Wednesday, March 30, 2011

Nobel Economist Elinor Ostrom On How To Solve Climate Change Now: Why We Do Not Need To Wait For Collective International Government Action

I am a big fan of Elinor Ostrom. She does field work and builds her models and ideas based on factual evidence. For a while, I have been thinking about writing a post about using her ideas about governing the commons and applying them to climate change and I am extremely happy she gave a talk on the subject.

Basically, not all the world's problems about externalities need government involvement for solutions. She favors poly-centric approaches and has written about many real world examples of people and communities solving their own externalities and tragedy of the commons problems.

Read "Nobel Laureate on Combating Climate Change: We Don't Need to Wait for that Elusive Top-Down Solution" and download her podcast of her half-hour speech on the topic of solving the climate change problem here, or listen to it on the following embedded player.

Michelle Obama Doesn't Know What People Should Eat: Candy Eaters Have Decreased Obesity And Health Risk Factors

From "Have your candy and eat it too — without adverse health effects" on ScienceBlog:
Good news for candy and chocolate lovers: they tend to weigh less, have lower body mass indices (BMI) and waist circumferences, and have decreased levels of risk factors for cardiovascular disease (CVD) and metabolic syndrome, according to a new study published in Nutrition Research.

Connection Between Wealth And Income Comment To The NY Times

My comment to The New York Times, "Inequality Is Most Extreme in Wealth, Not Income" by Catherine Rampell:
According to a Minneapolis Fed Study, Table 4, http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=946), wealth and labor income have a 0.27 correlation coefficient, i.e. income explains about 7 percent (0.27 squared) of wealth and vice versa.

When business income derived from business ownership and capital income are included, the correlation coefficient of income and wealth jumps to 0.60, table 3, (36 percent explanatory).

Even when labor, capital and business ownership incomes are combined, there is a low connection between income and wealth (64 percent of the connection is unexplained by just wealth and income).

When we measure things like poverty, income inequality, eligibility for low income, need based government programs, etc. that look at only income, some wealthy people are included. Surprisingly, wealthy people without income exaggerate inequality and poverty statistics because they show low income.

Part of the reason the wealthy do not show more income is to avoid paying income tax.

Income statistics overstate our perception of the needy and income inequality because the numbers include people with wealth without observable income, e.g. withdrawing and spending from savings is not income, a million dollar stock sale will likely result in a much lower capital income number (just the profit is reported as income).

In response, some in the US would like higher marginal income taxes, which motivates the wealthy to report less income and increases our income inequality statistics, causing another round of calls for higher taxes to redistribute from the rich to the poor in an endless, unsatisfactory spiral.

Wealth and income are two different concepts, but in the media and politics, the two are often used interchangeably.

23 Million To Be Without Health Insurance Under Obama's New Health Law, According To CBO

From "CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010" by Douglas W. Elmendorf, CBO Director, March 30, 2011, Statement before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives:
About 23 million nonelderly residents will remain uninsured: About one-third of that group will be unauthorized immigrants, who are not eligible to participate in Medicaid or the insurance exchanges; another quarter will be eligible for Medicaid but are not expected to enroll; and the remaining fraction will include individuals who are ineligible for subsidies, are exempt from the individual mandate, choose not to comply with the mandate, or have some combination of those characteristics.

Trump Is Correct: Smoking Gun And Politico Are Wrong

Donald Trump submitted a certificate of birth as his birth certificate and was immediately pounced upon by various pundits who declared that a certificate of birth is not a birth certificate and that a birth certificate can only come from a government agency such as the department of health.

Section 4103 of NYS Public Health Law states that government agency certified copies are as good as the original "certificate of birth" and Donald has an original certificate of birth:
2. Any copy of the record of a birth or of a death or any certificate of registration of birth or any certification of birth, when properly certified by the local registrar, shall be prima facie evidence of the facts therein stated in all courts and places and in all actions, proceedings, or applications, judicial, administrative or otherwise, and any such certificate of registration of birth or any such certification of birth shall be accepted with the same force and effect with respect to the facts therein stated as the original certificate of birth or a certified copy thereof.[emphasis added]
Additionally, New York State laws use "birth certificate" and "certificate of birth" interchangeably and a government agency, such as a health department can only issue a certified copy, what the various pundits call a birth certificate, of the filed certificate of birth.

New York State Public Heath Law, Title 3, Registration of Births, Section 4130 and following, deals with birth certificates and certificates of birth.

The law uses the phrases "certificate of birth" and "birth certificate" throughout interchangeably.

For example, Section 4132 is titled, "Birth certificate; form and content" but the first sentence of the law says:
1. The certificate of birth shall contain such information...

3. (a) The certificate shall be signed by the attending physician or nurse-midwife, with date of signature and his or her address....

4. The registrar shall enter the exact date of filing of the certificate of birth in his office attested by his official signature and registered number of birth.
Also, NYS Public Health Law Section 4174 uses both phrases interchangeably and states:
1. The commissioner or any person authorized by him shall:

(b) issue certified copies or certified transcripts of birth certificates only (1) upon order of a court of competent jurisdiction, or (2) upon specific request therefor by the person, if eighteen years of age or more, or by a parent or other lawful representative of the person, to whom the record of birth relates, or (3) upon specific request therefor by a department of a state or the federal government of the United States;

(c) upon request, issue a wallet-size certification of birth, in a form and bearing a design provided by the commissioner. Each applicant for a wallet-size certification of birth shall emit to the commissioner with such application, a fee determined by the department;

(d) upon request, issue certification of birth or death unless in his judgment it does not appear to be necessary or required for a proper purpose;
Donald Trump has an original certificate of birth, which is also called a birth certificate and recognized in law. Certified copies of the filed "certificate of birth" so called "birth certificates" are also valid, but neither is more valid than the other and the only birth certificate is the one Trump produced. The others, from the Department of Health, are certified copies.




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Tuesday, March 29, 2011

Student's Behavior Affects Teacher's Academic Evaluation Of Student

From "Poor behavior doesn’t always lead to poor academics" on ScienceBlog:
Researchers from the University of North Carolina – Charlotte (Bob Algozzine, Chuang Wang and Amy Violette) followed 350 students in seven at-risk schools over a 5-year period. They assessed both teacher perceptions of student behavior and academic achievement, as well as actual performance. They found that teachers were more likely to report that well-behaved students did better academically and expected more of them – even when some of these students were struggling with school-work. At the same time, students who acted out in school were seen as having more academic difficulties, even though this was not always the case.

Japan's Radiation In US From Contaminated Steam And Not Spent Fuel Rods Or Reactor Material

From ScienceNews, "Japan nuke accident seen from Seattle: Clues to events at crippled plant found in traces of radiation reaching Pacific Northwest" by Devin Powell:
Radioactive particles wafting eastward over the Pacific Ocean from Japan have been spotted in Seattle and used by a forensic team of physicists as a window into recent events inside the crippled Fukushima Daiichi nuclear plant 5,000 miles away. Working backward from these nuclear byproducts, the physicists have confirmed that contaminated steam is the source of this radiation, not spent fuel rods or material ejected directly from the reactor core.
Read the complete ScienceNews post here.

Saturday, March 26, 2011

Top Earners Saw 4 Times Average Income Drop During Recession: States' Over Reliance On Taxing High Income Earners Created State Tax Revenue Shortfalls And Deficits During Recession

From The Wall Street Journal, "The Price of Taxing the Rich: The top 1% of earners fill the coffers of states like California and New York during a boom—and leave them starved for revenue in a bust." by Robert Frank:
In New York before the recession, the top 1% of earners, who made more than $580,000 a year, paid 41% of the state's income taxes in 2007, up from 25% in 1994, according to state tax data. The top 1% of taxpayers paid 40% or more of state income taxes in New Jersey and Connecticut. In Illinois, which has a flat income-tax rate of 5%, the top 15% paid more than half the state's income taxes.
***
As they've grown, the incomes of the wealthy have become more unstable. Between 2007 and 2008, the incomes of the top-earning 1% fell 16%, compared to a decline of 4% for U.S. earners as a whole, according to the IRS. Because today's highest salaries are usually linked to financial markets—through stock-based pay or investments—they are more prone to sudden shocks.

The income swings have created more extreme booms and busts for state governments. In New York, the top 1% of taxpayers contribute more to the state's year-to-year tax swings than all the other taxpayers combined, according to a study by the Rockefeller Institute of Government. In its January report downgrading New Jersey's credit rating, Standard & Poor's stated that New Jersey's wealth "translates into a high ability to pay taxes but might also contribute to potential revenue volatility."

Continuing Decline In Number Of US Publicly Traded Companies

From CFO.com "Missing: Public Companies: Why is the number of publicly traded companies in the U.S. declining?" by Alix Stuart:
the number of publicly traded companies in the United States continues to fall, according to new data supplied by Grant Thornton. At the end of February, there were 5,091 companies listed on major U.S. exchanges, a 2% drop from 5,179 companies at the end of 2009 and a 42% decline from the peak of 8,823 in 1997. (The numbers include foreign firms listing in the United States.) "U.S. listings have decreased every single year since 1997 with no rebound at all," says Edward Kim, capital markets senior adviser to Grant Thornton.
***
Stock exchanges in virtually every other country continue to grow....

1 In 4 US Children Are Hispanic, 1 In 6 Americans Are Hispanic: Hispanics Were More Than Half Of US Population Increase Since 2000

From "More than half of population hike is Hispanic" By Associated Press:
according to U.S. Census Bureau findings from the 2010 count that were released Thursday ... showed that Hispanics accounted for more than half of the nation’s population increase over the past decade.
***
in a surprising show of growth, Hispanics exceeded estimates in most states as they crossed a new census milestone: 50 million, or almost 1 in 6 Americans.
***
The final count: 196.8 million whites, 37.7 million blacks, 50.5 million Hispanics and 14.5 million Asians.

Hispanics and Asians were the two fastest-growing demographic groups, increasing about 42 percent from 2000. Hispanics, now number 1 in 6 Americans; among U.S. children, roughly 1 in 4 are Hispanic.

Friday, March 25, 2011

New Healthcare Law's Taxes And Controls Will Stop US Life Expectancy Gains

From The Wall Street Journal opinion, "The March of Health Progress: A new report shows lower death rates and lower infant mortality."
Life expectancy in the U.S. rose again to 78.2 years in 2009
***
The overall age-adjusted death rate (the probability of dying at any particular age) fell to 741 from 759 per 100,000—again in a single year, and the 10th consecutive year the death rate has fallen. What an irony that all of this progress took place over a decade when we were told that lack of health insurance was dooming millions to inadequate care. It turns out that advances in medical treatment matter far more to overall health progress than do insurance coverage rates.
***
A poor person in America today has access to much better health care than did a billionaire or a prince in the 1950s.

The main objective of health-care policy should be to maintain an environment and incentives so this progress can continue. The greatest tragedy of ObamaCare is that its taxes on medical device makers and others will slow that progress, while its price controls on insurance and medical providers deter competition and innovation. Yes, American health care is expensive, but the CDC report shows that its benefits include longer and better lives.

Thursday, March 24, 2011

What Are Teachers Paid For?

From "On Public Education" on The View from Chaos Manor by Jerry Pournelle:
What are they [teachers] being paid to do?
***
The only rational purpose of a tax paid school system is to produce more productive and better citizens. If it doesn't accomplish that, there is no justification for making everyone pay for it. There is certainly no justification for taxing a person on a $44,000 income to pay salary and benefits including pensions to someone making $50,000 simply because the teacher is entitled to the money. (In California the top state income tax bracket starts at $44,000, and I think no tenured teacher makes less than $50,000. If those numbers don't apply in your state, supply your own, but you get the idea). The most effective way to get better and more productive citizens is to allocate resources in a way that benefits those who can benefit the most: make sure the best and the brightest regardless of their race or social or economic status get the most education. If you have a little more time to spend with a student, put that time into make the bright ones learn more rather than trying to make the dummies just a little less uninformed. Of course that is not what we do: the whole system, and particularly No Child Left Behind, is geared in the opposite direction. You can ameliorate that a bit by assigning the best and the brightest teachers to the best and the brightest students, but you can't if the unions are allowed to negotiate the work rules. You certainly can't accomplish much when saddled with tenure and seniority rules.

The American school system is a bad parody of an optimum allocation of resources, and nearly everyone knows it, but we always talk as if it were not so. Of course we never discuss the basic premises of public education to begin with.

Wednesday, March 23, 2011

US Has Fewer Entrepreneurs And Self-Employed Than Before The Recession

From "The Great Recession’s Effect on Entrepreneurship" by Scott Shane, Federal Reserve Bank of Cleveland:
Despite the claim that recessions are a time of opportunity for entrepreneurs, the Great Recession had a negative impact on U.S. entrepreneurship. At the end of the recession, the United States had fewer businesses and self-employed people than it had before the downturn began. While some measures indicate that a big part of this decline came from the increased closure of existing businesses, the largest effect came from a decline in new business formation, particularly for businesses with employees, the more economically substantial type of business.
Read the complete commentary here.

Share Of Mortgage Holders With Negative Equity By State

Share of Mortgage Holders With Negative Equity
Click chart to enlarge.

The above chart is from "Examining the presence of negative equity in the Southeast" by Whitney Mancuso and Shalini Patel, senior analysts in the Atlanta Fed's research department.

Tuesday, March 22, 2011

Who Gets More Than They Paid Into Social Security

From "Is Social Security Middle-Class Welfare?" By Andrew G. Biggs:
The problem with Social Security isn’t that it’s welfare to the middle class of the future; it’s welfare to the middle class of the past. Until recently, Social Security was a very good deal for most participants and an insanely good deal for others. When a pay-as-you-go program like Social Security starts, it can pay benefits to people who didn’t pay into the program for very long. These folks make out like bandits. Moreover, Congress has increased benefits over time, sweetening the pot even more.

As the chart above shows, throughout much of Social Security’s life the net tax rate paid by the average participant was negative, meaning that they received more in benefits than they paid in taxes, even after accounting for interest. For someone retiring in 1950 Social Security was like receiving an extra 3 percent in lifetime earnings; for someone retiring in 1972, the true sweet spot, Social Security was like getting a 6 percent boost in lifetime income.
Read the complete article here.

Monday, March 21, 2011

Map Of State Gasoline Tax Rates

From the Tax Foundation, Tax Policy Blog:

The weblink for this map is here.

The Richest 10% of Taxpayers Pay A Greater Share Of Taxes In The US Than In OECD Countries

From "No Country Leans on Upper-Income Households as Much as U.S." by Scott A. Hodge:
the top 10 percent of households in the U.S. pays 45.1 percent of all income taxes (both personal income and payroll taxes combined) in the country. Italy is the only other country in which the top 10 percent of households pays more than 40 percent of the income tax burden (42.2%). Meanwhile, the average tax burden for the top decile of households in OECD countries is 31.6 percent.
Read the complete Tax Foundation blog here,

CBO's Preliminary Analysis Of The President’s 2012 Budget

The Congressional Budget Office's preliminary analysis of the President’s budget for fiscal year 2012 and their estimated effects on federal revenues, outlays, and budget deficits. In April, CBO expects to publish a full analysis of the President’s budget, including an assessment of the macroeconomic effects.


A full copy of the preliminary analysis is available here.
Preliminary Analysis of the President's Budget for 2012

Thursday, March 17, 2011

New Healthcare Law Will Not Reduce Medicine's GDP Percent: Fed Res Bank Of Dallas

From Economic Letter—Insights from the Federal Reserve Bank of Dallas, Vol. 6, No. 2, March 2011, "Federal Health Care Law Promises Coverage for All, But at a Price" by Jason Saving:

A final question concerns the extent to which national health expenditures will change as a share of GDP as the health care law takes effect. Reducing the share of GDP devoted to health care was a primary objective of lawmakers.

The legislation isn’t likely to achieve that, according to the most recent projection from the Centers for Medicare and Medicaid Services. Even without considering the fiscal caveats already mentioned, the health care reform law has only a negligible net impact on the size of the health care sector and its growth over time (Chart 5). This is not necessarily “bad,” as one might reasonably expect a high-income country with high-quality upper-end care to spend a great deal on health care. But it does reinforce the point that cost control is unlikely to be the lasting legacy of the law.

Cost of Expanding Coverage
The health care reform law was designed to expand coverage while also controlling costs. The law certainly will provide insurance for millions of currently uninsured Americans. However, it is unlikely to simultaneously “bend the cost curve.” That is the more difficult task left to future policymakers to resolve.
Read more here.

After 40 Years, Time To Repeal All Energy Efficiency And MPG Rules

A comment I posted to The Wall Street Journal Opinion, "How Washington Ruined Your Washing Machine: The top-loading washer continues to disappear, thanks to the usual nanny state suspects" by Sam Kazman:
Whether it is washing machines, light bulbs or mile per gallons, the goal of the government intrusion and mandates into our daily lives is to reduce our use of water, electricity, gasoline, etc. If our use of the resources are not reduced then the legislated conservation policies are a failure and should be repealed.

Despite efficiency mandates for our cars and our household appliances including light bulbs, refrigerators, washing machines, air conditioning, hot water and heating systems, there has not been any decrease in per household energy use in the last 40 years. The reason is that people judge energy use by their total costs (electricity, gas, heating oil, propane, gasoline, etc.). As an appliance or a car's energy use declines, people use it more often, drive more miles, buy other household apparatus that use energy, or buy or rent a bigger living space.

This is a well-documented rebound effect. Efficiency improvements make energy use cheaper, creates a rebound effect and people use more of it. It is called the Jevons Effect or Jevons Paradox and known since at least the mid-1800s.

There is even a well-documented rebound effect for autos that as the MPG for cars increases, people drive more miles. They use the about the same amount of gasoline after as before the improvements.

Government energy efficiency mandates are a failure. I have yet to see a government agency publish statistics that American households are using less gasoline, less water, or less electricity, in total or per household. They can't because it has not happened.

Despite government and the EPA telling and mandating us to conserve, the reality is that all their programs, laws and regulations for us to use less per household have failed. The government should stop annoying us with all this conservation and energy efficiency rules because for 40 years they have failed to do what they were intended to do.

All energy efficiency and MPG laws and rules are failures and should be repealed. Let the market place decide what are scarce resources, price them accordingly and let consumers budget how much they want to spend on them. Accurate pricing of our resources are the best method for conservation.

Tuesday, March 15, 2011

Japan's Foreign Trade Data Including Amount And Type By Regions And Countries

I am providing historical, statistical and graphical information about Japan's foreign trade, imports and exports, courtesy of Japan's Statistics Bureau, for those who want to estimate the potential world-wide economic effect of the horrible devastation, human injury and loss of life in Japan.

The Statistics Bureau's Report on International Trade is available here as a PDF or on the Bureau's web page here. There is information about the amount of foreign trade, what is imported and exported and with which regions and countries.

See the following reproduced charts and graphs from their web page for information about the amount and type of trade and with which regions. The charts and graphs should become bigger by clicking on them individually.

Our hearts, thoughts, hopes and prayers go out to all the people in Japan, and their families and loved ones wherever they may be.












S&P Futures Down 2.6 Percent At 1 AM EDT: Nikkei Down 12 Percemt

On news, Bloomberg and NY Times, Wall St. Journal, of explosions and the increased radiation leakage at Japan's nuclear facility, Fukushima Dai-Ichi nuclear plant, and the potential health risk, the S&P 500 futures are down 33 points, 2.6 percent, at 1 AM EDT.

The Nikkei is trading down about 12 percent.

Sunday, March 13, 2011

Press Is Wrong: A Radiation Disaster From Japan's Nuclear Reactors Will Not Occur: MIT Nuclear Research Scientist

MIT nuclear research scientist Dr. Josef Oehmen's detailed explanation of the US press overreaction to the nuclear reactor problems in Japan in "You Can STOP WORRYING ABOUT A RADIATION DISASTER IN JAPAN -- Here's Why."
I repeat, there was and will *not* be any significant release of radioactivity from the damaged Japanese reactors.

By "significant" I mean a level of radiation of more than what you would receive on - say - a long distance flight, or drinking a glass of beer that comes from certain areas with high levels of natural background radiation.
Read the complete description of the safety processes, back up systems and fail safe systems at place in the Japanese reactors here.

Explanation Of A Nuclear Reactor Meltdown

From The Wall Street Journal "Japan Does Not Face Another Chernobyl: The containment structures appear to be working, and the latest reactor designs aren't vulnerable to the coolant problem at issue here" by William Tucker:
Before we respond with such panic, though, it would be useful to review exactly what is happening in Japan and what we have to fear from it.

The core of a nuclear reactor operates at about 550 degrees Fahrenheit, well below the temperature of a coal furnace and only slightly hotter than a kitchen oven. If anything unusual occurs, the control rods immediately drop, shutting off the nuclear reaction. You can't have a "runaway reactor," nor can a reactor explode like a nuclear bomb. A commercial reactor is to a bomb what Vaseline is to napalm. Although both are made from petroleum jelly, only one of them has potentially explosive material.

Once the reactor has shut down, there remains "decay heat" from traces of other radioactive isotopes. This can take more than a week to cool down, and the rods must be continually bathed in cooling waters to keep them from overheating.

On all Generation II reactors—the ones currently in operation—the cooling water is circulated by electric pumps. The new Generation III reactors such as the AP1000 have a simplified "passive" cooling system where the water circulates by natural convection with no pumping required.

If the pumps are knocked out in a Generation II reactor—as they were at Fukushima Daiichi by the tsunami—the water in the cooling system can overheat and evaporate. The resulting steam increases internal pressure that must be vented. There was a small release of radioactive steam at Three Mile Island in 1979, and there have also been a few releases at Fukushima Daiichi. These produce radiation at about the level of one dental X-ray in the immediate vicinity and quickly dissipate.

If the coolant continues to evaporate, the water level can fall below the level of the fuel rods, exposing them. This will cause a meltdown, meaning the fuel rods melt to the bottom of the steel pressure vessel.

Early speculation was that in a case like this the fuel might continue melting right through the steel and perhaps even through the concrete containment structure—the so-called China syndrome, where the fuel would melt all the way to China. But Three Mile Island proved this doesn't happen. The melted fuel rods simply aren't hot enough to melt steel or concrete.

The decay heat must still be absorbed, however, and as a last-ditch effort the emergency core cooling system can be activated to flood the entire containment structure with water. This will do considerable damage to the reactor but will prevent any further steam releases. The Japanese have now reportedly done this using seawater in at least two of the troubled reactors. These reactors will never be restarted.

None of this amounts to "another Chernobyl."
Read the complete Wall Street Journal article here.

Budgeting And Deficit Reduction Is About Spending Less On Worthwhile Projects

A comment I posted on Econbrowser, "AP: GOP budget targets agency that warned of tsunami" posted by Menzie Chinn:
Americans cannot afford to fund every worthwhile project. Budgeting is about admitting dollars are limited and setting project priorities. Just like a household that goes to the grocery with a fixed budget. The household cannot afford to buy every appealing delicious or nutritious food item in the store that catches their eye. Some items must stay on the shelf and not go in the cart.

Looking at any government project or expense in isolation is unfair. You have to look at all of the items together and decide which are the ones you want to keep and fund and which are the one you want to pass on.

Would you rather have a Tsunami warning system, headstart, a no fly zone over Libya, heating fuel subsidies for the poor, housing rent subsidies for the poor, incentives for converting to solar energy, etc. A great majority of the things the government spends money on are worthwhile, but which are the keepers and which are the unfunded and shelved.

The choices are tough. There is no right or wrong answer or choice, but it is unfair to discuss just one project in isolation. It makes it seem as if there is no reason other than politics not to fund a project and that is not the case when one is trying to reduce a deficit and balance a budget. In budgeting, sometimes very worthwhile funding must be curtailed.
It is the bright, rational do-gooder people who look at defunding of a project in isolation that are the biggest political force against budget balancing and deficit reduction. They are for deficit reduction, but they are not willing to make the hard choices, set priorities and limit funding with the understanding that some good projects will not get money.

Public Sector Employees Are Immune To Globalization

Excerpt from a letter by Dave S reprinted in "What Public Sector Employees Don’t Realize or Appreciate" by Brian Sampson on UnshackleUpstate.com blog, March 08 2011:
The public sector is immune to globalization.

We can’t outsource our teachers, highway department, police, or other public workers to China or India. They are fortunate, but the fact that they cannot even comprehend how this is straining the tax base, the people who provide their paycheck, is truly galling.

I watched 60 Minutes a few weeks back, as a teacher confronted the governor of New Jersey and his proposed budget cuts, saying “you are not compensating me for my education!” All I could think is, what an idiot. Doesn’t this teacher realize that thousands of engineers with advanced degrees would be told that they would no longer be compensated for any education, as they lost their jobs to those overseas who could do it for less? Perhaps she does, but frankly, doesn’t give a damn!”
(HT: Henry Blodget)

US Will Draw Wrong Conclusions About Nuclear Energy From Japan's Tsunami

Already the New York Times and The Wall Street Journal have articles about the US public's concerns and fears over nuclear power safety and the political fallout in the US from the failure of the cooling systems and potential meltdown at several Japanese nuclear energy facilities.

The fears of radiation leakage and the building and use of nuclear power plants will be looked at in isolation. The public dialog in the US likely will be build or do not build a nuclear power generating facility. This is an incomplete conversation.

New power generating facilities will be built in the US because our need for more enegry grows as our population and GDP grow.

Imagine the extra devastation and loss of life that might have occurred, if Japan were circled by huge wind turbines and the Tsunami pushed hundreds, if not thousands, gigantic turbine blades into people and buildings. Imagine the devastation from a large solar plant that uses large batteries containing toxic materials, such as lithium, mercury, etc. to store power for times of the day when the sun is unavailable and that toxic material was spread over a city or got into a water supply.

Imagine the difficulty in using emergency vehicles and other transportation modes during this crisis in Japan, if every vehicle were zero emission, did not use carbon emitting fuels and had to rely on non-existent electricity to recharge batteries.

Yes, there should be a public discussion about the safety of nuclear power plants, if the US is going to increase its nuclear power production. The discussion should not be limited to build or do not build a nuclear power plant. The discussion should include consideration of the effects of naturally occurring crises, such as earthquakes, hurricanes, tornadoes, floods, mudslides, droughts, etc., on the different types of power generating facilities, nuclear, wind, solar, natural gas, coal, oil, etc.

Power plants, whether of a green technology or of an old carbon based technology, are large facilities and because many green energy producing technologies are less efficient than old industrial technologies, green technology energy facilities to meet growing energy demands will be huge and numerous. A lot of very huge anythings in times of catastrophe have the possibility of worsening a catastrophe.

Each type of power generator has different adverse risks to the surrounding populace in times of catastrophic crises. When discussing the risk of nuclear energy, consideration of the risks from other large energy generating facilities should be compared simultaneously. In comparison to a gas explosion, oil fires, or the devastation from large structural materials pushed at high speeds with great force by winds, water or mud, towards a populated area, the risk of a nuclear meltdown is only one of many devastating risks from power generating facilities and may not be enough of a risk in comparison to other power sources to limit the use of nuclear power.

Friday, March 11, 2011

Former Fannie Mae CEO Receives SEC Wells Notice Over Subprime Disclosures

From Bloomberg's "Fannie Mae Ex-CEO May Face SEC Claims in Subprime Probe" by Joshua Gallu and Dawn Kopecki:
Daniel Mudd received notice from U.S. regulators that he may face claims for misleading investors about Fannie Mae’s exposure to subprime loans when he ran the mortgage firm during the financial crisis.

Major Sources Of Increased Income Tax Revenue Opportunities

From the March 2011, CBO report "Reducing the Deficit: Spending and Revenue Options," Figure 4-3, Page 133, the major sources of unused opportunities for increasing income tax revenue (projected $ totals for 2010-2014) are:

  1. $675 billion from the elimination of the Exclusion of Employers' Contributions for Health Care, Health Insurance Programs, and Long-Term Care Insurance Premiums:
  2. $600 billion from the elimination of the Net Exclusion of Pension Contributions and Earnings:
  3. $500 billion from the elimination of the Deduction of Mortgage Interest on Owner-Occupied Residences:
  4. $400 billion from the elimination of the Reduced Rate of Taxation on Long-Term Capital Gains and Dividends:
  5. $275 billion from the elimination of the Earned Income Tax Credit:
  6. $225 billion from the elimination of the Deduction of Nonbusiness State and Local Government Income Taxes, Sales Taxes, and Personal Property Taxes.
The total deficit over the same period is projected to be over $5 trillion. The major sources of tax revenue mentioned above reduce the deficit about half, but will have a greater impact going forward as the deficit is expected to shrink.

Of all the items above, elimination of the earned income tax credit is the only revenue opportunity I would not include. The earned income tax is a fair and efficient income program for the poor. It is basically a negative income tax and I am in favor of switching most government entitlement and subsidy programs to a negative tax. Negative taxes are easy to administer and cause fewer investment and consumer demand distortions.

There are few if any other options that would produce as much tax revenue for the US. Plus, elimination of most of these 'income tax expenditures' would reduce investment, consumption and incentive distortions that exist in the US economy. Increases to the personal income tax rate or the corporate tax rate are unlikely to produce an equivalent amount of new tax revenue.

Thursday, March 10, 2011

Finally The SEC Gets Smart About Enforcement

From "SEC Looks Into Hedge Funds With Repeated, Above-Market Returns" by By Siobhan Hughes:
The U.S. Securities and Exchange Commission is scrutinizing hedge funds that consistently offer above-market returns amid a concern about whether outsized returns are a result of malfeasance, but budget constraints could hamper the agency.

"We're now doing things like canvassing all hedge funds for aberrational performance," SEC enforcement director Robert Khuzami told a House Financial Services Committee subcommittee Thursday. He said the focus was on "anybody who is beating market indexes by 3% and doing it on a steady basis."
As I wrote a year ago in my March 16, 2010 blog, "Madoff Is A Case Of SEC Dysfunction":
Furthermore, Madoff's reported long run of positive returns to investors should have been a signal to the SEC. The returns were too good to be true and unlike the returns of other investment managers. Several banks and brokerage firms did not do business with Madoff because his returns were suspicious. Why is the SEC isolated from the information available to other investment firms on the street?
If the SEC continues along the path of using heuristics, looking for commonality among investors and fraudsters and uses other experienced based warning signals to detect investment malfeasance, the Commission will find it can accomplish more to effectively deter fraud with fewer dollars and personnel.

As I said the above mentioned 2010 post:
Madoff's crime is a simple form of affinity fraud. A gullible group with some cohesion, similarities and member trust is targeted, such as church groups, religious groups, ethnic groups, immigrant groups, country club members, etc. The fraudster relies on members of the group to introduce other members to the fraud. The referral and implicit trust among members of the group makes the job of the fraudster easier than if he targeted strangers.

The SEC has prosecuted affinity frauds for years. Yet, it does not ask questions during an exam to determine if the investors have any commonality that would suggest the possibility of an affinity fraud. A simple question such as how did you find the investor would have indicated to the SEC that most of Madoff's investors were referrals from a few small social circles and indicated the extremely high likelihood of affinity fraud.
Hopefully, using market benchmarks to highlight excessive returns is only the beginning of the SEC's use of behavioral, statistical and market indicators to detect fraud. If the SEC continues to use and expands its use of its experience and knowledge base, a lot of investor fraud will be deterred for fear of discovery at minimal expense to the taxpayer.

Wednesday, March 9, 2011

Great Recession Job Losses And The Minimum Wage Increases

Often lost in the discussions of the Great Recession and the financial crisis is the federal government's mandated step increases in the minimum wage in 2007, 2008 and 2009. Was the rise in the minimum wage a contributor?

From Political Calculations blog "The Minimum Wage and Job Loss from 2006 through 2010" on March 9, 2011:
Interestingly, the average number of employed members of the civilian labor force in 2006 was 144,427,000. In 2010, the average number of employed members of the civilian labor force in the U.S. was 5,363,000 less, standing at 139,064,000.

So, in percentage terms of the change in total employment level from 2006 to 2010, jobs affected by the federal minimum wage hikes of 2007, 2008 and 2009 account for 42.5% of the total reduction in jobs seen since 2006.

Also see my 2009 post, "Minimum Wage Increases Unemployment."

Tuesday, March 8, 2011

Schapiro Must Go For Hiring/Keeping SEC General Counsel Becker

From The New York Times article, "S.E.C. Chairwoman Under Fire Over Ethics Issues" by Louise Story and Gretchen Morgenson:
Now, its [SEC} chairwoman [Mary Schapiro] is coming under Congressional fire for hiring as the S.E.C.’s general counsel someone with a Madoff financial interest — David M. Becker, who participated in matters involving how the scheme’s victims would be compensated.
***
Last Friday, H. David Kotz, the agency’s inspector general, announced that he would investigate the potential conflicts in Mr. Becker’s role as a Madoff recipient who was also the S.E.C.’s general counsel and senior policy director involved in decisions relating to the Ponzi scheme. Ms. Schapiro requested the review, a commission spokesman said.

Lawmakers have also asked Ms. Schapiro for details of her discussions with Mr. Becker about his Madoff account when she hired him in 2009. Ms. Schapiro missed a deadline on Monday for those responses. An S.E.C. spokesman said Ms. Schapiro declined to comment on Tuesday.
Can Mary Schapiro survive this taint?

A major role of the SEC is to preserve, protect and foster the retail investor's sense of trust and fairness in the financial markets. Schapiro hired and retained Becker as General Counsel with knowledge of his investment connection and financial interest in Madoff.

Schapiro has to go or the average investor will think the financial markets are rigged against them and that government oversight is to protect the rich and connected and not the common investor.

No Free Lunch With Internet Sales Taxes; Sales Tax Will Act Like a Tariff

Comment I posted to "The Battle over Internet Sales Taxes" by Howard Gleckman on TaxVox blog:
Behind every Internet sale are physical locations of the business, its headquarters, its IT department and servers, its distribution center, etc. These locations pay fees and local, State and Federal taxes based on their geographical presence and volume of business.

Adding a sales tax on top will act like a tariff. It will increase the transaction cost and price of buying the item on the Internet, resulting in decrease sales volume and lower the tax revenue to the localities where the Internet businesses are located.

It will cause relocation of distribution centers and because it will act as a price increase, sales volume will decline, employment will decline and tax revenue will be much less than anticipated.
Read the complete blog post here.

CBO Presentation "Four Observations About The Federal Budget"

From CBO director Douglas Elmendorf's presentation, "Four Observations about the Federal Budget" om March 7, 2011, to the National Association for Business Economics:
1. The gap between spending and revenues is likely to remain very large even after we return to normal economic conditions.

2. Fiscal policy cannot be put on a sustainable path just by eliminating waste and inefficiency; the policy changes that are needed will significantly affect popular programs or people’s tax payments or both.

3. Policymakers face difficult tradeoffs in deciding how quickly to implement policy changes that would reduce future budget implement policy changes that deficits.

4. There is more focus in Washington on federal budget problems today than there has been since the late 1990s, and that focus has led to a range of proposals for tackling the problems.
The complete 17-page presentation is available here.
Four Observations About the Federal Budget CBO Presentation March 7, 2011 to National Association for Busin...

Monday, March 7, 2011

Legislative Mandates For Energy Efficiency Almost Always Increase Energy Use

From The New York Times article "When Energy Efficiency Sullies the Environment" by John Tierney:
But a growing number of economists say that the environmental benefits of energy efficiency have been oversold. Paradoxically, there could even be more emissions as a result of some improvements in energy efficiency, these economists say.
Read the complete article here.

The following are two of my previous posts on the Jevons effect.

See my September 30, 2010 post, "Jevons Effect In Action: US Homes Use Same Per Capita Energy As In 1971."

Also see my May 20, 2009 post, "Benefits of Higher Auto MPG Will Not Occur."

Now if The New York Times and the economists who are just understanding the Jevons effect, understood the Kaya Identity, they would recognize that even a carbon tax will not lower worldwide total carbon emissions. Population growth, GDP and standard of living growth, and increasing uses for energy will increase carbon emissions, even with a carbon tax. Technological solutions to remove carbon and a switch to proven low carbon energy production technologies are possibly the best solutions.

Families And Not Schools Determine Children's Success: Switch To Family Centric From School Centric Skill Training: Switch US Education Funding To Parent Skills Funding To Close Income And Education Level Gap

From "The American Family in Black and White: A Post-Racial Strategy for Improving Skills to Promote Equality" by James J. Heckman, February 2011:
While the cognitive skills measured by achievement tests are powerful predictors of life success, so are socioemotional skills—sometimes called “soft skills” or character traits. These involve motivation, sociability (the ability to work with and cooperate with others), attention, self regulation, self esteem, the ability to defer gratification and the like. Good schools and functional families produce soft skills as well as cognitive skills. For many outcomes, soft skills are as predictive, if not more predictive, of schooling, wages, participation in crime and participation in healthy behaviors as cognitive skills. There is evidence that disadvantaged children of all race groups have lower levels of soft skills.
***
How Best to Foster Skills

What are the best ways to promote skills and reduce achievement gaps? Is it fixing schools? Is it supplementing the resources of families? It is both but with proper timing and measure. In the current fiscal climate, we cannot afford to repeat the mistakes of the War on Poverty and try to do everything. Prioritization is essential. Bad schools should be improved, but supplementing the parenting resources of disadvantaged families is an effective and less commonly understood way to improve educational outcomes.

One year after the Moynihan report circulated, the eminent sociologist James Coleman and his colleagues produced a study that challenged a central premise of American policy. The report showed that families and not the attributes of schools, the focus of much current public policy, determined the success of children in schools as measured by their performance on achievement tests.
***
At the present time, our social policy for fostering the skills of children largely focuses on improving schools.
***
The evidence on the success of school reforms is at best mixed. For example, not all charter schools are more effective than public schools. The latest evaluations show that 20% are better; 20% are worse and most—60%—about the same. Moreover, parental involvement and encouragement appear to be essential ingredients of successful charters.

Surely we can and should improve our schools. But, in light of the evidence from the Coleman Report and a vast body of scholarly literature that arose from that study, improving the schools by hiring better teachers, monitoring their performance, reducing classroom sizes, and improving access to the Internet is unlikely to be enough to eliminate gaps, although much recent public policy and philanthropic activity is predicated on that assumption. Schools work with what parents bring them and they are more successful if parents support them.
***
we know for certain that parents do a lot more than pass on their genes, and good parenting matters a lot.
Read Heckman's complete paper here.

See my earlier post, "Improving Mother's Literacy Improves Disadvantaged Child's Academic Performance" on October 25, 2010.

Saturday, March 5, 2011

Lawyers Face Displacement By Computers At Fraction Of Cost

From The New York Times article, "Armies of Expensive Lawyers, Replaced by Cheaper Software" by John Markoff:
When five television studios became entangled in a Justice Department antitrust lawsuit against CBS, the cost was immense. As part of the obscure task of “discovery” — providing documents relevant to a lawsuit — the studios examined six million documents at a cost of more than $2.2 million [$7.4 million in today's dollars], much of it to pay for a platoon of lawyers and paralegals who worked for months at high hourly rates.

But that was in 1978. Now, thanks to advances in artificial intelligence, “e-discovery” software can analyze documents in a fraction of the time for a fraction of the cost. In January, for example, Blackstone Discovery of Palo Alto, Calif., helped analyze 1.5 million documents for less than $100,000.
***
Quantifying the employment impact of these new technologies is difficult. Mike Lynch, the founder of Autonomy, is convinced that “legal is a sector that will likely employ fewer, not more, people in the U.S. in the future.” He estimated that the shift from manual document discovery to e-discovery would lead to a manpower reduction in which one lawyer would suffice for work that once required 500 and that the newest generation of software, which can detect duplicates and find clusters of important documents on a particular topic, could cut the head count by another 50 percent.

Friday, March 4, 2011

Life Expectancy Versus Medical Costs Charts Are Often Wrong

A comment I posted about the following chart on the But Then What blog, "The Unassailable Math Of Health Care" by Tom Lindmark and on Bronte Capital blog, "Health care and fiscal reform" by John Hempton:

The chart as presented is misleading if not outright wrong. Life expectancy is not an internationally standard measurement. When the measurement of life expectancy is standardized among OECD countries, the US has the highest life expectancy.

The US includes deaths of short-lived premature births and short-lived high-risk births in life expectancy numbers. Other OECD countries do not include these and other short-lived births. The exclusion of these under 1-year-old babies' deaths increases OECD life expectancy averages.

Deaths come from three causes; accidents, homicides and disease/illness/heath.

The US has a much higher accident death rate, including auto, and homicide rate than other OECD countries. Accidents and homicides tend to be higher among younger adults. The US has a younger average aged population than other OECD countries, which leads it to have more homicide and accident deaths and consequently a lower life expectancy. Japan's longer life expectancy measure comes from an older population having fewer homicides and accidents.

The US also has more wide-open spaces and highways, which lead to more auto related deaths than OECD countries.

When each country's life expectancy is recomputed to eliminate the effects on life expectancy averages of the different accident and homicide rates death causes, and short-lived births, the US has the highest life expectancy among OECD countries. In other words, the higher US rate of accidents, homicides and high-risk premature births negatively distort US life expectancy numbers. For example, Ohsfeldt and Schneider among others have recomputed life expectancy numbers and the US does much better than the OECD charts.

While there has been an effort to standardize medical related costs, one area where there is still a big difference is medical education costs.

The US government does not pay a doctor's cost of a medical education. In OECD countries, the government often pays the cost of a doctor's education. The OECD country cost of educating doctors is not included as a medical cost. OECD countries count that cost as an education cost. In the US, doctors pay for their own education. Doctors are making a capital investment in themselves and as such price their services to recoup their costs and to make a fair return on that investment in addition to their economic base salary for the value of their services. In other words, doctors are compensated for their previous investment. In OECD, doctors do not make the same economic investment in themselves and as such do not need to recoup their education costs. OECD does not get a free ride. The cost of educating doctors is pay for from taxes on their citizens instead of through doctors' fees. A fair comparison of medical costs in OECD countries and the US should include in OECD medical costs, the costs of educating doctors.

In reality, when one matches apples to apples and oranges to oranges, medical costs in the US as compared to other OECD countries are not too high for our life expectancy.

SEC Investigating Former General Counsel Over Parents' Madoff Investments

From Bloomberg, "SEC's Inspector General Is Investigating Former Top Lawyer" by By Jesse Hamilton :
H. David Kotz, inspector general of the U.S. Securities and Exchange Commission, said he is investigating former general counsel David M. Becker’s role in the agency’s Bernard Madoff policies after Becker inherited profits from his parents’ investment with the jailed financier.

Thursday, March 3, 2011

Teacher Unions First, Students Second, Parents And Taxpayers Last: Video

From The Wall Street Journal Opinion Video, "The Empire Strikes Back:"



A related and relevant article in City Journal, "Triggering School Reform in California: Parents push for their legal rights to better schools, but the education establishment pushes back." by Ben Boychuk.

Why Teachers Are Scorned: Response To The New York Times

A New York Times article asks "Teachers Wonder, Why the Scorn?" by Trip Gabriel.

Teachers are scorned because they have been ineffective in teaching basic math and reading skills to students over the last 40 years.

From my April 14, 2010 blog, "Cutting Funding For Education Without Negatively Affecting Student Outcomes:"
Despite the more than double per pupil expenditure of inflation adjusted tax dollars on k-12 education from 1970 to 2005, there has been little, if any, improvement in student outcomes. Reading, Math levels and high school graduation rates have remained flat and unaffected by the increase in education expenditures.
See the following charts from the same post.





If one includes inflation over the period 1970 to 2005, instead of using constant inflation adjusted dollars, a dollar spent in 1970 was equal to 5 dollars in 2005. That means in actual dollars in budget terms, in doubling their constant dollar inflation adjusted budgets, school districts are spending over ten times as much as they did in 1970 on per student education. Over 75 percent of school district funds goes to teacher salaries and benefits. Since we are looking at per student costs, the increased in education spending has gone into spending more on individual teachers' salaries and benefits.

While state residents have paid teachers more in base salaries and more in benefits, there has been no improvident improvement in student math, reading scores and high school graduation rates since at least 1970.

Is there really any wonder there is a state taxpayer revolt against teachers. When you pay more for a better product (better educated students as measured by reading and math scores) and you do not get a better product, people will complain, feel they over paid and want their money back.

In all the comments I have seen by teachers protesting the recent state revolts against their salaries and union rights, not one teacher has said that the average student is learning more today than they did in 1970.

As I said in my 2010 post:
If we can double [in inflation adjusted dollars] per pupil outlays without positive impacts on student educational results, can we substantially reduce our education expenses, maybe by even half, without reducing student reading and math scores and without reducing high school graduation rates?

It seems likely.

Wednesday, March 2, 2011

Interactive Map Of Every State's Taxes

Click the top tabs above the map for the different taxes and then click the individual state for specifics.

If the interactive map does not load below go to the source site at http://images.turbotax.intuit.com/iqcms/marketing/lib/images/TurboTaxState.swf



If the interactive map does not load above go to the source site at http://images.turbotax.intuit.com/iqcms/marketing/lib/images/TurboTaxState.swf.

Free Tax Filing at TurboTax.com

Governments Are Unlimited Liability Guarantors Of Public Pensions

A comment I posted on Marginal Revolution "How bad is the state pension funding mess?" by Tyler Cowen:
Despite historical averages, future returns on pension investments are uncertain. In defined benefit plans for public workers, governments become guarantors to make whole any investment funds shortfall. These guarantees are open ended and have no upper limit cap.

States and municipalities should not become guarantors, especially unlimited guarantors. Since state revenues come from the state's residents from taxes and fees, in effect, the state's residents have become unlimited liability guarantors of public workers' pensions.

Any sensible private insurer or guarantor would have limited its future liability.

Any sensible private risk manager would have hedged the shortfall risk through some sort of insurance product.

Tuesday, March 1, 2011

Public Schools Manipulate Test Scores Upward To Avoid Stigma And Voucher Use

From the abstract to Federal Reserve Bank of New York, Staff Report 486, March 2011, "Vouchers, Responses, and the Test-Taking Population: Regression Discontinuity Evidence from Florida" by Rajashri Chakrabarti:
...investigates whether the threat of vouchers and the stigma associated with the ... program induced schools to strategically manipulate their test-taking population. ... scores of students in several special-education and limited-English-proficient (LEP) categories were not included in the computation of school grades. Did this rule induce the threatened schools to reclassify some of their weaker students into these “excluded” categories so as to remove them from the effective test-taking pool? Using a regression discontinuity strategy, I find evidence in favor of strategic reclassification into the excluded LEP category in high-stakes grade 4 and entry-grade 3. In contrast, I find no evidence that the program led to reclassification into excluded special-education categories, which is consistent with the substantial costs of classifying into special-education categories during this period. These findings have important policy implications. [emphasis added]
The full paper is available here>

We Are Not Running Out Of Natural Resources: Video By Prof. Steve Horwitz

Excellent economics video on why we are not running out of natural resources by St. Lawrence University economics professor Steve Horwitz. He is the Charles A. Dana Professor and Chair of the
Department of Economics. Well worth the 4 minutes.



I also suggest you take a look at his working paper, "Wal-Mart to the Rescue: Private Enterprise’s Response to Hurricane Katrina." From the abstract:
The failures of FEMA and other government agencies during Hurricane Katrina have been widely acknowledged in both the popular press and academic literature. However, much less attention has been paid to the successful private sector response during the storm and its aftermath. Wal-Mart and other private retailers played an extraordinarily effective role in the disaster relief process. This paper describes aspects of Wal-Mart’s emergency response system and details their actions during the storm. I argue that WalMart’s successful response was a product of the incentives, knowledge, and superior organizational routines that emerge through private ownership and competitive markets. Because their effectiveness is a function of that institutional context, policy makers should be wary of trying to import or imitate Wal-Mart’s practices in the very different institutional context of the public sector, or assuming that better management, more concern, or additional resources will improve the performance of government agencies. [emphasis added]
Read the complete paper here.

Private markets with unencumbered price signals and investment returns work so much better than government intervention, there is no contest.

Public Unions As Monopolists

From The Wall Street Journal Opinion piece, "A Union Education: What Wisconsin reveals about public workers and political power."

...unlike in the private economy, a public union has a natural monopoly over government services. An industrial union will fight for a greater share of corporate profits, but it also knows that a business must make profits or it will move or shut down. The union chief for teachers, transit workers or firemen knows that the city is not going to close the schools, buses or firehouses.

This monopoly power, in turn, gives public unions inordinate sway over elected officials. The money they collect from member dues helps to elect politicians who are then supposed to represent the taxpayers during the next round of collective bargaining. In effect union representatives sit on both sides of the bargaining table, with no one sitting in for taxpayers.
Read the complete Journal Opinion piece here.

Diversify Crops To Prevent Global Climate Change Agricultural Damage

From "Diversifying crops may protect yields against a more variable climate" on ScienceBlog:
Adaptation to ongoing climate change is considered a policy priority for agriculture. The survey, by Brenda B. Lin of the Australian Commonwealth Scientific and Industrial Research Organization, documents multiple instances of farmers protecting economically important crops, such as rice and other cereals, alfalfa, and coffee, from outbreaks of pests and disease, often associated with climate change, or simply from changed physical conditions. The farmers succeeded by switching from growing a single variety of crop to growing a broader range of species or varieties, either at the same time or in rotation, or by introducing structural variety into uniform fields.