Knowing how consumers will respond is key in estimating how much revenue will come in from a proposed tax rate increase - if any. There are tax economists who can give pretty good estimates about the consumer response.  Unfortunately, they are not allowed to speak in the Joint Tax Committee (JTC) of the U.S. Congress, the "Secret Chamber" where the "official estimate" is made.

For decades, a cabal in Congress has had effective control of the official tax scoring committee. Thus, they overestimate the tax revenue that will come in from a rate increase and overestimate the loss in revenue from a tax rate cut, which serves the interest of those who, for ideological reasons, want to increase the size of government.

After all too many years, the Bush administration is at least trying to have its Treasury Department tax office (OTA) undertake some dynamic analysis (i.e., considering the behavioral response). However, Congress refuses to fund this modest effort (we are talking about less than a million dollars), let alone clean up JTC, which refuses to allow public scrutiny of its estimating procedures.

Much has been written already about what happened at Fort Hood last week but precious little as to why it happened. To understand why it happened it may be useful to start by reminding ourselves again that the mass murder at Fort Hood was the first act of suicide terrorism on American soil by a homegrown Islamic extremist.

To come to this conclusion we do not need to know what motivated Major Malik Nidal Hasan, but only that he was a Moslem and that he was on a suicide mission.  There is no doubt about the former and little doubt that somebody embarked on mass murder in a military base had much hope of coming out alive.

The real question then, is not what made Major Hasan commit mass murder, but how he became a terrorist. It is a question of seminal relevance given the strong probability that homegrown terrorism might well be a greater threat to homeland security in the future than foreign jihadists.

To understand the nature of the problem a quick look at the origins and evolution of Islamic extremism in America and its sponsors is essential.

We start with the revelation that there is a solid scientific reason for calling this the Half-Full Report.  Psychological researchers have studied silver and bronze medal winners over the last several Olympics.  It turns out that, on average, the bronze winners were happier than the silver.

Those that won the silver were filled with regret that they didn't win the gold, while those that won the bronze were happy they got a medal at all rather than nothing for finishing fourth.

The lead researcher, Dr. Thomas Gilovich of Cornell University, summed up the lesson learned:

"The key to understanding happiness is not to think about it as a trait but as a talent.  Happy people have a talent - they are able to argue that life is a glass half full."

Happy people look at life as a glass half-full.  Yes, that is exactly the purpose of the Half-Full Report!  It's good to have science behind the reason.

***

Wasn't it so much fun this week watching Obambi get the crap beat out of him by a woman and an old man?  The HFR's description last April of him as a pussy sure is turning out to be spot on:

The view of Russia is clear from where I am writing this, Bucharest, Romania.  Month by month, President Putin of Russia has been erecting a new authoritarian model that owes more of its lineage to fascism than communism.  

That model can now be named:  Putinism  - a Russian nationalistic authoritarian form of government that pretends to be a free market democracy.

Unlike Soviet communism, the new Russian state does not seek to direct every aspect of political and economic life. Instead, through limited, direct control and intimidation, plus strategic investments in both institutions and people, not only in Russia but other nations as well, the Kremlin seeks to ensure favorable global press and decisions beneficial to its interests from political and business leaders around the world.

Putinism is shrewd and ruthless -- but how long can it succeed?

Poll after poll indicates that official Washington is held in very low regard by the American people.  One reason is that our leaders are seen as out of touch with the realities confronting ordinary folks - and with what those folks' common sense suggests are appropriate responses to such realities.

There could scarcely be a more graphic example of that disconnect - and its ominous implications - than the contortions the U.S. government is now going through in the wake of the murder of 13 people and the wounding of dozens more at Fort Hood last week. 

For example, the FBI declared immediately after the attack that it was not an act of terrorism.  Other officials are promoting the idea that it is simply a case of an individual afflicted by post-traumatic stress disorder (PTSD) or deranged by the prospect of an upcoming deployment to a war zone. 

Mr. Obama insists that we should reserve judgment, evidently because the facts are open to varying interpretations.

Such statements are an affront to most Americans' intelligence which commonsensically applies a prosaic form of the scientific method:  They look for the explanation that best fits the facts. 

In recent years, the old "let's tax them more" crowd was on the defensive. But now, with a politically weakened president, the tax increase lobby is out in full force.

All the Democrats running for president have promised to increase taxes. Almost every week, some senator or representative advocates more taxes to impose upon the American people.

The tax increasing Democrats are betting the new generation of voters does not remember how the old, high tax rates affected the economy. The U.S. has only suffered three "down" quarters of economic growth since 1982 - a record never before enjoyed.

To pull off the "new taxes will not hurt" charade, the Democrats need to convince people the Reagan and Bush tax cuts had nothing to do with the unmatched economic growth and job creation.

If Benjamin Franklin were with us today, he would rephrase his famous quote and say, with Democrats, nothing is certain but lies and taxes.

As President Obama belatedly appeared at Fort Hood today (11/10), he did not dare to speak the word "terror."  He did not use the word "Islamist." He did not even mention Islam at all.

We've already learned that Islamist terrorist Maj. Nidal Malik Hasan attended the Northern Virginia mosque of Imam Anwar al-Aulaqi, a fiery al Qaeda supporter who later fled the United States.

We know that Hasan's peers, subordinates and patients repeatedly raised red flags that his superiors suppressed. We know he was a player on Islamist-extremist Web sites. The FBI's uncovering one extremist link after another.

But to call this an act of terrorism, the White House would need an autographed photo of Osama bin Laden helping Hasan buy weapons in downtown Killeen, Texas. Even that might not suffice.    

This week we'll be talking a lot about numbers.  It's a mark of a primitive brain to be superstitious about particular ones, to believe that certain numbers are "lucky" or "unlucky."

For all their vaunted rationality, most Chinese for example have a Stone Age superstition that the number 8 brings good fortune.  So they quite purposefully are having their Olympics begin today, 08/08/08, precisely at 8:08pm Beijing time.

People with primitive beliefs are vulnerable.  If the Chicom Olympics don't live up to expectations, don't bring China the world's adoration and respect, then the Chicoms risk losing the "Mandate of Heaven" - the superstitious belief that fate favors them.

Watch the Games unfold over the next two weeks with that context in mind.  There's a lot more drama going on than just in the athletic contests.

***

Now for fun with numbers.  Magic numbers.  The most magic number in America right now is 112.

Alpbach, Austria. Nestled in the middle of the Alps, this is about as scenic as a place can be. The homes and lodges, all of which have the distinctive Alpine architecture, are graced with lovely hanging red and white flowers. There is no crime, no graffiti, no litter and no apparent poverty.

In short, it is the perfect place for the 63rd annual Alpbach European Forum, where many European opinion leaders gather each summer to discuss the problems of, and opportunities for, Europe.

Alpbach, of course, is no more representative of Europe than is the Disney-created town of Celebration, Florida, representative of America. They are both attempts to produce the ideal community.

Many conference participants seek to fashion their ideal version of Europe, yet fail to understand that the philosophers of the Scottish Enlightenment and the economists of the Austrian School (along with their University of Chicago comrades) many years ago set forth the rules that need to be followed for Europe and the rest of the planet to achieve peace, tolerance and ever-increasing prosperity.

Ironically, America learned the lessons from these Europeans better than did Europe, and now many Asians are learning them and becoming ever freer and more prosperous as a result. Yet today, many in Europe claim they have a more humane economic system than one with the rough edges of American style capitalism. However, reality shows a very different picture.

As USS New York, forged with steel from the Twin Towers, prepares to join the fleet, she will enter a world of crises. As we obsess over worthless Afghan real estate, truly vital problems loom abroad.

Violent challenges to our security and strategic position are slighted or ignored, while a combination of politics, pride and inertia bind us to a distant land of marginal relevance.

The crises highlighted below are not in order of priority. Any of them could take a painful bite out of Washington's complacency: