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2009 August 31 Monday
The Myth Of A Moderate Malaysia

Read Sadanand Dhume's article The Myth Of A Moderate Malaysia.

Over the past 30 years, encouraged by the government and influenced by the Middle East, Malaysia's growing prosperity has gone hand-in-hand with a heightened piety. But instead of making the country more humane, this has had the opposite effect. Friday's protest was part of a larger pattern. A 32-year-old Malaysian Muslim model, Kartika Sari Dewi Shukarno, faces a sharia-prescribed caning, suspended at the moment on account of Ramadan, for the crime of drinking a beer. Muslims have been barred from a Black Eyed Peas concert next month sponsored by Guinness. Two years ago, a Muslim-born woman, Lina Joy, failed in her famous eight-year quest to convert to Christianity to marry the man that she loved. (Interfaith marriages are forbidden.) In another high-profile case, Revathi Masoosai, a practicing Hindu, was forcibly separated from her husband and infant daughter and sent to a religious re-education camp after it was discovered that technically she had been born a Muslim.

Modest proposal: The Philippines ought to let Lina Joy and her boyfriend immigrate.

Islam isn't compatible with other religions.

By Randall Parker 2009 August 31 09:07 PM  Civilizations Clash Of
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2009 August 30 Sunday
Higher Taxes In California

As if they weren't high enough already.

Under the latest changes, for a married couple filing jointly, the top tax rate of 9.55% now begins at $92,698, down from $94,110. Combined with the earlier increases, such a couple with two children, earning $100,000, will see their California income tax bill rise by 22.3%, or $716, according to the state Franchise Tax Board. Their tax would go from $3,208 to $3,924, factoring in a $110 drop in the standard deduction for joint returns.

For singles, the top tax threshold has dropped from $47,055 to $46,349. This year, a single filer without children who earned $30,000 in 2008 and 2009 would pay 13.8% more: $617 instead of $542. The standard deduction for sole filers will fall by $55.

The state's ongoing financial crisis needs to be seen in perspective. Some states have no income tax at all (e.g. New Hampshire, Florida, Texas, South Dakota, Wyoming). Some states have no sales tax. California has high levels of both. There are restrictions on the property tax due to Proposition 13. But given our higher housing prices the governments still get a lot of money from property taxes. In spite of all this we still have a state government funding crisis.

I think I'm going to have to leave California eventually. Given our demographic trends this story is going to get much worse. Any suggestions on where a software developer (Linux drivers, C/C++ both embedded and Win32, Javascript/CSS/HTML, even some .NET experience) ought to live? Alternatively, got experience in places where you think one shouldn't want to live?

By Randall Parker 2009 August 30 10:12 PM  Economics California
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US To Become World's Largest Banana Republic?

Richard Russell puts the growing US national debt in a perspective that rarely gets mention: as the debt increases a larger fraction of all tax revenue will go toward debt service. The big expansion of US government spending happening now will be matched by a contraction in government programs as more money goes toward bond interest payments.

When the primary trend of the stock market is "blocked," I look for the law of unintended consequences to become operative. We already know that one of the consequences of the Bernanke-Geithner-Obama battle to halt the bear market is a build-up in debt in the US beyond anything ever seen in human history before. Over the next ten years the US will be adding $9 trillion to its national debt. If this occurs, the US will end up being the "world's largest banana republic." The dollar will have lost its reserve status. And the word "bankruptcy" will have a new dimension.

The US national debt is now over $11 trillion dollars. The interest on our national debt is now $340 billion. This is about at 3.04% rate of interest. In ten years the Obama administration admits that they will add $9 trillion to the national debt. That would take it to $20 trillion. Let's say that by some miracle the interest on the national debt in 10 years will still be 3.09%. That would mean that the interest on the national debt would be $618 billion a year or over one billion a day. No nation can hold up in the face of those kinds of expenses. Either the dollar would collapse or interest rates would go through the roof.

The interest rate could of course go much higher. A surge in interest rates could cause an acute crisis as programs must be cut back and taxes raised to pay the higher interest costs. Foreigners will eventually become reluctant to buy huge amounts of US sovereign debt. At that point interest rates will go up up up.

I do not write posts about this topic with the hopes of persuading a substantial fraction of the US population to oppose this madness. My own platform here is too small to make much of a difference. Rather, I write to warn my readers of what is coming. Plan your own financial affairs and make peace with the fact that a country you might feel pride and emotional attachment for is headed for a long lasting financial crisis. Too many developing problems will reach critical mass for this to be avoided.

It seems prudent to me to invest some money abroad. Americans need to reduce their risks from holding assets in the US and reduce the extent of our personal reliance on the health of the US economy.

Paul Krugman tries to argue that we aren't in all that much trouble since the US had an even higher level of debt at the end of World War II. But as James Hamilton rightly points out, the WWII spending surge was of short duration whereas all the unfunded liabilities for old folks medical care and other programs are of long duration.

And whereas in 1945 Americans could reasonably look ahead to a huge decrease in military expenditures, in 2009 when I look ahead what I see is a looming increase in federal medical expenditures.

I also believe it is relevant to compare these deficits not just with GDP but also with current federal tax revenues. $1 trillion is approximately the total personal income tax receipts of the federal government in 2006. My preferred metric for what each additional trillion dollars would require from me personally is to take what I paid in federal income taxes in 2006 and double that amount. To pay off $9 trillion, I'd have to do that for 9 years.

Unfortunately, $9 trillion may not be the whole iceberg. Diane Lim Rogers highlights the Concord Coalition estimate that current policy would imply a cumulative $14.4 trillion deficit over the next ten years.

At the end of the 10 years even bigger unfunded liabilities await. That's the real problem. We aren't just on a spending bender for the next 10 years. Beyond that lies even bigger demands for government hand-outs. Plus, the government's interest rate payments on accumulated debt will compete with the expanding entitlements programs.

As the tax burden rises so will the opposition of the non-recipients of this largesse. The next 20 years is going to be a continual battle over tax increases and debt. On top of all this the economists are ignoring Peak Oil and America's decaying demographics. Therefore they grossly underestimate the size of the problem.

My advice: work harder now to save money because in the future the marginal tax rates will be a lot higher. Salt money away now. Save and work longer hours. Look for ways to start up small side ventures to bring in extra bucks.

By Randall Parker 2009 August 30 01:08 PM  Economics Government Costs
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2009 August 29 Saturday
No Eating By Police In Molenbeek Brussels During Ramadan

Thomas Lander reports on another example of appeasement of Muslims by a European government.

It is hot in Brussels. Ramadan has begun. The faithful in the predominantly Muslim borough of Molenbeek are not allowed to eat or drink from sunrise until sunset. Non-Muslim policemen, patrolling the streets of Molenbeek in their sweltering cars, are not allowed to eat or drink either. As every year during Ramadan, they have been told by their superior, Philippe Moureaux, the Socialist mayor of Molenbeek, that they have to respect Muslim sensitivities and not to “provoke” Muslims by violating Islamic Ramadan restrictions in public. In effect, Islamic or Sharia law is already applied – for everyone – in the Muslim areas of Brussels.

Whatever happened to the idea that non-Muslims should not be bound by a religion they haven't decided to believe in? Click thru and read the full article about how European police forces do many other things to appease Muslims.

In some European cities with large Muslim populations it is now possible to go on "Safari" in cities.

Some friends in Brussels organize one-hour trips through Molenbeek. They go in an inconspicuous car, driven by a local who knows the escape routes, and with a bodyguard. Otherwise the risk would be too great. These trips are called “safaris.” Similar “Eurabia safaris” are organized in other European cities. One of the highlights – though absolutely not the most dangerous one – of the safari in Rosengaard, the Muslim section of the Swedish city of Malmö, is a short stop, to give the visitor the opportunity to take a quick snapshot, in front of Malmö’s “Jihadskörkortsteori” (Jihad Driving School).

How cool is that? No need for long expensive intercontinental air flights to reach the wilds. You can put your life in danger much closer to home.

By Randall Parker 2009 August 29 01:16 PM  Immigration Culture Clash
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The Inductivist Finds Low High School Teacher IQs

Ron Guhname (a pseudonym since he works in politically oppressive academia) The Inductivist finds that using answers on the General Social Survey the average high school teacher in America has an IQ of only 104. That is worse than I expected. I would have guessed between 110 and 115.

What is the typical teacher's IQ? Reader David made an interesting comment on the post about the breadwinner family that with homeschooling your child is taught by someone with a IQ higher than that of the typical teacher (not to mention having the right politics).

What is the level of intelligence of today's high school teacher? Looking at GSS data, I calculated mean IQs for the 1980s and 1990s combined (N = 107) and for this decade (N = 68) . For the early period, the average was 107. Now it's 104. I'm not impressed.

College education departments are less known for their academic standards than for their kooky theories. But I expected the need to pass courses outside of education majors would have put a floor on teacher IQs that would have produced a higher average than 104. But I haven't looked at the SAT and ACT data for applicants to state teachers colleges. Maybe 104 is plausible. Anyone got a source of data on this?

Ron's point about homeschooling is important. Smart moms can give their kids better educations than they'll receive at school.

These results provide another argument for more video lectures and downloadable textbooks for kids in grade school and high school. A private non-profit foundation looking for beneficial ways to spend its money could serve a useful service by hiring smart people to lecture to video cameras on grammar, history, and other topics aimed at grade school and high school students. Recorded high quality lectures would serve as useful tools for both home schooling moms and also for parents who want to provide a higher quality supplement for what Johnnie and Jill are learning at the local public school.

By Randall Parker 2009 August 29 12:55 PM  Education
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2009 August 24 Monday
Geman Authorities Appease Muslim Parents, Persecute Baptists

Writing at the Brussels Journal Thomas Landen describes how German authorities persecute ethnic German Baptists who do not want their children exposed to so many secular attitudes while the German authorities appease Muslim parents. Why? Landen says the authorities are afraid of the Muslims but not the Baptists.

In 1938, Germany outlawed homeschooling. The ban is one of the few bills introduced by Adolf Hitler that is still on the books in Germany today. In the late 1980s and early 1990s, hundreds of ethnic German families from Southern Russia and Kazakhstan emigrated to Germany. Many of them were Baptists who had been fiercely persecuted in the Soviet Union for their religious beliefs.

Following their arrival in the West, the Baptists soon became unhappy with what their children were learning in the secular German public schools. They decided to homeschool their children. This move led to fierce repression by the German authorities who took the parents to court on charges of “Hochverrat und Volksverhetzung” (high treason and incitement of the people against the authorities). Some parents were imprisoned, some were robbed of their parental authority, some had their children taken away from them. Some children who sided with their parents, such as 16-year old Melissa Busekros in 2007, were placed in a psychiatric ward because, as the psychiatric evaluation report stated, she “considers herself healthy and her behavior fully normal” and, hence, needed “urgent help in a closed setting” where she would get “special education treatment to ensure schooling.” Some families, having fled from the Soviet Union at one time, fled again, from the Federal Republic of Germany to Austria, Britain, or other countries with a more lenient approach to homeschooling. Some parents, however, complied with ‘Hitler’s law’ and reluctantly sent their children to school.

These Baptist parents are trying to teach values that the German people as a whole could benefit from.

Muslim boys and girls encounter treatment more aimed at appeasing their parents.

While Baptist children are being forced to attend carnival parties at school, a 1993 German court ruling stated that “as long as separate sports classes for boys and girls are not being offered” Muslim girls do not have to participate in the obligatory sports sessions at school. The parents of the girls had explicitly invoked Koranic prescriptions to object to their daughters participating in the co-ed sports classes. Strangely enough, the German school authorities did not appeal the 1993 court ruling and failed to bring the case to the Supreme Court. Instead, they accepted the ruling, which has since become a legal precedent accepted by all school authorities.

Likewise, last May a court in Münster ruled that, though Muslim schoolgirls are obliged to participate in school swimming lessons, they are allowed to wear so-called “burqini” swimsuits that cover their entire body and hide their figures. Wearing the burqini has never been a “tradition” of the majority in Germany – a country with a long tradition of Freikörperkultur or nude sports activities. On the contrary, it is a practice which results from “the religious convictions of a minority” which is less indigenous to Germany than Christian Baptists. Nevertheless, the German school authorities have accepted the Munster ruling. They have not taken the case to the Supreme Court in order to have Muslim children forced to swim in regular swimsuits. Muslim children do not have to comply with the “contradictory tradition of a differently inclined majority” in the same way as Baptist children, whose parents are fined if they do not attend the school carnival.

Click thru and read how Landen describes fear as the underlying cause of the different treatment. I think that government should not let in immigrants that they fear.

On The Internal Muslim Threat To European Peoples about Christopher Caldwell's new book Reflections on the Revolution In Europe: Immigration, Islam, and the West . Watch the Monty Python skit there and pay especial attention to the getting hit on the head lessons at 4:00.

By Randall Parker 2009 August 24 07:28 PM  Immigration Culture Clash
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2009 August 23 Sunday
Mormon Affordable Family Formation Problem?

Steve Sailer's Affordable Family Formation idea as a key element in determining the political leanings of a region comes to mind when I see in Businessweek that housing prices are strong in Salt Lake City. Will Mormons shift leftward or move to cheaper housing areas?

Local job growth is one of the most important factors to study when assessing a market's prospects. Omaha, for example, which has attracted employers such as Yahoo! (YHOO) and Google (GOOG), missed out on the boom but is likewise dodging the bust. With the city adding jobs, the prospects for home prices look good. Detroit, where home prices fell by a third from 2003 through 2008, is likely to suffer even more in coming years as the auto sector continues to shrink. Demographic change, another trend examined here, is equally influential. For instance, Salt Lake City's youthful population is primed for house buying. While the bust left prices in once-bubbly Western markets such as Phoenix and Vegas lower in 2008 than in 2003, Salt Lake prices rose 51% over that period.

Fortunately for Mormons plenty of neighboring states have cheap housing. But will they so develop some cities and drive up housing prices that Mormons in those cities will shift leftward politically?

By Randall Parker 2009 August 23 07:35 PM  Economics History
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Self Delusion By War Supporters Over Saddam And 9/11

Contrary to assertions by leftists that George W. Bush created the illusion that Saddam Hussein was behind 9/11 supporters of Bush's invasion of Iraq who decided Saddam was linked to the 9/11 attack did so of their own volition in order to avoid reaching the conclusion that the war was a huge mistake.

BUFFALO, N.Y. -- In a study published in the most recent issue of the journal Sociological Inquiry, sociologists from four major research institutions focus on one of the most curious aspects of the 2004 presidential election: the strength and resilience of the belief among many Americans that Saddam Hussein was linked to the terrorist attacks of 9/11.

Although this belief influenced the 2004 election, they claim it did not result from pro-Bush propaganda, but from an urgent need by many Americans to seek justification for a war already in progress.

The findings may illuminate reasons why some people form false beliefs about the pros and cons of health-care reform or regarding President Obama's citizenship, for example.

The study, "There Must Be a Reason: Osama, Saddam and Inferred Justification" calls such unsubstantiated beliefs "a serious challenge to democratic theory and practice" and considers how and why it was maintained by so many voters for so long in the absence of supporting evidence.

No need for propaganda. Just get people convinced to support something and once they've crossed an intellectual Rubicon they'll actively develop explanations that support their decision. This doesn't just apply to Republicans who continued to support the Iraq war. One can see this mechanism at work in many things. People on the Left continue to support increased spending as a way to improve educational outcomes because they are invested in the idea that education has to be the solution. If it isn' then they have to reexamine assumptions that they do not want to look at.

Motivated reasoning. Avoid it.

Co-author Steven Hoffman, Ph.D., visiting assistant professor of sociology at the University at Buffalo, says, "Our data shows substantial support for a cognitive theory known as 'motivated reasoning,' which suggests that rather than search rationally for information that either confirms or disconfirms a particular belief, people actually seek out information that confirms what they already believe.

"In fact," he says, "for the most part people completely ignore contrary information.

"The study demonstrates voters' ability to develop elaborate rationalizations based on faulty information," he explains.

Got any beliefs you are too attached to?

While numerous scholars have blamed a campaign of false information and innuendo from the Bush administration, this study argues that the primary cause of misperception in the 9/11-Saddam Hussein case was not the presence or absence of accurate data but a respondent's desire to believe in particular kinds of information.

"The argument here is that people get deeply attached to their beliefs," Hoffman says.

"We form emotional attachments that get wrapped up in our personal identity and sense of morality, irrespective of the facts of the matter. The problem is that this notion of 'motivated reasoning' has only been supported with experimental results in artificial settings. We decided it was time to see if it held up when you talk to actual voters in their homes, workplaces, restaurants, offices and other deliberative settings."

Hey, we couldn't have engaged in a pointless war, lost thousands of American lives, left tens of thousands more Americans physically and mentally damaged for life, and threw away trillions of dollars for nothing, could we?

This reminds me of Bryan Caplan's book The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Yet another reason why we get bad government.

By Randall Parker 2009 August 23 05:24 PM  Human Nature
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Mexico Oil Production Hits 7.8% Yearly Decline Rate

Another reason why the US needs bigger barriers on its southern border with Mexico:

Aug. 21 (Bloomberg) -- Petroleos Mexicanos, the state-owned oil company, said oil output in July fell 7.8 percent to 2.561 million barrels a day as production from its Cantarell field kept sinking.

Mexico is a few years away from becoming a net oil importer. Currently Mexico is one of the United States' biggest oil suppliers. Not for long.

The Mexican federal government is going to lose its biggest funding source as oil production declines.

Falling oil production poses a big threat to the Mexican government's finances, which rely on oil taxes to fund nearly 40 percent of the federal budget.

Petroleum geologist Jeffrey "westexas" Brown says since 2004 Mexico's production has declined on average 4.7% per year but net exports have declined 13.5% per year. This fits with Brown's Export Land Model where internal consumption growth of oil exporters causes their exports to decline much more rapidly than their production.

Canada has a lot of oil in its tar sands in Alberta and will continue to export oil for many years to come. US oil production will decline. International oil prices will go up as high as needed to continue demand destruction. The cost of substitutes will determine how much our living standards decline.

By Randall Parker 2009 August 23 04:58 PM  Economics Energy
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US Health Insurance Cost Trend Not Sustainable

Here's a trend that can't continue.

August 20, 2009, New York, NY— Nationally, family premiums for employer-sponsored health insurance increased 119 percent between 1999 and 2008, and could increase another 94 percent to an average $23,842 per family by 2020 if cost growth continues on its current course, according to a new Commonwealth Fund report.

The report, Paying the Price: How Health Insurance Premiums Are Eating Up Middle Class Incomes, State Health Insurance Premium Trends And The Potential Of National Reforms, finds that national reforms that slow health care cost increases by 1 to 1.5 percent per year would yield substantial savings for families and businesses across the country. By 2020, slowing the annual rate of growth by 1 percent would yield more than $2,500 in reduced premiums for family coverage, and slowing growth by 1.5 percent would yield more than $3,700 in premium savings compared to projected trends.

This is, parenthetically, an argument against letting in low skilled immigrants. Our basic standard of medical care is so incredibly expensive that any immigrant incapable of earning $100k per year is probably going to be a tax burden on the rest of us.

Obviously companies, families, and individuals are going to increasingly be unable to afford these rising costs. What will they do? The overwhelming majority will demand more medical spending by government. If Obamacare is defeated this year that does not mean the battle over a bigger government role is over.

The problem is that newer high tech treatments are incredibly expensive but patients expect them.

A recent study by Evergreen Re was completed in conjunction with Ingenix/Reden & Anders, Minneapolis. The study found that the frequency of members with paid claims greater than $1 million per 100,000 commercial members rose from 0.07 in the year 2000 to 1.1 in 2005, and will increase to 2.4 (low trend) and possibly 3.6 (high trend) by 2010.

...

The four largest sources of $1 million plus claims are premature babies/infants, organ transplants, cardiovascular disease, specialty drug therapies and cancer treatment.

For example, the number of organ transplants has doubled in the past 10 years. There are more than 100,000 Americans on the organ transplant list and approximately 25,000 solid organ transplants are performed every year. The average billed charges for a multiple organ transplant now approaches $775,000. In addition, bone marrow transplants, now used to treat some 70 different diseases, increasingly cost more than $500,000.

Who is going to tell people they can't have extremely expensive treatments?

What I'd like to know: What is the rate of treatment with organ transplants per million people per year in the US versus Canada, Britain, France, Germany? Similarly, how hard do other countries try to keep premature babies alive? I suspect a lot of the differences in health care costs between the US and other Western countries has to do with the costs-be-damned extremes we go to.

By Randall Parker 2009 August 23 10:46 AM  Economics Health
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2009 August 21 Friday
10 Year Deficit Projection Up To $9 Trillion

What's another couple trillion dollars to the 10 year US government deficit projection?

The new projections add approximately $2 trillion to budget deficits through 2019. Earlier this year, the administration had predicted that Obama's policies would require the government to spend $7.108 trillion more than it collects in tax revenue over the next decade.

Obama's health care plan might end up adding another $2.1 to $2.4 trillion to those costs. We definitely live in Warren Buffett's Squanderville, not Thriftville.

Of course that much of a deficit requires continued willingness of lenders to fund such a huge spend spree. We can not count on this state of affairs continuing.

Treasury markets have been worried all year about the mounting deficit. The United States relies on large foreign buyers such as China and Japan to cheaply finance its debt, and they may demand higher interest rates if they begin to doubt that the government can control its deficits.

I expect the numbers above are all optimistic. Why? America's demographics are deteriorating. The Baby Boomers will be replaced by intellectually lower performing younger generations. Plus, Peak Oil is going to knock the economy down repeatedly, denying the spenders the tax revenue growth they expect from a growing economy.

James Hamilton's paper Causes and Consequences of the Oil Shock of 2007-2008 explains what happens when oil price shocks hit the economy. We are going to experience a series of oil price shocks as oil production peaks and then declines.

Update: I am reminded of what Texas oil billionaire Richard Rainwater said in 2005: Rainwater expects Peak Oil will lead to higher taxes, a scaling back of government programs, and riots.

What concerns him most is the conflict that he thinks an oil shortage will precipitate. What happens when people get blindsided by prices rocketing past any level they have contemplated--especially when you factor in other challenges America faces? "We've got a lot of things going on simultaneously," he says. "The world as we know it is unwinding with respect to Social Security, pensions, Medicare. We're going to have dramatically increased taxes in the U.S. I believe we're going into a world where there's going to be more hostility. More people are going to be asking, 'Why did God do this to us?' Whatever God they worship. Alfred Sloan said it a long time ago at General Motors, that we're giving these things during good times. What happens in bad times? We're going to have to take them back, and then everybody will riot.' And he's right."

Riots? Depends on the slope of the downhill production slope. Given a sharp enough slope some countries will descend into chaos.

By Randall Parker 2009 August 21 10:27 PM  Economics Squanderville Thriftville
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2009 August 20 Thursday
California State Pension Costs Not Sustainable

The California Public Employees Retirement System does not have enough money to meet its future obligations.

The CalPERS chief actuary says pension costs are "unsustainable," and the giant public employee pension system plans to meet with stakeholders to discuss the issue.

"I don't want to sugarcoat anything," Ron Seeling, the CalPERS chief actuary said as he neared the end of his comments. "We are facing decades without significant turnarounds in assets, decades of -- what I, my personal words, nobody else's -- unsustainable pension costs of between 25 percent of pay for a miscellaneous plan and 40 to 50 percent of pay for a safety plan (police and firefighters) ... unsustainable pension costs. We've got to find some other solutions."

The unions for California state and local government employees have gotten themselves such rich deals that the state is headed for an even bigger financial crisis than it is already in. The next generation is going to be less skilled and less productive. They won't earn as much and they'll demand more from government (e.g. more subsidized health care). The result will be a fiscal disaster.

By Randall Parker 2009 August 20 11:16 PM  Economics Squanderville Thriftville
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23 Percent Of Mortgages Underwater In US

Hopes of a recovery in consumer spending seem unrealistic to me. People who owe more than their houses are worth aren't going to be eager to do big spending.

  • Home values: Home values fell 12.1 percent year-over-year in Q2 to a Zillow Home Value Index of $186,500, resulting in a total 22.3 percent drop in value since the market peaked in mid-2006. Although this marked the 10th consecutive quarter of decline in the Index, it was the first time during that period that the rate of year-over-year decline was smaller. The Zillow Home Value Index measures the value of all homes, not just those that sold in a particular period.
  • Foreclosure re-sales: More than one-fifth (22 percent) of all transactions in June were foreclosure re-sales (REO sales) compared to 10.5 percent one year ago. Merced, Cailf. had the highest rate in the country (77.4 percent), closely followed by Stockton, Modesto, Vallejo and Las Vegas.
  • Negative equity: 23 percent of all owners of single-family homes with mortgages were underwater at the end of Q2.
  • Home sales: Total number of home sales in June was down 23.7 percent compared to the same time period one year ago.

Another source puts the percentage of mortgages under water at an even higher 32.2%.

More than 15.2 million U.S. mortgages, or 32.2 percent of all mortgaged properties, were in negative equity position as of June 30, 2009 according to newly released data from First American CoreLogic. As of June 2009, there were an additional 2.5 million mortgaged properties that were approaching negative equity. Negative equity and near negative equity mortgages combined account for nearly 38 percent of all residential properties with a mortgage nationwide.

What I want to know: How many banks will fail because of these numbers?

The Mortgage Bankers Association says 9.24% of all loans are delinquent. Since the MBA expects foreclosures to peak at the end of 2010 (yes, we are over a year from the peak) and since it takes more months for those houses to go on the market we are looking at a big supply of housing on the market in 2011. Keep that in mind before buying.

The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.24 percent of all loans outstanding as of the end of the second quarter of 2009, up 12 basis points from the first quarter of 2009, and up 283 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

These numbers will grow worse as more people with negative equity decide to walk away from their mortgages.

In Florida 12% of mortgages are in the foreclosure process and over 10% more are delinquent. You can buy a house cheap in Florida. But just wait and you can get one even cheaper.

Check out advice Mish Shedlock gives to someone thinking about walking away from an underwater mortgage in Arizona.

The bright side is home prices are likely to keep falling for a couple more years at least, then do nothing much of anything for another 5-10 years. That means if you walk away and suffer the credit rating penalty now, it may not matter by the time you are ready to buy another house 3-5 years from now. Moreover, you would then have a clean slate on credit, and hopefully a saved up down payment as well.

However, if you try and wait this out, yet fail by going bankrupt in say two years, you will have made matters that much worse in terms of opportunity cost in improving your credit, and in saving up money for a down payment, while worrying every step of the way about the axe that will fall.

In a nutshell: a bad credit rating due to a foreclosure now won't matter for 5 years since you shouldn't buy a house for 5 years anyway.

By Randall Parker 2009 August 20 11:01 PM  Economics Housing
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2009 August 19 Wednesday
Most Americans Oppose Afghanistan War

Most Americans oppose the war of the neoconservative hawk who occupies the Oval Office. But the evil Republicans in control of the White House insist on defying the popular will. If only the Democrats were in charge.

A majority of Americans now see the war in Afghanistan as not worth fighting, and just a quarter say more U.S. troops should be sent to the country, according to a new Washington Post-ABC News poll.

But seriously: If we spend the Afghanistan war money on anti-terrorism security agencies, securing our borders, deporting illegal aliens (especially Muslim illegal aliens), and if we changed immigration policy to end Muslim immigration this would do far more to reduce our risks of terrorist attack. These policies would cost far less than that war and actually deliver a real benefit.

By Randall Parker 2009 August 19 11:05 PM  MidEast Afghanistan
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2009 August 18 Tuesday
Yale Press Chickens Out On Muslim Cartoons

How could a book entitled “The Cartoons That Shook The World” not show the actual cartoons?

So Yale University and Yale University Press consulted two dozen authorities, including diplomats and experts on Islam and counterterrorism, and the recommendation was unanimous: The book, “The Cartoons That Shook the World,” should not include the 12 Danish drawings that originally appeared in September 2005. What’s more, they suggested that the Yale press also refrain from publishing any other illustrations of the prophet that were to be included, specifically, a drawing for a children’s book; an Ottoman print; and a sketch by the 19th-century artist Gustave Doré of Muhammad being tormented in Hell, an episode from Dante’s “Inferno” that has been depicted by Botticelli, Blake, Rodin and Dalí.

Yale Press surrenders.

“We do not negotiate with terrorists. We just accede to their anticipated demands’. That is effectively the new policy position at Yale University Press,” Cary Nelson, the president of the American Association of University Professors, wrote in an open letter.

Got to avoid that repeated pattern of violence.

“There is a repeated pattern of violence when these cartoons have been republished,” University Vice President and Secretary Linda Lorimer said in an interview. Indeed, while the 2005 violence was the most severe outbreak, there have been subsequent incidents related to the republication of the images as recently as June of last year. In total, about 200 people have been killed in incidents related to the cartoons.

“The homework for us here this summer,” Lorimer said, “was to ask people in positions who could give expert counsel whether there is still an appreciable chance of violence from publishing the cartoons.”

I think the repeated pattern of violence serves an important pedagogical function: It reminds people that Islam is incompatible with Western values.

Update So glad I do not live in Pakistan.

Paramilitary troops patrolled the streets of a town in eastern Pakistan yesterday after Muslim radicals burnt to death eight members of a Christian family, raising fears of violence spreading to other areas.

Hundreds of armed supporters of Lashkar-e-Jhangvi, an outlawed Islamic militant group, set alight dozens of Christian homes in Gojra town at the weekend after allegations that a copy of the Koran had been defiled.

A few Muslims in Islington England recently demonstrated their strong feelings about burning hot literature. The West doesn't need this.

Three Muslim men who poured petrol through the letterbox of a publisher who they had heard was printing a controversial book about the Prophet Muhammed were today each jailed for four and a half years.

Ali Beheshti, Abrar Mirza and Abbas Taj planned to set fire to Gibson Square Books after discovering it was going to publish The Jewel of Medina, a book about the Prophet and his young wife.

By Randall Parker 2009 August 18 11:22 PM  Civilizations Clash Of
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2009 August 16 Sunday
California Debt Riskier Than Russian Debt

The market also thinks Michigan debt is riskier than Indonesian debt.

The annual cost of protecting holdings in Turkey’s bonds fell by half to $200,000 per $10 million for five years, or 200 basis points, sinking below New York City swaps for two weeks starting July 22, Bloomberg data show. Indonesia debt insurance dropped below Michigan the next day. Brazil swaps just had their biggest four-month slide ever. For China, protection is near the cheapest in a year. Eleven years after Russia defaulted, investors want less to insure its debt than California’s.

I'm living in a banana republic and I didn't even have to move. How cool is that?

Some US states are in serious trouble.

Most states have just approved a budget for the fiscal year that began July 1, and their legislatures have adjourned for the summer. But in a dozen or more states, those budgets have already gone into the red less than two months into the fiscal year, by a total of about $24 billion. More than 30 states are projecting deficits for next year, according to the Center on Budget and Policy Priorities, a Washington-based think tank, and other expert estimates.

You might expect that California can't borrow money or must borrow it at ruinous rates. Nope. Interest rates are so low that California might only pay 2.5% to borrow for several months.

Despite the much larger size of the RAN deal Lockyer is planning for September -- and despite California's image of fiscal dysfunction -- bond traders and fund managers were telling me this week that they thought the state might end up paying as little as 2.5% on the securities, given expected demand from yield-hungry investors.

So you gotta ask yourself, do you feel lucky? If you feel lucky you can get 2.5% tax free on California debt. Me, I'd rather buy stocks.

By Randall Parker 2009 August 16 10:41 PM  Economics Squanderville Thriftville
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2009 August 15 Saturday
Whole Foods CEO: Customers Want Junk Food

The Whole Foods Alternative to ObamaCare: Eight things we can do to improve health care without adding to the deficit. Take a look. It is a pretty good list. But this list does not come from a leftist mindset which supports more government provision of health care. So the SWPL folks who patronize Whole Foods are upset and some liberals are boycotting Whole Foods. But that's not the most interesting story about Whole Foods. Oh no. Whole Foods is a hoot because it basically exists to allow SWPL people to pretend to buy healthy foods. After all, the food comes from Whole Foods. It must be healthy.

Don't believe me? CEO John Mackey says Whole Foods sells junk and he's going to try to convince SWPLs to eat better food:

Mr. Mackey said in an interview prior to Tuesday's results that Whole Foods this fall will launch a "healthy eating" initiative with cooking demonstrations and recipes. The blunt-speaking Mr. Mackey said the company's product selection had veered off-course.

"We sell a bunch of junk," he said, vowing to promote healthier lifestyles for its customers and employees. "We've decided if Whole Foods doesn't take a leadership role in educating people about a healthy diet, who the heck is going to do it?"

What fun. An attempt to convince people to eat healthy rather than just to pretend to eat healthy. Sounds like a tough order to me. It is an even tougher order now that some liberals have gone negative in their emotions about Whole Foods. Seems like an opportunity for another food chain to appeal to SWPLers with faux healthy food. The demand is there. The customers want to pretend. Help them and make a profit satisfying their need.

By Randall Parker 2009 August 15 01:07 PM  Cultural Wars Western
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New York Times Misses Real Cash For Clunkers Effects

Writing in the New York Times David Sanger reports on the sorts of objections to the Cash For Clunkers program that the New York Times notices.

The first is that the program is simply not ambitious enough — in an effort to make sure American carmakers are among the biggest winners, it set the mileage requirements for newly purchased cars too low. The second is that Congress and the White House are essentially rewarding car owners who in years past chose to buy gas-guzzlers — violating Mr. Obama’s own first rule of environmentalism, which is that polluters should pay.

And the third question is the one that haunts any big government subsidy: Does it make more sense to pay Americans to buy a new, slightly more efficient car than it does to insulate their homes? Or to go to the health club, in hopes of lowering future health care costs?

That's the best they can do? How about a few other objections?

  • The Cash For Clunkers Program steals sales from future quarters. Some of these cars would have been purchased this fall or winter. So sales will dip this fall and winter.
  • People who are spending more on cars are cutting back on other expenditures. In fact, in July non-auto retail sales dropped 0.6% while auto sales rose 2.4%.
  • It is redistributionist in a lottery sort of way. Just happen to have an old car with very little resale value? Just happen to want a new car that fits the program's criteria. You get a deal at the expense of everyone else.

I have an even more fundamental objection: American taxpayers are paying other citizens to get cars that stimulate the economies of Japan and South Korea. What about the American economy?

The top five models purchased in the week ending Aug. 5 included three Toyotas — the Corolla, the Prius and the Camry — along with the Honda Civic and the Hyundai Elantra.

Um, I want more American jobs, not more Japanese jobs. Japan not my country (though its an interesting place to visit). I do not pay taxes to the Japanese government. I do not have a Japanese passport.

George Pipas at Ford admits Cash For Clunkers shifts sales from future quarters.

The sales last month from the federal incentives may result in fewer buyers later this year after the program ends, George Pipas, Ford‘s sales analyst, told CNBC today.

The demand effect of the incentive is already waning.

“A lot of demand got sopped up in the first mad rush, now the pressure is off to be first in line,” said Edmunds.com senior analyst Michelle Krebs, adding that sales may drop after the program ends. “We‘re nervous about what September and October will look like after this plays out.”

Okay, we taxpayers are funding the shifting of sales from future quarters and we are also funding displacement of the purchase of other goods and services so that people buy cars instead. This isn't hard to figure out.

If the US government is going to spend money to stimulate the economy I'd prefer the money get spent on something with lasting value. Nuclear power plants come to mind. They are made here. They produce energy for decades and avoid the pollution of dwindling fossil fuels.

But the Cash For Clunkers program is small potatoes compared to what is being lavished on GM, Chrysler, and the UAW retirees and workers.

The bailout of America's auto industry--General Motors, Chrysler, their finance units, their parts suppliers, Cash for Clunkers, etc.--is costing American taxpayers more than $100 billion.

By Randall Parker 2009 August 15 10:29 AM  Economics Government Intervention
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2009 August 12 Wednesday
Afghanistan: The 50 Year War?

My conspiracy theory of the day: America stayed in Afghanistan so that Obama could have his own war that was not heavily Bush branded. Never mind that Bush put US troops in Afghanistan in the first place in response to 9/11. The press branded Iraq as Bush's war and Afghanistan as the nation's war. So now Obama can use Afghanistan to show he's tough. This war is perfect for him because it involves a smaller force and less money (convenient for scaling up social spending).

If the Democrats hang on to the White House in future elections they can continue to use Afghanistan to show they are just as hawkish and militaristic as the Republicans. The new British Chief of the General Staff, General Sir David Richards, sees another 40 years of British military presence in Afghanistan. That's long enough for voters to get really bored with it.

Britain’s mission in Afghanistan could last for up to 40 years, the next head of the Army warns today in an exclusive interview with The Times.

General Sir David Richards, who becomes Chief of the General Staff on August 28, said: “The Army’s role will evolve, but the whole process might take as long as 30 to 40 years.”

But the money isn't going to be there to finance another 40 years of war.

Washington -- U.S. Treasury Secretary Timothy Geithner asked Congress to increase the $12.1 trillion debt limit on Friday, saying it is “critically important” that they act in the next two months.

Since the whole US economy is only about $14 trillion a year the US government debt is getting perilously close to 100% GDP. How are we supposed to finance another 40 years of war? I guess by selling really long term bonds that have no coupons.

By Randall Parker 2009 August 12 11:38 PM  MidEast Afghanistan
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Rising Unemployment Boosts Productivity Of Workers

The people still working are more productive.

U.S. productivity staged its biggest gain in nearly six years in the second quarter despite the contraction in the overall economy, suggesting companies have adjusted to the recession by cutting jobs and workers' hours.

Nonfarm business productivity rose a higher-than-expected 6.4% at an annual rate last quarter, the most since the third quarter of 2003, the Labor Department said in preliminary figures released Tuesday.

When companies lay off people and productivity rises this means they are laying off lower productivity workers. Why don't they just cut wages of lower productivity workers?

In early 2009 high school graduates had twice the unemployment of college graduates. Less educated and lower productivity workers get laid off more. Why is that? Why don't employers just pay the less educated less money and use them just as much? I figure part of the explanation has got to be such low productivity that the transaction costs of dealing with low productivity labor end up higher than the value produced by low productivity workers. A growing ranks of unemployable people might be the long term result. Why deal with frustrating workers of unknown quality when robots beckon?

James J. Heckman and Paul A. LaFontaine said in a February 2008 report the income gap between high school graduates and drop-outs is soaring and yet drop-outs are rising.

During the past 25 years, growing wage differentials between high school graduates and dropouts increased the economic incentives to graduate high school. The real wages of high school dropouts have declined since the early 1970s while those of more skilled workers have risen sharply.1 Heckman, Lochner, and Todd (2008) show that in recent decades, the internal rate of return to graduating high school compared to dropping out has increased dramatically and is now over 50 percent. Therefore, it is surprising and disturbing that, at a time when the premium for skills has increased and the return to graduating high school has risen, the high school dropout rate in America is increasing. America is becoming a polarised society. Proportionately more American youth are going to college and graduating than ever before. At the same time, proportionately more are failing to complete high school.

Black and Hispanic graduation rates are much lower - and they are growing portions of the US population.

After adjusting for multiple sources of bias and differences in sample construction, we establish that (1) the U.S. high school graduation rate peaked at around 80 percent in the late 1960s and then declined by 4-5 percentage points; (2) the actual high school graduation rate is substantially lower than the 88 percent official estimate; (3) about 65 percent of blacks and Hispanics leave school with a high school diploma and minority graduation rates are still substantially below the rates for non-Hispanic whites. Contrary to claims based on the official statistics, we find no evidence of convergence in minority-majority graduation rates over the past 35 years. (4) Exclusion of incarcerated populations from the official statistics greatly biases the reported high school graduation rate for blacks.

The growing ranks of unemployed are less educated.

* Department of Labor data show that among high school dropouts over the age of 25, the unemployment rate in June 2009 was 15.5 percent -- almost double the June 2008 rate of 8 percent.

* In June 2009, the comparable unemployment rate for high school graduates with no college was 9.8 percent, or just over the national average of 9.5 percent.

From October 2008 note the racial break-down in unemployment for high school drop-outs.

The unemployment rate for out-of-school youth age 16 to 24 was 14.2 percent in October 2008. Among the educational attainment categories, unemployment rates for youth not in school were highest for those with- out a high school diploma--26.3 percent for young men and 25.0 percent for young women. In contrast, the unemployment rates for young male and female college graduates were 8.7 and 6.6 percent, respectively. Black out-of-school youth had an unemployment rate of 23.7 percent in October 2008, compared with 12.4 percent for whites, 15.1 percent for Hispanics, and 7.3 percent for Asians.

By Randall Parker 2009 August 12 12:06 AM  Economics Labor
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2009 August 10 Monday
Food Stamp Subsidies Making Americans Fat

Government subsidies for poor folks to buy food are making them fat.

COLUMBUS, Ohio – The U.S. Food Stamp Program may help contribute to obesity among its users, according to a new nationwide study that followed participants for 14 years.

Researchers found that the average user of food stamps had a Body Mass Index (BMI) 1.15 points higher than non-users.  The link between food stamps and higher weight was almost entirely based on women users, who averaged 1.24 points higher BMI than those not in the program, the study found.  For an average American woman, this would mean an increase in weight of 5.8 pounds.

Modest proposal: Make eligibility for the food stamps weight-tested.

The welfare state is making people fatty and unhealthy.

The study also found that people’s BMI increased faster when they were on food stamps than when they were not, and increased more the longer they were in the program.

Former Democratic Party Presidential candidate George McGovern, a big welfare state supporter, might have contributed to the obesity epidemic in another way. See Dennis Mangan's post for the details: The Government's War Against Dietary Fat Caused the Obesity Epidemic. The goverrnment's encouragement of higher carbo consumption and lower fat consumption might be to blame. So then is Gary Taubes right in his book Good Calories, Bad Calories: Fats, Carbs, and the Controversial Science of Diet and Health?

By Randall Parker 2009 August 10 11:33 PM  Economics Health
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Biggest US Tax Revenue Decline Since 1930s

The economic downturn has shrunk tax revenues to an extent not seen since 1932.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

Partly this is a reflection of the extent to which The Upper Class Funds The US Government. Incomes are more volatile for those at higher income levels. Therefore the revenues from income taxes have become more volatile as economic inequality has grown.

The Democratic Congress is on a spending bender.

The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies' spending by 11 percent in 2010 and military spending by 4 percent.

The recession basically gave the Democrats an excuse to spend on things they wanted to spend on anyway. Where does this lead? See my post: Odds Of Eventual US Sovereign Debt Default?

By Randall Parker 2009 August 10 12:00 AM  Economics Government Costs
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2009 August 09 Sunday
Gregory Clark Expects Unemployable Lower Class

Gregory Clark, historian and author of the noted book A Farewell to Alms: A Brief Economic History of the World, has an op/ed in the Washington Post on his expectation that smart machines will make the lower skilled human workers unemployable.

The battle will be over how to get the economy's winners to pay for an increasingly costly poor. Last weekend Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the White House's National Economic Council, refused to rule out raising taxes. Despite the White House's subsequent denials, this may be an early acknowledgment of an inexorable trend. In a future with higher taxes, the divide between rich and poor would be the central economic challenge.

Lower IQ people will become irrelevant as they are increasingly replaced by robots and other machines.

Even outsourcing of phone calls to very cheap Indian call-center workers is getting replaced by computers.

I recently carried out a complicated phone transaction with United Airlines but never once spoke to a human; my mechanical interlocutor seemed no less capable than the Indian call-center operatives it replaced. Outsourcing to India and China may be only a brief historical interlude before the great outsourcing yet to come -- to machines. And as machines expand their domain, basic wages could easily fall so low that families cannot support themselves without public assistance.

If Indians getting paid much less than American minimum wage can't compete what to do about our growing lower class?

Clark expects unemployment on a massive scale.

With the march of technology, the size of a future American underclass dependent on public support for part of its livelihood is hard to predict: 10 million, 20 million, 100 million? We could imagine cities where entire neighborhoods are populated by people on state support.

More than half the American population has an IQ of less than 100 and that percentage is growing. We really need to stop letting people enter the country to do manual labor. The people stuck in the lower classes will feel their decline in status. Whether they are given make-work jobs or welfare they will feel frustrated and angry at their low status and lower power.

Also see my post Robots To Cause Mass Unemployment Of Low IQ Workers.

Update: In the comments someone who doubts the eventual unemployability of most low IQ people points to sweeping as a job still requires human labor. I have a couple of answers for this that you can buy right now:

Imagine what cleaning robots will do 20 years from now.

By Randall Parker 2009 August 09 11:26 PM  Economics Labor
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Odds Of Eventual US Sovereign Debt Default?

Jeffrey Rogers Hummel, an economist at San Jose State U in Silicon Valley, says eventual US federal default on sovereign debt seems likely.

What about increasing the proceeds from explicit taxes? Examine Graph 1, which depicts both federal outlays and receipts as a percent of GDP from 1940 to 2008. Two things stand out. First is the striking behavior of federal tax revenue since the Korean War. Displaying less volatility than expenditures, it has bumped up against 20 percent of GDP for well over half a century. That is quite an astonishing statistic when you think about all the changes in the tax code over the intervening years. Tax rates go up, tax rates go down, and the total bite out of the economy remains relatively constant. This suggests that 20 percent is some kind of structural-political limit for federal taxes in the United States. It also means that variations in the deficit resulted mainly from changes in spending rather than from changes in taxes. The second fact that stands out in the graph is that federal tax revenue at the height of World War II never quite reached 24 percent of GDP. That represents the all-time high in U.S. history, should even the 20-percent-of-GDP post-war barrier prove breachable.2

The point about historical tax revenue as a percentage of GDP seems persuasive. How many Americans are going to support cutting their own effective buying power by 20% to pay for US federal entitlements programs in the 2020s and 2030s? On the other hand, the people who want to get stuff from the government and the people who want them to get stuff from the government are substantial factions as well (with some considerable overlap with the people who do not want to be taxed).

Currently I see Obama doing something that is the mirror image of what Reagan tried to do. Reagan tried to cut taxes to starve government and cut its size. Obama is trying to so increase spending that taxes have to rise to support the spending programs. Once the spending programs get established they develop powerful constituencies to defend them. If Obama can enact more new spending programs he increases the odds of a call for a tax increase as the needed fiscal response.

But the problem is that government is already on an unsustainable course with growth in entitlements spending before considering new Obama entitlements such as medical insurance funded by government.

Compare these percentages with that of President Barack Obama's first budget, which is slated to come in at above 28 percent of GDP. Although this spending surge is supposed to be significantly reversed when the recession is over, the administration's own estimates have federal outlays never falling below 22 percent of GDP. And that is before the Social Security and Medicare increases really kick in. In its latest long-term budget scenarios, the Congressional Budget Office (CBO), not known for undue pessimism, projects that total federal spending will rise over the next 75 years to as much as 35 percent of GDP, not counting any interest on the accumulating debt, which critically varies with how fast tax revenues rise. However, the CBO's highest projection for tax revenue over the same span reaches a mere 26 percent of GDP. Notice how even that "optimistic" projection assumes that Americans will put up with, on a regular peacetime basis, a higher level of federal taxation than they briefly endured during the widely perceived national emergency of the Second World War. Moreover, once you add in the interest on the growing debt because of the persistent deficits, federal expenditures in 2083, according to the CBO, could range anywhere between 44 and 75 percent of GDP.3

I see about 4 possible resolutions of the coming financial crisis:

  • US government default. This seems like the lowest probability outcome.
  • Huge tax revenue increase. Only one way to do that: Stiff European-style Value Added Tax (VAT) that raises prices 10-20-30%. Goods and services become as expense as we see in Europe. We get a permanent large European-style welfare state but with a worse outcome. I see the people who support this as enemies.
  • Inflation. This might happen thru the back door as a response to a financial crisis even bigger than what we saw last fall. The Federal Reserve's attempt to stop a panic will lead to an even bigger monetary injection than we've seen in the last year.
  • Massive cuts in entitlements programs. California's fiscal crisis provides a demonstration.

If and when the US dollar ceases to be the world's reserve currency a sharp transition caused by large scale flight from the dollar could cause skyrocketing interest rates and a downturn that causes one or more of the above resolutions. We might get some combination of the latter 3 possibilities in a series of crises with different levels of contribution from each item.

The biggest mistake the Democrats are making is to assume economic growth will fund their dreams. I see demographic problems slowing economic growth as a lower skilled work force grows up to replace the smarter Baby Boomers. Also, Peak Oil is coming at most 11 years from now and possibly much sooner. Economist James Hamilton has explained in his paper Causes and Consequences of the Oil Shock of 2007-08 how oil price run-ups cause recessions. Well, our current recession is basically a rehearsal for worse recessions to come in the 2010s as a result of high oil prices. The money isn't going to be there to make the government spending scenarios above remotely possible.

As people get poorer due to Peak Oil and demographic problems they will become more opposed to taxes on what remains of their take-home income. So I'm expecting some really severe cuts in entitlements. Expect to work longer. Expect more entitlements for old folks to become needs tested. Save now because you are going to need the money in years to come.

By Randall Parker 2009 August 09 05:49 PM  Economics Government Costs
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Congressional Health Plan Cost Estimates $1 Tril Too Low

Stephen T. Parente, a biz prof at U Minn and a member of a consulting firm that works with large medical cost databases, says Congressional estimates for costs of current health care legislation are low by over $1 trillion dollars.

The CBO is actually being kind to the would-be reformers. Its analysis likely understates—by at least $1 trillion—the true costs of expanding health coverage as current Democratic legislation contemplates. Over the last few months, my colleagues and I at the consulting firm Health Systems Innovations have provided cost estimates of health-care reform to both Republican and Democratic members of Congress, and we’ve posted these estimates on our website as well. We believe that the Democratic bills currently under consideration in the House and Senate would cost $2.1 trillion and $2.4 trillion, respectively—much higher than CBO’s figures.

The discrepancies between our estimates and CBO’s stem from our different assumptions about a key issue. The Democratic plans envision a government-run insurance program, modeled after Medicare, that will compete with private insurers. How many people would opt for coverage under this public insurance? We believe that both large and small employers would have powerful incentives to shift their employees out of private coverage and into the public plan. Like the Urban Institute, we estimate that roughly 40 million people would make the shift. CBO seems to assume, however, that large employers would use the public plan only sparingly and that only 11 million people would move from private to public insurance—which would, of course, result in lower costs.

To the extent that the US government subsidizes its own health insurance plan it will be able to offer premiums at below market rates. So it seems inevitable that it will take away market share from private plans. How can one expect otherwise?

Parente says he has a bigger dataset of commercial insurance data to work with that the Congressional Budget Office does not have.

Why the difference in these estimates? We believe that we have better data on this issue than the CBO, which uses simulation models of health-insurance plans based on much older health-plan data—typically from 2001 or even 2000. Our estimates are grounded in 2006 commercial-insurance data to which the CBO doesn’t have access (the data are not publicly available and the CBO didn’t make provisions to purchase them). These data reflect the advent of much cheaper, high-deductible health plans and limited-provider network plans. If the government modeled its public option on these inexpensive plans, the result would be cheap enough to lure far more people away from private health insurance than the CBO estimates.

We already have government entitlements programs that we can not afford. The aging population is going to cause the costs of those programs to skyrocket in the 2010s and 2020s. On top of that Peak Oil is rapidly approaching and will cause an extended economic contraction. Existing entitlements programs will have to shrink and suffer big benefits cuts as the economy contracts.

By Randall Parker 2009 August 09 02:09 PM  Economics Health
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2009 August 08 Saturday
Robots To Cause Mass Unemployment Of Low IQ Workers

Blogger OneSTDV says a robotic chef in Japan points us toward a future where our growing lower IQ population will have little or no useful work to do. This will cause problems for the rest of us.

Low-IQ individuals inevitably end up in menial labor jobs like fast-food service, lawncare, and agriculture field work. Through dysgenic fertility and low-IQ immigration, the population of low-IQ individuals is steadily increasing. As robotic technology advances, menial labor jobs will slowly be taken over by automated systems. Thus, the supply of potential workers increases while the demand for these workers decreases. Initially, the current menial labor workers will oversee the first automated systems. But, eventually, these systems will run entirely free of operation. As a result, a large segment of the low-IQ class, a class pathologically predicated towards social turmoil, will have no steady job opportunities.

We need to accept the inevitability of this future and start making policies now that prepare us for this future. Most notably we should halt and reverse the influx of immigrant labor to do low skilled and easily automatable jobs.

Larger Western state dairy farms using 40% immigrant laborers are driving a lot of Midwestern family farms out of business. But robotic milkers are going to drastically cut labor usage in dairies. Note that in a Europe that lacks cheap Mexican labor the robotic milkers are already widely used.

"We have seven working now," Brower says. In Minnesota there are about 30 systems working. "By the end of the year, I think we'll have 20." Last fall, Brower and representatives from a couple of other U.S. dealership traveled to Holland. They toured five robotic Lely dairies there, as well as the manufacturing plant.

"It was just to see how they set them up in Europe, the culture, and get to know Lely a little better," he says.

One startling fact is that in Europe, 65 percent of the new installations and upgrades are robotic.

"It's very common there," he says. "I'd say that within five years, we'll be at the same level in the U.S. I would say in 10 years this'll be very common."

I've seen a video of these automated cow milkers. The cows are trained to step into a milker stall once their milk starts feeling unpleasant to them. A human doesn't have to be around. The cows step voluntarily into a location where robotic milkers can attach and relieve them of their milk burden.

A Minnesota dairy farmer says one robot can handle 65 cows.

One unit can handle up to 65 cows, depending on the farm and production levels.

“Before, I was at about 110 cows. I have room for 120, which is about the right size for two robots,” Johansen says. “I have 105 cows right now. I have to get 120 milking by next spring.”

The other issue: Reliability.

Parts for the system have warranties from one to five years, depending on the part.

“People I talked to, who have had them for a year or two, say they had few problems with them and that the company stands behind their product,” Johansen says. “I’ve had some issues and they’ve been extremely good to work with.”

In New Zealand robots are automating meat-processing plants.

Knife-wielding robots with x-ray vision are invading the meat-processing industry. But far from posing a threat to humans, the machines have the potential to save the industry tens of millions of dollars.

In the US Mexican illegal immigrants have flooded into meat-processing plants. We'd have more automation already if Hispanic immigration (both legal and illegal) was stopped and reversed.

Update: Audacious Epigone looks at how labor costs determine how quickly automated equipment gets adopted.

By Randall Parker 2009 August 08 07:25 PM  Immigration Labor Market
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Bush Invaded Iraq To Thwart Gog And Magog

Really, I am not making this up. James A. Haught reports George W. Bush pitched Jacques Chirac to join in America's religious battle against Gog and Magog.

Incredibly, President George W. Bush told French President Jacques Chirac in early 2003 that Iraq must be invaded to thwart Gog and Magog, the Bible’s satanic agents of the Apocalypse.

Honest. This isn’t a joke. The president of the United States, in a top-secret phone call to a major European ally, asked for French troops to join American soldiers in attacking Iraq as a mission from God.

Now out of office, Chirac recounts that the American leader appealed to their “common faith” (Christianity) and told him: “Gog and Magog are at work in the Middle East…. The biblical prophecies are being fulfilled…. This confrontation is willed by God, who wants to use this conflict to erase his people’s enemies before a New Age begins.”

Truth is stranger than fiction.

But even if we accept the Bible as the inerrant word of God is Bush talking sense? Nope. Bred DeLong chides Bush for misinterpreting scriptures from Revelations 20.

That George W. Bush gets Revelations so wrong--you see, Gog and Magog do not arise until 1000 years after the "first resurrection." It won't be time for Gog and Magog to show until 1000 years after an angel comes down from heaven and binds the Devil and casts him into the bottomless pit, and those who were beheaded for their witness of Jesus are resurrected and reign with Christ for a millennium.

Sure enough, I went and looked at a bunch of parallel translations of the Revelations 20 and found this translation is pretty clear that Satan will have to spend 1000 years in prison before he gathers Gog and Magog together to make war.

7 And after the thousand years, Satan will be released from his prison, 8 and he will come out to deceive the nations which are in the four corners of the earth, Gog and Magog, to gather them together to the war; the number of whom is as the sand of the sea. 9 They went up over the breadth of the earth, and surrounded the camp of the saints, and the beloved city. Fire came down out of heaven from God, and devoured them. 10 The devil who deceived them was thrown into the lake of fire and sulfur, where the beast and the false prophet are also. They will be tormented day and night forever and ever.

Bush was fighting the wrong war. Does anyone want to make the effort to read Revelations and tell us what Bush should have been fighting if not Gog and Magog? Maybe Obama is following scripture in Afghanistan? Nah, I doubt it.

Update: If we are to believe one Christian Pastor Ezekiel 38 has an assortment of nations including Libya and Iran attacking Israel but suffering defeat. It is God's will that these nations should attack. As I see it Dubya was trying to defeat God's will by undermining their ability to attack.

Chapter 38 begins with a prophecy against Gog. Verse 3 states, “I am against you, O Gog, chief prince of Meshech and Tubal.” In a short explanation, the names mentioned are sons of Japheth (Noah’s son). They are also the brothers of Magog, all who settled to the north of present day Israel. Vss 5,6 “Persia, Cush, and Put will be with them, all with shields and helmets, also Gomer with all its troops, and Beth Togarmah from the far north with all its’ troops- the many nations with you.” Cush is the upper Nile region (presumably northern Egypt ) and Put is modern day Libya. Gomer is another son of Japheth and Beth Togarmah is Gomer’s son. Historically, they are regarded to have originated north of the Black Sea . North of the Black Sea is present day Ukraine and the western most reaches of Russia. All put together, the nations described are currently Muslim nations that surround Israel from all sides.

Verse 8 proclaims that these nations will “invade a land that has recovered from war, whose people were gathered from many nations to the mountains of Israel, which had long been desolate.” The land that is invaded can only appear to be Israel, a nation whose people have been gathering from all over the world for 50 years.

God has intended this invasion however. In vs. 16 he declares, “In days to come, O Gog, I will bring you against my land so that the nations may know me when I show myself holy though you before their eyes.” Verses 17-23 describe the exact catastrophes that will befall the invading nations. They are supernaturally destroyed and no harm is done to Israel. God will not let his people be harmed. The miraculous Six Day War of 1967 should have taught everyone that, but the world has turned a blind eye.

Go read Ezekiel 38 and see for yourself. How do you interpret it?

By Randall Parker 2009 August 08 05:24 PM  Mideast Iraq Blame Game
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Employment Declines For Native Americans

Edwin S. Rubenstein finds an interesting pattern in the recession's job numbers: In occupations with lots of Hispanics hiring has turned around but not for the rest of us.

The alternative employment survey, of households rather than business establishments, shows a decidedly bifurcated picture. While total employment declined modestly in July, non-Hispanics bore the entire decline. For Hispanic workers, July was one big job fair:

  • Total employment decline in July: -155,000 (0.11 percent)
  • Non-Hispanic employment: -277,000 (-0.23 percent)
  • Hispanic employment: +122,000 (+0.62 percent)

Hispanic employment rose by 0.63 percent in July - the largest percentage gain since April; non-Hispanic employment declined by 0.23 percent.

Non-Hispanic employment has declined every month since April 2008.

Rubenstein shows that during the last recession Hispanic employment rose as white and black employment fell. A supply of lower priced labor displaces higher priced labor.

My take on this is that we should put the interests of our existing poor people ahead of those of potential immigrants. We also should not use taxpayer money to pay for medical care for people who are displacing Americans from their jobs.

By Randall Parker 2009 August 08 04:55 PM  Immigration Labor Market
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2009 August 06 Thursday
Federal Judges Order Massive California Prisoner Release

California prisons aren't considered healthy enough for prisoners. But prisoners released on the street aren't safe for Californians. Why doesn't that matter?

Citing an overcrowded prison system that has led to inadequate health care for inmates, a panel of federal judges has ordered California to reduce its prison population by 40,000 over the next two years. That reflects a roughly 27 percent cut from the current population of 150,000.

The New York Times, which has a PDF of the court order, reports that "judges said that reducing prison crowding in California was the only way to change what they called an unconstitutional prison health care system that causes one unnecessary death a week."

Gov. Arnold Schwarzenegger wants to transfer almost half that number to federal custody because they are illegal aliens. So almost 13% of California's prisoners are known illegal aliens. How many others are illegal aliens but not yet identified?

He has also proposed transferring as many as 19,000 illegal immigrant inmates to federal custody for deportation and updating grand-theft laws to keep pace with inflation, which would reduce felony convictions.

What the federal judges should have done: order construction of a formidable barrier along the US border with Mexico to keep out illegals. Then order real effective enforcement of immigration laws in California and the US Southwest. That would so lower the demand for prisons, police, taxpayer-subsidized health care, and schools for immigrants that the state of California would have more money and fewer prisoners. Soi the remaining prisoners would have more money to spend on their health and imprisonment.

California's prison population is already 12,000 below a 2006 peak in spite of a growing population.

One state senator says prisoners in California are not dying at noticeably high rates.

That has local state Sen. John Benoit upset.

"The mortality rate for prisoners in California is below the national average," says Benoit. "There's a strong argument that there does not exist a problem on the scale the judges have based their decision on."

I think Jerry Brown's time spent as mayor of Oakland has grounded him in the reality of criminals. Jerry Brown does not want the prisoners released.

Attorney General Jerry Brown said in a telephone interview Tuesday that he intended to appeal the ruling. “Eventually, we’re going to have to go to the Supreme Court because I think the California prisons are spending about $14,000 per year per inmate,” Mr. Brown said, adding that the changes the judges ordered would cost more money, which the state does not have.

Jerry wonders what happens when released criminals commit more crime. How about "4 strikes and you are out again"?

"The courts are ordering the state to come up with a plan to release all these prisoners, but the question is: Which prisoners? Release to what -- halfway houses, GPS monitoring? And what happens when they commit another crime -- do they come back? There's a lot that is not clear," Brown said.

By Randall Parker 2009 August 06 09:41 PM  Civilizations Decay
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2009 August 03 Monday
Poor Jefferson County In Alabama

Jefferson County Alabama Spent too much on a sewer system and then got suckered by investment bankers into auction rate securities whose interest rates are too high for the county to afford. Jefferson County's multi-billion dollar debt and high interest rates have the county in such a bind that it has drastically cut back staffing. The state of California is an example of financial soundness by comparison.

Alabama's debt-ridden Jefferson County laid off about two-thirds of its 3,600 employees on Monday because of plummeting revenues, a move that will sharply curtail services in areas ranging from roads to courthouses.

Nothing like a good crisis to get rid of the dead wood. I'm thinking county employee productivity will soar. But the lesson here is that when investment bankers come knocking don't open your door.

The coroners were not cut. Can't keep the dead waiting.

Some departments will not be affected by the cutbacks, at least not yet. Those include the sheriff's office, because a Circuit Court judge has blocked budget cuts until county commissioners and the sheriff can work out an agreement; Cooper Green Mercy Hospital, which gets most of its money from the indigent care fund; and the coroner's office, which was spared cuts.

The county would be in deep trouble with getting roads repaired if a tornado or hurricane swept thru.

The most avoidable consequence? Huge lines at county offices for things that cost money.

If you need to run into the Jefferson County Court House for tags, license, or pretty much anything else you better think ahead. It's not just the four hour wait you'll need to prepare for, it's the fight for parking!

Think about it. Would you prefer to pay a few dollars more to avoid waiting 4 hours to get a license for your dog, car, or some other activity or property? Why hasn't the county just hiked some fees and used the money to pay for salaries of people who collect the money for the fees? Raise fees until the lines are fairly short. Increase supply and cut demand. This is easy.

The government is missing an opportunity to make more money off of people's desire not to waste time in lines. Ditto for construction site inspectors. Make the fees high enough and these functions of government can be totally self-financing with very fast service.

Another idea: fine criminals. Take DUI drivers for example. Sock it to them.

By Randall Parker 2009 August 03 11:08 PM  Economics Government Costs
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Phone Pollsters Should Have Pleasant Voices

I just hung up on a call from a Susan who said she was with "WRA, a national consumer research firm". I normally hang up on such calls. But I hung up especially quickly because she started out loudly at a high pitched tinny voice that was very grating. My reaction: phone calling banks ought to screen for voice quality and they ought to choose callers whose voices won't immediately turn off callers.

My other reaction: Why should I give some of my time for free to help some for-profit company make money selling info about my preferences to other for-profit companies? Why should anyone bother?

Do you answer questions from phone pollers? If so, why?

It occurred to me that I ought to go and renew my donotcall.gov phone registry entries. If you live in the US of A and haven't done this or haven't done it lately then here's your chance to start clicking your way to greater solitude.

By Randall Parker 2009 August 03 07:38 PM  Off Beat And Odd
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2009 August 01 Saturday
On The Internal Muslim Threat To European Peoples

A New York Times review of Christopher Caldwell's new book Reflections on the Revolution In Europe: Immigration, Islam, and the West summarizes the bad news which Caldwell conveys about Muslim immigration into Europe.

But they are arguments one is not used to hearing put so baldly, at least from the West’s leading political journalists. Primary among them are these: Through decades of mass immigration to Europe’s hospitable cities and because of a strong disinclination to assimilate, Muslims are changing the face of Europe, perhaps decisively. These Muslim immigrants are not so much enhancing European culture as they are supplanting it. The products of an adversarial culture, these immigrants and their religion, Islam, are “patiently conquering Europe’s cities, street by street.”

Mr. Caldwell is a vivid writer, and like an action-movie hero he walks calmly away from his own detonations while fire swirls behind him. “Imagine that the West, at the height of the Cold War, had received a mass inflow of immigrants from Communist countries who were ambivalent about which side they supported,” he writes. “Something similar is taking place now.”

What is the sense of allowing a hostile religion into your country? Why let in an immigrant group that will create a parallel society?

The existing peoples of the European nations are not allowed to have an honest debate on the subject.

The most chilling observation in Mr. Caldwell’s book may be that the debate over Muslim immigration in Europe is one that the continent can’t openly have, because anyone remotely critical of Islam is branded as Islamophobic.

The Dutch politician Geert Wilders lives in hiding and with police protection due to death threats from Muslims and yet the Dutch government is prosecuting him for his statements which are critical of Islam. The Dutch lack America's 1st amendment speech protections. The Dutch also lack a government which puts the interests of its people ahead of an oppressive religion.

The European elites are afraid of angering the Muslims. Isn't that fear reason enough to stop and reverse this immigration? The reversal is possible: European governments could pay Muslims to leave.

Since the Belgian authorities try to pressure the Brussels Journal over its coverage of Islam in Europe it seems fitting to quote the Brussels Journal on the attempts by French authorities to hide from the French public the extent of the threat from Muslims in France.

The French Interior Ministry has issued orders to the prefects not to communicate to the media the crime statistics for the nights of July 13-15. The cartoon at the top shows Marianne, the woman symbolizing the French Republic, watching the "official" weather report, “More sun tomorrow” it says, as it pours outside.

The Brussels Journal has also recently taken a look at how Newsweek paints a rosier picture of Islam in Europe than is justified by the facts.

In an article published in Newsweek this week, William Underhill tells the magazine’s readers that “fears of a Muslim takeover [in Europe] are all wrong.”

The article was published one week after Muslim youths, during consecutive nights of rioting, torched hundreds of cars and burnt the entire business district of the French town of Firminy to the ground.

Perhaps Mr. Underhill was unaware of the events in Firminy, as are many Europeans and even Frenchmen, because the media are loath to report facts like these. In the Fall of 2005, a wave of nightly rioting by young Muslim thugs suddenly disappeared from the news when the press, at the request of the French authorities, stopped reporting about it.

In France, over 750 territorial enclaves have been given up by the state and are no longer controlled by the French authorities. These are the so-called “zones urbaines sensibles” (ZUS, sensitive urban areas). They have even been listed as such on an official website. The ZUS are run by Muslim gangs, while the inhabitants live under a combination of Shariah law and mafia rule.

Warnings concerning the loss of Europe to Islam is referred to by Mr. Underhill as “rabble-rousing stuff” and “alarming and highly speculative projections.” While conceding that “about half of respondents in Spain and Germany [hold] negative views of Muslims,” Newsweek pretends to know better than the 50 per cent of Europeans who feel uneasy about their daily confrontations with men in djellabahs and women in hijabs (if not niqabs and burkas), and with the construction of huge mosques in their home towns.

Every time I read about Muslim immigration into Europe I flash on Monty Python's Argument Clinic and the "getting hit on the head lessons" which start at 4:00 in this video:

Why subject yourselves to "getting hit on the head lessons"? That's what's the European governments are doing to their peoples.

Update: Also see Fouad Ajami on Caldwell's book.

Also, on Samuel Huntington's The Clash of Civilizations and the Remaking of World Order see Fouad Ajami's review.

In Huntington’s unsparing view, culture is underpinned and defined by power. The West had once been pre-eminent and militarily dominant, and the first generation of third-world nationalists had sought to fashion their world in the image of the West. But Western dominion had cracked, Huntington said. Demography best told the story: where more than 40 percent of the world population was “under the political control” of Western civilization in the year 1900, that share had declined to about 15 percent in 1990, and is set to come down to 10 percent by the year 2025. Conversely, Islam’s share had risen from 4 percent in 1900 to 13 percent in 1990, and could be as high as 19 percent by 2025.

It is not pretty at the frontiers between societies with dwindling populations — Western Europe being one example, Russia another — and those with young people making claims on the world. Huntington saw this gathering storm. Those young people of the densely populated North African states who have been risking all for a journey across the Strait of Gibraltar walk right out of his pages.

By Randall Parker 2009 August 01 12:10 PM  Immigration Culture Clash
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