Tepid Economic Growth Is The Cause Of Our Political Divisiveness

From The Weekly Standard, "The Beltway Establishment Still Doesn't Get It" by Jay Cost:

The American political process is starting to break down because of major changes to the political economy of this country. For half a century after World War II, the economy grew at such an incredible pace that we could have low taxes, high social welfare benefits, and a low deficit. This was one of the major reasons why there could be bipartisanship. Economic growth bankrolled these “great” compromises. It had very little to do with the foresight, courage, or moderation of the pols in Washington. They were just riding the wave generated by the private sector.

But all that seems to be over now. For more than a decade (not just the Great Recession but going back to 2000), economic growth has been far below its postwar average, and too low to keep the old regime afloat. You can’t have low taxes, high spending, and low deficits when the economy can’t break 3 percent growth.

This is something the D.C. establishment still does not seem to get. For years, their “farsighted,” bipartisan compromises were possible because the guys with the green eyeshades told them that the economy would grow to fill the gaps that they couldn’t fill. But now the economy can’t do that – so we have a mind-bogglingly large deficit and increased polarization in the political sphere.

2011 Inflation Adjusted (Real) GDP Growth By State And Region

From The US Department Of Commerce Bureau of Economic Analysis, "Widespread Economic Growth Across States In 2011: Advance 2011 and Revised 1997—2010 GDP–by–State Statistics:"

Real gross domestic product (GDP) increased in 43 states and the District of Columbia in 2011, according to new statistics released today by the U.S. Bureau of Economic Analysis (BEA) that breakdown GDP by state. Durable–goods manufacturing, professional, scientific, and technical services, and information services were the leading contributors to real U.S. economic growth. U.S. real GDP by state grew 1.5 percent in 2011 after a 3.1 percent increase in 2010. [Footnotes omitted.]

Real GDP increased in all eight BEA regions in 2011, although growth slowed in most regions. The Far West (2.1 percent) was the only region where growth accelerated. The Southwest region grew the fastest (2.7 percent), led by Texas with a 3.3 percent increase.

US Economy Is 10 Percent Below Where It Should Be And Falling Further Behind

From The Wall Street Journal, "Why This Slow Recovery Is Like No Recovery: The U.S. economy lost about 10% relative to trendline growth. To make up the shortfall, we need to average more than 3% growth a year for several years." by Robert J Barro:

The average annual growth rate of U.S. GDP since 1948 has been 3.1%. In the recession starting in the third quarter of 2007 and ending in the second quarter of 2009, GDP fell by nearly 5%. But this decline is 10% when gauged relative to trend—that is, after factoring in normal growth. To make up for this shortfall, the subsequent recovery has to attain growth rates averaging above 3% for several years.

This is not an unreasonable expectation. For instance, the GDP growth rate averaged 4.3% per year from 1982 to 1989 following the deep recession of the early 1980s. Yet in the current "recovery," beginning in the second quarter of 2009, growth has averaged only 2.4% per year, and just 1.8% for the first quarter of 2012. This low growth means that the U.S. economy has actually been falling further and further behind the normal trend. Therefore, it is not a recovery at all.

By Age 14, 78 Percent Of US Kids Have A Facebook Account

Source: The WSJ "Facebook Explores Giving Kids Access"

From The Wall Street Journal blog Digits, "Kids Find a Way to Facebook" by Shayndi Raice:

Facebook currently won’t let users under the age of 13 set up accounts. Last June, however, Consumer Reports released a study that found that of the 20 million children signed up for Facebook, a whopping 7.5 million were under the age of 13. Of those illegitimately using the site, five million children were under the age of 10.

Then in the fall, researcher Danah Boyd released a study sponsored by Microsoft Research that found 36% of parents were aware that their children joined Facebook before age 13 and that a substantial percentage of those parents helped their kids lie about their age in order to sign up.

Excerpts From The Moral Case For Capitalism

From the Manhattan Institute for Policy Research, Issue No.12, May 2012, "An Audacious Promise: The Moral Case for Capitalism" by James R. Otteson, joint professor of philosophy and economics, and chair of the Philosophy Department, at Yeshiva University in New York:

Milton Friedman once said that every time capitalism has been tried, it has succeeded; whereas every time socialism has been tried, it has failed. Yet President Obama has oddly claimed that we’ve tried free-market capitalism, and it “has never worked.” This is rather remarkable. Since 1800, the world’s population has increased sixfold; yet despite this enormous increase, real income per person has increased approximately 16-fold. That is a truly amazing achievement. In America, the increase is even more dramatic: in 1800, the total population in America was 5.3 million, life expectancy was 39, and the real gross domestic product per capita was $1,343 (in 2010 dollars); in 2011, our population was 308 million, our life expectancy was 78, and our GDP per capita was $48,800. Thus even while the population increased 58-fold, our life expectancy doubled, and our GDP per capita increased almost 36-fold. Such growth is unprecedented in the history of humankind.***Capitalism gives us incentives to trade and associate with people outside our local community, even complete strangers, not on the basis of our love or care for them but out of our own—and their—self-interest. So capitalism enables people to escape the strictures of their local communities. But is that bad? Capitalism creates opportunities for people to trade, exchange, partner, associate, collaborate, cooperate, and share with—as well as learn from—people not only from next door but from around the world—even people who speak different languages, wear different clothing, eat different foods, and worship different gods. The social characteristics that in other times and under different institutions would lead to conflict—even violent, bloody conflict—become, under capitalism, irrelevant—and thus no longer cause for discord.***Even if we do not all get rich at the same rate, we all still get richer. To see the importance of this point, ask yourself: If you could solve only one social ill—either inequality or poverty—which would it be? Or suppose that the only way to address poverty would be to allow inequality: Would you allow it? This seems a no-brainer: poverty is a far larger factor in human misery than is inequality. If we could have steadily fewer people suffering from grinding poverty, is that not something to wish for, even if it comes with inequality?

Read the complete article.

[HT: Craig Newmark]

Less Than A Third of Public College Students And About Half Of Private College Students Graduate In Four Years

From The Washington Post, "Public universities pushing ‘super-seniors’ to the graduation stage" by Daniel de Vise:

Fewer than half of students graduate in four years at 33 of the 50 state flagship schools. The overall four-year graduation rate is 31 percent for public colleges and 52 percent for private ones, the federal government reported this year.

Majority Of Unemployed Have Some College

From The Wall Street Journal Real Time Economics Blog, "Number of the Week: Most Unemployed Have College Experience" by Phil Izzo:

52%: Percent of the unemployed who have spent at least some time in college.

In a significant shift in the labor market, the majority of people who are unemployed have some college education, reversing the situation that prevailed for decades. In 1992, only 37% of the unemployed had some college experience.***In May 4.8 million of the 9.2 million people older than 25 looking for work had spent at least some time in college, while 48% of the unemployed had only completed high school.

About Two-Thirds Of Likely Voters Do Not See Obama or Romney As Best Candidate

From Rasmussen Reports, "Only 19% See Obama, Romney As Best Possible Presidential Candidates:"

Just 19% of Likely U.S. Voters believe Romney and President Obama are the two best people running for the presidency. A new Rasmussen Reports national telephone survey finds that 64% don’t believe they're the best possible nominees. Seventeen percent (17%) are undecided.

An Average Economic Recovery Versus Obama's Lackluster Recovery

From The American Enterprise Institute, The Enterprise Blog, "What the Obama recovery looks like on Earth-Two" by James Pethokoukis:

Source:  The Enterprise Blog

About a million more jobs and over a trillion dollars in more GDP if the current economic recovery were just average.

Over-Regulation Leads To Too Much Regulatory Discretion And Whimsy

From The Grumpy Economist "Local Regulation" by John Cochrane:

We talk about "regulation," but the real issue is rules vs. discretion. Regulating by simple clear rules is much better than regulation by discretion, or by rules so complex they amount to discretion. When a zoning inspector can come in after the fact and always find something wrong, it's in invitation to corruption. We are increasingly a country in which "regulation" means that regulators can tell people what to do on a whim, not one in which clear objective rules are imposed.

The ill effects of this sort of over-regulation are hard to measure, so they tend to be forgotten. We talk about tax rates, spending and laws. But how do you quantify the far more important effects of this sort of thing? It's far worse than an explicit tax, or on the books spending. But it just shows up as mysterious lack of business. We can find isolated anectdotes, but how do we add up the effects of regulatory harassment across the whole country?

Candidates For Elected Federal Office, The Presidency And Congress, Should Not Be Allowed To Use Privacy Laws to Prevent Information Disclosure

Congress needs to pass an election law that removes all federal law and regulation privacy protection, and preempts equivalent state law privacy protection, of privacy protected records of presidential candidates, such as academic transcripts, military, birth, marriage, divorce or prison records and tax returns. Allowances can be made for redacting specific non-material information, such as social security numbers. If it has the authority, Congress should legislatively require all presidential and Congressional candidates for elected office to release performance related substantive relevant data.

Voters should have a chance to evaluate candidates on substantive measures and not just well honed public images. Voters should have access to relevant information about candidates for federal office and candidates should not be able to avoid releasing important data to the voting public.

From The Washington Times "Obama ducks calls to release his collegiate transcripts: Romney’s academic records also a mystery" Dave Boyer:

When President Obama gave the commencement address last week at the Air Force Academy, he congratulated the cadets for excelling at one of the most demanding schools in the country.

But decades after Mr. Obama completed his own college course work, his academic performance is still a mystery. Before and after his election as president, Mr. Obama has refused to release his college transcripts from his days as an undergraduate and a law school student.

Higher Minimum Wage Increases Teenage Driver Alcohol Related Traffic Accidents And Fatalities

From The Review Of Economic Statistics, "Minimum Wages and Alcohol-Related Traffic Fatalities among Teens" by Scott Adams, University of Wisconsin–Milwaukee, McKinley L. Blackburn, University of South Carolina and Chad D. Cotti, University of Wisconsin–Oshkosh:

Using cross-state variation in minimum wages, we observe a positive relationship between the minimum wage and the number of alcohol-related accidents involving teen drivers. A similar effect is not observed when examining accidents among adults. The results are consistent with a positive income elasticity for alcoholic beverages and driving activities among young people, in particular for consumption out of discretionary income accorded by higher minimum wages.

20-Year Low For High School Students With Jobs

From The Washington Times, "Number of high-school students with jobs hits 20-year low" by Ben Wolfgang:

the number of employed high schoolers has hit its lowest level in more than 20 years, according to new figures from the National Center for Education Statistics.

In 1990, 32 percent of high school students held jobs, versus just 16 percent now. Blame their elders.

Sectors that traditionally have offered teens their first paying gig — fast-food chains, movie theaters, malls and big-box retailers — have now become the last resorts for out-of-work college graduates or older Americans forced back into the labor force

Faster GDP Growth In Countries With Smaller Government Share

From The Wall Street Journal, "To Get Growth, Shrink the State: The best stimulus is a smaller government." by Tim Knox and Ryan Bourne:

For all those who wish to see a return to enduring prosperity, new research published today by the Centre for Policy Studies suggests a simple, specific destination. We find that the size of government as a proportion of GDP is a major influence, controlling for other factors, on a country's rate of economic growth. If you want growth, scaling back the state should be an aim whether you have a deficit or not.

We examined the 28 OECD countries defined as "advanced" by the IMF between 1965 and 2010. Using regression analysis to control for the growth rates of the factors of production (physical capital, labor and human capital) and initial GDP, our results suggest that reducing the ratio of taxes or spending to GDP by five percentage points increases the growth rate of GDP per capita by 0.5 to 0.6 percentage points per year.

A broader sample of all "advanced" countries (again, as defined by the IMF) over the past 10 years seems to support these findings. Over this period, countries whose governments tax and spend less than 40% of GDP have grown more quickly than the big-government countries.
***Our findings add to the already significant body of economic literature that suggests that small-government countries grow more quickly after accounting for other characteristics. It also shows that there appears to be little correlation between government size as a proportion of GDP and some key outcomes in health and education. The implication is that in the medium term, constraining the size of the state is good for growth, and can also provide social outcomes that are at least as good as those in big-government countries. [Emphasis Added.]

Source: The Wall Street Journal

The Center For Policy Study report in PDF is available free for download.

An online summary of the study is also available to read.

Facebook IPO Did Not Flop: Shows Silicon Valley's Finance Savviness

From Businomics Blog, "Facebook IPO Not a Flop" by Bill Conerly:

Is the Facebook IPO a flop? Not on your life. It’s a sign that Silicon Valley has gotten as smart about finance as it has been about technology. I like it.

The smackdown of Facebook comes from the lack of a price pop on the first day of trading, compounded by declines in the company’s stock price in succeeding days. This is not a flop from Facebook’s perspective, it’s a success.

Fever During Pregnancy Doubles Autism Risk: Fever Medication Counters Risk

From "Fever During Pregnancy More Than Doubles The Risk Of Autism Or Developmental Delay" on ScienceBlog:

A team of UC Davis researchers has found that mothers who had fevers during their pregnancies were more than twice as likely to have a child with autism or developmental delay than were mothers of typically developing children, and that taking medication to treat fever countered its effect.

“Our study provides strong evidence that controlling fevers while pregnant may be effective in modifying the risk of having a child with autism or developmental delay,” said Ousseny Zerbo, lead author of the study, who was a Ph.D. candidate with UC Davis when the study was conducted and is now a postdoctoral researcher with the Kaiser Permanente Northern California Division of Research. "We recommend that pregnant women who develop fever take anti-pyretic medications and seek medical attention if their fever persists."

Majority Of The 11 Million Private Individual Health Insurance Plans In Use Do Not Meet Affordable Care Act (ObamaCare) Minimum Standards

From HealthAffairs Blog, "Most Individual Polices Would Not Meet Affordable Care Act Standards" by Chris Fleming:

More than 11 million Americans below the age of 65 are now covered by private individual health insurance plans. A new study, released yesterday by Health Affairs as a Web First, measures the actuarial value (the percentage of medical bills an insurance company pays) for a sample of 2010 health plans offering group and individual policies, and finds that the majority of individual plans fell below the minimum standards and benefits required by the Affordable Care Act of 2010.

JP Morgan Is Proof That Markets Work Without More Regulation

From The Washington Times, "J.P. Morgan’s risky business: Loss logic: Market discipline beats government regulation" by Nita Ghei:

Even if the final damage tally reaches $5 billion, J.P. Morgan still will be in the black, with profits of $25 billion. The company’s assets are valued at $2.3 trillion, so the firm’s missteps are far from fatal with such a massive diversified portfolio. The only losers from this bad deal are the people who, if it had gone the other way, would have reaped the rewards: the J.P. Morgan employees who set up the deal and the investors. Instead, heads rolled within a week at J.P. Morgan, and the firm lost some of its value and reputation.

That’s exactly how financial markets are supposed to work. It is a risky business. The same people who stand to earn the rewards must bear the risk. The notion of a risk-free, error-free market is fundamentally flawed. Some trades inevitably will go wrong. What is important is to make sure that third parties - such as taxpayers - aren’t stuck with the bill when that happens. The alternative is to do what Congress did in 2008: bail out banks, breaking the link between risk and reward.

Capitalism Is Getting People I Do Not Know To Work On Making My Life Better

David Henderson - Joy Of Capitalism


(HT: John Goodman's Health Policy Blog).

Only Four States Have Replaced Jobs Lost In Recession

From The Wall Street Journal, "Most States Still Years Away From Getting Back Lost Jobs" by Phil Izzo:

Only four states — Alaska, North Dakota, Texas, and Louisiana — have created enough jobs since the recovery to get back to where they were prior to the recession, according to economist Steven Frable of IHS Global Insight. All four of those states have benefited from an energy boom, and Louisiana was starting at a low level of employment after taking a major hit from Hurricane Katrina.

Two more states, New York and West Virginia, are expected to return to their prerecession peak later this year, and 10 more should reach the mark next year. But the majority of states still won’t get there until after 2014. Meanwhile, returning to peak employment levels doesn’t necessarily mean jobs markets are healed. In fact, getting back to where a state started doesn’t account for the jobs needed by new entrants to the labor force over the past four years.

Source: The Wall Street Journal