2009 June 30 Tuesday
Waxman-Markey Spends New Fossil Fuel Taxes

Henry Waxman and Edward Markey have negotiated with their fellow House Democrats and predictably they all decided to tax fossil fuels and then spend that money as fast as it comes in. So the threat of climate change isn't going to harnessed used to close the massive budget deficit.

Here’s today’s news from the Congressional Budget Office on the recently passed Waxman-Markey legislation: It’s a big tax and spend bill. For the years 2010-2019 the tax increase is $872.8 billion. Ka-ching! (For the record, that’s pretty close [we’re talking government work here] to the $885 billion revenue estimate that Heritage calculated through 2019.)

The CBO estimates the spending increases in the bill add up to $863.8 billion. Wow! It didn’t take long to spend that money. The outlays amount to 98.9 percent of the expected revenue. More startling, perhaps, is that the bill authorizes expenditures of $875.2 billion. That is, they have authorized spending 100.3 percent of the amount taken in. Some of that spending is delayed, perhaps, so that there is no increase in the deficit up to 2019 from Waxman-Markey, but maybe later.

It isn't enough that the bill raises almost a trillion dollars in taxes. Oh no. It has to raise spending by even more. The Democrats could have used Global Warming as an excuse to fund their existing spending plans (which are already huge). But they are gluttons. There's no satisfying them.

We haven't had enough American industry go aboard yet. Uh uh. Still more to push off the shores. Big Oil knows it can use foreign refineries instead and avoid some of the taxes.

Under the Waxman-Markey climate bill that may be voted on today by the U.S. House, refiners would have to buy allowances for carbon dioxide spewed from their plants and from vehicles when motorists burn their fuel. Imports would need permits only for the latter, which ConocoPhillips Chief Executive Officer Jim Mulva said would create a competitive imbalance.

“It will lead to the opportunity for foreign sources to bring in transportation fuels at a lower cost, which will have an adverse impact to our industry, potential shutdown of refineries and investment and, ultimately, employment,” Mulva said in a June 16 interview in Detroit. Houston-based ConocoPhillips has the second-largest U.S. refining capacity.

With Peak Oil approaching the US refineries are going to get cut back with many closings anyhow. The oil taxes won't raise as much as the Democrats expect because less oil will get pumped and consumed. So their spending plans will make the deficit even bigger.

The corresponding Senate bill is a mixed bag. At least the Senate bill will start seismic surveys for some of the Outer Continental Shelf in areas now off-limits to drilling.

Oil and gas trade associations applauded the bill which emerged from the US Senate Energy and Natural Resources Committee on June 17 because it would open parts of the eastern Gulf of Mexico for leasing and development. But the measure contained several other elements which would directly affect the industry.

These included establishing a 30 million bbl refined products stockpile within the Strategic Petroleum Reserve; requiring an inventory of marine resources off the US coast, including seismic surveys on the Outer Continental Shelf; increasing federal guarantees for constructing a natural gas pipeline from Alaska to $30 billion; requiring Senate confirmation of nominees to be US Minerals Management Service director, and repealing offshore royalty and other incentives in the 2005 Energy Policy Act.

We need to get that OCS exploration (and Alaska National Wildlife Refuge - ANWR) exploration kicked off immediately because our available oil supply is going to start declining every year by 2016 at the outside.

Federal guarantees for a natural gas pipeline are a bad idea. The private sector should fund it if it is worth doing. I suspect that natural gas won't be needed for a while due to improvements (hydro-fracturing if anyone cares) that make the natural gas in shales accessible.

By Randall Parker 2009 June 30 04:49 PM  Economics Energy
Entry Permalink | Comments(6)
Higher Education Costs Up More Than Inflation Yet Again

The National Association of Independent Colleges and Universities finds that educational costs at colleges and universities still keep going up faster than inflation.

June 29 (Bloomberg) -- Tuition and fees at private U.S. colleges and universities for the 2009-2010 school year will rise an average 4.3 percent, the lowest percentage increase in at least 37 years, according to a survey.

Never mind that the economy is flirting with deflation and we are in the worst economic downturn since the Great Depression. The education cartel is raising rates.

Hey, they've improved. Smallest increase since 1972-1973.

The 4.3 percent increase for 2009-10 is the smallest since 1972-73, when average tuition and fees at private institutions rose by the same rate. The increase is slightly higher than the 2008 Consumer Price Index of 3.8 percent. NAICU's figure is based on responses from 350 private, nonprofit colleges and universities.

What we need:

  • Large scale high res video recording of course lectures. State governments should fund this activity at state universities. Get more enduring value from paying professor salaries.
  • Make the videos downloadable and purchasable on DVD.
  • Develop web-based standard practice tests so people can test their mastery of topics while sitting at home or anywhere else with an internet connection.
  • Proctored standardized tests that you pay to take that let you get credit for knowledge in a subject without having to apply and enroll in a college.

This won't work for every course. But it'll work for most science, engineering, math, economics, and business undergrad courses. People who want to learn an economically valuable skill will be able to do so at low cost, at their own rate, with no transportation costs, and without disrupting their work day. They'll even be able to choose among many people teaching the same topic and therefore view a higher average level of lecture quality than they'd get from taking courses at a single college or university.

Automation of education cuts costs, improves quality, increases convenience, and increases availability.

By Randall Parker 2009 June 30 10:27 AM  Education
Entry Permalink | Comments(24)
United States Tops In Higher Education Expenditures

In the United States the cost of higher education has been rising faster than the rate of inflation for decades. Turns out the United States spends almost twice the percentage of GDP on higher education than the average among OECD countries (basically the developed economies).

Among the OECD countries reporting data in 2005, the countries that spent the highest percentage of their GDP on total education expenditures were Iceland (8.0 percent), Denmark (7.4 percent), Korea (7.2 percent), and the United States (7.1 percent). Looking at education expenditures by level, the United States spent 3.8 percent of its GDP on elementary and secondary education, which was the same as the average for all OECD countries reporting data. Compared with the percentage of GDP that the United States spent on elementary and secondary education, 12 countries spent a higher percentage, 13 countries spent a lower percentage, and 2 countries spent the same percentage. Iceland spent the highest percentage (5.4 percent) of its GDP on elementary and secondary education. At the postsecondary level, 2.9 percent of the GDP of the United States was spent on education; this amount was higher than the OECD average of 1.5 percent and higher than that of any other OECD country reporting data.

That's a lot of waste we can ill afford. In education we have the potential to cut costs, raise quality, increase convenience, and increase accessibility all at the same time. Let me repeat what we need:

  • Large scale high res video recording of course lectures. State governments should fund this activity at state universities. Get more enduring value from paying professor salaries.
  • Make the videos downloadable and purchasable on DVD.
  • Develop web-based standard practice tests so people can test their mastery of topics while sitting at home or anywhere else with an internet connection.
  • Proctored standardized tests that you pay to take that let you get credit for knowledge in a subject without having to apply and enroll in a college.

The average college lecture is way worse than the best college lecture on any given topic. If many courses that cover the same topic were video recorded then we could choose among dozens of lecturers for the same course and we could rate them just like we rate books and gadgets on Amazon. So we could get much higher quality instruction. We could learn at our own pace. We could crame huge amounts of learning into a week or two off from work. We could watch lectures on a laptop while riding a train or subway. We could watch lectures on the beach or on a mountain top. We could test our abilities in a large range of subjects.

For a very small portion of what governments now spend on education far more automated means of delivery and testing could be made widely available for cheap.

By Randall Parker 2009 June 30 09:31 AM  Education
Entry Permalink | Comments(1)
2009 June 29 Monday
Oil Price Surges Cause Recessions

Steve Kopits of energy business analysts Douglas-Westwood argues that energy price surges cause many of our economic recessions. Watch out for oil prices that take oil's cost above 4% of GDP. That's around $80 per barrel. Does that mean we are close to a double dip recession?

In the last 37 years, the US has suffered six recessions. From the beginning, oil played a central role. As the period opened in 1972, Saudi Arabia was selling oil for about US$2.50/bbl – or about $13.50 in today’s prices. Oil had seen a decade of unprecedented growth. The US and Western Europe were finishing the process of motorization of their societies, and demand had soared from just over 20 MMbbl/d in 1960, to more than 50 MMbbl/d by 1972. At the same time, US oil production had peaked in 1970 and had begun to decline. The time was ripe for a shift of power to the up-and-coming OPEC producers, and it was not long in coming.

The price level at which oil hits 4% of GDP depends on how big is the GDP, how much oil we are using, and the price of oil. Our oil demand peaked in 2007. We are a few million barrels a day below that peak now. On the other hand, our economy is smaller too. When oil production starts shrinking after world oil production peaks will the economy contract as fast as oil production declines? Probably not. But it is not clear to me what percentage of the GDP we'll use per 1% of oil lost to declining production.

The US economy has tended to grow well when oil consumption expenditures were less than 2% of GDP. In the early 1970s, for example, oil ranged from 1% to 2% of GDP. By contrast, from 1973 through 1978, oil consumption’s share of the economy peaked as high as 6.3%, never fell below 4%, and averaged 5.3% of GDP. In other words, oil expenditures represented a drag of about 3% of the economy throughout the period.

He say once the economy goes above 4% of GDP going to energy it will go into a recession. Then it can't readjust oil consumption downward by an amount equal to more than 0.8% of GDP per year. I'm unclear on what he means by this point. So if the economy is spending 6% on GDP and prices stay even the economy can cut consumption down far enough to lower oil consumption costs to 5.2% of GDP? It is not clear.

He says the US economy needs to avoid 3 conditions in order to avoid an oil-caused recession.

1. Crude oil expenditures should not exceed 4% of GDP.
2. Oil prices should not increase by more than 50% year-on-year.
3. Oil price increases should not be so great that a potential demand adjustment should have to reach 0.8% of GDP on an annual basis, as shedding demand at this rate has generally been associated with recession.

This report reinforces my belief that we can't avoid an extended and deep economic downturn more akin to a Depression. Once Peak Oil hits and world production starts declining by 3-4-5% per year I see no way to avoid a continual oil shock with sustained prices larger than these numbers. Our decline in consumption over the last 2 years is nothing compared to what's coming. The US economy and that of most other nations will enter into an economic contraction that will continue for years.

You can also read the report as a PDF.

Update: What I worry about: eventual collapse. Parasitism keeps building up. The system can't get enough resources to feed all the burdens placed on it.

By Randall Parker 2009 June 29 08:31 PM  Economics Energy
Entry Permalink | Comments(11)
2009 June 28 Sunday
Bill Gross Sees More Debt And Lower Economic Growth

Pimco (really big bond manager) managing director Bill Gross says we are at risk of total federal government debt rising to 100% of GDP.

To zero in on the U.S. of A., its annual deficit of nearly $1.5 trillion is 10% of GDP alone, a number never approached since the 1930s Depression. While policymakers, including the President and Treasury Secretary Geithner, assure voters and financial markets alike that such a path is unsustainable and that a return to fiscal conservatism is just around the recovery’s corner, it is hard to comprehend exactly how that more balanced rabbit can be pulled out of Washington’s hat. Private sector deleveraging, reregulation and reduced consumption all argue for a real growth rate in the U.S. that requires a government checkbook for years to come just to keep its head above the 1% required to stabilize unemployment. Five more years of those 10% of GDP deficits will quickly raise America’s debt to GDP level to over 100%, a level that the rating services – and more importantly the markets – recognize as a point of no return. At 100% debt to GDP, the interest on the debt might amount to 5% or 6% of annual output alone, and it quickly compounds as the interest upon interest becomes as heavy as those “sixteen tons” in Tennessee Ernie Ford’s famous song of a West Virginia coal miner. “You load sixteen tons and whattaya get? Another day older and deeper in debt.”

The claim by the Obama Administration for an eventual return to fiscal probity is based on their assumption of a healthy recovery from the recession. They expect this recovery to kick in by the end of 2009 or thereabouts. But suppose the recession goes deeper than the Administration projects (it already has) and suppose recovery is slow for years (and Bill Gross expects a slow recovery - see below). Then what happens to the US federal budget? Spending goes up but revenue doesn't. It is as simple as that. So the deficit and accumulated debt go up even faster.

Gross says America's demographics with an aging population mean the problem is even bigger. I'll see him an aging population problem and raise him a declining skills population due to low skilled immigration. America's workforce in the future will be less capable and a smaller percentage of the total population. That spells declining living standards before we even begin to account for Peak Oil.

The current annual deficit of $1.5 trillion does not even address the “pig in the python,” baby boomer, demographic squeeze on resources that looms straight ahead. Private think tanks such as The Blackstone Group and even studies by government agencies, such as the Congressional Budget Office, promise that Federal spending for Social Security, Medicare, and Medicaid will collectively increase by 6% of GDP over the next 20 years, leading to even larger deficits unless taxes are increased proportionately. Collectively these three programs represent an approximate $40 trillion liability that will have to be paid. If not, you can add that present value figure to the current $10 trillion deficit and reach a 300% of GDP figure – a number that resembles Latin American economies such as Argentina and Brazil over the past century.

Gross says funding the US government debt is going to become difficult. He expects higher interest rates. Now's not the time to buy a long term bond.

So the rather conservative U.S. government debt ratio shown in Table 1 will likely be anything but in less than a decade’s time. The immediate question is who is going to buy all of this debt? Estimates suggest gross Treasury issuance of up to $3 trillion this calendar year and net offerings close to $2 trillion – almost four times last year’s supply. Prior to 2009, it was enough to count on the recycling of the U.S. trade/current account deficit to fund Treasury borrowing requirements. Now, however, with that amount approximating only $500 billion, it is obvious that the Chinese and other surplus nations cannot fund the deficit even if they were fully on board – which they are not.

Consumer spending is not going to ride to the rescue. Consumers are trying to cut back on their debt loads.

Although personal spending increased slightly last month, the saving rate climbed to its highest level in 15 years as consumers tried to build a buffer against the threat of job losses and more economic hardships.

By Randall Parker 2009 June 28 12:57 AM  Economics Business Cycle
Entry Permalink | Comments(5)
2009 June 27 Saturday
Oil Consumption Decline Continues

Peak Oil theorist Dave Cohen takes a look at the size of the decrease in oil consumption.

Oil demand strength can be viewed as following from economic conditions. However, due to its tight correlation with GDP, demand also serves as an indicator of those conditions. World oil demand is way down. Japan, where GDP shrank 15.2% in 2009:Q1, consumed 3.97 million barrels-per-day in April, down 1.02 million barrels compared with previous year. For the week ending May 22nd, demand in the United States was 18.292 million barrels-per-day, down 1.447 million barrels (-7.9%) compared with the same week in 2008. That’s almost 2 and a half million barrels-per-day right there, and I’ve only listed 2 countries.

According to Platts, China consumed 6.69 million barrels-per-day in the 2009:Q1, down 4.5% over the previous year. The lone “bright spot” was India, which was up 4.8% averaged over the entire year 2008-2009 ending March 31st (2.65 million barrels-per-day).

Note that the percentage decline for the US is larger than the percentage decline for China. India's consumption is still growing in spite of the world recession. The size of the US consumption decline is a lot bigger than I'd expected. That was a May figure. In June the consumption decline continues.

Fuel consumption fell 5.5 percent to 17.9 million barrels a day last week, the biggest drop since January, the report showed. Daily gasoline demand declined 2.4 percent, to 9.13 million barrels.

Look at these numbers in a larger context. US per capita oil consumption peaked in 2004. The reduction in per capita consumption so far probably takes us about a third of the way back to 1950 level of per capita oil consumption. We'll get back to 1950 eventually. Though some of us will be driving electric cars when we arrive. US total oil consumption peaked in 2007. My guess: due to Peak Oil we will probably never revisit that peak. If James Hamilton is right to argue that the oil price run-up was an economic shock and major cause of our current recession then it looks like the US economy does not have the buying power needed to push up our oil consumption any higher than it reached in 2007.

US peak per capita oil consumption comes before world oil production peaks for a few reasons. Exporters are using oil of their oil internally. Asian demand grows and drives up prices, basically competing American buyers out of the market. Also, US population growth means additional residents and citizens compete with existing ones. So your own oil consumption takes a bigger hit than world production declines would lead you to expect.

By Randall Parker 2009 June 27 10:16 PM  Economics Energy
Entry Permalink | Comments(0)
Obama Blocked On Immigration Amnesty By Economy

Rahm Emanuel says the votes aren't there to pass an immigration amnesty. I would not think so. The US unemployment rate is probably over 10% and likely to hit 11% or maybe even 12%.

Just hours before President Obama hosted lawmakers for a discussion on immigration at the White House, Chief of Staff Rahm Emanuel conceded that Obama and his allies on Capitol Hill do not have the votes to pass a comprehensive reform bill.

"If the votes were there, you wouldn't need to have the meeting. You could go to a roll call," Emanuel told reporters during an hour-long breakfast.

Obama hopes conditions in 2010 will make immigration amnesty possible. But I'm predicting a jobless economic recovery next year.

But "after all the demagoguery, we've got a responsible set of leaders who want to get things done" for a possible immigration compromise next year, Obama said. He singled out former foe John McCain (R-Ariz.) as an ally.

Why do I expect a jobless recovery (and therefore continued deep opposition to immigration amnesty)? See the San Francisco Federal Reserve Bank's report Jobless Recovery Redux? and also Calculated Risk points out that unemployment continued to rise for 15 months after the end of the 1990 recession and 19 months after the 2001 recession with weak jobs growth even after the latter 19 month period. Plus, Peak Oil is hitting.

Senator McCain insists any immigration deal have strong union-busting measures. I'm sure the large anti-union wing of the Democratic Party will agree.

"I can't support any proposal that doesn't have a legal temporary worker program and I would expect the president of the United States to put his influence on the unions in order to change their position," McCain said.

The biggest reason for this opposition to more low skilled immigration: the deepening recession. States can't afford the poor people they already have and the states are slashing budgets for health care, education, even jails and police. The unemployed and those who (quite rationally) fear unemployment do not want more competition for a limited supply of jobs.

Obama clearly wants to expand the lower class.

"I'm committed to passing comprehensive immigration reform as president of the United States," Mr. Obama said at the Esperanza National Hispanic Prayer Breakfast in Washington. "The American people believe in immigration."

The Democrats in the US House Of Representatives do not want to pass unpopular immigration amnesty legislation until they can be sure the Senate will too.

Pressed on the issue at a briefing today, House Speaker Nancy Pelosi said that “the plan has always been for the Senate to go first.”

The Senate passed immigration reform in 2006, but efforts bogged down in 2007 and 2008. House Democrats, who all face voters every two years, want to be assured that a plan can pass the Senate, before taking what is for many a tough vote.

While the elites who have firm control of our national government look for ways to pass another immigration amnesty down at the state and local levels the tide is running in the opposition direction. The states have been moving toward tougher immigration law enforcement for years. Arizona has a law in its legislature that will criminalize illegal aliens.

And, if approved, Arizona would become the only state to criminalize the presence of illegal immigrants through an expansion of its trespassing law.

Utah has a new law going into effect that will require prove of legal residence in order to get a driver's license or state ID card. The lawyers who make a living off of illegal aliens ar e not happy about this law.

Utah's new immigration law, SB81, takes effect July 1. But several attorneys who belong to the American Immigration Lawyers Association say they're not waiting.

They plan to file a lawsuit later this week challenging various portions of the law.

"There are a number of provisions we think are unconstitutional," said Hakeem Ishola, one of the attorneys filing the suit.

The "Jobs Americans won't do" chestnut is wearing thin in this recession. Coloradans are taking farm worker jobs. Tennesseans are working the night shift in Tyson chicken processing plants. After Swift meat packing plants were raided for illegal aliens Americans in Mississippi lined up to replace them. When plants get raided to clean out the illegals salaries go up. The Democratic Party wants to drive salaries down. The Democratic Party serves the employers while pretending to represent the working class.

By Randall Parker 2009 June 27 09:20 AM  Immigration Politics
Entry Permalink | Comments(4)
2009 June 23 Tuesday
Sarkozy: Burqa "not welcome on French soil"

I admire the French for defending their own culture from a culture that is incompatible. If only America had a similar elite we'd be better off.

Paris - Leading Muslims and the media in France here have indicated general support of French president Nicolas Sarkozy's striking comments Monday that the burqa cover for Muslim women is "not welcome on French soil," though opinion is divided on whether the president's cultural stricture should be extended to an outright ban of the burqa for women.

On Tuesday, a diverse group of French lawmakers announced a six-month study to see if a ban is warranted on the black veil, known in the Gulf states as a niqab, and in northern Pakistan and Afghanistan as a burqa.

To the neocons who want me to believe the French are my enemies: to hell with you. Western nations would be a lot better off if they, like the French, treated their cultures as worth saving.

By Randall Parker 2009 June 23 11:18 PM  Civilizations Clash Of
Entry Permalink | Comments(11)
Ahmadinejad Preferred By Israelis Who See Him Easier To Isolate

Someone tell the Jewish hawks in America to calm down about the Mousavi supporters in Iran.

Tel Aviv - If they were to follow the ancient proverb, "the enemy of my enemy is my friend," one would think Israelis would be rooting for Iranian opposition candidate Mir Hussein Mousavi and the hundreds of thousands of Iranian protesters who have challenged the re-election of President Mahmoud Ahmadinejad.

But even though Mr. Ahmadinejad has threatened the Jewish state with destruction, many officials and analysts here actually prefer the incumbent president because – short of the downfall of Iran's theocratic system of government – he'll be easier to isolate. Reformist leader Mr. Mousavi, by contrast, isn't expected to alter Iran's drive for nuclear power, but he would win international sympathy.

"Just because Mousavi is called a moderate or a reformist doesn't mean he's a nice guy. After all he was approved by the Islamic leadership," says Ephraim Inbar, director of the Begin Sadat Center at Bar Ilan University. "If we have Ahmadinejad, we know where we stand. If we have Mousavi we have a serpent with a nice image."

But the street protests make for great video that boosts ratings of cable TV news channels. Those street battlers can be portrayed as freedom fighters.

Is Mousavi wrong when he claims he was cheated out of a victory? Also, are secular moderates in Iran a small fraction of the total Iranian population? Quite possibly "yes" on the first question and definitely "yes" on the second question. Here's some more unconventional wisdom about Iran.

By Randall Parker 2009 June 23 12:23 AM  MidEast Arabs Versus Israelis
Entry Permalink | Comments(0)
2009 June 22 Monday
Cities Shrinking To Save Money

Shrinking Flint Michigan will pull in toward a city core in order to cut costs.

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

Concentrating cities in a smaller area reduces the costs of trash collection, street maintenance, police patrols, and other city services. Flint's economy has been in decline for decades. It needs to shrink to survive.

Detroit is in a similar situation.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside.

"The real question is not whether these cities shrink – we're all shrinking – but whether we let it happen in a destructive or sustainable way," said Mr Kildee. "Decline is a fact of life in Flint. Resisting it is like resisting gravity."

What some poor Michigan cities are going thru foreshadows what the country as a whole will go thru as Peak Oil hits. The economy will contract much more than it is contracting right now. The costs of road maintenance, trash collection, and other local government services will soar along with the costs of asphalt and vehicle fuel. Already Michigan counties are converting some roads from asphalt to gravel in order to save money.

The economy's decline is creating a crisis atmosphere where extreme options become thinkable.

State income-tax revenue fell 26% in the first four months of 2009 compared to the same period last year, according to a survey of states by the nonprofit Nelson A. Rockefeller Institute of Government.

The revenue decline could become even more severe as the year wears on.

By Randall Parker 2009 June 22 11:50 PM  Economics Government Costs
Entry Permalink | Comments(5)
2009 June 20 Saturday
Fertility, Living Standards, Freedom, And IQ

Libertarian writer Ron Bailey thinks freedom lowers fertility. But I find that conclusion highly suspect.

There is no prosperous population in the world today that has, and has had for some time, a growth rate of zero,” Hardin declared. That’s no longer true. Japan is now experiencing a fall in its population due to reduced fertility, as are Germany, Russia, Italy, Poland and 25 other countries and territories. And there are many societies in which total fertility rates are rapidly decelerating.

Let's take a look at two intriguing lists. The first is a list of countries ranked on the 2009 Index of Economic Freedom issued by the Heritage Foundation and The Wall Street Journal. Then compare the economic freedom index rankings with a list of countries ranked by their total fertility rates. Of the 30 countries that are ranked as being free or mostly free, only three have fertility rates above 2.1, e.g., New Zealand at 2.11, the Bahamas at 2.13, and Bahrain at 2.53. If one adds the next 53 countries that are ranked as moderately free, one finds that only 8 out of 83 countries have fertility rates above 3. It should be noted that low fertility rates can also be found in more repressive countries as well, e.g., China at 1.77, Cuba at 1.6, Iran at 1.71, and Russia at 1.4.

In 2002, Seth Norton, a business economics professor at Wheaton College in Illinois, published a remarkably interesting study on the inverse relationship between prosperity and fertility. Norton compared fertility rates of over 100 countries with their index rankings for economic freedom and another index for the rule of law. "Fertility rate is highest for those countries that have little economic freedom and little respect for the rule of law," wrote Norton. "The relationship is a powerful one. Fertility rates are more than twice as high in countries with low levels of economic freedom and the rule of law compared to countries with high levels of those measures."

Okay number crunchers, should we take seriously this idea of freedom as the main driver of declining fertility? I can certainly see how industrialization changed the division of labor between men and women (as well as making it easier for women to raise children on their own) and how it created incentives for smaller families. But how does freedom figure in? Regular readers of human biodiversity realism blogs (see here and here and here and here and here) are probably all thinking that IQ has something to do with differences in fertility rates. But Ron Bailey's naturally not going to mention that possibility. IQ doesn't fit the libertarian script for why countries differ so much in affluence and freedom. Yet IQ plays a powerful role in determining differences between political systems and economic systems.

So how to tease out the influences of IQ, affluence, and political freedom on fertility? To the extent that political freedom enables rising living standards I can see a role for it in reducing fertility. But I see a few reasons for dismissing freedom's role. First off, the US has higher overall (2.1) and white (a href="http://www.nctimes.com/articles/2008/01/16/news/nation/11_50_091_15_08.txt">1.9) fertility than almost all European countries (Faroe Islands at 2.45 excepted). Yet we have more political freedom. Why doesn't our political freedom lower our fertility below that of European countries? Also, America's high degree of freedom does not prevent blacks and Hispanics from having higher fertility than whites. Plus, I do not see how America's higher freedom should cause East Asian Americans to have lower fertility than American whites - yet I'm pretty sure (but too lazy to check) that they do.

We also see incredibly low fertility in (high IQ) East Asia. Orderly and not especially liberal Japan at 1.22, South Korea at 1.2, socially engineered and highly controlled Singapore at 1.08 do not fit the freedom explanation. Nor does Cuba at 1.6.

Any reader have the later Richard Lynn data on IQ and wealth plus some freedom and fertility data in electronic form? Want to do some regressions and report on the correlations?

The future of freedom looks bleak to me. Countries with low respect for the rule of law, low IQ, low freedom, and lower living standards are making the babies. The free and well behaved portion of the world's population is shrinking as a fraction of the whole and probably even in absolute numbers. That does not bode well for the future.

Update: I think education reduces fertility in a few ways:

  • Less total time available in which to have children.
  • The number of suitable mates goes down as a woman's education and earning power rises. Fewer men have sufficient status to make suitable makes and those men have lots of lower status women to choose among.
  • Intellectual development opens up a wider range of choices for how to spend your time other than raising children.

High IQ then lowers fertility a few ways:

  • Higher IQ women get a higher return on time invested in education than lower IQ women. So higher IQ women have a bigger incentive to stay in school and delay child-rearing.
  • Once educated higher IQ women have money and career to compete with their desire to have children.
  • Smarter women can picture the whole child-raising process in greater detail. This makes them less willing to make babies. They see all the problems and downsides. They see the risks. They see the resource needs. They want to do more preparation and wait for better circumstances.

Unfortunately lower IQ people and their progeny are among the factors that make higher IQ women reluctant to reproduce. The higher IQ women want a neighborhood and the school that will insulate their children from the dumber, more impulsive, more criminal, less studious, and otherwise "bad influences". The result is a birth dearth among smarties.

By Randall Parker 2009 June 20 01:28 PM  Human Nature
Entry Permalink | Comments(24)
Fear Fatigue Drives Stock Market Rebound?

Andy Xie, who some of you may recognize as formerly an economist for Morgan Stanley, writes that the stock market rally of recent months comes from investors getting tired of fear. Given the poor fundamentals this argument is at least plausible.

Regardless of what investors or speculators say to justify their punting, the real driving force is the return of animal spirit. After living in fear for more than a year, they just couldn't sit around any longer. So they decided to inch back. The resulting market appreciation emboldened more people. All sorts of theories began to surface to justify the market trend. Now that the rising trend has been around for three months globally and seven months in China, even the most timid have been unable to resist. They're jumping in, in droves.

Fear drove the market too far down after greed drove it too far up. Now fear fatigue has set in and investors have gotten tired of sitting on the sidelines.

Xie also believes that foreign buying of US Treasury bonds will decline and therefore Treasury interest rates will return to historic patterns of being about 2.5% above inflation.

The 10-year Treasury yield historically averages about 6 percent, with about 3.5 percent inflation and a real yield of 2.5 percent. This reflects the preferences of marginal buyers in the United States. Foreign central banks have pushed down the yield requirement substantially over the past seven years. If marginal buyers become American again, as I believe, Treasury yields will surge even higher from current levels.

So shy away from longer term bonds right now. You'll be able to earn much better yields if you wait.

If Xie is correct then there are some bigger consequences in store. First off, government debt servicing costs will soar and therefore the US government (as well as state and local governments) will have less money to spend on services and will be looking much harder at ways to raise taxes.

Higher interest rates will raise the cost of capital for the private sector too. But I'm not so sure about the impacts on private sector growth. If the national savings rate continues to rise then households might have more money available to invest.

On the plus side, net additions to household debt began to slow in 2007, and since the third quarter of last year liabilities have shrunk by $421 billion. For the first time ever, households have paid off more debt than they took on for two quarters in a row.

On the other hand, the Chinese might feel compelled to continue to buy Treasuries. The high savings rate in China might be driven by selective abortion of female fetuses and the resulting greater competition to attract wives.

In 2007, Chinese household savings as a share of disposable income was 30%, up from 16% in 1990. One possible reason for the jump in savings: The dearth of women is making China’s marriage market extremely competitive, and families with boys are accumulating wealth to make their sons more attractive matches.

Selective abortion increased savings in China, drove Chinese to buy more American bonds, and then this helped cause the real estate and debt bubble in the United States.

Chinese savings look set to rise even further as the sex ratio becomes even more unbalanced.

While the high savings rate in China has global impact, existing explanations are incomplete. This paper proposes a competitive saving motive as a new explanation: as the country experiences a rising sex ratio imbalance, the increased competition in the marriage market has induced the Chinese, especially parents with a son, to postpone consumption in favor of wealth accumulation. The pressure on savings spills over to other households through higher costs of house purchases. Both cross-regional and household-level evidence supports this hypothesis. This factor can potentially account for about half of the actual increase in the household savings rate during 1990-2007.

This has implications that go beyond China since selective abortion for sex selection is practiced in Vietnam, India, and other countries.

By Randall Parker 2009 June 20 11:51 AM  Economics Motivation
Entry Permalink | Comments(4)
2009 June 18 Thursday
Medical Costs In United States Continue Rapid Ascent

The continued big increases in US health care costs are not sustainable.

Even after the US economy recorded its worst contraction in a quarter-century in late 2008 and early 2009, medical costs continued to grow. The perplexing contrast of health spending growing amid a deflated general economy will present employers with unique challenges for their 2010 healthcare benefits strategies.

Key findings from the report include:

  • Growth in medical costs for 2010 is expected to be 9 percent, slightly lower than in previous years
  • The recession and the prospect of health reform will help temper medical costs, impacting the pricing
  • As the recession pounded corporate profits in early 2009, employers surveyed said they were ready to push more of the costs of health insurance to their workers in 2010 while expecting more responsibility from workers for managing their personal health
  • Although health reform will have a major impact on the industry, its effect on medical costs likely will not be felt until 2011 or later

These rapidly rising costs are providing the political impetus to do something about health care policy. Unfortunately, I do not have faith in our political class to do something constructive about those costs.

By Randall Parker 2009 June 18 10:43 PM  Economics Health
Entry Permalink | Comments(1)
Iranian Power Struggle Over Ethics And Corruption?

Some of the people opposing Ahmadinejad in Iran have lots of money they are trying to protect.

Among those arrested Wednesday were prominent reform strategist Said Hajjarian, former vice president Ali Abtahi, former foreign minister Ibrahim Yazdi, and prominent critic and editor Saeed Laylaz – adding to the scores of key Mousavi supporters already detained.

The moves are part of a power struggle among Iran's political elite 30 years after the Islamic revolution. Analysts speculate that Supreme Leader Ayatollah Sayed Ali Khamenei is aiming to remove rival first-generation leaders – some of the original leaders of the revolution. President Mahmoud Ahmadinejad (a second-generation leader) is a useful ally in that effort.

On the other side, the anti-Ahmadinejad camp – motivated by dislike for the president's abrasive style, that they believe has damaged Iran's standing abroad – is striving to topple Ahmadinejad and preserve their own influence, and sometimes wealth, in Iran's opaque system of rule.

Is Ahmadinejad a reformist battling the corrupt old guard?

By Randall Parker 2009 June 18 10:40 PM  MidEast Iran
Entry Permalink | Comments(9)
2009 June 17 Wednesday
Hearings On Health Insurance Policy Cancelations

If you get seriously sick your health insurance company might investigate your medical history.

An investigation by the House Subcommittee on Oversight and Investigations showed that health insurers WellPoint Inc., UnitedHealth Group and Assurant Inc. canceled the coverage of more than 20,000 people, allowing the companies to avoid paying more than $300 million in medical claims over a five-year period.

It also found that policyholders with breast cancer, lymphoma and more than 1,000 other conditions were targeted for rescission and that employees were praised in performance reviews for terminating the policies of customers with expensive illnesses.

In some cases they are targeted over items in their medical records unrelated to the expensive conditions that cause insurance companies to focus on them in the first place.

I happened to watch the testimony for this subcommittee on C-SPAN. I saw these people testify:

A Texas nurse said she lost her coverage, after she was diagnosed with aggressive breast cancer, for failing to disclose a visit to a dermatologist for acne.

The sister of an Illinois man who died of lymphoma said his policy was rescinded for the failure to report a possible aneurysm and gallstones that his physician noted in his chart but did not discuss with him.

What really floored me: the policyholders did not get their policies revoked for hiding the disease that racked up the big costs. For those testifying they lost their coverage over medical issues that nothing to do with their expensive diseases that came later. I sat watching thinking that if one has an individual policy one is basically not safe. You can't count on remaining insured if your insurance company decides to dump you.

It seems to be the case that you can lose your coverage even though you didn't fraudulently represent yourself to a medical insurance company. If one can't make a good faith effort to reveal one's medical history and be assured continued medical insurance as long as you pay your premiums then anyone who has to buy their own medical insurance directly is at risk of losing medical insurance.

Leave aside the public policy issue of health insurance coverage for the moment. What should the self-employed do to ensure they will have medical coverage should the need arise? If you have plenty of money, are healthy, and want to get medical insurance then how to go about it in a way that won't leave an opening for your insurance company to drop coverage a few years later should you suddenly get an expensive disease?

What I also wonder: Are there companies that only try to do rescission on policyholders for previous medical records on the disease that becomes expensive? In other words, do any of the health insurance companies use ethical standards for deciding when to revoke a policy?

The LA Times has been covering the health insurance rescission phenomenon for years and has a lot of articles on their web site about it.

Suppose you don't get your policy revoked. How expensive might it become? Blue Shielf of California hit one 44 year old policy holder with a 54% rate hike to $484 per month. What's it going to cost her at age 50? 55? 60?

The medical insurance providers say they have to contend with fraud. I buy that argument. But the fraud charge is hard to justify when the reason for revoking the policy is for a condition for which the policyholder hasn't even sought treatment (as was the case for some of the people who testified to Congress).

Wellpoint executive Brian A. Sassi told the panel recission policies helped insurance companies combat fraud by ferreting out policyholders who did not reveal pre-existing condition before they signed up for coverage. Sassi pointed to statistics suggesting health-care fraud in the U.S exceeds $100 billion each year.

Since in the United States most people get their medical insurance through their employer they are at risk of losing the ability to get coverage if they develop a condition while employed and then lose their job. An individual can become uninsurable via individual policies. Then it becomes necessary to get a job that comes with medical insurance. Well, what if you are too sick to work?

Even those with employer-provided health insurance are getting hit by rapidly rising costs.

Among adults with employer-sponsored health coverage, out-of-pocket (OOP) spending—including premium shares, deductibles, copayments, and coinsurance—increased by 34 percent between 2004 and 2007, from $545 to $729. Out-of-pocket spending rose 42 percent for the 1 percent of adults with the greatest medical expenses.

By Randall Parker 2009 June 17 11:57 PM  Economics Health
Entry Permalink | Comments(15)
2009 June 16 Tuesday
Boys Hit By Bigger Problems Than Girls

Lots of bad things happen to boys.

According to Judith Kleinfeld, boys get the raw deal. Compared with girls, American boys have lower rates of literacy, lower grades and engagement in school, higher drop-out from school, and dramatically higher rates of suicide, premature death, injuries, and arrests. Boys are also placed more often in special education. Girls on the other hand are more likely to have different problems including depression, suicidal thoughts and eating disorders.

The researcher argues that although there have been numerous federal, state, school district, and foundation programs aimed at addressing issues faced by girls, led in part by the strong feminist movement, the same cannot be said for the problems encountered by boys. In her view, they have been largely neglected.

Does it matter that girls get more attention?: Yes, in one sense: the sorts of environments that appeal to boys are denied to them on the theory that boys need taming and conditioning to embrace female values. School becomes far more boring for boys because less teaching is devoted to subjects which appeal to boys.

Why do boys have so many problems i the first place? One reason is just 1 X chromosome per cell. Recessive mutations on X chromosomes might be supressed in girls. But not so in boys. Also, boys were selected for to be more masculine and aggressive. What boys need are hobbies and school course work that appeals to boys. Military history rather than social history. Novels about adventures and exploration rather than novels about complex family relationships. Boys need guns, archerty, sports.

By Randall Parker 2009 June 16 11:07 PM  Human Nature
Entry Permalink | Comments(8)
2009 June 14 Sunday
Gulf Cartel Beats Sinaloa Cartel In Nuevo Laredo Mexico

The relative calm that has replaced gun battles and lawlessness in Nuevo Laredo came as a result of one cartel winning over the other. The presence of government troops helped the Gulf Cartel hang on to their territory.

The government, which is in the midst of a vicious, countrywide battle with the cartels, played a role in the newfound tranquillity by pouring soldiers into Nuevo Laredo, under President Felipe Calderón and his predecessor, Vicente Fox. They took up positions around the city and took over the police force, which was regarded as a corrupt adjunct of the cartels.

But the army did not actually defeat the traffickers here by rounding them up and putting them out of business. Rather, law enforcement officials on both sides of the border say, a brutal, long-running turf war between rival cartels came to an end when one side, the Gulf Cartel, came out on top. The added presence of government troops made it harder for the rival Sinaloa Cartel to continue its quest to take over Gulf territory. But many of the most-wanted criminals responsible for the violence got away and continued their business trafficking drugs, in the shadows.

This is all nature's way of telling us we should build a thick deep border barrier on the entire US border with Mexico.

Government troops sent to Ciudad Juarez so far haven't brought peace to the place.

CIUDAD JUAREZ, Mexico — Three months into a military surge aimed at restoring peace to this gangster-choked border city, soldiers are being blamed for the deaths of as many as four men, the disappearances of eight others and the torture of still scores more.

“The guarantee of public security has been totally broken,” said Gustavo de la Rosa, an outspoken official with the Chihuahua state human rights commission. “Juarez was better off without the soldiers.”

In Juarez drug addicts are among those targeted and it is not clear why.

No one knows why the drug addicts have strayed into the crosshairs here. One reason for the mystery is that few homicides are ever solved in Ciudad Juarez. The addicts, counselors and police say they suspect that patients may owe money to dealers or work for competing gangs or have stolen drugs they were hired to carry across the river to El Paso.

Making the United States more like Mexico is a bad idea. We live in an era when the obvious requires frequent restatement. The truth just doesn't sink in among our high and mighty.

A lot of police officers are among those killed in Juarez. I wonder how many of those police were innocents and how many were working for cartels battling each other.

The border city, home to the Juarez drug cartel, ended 2008 with a total of 1,605 people murdered, according to press tallies, including 77 federal, state and municipal police officers.

Chihuahua, where Juarez is located, was considered Mexico’s most violent state in 2008, with 2,206 murders reported.

Want to live in the Third World but don't want to move? The Third World is coming to you so that you do not have to come to it.

By Randall Parker 2009 June 14 11:38 PM  Mexico
Entry Permalink | Comments(1)
Housing Price Decline Seen As Long Lasting

James Quinn points out that Yale economist Robert Schiller expects the housing downturn to last for several years if past patterns repeat.

Prices have now declined back within the range seen during the period from the  1970s through the 1990s. This is why the eternal optimists are proclaiming a housing bottom. These people don’t seem to understand the concept of averages. An average is created by prices being above average for a period of time and then below average for a period of time. The current downturn will over correct to the downside. The most respected housing expert on the planet, Robert Shiller, recently gave his opinion on the future of our housing market:

“Even the federal government has projected price decreases through 2010. As a baseline, the stress tests recently performed on big banks included a total fall in housing prices of 41 percent from 2006 through 2010. Their “more adverse” forecast projected a drop of 48 percent — suggesting that important housing ratios, like price to rent, and price to construction cost — would fall to their lowest levels in 20 years. Long declines do happen with some regularity. And despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline. After the bursting of the Japanese housing bubble in 1991, land prices in Japan’s major cities fell every single year for 15 consecutive years. Even if there is a quick end to the recession, the housing market’s poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997.”

Americans have built up a lot more debt than they had in 1991. So recovery looks like it should be slow when it comes.

Quinn says Americans are far too indebted and blames the banks and the Federal Reserve.

When this debt binge began in 1982, the profits of financial companies accounted for 7% of all U.S. company profits. At the peak in 2006, they accounted for more than 30% of all U.S. company profits. This is why the money managers own the yachts, not the customers. The banking industry, backed by its sugar daddy the Federal Reserve, has enslaved the most of America in their web of debt.

I see the lesson here that easy credit is a bad idea. A substantial fraction of the population can no more handle easy credit than they can handle heroin or cocaine. We were better off when consumer debt was a lot harder to get because people are vulnerable to vices including vice of spend now to pay later.

Robert L. Rodriguez, Chief Executive Officer of money managers First Pacific Advisors, says the federal government's subsidization of consumer lending amounts to giving heroin to a heroin addict but people are going to increase their savings rates in spite of government intervention in credit markets. Could he be right on the consumer response?

Misguided measures to re-stimulate consumer borrowing, beyond just getting the system functioning, are highly questionable. The combined collapses of stocks and housing prices have pummeled the U.S. household’s net worth by an estimated $12.7 trillion, according to the Federal Reserve, while ISI International estimates it to be in the area of $14 trillion. This net worth destruction is the most severe since the Great Depression. We have a news flash for the government, creating new credit programs for a consumer who was spending almost $1.1 trillion more than they were earning in spendable income, according to MacroMaven’s estimate, will be a non-starter. More leverage is not what they need. Encouraging the consumer to take on more debt is like trying to help a recovering heroin addict lessen his pain by providing him with more heroin.

A dramatic rise in the U.S. personal savings rate will be required to begin the mending process of the consumer’s balance sheet. I expect the U.S. personal savings rate will rise from 2% to 8% this year and remain at an elevated level for the foreseeable future. This process should increase savings by approximately $650 billion annually. An increase of this magnitude, in such a brief period, is unprecedented, other than during WW2, when it rose from 12% to 24% between 1941 and 1942. Assuming some earnings on this incremental savings and a partial recovery in the stock and real-estate markets, it will likely take ten years for the consumer’s net worth to return to its pre-crisis level.

I would like to know why this guy thinks our savings rate will go that high. If it does go that high how will people invest their savings?

Quinn says household debt service is higher than the 30 year average and so consumers are vulnerable to rising interest rates.

Anyone anticipating a consumer-led recovery is counting on consumers who have been whacked in the head with a 2 by 4 to stagger to their feet and say, thank you sir may I have another? Even with interest rates at extremely low levels, household debt service is 14% of disposable income, versus the 30 year average of 12.1%. As interest rates rise, this burden will break the consumer’s back. The only way to avoid this fate is a substantial pay down of debt.

I would also add that they are vulnerable to Peak Oil. Plus, America's demographics are deteriorating with an aging population and a large and growing non-Asian minority (or NAM) population that performs poorly in schools and in the work place. The American labor force's earnings power is weakening.

By Randall Parker 2009 June 14 08:36 PM  Economics Housing
Entry Permalink | Comments(1)
2009 June 13 Saturday
Obama Administration Suckers For China On Energy Tech

This is what a sucker sounds like.

BONN, Germany – China wants the United States to deliver top of the line technology as part of a new global warming agreement, the chief U.S. climate negotiator said Thursday.

Jonathan Pershing, who was part of a U.S. delegation that returned this week from Beijing, said the Chinese are looking to the U.S. for ideas and technology to retool its high-carbon industry.

"They want from us technology, and we want from them action," Pershing said on the sidelines of U.N. climate talks. "There's room for agreement there."

The Chinese could already buy technology. They are only negotiating for technology with the Obama Administration because they do not want to pay for it and they think the Obamanauts are foolish enough to think that giving it away in exchange for a climate deal will yield a better result than making them pay for it. In reality China's leaders are not going to impose large costs on their economy to cut CO2 emissions. Anything they do in exchange for technology will be steps they would have taken anyway. Take for example a bigger Chinese nuclear power program. They are scaling it up already because their air has become barely breathable and their coal reserves will run out eventually.

The Chinese hold plenty of US dollar debt they could use to buy cleaner energy technology from the United States.

China is the largest U.S. creditor, holding $767.9 billion of U.S. debt as of March, according to Treasury Department figures. Japan is second with $686.7 billion. Brazil holds $126.6 billion, while Russia has $138.4 billion.

In April alone the US trade deficit with China was $16.8 billion out of a total of $29.2 billion.

The deficit with China, which often causes tensions between the two nations, widened by 7.3% to $16.8bn.

By Randall Parker 2009 June 13 04:41 PM  China
Entry Permalink | Comments(1)
2009 June 11 Thursday
Democrats In California Legislature Face Fiscal Meltdown

Absent drastic spending cuts the state government of California will run out of money in late July 2009.

Senate President Pro Tem Darrell Steinberg pushed for raiding much of the state's proposed $4.5 billion budget reserve next year to bankroll key health, welfare and college aid programs.

"The purpose of a rainy-day fund is to provide funds for a rainy day," he said. "It's thunder and lightning in California right now."

A budget reserve is for worsening conditions and unforeseen problems. The economy could easily contract even further and and further reduce the state's tax revenues.

The editors of the Fresno Bee say partial solutions got us into this mess.

Gov. Arnold Schwarzenegger is correct to insist that the Legislature solve the entire state budget problem of $24.3 billion, and not come up with partial solutions, with the hope that tax revenues will increase as the economy improves. Partial solutions have brought California budget misery that now threatens every state program, including the safety net for our poorest residents.

Karen Bass doesn't want a $24 billion dollar hole in a $92 billion budget to lead to big spending cuts. To do what is necessary is a misuse of the situation.

Assembly Speaker Karen Bass also explained that “[t]he bottom line for Assembly Democrats is that we are committed to ensuring that the state's fiscal emergency isn't allowed to be misused to eliminate the safety net in California or to eviscerate our public education system."

Misused? A budget deficit shouldn't be "misused" to cut spending? How should a budget deficit be used? To increase spending? There's an Alice In Wonderland aspect to the California state legislature. The state is in its biggest fiscal crisis since the Great Depression and the Democrats are in denial that they have to make big cuts in spending programs.

Clue for Karen Bass: When you have less to spend you have to spend less. Admit it. Accept it. Make peace with it. The state government doesn't have the money that a welfare state requires. Don't dig the hole deeper. You are just delaying the inevitable and making the inevitable cuts deeper when they come.

I wonder of the Democrats in Sacramento need for the state to totally run out of money in order to let them justify to their supporters that government employees must get pay and benefits cuts and that many welfare programs must be slashed and eliminated. Do they need a fully developed state crisis to force them to make drastic cuts?

State Treasurer Bill Lockyer says the legislature needs to vote with to solve the budget crisis with the belief they will not get reelected.

Lockyer was invited by Assembly Speaker Karen Bass (D-Los Angeles) to explain the fiscal facts of life to house Democrats during a five-hour caucus Monday. These mostly-liberal lawmakers soon will be asked to cut spending as they'd never dreamed in their worst nightmares.

"I began with, 'Why don't you start with the realization that probably none of you are going to be back here next year?' " after the November elections, Lockyer recalls.

"That's a very liberating thought, and with it you can get a lot done."

Imagine that none of the people in the legislature were even eligible to run again. Would they finally vote to balance the budget?

Arnold Schwarzenegger wants to terminate some spending programs. Schwarzenegger calls on the legislature to put the citizens ahead of the interests of employees of the government and unions.

In the wide-ranging interview, Schwarzenegger challenged legislative Democrats to resist the influence of special interests fighting the deep program cuts he has proposed to help balance the budget.

Clearly alluding to labor unions that oppose the cuts, the governor said: "Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them."

But Arnie's in some denial of his own over Hispanic immigration.

SACRAMENTO — Gov. Arnold Schwarzenegger on Friday disputed claims that illegal immigrants caused California's $24.3 billion deficit, while he praised their economic contributions and said he is "happy" they have access to services.

Reality check: Imagine America's southern border was closed to immigration 30 years ago. Imagine illegals were rounded up and deported. California would have many millions fewer lower skilled and lower earning Hispanics. Also, millions of higher earning whites would not have fled the state for a better life elsewhere. So the state would face less demand for medical, prison, and other services for poor Hispanics and more tax revenue per higher earning citizen. The state would be in better shape to the tune of billions of dollars per year.

The illegals alone cost several billion per year. The descendants of previous generations of illegals cost far more.

He said the cost of services to illegal immigrants, which has been estimated at $4 billion to $5 billion annually, is a "small percentage" of the deficit California faces.

Update: BTW, a factor rarely considered in discussions of immigration is the fiscal effects of population growth. When a population grows the number of roads, schools, police stations, court houses, jails, fire stations, sewage treatment plants, and other physical plant must all increase. Those costs end up getting paid much more by the existing population than by the new population since all are taxed to pay for the needed additional assets. Since the immigrants have much lower productivity and earning power than the natives the natives pay an even larger amount to fund the needed infrastructure.

California's rapid population growth due to immigration is a major reason why it is in a fiscal crisis. Lower income immigrants have come in while higher income natives have left. This trend looks set to continue in the future. The remaining white population will shrink while the lower earning Hispanic population grows. We will see both higher taxes and lower quality of public services as a result. The California dream is dead.

By Randall Parker 2009 June 11 11:43 PM  Economics Government Costs
Entry Permalink | Comments(6)
2009 June 10 Wednesday
Roissy Sees Artistic Decay As A Mirror On Our Society

That's not just bad art you are looking at in art museums. Ugly art is a reflection of a sick culture.

Creepy crying babies, piles of baubles and trinkets, brains seeping out of eye sockets, distorted faces and renderings of mangled penises dangling from age-spotted bodies. If we agree that art is a mirror held up to the artist’s inner world, and by extension a larger mirror reflecting the culture in which the artist is immersed, and that its function is to tell us something about ourselves, then the message is loud and clear: We are an ugly culture crippled by ugly advocates whipping anyone who professes to see profound meaning in their ugliness with the barbed ends of a bloody cat-o’-nine tails, fat bloated hogs rooting in a trash heap of stupid, begging for more. All your mudpits are belong to us.

Maybe ugly art is celebrated so that more people can pretend to create valuable art. A sort of affirmative action for the ugly minds that lowers standards to let in more tasteless people.

By Randall Parker 2009 June 10 11:39 PM  Civilizations Decay
Entry Permalink | Comments(5)
2009 June 09 Tuesday
Medical Care Costs And Nationalized Health Care

Medical care costs vary greatly from city to city.

Nationally, according to the Dartmouth Atlas of Health Care, Medicare spent an average of $8,304 per beneficiary in 2006. Among states, New York was tops, at $9,564, and Hawaii was lowest, at $5,311.

Researchers at Dartmouth Medical School have also found wide variations within states and among cities. Medicare spent $16,351 per beneficiary in Miami in 2006, almost twice the average of $8,331 in San Francisco, they said.

The Senate Finance Committee recently suggested that one way to pay for health care overhaul would be to reduce geographic variations by cutting or capping Medicare payments in “areas where per-beneficiary spending is above a certain threshold, compared with the national average.”

Local differences in how medicine is practiced accounts for a large chunk of these differences. Some doctors and hospitals provide a lot of care that yields little benefit. I've seen this up close and personal with a close relative whose oncologist wanted to continue treatment for months beyond the point where the treatment was providing any benefit. But that treatment was doing a serious ka-ching on the doctor's bank account. In some areas are doctors just more ethical? Or are patients less realistic about potential treatment benefits?

The US government has done a poor job of reining in growth of Medicare spending - see Miami above. It has cut pay-outs for various treatments and the result has been fewer doctors willing to treat Medicare patients. Given the poor record of the US government with Medicare it seems kinda cheeky for the Obama Administration to propose a bigger government role for funding health care for those not yet retired as a way to cut costs and make health care more affordable.

But Obama's not looking at cost cutting so much as he's looking at tax the rich to pay for the poorer folks.

“He made a very strong case for the proposal that he put on the table, which was to cap deductions for high-income Americans, and he urged them to go back and look at that,” Axelrod said on the CNN’s “State of the Union.” Goolsbee, appearing on “Fox News Sunday,” said Obama is “mindful” about how “ordinary Americans are able to foot the bills” and never proposed taxing employee benefits.

Taxes aside, what disturbs me is that people wanting individual health insurance policies will have to go thru some some of federal exchange. What is the exchange? How does it affect what sorts of medical insurance policies we will be able to choose?

The outline suggests consumers who have individual health insurance policies that they like could keep them. Still, it says that “by and large” the nation’s market for individually purchased health insurance policies would move to a new federally operated exchange. It would permit both individuals and employees of small firms to buy policies at less expensive group rates.

I do not want a government getting near to messing with my own ability to make choices about medical care.

By Randall Parker 2009 June 09 03:09 AM  Economics Health
Entry Permalink | Comments(6)
2009 June 08 Monday
Mish Shedlock Does A Google Tech Talk

Mish Shedlock, whose Global Economic Analysis blog I read regularly, has cut such a big figure on the economics blogging scene that he was invited to give a Google Tech Talk:

Mish is a former computer programmer who is mostly self-taught on economics with a lot of informal tutoring by others. He's managed to attract a bigger readership than almost all trained economists. He's been heavily influenced by the Austrian economists.

I find it interesting that people such as Mish outside of the academic and financial mainstream of economics did a better job of calling the coming of our financial disaster than the mainstream. Group think by smart people is a big problem. Blogs are useful in part because they provide forums for dissenting view from assorted prevailing group thinks that are ridiculous in their obvious errors. It helps to look at non-official and basically dissenting sources of information on a variety of topics. The trick is to find high quality dissenting views.

By Randall Parker 2009 June 08 06:16 PM  Economics Elites
Entry Permalink | Comments(4)
2009 June 07 Sunday
Decline Of Manufacturing Sector Collides With American Demographics

America's long term unemployed ranks are swelling.

But even if the pay for newly created jobs could compare with the $28 an hour that laid-off GM workers make, it's not clear that those thrown out of work have the skills or training needed to fill them. The number of "discouraged workers"—those who have given up looking for work because they don't believe a job is available for them—has nearly doubled in the past year. The number of long-term unemployed (jobless at least 27 weeks) increased by 268,000 in May, to 3.9 million. That number has tripled since the beginning of the recession, indicating that there may be a mismatch between open positions and workers' skill sets, geographical location, or desired rate of pay.

GM is laying off while Wal-Mart is planning a big expansion. All those minimum wage jobs. Yum, yum. Eat 'em up kids. I expect the middle will shrink while the lower class grows and the upper class grows to a lesser extent.

The manufacturing sector's decline has a disproportionate impact on less educated workers, who already face an unemployment rate significantly higher than that of college graduates.

"The concern is for workers that have only a high school degree or less," says NELP's Stettner. "We're losing lots of good jobs for people with that level of education. Unless the manufacturing sector recovers—or we somehow upgrade the level of jobs in the service sector—the job market will become even more unequal."

America has millions more high school drop-outs in its future. I do not see the logic of importing a new underclass. But that's what our elite wants to do.

By Randall Parker 2009 June 07 11:41 PM  Economics Labor
Entry Permalink | Comments(11)
Mozilo Of Countrywide Saw The Mortgage Disaster In 2006

An on-going question I keep asking as I watch powerful people make bad decisions in politics and business is this: Do they understand the consequences of what they are doing? In the case of former Countrywide Finance CEO Angelo Mozilo some commentators I came across months ago claimed Mozilo was a populist believer in what he was doing. In this theory Mozilo thought he was extending credit to deserving borrowers who just weren't able to get credit from staid racist mortgage companies and banks. But emails released as part of criminal charges against Mozilo show in 2006 Mozilo knew Countrywide was issuing terrible toxic loans.

In March 2006, Mozilo wrote that the lender’s program of granting subprime loans for 100% of the value of a borrower’s home was "the most dangerous product in existence and there can be nothing more toxic and therefore requires that no deviation from [underwriting] guidelines be permitted irrespective of the circumstances."

He was using the term privately before the term toxic entered the mainstream lexicon for talking about loan quality.

Here in April 2006 Mozilo warns then Countrywide President David Sambol about the low quality of Countrywide's subprime loans.

Furthermore, in an April 7, 2006 email to Sambol concerning Countrywide’s subprime 80/20 loans, Mozilo fumed: “In all my years in the business I have never seen a more toxic prduct. [sic] It’s not only subordinated to the first, but the first is subprime. In addition, the FICOs are below 600, below 500 and some below 400[.] With real estate values coming down …the product will become increasingly worse. There has [sic] to be major changes in this program, including substantial increases in the minimum FICO…. Whether you consider the business milk or not, I am prepared to go without milk irrespective of the consequences to our production.”

So why didn't Mozilo just order a stop to the issuance of such loans?

Mark Gimein asks why did Mozilo catalog the problems with Countrywide's lending while still sitting by as they happened.

Irresponsible loans to folks lying about their income, toxic zero-down deals, pay-option loans with exploding payments: All the misdeeds that brought the mortgage industry down are cataloged in Mozilo's own e-mails. You would think that with all this coming straight from the top, Countrywide would have been racing to change its practices. But the stunning thing is that this is in no way the case. What's most striking about the Mozilo e-mails is not that he continued to present a rosy picture of Countrywide's prospects to investors. That's dishonest but easy to understand. It's that all those complaints didn't actually change how Countrywide did business.

Gimein advances a few theories. Did Mozilo just want to sell (which he did) a couple hundred million dollars worth of Countrywide stock without spooking the market with a bit cut-back in lending? Were the memoes a form of cover-your-ass where he went on record stating his opposition as if somehow he didn't have the power to stop them? The board of directors made him do it? Whatever his motives, he can't honestly claim ignorance as Countrywide's lending practices contributed to the huge and disastrously damaging housing bubble.

By Randall Parker 2009 June 07 08:38 AM  Economics Lending
Entry Permalink | Comments(1)
2009 June 03 Wednesday
Gang Members Feel Safer But Die More Often

Gang members, like most humans, make decisions that demonstrate innumeracy.

EAST LANSING, Mich. — Children who join gangs feel safer despite a greater risk of being assaulted or killed, according to federally funded research led by a Michigan State University criminologist.

The findings by MSU’s Chris Melde, which appear in the online edition of the journal Criminology, may help explain why youth continue to join street gangs despite the well-established danger.

“It’s a paradox,” said Melde, assistant professor of criminal justice. “Gang members essentially are not allowed to show fear and this can have a profound impact on adolescents. Their quest for acceptance, along with their immersion into this culture steeped in violence, may ultimately numb their reaction to violence, including their fear of victimization.”

I'm reminded of a recent post where Razib brought up the term "alief" as distinct from "belief" and a discussion of aliefs. Is this feeling of safety a demonstration of an alief?

By Randall Parker 2009 June 03 10:58 PM  Human Nature
Entry Permalink | Comments(13)
2009 June 01 Monday
Bad Girls Get Pregnant As Teens

Try hard to guide naughty juvie girls away from a life of crime and they'll get pregnant less often.

CORVALLIS, Ore. – A program aimed at reducing criminal behavior in juvenile justice teens has yielded a surprising side benefit. The program is also reducing the teens' rate of pregnancy, according to a new study out this week.

David Kerr, an assistant professor in the Department of Psychology at Oregon State University, and Leslie Leve and Patricia Chamberlain of the Eugene-based Oregon Social Learning Center, conducted the research, which will be published in the April edition of the Journal of Consulting and Clinical Psychology. Their work was funded in part by grants from the National Institute on Drug Abuse and the National Institute of Mental Health at the National Institutes of Health (NIH).

The study was conducted with 166 teen girls ages 13-17 with histories of criminal behavior who had been court-mandated to receive out-of-home treatment. The girls were randomly assigned to either receive the Multidimensional Treatment Foster Care (MTFC) program, which involved one-on-one care in the homes of highly trained foster parents, or the services they would have received had they not participated in the study, which was usually treatment in a group care facility.

Crime chicks get knocked up a lot. Even a quarter of crime chicks put in with high quality foster parents still got themselves pregnant.

The results were dramatic, according to lead author Kerr of OSU. About 26 percent of the girls assigned to receive the specialized Treatment Foster Care program became pregnant, compared to almost 47 percent of teens in group care.

So look, what's going on here? Crime genes are getting propagated. Dysgenesis. We are DEVO. D-E-V-O. Think of it as evolution in action.

These are bad girls.

"These girls are extremely compromised," Kerr said. "They are not doing well. They have had a hard time in different areas, including criminal behavior, drugs and risky sexual activity. Many of them had already been pregnant before the time of the intervention."

Girls in the foster care system get themselves knocked up - thereby ensuring the cycle repeats. We should intervene to break this cycle.

Kerr said while teen pregnancy rates have fallen in recent years, the United States still has one of the highest rates compared to other industrialized nations. And that rate is even higher among females in the foster care system. One survey of child welfare systems in three states found that nearly half of girls in the foster system reported a pregnancy by age 19.

What's the answer? Norplant. Really. Norplant. Girl in foster care? Norplant. Make pegnancy a biological impossibility.

Once the girls turns 18 offer her money to keep getting Norplant at least for a few years. Break the cycle of crime, poverty, drug abuse, child abuse, welfare, and dependency. We should regain a sense of pride and a sense of desire to reverse our decay and stop problems that are stoppable.

By Randall Parker 2009 June 01 11:17 PM  Human Nature
Entry Permalink | Comments(10)
Advertise here. Contact randall dot parker at ymail dot com
Web parapundit.com
Site Traffic Info