Wednesday, February 27, 2013

Sport Players' Safety Measures Lead To Increased Risk Taking

Posted by Milton Recht:

From The Wall Street Journal, "Jenkins: Nascar's Creative Destruction: Here's one great business innovation no one seems to want to copy." by Holman W Jenkins:
As with football, though, participant risk-taking tends to increase in tandem with safety. In a comparison noted by many, rugby is a brutal and aggressive sport, and players don't wear helmets. Rugby players, therefore, don't use their heads as weapons, and they play in such a way as to spare their craniums.

With Sequester, US Will Still Spend $15 Billion More Than Last year

Posted by Milton Recht:

from The Wall Street Journal, "Phil Gramm: Obama and the Sequester Scare: Governing isn't about blaming someone else. It is about choosing." by Phil Gramm:
Even after the sequester, the federal government will spend $15 billion more than it did last year, and 30% more than it spent in 2007. Government spending on nondefense discretionary programs will be 19.2% higher and spending on defense will be 13.8% higher than it was in 2007.

Tuesday, February 26, 2013

Higher Levels Of Toxic Metals In Autistic Kids

Posted by Milton Recht:

From "Higher levels of several toxic metals in children with autism" on ScienceBlog:
In a recently published study in the journal Biological Trace Element Research, Arizona State University researchers report that children with autism had higher levels of several toxic metals in their blood and urine compared to typical children. The study involved 55 children with autism ages 5–16 years compared to 44 controls of similar age and gender.

The autism group had significantly higher levels of lead in their red blood cells (+41 percent) and significantly higher urinary levels of lead (+74 percent), thallium (+77 percent), tin (+115 percent), and tungsten (+44 percent). Lead, thallium, tin, and tungsten are toxic metals that can impair brain development and function, and also interfere with the normal functioning of other body organs and systems.

Modified Virus Can Safely Kill Human Prostate Cancer Cells

Posted by Milton Recht:

From "Newcastle virus shows promise as prostate cancer treatment" on ScienceBlog:
A recombinant Newcastle disease virus kills all kinds of prostate cancer cells, including hormone resistant cells, but leaves normal cells unscathed, according to a paper published online ahead of print in the Journal of Virology.

A treatment for prostate cancer based on this virus would avoid the adverse side effects typically associated with hormonal treatment for prostate cancer, as well as those associated with cancer chemotherapies generally, says corresponding author Subbiah Elankumaran of Virginia Polytechnic Institute, Blacksburg. The modified virus is now ready to be tested in preclinical animal models, and possibly in phase I human clinical trials.

Thursday, February 21, 2013

Municipal Bond Market Spreads Signaling Unfunded Pension Liabilities Are Soft Debt Unlikely To Be Paid In Full: Municipal Retirees In Unfunded Pension States Unlikely To Receive Full Promised Retirement Benefits

Posted by Milton Recht:

From Federal Reserve Bank of Cleveland, Working Paper 13-01, February 2013, "Do Public Pension Obligations Affect State Funding Costs?" by Jean Burson, John Carlson, O. Emre Ergungor, and Patricia Waiwood:
[Y]ears of chronic underfunding of public pensions and the devastating effects of the financial crisis on investment returns on public pension fund assets have resulted in unfunded liabilities that have swelled to amounts that are estimated to be between $750 billion and $4.4 trillion.
Yet there are also reasons why markets should be shrugging off the pension news. As Rhode Island demonstrated in August 2011, state and local governments have demonstrated a willingness and ability to reduce their pension obligations, thus providing greater capacity to meet other financial obligations. As we discuss in the next section, public pension reform is a complex legal issue, but in principle, when taxpayers are asked to pay higher taxes to preserve the financial wellbeing of public sector retirees, it is conceivable that the interests of the many will prevail even if this entails attempts to rescind the strong legal protections provided to the few.

In this paper, we investigate whether municipal bond spreads are sensitive to unfunded pension fund obligations. If the market views these public pension obligations to state and local government retirees as non-negotiable hard debt, one would expect to observe more indebted states to pay higher spreads. If the market perceives these pension obligations as soft debt, we may not observe any impact on bond spreads.

Our analysis suggests that markets are taking the latter view since the crisis. Before the crisis, states with high unfunded pension obligations paid higher spreads in the primary municipal bond market. After the crisis, we find scant evidence of a relationship between the degree of pension underfunding and yield spreads at issuance.
V. Conclusion

In this paper, we investigate whether the bond market considers the states’ unfunded pension obligations as a risk factor. We find no evidence that these obligations are priced in as a threat to states’ creditworthiness and propose two possible explanations. First, pension liabilities may indeed not be a risk factor for bondholders. Historically, investor confidence in municipal debt has been well placed. States do maintain the authority to generate additional revenue by raising taxes, however political unpopular. States would also face penalty rates for future borrowing in the wake of default.

Investors might also be speculating that the states facing financial distress will be more likely to uphold their obligations to bondholders than to pensioners. Rhode Island’s elevation of bondholders’ seniority above those of pensioners in 2011 is recent evidence of this possibility. And, while states face high hurdles in reducing future pension benefits for current employees, these actions can be upheld if they are deemed reasonable and necessary for the public interest.

Wednesday, February 20, 2013

Comment To TIME, Bank Shares Discount To Book, And Elizabeth Warren

Posted by Milton Recht:

The comment I posted on TIME Business & Money, "Mrs. Warren Goes to Washington: Does the Market Mistrust Big Banks?" by Christopher Matthews:
There is an alternate explanation. Congress and Elizabeth Warren.

Public companies including banks are worth the discounted value of their future earnings (more correctly would be their discounted future free cash flows, but both often move in tandem.) Bank shares traded above book value until around 2008-9 coinciding with the drafting and passage of Dodd–Frank Wall Street Reform and Consumer Protection Act. Banks have used the same loan loss, securitizations and derivatives on and off balance sheet accounting for many years, including years when their shares traded well above book value. It is only with the passage of recent federal consumer protection and financial reform that banks have traded below book value. A more likely explanation for the discount to book value is that the federal legislation is significantly increasing bank expenses while limiting the ability of banks to offset these additional costs through price increases and new products. The new federal legislation has decreased future bank earnings and the lower expected earnings have negatively impacted banking industry stock prices.

The discount to book value for banks should be called the Elizabeth Warren bank shareholder loss effect.

Friday, February 15, 2013

Intrade Gives Hillary Clinton 50-50 Chance To Become 2016 Democratic Presidential Nominee

Posted by Milton Recht:

Intrade security price shows Hillary Clinton currently has a 50 percent chance to be the Democratic Presidential Nominee in 2016.

Thursday, February 14, 2013

Current Real GDP 11.4 Percent Below CBO Pre-Recession Forecast: Caused By Decrease In Investment And Capital Accumulation: Investment Growth Less Than Half of Pre-Recession Rates

Posted by Milton Recht:

The higher capital gains tax rates certainly will not help increase investment and capital accumulation.

From Federal Reserve Bank Of Cleveland, Economic Trends, "Behind the Slowdown of Potential GDP" by Margaret Jacobson and Filippo Occhino:
The current level of real GDP is 11.4 percent below the forecast that the Congressional Budget Office (CBO) made back in 2007, before the beginning of the crisis. One reason for the lower-than-expected output is that the recovery has been slow and the economy is still producing much less than its potential output level—the level that could be reached if all available capital and labor were being used at a high rate. The other reason is that the level of potential output itself is now estimated by the CBO to be lower. This downward revision accounts for a little more than 50 percent of the gap between the current level of real GDP and the pre-crisis forecast. Forecasts of future potential output have been revised downward as well, and this will have long-lasting implications for economic activity. The CBO now expects future potential GDP to be lower by about 7 percent relative to its pre-crisis path. Since actual output is expected to converge to its potential over time, the long-run path of real GDP is now expected to be lower by about 7 percent as well.

Source: Federal Reserve Bank Of Cleveland

Source: Federal Reserve Bank Of Cleveland

This evidence points to the drop in investment and the resulting slowdown of capital accumulation as factors behind the loss of potential GDP. [Modified 2/13/13.] Capital growth dropped from rates consistently above 2.5 percent before the recession to rates below 1 percent after the economy bottomed out. This decline was larger and more extended than was typical in past business cycles. The smaller stock of capital will have long-lasting consequences, permanently lowering the future path of capital, potential GDP, and actual GDP relative to their pre-crisis paths.

Tuesday, February 12, 2013

Mothers Who Take At Least 6 Months Off For Children Who Return To Previous Job Make The Same Wages As Women Who Do Not Take Time Off

Posted by Milton Recht:

From The Wall Street Journal, "How to Limit Hit From Maternity Leave" by Ben Casselman:
One reason for the gender gap — though not the only one — is that women remain far more likely than men to take time off to raise children.
Those years out of the workforce can leave women lagging behind in their careers. Census researchers compared the earnings of women who had taken at least six months off work to those without a prolonged gap. After a decade in the workforce, the women with gaps earned 18% less than those with steadier work histories.
But researchers found that the story was very different when they looked at how long women had been in the same job, rather than how long they’d been in the work force more generally. If two women have held a job for the same amount of time, it makes little difference if one took time off and the other didn’t.
In a report Tuesday, Census researchers Rebecca Chenevert and Daniel Litwok said the data suggest two conclusions: First, many women start new jobs when they return to the workforce, and effectively start over at the bottom of the totem pole. And second, women who return to the same job are better able to keep up with their peers than those who don’t.

Healthcare Costs Still Expected To Increase US Deficits Despite Passage Of Healthcare Law Resulting In Historically High US Debt Levels: The High Debt Levels Will Lower Savings, Capital Investment And Total Wages: CBO Congressional Testimony

Posted by Milton Recht:

From The Congressional Budget Office, Director Douglas Elmendorf's testimony, "Testimony: The Budget and Economic Outlook: Fiscal Years 2013 to 2023" before the US Senate Committee on the Budget, February 12, 2013:
In CBO’s baseline projections, deficits continue to shrink over the next few years, falling to 2.4 percent of GDP by 2015. Deficits are projected to increase later in the coming decade, however, because of the pressures of an aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt. As a result, federal debt held by the public is projected to remain historically high relative to the size of the economy for the next decade. By 2023, if current laws remain in place, debt will equal 77 percent of GDP and be on an upward path, CBO projects (see Figure 1).

Such high and rising debt would have serious negative consequences: When interest rates rose to more normal levels, federal spending on interest payments would increase substantially. Moreover, because federal borrowing reduces national saving, the capital stock would be smaller and total wages would be lower than they would be if the debt was reduced. In addition, lawmakers would have less flexibility than they might ordinarily to use tax and spending policies to respond to unexpected challenges. Finally, such a large debt would increase the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates.
Budgetary outcomes will also be affected by decisions about whether to continue certain policies that have been in effect in recent years. Such policies could be continued, for example, by extending some tax provisions that are scheduled to expire (and that have routinely been extended in the past) or by preventing the 25 percent cut in Medicare’s payment rates for physicians that is due to occur in 2014. If, for instance, lawmakers eliminated the automatic spending cuts scheduled to take effect in March (but left in place the original caps on discretionary funding set by the Budget Control Act), prevented the sharp reduction in Medicare’s payment rates for physicians, and extended the tax provisions that are scheduled to expire at the end of calendar year 2013 (or, in some cases, in later years), budget deficits would be substantially larger over the coming decade than in CBO’s baseline projections. With those changes, and no offsetting reductions in deficits, debt held by the public would rise to 87 percent of GDP by the end of 2023 rather than to 77 percent.

In addition to those decisions, lawmakers will continue to face the longer-term budgetary issues posed by the substantial federal debt and by the implications of rising health care costs and the aging of the population.

CBO Testimony the Budget and Economic Outlook 2013 to 2023 by

Thursday, February 7, 2013

The Unemployment Rate For Private Sector Workers Is Double Government Workers

Posted by Milton Recht:

From AEIdeas, "The unemployment rate for government workers is 4.2%. Private sector workers: 8.6%" by James Pethokoukis:

Source: AEIdeas
   Green: Private Sector Workers
Blue: Public Sector Workers

Public College Graduates Finish With More Student Loan Debt Than Private College Graduates

Posted by Milton Recht:

Private college graduates end up with less student loan college debt because private colleges provide more financial aid, more students graduate in 4 years instead of 5 or 6 years and parents provide more financial help with tuition.

From TIME, "How a $54K-Per-Year School Is Deemed a 'Best Value College' " by Brad Tuttle:
Another interesting revelation from the Princeton Review roundup concerns average student debt upon graduation. Even when considering the discounted price, private schools cost double public universities, on average. And yet, public school grads tend to finish up their degrees with more debt.

Let’s look at a couple examples for the sake of comparison. Full tuition at Duke University is $44,000 [per year], and the average graduate gets out of school with $16,500 in debt. Down the road at rival UNC-Chapel Hill, tuition [per year] is $5,800 for in-state students and $26,500 for out-of-staters. The average debt for these public school grads is around $17,500. The difference is even starker in New Jersey. The full price of tuition, room and board, books, and fees at Princeton University is $52,480 [per year], compared to $26,217 in state or $36,369 out of state for students at the nearby College of New Jersey. Graduates of the latter come away with $32,754 debt, on average, compared to just $5,330 for the smarty pants Princeton kids.

Among all of the Princeton Review’s "Best Value Colleges," the median debt at private universities was slightly less than public schools: $20,556 vs. $21,373. How could this be? Robust aid at private schools factors in. Students at private universities are more likely to earn their degrees in four years too, which helps keep costs down. It’s also quite likely that private school students’ families provided significant help paying for college—which is probably one of the reasons why these students felt like they could attend in the first place.

Wednesday, February 6, 2013

Alcohol Mixed With Diet Drinks Increases Breath Alcohol Levels: Places Women At Greater Risk Of Alcohol Intoxication

Posted by Milton Recht:

from "Alcohol + diet drinks may increase intoxication" on ScienceBlog:
While it is known that food delays the stomach emptying, thus reducing BrAC [breath alcohol concentration], only recently has the role of nonalcoholic drink mixers used with alcohol been explored as a factor influencing BrAC. A new comparison of BrACs of alcohol consumed with an artificial sweetener versus alcohol consumed with a sugared beverage has found that mixing alcohol with a diet soft drink can result in a higher BrAC.
"In natural drinking settings, such as bars and nightclubs, young women are significantly more likely than young men to order drinks mixed with diet cola," said [Dennis L] Thombs [professor and chair of the department of behavioral and community health at UNT Health Science Center]. "I suspect this occurs because young women tend to be more weight conscious than young men. Thus, from a public health perspective, artificially sweetened alcohol mixers may place young women at greater risk for a range of problems associated with acute alcohol intoxication."

Baby Boomers Less Healthy Than Believed

Posted by Milton Recht:

From Bloomberg, "Baby Boomers Sicker Than Parents’ Generation, Study Finds" by Nicole Ostrow:
Baby boomers have more chronic illness and disability than their parents, as their sedentary habits and expanding girth offset the modern medicine that enables them to live longer, a study said.

Baby boomers, the 78 million Americans born from 1946 through 1964, engage in less physical activity, are more overweight and have higher rates of hypertension and high cholesterol, according to a study released yesterday in JAMA Internal Medicine.

The study, among the first to compare the generations, shows that baby boomers aren’t as healthy and active as most would believe, said Dana E. King, the lead author. They become sicker earlier in life than the previous generation, are more limited in what they can do at work and are more likely to need the use of a cane or walker, the research found.

Tuesday, February 5, 2013

Autistic College Students Have Higher Rates Of STEM Majors

Posted by Milton Recht:

From NATURE | SCI AM BLOGS, a blog by Scientific American, "Students with autism gravitate toward STEM majors" by Marissa Fessenden:
A study published late last year in the Journal of Autism and Developmental Disorders found that students with autism choose majors in science, technology, engineering and math at higher rates than students in the general population. Yet students with autism enter college at far lower rates. The authors say the results highlight the need to encourage students with autism to pursue a post-secondary education and that doing so may strengthen participation in the STEM fields.

Friday, February 1, 2013

Higher Government Debt To GDP Slows Economic Growth In The Post War (After 1954) Period: Linear Relationship But No Tipping Point: Federal Reserve Board Research

Posted by Milton Recht:

From Federal Reserve Board Working Papers, 2013-05, December 2012, "Government Debt and Macroeconomic Activity: A Predictive Analysis for Advanced Economies" by Deniz Baglan and Emre Yoldas:
For countries with chronically high debt ratios, GDP growth slows as relative government debt increases, but we find no significant threshold effect.

We contribute to the empirical literature on the relationship between government debt and economic activity by putting the Reinhart and Rogo (2010) data set for the post-war period in a formal statistical context. We aim to determine whether a higher level of debt to GDP ratio predicts slower GDP growth in the medium term, as opposed to investigating the steady state relationship between growth in per capita income and public debt, which is the focus of the aforementioned studies.
Our findings can be summarized as follows.
there is a significant negative linear predictive relationship between debt to GDP and GDP growth for countries with chronivally [sic] high debt to GDP ratios but we do not find evidence for a debt tipping point for such countries. [Emphasis added.]