Casey Mulligan's New Book, The Redistribution Recession, Says The Government's Response To Those Hurt By The Recession, Deepened The Recession

University of Chicago Economics Professor Casey B Mulligan's has a new, forthcoming book about the recent recession, The Redistribution Recession: How Labor Market Distortions Contracted the Economy.Mulligan cites economic evidence and analyses for his conclusion that the government's response to the recession of extending and creating benefit programs to help those hurt by the slowing economy, unintentionally deepened the recession and increased its severity.

From Amazon's description of Casey B Mulligan's forthcoming book:

Redistribution, or subsidies and regulations intended to help the poor, unemployed, and financially distressed, have changed in many ways since the onset of the recent financial crisis. The unemployed, for instance, can collect benefits longer and can receive bonuses, health subsidies, and tax deductions, and millions more people have became eligible for food stamps.

Economist Casey B. Mulligan argues that while many of these changes were intended to help people endure economic events and boost the economy, they had the unintended consequence of deepening-if not causing-the recession. By dulling incentives for people to maintain their own living standards, redistribution created employment losses according to age, skill, and family composition. Mulligan explains how elevated tax rates and binding minimum-wage laws reduced labor usage, consumption, and investment, and how they increased labor productivity. He points to entire industries that slashed payrolls while experiencing little or no decline in production or revenue, documenting the disconnect between employment and production that occurred during the recession. The book provides an authoritative, comprehensive economic analysis of the marginal tax rates implicit in public and private sector subsidy programs, and uses quantitative measures of incentives to work and their changes over time since 2007 to illustrate production and employment patterns. It reveals the startling amount of work incentives eroded by the labyrinth of new and existing social safety net program rules, and, using prior results from labor economics and public finance, estimates that the labor market contracted two to three times more than it would have if redistribution policies had remained constant.

In The Redistribution Recession: How Labor Market Distortions Contracted the Economy,Casey B. Mulligan offers hard evidence to contradict the notion that work incentives suddenly stop mattering during a recession or when interest rates approach zero, and offers groundbreaking interpretations and precise explanations of the interplay between unemployment and financial markets.

Official Statistics Overstate US Poverty Rate By 3-4 Times: US Poverty Rate Is 4-5 Percent And Not 15 Percent:

From Bloomberg, "Poverty, Inequality Aren’t as Bad as You Think" by the Editors:

Poverty isn’t as high as the U.S. government says it is. The reason is that federal programs, supported by Democrats and Republicans alike, have dramatically reduced poverty and, by extension, income inequality.

To understand why, let’s look at what the numbers don’t show. The Census Bureau doesn’t count safety-net benefits, including food stamps, housing aid, school lunches and other noncash transfers. Adding the cash value of food stamps alone would lower the poverty population by 3.9 million people. Census data also overcompensate for inflation by ignoring discount prices at big-box outlets such as Wal-Mart Stores Inc., where many low-income families shop. The figures don’t even factor in Medicare and Medicaid benefits.

Most Overlooked

But tax credits are the most overlooked numbers of all. One, the Earned Income Tax Credit, is refundable, meaning that some low-income breadwinners get a check from the Internal Revenue Service even if their earnings are so small that they owe no income tax. Counting that tax credit would decrease the number of people living in poverty by another 5.7 million.

The Census Bureau defines a family of four with income less than $23,021 as impoverished. But a better portrait of poverty in America would count all government benefits and tax credits, raising many households’ income considerably. An even truer picture of deprivation would measure consumption (how much a household spends on rent, autos, food and other items) rather than income (how much a household admits to bringing home in earnings). Incomes are unreliable because people are reluctant to reveal how much they make. They are less reticent when asked if they have television sets, cars and air conditioning, or if they eat out and go to movies.

When adjusted for these flaws, the level of poverty is much lower, says a new paper by economists Bruce D. Meyer at the University of Chicago and James X. Sullivan at the University of Notre Dame. Instead of 15 percent, it is only 4 percent to 5 percent. And instead of being higher than it was in 1980, poverty has declined by two-thirds.[Emphasis added.

Meyer and Sullivan in their paper state:

Official poverty statistics suggest that poverty has increased over the past forty years. This claim is inconsistent with our results which show substantial improvements in income based poverty over the past forty years and even larger improvements in consumption based poverty, especially in the last decade. These poverty results are corroborated by other indicators of well-being for those with low income such as increases in car ownership and evidence of improved living conditions including larger living units that are more likely to have air conditioning and other features. While the deficiencies in the official poverty measure have been the subject of much previous research, most poverty scholars still rely on the official measure as the definitive measure of trends in poverty and draw important conclusions based upon it.

Also, see the Brookings article, "Poverty Has Fallen Much More than Previously Thought: Consumption a Better Measure than Income; We are Winning the War on Poverty, New Research Asserts."

CBO Director Presentation On Federal Spending and Taxes

CBO Director Doug Elmendorf's Presentation, "Choices for Federal Spending and Taxes" at the University of Michigan, September 20, 2012:

Choices for Federal Spending and Taxes: CBO Director Doug Elmendorf's Presentation at the University of Maryland from Congressional Budget Office

Mitt And Ann Romney 2011 Tax Return

All 379 pages of Mitt And Ann Romney's 2011 Tax Return, Form 1040.

A copy of the return follows:
Mitt and Ann Romney 2011 1040

Incentives And Tax Credits To Buy Hybrid And Electric Cars Does Not Reduce Gasoline Use Or Greenhouse Gas Emissions: CBO Report

Federal tax credits and incentives to buy electric and hybrid cars and trucks do not reduce gasoline use and automotive greenhouse gas emissions due to the interplay between the incentives and the existing US government's mandated automobile manufacturers Corporate Average Fuel Economy [Cafe] standards for new vehicles.

CAFE standards require auto manufacturers to achieve an average level of fuel economy. Incentives that increase the sales of hybrid and electric vehicles, which have above average fuel economy, allow automobile and truck manufacturers to sell more vehicles that have below mandated average fuel economy, while still meeting the required US government's average fuel economy mandates. As car manufacturers sell more above average fuel economy hybrids and electric vehicles, they sell more below average fuel economy vehicles. The result is that the total gasoline use and greenhouse gas emissions for the total vehicle sales remains the same with and without the incentives that increase the sale of hybrids and electric vehicles.

From CBO, "Effects of Federal Tax Credits for the Purchase of Electric Vehicles" September 2012:

Comparing the Tax Credits with Other Recent Subsidy Programs in the Transportation Sector
CBO compared the effects of the current tax credits in reducing gasoline use and greenhouse gas emissions with the effects of three other recent subsidy programs aimed at the transportation sector: federal tax credits for the purchase of traditional hybrid vehicles, which were in effect until 2011; federal tax credits, most of which have expired, for companies that blended biofuels with petroleum fuels; and the 2009 “Cash for Clunkers” program, which made payments to people who traded in eligible lower-fuel-economy vehicles for higher-fuel-economy vehicles. Like the current credits for electric vehicles, the credits for traditional hybrids did not reduce gasoline use or greenhouse gas emissions in the short term, because sales of those high-fuel-economy vehicles allowed vehicle manufacturers to sell more low-fuel-economy vehicles and still comply with CAFE standards. By contrast, the other two programs did reduce total gasoline use and greenhouse gas emissions in the short term. The biofuel credits lowered the emissions of vehicles already purchased, and “Cash for Clunkers” raised the average fuel efficiency of all vehicles in operation (by reducing the number of less fuel-efficient older vehicles in favor of those with higher fuel economy). [Emphasis added.]

30 To 40 Percent Of Obese People Have Same Mortality Risk As People Of Normal Weight

From "Obese Can Be Metabolically Healthy and In Good Shape" on ScienceBlog:

"Obesity is associated with a large number of chronic diseases as heart diseases or cancer. However, there is a group of obese people that do not suffer the metabolic complications associated with obesity", the author of the study, Prof. Francisco B.Ortega, explains.***Prof. Ortega et al. observed in their study that between 30-40% of obese patients were metabolically healthy. "We made two findings: firstly, metabolically-healthy obese people exhibited better cardiorespiratory fitness –or aerobic fitness-. Secondly, this subgroup has a lower mortality risk rate for heart disease or cancer than other obese people, and has the same mortality risk than people of normal weight."

3 Of 4 Venture Capital Backed Start-Ups Fail

From The Wall Street Journal, "The Venture Capital Secret: 3 Out of 4 Start-Ups Fail" by Deborah Gage:

... now there is evidence that venture-backed start-ups fail at far higher numbers than the rate the industry usually cites.

About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research by Shikhar Ghosh, a senior lecturer at Harvard Business School.***There are also different definitions of failure. If failure means liquidating all assets, with investors losing all their money, an estimated 30% to 40% of high potential U.S. start-ups fail, he says. If failure is defined as failing to see the projected return on investment—say, a specific revenue growth rate or date to break even on cash flow—then more than 95% of start-ups fail, based on Mr. Ghosh's research.

Failure often is harder on entrepreneurs who lose money that they've borrowed on credit cards or from friends and relatives than it is on those who raised venture capital.***Overall, nonventure-backed companies fail more often than venture-backed companies in the first four years of existence, typically because they don't have the capital to keep going if the business model doesn't work, Harvard's Mr. Ghosh says. Venture-backed companies tend to fail following their fourth years—after investors stop injecting more capital, he says.

Of all companies, about 60% of start-ups survive to age three and roughly 35% survive to age 10, according to separate studies by the U.S. Bureau of Labor Statistics and the Ewing Marion Kauffman Foundation, a nonprofit that promotes U.S. entrepreneurship. Both studies counted only incorporated companies with employees. And companies that didn't survive might have closed their doors for reasons other than failure, for example, getting acquired or the founders moving on to new projects. Languishing businesses were counted as survivors.

Thomas Sowell On Redistribution

From Townhall.com, "The Fallacy of Redistribution" by Thomas Sowell:

In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler's Holocaust in the 1940s.

How can that be? It is not complicated. You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth -- and that future wealth is less likely to be produced when people see that it is going to be confiscated.

iPhone Development Reduces GDP Until The Final Product Is Released

From supply and demand (in that order) blog,"The iPhone5 and Consumer Spending" by Casey B. Mulligan:

the development of Apple products reduces consumption before the release, because the people working on the coming products are not available to produce consumer goods during that time.

Much of the development work on the iPhone 5 did not, before its release, count as investment or G.D.P. (G.D.P. is the sum of public and private consumption and public and private investment). The national accounts treat research and development activities as intermediate inputs, which means that they are subtracted from revenue for the purpose of determining a corporation’s contribution to national production.

This same is true for, say, Apple’s legal expenses in developing patents (many of which are discussed on the Mactech Web site) and license terms for their new product.

These development activities appear as G.D.P. only when the product is completed and sold. If the product is not valuable, it will not sell and will not count for much, although national consumption could still rise if upon project completion the developers move out of development and into the production of consumer goods.

Environmental Regulations Decreased Manufacturing Productivity And Output By $21 Billion Per Year, About 8.8 Percent Of Corporate Profits

Air quality regulations decrease US manufacturing sector productivity. A decline in manufacturing productivity leads to lower wage increases to workers, higher product costs, lower corporate profits and lower employment.

From the abstract to "The Effects Of Environmental Regulation On The Competitiveness Of Us Manufacturing" by Michael Greenstone, John A. List and Chad Syverson, NBER Working Paper 18392:

ABSTRACTThe economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago. Using detailed production data from nearly 1.2 million plant observations drawn from the 1972-1993 Annual Survey of Manufactures, we estimate the effects of air quality regulations on manufacturing plants’ total factor productivity (TFP) levels.***... produce a 4.8 percent estimated decline in TFP for polluting plants in regulated areas. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion, about 8.8 percent of manufacturing sector profits in this period.

From the body of the paper:

The economic costs of environmental regulations have been widely debated since the U.S. began to restrict pollution emissions more than four decades ago through the Clean Air and Water Acts.***TFP declines by 4.8 percent for polluting plants in nonattainment counties. This corresponds to an annual economic cost from the regulation of manufacturing plants of roughly $21 billion in 2010 dollars. This translates into a loss of more than $450 billion over the studied period.***Are these TFP losses big? They correspond to annual lost output in the manufacturing sector of about $20.8 billion in 2010 dollars. This is roughly 8.8 percent of average manufacturing sector profits over this period. It is noteworthy that the estimated costs are substantially larger than the costs borne by workers in polluting industries (Walker 2012). At least in the case of the Clean Air Act and the manufacturing sector, it seems reasonable to conclude that the claim that environmental regulations are costless or even beneficial for the regulated is contradicted by the available data.

CBO Estimates Of The 30 Million Non-Elderly Uninsured In 2016, About 6 Million Will Have To Pay The Penalty For Lacking Health Insurance

from The Congressional Budget Office (CBO), "Payments of Penalties for Being Uninsured Under the Affordable Care Act:"

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) have estimated that about 30 million nonelderly residents will be uninsured in 2016, but the majority of them will not be subject to the penalty tax. Unauthorized immigrants, for example, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges, are exempted from the mandate to obtain health insurance. Others will be subject to the mandate but exempted from the penalty tax—for example, because they will have income low enough that they are not required to file an income tax return, because they are members of Indian tribes, or because the premium they would have to pay would exceed a specified share of their income (initially 8 percent in 2014 and indexed over time). CBO and JCT estimate that between 18 million and 19 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 11 million to 12 million uninsured people, some individuals will be granted exemptions from the penalty because of hardship, and others will be exempted from the requirement on the basis of their religious beliefs.

After accounting for those who will not be subject to the penalty tax, CBO and JCT now estimate that about 6 million people will pay a penalty because they are uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf) and that total collections will be about $7 billion in 2016 and average about $8 billion per year over the 2017–2022 period. Those estimates differ from projections that CBO and JCT made in April 2010: About two million more uninsured people are now projected to pay the penalty each year, and collections are now expected to be about $3 billion more per year.

Northeast Facing Weaker House Prices Due To Rise In Serious Delinquencies

From Bloomberg, "New Jersey Housing Suffers as Defaults Exceed Nevada: Mortgages" by John Gittelsohn and Prashant Gopal:

Serious delinquencies as of June 30 were up 6 percent from a year earlier in New York, Connecticut and Maryland, and up 5 percent in Pennsylvania and the District of Columbia, the Washington-based Mortgage Bankers said on Aug. 9. The rate fell by 27 percent in Arizona, 24 percent in California and 14 percent in Nevada, among states worst hit by the housing crisis.

Shadow Inventory

"Shadow inventory is falling in much of the country -- except for the Northeast," said [Mark] Zandi [chief economist at Moody’s Analytics Inc.] "The implication is that house prices will be much weaker in the Northeast in coming years as these distressed properties eventually get sold."

The US Bailout Investment In GM Lost $15 Billion On A Market Value Basis

From The Wall Street Journal, "Treasury Motors: If GM is 'roaring back,' why won't Obama sell our shares?"

But the Administration is refusing GM's stock buyback because it would mean losing billions of dollars on this "investment." The auto maker's shares are trading around $24, which is not merely a tumble from the November 2010 IPO price of $33 but means the government would lose $15 billion if it sold today.

GM's share price needs to hit $53 for the U.S. to break even.

Chart Showing How Quantitative Easing Works: Wall St Journal

From The Wall Street Journal, Real Time Economics Blog, "How Quantitative Easing Works:"

Source: The Wall Street Journal

FDIC Director Calls For Rejection Of Basel III Capital Rules As Too Complex And Fundamentally Flawed

From "Back to Basics: A Better Alternative to Basel Capital Rules" by Thomas M. Hoenig, Director, Federal Deposit Insurance Corporation, delivered to The American Banker Regulatory Symposium; Washington, DC, September 14, 2012:

After reading the entire 1,000-plus page proposal, I would encourage the Basel Committee and the international regulatory community to step back and rethink the Basel capital standards.***Basel III is intended to be a significant improvement over earlier rules. It does attempt to increase capital, but it does so using highly complex modeling tools that rely on a set of subjective, simplifying assumptions to align a firm's capital and risk profiles. This promises precision far beyond what can be achieved for a system as complex and varied as that of U.S. banking. It relies on central planners' determination of risks, which creates its own adverse incentives for banks making asset choices.

The poor record of Basel I, II and II.5 is that of a system fundamentally flawed. Basel III is a continuation of these efforts, but with more complexity. It also is more prolific since it applies across all banking firms. Directors and managers will have a steep learning curve as they attempt to implement these expanded rules. They will delegate the task of compliance to technical experts, and the most brazen and connected banks with the smartest experts will game the system.***It is time for international capital rules to be simple, understandable and enforceable.

I understand where the proposal stands today and how much has been invested in drafting Basel III, but I believe the Committee should agree to delay implementation and revisit the proposal. Absent that, the United States should not implement Basel III, but reject the Basel approach to capital and go back to the basics. By doing so, we can focus on efforts that will create a well-managed, well-capitalized, well-regulated financial system that actually supports economic growth.

Cheap Coal Supplanted By Cheaper Shale Natural Gas: Cleaner Air And Lower Electricity Prices Thanks To Fracking

From The Wall Street Journal, "Coal-Fired Plants Mothballed by Gas Glut" by Rebecca Smith:

Coal has been losing ground to natural gas ever since a boost in shale-gas production sent the price of natural gas tumbling four years ago. But now the natural-gas price advantage is beginning to affect the coal units that seemed most protected from the shift. Many of these plants have the latest environmental upgrades and are often close to coal deposits.

The reason: With natural gas priced below $3 per million British thermal units, down from about $8 in 2008, many gas-fueled plants can make electricity for about two cents a kilowatt hour, less than half what it costs to run many coal units, said Julien Demoulin-Smith, director of utilities research at UBS Securities LLC in New York.

"This marks another iteration of the way in which natural gas is displacing coal," said Mr. Demoulin-Smith. He said he expects the trend to become more pronounced in coming months as companies seek ways to cut their operating costs, especially those selling power into deregulated markets in the Northeast, Midwest, California and Texas, where power prices are very low because there is no pricing floor.

The Best Government Economic Plan Is No Government Intervention

From TownHall.com, "An Economic 'Plan'?" by Thomas Sowell:

For the first 150 years of this country's existence, the federal government felt no great need to "do something" when the economy turned down. Over that long span of time, the economic downturns were neither as deep nor as long lasting as they have been since the federal government decided that it had to "do something" in the wake of the stock market crash of 1929, which set a new precedent.

One of the last of the "do nothing" presidents was Warren G. Harding. In 1921, under President Harding, unemployment hit 11.7 percent -- higher than it has been under President Obama. Harding did nothing to get the economy stimulated.***The 11.7 percent unemployment rate in 1921 fell to 6.7 percent in 1922, and then to 2.4 percent in 1923. It is hard to think of any government intervention in the economy that produced such a sharp and swift reduction in unemployment as was produced by just staying out of the way and letting the economy rebound on its own.

Immigrant Parents' Education Level Before Coming To US Is The Most Important Factor For Predicting Their Children's Success In US: Logical Conclusion Is Adult Literacy Programs For Parents Could Improve Children's Educational Outcomes And Aid Children's Success In US

From "Parents’ education before migrating tied to children’s achievement" on ScienceBlog:

Immigrant parents’ education before migrating is more strongly tied to their children’s achievement in the United States than any other social, economic, or linguistic parental attribute, either before or after migration. That’s the conclusion of a new study in a special section of the September/October 2012 issue of Child Development on the children of immigrants.

The study was carried out by researchers at the Pennsylvania State University.***According to [Suet-ling] Pong [professor of education and sociology at the Pennsylvania State University and the study’s lead author], the results raise the possibility that adult literacy programs to increase education levels of immigrant parents could have benefits in both parents’ and children’s generations. [Emphasis added.]

See my October 25, 2010, post on this blog, "Improving Mother's Literacy Improves Disadvantaged Child's Academic Performance." A different researcher reach a similar conclusion about parent literacy programs improving the educational outcomes of children.

A Lingering Chicago Teachers' Strike Has Potential To Be Obama's Waterloo And Cost Him A Second Term

Obama is between a rock and a hard place in Chicago. The 26,000 unionized Chicago public school teachers have gone on strike, closed the schools and left 350,000 young children without classes and an education just as the school year was about to begin.

Despite the $1 billion deficit in the school system's operating budget, Democratic Mayor Rahm Emanuel, President Obama's former chief of staff, offered the teaches a 16 percent pay raise.

If the Chicago strike is not settled quickly and Obama stays on the sidelines, Obama will face the prospect of losing the support of mothers of school children and unionized labor, especially public school teachers, across the country.

If Obama tries to mediate a settlement, he will face sharp criticism for allowing a 16 percent raise to the teachers while there is a Chicago school system budget deficit and for allowing the extra money to go to raises instead of to the hiring of more teachers for smaller class size.

Parents know that Republicans favor school choice, school vouchers and would not tolerate a public school teachers' strike. Strikes do not happen when teachers know children are no longer bargaining leverage and hostages because parents with school choice and vouchers can switch their children into non-striking schools.

A lingering Chicago teachers' strike can force Obama to show his true priorities about education, unions and fiscal restraint. Once Obama is involved and linked to the strike, any solution will upset future Obama voters. If Obama, plays 'present' and stays on the core issue sidelines of the strike, future Obama voters will find him not really serious about education, domestic policy and unacceptable as a second term US leader and president.

If Obama gets involved, even just through public statements, large blocs of voters will see a lack of his support for their position (raises, fiscal restraint, children, education) as a reason to not vote for him. The strike, however resolved, will come up in Romney campaign ads and in the presidential debates. Romney can afford to offend unionized labor in the hope of getting mothers and others on board.

The timing of the strike just a few weeks before the presidential election, and before the debates, could not have been worse for Obama. The Chicago teachers' strike has the potential to do to him what the financial crisis did to McCain in 2008. McCain was leading in the election polls over Obama until the financial crisis occurred.

From The New York Times, "Teachers’ Strike in Chicago Tests Mayor and Union" by By Monica Davey:

CHICAGO — This city found itself engulfed on Monday by a sudden public school strike that left 350,000 children without classes, turned a spotlight on rising tensions nationally over teachers’ circumstances, and placed both the powerful teachers’ union and Mayor Rahm Emanuel in a risky, politically fraught standoff with no clear end in sight.***The strike, Chicago’s first in 25 years and the first in a major city in a half-dozen years, also revealed a rift between unions and Mr. Emanuel, a Democrat and former chief of staff to President Obama, raising the prospect that a lingering strike in the president’s hometown might become an issue in a presidential election year when Democrats depend on the backing of labor.***Mr. Obama on Monday issued no specific reaction to the strike. Jay Carney, the White House press secretary, said: "His principal concern is for the students and families who are affected by the situation. And we hope that both sides are able to come together to settle this quickly and in the best interest of Chicago’s students."***School officials said they had made significant concessions in the contract talks, including what would amount to a 16 percent increase for teachers over four years despite what is expected to be a $1 billion deficit in the system’s operating budget next year.***But on Monday, union officials seemed to suggest that the dispute was larger, and included other issues related to benefits, how to calculate raises based on experience level, training days for teachers, and more.

Free Market Works Just Fine For Health Care

From PJ Media, "In Top Journal, Obamacare Boosters Push ‘Global Spending Target’ Which is the very definition of 'rationing,' the word they aren't supposed to say" by Paul Hsieh, MD:

The free market also works in health care. Consider "calcium scoring" heart scans, which measure how much calcium is deposited in the coronary arteries. Recent studies have shown these to be one of the safest and most reliable ways to measure one’s risk of future heart attack.

These calcium scoring scans do not require a doctor’s order and are not typically covered by insurance. Because patients generally pay out of pocket, motivated consumers shop around. Over time, normal market forces have dramatically driven down their price. Several years ago, they cost $500; now some centers offer them for under $100. This pattern of rising quality and falling prices can and should be the norm in all of health care.

Obama And Romney Propose Same Top Tax Rate For The Rich: 28 Percent

From John Goodman's Health policy Blog, "Fact-Checking the President" by John Goodman:

President Obama said that we must get our fiscal house in order; that he was willing to work with Republicans to get that done; and that the road map for starting the process is the Simpson/Bowles commission report.

Whoa. What is Simpson/Bowles? For those who haven’t been paying attention, Alan Simpson and Erskine Bowles were the two co-chairs of President Obama’s debt commission — a bipartisan effort to deal with the long-term deficit. Among other things they called for fundamental tax reform, with a top marginal tax rate of 28%.

So what rate is Mitt Romney proposing for the highest income earners? Answer: 28%.

No, that isn’t a misprint. Apparently, if Mitt Romney recommends a maximum 28% tax bracket, that’s a giveaway to the rich. But if President Obama’s own deficit commission recommends the exact same tax rate, that’s sensible tax reform!

1st And 2nd Generation Immigrant African And Caribbean Blacks More Likely To Be College Educated Than Other US Born Black Americans Or Even US Born White Americans Due To Their Culture And Beliefs

From The Washington Post, The Root DC Live, "Rethinking the achievement gap: Lessons from the African diaspora" by Curtis Valentine:

There is a subgroup of black Americans in this country who continue to achieve at high levels, results that might provide some clues to solving one of our most persistent educational problems. First- and second-generation immigrants from Africa and the Caribbean, though only 13 percent of the nation’s blacks as a whole, represent 41 percent of all those of African descent at 28 selective universities and 23 percent of the black population at all public universities.

Meanwhile, census data show that the children of these immigrants were more likely to be college-educated than any other immigrant or U.S.-born ethnic group, including white Americans.***This is largely because they lack a connection to predominantly U.S.-born black communities and they trust white institutions more than non-immigrant blacks. This leads them them to make housing choices based on the potential for greatest opportunity in education and employment, which tend to be in more diverse communities.

In his study, [John] Ogbu [then a professor of anthropology at the University of California at Berkeley] outlines the factors that created this environment where first- and second-generation blacks are succeeding. There are three we can learn from. First, first- and second-generation immigrant blacks rarely internalize the "oppositional culture" that rejects characteristics deemed "white." Research has shown that internalizing oppositional culture affects U.S.-born African Americans already at high educational levels because it reduces motivation to surpass their peers.

Also, first- and second-generation immigrant blacks have high academic standards because of a belief in the relationship between education and the American Dream but from a recognition of sacrifices by family in their home country. Last, African and Caribbean blacks have a strong belief in their ability to succeed because they had firsthand examples of black professionals in their native lands.

Physician Error In 30 Percent Of DNA Tests

From Bloomberg, "Fumbled DNA Tests Mean Peril for Breast-Cancer Patients" by Robert Langreth:

ARUP Laboratories, a nonprofit laboratory affiliated with the University of Utah, found that 30 percent of orders for complex gene tests from February to December 2010 contained mistakes in handling by clinicians. Doctors requested the wrong test or mixed up rare diseases with similar names, or ordered a test for one cancer mutation when another ran in the family, said Christine Miller, an ARUP genetic counselor.

About 74 percent of internists said their knowledge of genetics was somewhat or very poor and 79 percent wanted more training on when to order the tests, according to a Columbia University study surveying 220 internists.

More Spending Does Not Produce Better Special Education Student Outcomes

From The Wall Street Journal Opinion, "More Isn't Better for Special Ed: A new study shows how school districts can get better results:"

Does more spending lead to better outcomes for students with disabilities? According to a new study led by former school superintendent Nathan Levenson and sponsored by the Thomas Fordham Institute, the answer is no. The news that quality and money aren't tightly linked should be welcome in cash-strapped school districts around the country.***The headline result? If districts with above-average special-ed staffing were staffed instead at the national median level, more than $10 billion annually would be saved. For example, a 10,000-student district now spending in the 90th percentile on special ed could save more than $7 million.***The authors are careful to note that this small sample does not prove a causal relationship between lower spending and higher achievement, but it certainly disproves that more money is always better.

US Will Install In The Current Year As Much Solar Power As It Did In Past Decade Due To Cheap Foreign-Made Imported Solar Cell Panels

From The Wall Street Journal, "Sun Peeks Through in Solar: Overseas Suppliers Trounce U.S. Panel Makers but Installations Are Soaring" by Ryan Tracy and Cassandra Sweet:

The solar-power business is expanding quickly in the U.S., helping lift the cloud that has surrounded the industry since the demise of Solyndra LLC a year ago.

Source: The Wall Street Journal

But the growth isn't coming from U.S. solar-panel manufacturing, despite the money and rhetoric devoted to the industry by the Obama administration. Instead, it is in installations of largely foreign-made panels, whose falling price has made solar more competitive with other forms of power.
***The U.S. is on pace to install as much solar power this year as it did in this century's entire first decade: at least 2,500 megawatts, the equivalent of more than two nuclear-power plants. The U.S. added about 742 megawatts of solar capacity in the second quarter, or enough to power about 150,000 homes, the Solar Energy Industries Association said in a report scheduled for release Monday.

Time To Dismantle Our Public School System: Our Public Schools And Teachers Are A Disgrace: Parents Need School Choice And Vouchers

From The New York Times Sunday Review Opinion, "A Terrifying Way to Discipline Children" by Bill Lichtenstein:

At the age of 5, she was kept in a seclusion room for up to an hour at a time over the course of three months, until we discovered what was happening. The trauma was severe.***The use of restraints and seclusion has become far more routine than it should be. "They’re the last resort too often being used as the first resort," said Jessica Butler, a lawyer in Washington who has written about seclusion in public schools.

Among the recent instances that have attracted attention: Children in Middletown, Conn., told their parents that there was a “scream room” in their school where they could hear other children who had been locked away; last December, Sandra Baker of Harrodsburg, Ky., found her fourth-grade son, Christopher, who had misbehaved, stuffed inside a duffel bag, its drawstrings pulled tight, and left outside his classroom. He was “thrown in the hall like trash,” she told me. And in April, Corey Foster, a 16-year-old with learning disabilities, died on a school basketball court in Yonkers, N.Y., as four staff members restrained him following a confrontation during a game.***At school, her mother and I found Rose standing alone on the cement floor of a basement mop closet, illuminated by a single light bulb. There was nothing in the closet for a child — no chair, no books, no crayons, nothing but our daughter standing naked in a pool of urine, looking frightened as she tried to cover herself with her hands. On the floor lay her favorite purple-striped Hanna Andersson outfit and panties.***We were told that Rose had been in the closet almost daily for three months, for up to an hour at a time. At first, it was for behavior issues, but later for not following directions. Once in the closet, Rose would pound on the door, or scream for help, staff members said, and once her hand was slammed in the doorjamb while being locked inside.

This is the governmental system of education that Obama praises and says needs more funding. It is a government funded function that with constant, federal funding acts more like a prison and daycare center than an educational system. It is a failed government program where employees are free to do whatever they want without fear of losing their jobs due to tenure and union protection, while receiving higher pay, better pension and benefits than the private sector.

The US education system needs to allow parents to freely choose the schools that they would like their children to attend, along with an education voucher system so parents can include private and charter schools among their choices. Only then will the US education system for the majority of American children improve.

We know, despite his lofty rhetoric and from his lack of support for the Washington DC education voucher program, that Obama favors unions and the status quo over the education of US children.

Lowest On Record Men Workforce Participation Rate

From The Wall Street Journal Real Time Economics Blog, "Men See Lowest Participation Rate on Record" by Neal Lipschutz:

First a definition: The labor force participation rate is that percentage of the adult population that is employed or actively seeking employment.

In August, this group was 63.5% of the population. That was the lowest figure since September 1981, when it also stood at 63.5%, according to the Labor Department‘s Bureau of Labor Statistics.

For men, the August participation rate figure was 69.8%. That’s the lowest on record. The records of the Labor Department began in 1948.

Source; The Wall Street Journal

Mark Cuban On His Facebook Losses And Facebook's IPO

From blog maverick the mark cuban weblog, "Facebook Handled their IPO Exactly Right" by Mark Cuban:

I bought and sold FB [Facebook] shares as a TRADE, not an investment. I lost money. When the stock didn’t bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn’t the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you. In this case it was me.

If the goal of the company is to maximize the cash obtained from the IPO, then the CFO should absolutely price the stock to maximize the return. If the goal of the company is to get a 1 day pop to make a PR splash , that is a completely different strategy. It obviously was not the strategy of Facebook. Facebook maximized the cash available to it. They have been very clear that they will not manage the stock, they will manage the company to reach the goals they have been very open and honest about. Good for them.

Earlier in his post, Cuban says:

Facebook was able to raise about 10 BILLION DOLLARS in this IPO. The CFO’s job is not to manage shareholder portfolios. His job is to help Facebook succeed. I don’t know about you, but putting 10 BILLION DOLLARS in the bank in my opinion is one way to help them succeed.

Unimportance Of Specific Leaders: Internal And External Circumstances Matter More

From Harvard Business School Working Knowledge, "Book Excerpt: Indispensable: When Leaders Really Matter" by Gautam Mukunda:

Strikingly, social scientists in every field have identified different versions of the same three forces that, together, minimize the impact of individual leaders....The combination of all three forces usually means that individual leaders have little or no real impact on the organizations they lead. The forces are:

1. The external environment. The external environment forces leaders to act in response to its pressures, leaving individual leaders little control or influence on policy and implementation.


2. Internal organizational dynamics. Leaders respond to the bureaucratic politics and interests of constituencies within their organization, making the identity of the leader unimportant as long as the internal dynamics of the organization remain constant.


3. Leader selection systems. The process by which leaders come to power homogenizes the pool of potential leaders. Different people might have acted differently, but those who would have chosen differently never gain power in the first place.

Forces 1 and 2—the external and internal forces—can be enormously strong and severely limit a leader's impact. This problem is compounded by force 3: how organizations choose leaders. Organizations tend to select their leaders carefully, so managers become "more and more homogenous" the higher you go. Or, to put it another way, organizations try to weed out the crazies, the incompetent, or anyone who just doesn't fit in. That means that CEOs and other leaders tend to be drawn from a pool of candidates that contains little variation. Established interests within organizations move to control the succession process to ensure that the winners are conducive to their interests. Management is important, but individual managers need not be.

The same is true of other selection processes that "filter" the candidates for leadership. The process will tend to prevent people with unique personalities from gaining leadership positions, or the state's governing political ideology will ensure that only a certain type of person can come to power, or the process of choosing a leader will match person to circumstance.

The upshot of the three forces? Some person must fill the role of leader, but which person may not matter at all. [Emphasis added.]

At Least 281 Electoral College Votes For Obama According To Intrade Market Current Prices: 270 Needed For Win

270 Electoral College votes are needed to win the election for the US presidency.

Intrade Election Market price for "Number of Electoral College votes won by Democratic nominee in 2012" is currently (September 3, 2012) predicting 281 electoral college votes out of the total 538 possible votes.

Source: Intrade: Electoral College Votes For Democrat

The Intrade price for the Republican nominee is currently (September 3, 2012) predicting 232 electoral college votes out of the total 538 possible votes.

Source: Intrade: Electoral College Votes For Republican

Intrade is currently predicting that Obama will receive more than the necessary 270 Electoral College votes in the upcoming presidential election.

35 Year Old Milton Friedman Lecture That Burst The Myths Obama Uses To Support His Taxes And Social Programs

35 years ago, Milton Friedman gave an almost hour long lecture that burst the myths of most, if not all, of Obama's social and tax programs.

[HT: Carpe Diem]

Simplification Of Banking Regulations Would Lead To Better Financial Crisis Prevention Than Current Complex Regulations: The Opposite Of Dodd-Frank: Bank Of England Paper: The Dog And The Frisbee

From the paper of the speech given at the Federal Reserve Bank of Kansas City’s 36th economic policy symposium, "The Changing Policy Landscape", Jackson Hole, Wyoming, 31 August 2012, "The Dog and the Frisbee" paper [25 pages of text and 12 pages of footnotes and charts] by Andrew G Haldane, Executive Director, Financial Stability and member of the Financial Policy Committee and Vasileios Madouros, Economist, Bank of England.

Take decision-making in a complex environment. ...Under risk, policy should respond to every raindrop; it is fine-tuned. Under uncertainty, that logic is reversed. Complex environments often instead call for simple decision rules. That is because these rules are more robust to ignorance. Under uncertainty, policy may only respond to every thunderstorm; it is coarse-tuned.***The answer, as in many other areas of complex decisionmaking, is simple. Or rather, it is to keep it simple. For studies have shown that the frisbee-catching dog follows the simplest of rules of thumb: run at a speed so that the angle of gaze to the frisbee remains roughly constant. Humans follow an identical rule of thumb.

Catching a crisis, like catching a frisbee, is difficult. Doing so requires the regulator to weigh a complex array of financial and psychological factors, among them innovation and risk appetite. Were an economist to write down crisis-catching as an optimal control problem, they would probably have to ask a physicist for help.

Yet despite this complexity, efforts to catch the crisis frisbee have continued to escalate. Casual empiricism reveals an ever-growing number of regulators, some with a Doctorate in physics. Ever-larger litters have not, however, obviously improved watchdogs’ frisbee-catching abilities. No regulator had the foresight to predict the financial crisis, although some have since exhibited supernatural powers of hindsight.

So what is the secret of the watchdogs’ failure? The answer is simple. Or rather, it is complexity. For what this paper explores is why the type of complex regulation developed over recent decades might not just be costly and cumbersome but sub-optimal for crisis control. In financial regulation, less may be more.***(8) Conclusion

Modern finance is complex, perhaps too complex. Regulation of modern finance is complex, almost certainly too complex. That configuration spells trouble. As you do not fight fire with fire, you do not fight complexity with complexity. Because complexity generates uncertainty, not risk, it requires a regulatory response grounded in simplicity, not complexity.

Delivering that would require an about-turn from the regulatory community from the path followed for the better part of the past 50 years. If a once-in-a-lifetime crisis is not able to deliver that change, it is not clear what will. To ask today’s regulators to save us from tomorrow’s crisis using yesterday’s toolbox is to ask a border collie to catch a frisbee by first applying Newton’s Law of Gravity. [Emphasis added]

Charter Schools Are Pulling Students From Private Schools

From The CATO Institute, "The Impact of Charter Schools on Public and Private School Enrollments" by Richard Buddin:

While most students are drawn from traditional public schools, charter schools are pulling large numbers of students from the private education market and present a potentially devastating impact on the private education market, as well as a serious increase in the financial burden on taxpayers.

Private school enrollments are much more sensitive to charters in urban districts than in non-urban districts. Overall, about 8 percent of charter elementary students and 11 percent of middle and high school students are drawn from private schools. In highly urban districts, private schools contribute 32, 23, and 15 percent of charter elementary, middle, and high school enrollments, respectively. Catholic schools seem particularly vulnerable, especially for elementary students in large metropolitan areas.

The Impact of Charter Schools on Public and Private School Enrollments, Cato Policy Analysis No. 707

10,000 Campers At Risk From Deadly Virus Epidemic In Yosemite National Park Cabins: Cabins Built In 2009: 2010 State Health Department Warned Yosemite: Poor Cabin Design Created Problem: Where Is The Outrage At Federal Government Park Service Failure?

From The Washington Times, "Up to 10,000 Yosemite visitors at risk of virus" by Associated Press:

Up to 10,000 people who were guests in certain lodging cabins at Yosemite National Park might have been exposed to a deadly mouse-borne virus, park officials confirmed Friday as rangers handled a slew of calls from frightened visitors.***The illness that begins as flu-like symptoms can take six weeks to incubate before rapid acute respiratory and organ failure.

There is no cure, and anyone exhibiting the symptoms must be hospitalized. More than 36 percent of people who contract the rare illness will die from it.***Park officials said the double-walled design of those particular [2009 built] cabins made it easy for mice to nest between the walls. The disease is carried in the feces, urine and saliva of deer mice and other rodents and carried on airborne aerosol particles and dust.***A 2010 report from the state health department warned park officials that rodent inspection efforts should be increased after a visitor to the Tuolumne Meadows area of the park fell ill.

The report revealed 18 percent of mice trapped for testing at various locations around the park were positive for hantavirus.***The 91 insulated, high-end canvas cabins in the century-old Curry Village are new to the park. They were constructed in 2009....

Now imagine how the media, the public, the President and Congress would react if Yosemite were run by a private, for profit company. Not only does the government get away with things that never would be tolerated from a private company, but the private company would probably be forced out of business or into bankruptcy. Instead, the same government agency and the same government bureaucrats get to keep running Yosemite.

Maybe its time to turn the management of campgrounds in National Parks over to private companies?