2009 July 30 Thursday
The Upper Class Funds The US Government

Inequality and high marginal tax rates mean that a small fraction of the population pays an outsized share of taxes.

Washington, DC - The top 1 percent of tax filers earned about 22.8 percent of the nation's income in 2007 (the latest IRS data available), and paid 40.4 percent of all federal income taxes - more than the bottom 95 percent of tax filers combined, according to a Tax Foundation analysis of just-released IRS data.

Do you know why this is great news for the government? Granted, getting such a large fraction of revenue from top earners makes tax revenues more volatile. But why is income inequality great for the leviathan? Think about it. I'll explain below.

You might think that the top 1% pays to fund government programs for a large chunk of the rest of the population. But there's more going on here than that.

Both income and income tax shares for the top 1 percent of tax returns (AGI over $410,096) hit all-time highs in 2007. In Fiscal Fact No. 183, "Summary of Latest Federal Individual Income Tax Data," Tax Foundation Senior Economist Gerald Prante notes that the record-setting trend for income and income tax shares is likely to end with 2007, given the economic downturn in 2008.

"This pattern at the top of the income spectrum is the same during almost every recession and recovery," according to Prante. "Unlike middle-income wage-earners whose incomes and tax liabilities are fairly steady, high-income people have incomes and tax liabilities that fluctuate wildly with the economy. The sharp rise in federal government tax revenue from 2003 to 2007 is likely to be followed by a substantial dip in 2008, 2009 and perhaps 2010 as the economy struggles through the worst recession since the early 1980s."

Unstable revenue, sure. But since the top earners earn such a large fraction of total income inequality makes it easier for government to raise revenue. Imagine income was more evenly distributed. In that case government would need to anger more people with higher tax rates in order to collect just as much revenue. Yes, inequality is a ravenous democratically elected government's friend because inequality allows high tax rates on a small fraction of the population to bring in such a large chunk of revenue. No need to anger most voters in order to collect a lot of tax revenue.

141,000 tax returns (probably some of those are couples) bring in a fifth of all revenue but only 12% of all adjusted gross income.

Fiscal Fact No. 183, available online at http://www.taxfoundation.org/publications/show/250.html, also takes a look for the first time at the top 0.1 percent of tax returns (the top 10 percent of the top 1 percent), which amounts to only 141,000 tax returns, but accounts for nearly 12 percent of AGI earned and around 20 percent of the nation's federal individual income taxes.

I expect inequality to increase because demographic trends mean a larger fraction of the population will not have high school diplomas. Texas style demographics mean greater wage inequality. Great for the leviathan.

By Randall Parker 2009 July 30 09:32 PM  Economics Inequality
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2009 July 28 Tuesday
Martin Feldstein Down On Obama Health Care Plan

Harvard econ prof Martin Feldstein argues that the Obama health plan is a bad idea.

For the 85 percent of Americans who already have health insurance, the Obama health plan is bad news. It means higher taxes, less health care and no protection if they lose their current insurance because of unemployment or early retirement.

I think Obama's biggest problem is his attempt to tie reductions in Medicare outlays to funding of medical insurance for the poor. The oldsters vote more reliably and and with clearer idea of their self interest than do the (less intelligent and less tuned in) poor.

Feldstein thinks there are less costly ways to extend health insurance to the poor.

President Obama's primary goal is to extend formal health insurance to those low-income individuals who are currently uninsured despite the nearly $300-billion-a-year Medicaid program. Doing so the Obama way would cost more than $1 trillion over the next 10 years. There surely must be better and less costly ways to improve the health and health care of that low-income group.

Feldstein makes some good points in the full article.

I have a great proposal for how to cut the number of medically uninsured: Non-citizens make up 43% of the uninsured. Some have citizen children who are similarly uninsured. Deport them before they create more citizens who are a net cost to the rest of us.

We pay for the uninsured in at least two ways. The most obvious way is thru taxes. Obama wants to increase that. But we also pay in another way: medical institutions charge the insured substantially more in order to subsidize care for the uninsured. We are therefore already paying a lot for the uninsured before Obamacare.

What I most do not want from Obamacare: lowered quality of care for the insured or the retirees. I fear Obama's attempt to create a government insurance company will undermine private insurance and reduce one's ability to avoid government meddling in health care. So I hope resistance to Obama's plan continues to build.

By Randall Parker 2009 July 28 12:02 AM  Economics Health
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2009 July 26 Sunday
FeministX Knows James Crowley Is Not Racist

It is a small world. FeministX, who if memory serves is south or east Asian lesbian (or bi? I forget), says James Crowley is not a racist.

Then I read an article about the issue. Holy Fucking Shit! I know James Crowley! He's helped me out before. And no joke- you probably won't be able to believe this- but he insisted on going the extra mile to help me fend off offensive behavior by man who happened to be a belligerent racist. How ironic that he is being accused of racism now. He's not a racist. That I know. I'm not white, and I can say for sure that he automatically regards any white person who expresses an aggressive racist sentiment as a potential problem. 

I originally got this reading a comment on Roissy's site. Roissy thinks Henry Louis Gates Junior is that weirdo loner kid from seventh grade. Gates really seems desperate to get everyone treat him with enormous amounts of respect and deference. As near as I can tell (and I could be wrong - unlike Gates of course) he expects cops (being lower class than Harvard profs) to kneel down and bow to his superiority.

Being a Harvard prof gives you mind-reading capabilities? Or are mind-reading capabilities a job requirement for a Harvard prof?

Crowley asks Gates to prove he lives there.

Looking out his front door, Gates sees someone who should be asking, "Is everything all right, sir?" He sees someone who would not doubt that a 58-year-old, gray-haired Harvard professor lived in this home — if he were white.

Gates sees a racist.

If someone doesn't defer to Gates is that person automatically a racist?

My take: white people and Asian people should defer to police because police are busy people doing important and dangerous work who need our deference of the police are going to succeed in keeping us mostly safe. It would be helpful if black people saw this need the same way. Though with people like Henry Louis "Skip" Gates preaching a different view to them (with President Obama backing him up and pissing off most Americans in the process) I'm thinking the job of police just got harder and our safety will decline as a result.

Crowley said he cut Gates more slack than he'd cut most people.

"He was arrested after following me outside the house," Crowley said on the radio, "continuing the tirade even after being warned multiple times, probably a few more times than the average person would have gotten."

Read the police report. You will get the whole deal if you just read the police report.

By Randall Parker 2009 July 26 05:12 PM  Politics Ethnicity
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China To Accelerate Overseas Acquisitions

The Financial Times reports that the Chinese government will encourage Chinese companies to do more overseas acquisitions.

Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.

“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.

The Chinese government has intentionally run a large trade surplus and built up a $2 trillion reserve in foreign holdings - much of it in US sovereign debt. So they have the cash needed to do the buying.

But other governments block some Chinese acquisitions for national security and commercial competitiveness reasons.

The U.S. effectively blocked a takeover of 3Com by Bain Capital and Huawei Technologies. Some of 3Com's assets were deemed "strategic," meaning China should never get its hands on technology that might be counter to American interests.

The most significant example of a fight between a sovereign government and China's M&A power was the death of a deal between Chinese mining company Chinalco and Rio Tinto (RTP). Chinalco planned to put almost $20 billion into the metals company.

As the biggest importer of almost all commodities (with the exception of oil where the US buys more) China has a vested interest in getting control of foreign mines and oil fields.

China has long been scouring the globe for energy and commodities to feed its thrumming economy. What is new is the leadership’s determination to increase outbound foreign direct investment, or O.F.D.I., as it weans the economy off low-value, export-oriented manufacturing. The deal by Sinopec, the largest Chinese oil refiner, to buy the Swiss oil explorer Addax for $7.24 billion last month was China’s largest overseas acquisition yet.

Letting the Chinese get control of more mineral resources is a bad idea. China already restricts export of a variety of minerals including rare ones not available elsewhere.

The complaint, filed with the World Trade Organization by the European Union as well as the U.S., accused China of restricting exports of various materials including zinc and coke, a key component for making steel, by establishing export quotas, duties and other restraints.

European industries have been complaining about these restrictions for years.

The European Commission said on June 23 that it has heard concerns for a number of years from European industries about Chinese export restrictions, namely quotas, export duties and minimum export prices, which China applies on key raw materials, such as yellow phosphorous, bauxite, coke, fluorspar, magnesium, manganese, silicon metal, silicon carbide and zinc – many of which cannot be sourced elsewhere.

Yet China is buying pieces and controlling interests in companies which operate mines that extract rare earth metals outside of China.

Copper is not the only metal China seeks to control and Teck is not the only acquisition China has made in the resource sector. In what could be a further indication of China’s tightening grip on the supply side, the China Non-Ferrous Metals Mining (Group) Co., Ltd. (CNMC) recently acquired controlling interest in the Australian rare earth project developer Lynas Corporation Ltd. (Lynas). The full transaction, comprising a combination of equity, debt and loan guarantees, is valued at US$366 million and provides a glimpse of what rare metal companies are really worth.

What is at stake? See this recent post from The Oil Drum on oil and minerals scarcity. Starting around slide 12 the presentation shifts toward mineral reserves and where minerals get produced. Does slide 18 really represent the future for minerals availability? Will other major reserves for rare earth minerals be found outside of China? Also see this post by André Diederen about minerals scarcity. China's export restrictions aside, if the situation with minerals reserves is really that dire we are in trouble.

By Randall Parker 2009 July 26 03:21 PM  China
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California Pretends To Balance Budget

Here in the land of make-believe we pretend to balance the state government.

One “trick” is to bump payroll expenses by one day, from June 30 to July 1, to make them a fiscal year 2011 expense, when revenues might be flowing better. “This is a paper savings of $1.2 billion which in my mind is clearly a gimmick… How are you going to make up for that unless you do it every year?” asks Jessica Levinson, director of political reform for the Center for Governmental Studies.

Another move is to withhold more taxes sooner from state paychecks – even if the money must be paid back, it generates a temporary increase in cash flow.

The legislature couldn't even be bothered to fully pretend to close the gap. Did they lack imagination? Couldn't they come up with some other fantasy phantom revenue sources?

Because the Assembly failed, however, to approve measures to borrow gas-tax revenues from local governments and on oil drilling, the Legislature handed Gov. Arnold Schwarzenegger a budget that falls short by $1.1 billion of being balanced.

Scwharzenegger said he would make line-item cuts in the next few days to make up for the gap, but lauded lawmakers for taking on the painstaking job.

Basically the Governor let the legislature pretend it has raised enough money.

The plan erases about $23 billion of the $26.3 billion gap that Gov. Arnold Schwarzenegger's finance experts projected through June 2010.

They really need Schwarzenegger's proposed $2 billion buffer because the odds of further economic contraction and further decline in state tax revenue seem pretty high to me. But the Democrats are hoping for the best. Hope is not a prudent foundation of good government.

Pedro Nava led the effort to prevent more oil drilling off Santa Barbara that could have brought in more revenue. I personally wouldn't mind the drilling since I rate the accident risks at this point as pretty low.

The plan to allow off-shore drilling at Tranquillon Ridge, expected to bring $100 million to the budget solution, passed in the state Senate 21-18 early Friday morning.

But it was voted down, 43-28, in the Assembly after a series of highly charged speeches by Democratic lawmakers who recalled the environmental devastation of the 1969 Santa Barbara oil slick.

Since these Democratic lawmakers do not want to totally swear off use of oil in their own lives they just expect to make people in other parts of the country and world deal with environmental threats from oil extraction. Make other people pay for it. That's the foundation of the Democratic Party.

By Randall Parker 2009 July 26 01:42 PM  Politics Money
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2009 July 25 Saturday
Immigration Raid Enabled Blacks To Unionize Smithfield Plant

Expect upper class Democrats to dig in their heels against immigration law enforcement when they realize that illegal alien deportation leads to more unionized and better paid jobs for blacks. How can upper class liberal Democrats get cheap labor if the native born don't have to compete against union-breakers?

But ironically the most decisive factor in the union’s victory may have been immigration enforcement raids at Tar Heel in 2007. The raids’ immediate result, the arrest of several dozen workers, was followed by the departure of hundreds of others who feared arrest on charges of violating immigration laws.

Their exodus led to an abrupt switch in the plant’s demographics. By the time of the vote on UFCW representation, the majority of workers were once again native-born black Americans, as they had been in the years immediately after the plant opened in 1992. The News & Observer noted that the “raids may have finally sealed the union’s victory…. The 2007 raids purged the plant of illegal Hispanic workers, and left behind a majority of native workers more likely to support unionization.”2

This report examines the developments at Tar Heel and concludes that the legacy of ICE’s enforcement of immigration laws includes not only the union victory, but also a decision by Smithfield to more closely examine documents workers use to verify their legal status.

Moreover, the raids, coming after years of lax enforcement of immigration laws, also opened up more jobs at the plant for authorized workers. At a time when the national recession has compounded years of job losses in North Carolina’s textile and furniture industries, the opportunity to work at Smithfield has provided a welcome boost to authorized workers, both native-born and immigrant.

Do not expect Barack Obama, putative defender of poor blacks, to celebrate immigration enforcement actions that remove competitors for blacks from the labor market. Oh no.

We do not have enough jobs for poor low skilled workers. Immigration to bring in yet more workers to compete against our lower class is a really bad idea. Yet our elites celebrate it.

By Randall Parker 2009 July 25 09:45 AM  Immigration Labor Market
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2009 July 23 Thursday
Chinese Take Over The Onion

The writers at The Onion show that they understand the new era emerging of Chinese global domination in the 21st century. It all started with an article entitled Well, I've Sold The Paper To The Chinese. Good move that. After all, the Chinese have the trained censors needed to create a more socially constructive publication. The effects are immediately apparent with stories like: EARTH—The entire world population confirmed Friday that Houston Rockets center Yao Ming is the greatest athlete in the history of sports and a glowing symbol of what citizens may become if they remain loyal to their government.

The magazine is helping people move down an intellectual pathway we are all going to have to trod sooner or later. Grab that finger of blame and point it in more appropriate directions. Start with this one:Toddler Chokes To Death On Plastic Taiwanese-Made Toy.

I also like the embrace of traditional values and pragmatic practicality (or is that practical pragmatism) in stories like Police Still Searching For Missing Productive, Obedient Woman. What to do if she doesn't turn up? Find another one of course. But the problem is women like her are far too uncommon in America. Instead bad parents raise kids like this brat: American Children Like Me Are Lazy And Insolent And Must Try Harder. Hear his pleas. He wants to be socially regimented into a good sweat shop worker.

Here's a story that decadent Western environmentalists need to read: Clear American Sky A Constant Reminder Of Industrial Inferiority.

I like The New Onion. Or should we call it The Red Onion?

By Randall Parker 2009 July 23 09:27 PM  Off Beat And Odd
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Obama Medical Plan Adds To Unsustainable Medical Costs

Barack Obama and his Congressional allies in the Democratic Party want to enact a big new entitlements program for medical benefits for the non-retired. Cost is a huge problem since the US deficit is already quite large and existing entitlements programs (which are mostly medical) are already on course to soar in costs. Douglas Elmendorf, director of the Congressional Budget Office, outlines just how much Medicaid and Medicare will grow as a percentage of GDP.

Measured relative to GDP, almost all of the projected growth in federal spending other than interest payments on the debt stems from the three largest entitlement programs—Medicare, Medicaid, and Social Security. For decades, spending on Medicare and Medicaid has been growing faster than the economy. CBO projects that if current laws do not change, federal spending on Medicare and Medicaid combined will grow from roughly 5 percent of GDP today to almost 10 percent by 2035. By 2080, the government would be spending almost as much, as a share of the economy, on just its two major health care programs as it has spent on all of its programs and services in recent years.

In CBO’s estimates, the increase in spending for Medicare and Medicaid will account for 80 percent of spending increases for the three entitlement programs between now and 2035 and 90 percent of spending growth between now and 2080. Thus, reducing overall government spending relative to what would occur under current fiscal policy would require fundamental changes in the trajectory of federal health spending. Slowing the growth rate of outlays for Medicare and Medicaid is the central long-term challenge for fiscal policy.

I think those figures are optimistic because I believe the conventional wisdom about future economic growth rates in the US economy are unrealistic. We have demographic and geological (oil and other resources) problems that will hold down economic growth in the next couple of decades and beyond. So these entitlements programs will need to take larger slices of the US economy in order to fund growing portions of the population of retirees and of lower performing and lower earning workers.

Higher taxes will lower earning power. You will need to increase your before-tax income much faster than the rate of inflation in order to increase your after-tax income.

Medicare is a big obstacle for Obama's ambitions because Obama wants to fund medical spending for poor people in part by cutting spending growth in Medicare. The old folks (and those near retirement) are starting to push back against that idea. The existence of Medicare basically puts old folks in an opposing faction against the poor younger medically uninsured.

Everything else is going to get squeezed by medical spending and old age benefits.

Under current law, spending on Social Security is also projected to rise over time as a share of GDP, but much less sharply. CBO projects that Social Security spending will increase from less than 5 percent of GDP today to about 6 percent in 2035 and then roughly stabilize at that level. Meanwhile, as depicted below, government spending on all activities other than Medicare, Medicaid, Social Security, and interest on federal debt—a broad category that includes national defense and a wide variety of domestic programs—is projected to decline or stay roughly stable as a share of GDP in future decades.

I think we should make a much more concerted effort to automate the provision of medical care and to reduce the need to see doctors. Software expert systems and lab tests done from samples collected at pharmacies should be elements of lower cost future of medical care. Rather than spend huge amounts of money on delivering medical care with current cost structures we should spend smaller amounts on automating the jobs of highly expensive medical care providers.

Leave aside for the moment whether you favor or oppose government spending on medical care. If the government is going to create a new and extremely expensive entitlements program it should be careful in the design of such a program and should know what will work and what will fail or be more expensive. The history of government medical programs has been far greater costs and problems than originally projected. Mitt Romney, who as governor of Massachusetts has experience extending health insurance to poor people, argues that the Obama administration is proceeding without proper analysis or understanding of how their medical plan will work in practice and that design of such a hugely expensive undertaking requires a lot more time and effort.

The legislation has almost nothing to do with cost reduction. Nothing I have seen in the bills that are being discussed by the Democratic leadership suggests that there will be a significant change in health inflation. This is an extraordinarily important topic and one for which there is a great deal of information around the world. Normally, if this were private enterprise, you would spend a great deal of time with brilliant analysts, looking at alternatives, evaluating lessons from foreign places, and perhaps even experimenting with some alternatives before unleashing them on the entire U.S. economy. Health-care reform is a matter that should be focused on allowing our citizens to have better health at more reasonable cost, as opposed to being thought of as a political success or failure. We really can't afford a lot of trillion-dollar mistakes.

The Massachusetts plan to raise the rate of medical insurance has not put a lid on costs.

Three years after mandating that residents get health insurance and requiring employers, insurers and taxpayers to chip in, Massachusetts has yet to control soaring costs that are eating up half its budget.

...

Dealing with cost and quality has proved trickier. Higher health care costs fueled a combined $9 billion gap in the state's 2009 and 2010 budgets that had to be closed last month, leaving less for education, public safety, the environment and other services.

Want less spending on education or the environment or public safety? Want fewer police and fewer prisons? Support expanded medical care spending. Better start lowering your living standard now. Get ready for the New Austerity.

Bush made a couple trillion dollar mistake in Iraq. Clinton, Bush, and Congress made an even bigger mistake with financial regulation. Now Obama and his allies are trying to make a far larger health care spending mistake. I'm opposed.

By Randall Parker 2009 July 23 06:43 AM  Economics Health
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Democrats Represent Most Wealthy Districts

As representatives of the upper class some Congressional Democrats feel obliged to vote against tax increases.

Friday, two freshmen representatives -- Dina Titus, from suburban Las Vegas, and Colorado's Jared Polis, representing Boulder, Vail and some of the tonier suburbs of Denver -- joined Republicans to vote against Mr. Obama's top-priority health-care overhaul when it faced a vote in their House Education and Labor Committee. One reason was a one-percentage point-surtax on couples earning between $350,000 and $500,000 -- gradually increasing to 5.4 percentage points on earnings more than $1 million -- to pay for it.

The rich have thoroughly thrown in their lots with the poor. Not only does the upper class support the importation of a large and growing Hispanic lower class but the rich have even decided to vote for the Democrats.

Of the 25 richest districts, 14 are represented by Democrats, according to Congressional Quarterly. In 1995, Democrats represented just five of those districts.

Between the growing lower class minorities, the upper class and the SWPLs the Democrats dominate demographically. The upper class seem like the least stable part of this coalition. Will the wealthy people in the Democratic Party submit meekly to marginal tax rates over 50%? If so, why?

By Randall Parker 2009 July 23 06:00 AM  Politics Redistribution
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2009 July 19 Sunday
Obama Health Care Financing Problem Looking Bigger

The Obama administration claims their universal medical insurance proposal won't bankrupt the country because assorted cuts will come later.

President Obama's budget director on Sunday described a House bill on health care reform as "deficit neutral" even though it includes Medicare payments to doctors that would put the bill $240 billion in the hole over a decade.

Office of Management and Budget Director Peter Orszag insisted that Obama won't sign any health care reform that isn't paid for, but also said the legislation doesn't take into account savings that will be achieved in other bills to come.

But the pattern of medical spending programs from the US government is that they end up costing far more than originally projected. You've got to start out with a break-even original proposal because going forward reality will only be worse. The recent Massachusetts expansion of health care coverage provides yet another example of a program that costs more than originally projected.

It will not save money. In fact, according to CBO director Douglas Elmendorf, it will "significantly expand the federal responsibility for health-care costs," exacerbating rather curing the dire, health-care driven budget problems we already face. As Ron Bailey pointed out earlier today, this is the result when you use official government cost estimates. And as the Massachusetts experiment with universal coverage taught us, the true cost of any universal-coverage oriented health-care overhaul is likely to be far higher than projected.

It will likely shift people away from their current health-insurance plans. Depending on the final details surrounding the proposed public plan, some people will almost certainly end up moved
away from their current plans. At a bare minimum, Obama's promise that individuals will be able to keep their current health-insurance is misleading.

It will raise taxes.

Governors of both political parties oppose Obamacare because it will foist still more unfunded medical spending mandates on them.

The role of the states in a restructured health care system dominated the summer meeting of the National Governors Association here this weekend — with bipartisan animosity voiced against the plan during a closed-door luncheon on Saturday and in a private meeting on Sunday with the health and human services secretary, Kathleen Sebelius.

Read that full article. The states have huge deficits and they can't afford a huge expansion in Medicaid that the bills in Congress would force upon them.

Why the numbers will be even worse than projected: The US economy is going to grow slowly for the next 10 years if it even grows at all. The US government assumes rising tax revenues based on excessively optimistic economic growth projections. But the recent financial crisis, demographic trends, and Peak Oil will lower long term growth if long term growth even happens at all.

By Randall Parker 2009 July 19 10:20 PM  Economics Health
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John Derbyshire Champions Pessimism

If the Derb's analysis of America's future is correct (collapse in 2022) then he's going to show how being a pessimist is a winning strategy. Yes, pessimism could well turn out to be the road to success. Society's decay is no reason to be pessimistic about one's own prospects if one can bet correctly on a pessimistic future. What am I talking about? The Derb's book coming out in September: We Are Doomed: Reclaiming Conservative Pessimism. Better order in advance in case the collapse comes early and book production stops in early October.

Without some political outlet for the conservative temperament, though, I doubt that American civilisation, or the US, can survive beyond (to take the date I actually use in my text) 2022. So I haven't been very seriously misrepresented.

DIA: Why 2022? What's going to cause this rather rapid downfall?

Mr Derbyshire: In my book I mention Andrei Amalrik's 1969 essay (later a book) "Will the Soviet Union Survive Until 1984?" He was looking forward 15 years. This inspired me to write a column in 2007: "Will the United States Survive Until 2022?" also looking forward 15 years. That's all. I mention this in my book and follow up with some remarks.

Read the "Will the United States Survive Until 2022?" essay for an outline of the arguments he developed into a book. His points about declining solidarity and declining social capital sound correct to me. At the same time, some shocks are headed our way. The list of countries past peak oil production keeps getting longer. When the amount of oil produced starts declining every year the effects will make our current recession look like a boom time in comparison. The resulting economic decline is not by itself sufficient to cause the US to plunge into a civil war if the American people feel closely bound and trustful of each other. But there's the rub. Mutual trust and the sense of shared identity are going down.

We are suffering a declining ability to even discuss our problems frankly. I keep hoping that will change. So far it has only changed in parts of the blogosphere.

Since the book doesn't come out for a few months I haven't read it. I did add it to my Amazon wishlist about complex systems and resources. So if you want me to read it there it is to order.

Update: Suppose the United States really will break up some day. Racial divisions seem necessary to make that happen. Can racial strife really ramp up that much in 13 years that the US could break up in 2022? If so, how? Seems to me a stronger program of racial preferences would be key to making that happen. We might get that. All it would take is a couple of Republican retirements from the US Supreme Court while Obama is in office. Then another Democrat elected in 2016. By 2022 the legal environment could pretty much make equal protection a dead doctrine.

But that legal environment does not strike me as sufficient to cause a civil war. Whites will be a minority of youths and youths do most of the violence. Plus, whites would need a strongly believed intellectual justification. So far most are cowed into very weak opposition to racial preferences. They are afraid of getting called racist if they demand fair evaluation of individual performance rather than equal outcomes for groups (which of course is what the Left demands and claims anything short of that is racist). The liberal mythology still reins unchallenged unlike its right wing religious equivalent. If and when whites become less bashful about asserting their interests (rather like other ethnic groups) even then I expect responses to take forms other than civil war and break-up of the United States.

So what's a realistic scenario for civil war? I don't see one myself. I expect decay.

Update II: Okay, still exploring the whole collapse of the United States idea. Another way American society could fall apart is if some other ethnic group decides to go for an ethnic nation. Well, which group would that be? Hispanics? Blacks? Brazil hasn't split up. Why would the US? Granted, we may become a low trust society. But plenty of low trust societies haven't broken up into smaller countries. Might a Mexican secession movement develop in the southwest?

Then there's just plain collapse. Okay, can a financial collapse ala the Great Depression happen? That seems the most plausible. The US dollar could cease to be the global reserve currency and that transition could cause financial convulsions as foreigners try to convert dollars into goods and inflation skyrockets and the US government hits acute funding problems. Will that happen? That strikes me as the most plausible collapse scenario. It would be helped along a great deal by a long term downward trend in oil production. Could a financial crisis bring anarchy to some US cities?

By Randall Parker 2009 July 19 11:59 AM  Civilizations Decay
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2009 July 18 Saturday
Living Together Cuts Odds Of Staying Married

Thinking about getting married? Here's another indicator on whether it will last.

University of Denver (DU) researchers find that couples who live together before they are engaged have a higher chance of getting divorced than those who wait until they are married to live together, or at least wait until they are engaged. In addition, couples who lived together before engagement and then married, reported a lower satisfaction in their marriages.

The research, which appears in the "Journal of Family Psychology," was conducted by Galena Rhoades, senior researcher, Scott Stanley, research professor, and Howard Markman, professor of psychology.

"We think that some couples who move in together without a clear commitment to marriage may wind up sliding into marriage partly because they are already cohabiting," Rhoades says.

"It seems wise to talk about commitment and what living together might mean for the future of the relationship before moving in together, especially because cohabiting likely makes it harder to break up compared to dating," Stanley says.

What's the direction of cause an effect here? Does living together change the relationship in a way that increases the odds of divorce? Or do people who have reservations about their relationship decide to live together first? Or do the people who avoid living together have a greater commitment to marriage as a special spiritual union that should not be torn asunder?

Maybe the pre-marriage time living together makes the relationship that much older and closer to dissolution by the time the married phase begins.

The second most popular reason for living together is convenience. Whose convenience? The guy's or the girl's?

The three researchers also studied the reasons why couples decide to live together. That study, which appeared in the "Journal of Family Issues," shows that most couples chose to live together in order to spend more time together. The second most popular reason is convenience, followed by testing the relationship. This is different than previous research that found most people cohabit to test the relationship.

"Cohabiting to test a relationship turns out to be associated with the most problems in relationships," Rhoades says. "Perhaps if a person is feeling a need to test the relationship, he or she already knows some important information about how a relationship may go over time."

In marriages that end in divorce which side of the relationship had to convince the other side to divorce? Guys, your main concern should be the sticking power of the woman to stay committed to the marriage. If you have doubts about her level of commitment then do not marry her. She'll shaft you in divorce. Avoid it.

By Randall Parker 2009 July 18 02:23 PM  Cultural Wars Marriage
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2009 July 16 Thursday
Obama Plans Feigned Toughness On Trade Partners

US presidents like to pretend toughness on other countries about trade and Obama is no exception.

WASHINGTON -- In a bid to revive support for free trade within the U.S., the Obama administration plans to press foreign nations to increase imports of U.S. agriculture and manufacturing -- but not to push so hard as to ignite a protectionist backlash.

"In order to save trade, we've got to deal more honestly with those who feel like [trade's] benefits haven't been manifested for them," U.S. Trade Representative Ron Kirk said in an interview Tuesday. "We've got to be serious about enforcement."

Okay, he misspoke. What he meant: "We've got to act serious about enforcement."

Bob Davis and Greg Hitt of the Wall Street Journal demonstrate a grasp of the history of US elite trade rhetoric:

To win over a public skeptical about trade, he is now following a course plotted by earlier Republican and Democratic administrations: appear to get tough with trade partners and show that trade deals can boost exports and jobs, then use that credibility to push for new trade deals.

We've had lots of new trade deals. Our trade deficit has gotten much larger. How about cutting down the size of the deficit before trying to get approval for new trade deals?

The excess indebtedness of US citizens has finally brought us to a point where the trade deficit has plummeted in spite of dumb US government policies.

The monthly trade gap, which peaked at $64.9 billion last July, plummeted nearly 10 percent in May to $26 billion, the Commerce Department reported Friday. After the monthly trade deficit increased relentlessly over 15 years, the recession has managed to cut it by 60 percent in less than a year.

Where there you go. All it took was the biggest downturn since the Great Depression. Now we just have to have a downturn bigger than the Great Depression and we could run a surplus.

If previous Republican and Democratic administrations had gotten substantially serious about getting tough with trade partners we would not now be in hock to the world. But of course we are (need some numbers on annual trade deficit, percentage of GDP, and total indebtedness here).

It would help if press coverage of the US trade deficit and growing indebtedness to the rest of the world grasped the essence of it. But no. This Bloomberg article demonstrates the widespread misinformation about the growing US indebtedness to the world.

July 16 (Bloomberg) -- China’s foreign-exchange reserves are surging again, helping the Obama administration sell unprecedented amounts of debt as it seeks to drag the world’s biggest economy out of a recession.

Stockpiles of currency rose by a record $178 billion in the second quarter to top $2 trillion for the first time, the People’s Bank of China said yesterday.

When the US sells debt abroad this pushes up the dollar against other currencies, decreasing foreign demand for US goods and services while boosting US demand for foreign goods and services. So both Americans and foreigners pay less to buy from America. This decreases demand for what US companies produce within the borders of the US.

Here's the core point: This low demand for products of the US economy leads the Obama Administration to borrow money from the Chinese to bolster demand that was undermined by the Chinese purchase of US debt. We are just digging the hole deeper. If we bought stuff from the Chinese and they used the dollars they received to buy stuff from us then we wouldn't need to borrow from them to bolster domestic demand.

By Randall Parker 2009 July 16 07:57 PM  Economics Trade
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2009 July 15 Wednesday
National Health Insurance Battle Continues In Congress

Employers must medically insure employees or else.

The Senate bill would require most Americans to obtain health insurance and require employers of more than 25 workers to provide coverage or face a $750-per-worker penalty. Insurers could no longer bar people with pre-existing conditions. But, no one with insurance would be required to change insurers.

At the risk of stating the obvious: Some companies will lay off employees in order to get below the 25 worker requirement for paying health care. Also, once people with existing conditions can get medical insurance those without existing conditions will pay more.

On the bright side: This will shift more of the cost of illegal aliens onto the shoulderes of the employers who hire them.

What's another $100 billion per year in a declining empire?

The Senate majority leader, Harry Reid of Nevada, has said he hopes to have a health care bill on the floor by July 27. That goal appears unrealistic, even though members of the Finance Committee said they were making progress in talks on how to pay for their bill, expected to cost at least $1 trillion over 10 years.

What I most worry about the health care debate: The changes will reduce the incentives for developing newer and better treatments. Which medical treatments do you most need: Those treatments that do not exist yet.

You (or your employer) will pay more in health insurance premiums to provide the US federal government with money to pay for health insurance of poor uninsured people.

Insurance companies should use their profits to help fund as much as $100 billion of a landmark overhaul of the U.S. health-care system, senators including Democrat Charles Schumer of New York said.

That $100 billion cost for national healthcare comes on top of the massive budget deficits already in place.

Millionaires will pay for wider health insurance too.

July 15 (Bloomberg) -- House Democrats plan to fund the broadest U.S. health-care expansion in four decades by increasing taxes on the wealthiest Americans, imposing a surtax of 5.4 percent on couples with more than $1 million in income.

Robin Hood is in charge in the US House of Representatives. Beware Sherwood Forest.

By Randall Parker 2009 July 15 11:09 PM  Economics Health
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2009 July 12 Sunday
Homeless Families Mostly Headed By Women

Single parenthood unsurprisingly boosts the odds of homelessness.

Women make up 81 percent of adults in homeless families, according to the report. And unlike homeless men, who are usually middle-aged, homeless women tend to be younger than 25 with children younger than 5. "The life of a homeless woman is particularly fraught with danger," said Suzanne Wenzel, a community psychologist and professor at the University of Southern California School of Social Work. "These young women are at much greater risk of being victimized when they have no stable home. It can be more difficult to obtain needed services. For anyone in this situation, it is destabilizing and extremely stressful. That's why these new figures are horrifying."

How have these women found themselves homeless with children? How'd it happen? Vicious evil male patriarchal capitalism? Nope. The women chose to put themselves at risk as single mothers. They also chose to put their children - their babies! - at risk. These are unthinking irresponsible women.

First off, women initiate 2/3rds or more of all divorces. States which have higher rates of awarding sole custody to moms also have higher divorce rates. In such states women who get divorced can be assured of getting rid of the father. Once the early feelings of love wear off getting rid of the father is attractive for many women - especially if they can be assured child care payments. But suppose dad says to hell with child care payments since he can get no satisfaction from having either a wife or kids? Well, especially in an economic downturn suddenly mom is either homeless or living on welfare.

Some might argue that it isn't the fault of women that their men turn out to be no good and that they decide that divorce is necessary. But that argument doesn't work because it doesn't explain the rise in illegitimate births where women let themselves become pregnant without even getting married in the first place.

You might be surprised to learn that in Iran women initiate most divorces as well.

In a look at the gender gap in voting patterns between men and women Roissy argues that women vote for the welfare state that allows them to ditch beta providers in favor of government aid and alpha male lovers.

There are a few predominant reasons for the gender gap, which I explained lucidly in this post. In short, women are voting more Democrat because the Democrat Party is the prime force for turning the government into the world’s biggest provider beta. From the time of the “sexual revolution” (which was really a “sexual devolution” back towards pre-agricultural mating norms when 80% of the women and 40% of the highest testosterone men reproduced) women have been more free to choose mating opportunities based on their gina tingles and the economic and social empowerment granted, respectively, by their pointless humanities degrees and the disintegration of traditional slut shaming mechanisms. The life of serial monogamy and alpha cock hopping has never been more attainable for the average American woman, and the result has been predictable: Women are substituting the beta males they no longer want or need for marriage with a Big Brother Daddy government to help them foot the child-raising bills that their PUA, drug running and serial killer lovers won’t.

Illegitimate Nation with a big welfare state could be our future.

By Randall Parker 2009 July 12 11:49 PM  Cultural Wars Marriage
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Adultery Dating Service

Really. If you are going to commit adultery do it efficiently using the latest internet technology. That way the affairs will take less time to set up and leave you with more family time. Isn't that a great idea?

"Drew" is a 37-year-old businessman who lives in the Troy area.

His wife is consumed with work. And they don't have sex.

"The truth is I love my wife, but sometimes I feel like I need something on the side," says Drew, who spoke to the Free Press on the condition of anonymity.

So Drew hooks up through the adultery dating service AshleyMadison.com. He said he has met, and had sex with, about 10 women, and he credits the illicit trysts with helping him stay married.

"It has enabled me to meet women in my similar situation and has helped fill the void of the lack of intimacy in my life," says Drew, whose wife has no clue. "Strange as it may sound, it's helped my marriage. The pressure is off ... It's probably a lot cheaper than divorce."

Save money by avoiding the divorce. Make sure kids have 2 parents. Okay, does this actually work?

Seriously, when men have affairs on the side while married and they do not get caught does this increase or decrease the odds of divorce? Is adultery a release valve or a destabilizer? This is hard to tease out because married men who commit adultery probably have stronger sex drives than married men who do not. Can social science data give us any insights into this question?

By Randall Parker 2009 July 12 11:17 PM  Cultural Wars Marriage
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United States Top Income Tax Rates Increasingly Over 50%

Remember when the United States had very high marginal tax rates? Then starting with Carter and Reagan the top rates were lowered to the point where taxes weren't severely confiscatory. Well, those confiscatory days are coming back. If Obama succeeds in sticking it to higher earners in order to fund medical spending for poor people then in lots more states the top income tax rate will go above 50%.

Washington, DC, July 10, 2009 - As Congress considers a surtax on the nation's top earners to fund an expansion in federal health care, a new Tax Foundation analysis shows that 33 states would see top tax rates exceed 50%.

One new funding proposal being floated by the House Ways and Means Committee is a 4% surtax levied on couples with adjusted gross incomes (AGI) over $250,000 and individuals earning more than $200,000.

"Combining top federal and state rates, and factoring in all deductions, the government would be taking over half of every additional dollar from high-income taxpayers in two-thirds of the states under this latest funding scheme," Tax Foundation President Scott Hodge said. "In fact, even in the seven states with no income tax, the lowest top tax rate would be about 46%."

Tax Foundation Fiscal Fact No. 176, "Top Effective Marginal Rates Under a 4 Percent Health Care Surtax by State," may be found online at http://www.taxfoundation.org/publications/show/24848.html.

The hardest-hit states would be Hawaii (55.8%), Oregon (55.8%), New Jersey (55.6%), California (55.4%), Rhode Island (54.8%), Vermont (54.4%), New York (54.00%), Maine (53.6%), Minnesota (53.0%), and Idaho (52.9%). Washington, DC, and New York City would see their top effective marginal rates rise to 53.6% and 57.3%, respectively. The effective marginal tax rate takes into consideration deductions and adjustments in order to present a truer measure of an individual's rate.

To me there's something morally outrageous for the government to take half of what you earned. Whatever did the government do to deserve taking more than half? This 4% surtax will kick in above $200k for single filers.

9 states still have no income tax. So the top federal rate of 45.9% will be the top total rate for them.

Only 17 states would see their top tax rates remain under 50%, with 45.9% being the lowest in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

High earners who do not want to pay over half of their marginal dollar in taxes should think about moving to places where you will still be able to keep half of what you earn. Also, write to your elected representatives and strongly suggest that the Leviathan should be cut down rather than expanded.

Obama aims to increase redistribution.

Washington, DC, June 25, 2009 - New analysis of President Obama's Budget finds that he is targeting the nation's highest earners for greater income redistributions. By 2012, the federal government is scheduled to be redistributing an extra $79 billion from the top-earning 5 percent of American families, and $71 billion of that will be paid by the top-earning 1 percent of families.

"That's an additional $64,000 per family redistributed from the top-earning 1 percent," said the Tax Foundation's president Scott Hodge, "on top of the already substantial $368,000 that would have been redistributed from each family even without President Obama's new policies."

"Part of that change is higher taxes, and part is lower spending on items that benefit high-income people," said the study's lead author, Tax Foundation Senior Economist Gerald Prante.

The new study is No. 168 in the Tax Foundation Special Report series, titled, "How Much Does President Obama's Budget Redistribute Income?" by Prante and his co-author, Chief Economist Patrick Fleenor, and is available online at www.taxfoundation.org/publications/show/24783.html.

Consider the longer run context of a 4% income surtax added just for medical spending for non-retired. The US federal government is running a huge deficit that looks set to continue for years to come. That deficit creates pressure for additional tax increases to balance the budget. But if medical spending is already going to raise the top marginal tax rate above 50% in most states what will happen to that rate once taxes are increased to balance the budget? The marginal return on tax increases will go negative. As a consequence, beware of value-added tax as a way to get even more revenue once income taxes run out of steam.

By Randall Parker 2009 July 12 12:41 AM  Economics Health
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2009 July 11 Saturday
Has Silicon Valley Peaked?

In a Forbes article about the best cities for tech jobs by Joel Kotkin in Forbes an interesting pair of numbers jumped out: Silicon Valley peaked in its number of tech jobs in 1997.

Equally critical, it seems clear that simply being a high-tech magnet does not make a region a prodigious job creator. The San Jose metropolitan area, better known as the heart of Silicon Valley, boasted over 960,000 jobs in 1997. Last year, even after the ballyhooed Version 2.0 of the dot-com boom, that number had actually declined--to barely 900,000. According to figures from economic-strategy firm Praxis Strategy Group, other traditionally tech-heavy areas, including San Francisco and Boston, also did poorly in terms of growth through the balance of this decade.

The article provides a list of cities which have experienced high percentage growth in tech jobs since 2000. Most of the high percentage growth cities have low absolute numbers of tech jobs. But a few (e.g. Seattle, Orlando Florida) stand out as having a lot in total terms, though still far smaller than Silicon Valley.

My impression is that the internet is reducing the value for a firm to co-location near other firms in the related lines of business. Also, companies increasingly use labor in lower cost areas (e.g. India) to do many projects or parts of projects. So a company can be headquartered in Silicon Valley while having a larger percentage of its work force elsewhere.

Granted, there are still advantages to a place like Silicon Valley, most notably in the form of a labor pool that has lots of specialists when the need arises. But while the advantages of the place are substantial they aren't as big as they used to be. At the same time, California's problems are weighing on the Valley.

By Randall Parker 2009 July 11 11:56 PM  Economics Labor
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2009 July 08 Wednesday
British Bribe French To Deport Illegal Aliens Trying To Reach UK

How practical.

The government today agreed a new deal to handle the growing crisis of migrants gathered at Calais, allocating £15m to tighten British border controls, while France promised to begin voluntary and forced repatriations.

The £15m is money well spent. The Brits are saving themselves much larger long term costs and a decay of their national identity.

There are currently around 1,600 mainly Afghan and Eritrean migrants sleeping rough in makeshift tents on the Nord-Pas-de-Calais coast, desperate to reach Kent by stowing away under cars and lorries.

The US border with Mexico is still too poorly defended to force illegal crossers into living in tent cities. The Brits are fortunate to have the English Channel.

Pay for deportation.

Alan Johnson, the Home Secretary, said: ``The investment will be made on the understanding that the French will, in return, effect significant returns of illegal migrants from northern French regions.

The pay for deportation competes against pay for illegal entrance.

People smugglers, who charge up to £1,000-a-head for an illegal passage use all kinds of methods to bypass checks, including instructing migrants to place plastic bags over their heads to beat carbon dioxide tests.

Ministers said last night that the new British technology would make it impossible for them to evade detection.

Meanwhile, in a deepening recession with high and rising unemployment America's elites are plotting how to do another immigration amnesty.

Sen. Chuck Schumer of New York, Chairman of the Senate Judiciary Subcommittee on Immigration, is point man for President Obama on immigration, riding herd on the Big Push for "comprehensive immigration reform." According to members of Congress committed to this unpopular policy, the campaign will be launched sometime in the fall.

By Randall Parker 2009 July 08 09:40 PM  Immigration Law Enforcement
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Chinese Attacks On Uighurs Started Latest Round Of Violence?

Being an ethnic minority can have big downsides. Therefore I do not want to become an ethnic minority. Sounds like the Chinese attacked the Uighurs first.

The trouble started when rumors began to spread that Turkic-speaking, mainly Muslim Uighur migrant workers at the toy plant had raped Chinese women. Allegations also were posted online, and they traveled through the Han community.

Police would eventually say the charges were untrue. But as word spread of further alleged sexual assaults, enraged Han workers attacked their Uighur co-workers.

The Chinese government has been importing Han Chinese to dilute the numbers of ethnic Uighurs in Xinjiang because the provice has lots of oil and because the Han do not want to see China shrink due to secession of Xinjiang. This use of immigrants to control a subject population should serve as a lesson for American net taxpayers.

The trigger for the inter-ethnic violence actually originated in Guangdong province.

Sunday's riots started when around 3,000 ethnic Uighurs, including many high-school and college students, gathered to protest ethnically motivated killings in a factory in China's southern Guangdong province. The riots turned violent but, thanks to China's information firewall, no one knows exactly why. State-run media report that Uighurs had attacked Han Chinese and count at least 156 people killed and more than 1,000 injured.

The Asian Wall Street Journal editorial I'm excerpting here is full of all sorts of wrong and foolish sentiment.

Like Beijing's brutal response to the Tibet riots, a crackdown will only strengthen the Uighurs' pro-independence movement.

The puny Uighur population is less than 1% of the Han Chinese population. The Han are going to swamp the Uighur and the Han will be totally ruthless in effectively suppressing dissent. The desire to be free isn't a strong feeling that is on the march around the world, lots of mythology not withstanding.

It makes sense for the Uighurs to oppose Han Chinese rule. The Han are more successful, powerful, and have higher status. The relative status of the Uighurs declines when Han Chinese move in. The Han government officials prefer their fellow Han co-ethnics. Uighur cultural and religious beliefs are opposed by the Han. The Uighurs can see the writing on the wall.

Peter Ford of the Christian Science Monitor reports that the Uighurs live in fear of the the Chinese secret police.

Getting any Uighurs in Urumqi to talk on Monday was impossible. Their Internet access had been cut off, most of their phones, too, and those whom foreign journalists reached were too terrified of the government to say anything.

Xinjiang, an allegedly autonomous region, is the hardest place I have ever worked. The atmosphere of repression is Stalinist. For a week last year I tried to gauge ordinary people’s feelings there about the authorities. Not one person I spoke to would give his real name, and most whom I approached wanted nothing to do with me.

Glad I'm not there. But here in America lots of people post with pseudonyms on blogs. Some of those pseudonymous writers have justified fears. Though most people who use pseudonyms say things that do not require secret identities. Every time you see a pseudonym in a comment ask if that comment contains something that necessitates hiding one's identity to say it. Rarely does it seem necessary.

By Randall Parker 2009 July 08 12:00 AM  China
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2009 July 07 Tuesday
California Credit Rating 2 Steps Above Junk Bond Status

2 more notches down and I'll be living in a junk bond state.

Fitch lowered its rating of California’s general obligation bonds by two steps to BBB from A-, placing the debt two ranks above so-called high-yield, high-risk junk ratings, and said the state may be cut further.

Have the people who brought us this folly learned any true facts about the foolishness of their ways? I'm thinking NO.

The state is running a deficit of $3 billion for a population of about 37 million and growing. If that growing population was highly skilled and smart we could produce our way out of debt. But the population is dumbing down if anything.

While Gov. Arnold Schwarzenegger and lawmakers battle over closing a $26.3 billion budget gap, the state's controller last week was forced to issue IOUs for the first time in 17 years. Some county agencies, state vendors and taxpayers are getting paid in paper. The IOUs help the state controller stave off a deficit of nearly $3 billion for July.

The state also had a BBB rating back during the 2003 fiscal crisis which resulted in Arnold Schwarzenegger replacing Gray Davis as governor. But this crisis is worse because the economy is worse and likely to stay worse for years.

The state's cash crisis has become pretty severe. The state has now begun issuing promissory notes rather than pay all its bills.

The state last week started issuing "IOU" promissory notes for some bills to conserve cash for priority payments, including payments to investors holding the state's debt.

With bad economic news on unemployment and a big drop in the employment to population ratio I do not think California can grow its way out of this one. It has to cut, cut, cut.

By Randall Parker 2009 July 07 12:01 AM  Economics Government Costs
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2009 July 04 Saturday
Colin Powell Unhappy With Obama Spendfest

Former US Secretary of State Colin Powell thinks Barack Obama is trying to spend more money than we have to spend. Colin Powell helped elect Obama as a prominent black and nominally Republican supporter.

"I'm concerned at the number of programs that are being presented, the bills associated with these programs and the additional government that will be needed to execute them," Mr. Powell said in an excerpt of an interview with CNN's John King, released by the network Friday morning.

Mr. Powell, a retired U.S. army general who rose to political prominence after a long and accomplished military career, said that health care reform and many of Mr. Obama's other initiatives are "important" to Americans.

But, he said, "one of the cautions that has to be given to the president -- and I've talked to some of his people about this -- is that you can't have so many things on the table that you can't absorb it all."

Powell states the obvious here:

"And we can't pay for it all," said Mr. Powell,

Powell is amazed at the size of the deficit.

And I never would have believed that we would have budgets that are running into the multi-trillions of dollars, and we are amassing a huge, huge national debt that, if we don’t pay for in our lifetime, our kids and grandkids and great grandchildren will have to pay for it.

Obama assumes the private sector can produce the wealth he needs to pursue is health, education, and other social programs. But the US economy

Think about the federal debt as an amount per person.

The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion - equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.

That $37k per resident is a much higher number per net taxpayer. Those who pay more in taxes than they take in benefits are a minority of the working population let alone of the total population. Us net taxpayers carry a much heavier and growing burden. Peak Oil is approaching and combined with our demographic problems (an aging population and a dumbing population) the federal government's longer term ability to finance the debt is highly questionable.

By Randall Parker 2009 July 04 08:32 PM  Politics Money
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Americans Competing For Farm Jobs

A story from Colorado reports on how people with graduate degrees are applying to work at farm jobs. Another hit to the "jobs Americans won't do" myth:

Farmers can use what's called the H-2A program to recruit foreign workers to do temporary or seasonal work here in the U.S.

From July to September of 2008, there were 171 H2-A jobs posted. Thirty-nine Americans applied for those positions.

The very next quarter, in the final three months of 2008, 887 Americans applied for the 981 H-2A available. And as unemployment jumped at the beginning of 2009, so did applications from Americans; 1,799 applied for 726 jobs. That means instead of the jobs being filled by foreign or migrant workers, they are mostly going to U.S. residents.

We are going to see a lot more of this. The least educated Americans already have an unemployment rate that is at Great Depression levels.

The blue-collar sector has been hit especially hard. Some 31 million native-born and immigrant workers with a high-school degree or less are now jobless. Unemployment in this category is now a record 14.7 percent for immigrants and 19.5 percent for natives.

Why are so many Americans willing to go back to the farm? Why do they want to take jobs away from illegal aliens? Recent job losses are higher than forecast. Unemployment exceeds the worst case used in the Fed's bank stress test. If this keeps up (and it probably will) then mortgage defaults and other loan defaults will be worse and big banks will teeter once again. The employment-population ratio and weekly hours are tanking.

By Randall Parker 2009 July 04 08:13 PM  Immigration Labor Market
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Tax Revenues Tanking

US government income tax revenue is declining due to rising unemployment, higher rates of part-time work, declining salaries, and cuts in bonuses.

According to Trim Tabs, income-tax withholdings in the past four weeks are down 6.1% from a year ago; in the last two weeks, they're down an even bigger 8.1% from last year. That marks a sharp deterioration from May, when income-tax withholdings were off "only" 4.8% from a year ago.

You hear a lot of talk about "green shoots". I think "drought", "root fungus", and "blight" a hit closer to reality. There's an angle here for locusts as well.

US states are hard hit too.

Tax collections fell sharply during the 2009 fiscal year just ended on all fronts. Revenues from sales taxes were down 3.2 percent from 2008, from personal income taxes 6.6 percent, and from corporate tax payments 15.2 percent, according to estimates by the National Governors Association. That reflects the nature of the current recession, which has caused consumers to retrench, capital gains for investors to evaporate, and business profits to shrink.

April state tax revenues are done 26% overall.

Albany, N.Y. — States that collect personal income taxes continued to suffer sharply declining revenues as the April 15 deadline for filing tax returns delivered troubling news, according to a Rockefeller Institute of Government report issued today.

The report — “April Is the Cruelest Month” — examined January to April tax collections for 37 of the 41 states that impose broad-based personal income taxes. It showed an overall decline of 26 percent, or $28.8 billion, when compared to the same period a year earlier. April income-tax collections were even worse than those in the preceding quarter, with a drop-off of $18.2 billion when compared to April 2008. April is the month during which states collect the most income tax revenue, because of the filing deadline.

Personal income tax receipts are down 54.9% in Arizona. That's an incredibly large number. What's the real unemployment rate in Arizona?

Overall, 34 of the 37 states covered in the report experienced personal income tax fall-offs, ranging from a high of 54.9 percent in Arizona to a low of only a 0.3 percent drop-off in West Virginia. Three of the 37 states studied — Alabama, North Dakota, and Utah — saw an increase. Data were not available yet for Kentucky, Missouri, Mississippi, and New Mexico.

Preliminary data for May showed further decline. Thirty of 34 states for which data were available reported continuing declines in personal income tax collections. That overall decline was about 25 percent in May.

The states are hit with financial problems greater than any they've seen in the last 30 years.

The National Association of State Budget Officers says 42 states wrestled with budget deficits this spring, the most since the organization began tracking budgets 30 years ago.

"This downturn, even more so than previous downturns, really is affecting every state right now," Sigritz said.

Japan is getting hit by a huge revenue decline as well. Since Japan's economy is doing much worse than the US economy I actually would expect even worse news from them on tax revenue.

The Ministry of Finance said tax revenue stood at 44.3 trillion yen ($458 billion) for the last financial year, below the 46.4 trillion yen forecast in the budget and a 13 percent fall from the previous year, the biggest annual decline ever.

These problems will all pale as compared to what happens when Peak Oil hits.

Economist David Rosenberg says this is not the typical type of recession and a slow recovery should be expected.

Most pundits who crow about green shoots and about an inventory restocking in the third quarter giving way towards some sustainable economic expansion live in the old paradigm. They don’t realize, for whatever reason, that the deflationary aftershocks that follow a post-bubble credit collapse typically last for 5 to 10 years. Businesses understand better than the typical Wall Street or Bay Street economist and strategist that everything from order books, to output, to staffing have to now be restructured to adequately reflect a permanently lower level of leverage in the economy.

Indeed, by our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies see this, which is why they are not just downsizing their payroll, but have also cut the workweek to a record low of 33.1 hours. Fewer people are working and those that are still working have seen their hours dramatically cut this cycle.

Companies are finding other ways to save on the aggregate labour cost bill as well, which may be a factor reinforcing the uptrend in the personal savings rate (see more below). For example, a rapidly growing number of employers are now suspending contributions to worker 401(k) plans. According to a joint survey by CFO Research Services and Charles Schwab, nearly 25% of U.S. companies have either suspended their plans or are planning to do so (this is up from 2% at the turn of the year). Again, how we end up squeezing inflation out of the system when the labour market is clearly deflating wages and benefits for the 70% of the economy called the consumer is going to be interesting to watch.

The party's over for years to come. Welcome to The New Frugality.

By Randall Parker 2009 July 04 12:45 AM  Economics Business Cycle
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Honduran President's Removal Seen As Lawful

Octavio Sánchez (whose name sounds pretty Spanish), a former presidential advisor in Honduras, argues that the removal of Honduran President Manuel Zelaya from office was lawful and in accordance with the Honduran constitution.

Under our Constitution, what happened in Honduras this past Sunday? Soldiers arrested and sent out of the country a Honduran citizen who, the day before, through his own actions had stripped himself of the presidency.

These are the facts: On June 26, President Zelaya issued a decree ordering all government employees to take part in the "Public Opinion Poll to convene a National Constitutional Assembly." In doing so, Zelaya triggered a constitutional provision that automatically removed him from office.

Constitutional assemblies are convened to write new constitutions. When Zelaya published that decree to initiate an "opinion poll" about the possibility of convening a national assembly, he contravened the unchangeable articles of the Constitution that deal with the prohibition of reelecting a president and of extending his term. His actions showed intent.

Our Constitution takes such intent seriously. According to Article 239: "No citizen who has already served as head of the Executive Branch can be President or Vice-President. Whoever violates this law or proposes its reform [emphasis added], as well as those that support such violation directly or indirectly, will immediately cease in their functions and will be unable to hold any public office for a period of 10 years."

Article 239 does seem pretty clear, doesn't it?

Other parts of the Honduran government opposed Zelaya's attempt to make himself President for life.

Honduran President Manuel Zelaya vowed on June 25 to ignore a Supreme Court ruling ordering him to reinstate the head of the armed forces Joint Chiefs of Staff, Gen. Romeo Vasquez. Zelaya had fired the general for refusing to support a non-binding referendum the president had called to change the Constitution and allow his reelection.

The Supreme Court, Congress and the country's attorney general have said that Zelaya's referendum is illegal. Hours after Zelaya's vow not to heed the Supreme Court's decision, Venezuelan President Hugo Chávez complained that ''there is a coup d'etat under way in Honduras,'' led by the ``retrograde bourgeoisie.''

I'm all for the retrograde bourgeoisie.

But Barack Obama supports the Leftist.

"We believe that the coup was not legal and that President Zelaya remains the President of Honduras - the democratically elected president there," said President Obama.

Obama is joined in this by Fidel Castro and the communist revolutionary Daniel Ortega of Nicaragua. But Zelaya really did try to violate the process of constitutional change in Honduras in order to give himself more power.

While Honduran law allows for a constitutional rewrite, the power to open that door does not lie with the president. A constituent assembly can only be called through a national referendum approved by its Congress.

But Mr. Zelaya declared the vote on his own and had Mr. Chávez ship him the necessary ballots from Venezuela. The Supreme Court ruled his referendum unconstitutional, and it instructed the military not to carry out the logistics of the vote as it normally would do.

The top military commander, Gen. Romeo Vásquez Velásquez, told the president that he would have to comply. Mr. Zelaya promptly fired him. The Supreme Court ordered him reinstated. Mr. Zelaya refused.

Can the Hondurans stand against the combined pressures of the Leftist governments of Cuba, the United States, Venezuela, and Bolivia?

By Randall Parker 2009 July 04 12:30 AM  Ethnic Conflict
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