2009 January 31 Saturday
Woman With 6 Kids Gives Birth To Octuplets From IVF

A single woman in Whittier California obsessed with babies gave birth to octuplets on top of the 6 kids she has already.

The California woman who gave birth to octuplets on Monday, although once married, seems to have had all 14 of her kids out of wedlock -- and various public records raise questions about the family's ability to support them.

I do not buy the argument that people have an unlimited right to make babies. We pay for bad reproductive decisions of others for decades.

The woman already had 6 kids! She has no right to burden the rest of us in this way. We taxpayers face big bills for her decisions.

No matter what your income, giving birth and caring for octuplets is an expensive proposition. The infants' delivery was performed by a team of 46 doctors, nurses and surgical assistants stationed in four delivery rooms at Kaiser Permanente Bellflower Medical Center in Bellflower, Calif., and it likely cost hundreds of thousands of dollars.

The births were extremely expensive. Then comes the neonatal intensive care at a few thousand dollars per day per baby.

All these premature babies which competed for limited nutrients in the womb will probably suffer lifelong learning disabilities. We will pay even more for decades to come. Special schooling, kids who grow up to be low-performing in the job market - assuming they can even work.

"If she went to a fertility clinic, there's wide consensus from every single ethicist and fertility specialist that this was irresponsible and unethical to implant that many embryos," said M. Sara Rosenthal, bioethicist at the University of Kentucky's College of Medicine. "This is an outrageous situation that should not happen."

Doctors say that giving birth to extreme multiples comes with tremendous risks for both the mother and the babies. Risks for the children include bleeding in the brain, intestinal problems, developmental delays and lifelong learning disabilities.

Enough already.

Fertility clinic operator Dr. Jeffrey Steinberg is clearly part of the problem.

Large multiple births "are presented on TV shows as a 'Brady Bunch' moment. They're not," fumed Arthur Caplan, bioethics chairman at the University of Pennsylvania. He noted the serious and sometimes lethal complications and crushing medical costs that often come with high-multiple births.

But Dr. Jeffrey Steinberg, who has fertility clinics in Los Angeles, Las Vegas and New York, countered: "Who am I to say that six is the limit? There are people who like to have big families."

Mom tried to declare bankruptcy in March 2008.

The mother of the octuplets lives with her parents in a modest, single-story home on a quiet cul-de-sac in Whittier, a Los Angeles suburb of about 85,000. Children's bicycles, a pink car and a wagon were scattered in the yard and driveway.

On Thursday night, the children's grandfather came to the door and angrily told reporters to leave the property.

Court records show Suleman filed for bankruptcy last March, but after she failed to make required payments and appear at a creditors' meeting, the case was dismissed. She reported liabilities of $981,371, mostly money owed on two houses she owns in Whittier.

Update: Steve Sailer has lots more details about the family. Get this: one of the existing 6 children is autistic. So mom and grandmom already have a big burden just caring for the existing brood.

By Randall Parker 2009 January 31 12:10 AM  Civilizations Decay
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2009 January 30 Friday
France To Use DNA Testing Of Immigrants

French immigration minister (yes, they have a cabinet level official in charge of immigration) Eric Besson proposes to use DNA tests to find out if applicants for family-related immigration really are the relatives they claim to be.

The tests will be for applications for visas of more than three months when there are doubts about an immigrant's birth or marriage certificates.

The move would allow officials to 'propose' to applicants that they take a test at their own expense to prove a biological link with other family members.

A recent report said there was often doubt over the authenticity of papers in family applications for visas.

It claimed that in African countries such as Senegal, Ivory Coast and Togo up to 80 per cent of birth and marriage certificates were forged.

An even better solution: just stop letting in immigrants due to family relations. If immigrants want to live with family members around they can always return to where they came from.

By Randall Parker 2009 January 30 11:20 PM  Immigration Law Enforcement
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2009 January 29 Thursday
Chinese And American Students Compared In Science Reasoning

Students in China know more scientific facts without gaining a greater ability to do scientific reasoning.

COLUMBUS, Ohio -- A study of college freshmen in the United States and in China found that Chinese students know more science facts than their American counterparts -- but both groups are nearly identical when it comes to their ability to do scientific reasoning.

Neither group is especially skilled at reasoning, however, and the study suggests that educators must go beyond teaching science facts if they hope to boost students’ reasoning ability.

Yes, educators must go beyond teaching facts. They must embrace genetic engineering. Only genetic engineering can bring about a large increase in reasoning ability. But these researchers do not address innate differences in intellectual ability.

Researchers tested nearly 6,000 students majoring in science and engineering at seven universities -- four in the United States and three in China. Chinese students greatly outperformed American students on factual knowledge of physics -- averaging 90 percent on one test, versus the American students’ 50 percent, for example.

But in a test of science reasoning, both groups averaged around 75 percent -- not a very high score, especially for students hoping to major in science or engineering.

These results would be more useful if the Chinese and American students were compared with IQ tests. At least in the US there's a huge difference in average student intellectual ability between universities. So these researchers might have been comparing students who differ too much in innate ability to allow useful comparisons.

By Randall Parker 2009 January 29 10:48 PM  Education
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2009 January 27 Tuesday
Some Bankers Avoided Making Loan Disaster

Writing in MarketWatch David Weidner points to banking executives who avoided the loan debacle including Comerica CEO Ralph Babb.

But if there's anything that recommends him, it is this: Comerica is the biggest bank in Michigan. Knowing what's happening to the auto industry, how it lost tens of thousands of jobs, is there anyone who isn't impressed that Comerica made nearly $200 million during the last 12 months?

Here's another reason to bring him to Washington: the bank only had $133 million in charge offs in the fourth quarter on a balance sheet of more than $65 billion, and that was double the rate of a year ago.

Analysts, such as Peter Winter at Bank of Montreal, note with a hint of astonishment that credit has held better at Comerica than many of its competitors. Consider that unemployment in Michigan is now about 10% and the state lost 30,000 jobs in October and November alone, according to the Bureau of Labor Statistics.

I am very interested in people who make accurate predictions and wise decisions. Can you point to financial industry executives who managed to implement policies that avoided reckless lending and reckless purchase of dodgy collateralized mortgage obligations and the like? Can you point to economists or traders who publically and accurately predicted much of the financial disaster years in advance? I'd like to build up a collection of links to people who made correct decisions so we can find out what they think now.

Weidner points to others:

It's a group that includes people like Christopher Wood, a chief strategist a Credit Lyonaisse's Asia brokerage who told investors to get out of the U.S. mortgage securities market in 2005 and to sell U.S. and European banks in 2007.

It includes Peter Schiff, a regular on business TV shows, who warned against a real estate collapse. Alone, that prediction was hardly unique, but what set Schiff apart was what he forecast as the fallout: deep recession, credit crunch and bank failures. Yes, that sounds familiar.

Incorrect predictions are much easier to find.

I do not know whether Nouriel Roubini will continue making correct predictions. He spent several years predicting premature financial disaster before finally being vindicated. But if Roubini is correct this is going to be a long deep recession.

Jan. 27 (Bloomberg) -- Global stock market declines are increasingly correlated and emerging economies will follow developed nations into a “severe recession,” according to New York University Professor Nouriel Roubini.

Roubini said economic growth in China will slow to less than 5 percent and the U.S. will lose 6 million jobs. The American economy will expand 1 percent at most in 2010 as private spending falls and unemployment climbs to at least 9 percent, he added.

Who should we listen to now? Who has the track record that makes them worthy of our time?

Update: Jeremy Grantham doesn't think much of the predictive ability of Alan Greenspan or Ben Bernanke.

What is one question you would ask Alan Greenspan?

What did you do to get the job? Because nothing in your record seems to justify it.

Have you ever talked to him?

No, and I'm happy to leave it that way.

What would you ask Ben Bernanke?

How did you possibly miss the housing bubble? How could you say at the peak of this three-Sigma event--a one in 1,000 year event at the top of 2006--how could you say the U.S. housing market merely reflects a strong U.S. economy? Surrounded as you are by all this statistical help, and with your experience with the Great Depression, how could you miss it? I simply don't get it.

The housing ratios for housing prices-to-income and housing prices-to-rental prices were so far out of whack from historical trends that the housing bubble was extremely easy to call for people whose jobs ought to involve looking at financial ratios.

By Randall Parker 2009 January 27 08:14 PM  Economics Lending
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2009 January 26 Monday
The 10,000 Year Explosion: How Civilization Accelerated Human Evolution

Over the Christmas holidays I read a now just released and thoroughly enjoyable book by Gregory Cochran and Henry Harpending, The 10,000 Year Explosion: How Civilization Accelerated Human Evolution. I'll be writing a review about it shortly. Michael Blowhard is running a week-long interview with Greg and you can read the first installment. The core argument: we now have enough genetic sequencing data to know that the rate of human evolution has accelerated by a couple of orders of magnitude in the last 10,000 years. Says Greg:

2B: What genuine reasons were there ever to believe that human evolution stopped?

GC: I can't think of any genuine reasons for thinking that human evolution had stopped. Some people seem to have thought that 40,000 years was small potatoes compared to the time since the chimp-human split (five or six million years), so that there wouldn't have been much change over that time period. Of course this ignores the massive ecological changes that humans experienced over the last 40 millennia, and the resulting selective pressures.

Others seem to have thought that newly clever humans instantly came up with a technological fix for any problem that arose, which would have removed the selective pressure associated with the problem. Face it, we're not that smart. People suffered from malaria for thousands of years before figuring out that it was transmitted by mosquitoes (in 1897, by Ronald Ross) -- and we haven't knocked it out yet.

And often when we did solve problems, they didn't stay solved. For example, whenever we came up with better methods of food production, population increased until people were hungry again. At that point you see selection for metabolic efficiency, for the ability to digest newly available foods such as milk, etc.

I've run into this misunderstanding in a recent correspondence. My correspondent figured that we must not have been under much selective pressure because for the last few thousand years the human population was growing rapidly. Yet Europe was repeatedly hit by famines and disease outbreaks. Ditto for other parts of the world. Human populations expanded quickly in response to new ways to farm and then hit limits. We didn't break free of the food limits until the 19th century in some parts of the West and much later in some other parts of the world. Death by starvation still occurs today. One dig of medieval bones in Stockholm found that average adult life expectancy was less than 50 years. Those causes of death were selective pressures.

Death from war occurred too. While the term genocide gets batted around today for fairly small scale killings in the past invaders wiped out entire cities and regions. These killings were selective pressures on human evolution. We have not escaped selective pressures. Our human-caused environmental changes cause differences in who reproduces and how much.

By Randall Parker 2009 January 26 11:48 PM  Human Nature
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2009 January 25 Sunday
The Flight To More Secure Job Occupations

An article in the New York Times discusses the flight of workers toward safer and more stable jobs. But the most interesting observation has to do with teaching salaries at some community colleges. People who earn Ph.D.s and teach at community colleges do not get paid much.

At 41,000 students, Macomb’s enrollment is up 10 percent from last year, Mr. Jacobs said. With the recession driving enrollment, he is adding to his staff of 220 full-time teachers and 750 adjuncts. Most of the new hires are adjuncts, though the courses they teach there and at another community college often add up to full-time work.

Since enrollment is rising, they are assured of work semester after semester, Mr. Jacobs said. The annual pay is $40,000 or less — usually less — and no benefits. Still, they are coming back.

“If you spent six or seven years and hundreds of thousands of dollars getting a graduate degree and you end up doing this, that is not a happy thought,” Mr. Jacobs said. “But it is steady work.”

A lot more people are getting Ph.D.s than ought to. Do they appreciate just how little some of their degrees are worth? Does getting a doctorate assure them that they are smart and wise? Or do they hold out hope they'll get one of those highly paid full professorships at the big name universities?

I see these doctorates as economic waste. Why take smarter people and convince them to spend lots of money in their 20s, go into debt, and spend years getting a credential that isn't going to provide a way to make a high salary? We shouldn't even have anywhere near as many college professors as we have anyway. The lectures of a fairly small number of professors can be video recorded and made available for viewing by anyone with an interest in a topic.

Health care is the field that most reliably grows even in recessions, mostly due to an aging population. But the economy will reach a point within 10 years where health care costs will become too large to allow continued growth at a rate faster than the economy overall. So I do not see health care as a good long term bet for job security. Though doctors will probably stay employed - albeit eventually at lower income levels.

Does anyone see an occupation which will provide job security in the long term?

By Randall Parker 2009 January 25 02:21 PM  Education
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Jeremy Grantham On Popping Financial Bubble

Accomplished money manager Jeremy Grantham muses on why top financial institutions failed to see the popping of the debt and real estate bubble.

I ask myself, "Why is it that several dozen people saw this crisis coming for years?" I described it as being like watching a train wreck in very slow motion. It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi and even [U.S. Treasury Secretary] Hank Paulson and [Fed Chairman Ben] Bernanke -- none of them seemed to see it coming.

I have a theory that people who find themselves running major-league companies are real organization-management types who focus on what they are doing this quarter or this annual budget. They are somewhat impatient, and focused on the present. Seeing these things requires more people with a historical perspective who are more thoughtful and more right-brained -- but we end up with an army of left-brained immediate doers.

So it's more or less guaranteed that every time we get an outlying, obscure event that has never happened before in history, they are always going to miss it. And the three or four-dozen-odd characters screaming about it are always going to be ignored.

More than a few dozen people saw that the US economy was on an unsustainable path and in a housing bubble. See this debt bubble chart starting in 1915 that was published in 2004. Note that the big debt run-up as a percentage of GDP during the 1930s was because of the economic contraction. Whereas today we have a far larger debt as a percentage of GDP even before economic contraction.

Why do CEOs of big banks act in such irresponsible ways when something like a housing bubble is developing? I suspect part of the answer is they are aiming for short term profits and figure the bubble will last longer than it turns out to last. Some bubbles last a long time. The housing bubble is part of a debt bubble that started building in the early 1980s. Here is another graph on the long term trend in US debt. That's an unsustainable trend which has gone on for decades. A lot of people have made a lot of money betting that the trend wouldn't hit the wall and reverse while they held this or that stock or other investment.

Barack Obama uses rhetoric about sacrifice but so far our economy is running on the assumption that foreigners will continue to sacrifice consumption and buy our debt to allow us to live beyond our means. They will not continue to do so. When they stop that'll come on top of the bursting real estate bubble.

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

These nations, in other words, must never use the money to buy other assets or fund domestic spending initiatives for their own people. When the old Treasury bills mature, they can do nothing with the money except buy new ones. To do otherwise would implode the market for U.S. Treasurys (sending U.S. interest rates much higher) and start a run on the dollar. (If foreign central banks become net sellers of Treasurys, the demand for dollars needed to buy them would plummet.)

In sum, our creditors must give up all hope of accessing the principal, and may be compensated only by the paltry 2%-3% yield our bonds currently deliver.

As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.

We have multiple problems that could easily start feeding on each other in a vicious cycle. We have a dumbing and aging population. Those two demographic trends will cause huge problems even without a debt bubble. We also have overpriced real estate and lots of insolvent banks that are walking zombies. We also have an unsustainable trade deficit where we live beyond our means. This deficit keeps driving America ever more deeply in hock to the world. Plus, peak world oil production is on the horizon. Add all these things up and our current financial crisis might just be the opening chapter on far bigger problems.

Update: Back in November 2008 Arnold Kling opined on where our economic trends are taking us: the US government will strip assets from the productive.

My point is that sooner or later the U.S. government is going to have to get serious about stripping the assets of those of us who have tried to live within our means. Sooner or later, the profligate are going to take from the prudent, the grasshopper is going to confiscate the property of the ants.

If you've got wealth, you need to find a haven for it. You don't want to keep it in a banana republic for too long.

That this sounds correct is a very bitter pill indeed.

Update II: John Kemp thinks the US and UK are headed for a debt crisis.

From the 1970s onward, however, the economy has undergone two profound structural shifts. First, the economy as a whole has become much more indebted. Output rose eight times between 1975 and 2007. But the total volume of debt rose a staggering 20 times, more than twice as fast. The total debt-to-GDP ratio surged from 155 percent to 355 percent. Second, almost all this extra debt has come from the private sector. Take a look at Chart 2 (https://customers.reuters.com/d/graphics/USDEBT2.pdf). Despite acres of newsprint devoted to the federal budget deficit over the last thirty years, public debt at all levels has risen only 11.5 times since 1975. This is slightly faster than the eight-fold increase in nominal GDP over the same period, but government debt has still only risen from 37 percent of GDP to 52 percent.

Instead, the real debt explosion has come from the private sector. Private debt outstanding has risen an enormous 22 times, three times faster than the economy as a whole, and fast enough to take the ratio of private debt to GDP from 117 percent to 303 percent in a little over thirty years.

Policymakers were complacent about the build-up of private sector debt because they naively thought that since companies are guided by market forces that the companies were competent to manage the debt.

For the most part, policymakers have been comfortable with rising private debt levels. Officials have cited a wide range of reasons why the economy can safely operate with much higher levels of debt than before, including improvements in macroeconomic management that have muted the business cycle and led to lower inflation and interest rates. But there is a suspicion that tolerance for private rather than public sector debt simply reflected an ideological preference.

In the wake of the last year of financial failures and bail-outs this faith in the financial institutions seems, er, dated.

Mish Shedlock responds to John Kemp and argues the US government might not be able to inflate the private sector out of its debt trap.

Clearly GDP needs to rise or debt levels reduced to reach a sustainable path. Kemp argues "widespread bankruptcies are probably socially and politically unacceptable."

While I agree with that statement in theory, practice is another matter. I do not believe government has a realistic choice in an environment of global wage arbitrage, changing consumer attitudes towards debt, and demographics of boomer retirement.

Mish thinks we are going to repeat Japan's deflationary pattern of the 1990s with repeated recessions and little economic growth.

Can we keep having a huge debt-to-GDP ratio or has the damage to the lending institutions become so great that the debtors are going to have an increasingly hard time rolling over their debts?

By Randall Parker 2009 January 25 01:26 PM  Economics Credit
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2009 January 24 Saturday
Hot Potato Game On Who Takes Guantanamo Detainees

A released Guantanamo detainee is suspected of involvement in bombing the US embassy in Sana Yemen.

BEIRUT: The emergence of a former Guantánamo Bay detainee as the deputy leader of Al Qaeda's Yemeni branch has underscored the potential complications in carrying out the executive order that President Barack Obama signed that the detention center be shut down within a year.

The militant, Said Ali al-Shihri, is suspected of involvement in a deadly bombing of the U.S. Embassy in Yemen's capital, Sana, in September. He was released to Saudi Arabia in 2007 and passed through a Saudi rehabilitation program for former jihadists before resurfacing with Al Qaeda in Yemen.

Appearing along with al-Shihri in a recent Jihadist video is another former Guantanamo detainee.

Three other men appear in the video, including Abu al-Hareth Muhammad al-Oufi, identified as an Al-Qaeda field commander. SITE later said he was prisoner No. 333.

Is there a Guantanamo detainee No. 666? If so, who is he? A charismatic fellow perhaps?

While most of the Guantanamo detainees are going to be released back out into the wild somewhere (including maybe the US and Europe - see below) 50-100 detainees will be tried in US courts.

The number of detainees who may face federal trials — by various estimates, 50 to 100 of the remaining Guantánamo inmates — is tiny by the standards of the federal prison system, which currently holds 201,375 people in 114 facilities, according to Felicia Ponce, a spokeswoman for the Federal Bureau of Prisons. Those include 9 detention centers that hold defendants awaiting trial, 21 high-security penitentiaries and a supersecure prison in Florence, Colo., where several convicted terrorists are already locked up.

If any of those prosecuted jihadists are not convicted or get sentences shorter than their lifespans then where will they be released?

It is considered inhumane (really, I am not making this up) to send some of the Guantanamo detainees back to their countries of origin. The European Union had previously indicated a willingness to accept some of these detainees as refugees if we would just close Guantanamo (funny the things people will promise when they are trying to pose as morally superior). They kinda like war refugees. Isn't this funny? I mean, okay, the Western countries are decadent and pathetic for even considering to do this in the first place. Albania - the Muslim European country that helped Kosovar Albanians push the Christian Orthodox Serbs out of Kosovo - took 5 whole Chinese Uigher freedom fighters/terrorists (take your pick). But the US is expected to take the rest.

European nations are mainly looking at the 60 of the 245 detainees who have been scrutinized and cleared for release – but cannot go home to China, Algeria, Uzbekistan, Russia, Syria, Libya, and other states, due to fears of reprisal.

Albania took five Chinese Uighers in 2006. Some human rights groups have called for the Obama administration to take the remaining 15 Uighers as a show of good faith.

Couldn't Saudi Arabia, birthplace of Islam, take in these devout Muslim believers? Are these Muslim warriors fighting for Islam?

Former Reagan and Bush Sr US DOJ lawyers David B. Rivkin Jr and Lee A. Casey argue that civilian courts are not the appropriate place for handling terrorists who are at war with the United States.

The Bush administration chose the law-of-war paradigm because the international law of armed conflict gives the U.S. maximum flexibility to meet the jihadist threat, including the right to attack and destroy al Qaeda bases and fighters in foreign countries. The alternative legal framework, the civilian criminal-justice system, is unsuitable for several key reasons. Civilian criminal suspects quite obviously cannot be targeted for military attack. They can be subjected only to the minimum force necessary to effect an arrest. They cannot -- consistent with international law -- be pursued across national boundaries. And finally, they are entitled to a speedy trial in a public courtroom. These rules cannot be ignored or altered without constitutional amendment.

In addition, the type and quality of evidence necessary for convictions in civilian courts is simply unavailable for most captured terrorists. One federal district judge recently concluded that although the government's information on one detainee was sufficient for intelligence purposes -- that is, he presumably could have been targeted for deadly attack -- it was insufficient to hold him without trial.

I've read some innocent people got swept up and imprisoned by the US during the war in Afghanistan. Does the US government still hold any remaining such people due to a lack of place to release them to that is not in the US?

By Randall Parker 2009 January 24 02:57 PM  Terrorists Western Response
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Obama Inaugural Popularity Exaggerated By Press

If you listened to the gushing descriptions of Obama's inauguration you might get the impression that the whole country is extremely excited and happy and everyone was tuning in. Well, while Nielsen estimates 37,793,008 watched Obama take office the inaugural star was clearly Ronald Reagan on January 20, 1969 with 41,800,260. The difference is even bigger than it looks at first glance since the United States had a much smaller population of 229 milion versus 304 million today. That is 12.4% for Obama versus 18.3% for Reagan. Obviously Reagan is the bigger star.

If you click thru you'll see that Obama scored a Nielsen HH (head of household?) rating of 25.5. Starting with Nixon (33.5 in 1969 and 28.5 in 1973) 3 other presidents beat him by Nielsen rating. Curiously, both Bushes scored very low for all 3 of their inaugurals.

The liberal press is ga ga over getting a leftie into office. We can't expect most of the press to do critical reporting about Obama. But if his TV ratings are any indication the public isn't as enamored as the press.

Unfortunately America's problems are more fundamental and deeper than either party's platform even begins to address. Our biggest problem by far is demographic decay. We are becoming both older and dumber. Clever macroeconomic policies or social policies can't fix these causes of decline. As long as conventional problem descriptions to not admit to the underlying causes of our problems those problems are going to grow in size.

By Randall Parker 2009 January 24 10:20 AM  Media Critique
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2009 January 23 Friday
Few Unemployed Can Afford Medical Insurance In US

In the United States those who received employer-provided medical insurance while employed and who lose their jobs can pay to continue their medical insurance for 18 months. But people who have lost their jobs lack the income needed to pay for that medical insurance. Turns out only 9% of newly laid-off workers opt to pay for continued medical insurance under COBRA.

New York, NY—As unemployment rates reach the highest levels in 16 years, a new analysis from The Commonwealth Fund finds that few laid-off workers—only 9 percent—took up coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) in 2006. Unemployed workers who also lose their health insurance would need substantial financial assistance, covering 75 to 85 percent of their health insurance premiums, for their premium contributions to remain at the levels they paid while they were working, according to the report, Maintaining Health Insurance During a Recession: Likely COBRA Eligibility, by Michelle M. Doty, director of survey research at The Commonwealth Fund and colleagues.

The ability of employers to buy medical insurance in pre-tax dollars while individuals have to buy it with after-tax income puts people in the position of depending on employer-provided health care. They can't save up pre-tax dollars while working to pay for medical insurance when they lose their jobs.

The inability of unemployed people to afford medical insurance creates political pressures for a larger government role in providing health care.

The report also finds that low-wage workers are at a particular disadvantage—with only 38 percent eligible to receive COBRA benefits—because they don't receive health insurance through their jobs, work for small firms that aren't required to offer COBRA, or are uninsured to begin with. Coverage options for low-income workers remain limited especially for childless adults because most lack a public coverage option. The authors say that policymakers should consider temporarily expanding Medicaid and SCHIP eligibility to unemployed adults with low incomes, with assistance for premium shares, to provide critical support to families.

Sixty-six percent of all current workers, if laid off, would be eligible to extend their health insurance under COBRA But for most people, COBRA payments are unaffordable, about four to six times higher than the amount of money they contributed to their health insurance when they were employed. According to the report, millions of the eligible could keep their coverage if they could get assistance with their premiums, which average $4,704 per year for an individual and $12,680 a year for a family.

The connection between a job and medical insurance also ties people to jobs and therefore makes the labor market less efficient. While some commentators call for an end to the tax advantages for employer-provided health care I think that would just make the pressures for government provision of health care even greater. We are better off with businesses funding health insurance than governments doing it.

What we need are medical accounts where while working one can accumulate money pre-tax that can be spent on insurance premiums and health costs when unemployed. The Health Savings Accounts are a step in that direction. But most people have other medical plans where they work and therefore can't accumulate pre-tax money while employed.

Here is the report referred to above.

Update: The ability to put aside money while working for future COBRA payments would also increase the rate of new company formation because it would reduce the risk and difficulty of starting new businesses. Our current medical insurance system is an obstacle to small company formation and therefore it lowers the rate of innovation.

By Randall Parker 2009 January 23 11:44 PM  Economics Health
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2009 January 22 Thursday
Most Groups Expect To Gain Influence Under Obama

Most people see themselves as becoming more influential now that Barack Obama has ascended to the US Presidency.

In the latest Pew Research survey, conducted Jan. 7-11, 47% said that people like themselves would gain influence under Barack Obama, 18% said they would lose influence, and 29% said they would not be affected. The survey found that overwhelming majorities of African Americans (79%) and other core Democratic groups said that people like themselves would gain influence under the new administration1.

But by nearly two-to-one (41% to 22%), more whites said they will gain rather than lose influence under Obama; 32% of whites say they will not be affected. White voters supported John McCain over Obama by 55% to 43%, according to exit polls conducted by the National Election Pool.

White evangelical Protestants were one of McCain's strongest groups last November; 74% supported McCain, while 24% backed Obama. Yet 37% of white evangelicals say that people like themselves will gain influence under Obama, compared with 31% who say they will lose influence and 27% who say they will not be affected.

What are the odds of all these people being right? I figure slim to none.

I think Bush was perceived (accurately in many cases) as impervious to reason. Obama comes across as seeking expert opinion and solicitous of the views of others. So people feel like he listens to them. This makes them feel more powerful and influential.

I've read that in person Bill Clinton comes across as very attentive and sympathetic to whichever view someone else is presenting. So people feel listened to by Clinton. Obama has some of that charm as well.

More whites feel like they are gaining influence with the transition from Bush to Obama than felt that way with the transition from Clinton to Bush.

Somewhat more whites say people like themselves will gain influence under Obama than expressed that view in January 2001 regarding Bush (41% vs. 35%). Hispanics, on balance, said they would gain influence under Bush, but a far greater percentage of Hispanics today believe that people like themselves will benefit under Obama (66% today vs. 38% in January 2001).

Some of the same groups had more people saying they'd gain than lose influence during each of these transitions. So are they all becoming more influential during each transition? I don't think so. I think this is all just delusion driven by the desire to feel higher in status and power.

By Randall Parker 2009 January 22 08:41 PM  Politics Human Nature
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2009 January 21 Wednesday
Researchers Find Obama Won Election On Race

MIT researchers find that Barack Obama won election by appealing more to blacks and Hispanics.

Some political observers have declared that the election of the first black president signals a new era of post-racial politics in the United States -- but the data show otherwise, two MIT researchers say.

Through careful analysis of 2008 exit-poll data, the researchers found that Barack Obama won the election precisely because of his race, most significantly because of his appeal among black voters who turned out in record numbers.

"Ironically, the candidate whom commentators lionized for ending America's debilitating racial divisions won the election on the basis of increasingly distinct white and nonwhite voting patterns," wrote the two researchers -- Charles H. Stewart III, the Kenan Sahin Distinguished Professor and head of the Department of Political Science at MIT; and Stephen Ansolabehere, professor of political science at MIT -- in the current issue of Boston Review. "Racial polarization in American voting patterns was the highest it has been since the 1984 election."

Despite many predictions, Obama did not "provoke a backlash among white voters," according to research compiled by Stewart and Ansolabehere. However, the percentage of blacks voting Democratic rose from 88 percent in 2004 to 95 percent in 2008. Hispanic voters -- who had been drifting into the Republican camp in recent years -- heavily favored Obama; Hispanics voting Democratic rose from 56 percent to 67 percent. "This additional support among nonwhites proved decisive," Stewart and Ansolabehere concluded.

Indeed, "had blacks and Hispanics voted Democratic in 2008 at the rates they had in 2004, McCain would have won," they wrote.

The Republican Party is becoming the white party.

This is not to say that Democrats lost ground among white voters; the Democrats did gain white votes but only a modest 3 million. "John McCain, on the other hand, received 2.3 million fewer votes than did George W. Bush in 2004. Most of this loss, 1.5 million votes, came from the net defection of blacks and Hispanics who voted Republican four years earlier; by comparison he lost 'only' 1.4 million white voters. Thus, Obama gained not only by bringing new minority voters into the electorate, but also by converting minority voters who had previously been in the GOP stable," the researchers wrote.

The Republican Party is pretty much political road kill. Demographic trends doom it. I'm expecting higher taxes on the most productive. I'm also expecting declining living standards. Texas will go Third World. Barack Obama will be helpless to stop this trend. He might even accelerate it.

By Randall Parker 2009 January 21 08:03 PM  Politics Ethnicity
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Dick Morris Sees More Socialism Under Obama

Former Bill Clinton adviser Dick Morris think America will swing left under OBama.

2009-2010 will rank with 1913-14, 1933-36, 1964-65 and 1981-82 as years that will permanently change our government, politics and lives. Just as the stars were aligned for Wilson, Roosevelt, Johnson and Reagan, they are aligned for Obama. Simply put, we enter his administration as free-enterprise, market-dominated, laissez-faire America. We will shortly become like Germany, France, the United Kingdom, or Sweden — a socialist democracy in which the government dominates the economy, determines private-sector priorities and offers a vastly expanded range of services to many more people at much higher taxes.

Obama will accomplish his agenda of “reform” under the rubric of “recovery.” Using the electoral mandate bestowed on a Democratic Congress by restless voters and the economic power given his administration by terrified Americans, he will change our country fundamentally in the name of lifting the depression. His stimulus packages won’t do much to shorten the downturn — although they will make it less painful — but they will do a great deal to change our nation.

It is not even obvious that fiscal stimulus will help speed recovery from a recession. But politicians want to be seen as trying.

Obama probably will reduce the number of people who pay federal income taxes. That's problematic. If fewer people pay any federal income taxes fewer people will oppose expansions in federal spending. They know they won't have to pay for it. Fewer taxed means more political irresponsibility.

But it is not his spending that will transform our political system, it is his tax and welfare policies. In the name of short-term stimulus, he will give every American family (who makes less than $200,000) a welfare check of $1,000 euphemistically called a refundable tax credit. And he will so sharply cut taxes on the middle class and the poor that the number of Americans who pay no federal income tax will rise from the current one-third of all households to more than half. In the process, he will create a permanent electoral majority that does not pay taxes, but counts on ever-expanding welfare checks from the government. The dependency on the dole, formerly limited in pre-Clinton days to 14 million women and children on Aid to Families with Dependent Children, will now grow to a clear majority of the American population.

Morris doesn't expect Obama to raise taxes since Obama wants to run a huge deficit to supposedly stimulate the economy. But some of Bush's tax cuts will expire in 2010 and I do not expect Obama and Congress to renew them. Plus, inflation will come back once the economic recovery kicks in and oil prices recover. Rising interest rates will put on the pressure for smaller deficits.

Illegal immigrant amnesty for a bigger permanent lower class is the scariest possibility. Morris is dreaming to imagine these people will ever move rightward.

And Obama will move to change permanently the partisan balance in America. He will move quickly to legalize all those who have been in America for five years, albeit illegally, and to smooth their paths to citizenship and voting. He will weaken border controls in an attempt to hike the Latino vote as high as he can in order to make red states like Texas into blue states like California. By the time he is finished, Latinos and African-Americans will cast a combined 30 percent of the vote. If they go by top-heavy margins for the Democrats, as they did in 2008, it will assure Democratic domination (until they move up the economic ladder and become good Republicans).

Higher taxes or more government spending will cause only temporary damage. These things can always be reversed. But importing low performing ethnic groups who do not improve across generations. I do not want to live in a society full of gangs. The libertarians who support open borders while purporting to defend liberty have a lot to answer for. Starr County Texas shows us our demographic future and it is not pretty.

A lot of people have been in ecstasy the last few days. But this mass delusion is not productive of good government.

Update When I call the Republican Party "road kill" I do not predict its demise or break-up. Rather it will move Left and supporters of limited government and a free market aren't going to have a real choice to vote for. As the Republican Party moves Left and picks up more moderate leftists with more left-leaning policies it will leave the Democrats with remaining members who are even more Leftist. So the Democratic Party will become even more hostile to markets and to individual rights and property.

By Randall Parker 2009 January 21 07:25 PM  Politics American Presidency
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2009 January 20 Tuesday
Mexico Oil Production In Steep Decline

Mexico's oil fields are past peak and continue to decline sharply.

Jan. 20 (Bloomberg) -- Petroleos Mexicanos, Mexico’s state oil company, will probably report its fastest drop in production since 1942, eroding revenue as plunging crude prices limit the amount of cash available to drill for new reserves.

Pemex last year likely extracted 2.8 million barrels a day, down about 9 percent from the 3.08 million a day pumped in 2007, representing a total of $20 billion in lost sales, according to data compiled by the government and Bloomberg. The Mexico City- based company, which had revenue of $104 billion in 2007, plans to report annual production figures tomorrow.

Given Pemex's role in funding the government this oil production decline is going to create a Mexican government financing crisis. Mexico will cease to export oil in a few years and will become an oil importer. This will create financial strains on the government and economy.

The US government ought to take steps to insulate the US from Mexico's coming economic crisis. We should build a deep and long border barrier to keep out Mexicans when their living standards go into decline.

By Randall Parker 2009 January 20 11:24 PM  Mexico
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2009 January 18 Sunday
Condi Rice Helped Create Latest Gaza Battle

Many have written about the latest round of missiles and fighting between Israel and the Palestinians. This time Hamas rule Gaza Strip as a result of elections which were supposed to bring the miraculous healing balm of democracy to Arabia. If you are interested in the debate about Israel and Hamas then read Ross Douthat's overview and click thru and read Noah Millman's take. But what I find most interesting of all: Condi Rice and George W. Bush helped make this latest round of fighting inevitable.

Hamas never called for the elections that put them in power. That was the brainstorm of Secretary Rice and her staff, who had apparently decided they could steer Palestinians into supporting the more-compliant Mahmoud Abbas (the current president of the Palestinian authority) and his Fatah Party through a marketing campaign that was to counter Hamas's growing popularity – all while ignoring continued Israeli settlement construction, land confiscation, and cantonization of the West Bank.

State Department staffers helped finance and supervise the Fatah campaign, down to the choice of backdrop color for the podium where Mr. Abbas was to proclaim victory. An adviser working for the United States Agency for International Development (USAID) explained to incredulous staffers at the Embassy in Tel Aviv how he would finance and direct elements of the campaign, leaving no US fingerprints. USAID teams, meanwhile, struggled to implement projects for which Abbas could claim credit. Once the covert political program cemented Fatah in place, the militia Washington was building for Fatah warlord-wannabee Mohammed Dahlan would destroy Hamas militarily.

Their collective confidence was unbounded. But the Palestinians didn't get the memo. Rice was reportedly blindsided when she heard the news of Hamas's victory during her 5 a.m. treadmill workout. But that did not prevent a swift response.

Blindsided. Imagine that.

Condi supported economic blockade that Israel put into place in response to Hamas. Hamas therefore started shooting rockets into Israel. If Israel hadn't done the economic blockade would Hamas have conducted attacks anyway?

I've become convinced that a variety of stupidities just have to play themselves out. In many cases people only learn the hard way - or they do not learn at all. Democracy as the Middle East's panacea? How's that working out in Lebanon? Or how about Algeria where the religious party won and so the military decided to take over and civil war ensued?

The conflict between Israel and the Palestinians doesn't have a happy ending. There's no mutually acceptable compromise. On the level of demographic war the Israelis are losing and the Palestinians therefore think they've got time on their side. Within Israel Arabs are making more babies than Jews and among the Jews the smarter Ashkenazis are making fewer babies than the Jews who came from Arab countries. So the smarter Jews are a shrinking percentage of the people within the territories and Israel proper. The Israelis need to separate themselves from the Muslim Arabs (though perhaps not the Christian Arabs).

By Randall Parker 2009 January 18 05:30 PM  MidEast Arabs Versus Israelis
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2009 January 17 Saturday
More Education Dollars Go To Administration

Colleges and universities continue to become more top-heavy. Time to cut the fat.

And the percentage of the budget going to instruction declined everywhere between 1995 and 2006 — to 63 percent from 64.4 percent at public research institutions, to 50.2 percent from 52.8 percent at public community colleges, and to 38.9 percent from 40.7 percent at private bachelors colleges.

The biggest decline occurred at private research universities, where the percentage of the budget devoted to instruction went to 57.9 percent in 2006 from 62.3 percent in 1996.

Meanwhile, the share spent on administration and support increased everywhere. At public research universities, those costs consumed 28.3 percent of the budget in 2006, up from 27.7 percent in 1995. At private research institutions, they accounted for 32.9 percent of the budget, up from 30.1 percent, and at public community colleges, 37.7, up from 35.9 percent.

Administration isn't the only cost that needs cutting. We need online lectures and online standard tests for a large assortment of subjects. It is a ridiculous waste to have thousands of people stand up every semester and quarter to lecture on the same introductory material for calculus, chemistry, physics, and history. The basics can be done with recorded lectures. Live humans should only be used to answer questions. Even a lot of the Q&A could be done with live chatrooms and video feeds so that many people all over the world can hear the same answers.

The news report above relays information from the Delta Cost Project which studies educational costs.

Update: American institutions of higher education, where prices have been rising faster than overall inflation for decades, want a bail-out from Obama's fiscal stimulus package. They want to stay fat. I say time for a diet.

By Randall Parker 2009 January 17 02:41 PM  Education
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2009 January 16 Friday
100 Trillion Dollar Zimbabwe Banknote

Nothing new to report here folks. Kinda like the Arab-Israeli conflict. Same old bad news year after year.

Zimbabwe's central bank will issue a 100 trillion Zimbabwe dollar banknote, worth about $33 (22 pounds) on the black market, to try to ease desperate cash shortages, state-run media said Friday.

Prices are doubling every day and food and fuel are in short supply. A cholera epidemic has killed more than 2,000 people and a deadlock between President Robert Mugabe and the opposition over power sharing has dampened hopes of ending the crisis.

The crisis could be ended by a return to colonial rule. Lots of Western retired heads of state could be given jobs running Zimbabwe's government. Tony Blair could take a wack at it. Or John Major could do it. A retired governor of a US state could do it. Retired judges could staff the judiciary. The police could be run by retired police chiefs. Bring in a few thousand foreign administrators, a thousand engineers, and a few thousand mercenaries and Zimbabwe could become substantially less bad.

Of course that isn't going to happen. Lucky thing in a way. I do not want to pay for all those colonial administrators.

By Randall Parker 2009 January 16 06:09 PM  Chaotic Regions
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Military Report Considers Possible Chaos In Mexico

A US military report, The Joint Operating Environment 2008, considers the possibility that Mexico will descend into chaos.

The Mexican possibility may seem less likely, but the government, its politicians, police, and judicial infrastructure are all under sustained assault and pressure by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone.

The drug and criminal cartels are not the only destabilizing influence on Mexico. Declining oil field production is another substantial problem. In a few years Mexico will become a net oil importer and won't be able to afford to maintain current levels of oil consumption.

Drug violence from Mexico could escalate in the US as a spillover.

Homeland Security Secretary Michael Chertoff said last week that the U.S. needed to be prepared for a spillover of the drug violence into the U.S. and would have to be prepared to fight it.

That means a military surge — not to defend faraway Iraq, but defending our own homeland. A collapsed state will bring millions of Mexicans spilling over our border, not as illegal immigrants, but war refugees, fleeing for their lives from violence.

What to do in that case? Investors Daily recommends letting in millions of refugees. I say build huge border walls instead. If Mexico needs our help then send in US troops to occupy part of it and make that part suitable for refugees. Also, form military and intelligence teams to hunt down and kill the people who control the big drug cartels.

The U.S. will have no choice but to accept such refugees on humanitarian grounds, just as Pakistan, Thailand and Venezuela have had to do from over their own borders in the past. Criminals often embed themselves among them, to prey on the helpless and to expand their operations, creating a new internal threat to the U.S.

A much tighter US border with Mexico would cut the flow of drugs from Mexico and cut the money flowing to drug cartels.

By Randall Parker 2009 January 16 12:57 AM  Mexico
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2009 January 13 Tuesday
Analyst Sees GM Bankruptcy Unavoidable

General Motors can't avoid bankruptcy.

A leading Wall Street analyst said Jan. 13 that he doesn't think General Motors (GM) will be able to restructure its debt to the satisfaction of the U.S. Treasury, which is lending the company billions of dollars, without the help of a federal bankruptcy judge.

"The chances are greater than not that there will be bankruptcy, at least for GM," said Rod Lache, auto analyst for Deutsche Bank (DB), speaking in Detroit at a conference sponsored by the Society of Automotive Analysts during the North American International Auto Show. "But it won't be the disruptive, scary bankruptcy that suppliers fear."

Lache thinks some of GM's debt holders won't agree to a large enough cut in their holdings to make a restructuring work outside of bankruptcy court. But since the Obama Administration gets to decide whether GM has really proven its financial viability it could be that GM could do a smaller restructuring and still get more US government money. But that'll just delay the inevitable bankruptcy. Also, if the Obama Administration doesn't force the United Auto Workers union to make very big concessions this also means a bankruptcy later.

GM could also do more dealer network shrinking in bankruptcy.

By Randall Parker 2009 January 13 11:07 PM  Economics Transportation
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2009 January 11 Sunday
GM And Chrysler Seen As Insolvent

US government loans just keep GM and Chrysler on life support.

General Motors Corp. and Chrysler LLC technically are bankrupt and Chrysler is a step away from death, said Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor.

"GM and Chrysler are insolvent. Without federal funding they are bankrupt," McAlinden said at a conference today at the joint office of The Detroit News and Detroit Free Press. If the government took half of all of the bailout money away, they would go back to being bankrupt, he said.

"GM will not meet the initial conditions of the loan. But the conditions will change so GM can keep them," McAlinden said.

This is why big cuts in UAW wages and benefits are necessary. Both GM and Chrysler need big reductions in their costs in order to survive. The only alternative is outright continuing subsidy by the taxpayers. Chrysler's loan isn't even big enough to pay for all it owes to its suppliers.

McAlinden said Chrysler needs $6 billion to pay its suppliers for last quarter's parts and he suspects the full $4 billion loan went towards these payments. Chrysler initially sought $7 billion from the government.

McAlinden said Chrysler may threaten to keep its factories closed longer as a bargaining tool in negotiations with the new Obama Administration.

But if Chrysler is allowed to go bankrupt that will pull parts suppliers that GM and Ford rely upon into bankruptcy as well. There's a big domino effect with the bankruptcies. Will a left-leaning Democrat Barack Obama force the UAW to offer concessions big enough to allow the US domestic auto industry to survive?

Chrysler needs to be freed from UAW work rules and UAW pension and wage and benefits costs. The Big Three are the UAW's bitches. Not only does UAW labor cost a lot but UAW work rules slow improvements in productivity and the bureaucracy around those work rules are an obstacle to continuous improvement. It isn't like unions shift money generally from management and capital to lower level workers. Read about The Aribtrariness of Wagner Act Redistribution (scroll down to find it).

Update: The unfunded pension benefits of the Big Three are far larger than the government loan amounts.

The outgoing director of the U.S. Pension Benefit Guaranty Corp. warned Friday that Detroit's Big Three automakers face a $41 billion pension shortfall.

...

In total, the Big Three pensions cover nearly 1.3 million people. If all three automakers were to collapse and turn their plans over to the pension corporation, the agency estimates it would pay out $13 billion of the $41 billion, because of limits set by Congress on how much the pension corporation can cover. The agency generally has a yearly cap of $54,000 in benefits for people who are 65.

So a bankruptcy would substantially cut the size of pensions received by retirees. The UAW could agree to cuts in salaries of current workers in order to free up more money to pay retirees. Or the UAW could agree to benefits cuts such as with health care for retirees and current workers. The UAW workers get medical benefits worthy of envy. How'd you like to have 95% of your medical costs paid for?

By Randall Parker 2009 January 11 10:16 AM  Economics Transportation
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Surgeon Wants Kidney Back From Cheating Wife

A surgeon wants his kidney back or $1.3 million from his cheating wife.

Dr. Richard Batista of Long Island, N.Y., didn't chop off his right arm for his ailing wife, but he did something many would consider equally noble: He gave up a kidney to her when she needed one in 2001.

How did Dawnell Batista repay this remarkably selfless expression of his love?

According to Dr. Batista and his attorney, she repaid him by having an affair with her physical therapist and filing for divorce.

She also, they claim, locked him out of their million-dollar mansion and denied him access to their three children.

He donated the kidney in 2001. She filed for divorce in 2005. The divorce proceedings still are not settled.

What is needed: genetic testing and brain scanning technology that'll give a person insight into the depth of the bond that another person has for them.

He feels betrayed. No kidding.

"I feel humbled and betrayed and disregarded. This divorce is killing me."

He probably thought his status as a surgeon made him too attractive to a woman to be treated like this. Er, no.

Update Also see Roissy on the surgeon whose ex-wife has his kidney. Says the always provocative Roissy "Like an innocent beta lamb to the slaughter."

By Randall Parker 2009 January 11 09:34 AM  Cultural Wars Marriage
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Toronto Guy Must Pay For Kids Not Genetically His

A Toronto Canada man has to pay child support for kids who genetically are not his.

Madam Justice Katherine van Rensburg ordered Pasqualino Cornelio to continue paying child support to the 16-year-old twins – regardless of whether he was bamboozled by a philandering wife.

“While the failure of Anciolina Cornelio to disclose to her husband the fact that she had an extramarital affair – and that the twins might not be his biological children – may have been a moral wrong against Mr. Cornelio, it is a wrong that does not afford him a legal remedy to recover child support he has already paid, and that does not permit him to stop paying child support,” Judge van Rensburg said.

Does anyone know of American states where discovery that the kids are from an extramarital affair lets the guy off the hook for child support? Even better, for alimony?

Marriage is in dire need of a more realistic appraisal of its uses and abuses.

By Randall Parker 2009 January 11 09:25 AM  Cultural Wars Marriage
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2009 January 08 Thursday
College Grad Unemployment Numbers Understated

On the surface this sounds like the job prospects for the college educated are pretty good even during a recession.

In November, the unemployment rate among workers with a college degree or higher reached 3.1 percent. While that figure is modest compared with the national unemployment rate of 6.7 percent -- and nowhere near the 10.5 percent unemployment rate among those without a high school diploma -- it hasn't been that high since 2003. Because the unemployment rate tends to lag behind other economic indicators, analysts think unemployment among college-educated workers is likely to surpass 4 percent, which would be the highest rate since the Bureau of Labor Statistics began tracking unemployment by education level in 1970.

But most of the college grads who are losing their jobs aren't showing up among the officially unemployed.

Last month, the number of college graduates working fell by 282,000, but the number of college graduates counted as unemployed rose by only 2,000 to 1.413 million.

Do smarter people give up job searching more quickly because they figure out more quickly how hopeless it is? Or are they more specialized and therefore have fewer choices to choose among? Or do they have more cash saved up on average and therefore are less desperate and don't want to work at lower paying and in other ways less desirable jobs? Or do they see lower paid and lower skilled jobs as bad marks they want to keep off their resumes?

By Randall Parker 2009 January 08 09:20 PM  Economics Labor
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2009 January 07 Wednesday
Pension Plan Losses To Depress Corporate Earnings

There's an element of vicious cycle here. The need to pay more into pension plans will lower corporate earnings which will lower stock prices which will lower pension plan values.

Pension plan losses are about to knock out $70 billion of corporate earnings, according to a report by consulting firm Mercer. Huge investment losses have left the funds of the Standard & Poor's 1500 some $409 billion in the red, the firm estimates in a report released Jan. 7. More than fully funded a year ago, these plans have suffered their most precipitous one-year drop in at least two decades, with the average fund now holding enough assets to cover just 75% of promised retirement payouts.

Downturns cause pension plans to become underfunded which then causes corporations to take even bigger hits to make up for losses.

When pension plans are underfunded, companies are required to plow enough additional money into the funds each year to correct the imbalance, a process than can take several years. This year, Mercer estimates that the companies in its study will end up reporting about $70 billion of pension expenses, up from about $10 billion in 2008. That would equate to an 8 percent reduction in annual profits compared with 2007, the most recent year for which companies have reported full annual results, Mercer said.

Of course, defined benefit pension plans are dwindling in number. A growing portion of the US labor force no longer gets a defined benefit pension plan as part of their benefits.

A recent law change raises the bar for companies to keep their pension plans well funded.

As reported earlier, a coalition of large companies that still offer defined-benefit plans is seeking a suspension or delay of new rules that would further drain them of much-needed cash. The Pension Protection Act of 2006, passed after funding dropped following the technology and internet collapse in 2001, requires companies to cover 94 percent of retirement-plan liabilities to be considered fully funded in 2009.

Some companies are taking steps to cut future vested benefits.

Besides paring back risk, more companies will likely consider freezing their defined pension plans, said Adrian Hartshorn, also a member of Mercer's financial strategy group. A frozen pension plan preserves employees' vested benefits but eliminates future accruals. Already, many major companies have taken this step including Motorola Inc. (MOT), BertelsmannAG's Random House Inc. and GenCorp Inc. (GY).

"Some companies will inevitably will take that step," said Hartshorn. "What they need to bear in mind is that even if they freeze it, they will still have legacy assets to deal with."

A long term slowing of economic growth will force more companies to freeze their defined benefits pension plans. My guess is that a combination of demographic problems and Peak Oil will cause the US economy to grow more slowly in the next couple of decades. So I expect pension plan benefits to get cut further.

By Randall Parker 2009 January 07 09:43 PM  Economics Entitlements
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Record US $1.2 Trillion Deficit Could Hit $1.7T

One way to look at a huge American budget deficit: The US government is testing the willingness of China to fund America's budget deficit in order to maintain America's trade deficit.

The Congressional Budget Office predicted on Wednesday that the federal deficit would balloon to $1.2 trillion this year — even before Democrats pass an economic stimulus bill that could cost an additional $1 trillion spread over this year and next.

To a degree that would have been unimaginable two years ago, economists and politicians from across the political spectrum have put aside calls for fiscal restraint and decided that Congress should spend whatever it takes to rescue the economy.

Remember when home buyers and lenders put aside restraint and bid up homes and commercial buildings to ridiculous price levels? A new mania in the government has replaced the mania in the real estate market. Of course, the mania in the real estate market replaced the dot com mania. What I want to know: which mania will replace the government spending mania? Tulips anyone?

Ronald Reagan's previous post-WWII record deficit is getting beaten by a large margin.

The budget office said the $1.2 trillion deficit would equal 8.3 percent of gross domestic product, obliterating the previous postwar record of 6 percent, reached in 1983 under President Ronald Reagan.

If Democrats enact a stimulus program of $1 trillion over two years, which is possible, the deficit this year could widen to about $1.7 trillion or more than 10 percent of gross domestic product.

Think about that. More than 10% of GDP.

Obama is starting out as a big spender. But you can bet the US Department of Defense budget will take a big hit.

And that stimulus package could still face a difficult time in Congress if fiscal conservatives can successfully define its author as just a traditional big-spending Democrat in new clothes.

“In order to make these investments that we need, we will have to cut the spending that we don’t,” Obama said at a Jan. 7 news conference.

What else will Obama cut?

Changes in Social Security and Medicare? Are changes to reduce the rate of growth of old age entitlements politically possible?

WASHINGTON — Changes in Social Security and Medicare will be central to efforts to bring federal spending in line, President-elect Barack Obama said on Wednesday, as the Congressional Budget Office projected a $1.2 trillion budget deficit for the fiscal year.

Obama is a leftward leaning Democrat. So you wouldn't expect him to cut old age entitlements. On the other hand, Richard Nixon went to communist Russia and China while Bill Clinton signed the Republican welfare reform.

One way to cut old age entitlements is to gradually raise the ages of eligibility. These age rises do not cut montly payments or medical options. So they aren't as easily labeled as cuts. Another way to do it is to restrict what medical providers can get paid. This again avoids the cuts label because in theory you can still get whatever treatment that now gets paid less to get done. How far such cuts can go without reducing availability is one of the things we are going to learn in coming years. Price controls are probably going to play a big role in slowing the rise in medical spending.

By Randall Parker 2009 January 07 08:46 PM  Economics Government Costs
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Iraq A Story Of Diminished Expectations

The end of US involvement in Iraq is in sight.

In Mahmudiyah the drawdown began almost a year ago. As hard as the Americans tried to fix the place, it's still nothing to brag about. The economy, although improving, remains crippled. Public services are practically nonexistent. Courts and government offices are open, but schools lack working toilets, and teachers are so bad that parents scrape money together for private tutors. Sewage floods some side streets, and telephone landlines fail as often as not. The big government hospital is chronically short of medical supplies; late last month, a man scoured the town's drugstores for surgical thread because the hospital had none for his wife, who was undergoing a Caesarean delivery. "The military is, in some cases, the only government people see," says Maj. John Baker, who advised Iraqi troops in rural areas near Mahmudiyah until late 2008. By normal standards the town is a mess—but it's less dangerous than it was, and at this point that's about the best anyone can expect.

"Iraqi good enough". Corrupt and inefficient just like the rest of the Middle East. Hey, if so many countries aren't Jeffersonian democracies this is not just by chance or momentum of past rulers.

The situation is summed up in a phrase you hear among American combat troops and trainers: "Iraqi good enough." The term expresses their resignation—realism, they'd call it—about the limits of what America can accomplish in Iraq. They say it when an Iraqi Army unit has no choice but to buy fuel for its Humvees on the private market because Iraq's military-supply system is so corrupt and inefficient. Or when the persistent shortage of capable leaders forces Iraqi battalions to function with only half the number of officers they require. Or when Iraqi soldiers fall apart in a senior officer's absence because that's the way it goes in a top-down society. The concept has spread to American Embassy staffers, who invoke it when speaking of the near-impossible task of reforming the decrepit old welfare-state economy. "Good enough" may not live up to Americans' hopes for Iraq, but at this point it describes the place we're likely to leave behind in 2011—if things stay on track. "It's a hell of a lot better than I thought we were going to get four years ago fighting in Anbar, or two years ago in a civil war," says counterinsurgency expert John Nagl. "The high side may not be that high, but the costs of failure are severe."

Hey, all those Anbar insurgents and all the bombings of civilians and soldiers served the purpose of lowering expectations. That's a pretty expensive and painful way to lower expectations. If only dreamers could have been more realistic about the prospects for Arab democracy going in.

Iraq will have elections (at least for a while) but will otherwise be very similar to the nondemocratic states in the Middle East. Lots of political prisoners, corruption, lack of rule of law.

America's expectations have plunged. Officials on the ground now envision an Iraq roughly like other nondemocratic states in the Middle East. The government will no doubt be repressive—not as bad as when Saddam Hussein was in charge, but even now Iraq's jails hold thousands of prisoners who have been held for months without hearing the charges against them. Corruption is rampant, in part because the state isn't strong enough to haul the biggest wrongdoers into court without touching off a rebellion. Residents of Mahmudiyah sarcastically call their mayor's neighborhood Owja, after Saddam's hometown—the lights stay on there even when the power is out everywhere else. And Tehran already has far more influence in the new Iraq than it did under Saddam.

We helped Iran expand its influence. Jewish neoconservative intellectuals sure damaged Israel's security.

In Iraq 2007 was bad enough to make 2008 look good. That's the upside of a bad year.

The increase in security has been striking in Baghdad, where shops are reopening and concrete barriers are being removed. But the surge did push insurgents north to cities like Mosul and Baquba, where attacks are still common but increasingly focused on Iraqi security forces rather than civilians. To be sure, insurgents are still able to carry out high-profile suicide bombings.

According to estimates from independent organizations, between 6,700 and 8,000 Iraqis were killed in attacks in 2008, more than a 50 percent drop compared with 2007. According to the Associated Press, 314 US troops are believed to have died in Iraq in 2008 compared with 904 servicemen and women killed in 2007.

The Kurd-Arab conflict could heat up.

It is simmering and could erupt if Baghdad and the semiautonomous Kurdistan Regional Government (KRG) don't come to an agreement over Kirkuk, the oil-rich city that is under central government authority but claimed by the Kurds as their historic capital. Added to the mix is a large Iraqi Turkmen minority backed by Turkey. A referendum to decide who should control the city has been postponed twice, and the UN has so far been unable to find an acceptable formula for a political settlement that would pave the way for a vote.

Will the Kurds and Arabs come to blows? Or will there be a de facto partition while the Kurds pretend to be part of Iraq?

By Randall Parker 2009 January 07 07:04 PM  Mideast Iraq Democracy Failure
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2009 January 06 Tuesday
Rasmussen Poll Shows Plurality Support Escape From Social Security

More support the right to exit America's government-mandated old age retirement program.

Forty-six percent (46%) of U.S. voters believe working Americans should be allowed to opt out of Social Security to provide for their own retirement planning, an idea not likely to gain much traction with Democrats more strongly in control of Congress.

Thirty-eight percent (38%) are opposed to the idea of opting out, and 16% are not sure in a new Rasmussen Reports national telephone survey.

But if younger people were allowed to escape from Social Security there wouldn't be enough money to pay the older people near or in retirement. The pyramid scheme is already showing the stress of a declining ratio of taxpayers to benefits receivers. Letting some of those taxpayers escape would bankrupt the system.

Bizarrely, some of those people who favor letting people escape also favor taxing more of the income of the people who are still in the system. Keep in mind that the average IQ in America is below 100 and most people with IQs above 100 are innumerate anyway. Then these same people say that those who pay more should get more, thereby defeating any benefit of higher taxes for keeping the system solvent.

A majority of voters continue to agree with President-elect Obama’s proposal for workers to pay Social Security taxes on more of the income they earn each year. Sixty percent (60%) say people should pay Social Security taxes on all or most of their annual income. Twenty-nine percent (29%) disagree, and 11% are undecided.

Sixty-two percent (62%) of voters also say people who pay more in Social Security taxes should receive more in retirement benefits when they retire. Twenty-two percent (22%) are against that idea, with 16% undecided.

Of course, one could argue that forcing people to keep the pyramid scheme solvent is immoral. But if that's the case why raise taxes on upper income people in the first place?

How bad will the Medicare and Social Security burden become on workers? Do workers each end up paying on average $500 per week by 2030 to support retirees? Since most workers can't afford that I'm thinking the upper middle class and upper class will pay much more. But opposition will grow much larger. So benefits cuts will limit how big the burden becomes.

The old age retirement entitlements programs depend very heavily on continued strong economic growth to pay most of what has been promised. But if Peak Oil cuts into growth and sends the economies of the industrialized countries into several years of economic contraction then there'll be no escaping the need to raise retirement ages and cut benefits. Taxes alone will cost too much and lower living standards of the still working even more sharply than the economic contraction caused by declining oil production.

America has other demographic problems that promise to cut living standards as a declining percentage of those in their working years possess the intellectual attributes needed to operate a complex modern economy.

By Randall Parker 2009 January 06 07:56 PM  Economics Entitlements
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Rasmussen Poll Shows Plurality Support Escape From Social Security

More support the right to exit America's government-mandated old age retirement program.

Forty-six percent (46%) of U.S. voters believe working Americans should be allowed to opt out of Social Security to provide for their own retirement planning, an idea not likely to gain much traction with Democrats more strongly in control of Congress.

Thirty-eight percent (38%) are opposed to the idea of opting out, and 16% are not sure in a new Rasmussen Reports national telephone survey.

But if younger people were allowed to escape from Social Security there wouldn't be enough money to pay the older people near or in retirement. The pyramid scheme is already showing the stress of a declining ratio of taxpayers to benefits receivers. Letting some of those taxpayers escape would bankrupt the system.

Bizarrely, some of those people who favor letting people escape also favor taxing more of the income of the people who are still in the system. Keep in mind that the average IQ in America is below 100 and most people with IQs above 100 are innumerate anyway. Then these same people say that those who pay more should get more, thereby defeating any benefit of higher taxes for keeping the system solvent.

A majority of voters continue to agree with President-elect Obama’s proposal for workers to pay Social Security taxes on more of the income they earn each year. Sixty percent (60%) say people should pay Social Security taxes on all or most of their annual income. Twenty-nine percent (29%) disagree, and 11% are undecided.

Sixty-two percent (62%) of voters also say people who pay more in Social Security taxes should receive more in retirement benefits when they retire. Twenty-two percent (22%) are against that idea, with 16% undecided.

Of course, one could argue that forcing people to keep the pyramid scheme solvent is immoral. But if that's the case why raise taxes on upper income people in the first place?

How bad will the Medicare and Social Security burden become on workers? Do workers each end up paying on average $500 per week by 2030 to support retirees? Since most workers can't afford that I'm thinking the upper middle class and upper class will pay much more. But opposition will grow much larger. So benefits cuts will limit how big the burden becomes.

The old age retirement entitlements programs depend very heavily on continued strong economic growth to pay most of what has been promised. But if Peak Oil cuts into growth and sends the economies of the industrialized countries into several years of economic contraction then there'll be no escaping the need to raise retirement ages and cut benefits. Taxes alone will cost too much and lower living standards of the still working even more sharply than the economic contraction caused by declining oil production.

America has other demographic problems that promise to cut living standards as a declining percentage of those in their working years possess the intellectual attributes needed to operate a complex modern economy.

By Randall Parker 2009 January 06 07:56 PM  Economics Entitlements
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2009 January 05 Monday
Housing Market Bottom In 2010?

11% unemployment coming to the US?

Economists Kenneth Rogoff of Harvard and Carmen Reinhart of the University of Maryland have a particularly grim view of the economic outlook.

In a fascinating new paper that Mr. Rogoff presented this weekend at the annual meeting of the American Economic Association, they offered some sobering details on what has happened to other countries in the aftermath of severe financial panics like the one the U.S. is now experiencing.

Their bottom line: If history is any guide, the housing market might not bottom until 2010, a stock market rebound isn’t in sight, the unemployment rate could exceed 11% and government debt is about to soar.

The work is an extension of long-running research by the two professors on the history of financial crises. In past work, they compared the U.S. situation to financial crises in developed countries. This time, they are adding in the experiences of developing after concluding that severe emerging-market crises aren’t all that different from crises in developed markets.

They also expect the stock market to stay down for a few years.

Thoughts?

By Randall Parker 2009 January 05 11:51 PM  Economics Business Cycle
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Profiting From The Rapture And Sustainable Disaster Survival

Thread drift on Megan McArdle's blog led me to post this as a logical response to what other posters were saying: The Rapture is a profit opportunity for those left behind.

To profit from the Rapture make sure you are not a believer. Otherwise you'll go up with the Rapture and your inheritors will reap all the profit.

I see some Rapture investment angles:

1) Do not own homes in fundamentalist neighborhoods because housing prices will drop when all those believer homes come on the market in estate sales.

2) Believer mortgages are similarly a bad investment bet.

3) Get into cash before the Rapture so you can buy up businesses and housing of departed believers that will sell for cheap in estate sales.

As for how to profit from societal collapse: I think the people who are focusing in guns and canned food are not thinking sustainably. Look, if utilities are going to collapse you ought to be thinking about a country home with solar panels and near a creek with a dam for hydroelectric power.

Think about how to sustain flows when the flows have stopped for everyone else. Now, I'm not saying pairs of 50 cals and lots of ammo aren't useful. You've got to be ready to repel direct assaults on the greenhouses you are going to sustainably grow food once TSHTF. But dogs are more sustainable for routine guard duty since you can trap rabbits and other small game to feed them and the dogs can reproduce.

Dogs are more sustainable. Dogs, solar panels, and small scale hydroelectric are what you need.

This is practical advice. If you want more disaster fare then also read Jason Bradford on survival in Mendocino County once nuclear war cuts off Middle Eastern oil. Mind you, his premise is flawed since a cut-off of Middle Eastern oil will not stop the flow of trucks to refill grocery stores in Ukiah or Willets. The amount of energy cut needed to strangle US agriculture and food distribution would need to be a lot larger than that. Precisely because we waste so much we have a large buffer of cuttable energy usage before we'd see collapse of essential infrastructure.

But disasters are good fun as numerous disaster movies demonstrate.

By Randall Parker 2009 January 05 10:21 PM  Economics Disasters
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2009 January 04 Sunday
Taliban Ban Female Education In Swat Valley Pakistan

The Taliban have brought their educational policies with them from Afghanistan.

Taliban militants in a former tourist region of Pakistan have banned girls from school beginning this month, claiming female education is contrary to Islam.

"From January 15, girls will not be allowed to attend schools," Mullah Shah Doran, the Taliban second in command in the scenic Swat Valley, announced in a recent radio address. Mullah Doran said educating girls is "un-Islamic."

120,000 girls were in school but the violence (including destruction of schools) has already cut the number to 40,000. Barack Obama wants to take on the Taliban. But is he going to send US troops into Pakistan to do it? The Pakistani government would object to large scale US operations inside of Pakistan.

Can anyone point to a good analysis of US military prospects for stomping down the Taliban in Pakistan? The Taliban are making headway in tribal areas of Pakistan according to some reports.

Militants have launched six such attacks in Peshawar since the beginning of December, destroying some 300 Humvees and other military vehicles as well as supplies worth millions of dollars. While these raids have obvious consequences for international troops in Afghanistan, they also mark a new level of insecurity for Peshawar, a city of universities, kebab stands, and carpet dealers that has always had an edgy border-town vibe but that now seems increasingly vulnerable to a Taliban takeover. Mahmood Shah, a retired army brigadier who lives in Peshawar, estimated that, based on the scale of the attacks on NATO supplies, it would take the Taliban as little as 20 minutes to gain control of the city's key administrative offices and essentially conquer it.

This sounds like the kind of situation that will get worse before it gets better. Can the US entice the government of Pakistan to assert full control of the tribal areas? Can the government of Pakistan competently do this?

By Randall Parker 2009 January 04 07:36 PM  MidEast Afghanistan
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Aging Populations Seen Causing Political Conflicts

Neil Howe and Richard Jackson argue that the demographics of aging populations will cause political conflicts as the young and old battle over how much the young will fork over to support the old.

For the world's wealthy nations, the 2020s are set to be a decade of hyperaging and population decline. Many countries will experience fiscal crisis, economic stagnation and ugly political battles over entitlements and immigration. Meanwhile, poor countries will be buffeted by their own demographic storms. Some will be overwhelmed by massive age waves that they can't afford, while others will be whipsawed by new explosions of youth whose aspirations they cannot satisfy. The risk of social and political upheaval and military aggression will grow throughout the developing world -- even as the developed world's capacity to deal with these threats weakens.

High taxes to pay for huge increases in old age entitlements will cut living standards for younger workers. They do not mention this but those taxes will also cut economic growth by reducing investment and in some cases by reducing labor force participation.

Graying means paying -- more for pensions, more for health care, more for nursing homes for the frail elderly. Yet the old-age benefit systems of most developed countries are already pushing the limits of fiscal and economic affordability. By the 2020s, political warfare over brutal benefit cuts seems unavoidable. On one side will be young adults who face declining after-tax earnings, including many who often have no choice but to live with their parents (and are known, pejoratively, as twixters in the United States, kippers in Britain, mammoni in Italy, nesthocker in Germany and freeters in Japan). On the other side will be retirees, who are often wholly dependent on pay-as-you-go public plans. In 2030, young people will have the future on their side. Elders will have the votes on theirs. Bold new investments in education, the environment or foreign assistance will be highly unlikely.

At first glance the US looks in better condition than the European countries because the US has a higher overall fertility rate. But immigration of low wage earning and low education achieving ethnic groups is setting up the US for a substantial decline in average per capita income and greater demand for social services for poorer ethnics. But Howe and Jackson do not recognize our second demographic problem and claim we are in much better shape.

America's economic problem due to immigration will become too noticeable to miss in the 2010s. US states with declining per capita income will be hard to explain away any other way. California per capita GDP will decline 11% by 2020. Texas will decline as well. The US entitlements financial crisis will be much larger than the 2008 crisis. While many libertarians like open borders America will become less libertarian as a result of immigration. The libertarians are wrong on immigration.

By Randall Parker 2009 January 04 06:33 PM  Economics Demographic
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2009 January 01 Thursday
Universities Encourage Student Credit Card Debt For Profit

As regular readers know, I take a dim view of what has become of higher education. The old brick-and-mortar schools cost too much and are antiquated in their approach to education. But it is worse. Some universities make money by helping to get their students deep into credit card debt.

Bank of America’s relationship with the university extends well beyond marketing at sports events. The bank has an $8.4 million, seven-year contract with Michigan State giving it access to students’ names and addresses and use of the university’s logo. The more students who take the banks’ credit cards, the more money the university gets. Under certain circumstances, Michigan State even stands to receive more money if students carry a balance on these cards.

Hundreds of colleges have contracts with lenders. But at a time of rising concern about student debt — and overall consumer debt — the arrangements have sounded alarm bells, and some student groups are starting to push back.

Whatever happened to the paternalistic view that colleges should treat their students as wards to protect? I really do not think universities should exist to put people into bondage.

Too many people go to college. Too many drop out or graduate burdened with debts. Charles Murray thinks we should stop pushing students to try to learn college level material that is beyond their intellectual capability.

For most of the nation’s youths, making the bachelor’s degree a job qualification means demanding a credential that is beyond their reach. It is a truth that politicians and educators cannot bring themselves to say out loud: A large majority of young people do not have the intellectual ability to do genuine college-level work.

If you doubt it, go back and look through your old college textbooks, and then do a little homework on the reading ability of high school seniors. About 10 percent to 20 percent of all 18-year-olds can absorb the material in your old liberal arts textbooks. For engineering and the hard sciences, the percentage is probably not as high as 10.

Murray advocates for more certification tests for specific capabilities that employers need. Let people get demonstrable job skills. I think that's a good idea. I also think we need tests of college-level material that can be taken to demonstrate knowledge without enrolling in a college and physically attending classes.

Universities funded by taxpayers should put course lectures on the web for download. People should be able to watch lectures from home, study textbooks, and then take online tests to check their knowledge levels. Once they know they can pass tests for a topic they should be able to go to a testing center to take the tests with witnesses to verify they took each test. Passing grades should earn credits toward degrees or toward job skill certifications.

By Randall Parker 2009 January 01 08:52 PM  Education
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In Some Divorces Noone Wants House

Women initiate most divorces. Due to the housing downturn they've got to think twice because with so many houses which have mortgages which exceed their market value many marriages no longer have net positive assets to divvy up.

With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s Economy.com, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. “We used to fight about who gets to keep the house,” said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. “Now we fight about who gets stuck with the dead cow.”

As a result, divorce has become more complicated and often more expensive, with lower prospects for money on the other side. Some divorce lawyers say that business has slowed or that clients are deciding to stay together because there are no assets left to help them start over.

“There’s an old joke,” said Randall M. Kessler, Ms. Needle’s lawyer. “Why is a divorce so expensive? Because it’s worth it. Now it better really be worth it.”

I'd like to see some figures on month-by-month changes in divorce filing rates. Maybe the people who lose their homes in foreclosure are more likely to divorce while those still underwater are less likely.

The more I think about it the more I think guys are crazy to get married without a prenuptial agreement that lays out how joint property will get divvied up should the marriage end up in divorce court. Guys should negotiate rules about debt, child support, alimony, retirement funds, child custody, pet custody for pets that already exist at the start of marriage, and numerous other details.

By Randall Parker 2009 January 01 04:30 PM  Economics Family
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Afghanistan Is Thoroughly Corrupt

Dexter Filkins of the New York Times reports on the depth and breadth of corruption in Afghanistan.

KABUL — When it comes to governing this violent, fractious land, everything, it seems, has its price.

Want to be a provincial police chief? It will cost you $100,000.

Want to drive a convoy of trucks loaded with fuel across the country? Be prepared to pay $6,000 per truck, so the police will not tip off the Taliban.

Need to settle a lawsuit over the ownership of your house? About $25,000, depending on the judge.

No doubt we fund those police. Given Afghanistan's fertility rate of 6.58 we are funding the development of a much larger corrupt state.

Hey, look at it on the libertarian free market bright side: Afghanistan has privatized everything, even the airport.

People pay bribes for large things, and for small things, too: to get electricity for their homes, to get out of jail, even to enter the airport.

A high rate of consanguineous (cousin) marriage with tribal loyalties over loyalties to the state, a high fertility rate, and an estimated average IQ of 84 all tell us that Afghanistan isn't on the road toward modern industrial society.

The US under the Obama Administration is going to get more involved with Afghanistan and Pakistan. We have a few advantages. First off, we can afford to bribe to rent loyalty. Though verifying performance will be difficult. Also, not too many countries care what happens in Afghanistan. So we probably won't be playing a Great Game for influence over Afghanistan. But our policy makers will continue to be blinded by politically correct ideology. Plus, the Pakistani government exercises limited control over Pakistan's Federally Administered Tribal Areas and some substantial portion of Pakistan's intelligence service is sympathetic to the Taliban on both tribal and religious grounds.

US policy makers are in way over their heads in the Middle East, Pakistan, and Afghanistan. We can't expect much from their performance.

Update Obama team adviser and former CIA analyst Bruce Riedel says Pakistan's government played us for suckers. Geez, are we really such Rubes? After all we've got foreign policy experts calling the shots in Washington DC. Surely experts know what they are doing? (okay, I'm being sarcastic)

Mr. Riedel is one of a chorus of terrorism experts who see the terrorist network’s base in the mountains of Pakistan as America’s greatest threat, and perhaps the biggest problem facing Mr. Obama’s new team.

He speaks angrily about what he calls a savvy campaign by Pakistan’s government under President Pervez Musharraf to fleece Washington for billions of dollars even as it allowed Al Qaeda to regroup in Pakistan’s tribal lands.

“We had a partner that was double-dealing us,” he said during an interview in his house in a Washington suburb. “Anyone can be snookered and double-dealt. But after six years you have to start to figure it out.”

It takes 6 years to figure out that we are being snookered? Me thinks sufficiently talented people do not go into government service.

By Randall Parker 2009 January 01 01:17 PM  MidEast Afghanistan
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