on what tax policy should be, are not contradictory. Unless, like one or both of these journalists, you think the phrase “fair share of taxes” means two distinct and contrary things at once.  But most people, I’m pretty sure, understand quite well what that phrase addresses.  And it’s only one of those two things, not both.

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15 апреля 2013, 19:45

Piestein

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by Sandwichman  (re-posted with author's permission): In his Essay Concerning Human Understanding, John Locke affirmed, "I do not question but that human knowledge, under the present circumstances of our beings and constitutions, may be carried much farther than it hitherto has been, if men would sincerely, and with freedom of mind, employ all that industry and labour of thought, in improving the means of discovering truth, which they do for the colouring or support of falsehood, to maintain a system, interest, or party, they are once engaged in." In Takings: Private Property and the Power of Eminent Domain, Richard Epstein, henceforth Professor Piestein, gave the quintessential demonstration of how to employ "all that industry and labour of thought... for the colouring or support of falsehood." In his "philosophical preliminary" chapter, "A Tale of Two Pies" Professor Piestein purported to illustrate, with a drawing of two pies, a Lockean perspective on "how natural rights over labor and property can be preserved in form and enhanced in value by the exercise of political power." Here is what Professor Piestein's pies looked like. Sandwichman coloured them in to make them prettier: And here is what Professor Piestein wrote about his pies: The larger pie indicates the gains that are possible from political organization. The outer ring represents the total social gains, while the dotted lines indicate the proportion of the gain received by each individual member. The implicit normative limit upon the use of political power is that it should preserve the relative entitlements among the members of the group, both in the formation of the social order and in its ongoing operation. All government action must he justified as moving a society from the smaller to the larger pie. A couple of questions go unasked and, of course, unanswered by Professor Piestein. Why should we assume that the unequal endowments are the consequence of natural rights rather than a backward projection of the inequalities imposed in political society by its rulers? Second, even if the unequal endowments had been present in nature, why should that make the more fortunate individuals entitled to a proportionately larger share of the social gains, since they are, after all, social gains? In The Natural and Artificial Rights of Property Contrasted (1832), Thomas Hodgson wrote: Laws being made by others than the labourer, and being always intended to preserve the power of those who make them, their great and chief aim for many ages, was, and still is, to enable those who are not labourers to appropriate wealth to themselves. In other words, the great object of law and of government has been and is, to establish and protect a violation of that natural right of property they are described in theory as being intended to guarantee. What would Locke say? I'll not waste your time with a pile of extraneous exegesis and superfluous hermeneutics. Number VIII of Locke's Essays on the Law of Nature was titled, "Is Every Man's Own Interest the Basis of the Law of Nature? No." Number VIII was the source for several of the arguments in Chapter Five, "Of Property," in Locke's Second Treatise on Civil Government. What part of the word "no" did Professor Piestein not understand?

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15 апреля 2013, 18:43

Saving, Investment, and Lending in the Real Economy (Graphs). S=I?

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With all the chaff that’s been flying around (recently, and for years now) about saving and investment, dissaving, and lending/borrowing, I felt the need to go back to the numbers and see how they’ve played out over the decades in what we tend to call the “real” economy — domestic households and nonfinancial business. Click for larger: Update: The signs were reversed for lending/borrowing. Graphs corrected and updated. Here’s the lending/borrowing broken out for you: This is all from the Fed FFAs. Saving is household/nonprofit net saving (after-tax/transfer income minus expenditures) + undistributed business profits (after-tax/transfer income minus expenditures and distributed profits [distributed profits are part of household income]). Details/spreadsheet on request. I’ve actually written at least three (long) posts on this in course of building out these graphs, but now that the graphs are complete I find myself fairly flummoxed. Saving seems to always be wildly insufficient to fund investment (and no, lending/borrowing + saving has no relationship either). S=I seems to provide exactly zero illumination here. And the post-1990 lending/borrowing swings I see don’t fit with any real-sector saving/dissaving story I’ve heard (or can remember). We see borrowing spike during the internet boom, dive following the bust, then spike again during the real-estate bust. ? So I’m going to leave this open to my gentle readers for the moment. What in the heck is going on here? What story (or stories) would you tell to explain what you see? If anyone wants to see earlier periods zoomed in to get a better feel what’s going on, let me know. I’m thinking 1946-1975 (to see what seems like a period of consistency), and 1970-1990 (from the fall of Bretton Woods to the start of the internet bubble and the Clinton surplus).Cross-posted at Asymptosis.

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15 апреля 2013, 16:45

Another try at migration...

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MEV will be moving us over to our Wordpress platform and new look Tuesday early morning.  They have assured us the glitches have been corrected...rss feeds should continue, and links to old posts will be maintained.  Please let me know right away if problems develop... Dan

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15 апреля 2013, 16:41

Criticizing the IMF staff and Ryan Avent

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Lifted from Robert Waldmann's Stochastic Thoughts: In the post below, I vigorously criticize IMF staff and Ryan Avent for claiming that central banks adopted low inflation targets in the early 80s without noting that the Fed did not adopt an inflation target until January 25 2012.  I have now read Avent's post as patiently as I can (meaning I skipped ahead).   Avent wrote "That the disinflation of the 1980s has generated a flattening of the Phillips curve is precisely what the IMF demonstrates:" This claim is illustrated by a figure which does not show that.  Even if a curve hasn't changed at all, the slope depends on where you are (that is the curve is not a straight line).  The figure does suggest that  the IMF staff are willing to assume that the Phillips curve is a straight line, or rather that they are willing to support their argument by presenting a graph which tends to convince people willing to make that assumption. The graph does not demonstrate any change at all in the Phillips curve (I'm not saying it didn't change just that the question can't be answered with the graph).  You can't see if different points lie on the same curve by plotting changes on changes, because the slope of a curve isn't constant. In particular, inflation is much lower now than it was in the early 80s.  It is possible that the slope of the Phillips curve is lower now, because the Phillips curve is a curve.  The pattern from 2007 on is clearly different from the pattern in the 1930s.   It is not clear that it is different from what would have happened from 1980 to 1994 if inflation had been around 2% in 1980.   Oh and the 30s were different. In most developed countries, the unemployed don't risk starvation any more.  The welfare state was quite different back when high unemployment caused sharp deflation. I swear that this post has been edited to make it less rude.  You don't want to read the first draft. Also I deleted a draft conclusion to the update to the post below, because it was too inflammatory.  I am trying to be as polite as I possibly can without actually lying. update:  Now I am going to make some graphs.  They are totally unlabeled only partly because I am lazy but also because I want the reader/graph eyeballed to try to guess what they are.  They are US analogs of the IMF graph with the change in core inflation on the y axis and the change the civilian unemployment rate on the x axis.  All graph 17 data points (as in the green series from the IMF).  Two  show data from after the Fed flattened the Phillips curve in the "early 80s".  Which two show the new flat Phillips curve? Figure 1 (chosen from three figures at random by the eyes closed point and click method) Figure 2 (not chosen at random) Figure 3 Don't peek  Come on it's more fun if you guess than look ? OK the answer is that figures 1 and 3 show the new flat post early 80s Phillips curve which is due to inflation targeting.   Did you guess without peeking ? Figure 1 shows 17 quarterly inflation changes from 1985q1 minus 1984q4 on.  They are the first data which came undeniably after the early 80s.  Figure 3 shows the most recent 17 quarterly changes.   It is not markedly different from figure 1 because of auto scaling (not "not *just* because I am lazy" does not imply "I am not lazy") but it is much flatter (the range of unemployment changes is 4 times as large and the range of core inflation changes is about the same). Figure 2 is the first 17 available quarters from Fred from 1958q2 - 1958q1 (when the core CPI series starts).  The first of those data were collected before Phillips published his famous scatter (with labeled axises even) .  The last in the first quarter of 1962 rather before the modern advances in monetary theory.  It is very flat indeed.  If Phillips had relied on FRED, he wouldn't have gotten published at all.  Inflation bounced around way back then, but there is almost no relationship between the change in inflation and the change in unemployment. This is what Phillips saw for extremely low inflation rates.  The rediscovery of the fact that the Phillips curve has a low slope at inflation rates near zero is not path breaking progress.

15 апреля 2013, 16:14

Reagan and Rios Montt: The Company You Keep

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by Mike KimelReagan and Rios Montt: The Company You Keep Former Guatemalan dictator Efrain Rios Montt is on trial for genocide. I was born in the US, but my formative years were spent in South America in the 1980s. That the right wing Guatamelan military dictatorship was massacring unarmed civilians on a large scale was no secret, andwas widely known and reported even in a region full of right wing military dictatorships engaging in large scale atrocities against civilians. On private channels, the CIA was reporting that "when an army patrol meets resistance and takes fire from a town or village it is assumed that the entire town is hostile and it is subsequently destroyed... The well documented belief by the Army that the entire Ixil Indian population is pro-EGP has created a situation in which the Army can be expected to give no quarter to combatants and non-combatants alike." Part of the document from which those quotes were derived has still not been declassified, so there is no telling what else is in it. All of which is to say, Ronald Reagan knew precisely what was happening when he said Rios Montt "is a man of great personal integrity and commitment" and that the dictator was "http://www.presidency.ucsb.edu/ws/index.php?pid=42070">"totally dedicated to democracy in Guatemala." Reagan would later lift the military embargo to Guatemala which aided in the genocide. It's also worth noting that Rios Montt counts Pat Robertson as a personal friend, and was buddy-buddy with Jerry Falwell before the latter's death as well.