2009 May 31 Sunday
Michael Blowhard Calls For Tradition In City Park Design

Down with modernity. Up with public spaces that people like to look at and spend time in. Works for me.

One easy lesson to take from this: Modernism (and its stylistic descendants) can be reasonably conceived-of as "the defiance of common experience." Modernism: Endless experiments based in theory and speculation, very few of which work out. Tradition: Practices based in experience that almost always succeed.

Another lesson: If public space is to serve any useful purpose it shouldn't be dealt with as "empty space." It needs to be crafted and created as a positive thing in its own right.

Designers rise to the challenge and botch designs of plazas and parks.

I was reminded of a great line from William H. Whyte: "It is difficult to design a space that will not attract people. What is remarkable is how often this has been accomplished."

The problem comes from narcissistic design. We need more of a customer-centered focus with plazas and park areas.

(A short parenthesis: Modernists just love putting their creations up on pedestals. Think of all the stark geometric skyscrapers you've seen that sit up on plazas five or six steps above sidewalk level. Why do modernists do this? Simple answer: They want their creations to be taken as freestanding artworks. You're meant to experience these buildings as autonomous creations, rather like sculptures on stands in a museum.)

Accept tradition. Accept proven solutions.

If "decent," "workable," and "pleasing" is the goal -- as, by the way, it almost always should be in architecture and urbanism -- then why not start by accepting tradition (hey, another name for tradition is "what has shown itself to work") and go from there? Memorable may not be achieved, but acceptable is pretty well guaranteed. And -- especially where public facilities go -- acceptable is pretty damn good.

Sounds like Total Quality Management is needed. No risky design changes. Use proven components. Make the same thing and control your process to ensure you make the same thing.

By Randall Parker 2009 May 31 11:43 PM  Cultural Wars Western
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Nouriel Roubini: Convert More Debt To Equity

Nouriel Roubini says we aren't converting enough debt into equity.

However, fiscal policy cannot resolve problems of credit, and it is not without cost. Over the next few years it's going to add about $9 trillion to the US public debt. Niall Ferguson said it's the end of the age of leverage. It's not really. There is not deleveraging. We have all the liabilities of the household sector, of the banks and financial institutions, of the corporate sectors; and now we've decided to socialize these bad debts and to put them on the balance sheet of the government. That's why the public debt is rising. Instead, when you have an excessive debt problem, you have to convert such debt into equity. That's what you do with corporate restructuring—it converts unsecured debt into equity. That's what you should do with the banks: induce the unsecured creditors to convert their claims into equity. You could do the same thing with the housing market. But we're not doing the debt-into-equity conversion. What we're doing is piling public debt on top of private debt to socialize the losses; and at some point the back of some governments' balance sheet is going to break, and if that happens, it's going to be a disaster. So we need fiscal stimulus in the short run, but we have to worry about the long-run fiscal sustainability, too.

I agree about the need to convert debt into equity. I also think piling on more government debt is a bad idea. Roubini also does not expect a rebound until next next year and he considers a double dip recession a possibility. That would bring down more banks as more mortgages defaulted. Check out a take on the total bad debt picture.

By Randall Parker 2009 May 31 11:39 PM  Economics Credit
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US Economic Growth Shifting To Lower Long Term Rate?

Is the future potential growth rate of America lower than it has been in the last half century?

May 26 (Bloomberg) -- Americans may have to get used to unemployment greater than 8 percent for the first time since 1983 and an economy that won’t grow much beyond 2 percent as a consequence of the lost confidence in consumer credit that shattered financial markets.

By this time next year, “the market will realize that potential growth for the U.S. is no longer 3 percent, but is 2 percent or under,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview with Bloomberg Radio.

I think this is the same Mohamed El-Erian who left management of Harvard's endowment just before it tanked along with the rest of the market. I wonder if he saw what was coming.

What is important about a slower growth rate: If it happens it is more disastrous than appears at first blush. America's big entitlements programs depend on rapid economic growth to make them able to pay even most of what they (unrealistically) promise to future generations of retirees. Even before factoring in a long term decrease in the rate of economic growth the big US government old age entitlements programs have seen their projections for insolvency moved up this year as has happened in other recent years.

Things have gone from bad to worse for the future of Social Security and Medicare. Social Security will begin to pay out more than the program receives in tax revenues by 2016, a year earlier than expected, according to a recent government report. Trust funds for Social Security are expected to run out completely by 2037, four years earlier than projected a year ago.

Medicare's fund that pays hospital bills for seniors, meanwhile, already is operating in the red and is expected to be exhausted by 2017, two years earlier than projected a year ago.

In the last 7 years Medicare's expected insolvency date has moved up 13 years sooner. Imagine what happens if the recovery from the current recession comes late and slowly.

The current economic downturn, which has eliminated millions of jobs and reduced workers' payments into the system, has further eroded Medicare's hospital trust fund.

The fund's fiscal health is tied, in part, to the economy's health. As recently as 2002, the trustees projected the fund could remain solvent until 2030; five years before that, they had warned of a collapse by 2001, precipitating a rescue by Congress.

Another contributing factor: Bad economic conditions drive people to retire and start collecting benefits sooner.

I expect Peak Oil and a less skilled population will make this picture far worse in the coming years. Bad economic conditions cause retirees to start collecting benefits sooner. This trend could continue for years.

The rate at which the US government is piling on unfunded obligations is not sustainable.

Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

The 12% rise in red ink in 2008 stems from an explosion of federal borrowing during the recession, plus an aging population driving up the costs of Medicare and Social Security.

You think we've been irresponsible individually? We've been far more irresponsible collectively.

The latest increase raises federal obligations to a record $546,668 per household in 2008, according to the USA TODAY analysis. That's quadruple what the average U.S. household owes for all mortgages, car loans, credit cards and other debt combined.

Barack Obama (peace be upon him) now wants to saddle us with a huge expansion of government spending for medical care for poorer people. This is on top of all the bad news above. He's got the spendthrift nation on a spending bender. The empire is in decline.

Update: Barack Obama also favors an immigration amnesty that will undermine the welfare state by increasing the number of welfare recipients and low earners and low tax payers. The problems of the United States are becoming too large already without more new policies that make them even worse.

Update II: Medicare spending increases combined with a stagnant economy will cause a financing crisis.

The trustees predict a 30 percent increase in the number of Medicare beneficiaries in the coming decade, to 58.8 million in 2018, from 45.2 million last year.

But the projected increase in health costs and the use of medical care is a more significant factor in the growth of Medicare. The trustees predict that average Medicare spending per beneficiary will increase more than 50 percent, to $17,000 in 2018, from $11,000 last year.

The 2010s will be characterized by fighting over pie slices as the pie doesn't grow as fast the demands on it.

By Randall Parker 2009 May 31 11:36 PM  Economics Living Standards
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Harvard Hit By Financial Crisis

Boston Magazine has a great article about Harvard's need to downsize due to endowment investment losses after a huge spending splurge.Bigger brains means bigger mistakes.

The turnover may have hurt, because last fall's stock market meltdown seemed to catch HMC asleep at the wheel. As of June 30, 2008, the Harvard endowment was 105 percent invested: HMC had borrowed above the endowment's value in order to make additional bets. With the vast majority of its money tied up in holdings from which it could not easily be extracted, the university was ill prepared when the tanking Dow spurred anxious counterparties to call in their chits. Those margin calls forced Harvard to put up collateral—cash that it did not have. And it couldn't unload its illiquid investments to come up with that money, because their value had fallen so precipitously that no one had any idea what they were really worth.

Harvard did bad things with complex financial instruments that Warren Buffett calls financial weapons of mass destruction. Harvard had to pay big money to Goldman Sachs when the market drove a big interest rate swap against Harvard.

Further squeezing Harvard was a transaction Summers had pushed it into in 2004, when he successfully argued that the university should engage in a multibillion-dollar interest rate swap with Goldman Sachs and other large banks. Under the terms of the deal, Harvard would pay Goldman a long-term fixed rate while Goldman paid Harvard the Federal Reserve rate. The main goal was to lock in a low rate for future debt, and if the Fed had raised rates, Harvard would have made hundreds of millions. But when the Fed slashed rates to historic lows to try to goose stalled credit markets, the deal turned equally sour for Harvard: By last November, the value of the swaps had fallen to negative $570 million. The university found itself needing to post more collateral to guarantee those swaps, and would ultimately buy its way out of them at an undisclosed cost.

The edge of insolvency? The center for the defense of the liberal ascendancy is at the edge of insolvency?

HMC "took the university right to the edge of the abyss," one alumnus, a financier who is privy to details of the university's balance sheet, told me. I asked what he meant. "Meaning, you're out of cash.

"That," he added, "is the definition of insolvency."

Harvard is kinda like the state of California. Living beyond its liberal means. In California the liberal welfare state is getting whacked. Libertarians rejoice.

What we need: More cheap online courses and online tests for certified competencies. Free online accounting training anyone? Charles Murray makes a similar argument in a book entitled Real Education: Four Simple Truths for Bringing America's Schools Back to Reality where Murray makes the case for certified examines to demonstrate subject mastery modeled after the CPA examination.

By Randall Parker 2009 May 31 03:07 PM  Education
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Women In America Less Happy Than In 1970s

Feminism doesn't appear to be helping women lead happier lives. In an NBER working paper Betsey Stevenson and Justin Wolfers find that men are becoming happier than women as female happiness declines.

By many objective measures the lives of women in the United States have improved over the past 35 years, yet we show that measures of subjective well-being indicate that women's happiness has declined both absolutely and relative to men. The paradox of women's declining relative well-being is found across various datasets, measures of subjective well-being, and is pervasive across demographic groups and industrialized countries. Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men. These declines have continued and a new gender gap is emerging -- one with higher subjective well-being for men.

One cause of this trend: the better educated and more successful a woman becomes the higher her standards for an acceptable guy. That shrinks her pool of potential mates while not shrinking the pool of potential mates for high status guys. So high status guys have more to choose from. The woman's high income makes her more alone. Her pursuit of a career makes her delay marriage until her value on the dating market goes down.

Because we pretend that assorted double standards between the sexes aren't natural consequences of our different natures we try to live and act in ways incompatible with our natures. Hence the unhappiness. Another possible cause of this greater female unhappiness: does the welfare state create more cads?

By Randall Parker 2009 May 31 02:35 PM  Human Nature
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Robert Reich Says New Knowledge Destroying Routine Jobs

Jobs that do not require a lot of thought are getting wiped out by automation (in case you didn't already notice).

Want to blame something? Blame new knowledge. Knowledge created the electronic gadgets and software that can now do almost any routine task. This goes well beyond the factory floor. America also used to have lots of elevator operators, telephone operators, bank tellers and service-station attendants. Remember? Most have been replaced by technology. Supermarket check-out clerks are being replaced by automatic scanners. The Internet has taken over the routine tasks of travel agents, real estate brokers, stock brokers and even accountants. With digitization and high-speed data networks a lot of back office work can now be done more cheaply abroad.

Any job that's even slightly routine is disappearing from the U.S. But this doesn't mean we are left with fewer jobs. It means only that we have fewer routine jobs, including traditional manufacturing. When the U.S. economy gets back on track, many routine jobs won't be returning--but new jobs will take their place. A quarter of all Americans now work in jobs that weren't listed in the Census Bureau's occupation codes in 1967. Technophobes, neo-Luddites and anti-globalists be warned: You're on the wrong side of history. You see only the loss of old jobs. You're overlooking all the new ones.

What is the defining characteristic of the routine jobs that are getting automated out of existence? They place low cognitive demands on workers. So the jobs that are going away are the jobs that dummies can do. The demand for workers on the left half of the IQ Bell Curve is declining. That's the most important trend in the labor force of America and every other industrialized nation.

What types of jobs are experiencing demand growth? Brain jobs. Occupations where you have to be smart to be productive. That's the flip side of the decline in jobs for dummies: more jobs for smarties.

The reason they're so easy to overlook is that so much of the new value added is invisible. A growing percent of every consumer dollar goes to people who analyze, manipulate, innovate and create. These people are responsible for research and development, design and engineering. Or for high-level sales, marketing and advertising. They're composers, writers and producers. They're lawyers, journalists, doctors and management consultants. I call this "symbolic analytic" work because most of it has to do with analyzing, manipulating and communicating through numbers, shapes, words, ideas.

Robert Reich, when you served as Bill Clinton's Labor Secretary didn't you get the memo? Low skilled Hispanic immigrants are needed for economic growth even though the demand for low skilled routine labor is dropping. Now, I do not understand logically how to reconcile the need for more supply when demand is falling. Using logical reasoning I'm not able to divine how the wisdom of our elites makes any sense. But that is what they tell us.

On the bright side, this future that Reich describes bodes well for his students at UC Berkeley. They've got the skills needed for the kinds of jobs the US economy is producing. But on the not-so-bright side, the average skill set of the US labor force is looking less and less like the graduates of UC Berkeley.

By Randall Parker 2009 May 31 10:32 AM  Economics Labor
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2009 May 30 Saturday
Medicine Best Occupation For Female Part Time Workers

Women in finance suffer the biggest decline in earnings from taking time off to raise kids. The medical profession gives women far better conditions in which to make babies and raise them.

One set of statistics neatly summarizes the findings. After surveying Harvard College alumni 15 years after graduation, Ms. Goldin and Mr. Katz estimated the average financial penalty for someone who had taken a year and a half off and then returned to work. In medicine, that person earned 16 percent less than a similar doctor who had not taken time off. Among people with no graduate degree, the gap was 25 percent. For both lawyers and Ph.D.’s, it was about 29 percent.

For M.B.A.’s, a group dominated by finance workers and consultants, it was 41 percent. Given how much money many make, they can probably do just fine even after such a pay cut. Yet the size of it suggests that time off puts them on a completely different career track.

I'm not surprised by these results. In high finance winning is more all or nothing and big deals get put together or not. With medicine the units of work are smaller and less intertwined with each other. Each patient does not take that much time. What you do for one patient is unknown to most of the other patients you deal with. Medicine is many smaller transactions which are less related to each other.

By Randall Parker 2009 May 30 10:47 PM  Economics Labor
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Rancher Sued For Rounding Up Illegal Aliens

Roger Barnett enforced the law where the US government failed to do so and now Barnett is under legal attack.

An Arizona man who has waged a 10-year campaign to stop a flood of illegal immigrants from crossing his property is being sued by 16 Mexican nationals who accuse him of conspiring to violate their civil rights when he stopped them at gunpoint on his ranch on the U.S.-Mexico border.

Roger Barnett, 64, began rounding up illegal immigrants in 1998 and turning them over to the U.S. Border Patrol, he said, after they destroyed his property, killed his calves and broke into his home.

Barnett has captured 12,000 illegals crossing his land over several years. They caused lots of damage to his property. The US government did not defend his property. He had to do it himself. In response to his doing what was necessary the Mexican American Legal Defense and Educational Fund (MALDEF) is attacking him using illegal aliens in a lawsuit against him. This is an outrage.

In an earlier and more sane era Barnett would have been congratulated and the lawsuit would have been thrown out. But the Left's attack on American society has greatly weakened our ability to do reasonable things to make our society work well. We are worse off for this attack.

By Randall Parker 2009 May 30 10:42 PM  Immigration Law Enforcement
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Sonia Sotomayor On Criminal Voting Disenfranchisement

Barack Obama's pick for a top spot in the most elite legislature in America (what some call the Supreme Court), Judge Sonia Sotomayor, sees the disproportionate voting disenfranchisement of high crime minorities as a bad thing. Why is it that the Left just keeps wanting to break things that work?

In Hayden v. Pataki, a number of inmates in New York state filed suit claiming that because blacks and Latinos make up a disproportionate share of the prison population, the state's refusal to allow them ballot access amounts to an unlawful, race-based denial of their right to vote. Eight of 13 judges on the liberal-leaning Second Circuit dismissed their arguments, and the 11th Circuit Court of Appeals ruled likewise in a similar case.

Yet, operating on a dubious and extremely broad reading of the Voting Rights Act, Ms. Sotomayor dissented from the decision. In a remarkably dismissive, four-paragraph opinion, she alleged that the "plain terms" of the Voting Rights Act would allow such race-based claims to go forward.

Most voters are ignorant, irrational, and dumb. It is bad enough that we let all non-felon adult citizens vote. The idea of letting criminals vote is crazy.

More generally: we live in a society that has grown too fond of pretty lies.

On the bright side, segregation by class is demoralizing poor people and making them less likely to vote. This improves the intellectual quality of voters - all else equal. More likely, it just slows a decline in the quality of voters.

In the 1970s, whether an individual came from a low-, medium- or high-income county didn't seem to have any predictive effect on whether or not that person voted, though rich people still voted at greater rates than poor people. But over the past three decades, as the nation became more segregated by wealth, the effect of living in a poor county, independent of one's own wealth, became a significant predictor of whether an individual voted or not. In other words, while individual-level poverty has always been associated with less civic engagement, increasing class-based segregation is widening the participatory gap between rich and poor even further. The results are published in the spring issue of Political Science Quarterly.

The upper classes are becoming more motivated to vote with the opposite happening with the lower classes. Sounds like good news to me.

By Randall Parker 2009 May 30 06:53 PM  Politics American Judiciary
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Lower Drinking Age Means More Teen Pregnancies

Lower drinking ages translate into more teen pregnancies.

The team examined birth records and survey data on alcohol use for the years 1978 to 1988, a period when state minimum drinking age laws were in flux. Fertig said the consensus among researchers is that a higher minimum drinking age reduces fatal car crashes and alcohol consumption among young adults, but there is little data on how drinking age laws influence infant health. The researchers found that a drinking age of 18:

  • Increases prenatal alcohol consumption among 18- to 20-year-old women by 21 percent;
  • Increases the number of births to 18- to 20-year-olds by 4.6 percent in white women and 3.9 percent in 18- to 20-year-old African-American women;
  • Increases the likelihood of women under age 21 having a low-birth weight baby by 6 percent (4 percent for white women and 8 percent for African-American women); and
  • Increases the likelihood of premature birth by 5 percent in white women under age 18 and by 7 percent in African-American women under age 18.

Fertig noted that in many cases the impact of a reduced drinking age disproportionately falls on African-Americans. The researchers found that a drinking age of 18 increases the probability of an unplanned pregnancy by 25 percent for African-American women, for example.

A radical libertarian would say that the government should make no laws about use of addictive and mind-altering substances. But I'm more utilitarian. Society has to actually work. Teen girls with marginal self control shouldn't be getting pregnant while on alcohol and also drinking while pregnant and we need to prevent them from doing this for the rest of us. They impose external costs by their behavior.

Teen girls who get pregnant while drunk are probably dumber than those who maintain more control and refrain. Our problems are with the dumber people and policy should be set more to encourage better behavior by the dumber people than for the convenience of those who have the most self control.

By Randall Parker 2009 May 30 10:27 AM  Human Nature
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2009 May 29 Friday
Mortgage Rate Spike Could Speed Housing Decline?

Reuters is running a funny headline: U.S. mortgage rate rise threatens housing recovery. What housing recovery? Blogger Calculated Risk points to the ratio of existing home sales to new home sales as a measure of the distress in the housing market. The ratio is still more than double its historical trend. Also, David Sokol, an executive at Berkshire Hathaway, sees no sign of "green shoots" in the housing market. He sees the same phenomenon as I've recently posted: the supply of unsold housing being held by banks is much larger than it looks.

However, there's a real important story behind this mortgage rate rise headline. 30 year mortgage rates in the US went from 4.875% last week to as high as 5.5% this week. That's certainly going to cut demand for housing. Plus, still rising unemployment is causing rising defaults on even higher rated mortgages.

The Federal Reserve might increase buying of US Treasury bonds in order to lower interest rates on longer term securities. But obviously the market thinks long term interest rates should be higher due to the threat of future inflation. Treasury interest rates have gone up substantially this year.

The 10-year Treasury note started this year yielding 2.2 percent, a rate that reflected an economy flat on its back. Today, investors who buy 10-year Treasuries can get 3.6 percent. In just the last two weeks, rates on those notes climbed by one-half of a percentage point.

Now look at the Treasury's 30-year bond, which offered 2.7 percent to investors at the beginning of the year. Interest rates on those bonds have climbed to nearly 4.5 percent, a very big move.

How many hundreds of billions of dollars will the Fed be willing to spend buying Treasuries in order to knock long term rates back down again? Will the spike in mortgage rates last long enough to speed the decline in housing prices? There's a big war going on out there in the debt markets. How's it going to turn out?

The difference in yields between 10 and 2 year Treasuries is the biggest on record. The Fed can hold down short term rates. But the market is putting up a big fight at longer maturity dates. I think the size of long term bond market is far too large for the Fed to lower rates in it. Longer term rates will only come down if the economy worsens.

By Randall Parker 2009 May 29 06:55 PM  Economics Housing
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Permanent Vast Underclass By 2050 In America

Writing in the Christian Science Monitor Lawrence Harrison claims Barack Obama is probably the last President who can stop the emergence of a vast underclass in America.

The political realities of the rapidly growing Latino population are such that Mr. Obama may be the last president who can avert the permanent, vast underclass implied by the current Census Bureau projection for 2050.

Do I sound like a right-wing "nativist"? I'm not. I'm a lifelong Democrat; an early and avid supporter of Obama. I'm gratified by his nomination of Sonia Sotomayor to the Supreme Court. I'm also the grandson of Eastern European Jewish immigrants; and a member, along with several other Democrats, of the advisory boards of the Federation for American Immigration Reform and Pro English. Similar concerns preoccupied the distinguished Democrat Barbara Jordan when she chaired the congressionally mandated US Commission on Immigration Reform in the 1990s.

Congresswoman Jordan was worried about the adverse impact of high levels of legal and illegal immigration on poor citizens, disproportionately Latinos and African-Americans. The principal beneficiaries of our current immigration policy are affluent Americans who hire immigrants at substandard wages for low-end work. Harvard economist George Borjas estimates that American workers lose $190 billion annually in depressed wages caused by the constant flooding of the labor market at the low-wage end.

America's future has already arrived in Starr County Texas and Imperial County California. Texas overall has the lowest graduation rates in America. The demographics of Texas and California are grim. Educational reform does not work as a solution. Immigrant groups do not improve demographically in later generations.

By Randall Parker 2009 May 29 11:56 AM  Immigration Societal Decay
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Barack Obama Undermines Unions

Barack Obama is clearly a tool of the anti-union capitalists. By deciding to shaft the secured creditors of Chrysler and GM Obama has driven up the cost of credit to unionized companies, putting them at a competitive disadvantage against their non-union counterparts.

To gauge whether those cases have made debtholders wary of other companies with so-called favored political classes, Garman compared spreads, or bonds' extra yields over U.S. Treasury yields, for companies with collective bargaining agreements with the high-yield bond market as a whole.

The secret titans of capitalism probably agreed to this move at a Bilderberger meeting. The credit losses they take on on GM and Chrysler bonds are small potatoes compared to what they'll gain with bets made on non-union companies.

While the two performed in line with each other since 2003, they diverged sharply in February, with spreads on companies with organized labor gapping nearly 11 percentage points higher than the market as a whole, according to Garman's research.

Barack Obama, the heroic fighter against unionism. He's so clever that he undermines union power while pretending to support and prop up unions. The UAW gets his support but that support comes at the very high cost of undermining the union movement as a whole. Sun Tzu would approve. Talk about a clever strategy of indirection.

Obama will next try to undermine black lower class wages by trying to get a big immigration amnesty passed. Bring in more low skilled Hispanic labor and reduce the manual laborers into wards of the government. Obama is a tireless class warrior for the upper class. He's like a Manchurian candidate in reverse. What an enigma.

By Randall Parker 2009 May 29 10:49 AM  Economics Labor
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2009 May 28 Thursday
Empathy: Code Word For Leftist Causes

Heather Mac Donald looks at what lies behind Barack Obama's search for an empathetic judicial appointee.

“Empathy” is a code word, naturally, for privileging the usual suspects: the alleged victims of American classism, racism, sexism, and homophobia.  (Glenn Greenwald notes that Samuel Alito paraded his empathy during his confirmation hearings.)

But why accept the conventional wisdom about who deserves empathy and who doesn’t.  Here’s some hypothetical litigants and affected parties who probably wouldn’t meet the Obama empathy test but who should (regardless of their actual legal rights in a dispute):

–A landlord trying to evict a deadbeat tenant.
–A landlord trying to evict a tenant who has trashed his property.
–Taxpayers who will be forced to fund whatever new welfare entitlement or reprieve from responsibility that Obama wants to cook up for his “young teenage mom.”
–The children of future “young teenage moms” who will be produced at an even higher rate thanks to the new welfare entitlement.
–The victims and neighbors of some of those children of future welfare-enabled teenage moms.
–A business owner who can’t make a go of it thanks to onerous new taxes or regulations imposed to satisfy an empathy lobby.
–His employees.
–Chrysler’s secured creditors who assumed on the basis of settled law that they would have priority in bankruptcy court.
–Intending immigrants waiting patiently to enter the country legally, while the courts block deportations of illegal aliens.
–The casualties of affirmative action policies, as conservatives have long pointed out, including the successful New Haven firefighter test-takers.

The received wisdom about who the underdogs and overdogs are has been formed over decades by the left.  But the assumption that underdogs—usually conventionally defined–occupy a special place of virtue is probably also a legacy of Christianity, as Nietzsche would have it, one that, combined with knee-jerk leftism, can have its downsides.

How about people who live within their means who have to pay for the bailing out of financial institutions, home buyers, and credit card users who live beyond their means?

How about people who save and work hard to make money before raising kids who also have to pay taxes to pay for babies born to single mother high school drop-outs?

The real victims are the talented, hard-working, prudent people who live within their means and pay for those who give less and take more.

By Randall Parker 2009 May 28 10:54 PM  Cultural Wars Western
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Less Need For Venture Capital Money For Web Startups

Economies are in serious trouble. Many of us fear for our jobs. Others are already unemployed with grim prospects. Some economists warn of a period of extended economic stagnation. All not good. But on the bright side cloud computing has so lowered the hardware cost side of web computing that most web startup companies no longer need venture capital.

Enthusiasm for Web startups has, however, clearly changed since the height of the Web 2.0 boom. This is due partly to tighter economic constraints, but also to plummeting costs of starting Web businesses as cloud-computing infrastructure has spread. Since less capital is required to start a company, there is less need to turn to outside investors.

"I think most [Web] startup companies should not take venture-capital money," said Jeff Fagnan, a partner at Atlas Venture, during a panel discussion. He cited, in particular, companies building lightweight Web applications or software for portable devices like the iPhone. In some cases, Fagnan said, venture capital may damage a startup by creating conditions that push the company to aim too high from the outset.

So this is a great time to do a web-based startup if you have a good idea and the talent to implement it. If the economy stagnates and yet you can bring in big bucks your buying power will be high and you'll be immune to the danger of unemployment.

By Randall Parker 2009 May 28 10:34 PM  Economics Venture Capital
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2009 May 27 Wednesday
Banks Holding Back Repo Houses From Market

Banks have a lot of houses in the bank.

Only 30 percent of foreclosed homes are currently on the market, meaning that some 500,000 sit vacant across the country, part of a vast “phantom inventory” that the market has yet to grapple with.

“There’s a frenzy for bank properties right now, and as a consumer, I’m likely to say, ‘Wow, that’s got to be an indicator of the bottom,’ ” says Brett Barry, a real estate agent at HomeSmart in Phoenix. “But a lot of us expect a tsunami of foreclosures to come on top in June, July, or August, because at some point the banks are going to release this stuff.”

They are holding back partly because they are too busy to process the paperwork. But the Obama Administration has also encouraged banks to hold back in order to help housing prices stabilize. I think they are just delaying the decline.

Whether the housing market recovers depends in large part on when the unemployment numbers turn around. Martin Feldstein, formerly Ronald Reagan's chief economist, argues that Obama's fiscal stimulus will only temporarily lift the economy. Rising unemployment will likely drive many more mortgages into default.

But the key thing to bear in mind is that the stimulus effect is a one-time rise in the level of activity, not an ongoing change in the rate of growth. While the one-time increase will appear in official statistics as a temporary rise in the growth rate, there is nothing to make that higher growth rate continue in the following quarters. So, by the end of the year, we will see a slightly improved level of GDP, but the rate of GDP growth is likely to return to negative territory.

The positive effect of the stimulus package is simply not large enough to offset the negative impact of dramatically lower household wealth, declines in residential construction, a dysfunctional banking system that does not increase credit creation, and the downward spiral of house prices. The Obama administration has developed policies to counter these negative effects, but, in my judgment, they are not adequate to turn the economy around and produce a sustained recovery.

Expiring foreclosure moratoriums will also boost bank repo numbers.

Major lenders temporarily halted foreclosures late last year and early this year in anticipation of President Obama's housing rescue plan. In addition, California enacted a new law this fall that slowed down foreclosures. That means the foreclosure rate was artificially depressed over the past several months. The moratoriums have now expired.

By Randall Parker 2009 May 27 11:55 PM  Economics Housing
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2009 May 26 Tuesday
Sonia Sotomayor The Ethnic Choice

Writing for The New Republic before Sonia Sotomayor was chosen by the blessed prophet Barack Obama (peace be upon him) to become the next US Supreme Court nominee Jeffrey Rosen reports that Democrats who have worked as law clerks and judges with Sotomayor think she's not smart enough for the job. This just shows how little things change between Presidential Administrations - all partisan protests to the contrary. Sonia Sotomayor is Spanish for Harriet Miers.

But despite the praise from some of her former clerks, and warm words from some of her Second Circuit colleagues, there are also many reservations about Sotomayor. Over the past few weeks, I've been talking to a range of people who have worked with her, nearly all of them former law clerks for other judges on the Second Circuit or former federal prosecutors in New York. Most are Democrats and all of them want President Obama to appoint a judicial star of the highest intellectual caliber who has the potential to change the direction of the court. Nearly all of them acknowledged that Sotomayor is a presumptive front-runner, but nearly none of them raved about her. They expressed questions about her temperament, her judicial craftsmanship, and most of all, her ability to provide an intellectual counterweight to the conservative justices, as well as a clear liberal alternative.

The most consistent concern was that Sotomayor, although an able lawyer, was "not that smart and kind of a bully on the bench," as one former Second Circuit clerk for another judge put it. "She has an inflated opinion of herself, and is domineering during oral arguments, but her questions aren't penetrating and don't get to the heart of the issue."

The difference here is that Sotomayor will most likely make it onto the Court. Obama gets a loyalist to his side plus an affirmative action hire. Kinda like Clarence Thomas.

Sotomayor thinks female Latinas can reach better judicial decisions than white males. Really, I am not making this up. And she's President Obama's nominee for the US Supreme Court.

Taylor has also noted this from a Sotomayor speech to a Hispanic group: "I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion [as a judge] than a white male who hasn't lived that life." Says Taylor, "Imagine the reaction if someone had unearthed in 2005 a speech in which then-Judge Samuel Alito had asserted, for example: 'I would hope that a white male with the richness of his traditional American values would reach a better conclusion than a Latina woman who hasn't lived that life' -- and had proceeded to speak of 'inherent physiological or cultural differences.' "

Washington Post writer Michael Gerson takes issue with Sotomayor's appeals court vote against the white firefighters of New Haven Connecticut who were discriminated against in the name of increased NAM promotion. Even Gerson can see the unfairness of the treatment of the top scoring firefighters.

The administration needs to understand that Ricci v. DeStefano is genuinely troubling. Normally when affirmative action goals are applied, people have little idea if they have been discriminated against or not. A few hundred law school rejections are put in the mail. A few may have been influenced by a desire for racial balance. But no one really knows. In the New Haven firefighters’ case, 20 people with identifiable names and faces were clearly denied benefits they had earned based on their race. I am not opposed to affirmative action in all cases. But the injustice here seems crude and obvious.

Liberal supporters of racial preferences want injustice that is more refined and harder to see.

Yes, in many cases individual whites can't prove they were personally victims of reverse discrimination. If one person is hired or promoted based on their non-white race and several (or hundreds of) people were competing for that position it is hard to tell who would have gotten the job of race was not a criterion for the position. Liberals prefer it when it is harder to identify exactly who missed out on getting a position.

In the case of firemen passed over for promotion because they are white it isn't just the firemen who pay the price. Our lives depend on emergency workers making split second correct decisions on matters of life and death. Less intellectually able decision makers mean more dead people in emergency situations.

Update: There's one advantage to putting her on the Supreme Court: she won't have to get overruled on appeal any more.

Three of the five majority opinions written by Judge Sotomayor for the 2nd Circuit Court of Appeals and reviewed by the Supreme Court were reversed, providing a potent line of attack raised by opponents Tuesday after President Obama announced he will nominate the 54-year-old Hispanic woman to the high court.

Always look on the bright side of life.

By Randall Parker 2009 May 26 11:47 PM  Politics Ethnicity
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2009 May 24 Sunday
The Optimism Of Our Economic Leaders

When high government officials tell you that we are about to turn the corner with the economy keep in mind their past performance. On April 20, 2007 then Treasury Secretary Hank Paulson said that the housing market problems had reached their worst.

"I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained," he added.

People want to believe that those in power are in control, understand what is going on, and the big bosses know what they are doing. Most people want to have faith in their leaders. But reality shows this faith is unjustified.

After seeing that quote I went looking for more. Here's a history of quotes from Fed chairman Ben Bernanke and Hank Paulson.

March 28th, 2007 – Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained,"

April 20th, 2007 – Paulson: "I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained." , "All the signs I look at" show "the housing market is at or near the bottom,"

May 17th, 2007 – Bernanke: “While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.”

February 29th, 2008 – Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system."

I also quite like Federal Reserve governor Frederic Mishkin on April 20, 2007. Stabilization of housing demand! Bottoming out!

"We do see some stabilization of demand in the housing market ... there is some indication that the market could be bottoming out."

In May 2008 Hank Paulson foresaw an economic recovery in the second half of 2008 as the financial crisis was supposedly behind us!

"Although we are still working through housing and capital markets issues, and expect to be doing so for some time, we also expect to see a faster pace of economic growth before the end of the year," he said.

Paulson said that both the ability to obtain loans and investor confidence are gradually improving, raising hopes that the financial market crisis which hit last August was beginning to recede.

"We are seeing signs of progress as capital markets and credit markets stabilize," Paulson said. "The markets are considerably calmer now than they were in March."

We need more comparisons of what leaders predict versus what actually happens.

More happy days from Paulson.

Update: On April 11, 2007 Chicago Fed President Michael Moskow had no idea what was in store.

"So far this year inflation has been somewhat elevated, highlighting the risk that inflation could stay stubbornly high.

"For the balance of 2007, economic growth likely will average modestly below potential. But I expect that growth will be picking up gradually over the coming quarters and return to near potential by 2008."

Near potential by 2008. Okay, but he just didn't know what that potential was: the potential for economic disaster.

The Fed member quotes at that link all focused on the fear of inflation. We are of course in the grip of deflation 2 years later. The reason financial experts do not seem so wrong most of the time is that most of the time the economy doesn't deviate that far from long term trends. So their incorrect guesses end up being wrong by smaller amounts. But these are all guesses.

You might think that Paulson couldn't have foreseen the disaster in the spring of 2007. Well, obviously he couldn't. But once problems became much worse in May 2008 Paulson painted a rosy picture for the latter part of 2008. We all know how that turned out.

"Although we are still working through housing and capital markets issues, and expect to be doing so for some time, we also expect to see a faster pace of economic growth before the end of the year," he said.

Coming to the end of the housing bubble Paulson in May 2008 foresaw the resumption of the housing bubble.

"In my judgment, we are closer to the end of the market turmoil than the beginning," he said. "Looking forward, I expect that financial markets will be driven less by the recent turmoil and more by broader economic conditions and, specifically, by the recovery of the housing sector."

Treasury Secretaries should not try predicting the course of the US economy. They don't know how.

Update II: But also beware of pessimists like Paul Krugman who predict more recessions than actually happen.

Update III: Another piece of current optimistic conventional wisdom: inflation is not a threat. Simon Johnson thinks the optimistic view about inflation might be unjustified. My take: the US government is on a spending binge that must be destroying wealth. Dollars spent by a government in a hurry are unlikely to promote much wealth-creating activity. So US productive capacity is probably being harmed. This makes inflation more likely since it reduces the ability to make goods for all the dollars that are being generated by the Fed. Says Johnson:

In all these respects, the United States showed itself to be much more like a middle-income emerging market than the prevailing orthodoxy thought possible. Our financial sector became supersized, took on too much risk, received the mother of all bailouts, and we still struggle to recover from the ensuing instability. What if our inflation dynamics have also changed to become more like those of Argentina, Russia or Ukraine?

By Randall Parker 2009 May 24 10:25 PM  Economics Disasters
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Hard To Escape Work On Vacation

It is tough out there.

CHICAGO, May 18, 2009 - With only a few days until the official start of vacation season, money, anxiety and guilt are causing some workers to scrap their vacation plans. More than a third (35 percent) of workers say they haven’t gone on or aren’t planning to take a vacation in 2009; 71 percent of those indicate it is because they just can’t afford it, according CareerBuilder’s annual vacation survey. The survey was conducted from February 20 through March 11, 2009 among more than 4,400 workers. Additionally, close to one-in-five workers indicate that they are either afraid of losing their jobs if they go on vacation or feel guilty being away from the office.

Taking a vacation doesn’t necessarily mean a clean break from the office. Half (50%) of employers say they expect employees to check in with the office while they are away, with 40 percent indicating it’ll be necessary only if they are working on a big project or there is a major issue going on with the company. Close to three-in-ten (28 percent) workers say they plan to contact the office at least once, regardless of what they are working on, while they are on vacation.

Harris Interactive did the survey I assume this was by phone.

In the factory worker era one could escape work by walking out the factory gates. You could only work while on the grounds of the factory. A day off was a day escape from work. Not any more with emails and instant messages asking for technical support, sales prospect questions, and the like.

So look, it is hard to escape from work. Get wealthy, save more money, make more money, and then do not spend it. Freedom comes from cash. Want to stop worrying about work? Make more. Spend less. Save more. Even if you can't get away from work you can at least feel less worried about the continuation of your job.

By Randall Parker 2009 May 24 03:56 PM  Economics Labor
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Benny Morris Thinks Palestinian-Israeli Conflict Unsolvable

Benny Morris is a slow learner.

“They say that Fatah has asked them to recognize Israel’s right to exist, and this is a big deception,” Dahlan said. “For the 1,000th time, I want to reaffirm that we are not asking Hamas to recognize Israel’s right to exist. Rather we are asking Hamas not to do so, because Fatah never recognized Israel’s right to exist.”

This was not a helpful statement, at least not to the peace-processors in Washington and in Europe, and to their diminishing band of confederates in Israel and the Palestinian territories. But Dahlan’s comment helps buttress the main argument of Benny Morris’s new book, “One State, Two States .” Morris, a professor of history at Ben-­Gurion University in Israel, argues that Arab rejectionism is so profound a force that only the terminally obtuse could believe that Palestinians will ever acquiesce to a state comprised solely of the West Bank and Gaza.

Does it serve a useful purpose for the US to pretend that the Arabs will ever really accept Israel? Does the fiction help keep the conflict more manageable? I personally do not like the dishonesty of diplomats pretending there is something called a "peace process". It confuses some fraction of the American population and I suspect, even worse, it confuses a fraction of our leadership. So does it help in some way?

The Palestinians and Israeli Jews have incompatible claims. These claims will last as long as both groups exist in that strip of land bounded by the Mediterranean and the Jordan River. The long term battle will be fought demographically and possibly technologically (smuggled nukes). Israel needs to isolate its population from the Arab population with walls. But Israeli Arabs might in the long run become an internal demographic threat too.

A lot of writing gets done about Israel and the Arabs. But I've mostly lost interest. Both sides are unfair. The Israelis have more power and so they have more ability to be unfair. The Israelis make mistakes in handling the Arabs. You can click thru and read what some of those mistakes have been if you are curious. But mostly after watching the conflict for many years I'm bored with it. I just wish the coverage was more blunt and honest.

By Randall Parker 2009 May 24 09:32 AM  MidEast Arabs Versus Israelis
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2009 May 23 Saturday
Imperial County California 26.9% Unemployment

An LA Times story about the long term lasting harm from California's budget crisis (they claim less educational spending will decrease intellectual capital - I'm skeptical) includes a link to a flash control with California's unemployment rate by county by month since January 2007. Well, Imperial County in Calfornia's southeastern corner (right on the border with Mexico and Arizona) has an eye-popping depression-level unemployment rate of 26.9%! You might think that the recession has hit that county especially hard. But if we back up the time line to January 2007 when the overall state unemployment rate was 5.4% Imperial's unemployment rate was already 15.3%.

What might account for that disaster? Oh, I'm sure you can guess. According to Wikipedia 72.2% of the population are Hispanic and 65.7% speak Spanish. That's not a recipe for economic success in America. But it is a recipe for America's economic future and the ascendance of the Democratic Party. In 1972 62.1% of its electorate voted Republican. It dropped below 50% starting in 1992 (38.5% and the Republican Party in Imperial County is basically road kill at this point. Well, the Democrats have won a great victory there. With a large Hispanic population and 26.1% unemployment the Democrats can count on the voters of Imperial County. This is the Democratic Party's future for America. The Democratic Party reminds me of the scheming of Dagny Taggart's brother James to use political machinations to make their railroad do better in business. Problem was, his machinations contributed to the collapse of the country. His victory over other railroads had a very pyrrhic quality.

By Randall Parker 2009 May 23 09:50 AM  Immigration Economics
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2009 May 22 Friday
Conspicuous Consumption Is Not Cost Effective

John Tierney reports useful information: Your attempts at impressing others with conspicuous consumption are mostly a waste of time.

The grand edifice of brand-name consumerism rests on the narcissistic fantasy that everyone else cares about what we buy. (It’s no accident that narcissistic teenagers are the most brand-obsessed consumers.) But who else even notices? Can you remember what your partner or your best friend was wearing the day before yesterday? Or what kind of watch your boss has?

A Harvard diploma might help get you a date or a job interview, but what you say during the date or conversation will make the difference. An elegantly thin Skagen watch might send a signal to a stranger at a cocktail party or in an airport lounge, but even if it were noticed, anyone who talked to you for just a few minutes would get a much better gauge of your intelligence and personality.

You are better off spending the money on stocks that have long term growth potential.

By Randall Parker 2009 May 22 07:21 AM  Human Nature
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2009 May 21 Thursday
California Budget Crisis Yields Some Benefits

California's budget crisis will push more illegal alien criminals into federal prisons from which they can then be deported.

To close the California budget gap, funds for education will now have to be slashed by $5.3 billion, and $2.8 billion will be cut from health and social programs, the governor said. Mr. Schwarzenegger also said the state would move about 19,000 illegal immigrants to federal facilities and transfer more than 23,000 nonviolent offenders to local jails to cut costs.

Regards the illegal alien criminals: This budget crisis creates a bigger incentive for states to identify illegal aliens amount those in prison. Sounds like any prisoner who is an illegal alien can be turned over to the federal government. So why aren't states already trying harder to identify illegal alien criminals? This would lead to their eventual deportation. Much better for us in the long run.

It takes a huge multi-year budget crisis with a $21 billion dollar budget gap to get the state of California to shift non-violent prisoners from expensive (read: staffed by high priced labor) state prisons to cheaper local jails. This is why I'm not sympathetic to the state government. It makes me wonder what else the government resists cutting that does not change quality of service delivered to the citizens of the state.

Back when Shwarzenegger's predecessor Gray Davis was in office Davis made a deal with the state prison guard union to give them large wage increases in exchange for big campaign donations. This is a major reason why those local jails cost less to run than the state prisons.

I think a severe fiscal crisis (and hopefully bankruptcy) in California will basically cut down on the amount of parasitism that has built up in the system. Nothing less than a severe crisis will shake loose well entrenched parasites.

Consider the University of California's bloated administration.

Sen. Jeff Denham, R-Merced, pointed to the University of California's administration as ripe for spending cuts.

"Does the UC president's office need 1,000 employees or can he do it with 500?" Denham asked. "Do we need to have presidents and chancellors that are making $400,000 plus per year?"

I'm thinking the UC president could run the UC with far fewer people. I'm also thinking the cost of instruction could be lowered with lots more video recording of lectures and web-based delivery of tests. Cut labor costs more more automation of education.

A San Jose State University political science professor is eager to fix the state's financial problems with lots of new taxes.But he's facing big state university cuts. I say video record lectures of political science professors and employ fewer of them to deliver lectures.

A small upper income elite pays a large fraction of all government costs in California.

The top 1 percent of the richest taxpayers typically pay about half of all personal income taxes in California. More than 55 percent of the state revenue last year came from personal income taxes, followed by the sales tax with 27 percent.

As long as times are good, this arrangement works because as people splurge on big-ticket items and make profits, they send large infusions of tax revenue to the state. But when the economy takes a tumble and people tighten their belts and corporations’ profits fall, the state’s primary source of revenue takes a precipitous drop.

“California is unique in that it so dependent on such a small portion of the population,” said Mark Baldassare, president of the Public Policy Institute of California, a nonprofit in San Francisco that does independent research on the state’s economic, social and political issues.

Low skilled immigrants - both legal and illegal - pay little in taxes because they have little earning power. If we deported them and greatly raised the standards for legal immigrants we could get far fewer but higher earning immigrants. This would both lower the cost of government and increase revenue available to fund government.

There'll be less financial aid for college.

Also potentially on the chopping block is CalGrants, a financial assistance program that offers cash grants to lower- and middle-income college students each year. The governor's proposal would eliminate the 77,000 in new grants awarded each year at a cost of $180 million, but that saving would eventually grow to more than $900 million as students graduate and the program is phased out.

A cut in the buying power of students will reduce prices of tuition at private colleges. Rather than spend $900 million per year in grants to students why not spend a much smaller sum to record college course lectures and shift more courses onto the web? Cut costs rather than fund inefficiency. That's the way it goes in private industry.

By Randall Parker 2009 May 21 10:47 PM  Economics Government Costs
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2009 May 19 Tuesday
Megan McArdle Sees California Doomed To Bankruptcy

Can California avoid bankruptcy?

So what about California?  A reader asks.  Ummm, that's a tough one.  No, wait, it's not:  California is completely, totally, irreparably hosed.  And not a little garden hose.  More like this.  Their outflow is bigger than their inflow.  You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession.  You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets.  Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!

There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice.  But actually, we do have a choice:  we could let them go bankrupt.  And we probably should.

Okay, but when California goes into bankruptcy court can it basically lay off and yank the citizenship of its dumbest citizens? Can it order all its illegal aliens to leave? Bankruptcy court is supposed to allow more powerful remedies to be applied to problems. Well, okay, I'm down with that. So how about solutions that address the root causes of the problem?

Defeat of ballot propositions aimed at balancing the budget has put California back into a budget crisis.

Voters decisively rejected five ballot propositions that were sold as reforming a dysfunctional state budgeting process and sealing the February agreement to wipe out a $42 billion deficit.

But the deficit quickly reopened, pushed by the struggling economy and now the defeat of the budget package to $21.3 billion.

California used to be a dream of a place. Now it has become a nightmare. Still has nice weather near the coast though.

Update: Megan also wonders whether the bursting financial bubble will end the resurgence of New York City.

There's a lot of angst out there over whether products like Starbucks that seem somehow emblematic of an era of wasteful spending will outlast the current downturn.  The other day it occurred to me to wonder if the same isn't true of US cities.  The first model for an urban renaissance was, after all, New York.  But while New York's renaissance was certainly a product of a lot of factors, all of the institutional improvements were funded by the post-1982 financial services boom.  New York City is projecting its 2010 revenue will be down 30% from FY2008.  That's three years after the recession started.

I do not expect financial services to come back as strongly because some of the ways financial services companies made money are not coming back. Plus, they are going to try harder to cut costs and the costs of operating in NYC are avoidable by shifting more operations out of the city.

Megan has moved on to worrying about the moral hazard of a state bail out by the US federal government. Think her fears are premature? Municipal born insurance might serve as one way for the Feds to bail out states, cities, and counties.

May 18 (Bloomberg) -- The National League of Cities says it will ask the U.S. Treasury today for a $5 billion interest-free loan to capitalize a new municipal bond insurer it plans to create.

By Randall Parker 2009 May 19 11:43 PM  Politics Money
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Criminal Immigrant Deportation To Rise Order Of Magnitude

That the number of illegal immigrants sitting in jails and getting arrested every year totals up to 1.4 million says a lot about the weakness of law enforcement against illegal immigrants. But even the Obama Administration has to concede that criminals from abroad should get deported.

Based on the pilot program, the agency estimates that if fingerprints from all 14 million bookings in local jails each year were screened, about 1.4 million "criminal aliens" would be found, Venturella said. That would be about 10 times the 117,000 criminal illegal immigrants ICE deported last year. There are more than 3,100 local jails nationwide, compared with about 1,200 federal and state prisons.

This move builds upon the Bush Administration's efforts to identify more deportation candidates in prisons.

From the FBI Featured Fugitives page click thru to the Wanted Murderers and note the pattern with the surnames. Surely if immigrant criminal deportation had been stepped up years ago we'd have a lot fewer murdered Americans and safer neighborhoods. Patterns in crime rates show how our immigration policy is damages the nation.

By Randall Parker 2009 May 19 11:32 PM  Immigration Crime
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2009 May 18 Monday
Taxes Coming On Medical Insurance Benefits?

Congress is busy thinking about how to tax from the haves to give to the have-nots.

A bipartisan outline released Monday by the Senate Finance Committee suggests peeling back a number of tax exemptions to pay for expanding health insurance to the nation's 46 million uninsured. They are just options at this point, but they signal where lawmakers are headed as they try to pass a health-care package by August.

The government gave up $194.2 billion in revenue due to health tax breaks in 2008, more than any other single group of abatements, according to the Senate report. The majority of that comes from the tax exemption for employer-provided health-care benefits. The Senate proposals would chip away at that exemption by limiting the amount that would remain tax-deductible based on employees' incomes or the value of their plans, or both.

I've watched recent televised Senate Finance Committee hearings about health care and some of the panelists chosen to testify to the Senators supported limits on tax avoidance employer-provided health insurance. Workers will pay more in taxes to fund medical care for the uninsured. The taxes will either set limits on the amounts employers can pay for insurance per employee or limit it by employee income.

This means that someone in their 50s or 60s will likely pay more in taxes as the cost of their medical insurance rises with age.

Already the insured pay for medical care for the uninsured via cost shifting that occurs in hospitals and other treatment centers. More productive people pay for less productive people. This burden is going to become heavier as the fraction of the population with low skills and low earning power increases due to demographic changes wrought mostly by immigration.

By Randall Parker 2009 May 18 05:46 PM  Economics Health
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2009 May 17 Sunday
IQ And Voting For The Dominant Party

Audacious Epigone finds some interesting patterns while looking at General Social Survey (GSS) results that serve as rough proxy for intellectual ability along with voting results. Democrats in New England are smarter than Republicans but this pattern does not hold in the rest of the country.

First, I should point out that during the Bush years, in aggregate Republicans are smarter than Democrats are (with IQ scores converted from Wordsum results of 100.5 and 98.6, respectively--independents are lower than either, at 95.3). This holds in every region of the country except for New England, where Democrats average 4.9 IQ points higher than Republicans do*.

...

By region, white Republicans in red states are a little more intelligent than white Democrats are. In blue states, it is the reverse, with white Democrats being smarter than white Republicans. The correlation between Obama's level of white support and the average white Democrat's IQ advantage over the average white Republican's is .72 (p=.03) at the regional level. This provides some explanation for why people in the Northeast may see the GOP as the party of rustic dummies while those in the South see it as the party of merit and prosperity.

What I wonder: How much of this pattern is due to smart Republicans leaving New England for other regions of the country? I look at California where higher income Republicans are more unhappy with the taxes and regulation. So the Republicans have bigger incentives to leave. This makes the remaining smart people more left leaning.

Also, if you are ambitious and want to get involved in politics there's also a real incentive to get involved in the political party that is dominant in your area. If you put your efforts into supporting the party which consistently loses elections then your chances of holding real power are much lower.

By Randall Parker 2009 May 17 11:16 PM  Politics Identity
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Will Iraq Spiral Down Into Violence As US Troops Pull Out

Ernesto Londoño of the Washington Post reports from Baghdad that A as we approach a June 2009 deadline for US troop withdrawal from some Iraqi cities it looks like and looting after the US soldiers pull out.

Separation anxiety is growing among residents, local leaders and American soldiers in the sprawling, impoverished Shiite district that was once the most dangerous battlefield in Baghdad for U.S. troops.

"When the Americans leave, everything will be looted because no one will be watching," an Iraqi army lieutenant newly deployed there said. "There will be a civil war -- without a doubt," predicted an Iraqi interpreter. Council members have asked about political asylum in the United States.

Maybe the Iraqi Army can keep it together? Or will Sadr order his militia to take back control of Sadr City?

One US military official says US forces will need to fight their way back in again when the withdrawal leads to violence.

"The bottom line is they are not ready for us to give over the cities," a senior U.S. military official said on the condition of anonymity to speak critically of the Iraqis. "If we do, and all indications are that they will make us leave, we will be in a firefight to get back in and stop the violence. And we will lose soldiers."

If there's a big uptick in violence after US troops pull back then what will Obama do? Will he delay the US pull-out from Iraq?

What I'd like to know: how big is the US program for renting the loyalty of Iraqi factions? My worry is that if the US starts channeling the payola thru the Iraqi government then too much will get skimmed off to reach the militia leaders whose loyalties are key for decisions on whether to start fighting again. I would rather that US officers directly do the bribing since that will increase the odds that US troops will get pulled out. My worry is that Obama will back track on an Iraq withdrawal just as Obama has backtracked on some other issues lately. Says Glenn Reynolds " And yet, his election was a matter of fierce moral urgency about which there could be no serious disagreement.". We are now going to watch various factions of his supporters go through the stages of disappointment as the reality of governing restricts what he can do.

By Randall Parker 2009 May 17 10:10 AM  MidEast Iraq New Regime Failures
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2009 May 16 Saturday
Jeff Macke Sees Dim Future For US Auto Industry

Jeff Macke doesn't see a bright future for the US auto industry.

Not that I’m saying the government and UAW won’t be able to restore the glory of the US auto industry. Wait. I’m saying exactly that. The Administration and unions stiffing the real owners (those “unpatriotic debt holders” who, in 60 days, will be asked to re-buy the Chrysler they just got hosed out of) and going halfsies on the auto industry is the worst merger since the axis powers were formed. I don’t think the answer to the American auto industry's problems is to make a bunch of golf carts that go 50 mph for an hour - before you have to plug them in for 8 hours. Keep in mind, these have to be subsidized, even if you sell them for $50,000. And the North American auto run-rate is now 8-9 million annually, versus 17 million 2 years ago - which is nothing short of terrifying.

My take: The UAW needs to take a much bigger hair cut. US auto companies need labor costs that are below the labor costs of their competitors. That's especially the case for Chrysler. Why? Because the Japanese companies especially have far better reputations for quality and value. The US companies need to be able to undersell the Japanese on price while closing the gap on quality.

Once the US companies close the quality gap (assuming they can survive long enough to do that) their reputations will take years to repair. Therefore the Japanese get to charge price premiums over US makers and therefore the US makers need to have lower costs for years while waiting for customer quality perceptions to catch up with reality. So there's the time period for closing the quality gaps and then there's the subsequent time period for closing the perception gaps. Chrysler has the longest time to go on the first step. Ford is farthest along on improving quality.

Of course the Obama Administration has decided to shaft the senior debt holders to the benefit of the UAW. The UAW concessions fall short of what is needed and far short of what the UAW gave up to Delphi during Delphi's bankruptcy. Those concessions came probably too late to save Delphi which has recently warned it may liquidate. Wow.

By Randall Parker 2009 May 16 05:06 PM  Economics Transportation
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China US Treasury Buys Contributed To Housing Bubble

Economics writer David Leonhardt of the New York Times admits something our elite media should have been focusing on years ago before so much damage was done: China's buying of US treasury bonds contributed to the housing bubble and financial crisis.

Over the past decade, China and the United States have developed a deeply symbiotic, and dangerous, relationship. China discovered that an economy built on cheap exports would allow it to grow faster than it ever had and to create enough jobs to mollify its impoverished population. American consumers snapped up these cheap exports — shoes, toys, electronics and the like — and China soon found itself owning a huge pile of American dollars. Governments don’t like to hold too much cash, because it pays no return, so the Chinese bought many, many Treasury bonds with their dollars. This additional demand for Treasuries was one big reason (though not the only reason) that interest rates fell so low in recent years. Thanks to those low interest rates, Americans were able to go on a shopping spree and buy some things, like houses, they couldn’t really afford. China kept lending and exporting, and we kept borrowing and consuming. It all worked very nicely, until it didn’t.

It all worked very nicely? So then as American factories shut down and got moved to China that worked well? What about the laid off workers left behind? What about the loss of future American productive capacity that happened as we hollowed out? What about the accumulating debt? For some of us the damage being done was apparent years ago. In 2003 Warren Buffett wrote an article Squanderville vs Thriftville calling for policy changes to balance trade.

If one tracks fundamentals and if one measures one's well being by the fundamentals it is easy to see when things are going poorly even if some of damaging effects won't become evident for some years. Is it really too much to ask of economists and economics writers to think about the long term?

Leonhardt admits the Chinese debt purchasing was a cause of the current crisis.

It has already helped create the global economic crisis, by splashing cheap money around the world and enabling American indebtedness and overconsumption. This country is now suffering through its worst recession since the early 1980s, one that could ultimately become the worst since the Great Depression.

Chinese purchases of US debt raised the value of the dollar, decreased US exports, increased US imports, reduced domestic investment in manufacturing industries, contributed to the housing bubble, and increased public and private indebtedness.

Foreign buying of US sovereign debt was one of the two biggest contributors to our on going financial crisis. The other big contributor was the political class's response to immigration: elite support for a huge increase in housing lending to non-Asian (read "poor") minorities. Where did the housing disaster hit hardest? "the immigrant share of the county population is the one that emerges as the most important correlate with the foreclosure rate." The US government's attempts to promote home ownership among the downtrodden has a long disastrous history.

Getting back to China: We need to consume less and make more stuff. The Chinese need to consume more and buy some of our stuff. Can our financial elite manage the transition back to a balance of trade without causing a depression? We are going to find out.

By Randall Parker 2009 May 16 10:31 AM  Economics Trade
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2009 May 14 Thursday
Insurance Costs For Medical Practices Measured

Medical costs as a percentage of the total US economy are approaching unsustainable levels. Medical cost cutting has become an important political issue.

Bethesda, MD—As policymakers consider ways to cut health costs as a part of health reform, a new national survey of physician practices finds that physicians on average are spending the equivalent of three work weeks annually on administrative tasks required by health plans. According to the study by Lawrence P. Casalino, M.D., Ph.D., of Weill Cornell Medical College and colleagues, physician practices report that overall the costs of interacting with insurance plans is $31 billion annually and 6.9 percent of all U.S. expenditures for physician and clinical services. The study, published in today’s online issue of Health Affairs, was co-funded by The Commonwealth Fund and the Robert Wood Johnson Foundation’s Changes in Health Care Financing and Organization (HCFO) Initiative.

The costs are higher for smaller practices with fewer physicians. One can imagine that larger practices have administrative specialists who do some of the work and better information systems for automating the work.

Another study finds a large group practice spends 10% on billing and insurance.

A separate study, also published in today’s online issue of Health Affairs and co-funded by The Commonwealth Fund and the HCFO, provides an in-depth look at the billing and insurance-related activities performed at a large multi-site, multi-specialty group practice in California to get paid for clinical services. The study found that clinicians spent more than 35 minutes per day performing billing and insurance-related tasks and that these activities also required the equivalent of 0.67 non-clinical full time staff per full-time physician at an annual cost of $85,276 per physician, representing 10 percent of operating revenue.

Then there are additional costs in the insurance companies. Plus, patients and their families have to spend some time dealing with insurance companies and bills.

To be fair to the insurance companies the biggest problem with medical payments is that the money doesn't flow in ways that maximize incentives for efficiency. That's mostly due to the fee-for-service model by which medical services are provided. Doctors and hospitals make more money by providing more services. They are not incentivized to manage care in ways that minimize costs. Insurance companies try to reduce the resulting waste by making treatment funding approvals harder to get. But this response by insurance companies does not address the underlying problem with incentives.

Political responses to the problem of high medical costs are in the offing. Will these responses make the problem of bad incentives better or worse? I fear the latter. America's elected leaders are an unimpressive lot. I do not expect wise decisions from them.

By Randall Parker 2009 May 14 11:54 PM  Economics Health
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Left Wing Blogosphere Influences Journalists

Journalists mostly read the left wing of the blogosphere.

According to research by a Brigham Young University political scientist, people who closely follow both political blogs and traditional news media tend to believe the content on blogs is more accurate.

Professor Richard Davis reports this and other blog-related insights in Typing Politics, a new book published by Oxford University Press.

“Blog readers still get most of their news from regular news sources, but they are concerned that they are not getting the whole side of the story there,” Davis said. “They suspect habitual bias in the traditional news content.”

Davis studied daily blog readers from a nationally representative sample and found that just 3 percent got most of their news from blogs. Most readers still got their information from traditional news organizations, despite some bloggers' predictions that they would entirely replace traditional media. Instead blogs have become an echo chamber that extends the shelf life of news stories, Davis said.

Professional journalists and political bloggers have different takes on accuracy in the world of political news, with the former pursuing objectivity and the latter openly peddling their personal opinions.

Yet political bloggers hold an edge with shared readers when it comes to the trust factor.
- 30 percent said blogs are more accurate
- 8 percent said traditional media are more accurate
- 40 percent said they’re about equal
- 21 percent were not sure

Davis also queried more than 200 journalists to learn how they use blog content in their coverage of political news. Most journalists were aware of influential blogs on both sides of the political spectrum, such as Daily Kos and Talking Points on the left and Michelle Malkin and Instapundit on the right. Despite equal awareness, journalists spend more time reading posts in the liberal blogosphere.

For example, more journalists know about Michelle Malkin than Talking Points. Yet twice as many journalists actually read Talking Points than read Michelle Malkin.

“When journalists take story ideas from blogs, those ideas naturally will come from blogs they read,” Davis said. “These reading patterns suggest journalists may be getting primarily one view of the blogosphere.”

In the near future, Davis expects continued coexistence of traditional media and blogs under the mutually beneficial arrangement where the former produces the news, and the latter provides commentary.

I'm surprised the ratio of reading TPM and Michelle Malkin is only 2 to 1. That's more time reading the Right than I'd expect from journalists. I wonder how many journalists read the more insightful right wing bloggers who do more in depth analysis.

By Randall Parker 2009 May 14 07:18 AM  Media Critique
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2009 May 10 Sunday
An Example Of Obama Idolization

On the Half Sigma blog commenter "100 Miles and Running" points to a ridiculous example of liberal press love of Obama with SF Gate columnist Mark Morford besides himself in Obama idolizing.

No, this time the Dems just so happen to be blessed beyond human comprehension with something very unique indeed, a true golden ticket, a magic death-ray force field of intellectual virtuosity even they don't seem to fully comprehend or know how to keep up with. They have Barack Obama himself.

Truly, the man outpaces and outshines even his own party. At nearly every turn, Obama often seems to be merely tolerating the whole two-party system, the whole D.C. dance he's forced to waltz, all of it merely a distraction to getting things done. It's as though he's an entirely new political mechanism, and the Dems just happen to be lucky enough to be the party that's most aligned with it. Meanwhile, it's all apparently driving the opposition party -- quite literally -- insane.

Of course these sorts of extremes of happiness do not last. Clinton eventually wore on his party. George W. Bush made a lot of Republicans sick of him too. Eventually the ecstatic feelings will start to wear off for at least some of the Obamanatics.

On the bright side the newspapers are going broke. So every week fewer nutty columnists get paid to spout nonsense.

Want to create a specialty blog that will serve a historically useful function? Just collect ravings by commentators and reporters about Obama and write a blog that just posts these outpourings of worship and delusion. You won't even have to comment on the emotional outpourings.

By Randall Parker 2009 May 10 04:53 PM  Media Critique
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California Tax Revenues Fall More Than Expected

Mike Shedlock points to the truly amazing California State Controller John Chiang's May 2009 California Budget Summary Analysis (PDF).

The State’s revenues continued to deteriorate in April. Total General Fund revenues were down $1.89 billion (-16%) from the latest estimates found in the 2009-10 Budget Act.

Personal income taxes were $1.06 billion below the estimate (-12.6%), corporate taxes were below the estimate by $831 million (-35.6%) and sales taxes lagged the estimate by $108 million (-19.9%).

Some of April’s sales tax receipts were pushed into early May, but declining taxable transactions still drove sales tax receipts well below the Budget Act projection. While California’s sales tax rate went up April 1, revenues from the new rate will not be seen until May.

Compared to April 2008, General Fund revenue in April 2009 was down $6.3 billion (-39%). The total for the three largest taxes was below 2008 levels by $6.3 billion (-40.3%). Sales taxes were $452 million lower (-50.9%) than last April, and personal income taxes were down $5.7 billion (-43.6%). Corporate taxes were $142 million below (-8.6%) April of 2008

How can sales tax revenue cut in half? Granted, car sales are down by almost that much. But cars are an extreme case. Could be due to the fact that not all goods are taxed. People are still paying for untaxed food. But they aren't buying the taxed goods and services that are more optional.

Cal state spending explodes during good times and then the party ends.

For example, during the dot-com bubble, government spending grew 28% over two years. That growth was ultimately unsustainable, and we didn't have the foresight to save for the recession that followed. During recessions, revenues drop just as the needs for services grow.

How is California's state government managing to function? Simple enough: federal aid has become the biggest source of revenue for the states.

The sales tax had been the No. 1 source of state and local revenue since the mid-1970s, according to the Bureau of Economic Analysis. Before that, property taxes were the primary source. That changed in the first three months of 2009.

Federal grants — early stimulus money plus conventional federal aid — soared 15% in the first quarter to a seasonally adjusted annual rate of $437 billion, eclipsing sales taxes, which fell 2%.

Wages are declining for those who still have jobs. So that cuts spending and tax revenue as well.

George Will points out that state spending has gone up much faster than inflation and population growth.

If, since 1990, state spending increases had been held to the inflation rate plus population growth, the state would have a $15 billion surplus instead of a $42 billion budget deficit, which is larger than the budgets of all but 10 states. Since 1990, the number of state employees has increased by more than a third. In Schwarzenegger's less than six years as governor, per capita government spending, adjusted for inflation, has increased nearly 20 percent.

The needs and demands of California's expanding poor NAM (Non-Asian Minorities) population explain part of the increased expenditures. But I've yet to come across a good analysis of what has caused California's biggest spending increases.

A budget deal between Governor Schwarzenegger and the Democrats in the legislature created some ballot measures that might close part of the budget gap.

Defeat of the measures on the May 19 ballot would chop nearly $6 billion in expected revenue from next year's budget, on top of a projected $8 billion deficit left by shrinking tax collections. Proposals by Gov. Arnold Schwarzenegger and others to close that gap are driving a wildfire of criticism across the state.

Those state ballot budget measures are polling very poorly. So another Cal state budget crisis is less than 2 weeks away. I hope the Obama Administration does not offer loan guarantees when the credit market locks the state out of borrowing more money. It is time for the state legislature to act responsibly and do huge restructurings to cut long term costs.

The Obama Administration is interceding in ways that make the situation in California even worse. Barack Obama is trying to block cuts in wages for unionized state workers

Guess what the Obama Administration is doing? It is telling Governor Arnold Schwarzenegger that it will revoke nearly $7 billion in federal stimulus money unless the state restores legislated wage cuts for unionized health-care workers.

Obama's loyalty is toward the public sector and the unions. He also wants an immigration amnesty that will legalize illegals and make them eligible for more social programs. Plus, the amnesty will only accelerate illegal migration and he'll probably push for more legal immigration. Obama makes California's long term problems worse.

By Randall Parker 2009 May 10 02:02 PM  Economics Government Costs
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2009 May 09 Saturday
Black Unemployment Rate Hits 15 Percent

While the US jobless rate has hit 8.9% some groups are much harder hit than others. Blacks are especially hard hit.

The unemployment rate reached 15 percent among African-Americans, 21.5 percent for teenagers, and 9.4 percent for adult men.

If Obama wants to help blacks he should start deporting large numbers of illegal aliens to open up jobs for black men and women. Instead Obama is talking about comprehensive immigration reform which is Washington DC code-talk for immigration amnesty.

The unemployment rate is much higher if people who have given up looking for a job are counted.

Those figures do not account for the millions of people working part time because their hours have been cut or they have failed to land full-time jobs. When those people are counted along with those who would like jobs but have given up looking, the so-called underemployment rate reached 15.8 percent — up from 15.6 percent in March and 9.2 percent a year earlier.

So then the black underemployment rate is over 20%.

For those out of work, this recession has already proven to be the most punishing since the government began tracking the length of unemployment in 1948: Among the officially jobless, 27.2 percent were unemployed for more than six months, the highest figure on record.

This recession is breaking post-WWII records. When will it start breaking pre-WWII records?

One way to figure out which side of an issue to be on is to look at the fools promoting one side or the other. Alan Greenspan says illegal immigration helps the economy. But Greenspan is still living in 2006 when he didn't think that his monetary policy was causing grievous damage to the economy by feeding a housing and credit bubble.

Greenspan sounds especially oblivious to the facts on the ground when we look at immigrant employment. Let me remind you again about a recent report by Steven A. Camarota and Karen Jensenius of the Center for Immigration Studies finds that immigrant unemployment has risen far more than native unemployment.

  • The immigrant unemployment rate is now 5.6 percentage points higher than in the third quarter of 2007, before the recession began. Native unemployment has increased 3.8 percentage points over the same period.
  • Among immigrants who have arrived since the beginning of 2006 unemployment is 13.3 percent.
  • The number of unemployed immigrants increased 1.3 million (130 percent) since the third quarter of 2007. Among natives the increase was five million (81 percent).
  • The number of immigrants holding a job dropped 2.1 million (9 percent) from the third quarter of 2007 to the first quarter of this year. For natives, the drop was 4.5 million (4 percent).
  • There is no way to know if the current trend will continue. But these high unemployment rates for immigrants and natives raise the question of whether it makes sense to continue admitting so many new immigrants. In FY 2008, some 1.45 million new immigrants (temporary and permanent) were given work authorization.
  • From 1994 until a few years ago immigrants consistently had higher unemployment than natives, though the rates tended to converge over time. By 2005 natives consistently had higher unemployment rates.
  • In the second half of 2007 and into 2008 unemployment began to rise slightly faster for immigrants than for natives. By the first quarter of this year, immigrants had higher unemployment than natives.
  • Unemployment has risen faster among the least-educated immigrants. The unemployment rate for immigrants without a high school diploma has increased 9.9 percentage points since the third quarter of 2007, reaching 14.7 percent in the first quarter of 2009. For natives without a high school diploma it increased 7.9 percentage points, reaching 19.5 percent during the same period.

Hispanic immigrant unemployment has risen more than for non-Hispanic immigrants.

The bottom portions of Tables 1 and 2 report unemployment for Hispanic immigrants. They show that Hispanic immigrants accounted for 66 percent of the increase in the number of unemployed immigrants since the third quarter of 2007. Hispanic immigrants accounted for 50 percent of all immigrant workers in 2007. Unemployment among foreign-born Hispanics increased dramatically, from 4.5 percent to 12.1 percent — a 7.6 percentage-point increase. This indicates that Hispanic immigrants were disproportionately hit by the recession. However, unemployment among non-Hispanic immigrants increased dramatically as well. In the third quarter of 2007 it was 3.6 percent, by the first quarter of 2009 it was 7.4 percent — a 3.8 percentage- point increase. Thus, it is not just Hispanic immigrants who have experienced a dramatic increase in unemployment.

This result makes sense because the least skilled suffer the highest unemployment rates. Also, the housing industry has been especially hard hit and large numbers of illegal Hispanics worked in construction. The lower skill levels of Hispanics put them most directly into competition for dwindling numbers of jobs with lower skills requirements. If Obama wanted to help blacks he'd reduce the competition they face in the labor market.

By Randall Parker 2009 May 09 08:46 AM  Economics Labor
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On Government Spending Relabeled As Investment

Republicans should organize a sustained attack on Obama's investment trope.

Republicans can start by taking the time to read the first Obama budget document, "A New Era of Responsibility." The word "investment" occurs over 140 times in its 142 pages. But this "investment" isn't private capital invested in private start-ups, what Mr. Kemp constantly called "entrepreneurial capitalism" and what most parents hope their children will join. Mr. Obama's document genuflects to "the market economy," then argues that it won't endure unless we "sacrifice" (through tax increases) to make "overdue investments" (which literally only means public spending) on four explicit goals: green energy, infrastructure, public health care, and education.

If the Republicans want to formulate an effective response to the Democratic Party's big spending splurge then one part of their response should involve very empirically based attack on the social investment rhetoric that Obama uses. Does spending on each of these favored areas of the Democrats really increase economic growth? What are the Democrats spending on? What's the ROI of each area?

Start by looking at those spending plans that are most obviously stupid. The huge Obama budget has items which are pure pork waste. Build up a list. Then take items that require more economic analysis and get more libertarian economists to do analyses. Come up with models of how much Obama's plans will lower economic growth in the long run by displacing more productive private investment.

By Randall Parker 2009 May 09 08:12 AM  Politics Pork Spending
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2009 May 08 Friday
Australia Ponders US Decline

A defense review in Australia looks ahead to the end of US dominance in the Pacific Ocean region.

In the preface to a sweeping defense review released Saturday, Australian Defense Minister Joel Fitzgibbon writes: "The biggest changes to our outlook . . . have been the rise of China, the emergence of India and the beginning of the end of the so-called unipolar moment; the almost two-decade-long period in which the pre-eminence of our principal ally, the United States, was without question."

Australia isn't forecasting the end of U.S. dominance soon; the report predicts that will continue through 2030.

I think 2030 seems a bit optimistic. China might not have a bigger fleet by then. But Chinese ability to sink the US fleet will increase greatly by then. The problem as I see it for the US Navy is that big ships are very vulnerable to fairly small weapons. The US Navy has had it easy in the sense that no nation had the money to spend to strike at the vulnerabilities of a surface fleet. But that'll change the weapons for attacking will cost far less than the prices for the ships.

The US has really big demographic problems that will combine with financial problems and Peak Oil to weaken the US economy in the next 20 years. What could change that picture? I'm thinking artificial intelligence and genetic engineering. But while AI will raise living standards (until they take over and wipe us out) I expect the Chinese to embrace and use AI as fast as we will.

By Randall Parker 2009 May 08 02:29 PM  Foreign Policy Power Balance
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Taleb Sees Worse Economy Than Great Depression

There's an old Chinese curse about how may you live in interesting times. The times certainly have gotten very interesting. Mr. Black Swan thinks governments so lack control that they can't avoid an economic depression.

May 7 (Bloomberg) -- The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent, “Black Swan” author Nassim Nicholas Taleb said.

But not all doomish prognosticators are as pessimistic. Economist Nouriel Roubini (aka Dr Doom) says we are headed for 3 years of deflation due to excess productive capacity and insufficient demand. But he isn't expecting a downturn as deep as a depression.

“There is already excess capacity in the global economy because of the overinvestment in capacity by China, Asia and other emerging markets,” Roubini said in Singapore today. “Without an increase in global demand, we will have even more excess capacity,” and China “is not building domestic demand,” he said.

Roubini sees the huge US fiscal stimulus as only a short-term fix and says we have to balance trade because the US can't supply all the demand needed to use the world's productive capacity. I agree.

Roubini expects a weak recovery to begin only in 2010. But it looks like we will avoid a depression in his estimation.

Roubini says he doesn’t see much in the way of “glimmers of hope” other economists have noted. Unemployment, capital investment, and exports are all worsening, and while there are a few signs of stability in housing, it’s not much. Overall, he figures, the odds of a prolonged “L-shaped” depression have fallen to less than 20%, from about 30%, thanks largely to the efforts of this administration and, to some extent, the last. He expects global contraction of 2% this year, and expansion of about 0.5% next year, “so small it’s going to feel like a recession still.”

Still, he adds: “I don’t worry as much as six months ago about a near depression.”

Declining prices for 3 years? Or massive monetary expansion by the US Federal Reserve? Do you fear inflation or deflation more? And why?

By Randall Parker 2009 May 08 02:14 PM  Economics Business Cycle
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2009 May 07 Thursday
Obama's $17 Billion Budget Cut

A lot of people on the political right are complaining because Obama's trying to promote his image as fiscally responsible by making a $17 billion budget cut. Obama's telling reporters to report the cut as "substantial". But I see another angle here that commentators seem to have missed: Obama's reporting the cut as a way to fund more spending on other government programs.

While the $17 billion in projected savings represents a small portion of the proposed budget, Mr. Obama insisted that “that’s a lot of money, even by Washington standards.” It was enough to pay for a $2,500 tuition tax credit for millions of students, for larger Pell education grants, he said, “with enough money left over to pay for everything we do to protect the National Parks.”

Shannon Love tries to make the scale of the cut more understandable by lopping off zeroes. If we think of the budget as $3500 then Obama's cut amounts to 10 cents and he's borrowing $1800. Update: Correction: The $17 billion amounts to $17 saved out of $3500. The 10 cents came from a previous proposed cut. I happen to be living as a fire evacuee (tens of thousands evacuated) while writing these posts and my living conditions (noise, heat, smoke) are cutting into my ability to think clearly.

By Randall Parker 2009 May 07 01:14 PM  Economics Government Costs
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2009 May 05 Tuesday
IQ Important For Supreme Court Picks?

Razib points out that faced with a decision of who to put on the Supreme Court suddenly people on the Left start comparing candidates by levels of intelligence.

As many have noted, The New Republic is now publishing perceptions that Sonia Sotomayor is not that intelligent. Granted, even if affirmative action played a role in her acceptance to Princeton and Yale law school, the fact that she graduated and passed the bar suggests a minimum threshold of ability. But that's not good enough, it seems that many liberals would like someone who can go toe-to-toe with the conservatives on the court intellectually, and she doesn't pass the grade on that elevated level. When the stakes are high, and a Supreme Court position is arguably one of the most powerful positions within the American government, the perceived marginal returns on more g become stark for those who would pooh-pooh it in other contexts.

How could be be not that intelligent if we are all equally intelligent? How could she not be that smart if environment is all powerful and she attended intellectually stimulating Princeton and Yale?

I'm reminded of a recent excerpt Steve Sailer did of a Geoffrey Miller book and Miller's comments on IQ.

In the 1970s, critics of intelligence research such as Leon Kamin and Stephen Jay Gould wrote many diatribes insisting that general intelligence had none of these correlations with other biological traits such as height, physical health, mental health, brain size, or nerve conduction speed. Mountains of research since then have shown that they were wrong, and today general intelligence dwells comfortably at the center of a whole web of empirical associations stretching from genetics through neuroscience to creativity research. Still, the anti-intelligence dogma continues unabated, and a conspicuous contempt for IQ remains, among the liberal elite, a fashionable indicator of one’s agreeableness and openness.

Yet this overt contempt for the concept of intelligence has never undermined our universal worship of the intelligence-based meritocracy that drives capitalist educational and occupational aspirations. All parents glow with pride when their children score well on standardized tests, get into elite universities that require high test scores, and pursue careers that require elite university degrees. The anti-intelligence dogma has not deterred liberal elites from sulking and ranting about the embarrassing stupidity of certain politicians, the inhumanity of inflicting capital punishment on murderers with subnormal IQs, or the IQ-harming effects of lead paint or prenatal alcoholism. Whenever policy issues are important enough, we turn to the concept of general intelligence as a crucial explanatory variable or measure of cognitive health, despite our Gould-tutored discomfort with the idea.

When a seat on the Supreme Court is at stake suddenly IQ becomes too important for the Left to ignore.

But if you think seriously about IQ differences then you are not a nice guy? Is the truth ugly? Or are standards for which facts are ugly learned from one's environment?

By Randall Parker 2009 May 05 11:56 PM  Cultural Wars Western
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2009 May 03 Sunday
On Obama's Attempt To Screw Creditors

Obama wants to give 55% of Chrysler to a UAW pension trust fund, 35% to Fiat, 8% to the US government, and 2% to the Canadian government. Obama wants to give only 30% of the face value of secured credit to the secured creditors. This amounts to putting politically favored junior creditors ahead of senior creditors.

The proposal to grant the UAW a large equity stake has stirred concerns among Chrysler's secured lenders. They question why the union should be given preferential treatment when bankruptcy law grants priority to the secured lenders.

Barack Obama the demagogue has decided to blame the secured creditors for the bankruptcy of Chrysler while he basically tries to screw them out of secured assets they rightfully own.

At the same time, in an echo of the tensions that have run high between Washington and Wall Street, the president and his aides blamed the filing squarely on about 20 smaller investment firms and hedge funds. This group voted against the government's last offer to eliminate $6.9 billion in debt owed them.

They "decided to hold out for the prospect of an unjustified, taxpayer-funded bailout," Mr. Obama charged. Rep. John Dingell, a Michigan Democrat, called the holdouts "rogue hedge funds" and "vultures" and said in a statement that they "will now be dealt with accordingly in court."

Obama decided to give the Chrysler UAW retirees a company to use to make money to pay their benefits. Obama's problem was that a large chunk of that company was assets pledged to back up loans. His solution: ignore bankruptcy law and property law and try to force thru his will. He managed to pull this off with those creditors who are banks regulated by governments. But pension funds, hedge funds, and other creditors who are less under Obama's thumb objected to this property steal. They are hoping a bankruptcy court judge will recognize their legal rights.

No one forced Chrysler to put up assets in exchange for loans. Had Chrysler not put up assets as collateral Chrysler either wouldn't have been able to get the loans or would have had to pay interest rates far too high for it to afford. Now Obama is trying to give the secured lenders the big shaft. This is highly unethical.

Megan Mcardle points out that Obama's tactics will make it harder for very unionized companies to raise money.

Which brings us to the real question, which is, when did it become the government's job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.

No, leave that aside for the nonce, and let's pretend that the most important thing in the world, far more interesting than stupid concepts like the rule of law, is saving unions. What do you think this is going to do to the supply of credit for industries with powerful unions? My liberal readers who ardently desire a return to the days of potent private unions should ask themselves what might happen to the labor movement in this country if any shop that unionizes suddenly has to pay through the nose for credit. Ask yourself, indeed, what this might do to Chrysler, since this is unlikely to be the last time in the life of the firm that they need credit. Though it may well be the last time they get it, on anything other than usurious terms.

In the long run this will make unions smaller. Companies will flee from union areas and will resist unionization attempts even harder. Governments, utilities, and other organizations tied to the region they service will not escape from unions. But mobile companies will move factories and take other measures to make sure that unions do not block their access to credit markets.

The Chrysler episode shows most clearly how far to the left Obama stands. He's revealing more of his true nature.

By Randall Parker 2009 May 03 12:16 PM  Cultural Wars Western
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Socialism Grows Due To Fewer Taxes On Lower Incomes?

Arthur C. Brooks, president of the American Enterprise Institute, argues that the declining percentage of people paying income tax in America increases support for socialism.

The government has been abetting this trend for years by exempting an increasing number of Americans from federal taxation. My colleague Adam Lerrick showed in these pages last year that the percentage of American adults who have no federal income-tax liability will rise to 49% from 40% under Mr. Obama's tax plan. Another 11% will pay less than 5% of their income in federal income taxes and less than $1,000 in total.

To put a modern twist on the old axiom, a man who is not a socialist at 20 has no heart; a man who is still a socialist at 40 either has no head, or pays no taxes. Social Democrats are working to create a society where the majority are net recipients of the "sharing economy." They are fighting a culture war of attrition with economic tools. Defenders of capitalism risk getting caught flat-footed with increasingly antiquated arguments that free enterprise is a Main Street pocketbook issue. Progressives are working relentlessly to see that it is not.

Well, I guess I have no heart then. But I think that axiom is wrong. A man who is not a socialist at 20 is an empiricist.

Socialism is more popular with adults under 30. They have accumulated less and so have less to lose. But I'd like to see the numbers broken out by race to see if the most rapidly growing ethnic groups are more socialist.

Only 53% of American adults believe capitalism is better than socialism.

The latest Rasmussen Reports national telephone survey found that 20% disagree and say socialism is better. Twenty-seven percent (27%) are not sure which is better.

Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided. Thirty-somethings are a bit more supportive of the free-enterprise approach with 49% for capitalism and 26% for socialism. Adults over 40 strongly favor capitalism, and just 13% of those older Americans believe socialism is better.

We really need a longitudinal track on where this is going.

Governments serve both serve useful functions and also function as parasites. That parasitism can get out of control and ruin things. Getting involved in politics to protect yourself from government is widely seen as necessary.

Forty-five percent (45%) of Americans adults say most people get involved in politics to protect themselves from what the government might do, according to a new Rasmussen Reports national telephone survey.

Update: We are entering an era characterized by a growing need for political involvement in order to protect oneself. Analysts at Clarium Capital refer to periods such as this one as bull markets in politics.

After a placid quarter-century, many cannot bring themselves to believe that the future holds anything more than a continuation of the recent bear market in US politics. But tremendous structural changes to the world’s economy render impossible any such continuation: for the US, global integration and competition have reached a point where a signifcant political response is inevitable. The bear market is giving way to a powerful new bull market and for the frst time in many years, US domestic politics will become a central concern for investors around the world. The background assumptions of the past three decades — that there will be no major changes in trade, immigration, and tax policy — have become unreliable. Portfolios that underweight the possibility of major policy shifts therefore risk signifcant underperformance as the US moves into an increasingly politicized future.

I disagree with them about immigration. We've had amnesties during Reagan's and Clinton's presidencies. We might have another (disastrous) amnesty under Obama even though unemployment is very high and rising rapidly. But the general gist of their argument, that government intervention will increase, sounds right. Obama is using the financial crisis as an opportunity to grow the size of the state. We should expect a lower rate of economic growth due to the expansion of the state, the aging of the population, and the dumbing of the population.

By Randall Parker 2009 May 03 01:29 AM  Cultural Wars Western
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2009 May 01 Friday
Immigrant Unemployment In US Hits High

The Center for Immigration Studies reports immigrant unemployment is now 9.7% in the United States.

  • Immigrant unemployment in the first quarter of 2009 was 9.7 percent, the highest level since 1994, when data began to be collected for immigrants. The current figure for natives is 8.6 percent, also the highest since 1994.

  • The immigrant unemployment rate is now 5.6 percentage points higher than in the third quarter of 2007, before the recession began. Native unemployment has increased 3.8 percentage points over the same period.

  • Among immigrants who arrived in 2006 or later unemployment is 13.3 percent.

  • The number of unemployed immigrants increased 1.3 million (130 percent) since the third quarter of 2007. Among natives the increase was five million (81 percent).

  • Looking at the number of immigrants holding a job shows a drop of 2.1 million (9 percent) from the third quarter of 2007 to the first quarter of this year. For natives, the drop was 4.5 million (4 percent).

  • There is no way to know if the current trend will continue, but these very high unemployment rates for immigrants and natives raises the question of whether it makes sense to continue admitting so many new immigrants. In FY 2008, some 1.45 million new immigrants (temporary and permanent) were given work authorization.

Steve Sailer asks why aren't we paying the unemployed illegals to leave. Offer any illegal a free ride home as long as they consent to fingerprinting, photograph, and DNA sample to allow identification in case they try to return.

Where illegals are removed from workplaces the salaries for lower income manual labor goes up.

  • As is the case in the entire industry, work at the six Swift plants is characterized by difficult and dangerous conditions.
  • Like the rest of the industry, workers at these facilities have seen a steady decline in their standard of living. Government data show that the average wages of meatpackers in 2007 were 45 percent lower than in 1980, adjusted for inflation.
  • We estimate that 23 percent of Swift’s production workers were illegal immigrants.
  • All facilities resumed production on the same day as the raids. All returned to full production within five months. This is an indication that the plants could operate at full capacity without the presence of illegal workers.
  • There is good evidence that after the raids the number of native-born workers increased significantly. But Swift would not provide information on how its workforce has changed. Swift also has recruited a large number of refugees who are legal immigrants.
  • At the four facilities for which we were able to obtain information, wages and bonuses rose on average 8 percent with the departure of illegal immigrants.
  • There is a widespread perception among union officials, workers, and others in these communities that if pay and working conditions were improved, it would be dramatically easier to recruit legal workers (immigrant and native).

In the face of the biggest economic downturn since the Great Depression Barack Obama and Democrats in Congress are promoting a big immigrant amnesty. They call this "comprehensive immigration reform". I see it as a labor-breaking tactic which is just what we can expect from that Democratic Party of big business.

By Randall Parker 2009 May 01 12:15 AM  Immigration Labor Market
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